Svenska Cellulosa Aktiebolaget SCA (publ)

Good morning and welcome to this presentation of SCA's first quarter results for 2023. With me here today, I have President and CEO Ulf Larsson and CFO Andreas Evert to go through the results and take your questions afterwards.

Over to you Ulf. Thank you for that, Anders. And also from my side, a good morning and a warm welcome to the presentation of the result for the first quarter 2023. And when I summarize the first quarter, I can state that we have delivered a stable result, not least driven by a profitable growth in renewable energy, but also resilience against increasing wood costs. The latter, of course, due to our relative high degree of self-sufficiency in our wood supply. EBITDA increased by 4% in comparison with the fourth quarter last year, up to 2.055 billion SEK, and our EBITDA margin increased to 43% for the first quarter. However, we see a continued weak demand in solid wood products, pulp and also container board. Prices for solid wood products have bottomed out and will start to increase in the second quarter, while prices for container board and pulp are still decreasing. When I compare the first quarter this year with the first quarter last year, I can note that the sales decreased with 4% and that is mainly due to price. EBITDA decreased with 21% during the same period due to decreasing prices in solid wood products and container board. On the positive side, we have had a profitable growth in renewable energy and also good cost control, and we will come back to that later. Turning over to some financial KPIs related to the first quarter. As just mentioned, our EBITDA increased 4% in comparison with last quarter, reached a little bit over 2 billion SEK for the first quarter this year, and that corresponds to a 43% EBITDA margin. Our industrial return on capital employed came out on 31%, calculated as the average for the last 12 months, and The figure for the first quarter was around 17%. The leverage is stable around 1%, despite our almost finalized large ongoing investment projects in Obola, Ortviken, Bolsta and also in Gothenburg. We continue to finance all our investments, including strategic projects with our operating cash flow. So I will now make some comments for each segment and I start with the forest and during the first quarter we've had a stable supply of wood to our industries. In general we can note the continued high demand of wood raw materials and by that also continued increasing wood prices as you can see in the graph in the bottom left. When compared the first quarter 23 with the first quarter 22, pulpwood prices have increased by almost 30%, somewhat more for birch and somewhat less for conifer. Corresponding figure for saw logs is an increase around 10%. Pulpwood prices in the Baltics are slightly down compared to Q4 last year, but substantially higher, of course, in comparison with Q1 2022. When we compare Q1-23 with Q1 last year, sales were up 14% and EBITDA was up 33%, mainly due to higher prices, but also due to higher harvesting level in our own forest. We can finally note the continued high interest to purchase forest land in Sweden, but also in the Baltics. Then I turn over to business area wood. And in general, we have a continued weak market for solid wood products. Building activities remained on an okay level during the first quarter, but new housing starts are in a decreasing trend, as we all know. Anyway, we cannot reduce supply, and in most markets, customers have finalized destocking and started to buy again. And SEA has, I must say, maintained a normal delivery during the first quarter. Price levels for solid wood products hit the bottom already in Q4 22. And as earlier communicated, we estimated unchanged prices between Q4 and the first quarter this year. And that was also realized as you can see in the graph bottom left. The stock of strong goods is relatively low in all markets today and the supply will not increase and we also now see a seasonally stronger consumption of wood in Q2 despite an unsecure economic macro environment. My best guess for the coming quarter is that we will see a solid price increase with high single digit in percent. Sales and EBITDA was substantially down due to price and cost of raw material when we compare Q123 with same quarter last year. Today's stock level of solid wood products in Sweden and Finland is in relation to the average for the past five years described at the top left on this slide. And we note that inventory volumes are on somewhat high level. to some extent due to the Finnish harbour strike. Anyway, SEA has maintained normal deliveries, as I said, during the first quarter, and by that we have a balanced and, I would say, a normal stock. As can be seen at the diagram to the bottom left, the Swedish and Finnish sawmills production has been on a rather normal level. Outside the Nordic countries, we've seen production containments, not least in Germany and also in Canada. And today we cannot see any Russian or Belorussian wood in the European market, which also helps the balance, of course. When looking at the diagram to the top right, we can note that the price peaked in the third quarter 2021 on a historically high level. Prices have come down substantially since then. And at the same time, the prices for SOLOGS have increased, will of course, a major negative effect on the profitability in this business. So over to PALP. First, I'm happy to say that our CTMP expansion continues according to plan regarding production ramp up and also sales growth. Sales was up 20% when comparing the first quarter this year with Q1 2022, while EBITDA was in line with last year. And we cannot price volume and currency on the positive side in this comparison, while higher wood-raw material costs were on the negative side. We saw a weak demand for pulp during the first quarter. Europe and the U.S. were soft during the whole quarter, while China started up okay, but ended with a very low demand. Coming into the second quarter now, we still see a slow demand, not least in China, but we are now waiting for a new price level to be established in China, and by that I believe that the trade will start again. The European Picks price peaked in September-October last year, close to 1,500 USD per ton. And since then, we have seen declining prices for all pulp crates in all markets. And the price for deliveries to Europe in April is 1,340 USD per ton. We expect the pulp prices to continue down during the second quarter. In China, prices are decreasing rapidly and will probably reach the bottom already in Q2. High-cost producers no longer cover the cost, and therefore we don't expect prices to stay on this level very long. I mean, already today we see weakening supply to China, not least from Canadian producers. In Europe and U.S., prices are falling slower, and here I expect prices to bottom out in the second half of this year. For SCA, weak demand and increasing prices have been mitigated by high level of contracted volumes on a core market and also by the high exposure to the tissue segment. As you can see in the graph, inventories for both hardwood and softwood pulp still are on the high side. Then I move over to container board and the successful startup was affecting the production volume and costs in Obola negative in the first quarter this year when comparing with last year. But long term, of course, this will create a good foundation for a highly successful project. The new recovered fiber line, which is a necessity to reach full capacity in Obola, is progressing according to plan and is planned to be ready in the first half of 2023. And as earlier communicated, we expect to reach full capacity in Obola in 2026. Sales was down 9% due to lower prices, while EBITDA was down 41%, mainly due to lower prices, but also due to the effects of an early startup of the new paper machine, short-term, causing higher costs. This project is in a way a little bit unique by the fact that we have delivered a strong cash flow throughout the project duration. Box demand has continued to decline in Q1, mainly related to low retail sales and destocking effects. European demand on Kraftliner have decreased to a corresponding degree by around 15% in the first quarter this year in comparison with the first quarter last year. However, we now hear signals from customers that these stocking effects are leveling out. We see a stronger demand in the second half of this year. On the other hand, there is additional supply of test liner coming on stream in the next quarters, and that will, of course, put some pressure on the supply-demand balance. Browncraft liner has decreased with 110 to 140 euro per tonne in the first quarter, depending on region and timing. and cumulative since the peak in September 22 with €200 to €230 per tonne. Kraftliner White Top decreased with €95 per tonne in Q1 and cumulative since the peak in September 22 with €125 per tonne. We have seen a continued price decline in April for container board. Natural gas prices have come down sharply from the peak in August last year, which eases the cost pressure for energy-intensive industries like test liner. We estimate that prices in Q2 is approaching break-even levels for high-cost producers, and therefore we'll be leveling out supported by production containments. Availability of OCC is still good because of historical high supply of corrugated boxes and lower current demand of test liner. Today's price has increased a bit and is around €8 per tonne, which is almost €120 per tonne lower than peak in July 2022. Since we are seeing demand decline to level off and stronger demand in second half of the year, we can assume that OCC prices will continue to increase based on limited supply. Finally, I'm happy to, for the first time, present renewable energy as a separate segment. We start this quarter with a strong profitable growth and higher prices in comparison with the same period last year. In general, we have had a strong market development during 2022 in solid biofuels. Q1 this year has been warmer than normal in Europe and also in Sweden. By that, stock levels in Europe for fossil fuels are high and inventories have increased. Biofuel prices has a downward trend from the second half of the fourth quarter last year. Anyway, we estimate the continued relative strong biofuel market in 2023 due to an expected shortage long and mid-term. In wind power, we took our first step in realizing our revised wind strategy by the acquisition of Skogberg wind farm at the end of last year. Land lease agreements on SCA land reached 7.8 terawatt hours in Q1, which is in line with our communicated plan. The result for wind power was substantially better Q1 this year in comparison with Q4 last year, and that is mainly driven by Skogberget wind farm, but also due to higher land lease revenues. In liquid biofuels we see an improved result mainly driven by higher green premiums for CTO or crude tall oil. The biorefinery in Gothenburg is under construction and we have a planned commissioning during the fourth quarter this year. So by that I hand over to you Andreas.

Thank you all and good morning everybody. I'll start off with the income statement for the first quarter. Net sales declined 4% to 4.8 billion, mainly driven by lower prices in wood and container board. EBITDA reached over 2 billion despite a weaker market, driven by growth in renewable energy and high results in our forest division. The EBITDA margin declined to 43%. Depreciation increased to 460 million due to the activation of the new paper machine in Obola, Debit margin declined to 43%, and financial items totaled minus 60 million. With an effective tax rate around 20%, bringing net profit to 1.2 billion, or 1.7 SEC per share. On the next slide, we have the financial development by segment. And starting with forest segment to the left, net sales grew to 1.9 billion, driven by increased volumes. and higher prices compared to the previous quarter. EBITDA increased to 780 million, where seasonal lower harvest from SCA's own forest was offset by higher prices. In wood, prices have bottomed out after several quarters with declining prices. In Q1, we had a positive mix effect, which increased EBITDA up to 120 million, corresponding to a margin of 10%. In pulp, Lower prices were offset by higher volumes and a continued high share of deliveries to core markets. Net sales increased to 1.9 billion, and EBITDA was in line with the previous quarter at 590 million, corresponding to a margin of 32%. In container board, craft liner prices continued to decrease. Net sales decreased slightly to 1.6 billion, and EBITDA totaled 450 million, corresponding to a margin of 29%. The planned maintenance stop in Obola had a negative impact of 21 million. In renewable energy, strong growth and higher prices increased EBITDA to 180 million, corresponding to a margin of 35%. EBITDA was positively impacted by the quiet wind farm in Markbygden and higher tallow prices. On the next slide, we have the sales bridge between Q1 last year and Q1 this year. Prices declined 9%, driven by lower prices in wood and container board. Volumes declined 1%, where higher volumes in pulp was offset by a weaker wood market and the startup of the new paper machine in Obola. And lastly, currency had a positive impact of 6%, bringing net sales to 4.8 billion. Moving on to the EBITDA bridge and starting to the left, price mix had a negative impact of 555 million, again driven by lower prices in wood and container bore. High cost for wood, raw material and chemicals had a negative impact of 140 million, while energy had a positive impact of 31 million, which really shows our high sales efficiency in both energy and wood, raw material. We had a positive impact from currency, and a negative impact from higher fuel prices and startup costs. In total, EBITDA decreased 21% to approximately 2.1 billion, corresponding to a margin of 43%. We continue to have a strong operating cash flow of 1.2 billion for the quarter, and this means that we are continuing to fund our strategic investments with operating cash flow. Looking at the balance sheet, the value of the forest assets increased to 99 billion, working capital stood at 4 billion, and total capital employed increased to 107 billion. Net debt increased to 11 billion, corresponding to 1.2 times EBITDA, and the increase was driven by the dividend of 1.8 billion. Equity was in line with the previous quarter at 96 billion, And net debt to equity was 12%. Thank you. With that, I'll hand back to you, Ulf.