Svenska Cellulosa Aktiebolaget SCA (publ)

Good morning and welcome to this presentation of the SEA half-year results for 2023. With me here today, I have CEO Ulf Larsson and CFO Andreas Evert. With that, Ulf, I hand over to you.

Thank you, Anders. And also from my side, a good morning and a warm welcome to the presentation of the result for the second quarter. When I summarize the second quarter, I can state that we have delivered a stable result, not least driven by a profitable growth in renewable energy, stable performance in forest, but also resilience against cost inflation. The latter is, of course, partly due to a relatively high degree of self-sufficiency in our wood, raw material supply and also in the energy supply, logistics and so on. However, we see a continued weak demand for solid wood products, pulp and container board. Prices for solid wood products increased as expected during the second quarter in comparison with the first, but will come down again in the third quarter. Prices for container board have now stabilized, while prices for pulp are still decreasing in both Europe and US. EBITDA decreased in comparison with the second quarter last year, but reached 1.7 billion SEK and by that a healthy EBITDA margin of 37%. When I compare the second quarter this year with the second quarter of last year, I can note the sales decreased by 22% and the EBITDA by 46%, mainly due to lower prices. On the positive side, we have seen a high result in forest and energy combined with a positive currency effect. Then I turn over to some financial KPIs related to the second quarter of 2023. As mentioned, our EBITDA decreased 17% in comparison with last quarter, but reached 1.7 billion SEK for the second quarter 23, and that corresponds to 37% EBITDA margin. Our industrial return on capital employed came out on 20%, calculated as the average for the last 12 months. The leverage is stable, a bit over 1, despite our almost finalized large ongoing investment projects in Obola, Ortviken, Bålsta and also Gothenburg. and by that we continue to finance all our investments including strategic projects with our operating cash flow. I will now make some comments for each segment and I will start with the forest and during the second quarter we have had a stable supply of wood raw materials to our industries In general, we can note the continued high demand of wood raw materials and by that continued increasing wood prices and that you can also see in the graph in the bottom left. When we compare the second quarter 23 with the second quarter last year, pulp wood prices have increased by almost 35%. Somewhat more for birch and somewhat less for conifer. Corresponding figure for saw logs is an increase of around 15%. Pulp wood prices in the Baltics continue to fall, but they are still higher in comparison with average cost for Swedish supply, counted as free delivered to Swedish mills. When we compare quarter on quarter, sales were up 18% and EBITDA was up 25%, and that is mainly due to higher prices, but also due to higher harvesting level in our own forest. Then I turn over to business area wood. In general, we have a continued weak underlying market for solid wood products. DIY activities had a seasonally positive effect on demand in the second quarter, but will slow down in the third quarter. Professional building activities remained on an okay level in the second quarter, but new housing starts are in a decreasing trend. I estimated a solid price increase with high single digits in percent in Q2 in comparison with Q1 that was also delivered and we increased the average price by approximately 8% during the second quarter. The underlying consumption is as already said weak and despite lower production and also despite the rather normal stock level prices will come down again in the third quarter as we have no strong positive seasonal impact from consumption in the third quarter. So I guess that we will be back close to where we were in the first quarter in terms of prices in the third quarter. Sales and the EBITDA were substantially down due to price and cost of raw material when we compared quarter on quarter. So today's stock level of solid wood products in Sweden and Finland is in relation to the average for the last five years described at top left on this slide. And one can note that the inventory volumes are now back on a normal level. SEA has also maintained normal deliveries during the second quarter and by that we have a balanced stock and also a normal stock level. As can be seen in the diagram to the bottom left, the Swedish and Finnish sawmill production has been on a rather normal level. Outside the Nordic countries, we have seen production containment, not the least in Germany and Canada. And today we can't really see any Russian or Belarusian wood in the European market. I think that we can expect further production containment during the coming quarter, not only maybe in Canada and Central Europe, but also in Scandinavia. 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 with a major negative effect on the profitability. So then I turn over to segment pulp. But first, I'm happy to say that our CTMP expansion continues according to plan regarding production ramp up and also sales growth. In general, sales and EBITDA were down 9 and 55% respectively when comparing the second quarter this year with the same period last year. We note lower prices and higher wood, raw material costs on the negative side. while currency had a positive impact in this comparison. We have seen another quarter with a very weak demand for pulp. Europe and US are still slow, while we have started to see an improving demand in China since May. I forecasted the price bottom to be reached and the price level to be set in China during the second quarter, and that also came in May. but on a very low level, around 610 to 620 USD per tonne. Pulp prices in Europe and US are on high levels, but still in the decreasing trend. The European peak price for deliveries in Europe in July is now set to 1200 USD per tonne, which is a price decrease of 50 USD per tonne. We expect the pulp prices to continue down during the third quarter in Europe and US. I still believe that we will reach the price bottom in these areas in the second half of this year. High cost producers no longer cover the costs and therefore prices shouldn't stay on these levels very long. However, on the negative side, as you can also see in the graphs, inventories for both hardwood and softwood pulp are on record high levels. which indicates that a positive turn in the market might take a while. So moving over to container board. The ramp up of the new craft line and paper machine in Obola is running according to plan. The new recovered fiber line, which is a necessity to reach full capacity, is also progressing according to plan and the ramp up of this line has started successfully. And as earlier communicated, we expect to reach full capacity in Obola in 2026. Sales was down quarter on quarter by 19% due to lower prices, while EBITDA was down by 71%, mainly due to lower prices and higher wood, raw material costs. During this period, we had a planned maintenance stop in Obola and that had a negative impact. result effect of between 90 and 100 million SEK. Box demand has continued to decline in the second quarter, mainly related to lower retail sales and destocking effects. European demand of Kraftliner have decreased by around 15% in the first quarter this year, slightly higher than box demand of 11%, indicating a destocking effect at box plants. We believe in a stronger demand for container board in the second half of this year. On the other hand, there is additional supply in test liner coming on stream in the next quarters, which will put some pressure on the supply-demand balance. Prices for brown craft liner have decreased with 30 euro per tonne in the second quarter this year. and that indicates now a price gap between Kraftliner and Testliner of around 190 euro per tonne. Prices for white top also decreased with 30 euro per tonne in Q2. We have seen unchanged prices for both brown and white Kraftliner from May until today and probably we have reached the bottom in this segment. Container board and especially craft line inventories have been very well balanced by reduction of supply. Despite significantly lower demand, inventories have been stable or slowly decreasing in the first two quarters of 2023. And we would estimate production of container board to be 12-15% lower in the first six months compared to last year, same period. So the current stock level will support, I think, a rather sharp volume and price recovery when the demand comes back. Availability of OCC is still good because of historical high supply of corrugated boxes and lower current demand of test liner. Today's price is around 75 euro per tonne, which is 110 euro per tonne lower than peak in July 2022. Since we are seeing demand decline to level off and strong demand in second half of the year, we can assume that OCC prices will start to increase again based on limited supply. So finally segment renewable energy. In renewable energy we continue with another quarter of strong profitable growth and higher prices in comparison with the same period last year. And due to increasing prices and high demand the income were up 22% and the EBITDA level by 153% when we compare with the same period last year. The market for solid biofuels is estimated to be continued strong due to an underbalanced market. In wind power, land disagreements on SEA land has now reached 8.2 terawatt hours in the second quarter and that is also in line with our communicated plan. Our newly acquired wind farm Skogberget is also delivering according to expectations. Finally, the biorefinery in Gothenburg is under construction and the first product to tank is plant Q4 this year. And we still see a strong market development for HVO and also for sustainable aviation fuels SAF. So by that I think I hand over to you Andreas.

Thank you, Ulf, and good morning, everybody. I'll start off with the forest valuation. Forest prices in northern Sweden declined slightly during the first half of 2023, from just below 420 SEK per cubic meter to approximately 400 SEK per cubic meter. Fewer than normal transactions were made in the first half of the year, and we have therefore left the three-year average price used in the forest valuation flat, at 366 sec per cubic meter. And by that, we maintain a healthy headroom to current prices. The forest valuation increased 1 billion to 99 billion, mainly driven by the growth in standing volume. If you move on to the income statement for the second quarter, net sales declined 22% to 4.6 billion, driven by lower prices. EBITDA reached 1.7 billion despite a weaker market, driven by growth in renewable energy and higher results in our forest division. The EBITDA margin was 37%. Depreciation increased to 471 million due to the activation of the new paper machine in Obola and the new CTP mill at Ortviken. The EBIT margin declined to 27%, and financial items totaled minus 103 million. With an effective tax rate of around 20%, bringing net profit to 0.9 billion, or 1.3 SEC per share. On the next slide, we have the financial development by segment. Starting with the forest segment to the left, net sales grew to 1.9 billion, driven by continued increase in prices. EBITDA increased to 870 million, driven by high prices and seasonally high harvest from our own forest compared to the previous quarter. In wood, prices increased in the second quarter compared to the first quarter due to seasonally stronger demand. Net sales increased to 1.35 billion and EBITDA increased to 201 million, corresponding to a margin of 15%. In pulp, prices continue to decrease and net sales declined to 1.8 billion and EBITDA decreased to 380 million, corresponding to a margin of 22%. Pulp wood raw material prices continue to increase while chemical costs are decreasing. In Container Board, craft liner prices are bottoming out, with stable index prices since May. In Q2, net sales declined to 1.4 billion and EBITDA totaled 217 million, corresponding to a margin of 15%. The planned maintenance stop in Obola had a negative impact of 94 million. In renewable energy, we had another strong quarter with EBITDA stable at around 180 million, despite seasonal lower volumes compared to the previous quarter. The EBITDA margin increased to 49% and was positively impacted, not the least by strong tall oil demand. On the next slide, we have the sales spreads between Q2 last year and Q2 this year. Prices declined 25%, with lower prices in wood, container board, and pulp. Volumes declined 5%, driven by a weaker wood market, which was partly offset by higher volumes in container board and pulp from the ramp-up of the new paper machine in Obola and the new CTP mill at Ortviken. And lastly, currency had a positive impact of 8%, bringing net sales to 4.6 billion. Moving on to tributar bridge and starting to the left, price mix had a negative impact of 1.5 billion and lower volumes, mainly due to a weaker wood market, had a negative impact of 167 million. High cost for mainly wood raw materials had a negative impact of 142 million, while energy had a neutral impact, which really shows our high self-sufficiency in both energy and wood raw material. with a positive impact from currency and a positive impact from lower distribution costs. In total, EBITDA decreased to approximately 1.7 billion, corresponding to a margin of 37%. We continue to have a strong operating cash flow, 650 million for the quarter and 1.85 billion for the first six months. And this means we're continuing to fund our strategic investments with operating cash flow. Look 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 108 billion. Net debt was stable at around 11 billion, corresponding to 1.3 times EBITDA. And we have now almost finalized our large ongoing investment projects in Obola, Ortviken, Bolsta, and Gothenburg. Equity increased to 97 billion, and net debt to equity was 11%. Thank you. With that, I'll hand back to you, Ulf.