Svenska Cellulosa Aktiebolaget SCA (publ)

Good morning and welcome to this presentation of SEA's interim report presentation for the third quarter of 2023. With me here today, I have CEO and President Ulf Larsson and CFO Andreas Everts. Now over to you, Ulf.

Thank you, Anders. And also from my side, a good morning and welcome to the presentation of SEA's result for the third quarter 2023. So when I summarize the quarter, I can state that we have delivered a stable result with a strong cash flow, not the least driven by a profitable growth in renewable energy, a stable performance in forest, but also resilience against cost inflation. And the latter, that is, of course, partly due to our high degree of self-sufficiency in our wood and energy supply, but also in logistics. We see a stabilizing demand in the market for our products. Prices for solid wood products decrease as expected during the third quarter, but will as an average remain on current level also in the fourth quarter. Container board prices have been flat since May this year, while prices for pulp have bottomed and started to increase also as expected. EBITDA decreased in comparison with the third quarter last year but reached 1.4 billion SEK and by that a healthy EBITDA margin of 33%. So when I compare the third quarter this year with the third quarter last year I can note that sales decreased by 14% and the EBITDA by 43% and that is mainly due to lower prices. On the positive side, we have seen a high result in forest, a high result in energy, and that is combined with high delivery volumes due to commission strategic investments and also positive currency effect. Finally, I can remind you that we recently have announced an acquisition of a wind park. Fasikan and the total cost is estimated to 1.7 billion SEK and the yearly production will be around 0.33 TWh and the commissioning will be early 2026. So turning over to some financial KPIs related to the third quarter. Our EBITDA decreased 17% in comparison with last quarter, but reached, as I said, 1.4 billion SEC. And that corresponds to a 33% EBITDA margin. Our industrial return on capital employed came out on 12%, calculated as the average for the last 12 months. The leverage is at 1.4, and that is despite our almost finalized large ongoing investment projects in Obola, Ortviken, Bålsta and also Gothenburg. And by that, we also 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 like to start with forest. During the third quarter, we have had a stable supply of wood-raw materials to our industries. In general, we can note the continued high demand for saw logs, while the demand for pulpwood has begun to weaken. As can be seen in the graph in the bottom left, prices for both pulpwood and saw logs have steadily increased. during a long period. And we now feel that they even out on a historically high level in the Baltics. We also see that raw materials prices have started to decline. When we compare Q3 23 with the same period last year, sales were up 17% and EBITDA was up 20%. And that is mainly due to higher prices. But we also have a positive effect due to higher harvesting level in our own forest. Turning over to business area wood. In general, we have a continued slow underlying market for solid wood products. DIY activities had a seasonally positive effect on the demand in the second quarter, but have now come down as expected in the third quarter. New housing starts are in a decreasing trend with the US as an exception. However, stock levels in the market are low, so demand in end-use market will create orders back to the sawmills. I estimate that the price should come down in the third quarter and reach the level we had in the first quarter. And that also happened, and we have seen a 7% price decrease in the third quarter in comparison with the second quarter. I now feel that we have reached the bottom and expect unchanged prices in the fourth quarter. Sales and EBITDA were substantially down Q3-23 in comparison with Q3-22 and that is due to price and cost of wood raw material. 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 the top left on this slide. We note that the inventory volumes are on a normal level. SEA has also maintained good deliveries during the third quarter and by that we have a balanced and also normal stock level. As can be seen in the diagram to the bottom left, the Swedish and Finnish sawmill production has been below normal level, approximately 5% less than last year, same period. Outside the Nordic countries, we have also seen continued production curtailments, mainly in Germany, but also in Canada, and we can expect further production curtailments during the coming quarter. When looking at the diagram to the top right we can note that the price peaked in the third quarter 21 and that was on historically high level. Prices have come down substantially since then and at the same time the prices for SOLOGS have increased with the major of course negative effect on profitability. So over to PALP. First, I'm happy to say that our CTMP expansion continues according to plan regarding production ramp up and sales growth. Sales and EBITDA were down 14 and 80% respectively when comparing the third quarter this year with Q3 2022. We can note lower prices and high wood-room material costs on the negative side. My currency and also volume have had a positive impact in this comparison. We did start up a planned maintenance stop at Östrand in the third quarter with a negative result impact of approximately 50 million SEK in the third quarter. We have seen a quarter with increasing demand of pulp in China and prices have also been rising lately, especially in China. Profitability has improved for Chinese deliveries. The increase in demand and turnaround of prices is an effect of low inventories by customers and also limitations of capacity from high cost producers for deliveries to China. The market in Europe has also improved in September. Customers are asking for increased volumes. Therefore, SEA has also announced a new base price of $1,200 per ton that is effective from October. The global inventories are on a stable but somewhat high level. SEA inventories are on a medium to low level after the planned maintenance stop. And we are also expecting prices in the U.S. to start increasing as of November. The prices of CTMP have also increased with approximately 75 USD per tonne in Asia. The closure of the CTMP line at Östrand was accomplished yearly September as planned and by that all CTMP production has now been transferred to the new line at Ortviken. From competition, we note that Metz's new mill in Keme has started up and Stora Enso's mill in Sunela has been announced to be closed. We have also noted that substantial BSK pulp capacities have been closed in Canada. In total, we by that estimate that the market balance to be more or less unchanged. Moving over to container board. The ramp up of the new craft line paper machine in Obola is running according to plan. The new recovered fiber line which is as said before 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 by 2026. Sales was down quarter on quarter by 18% due to lower prices, while EBITDA was down by 65%, mainly due to lower prices and higher raw material costs. Box demand has been stable in Q3. European demand of Kraftliner has also been stable in the third quarter this year, which indicates that pipeline effects have come to an end. We believe now in a stronger demand of container boards step by step. On the other hand, there is additional supply and test liner coming on stream in the next quarters, which will put maybe some extra pressure on the supply-demand balance. Prices for brown craft liner have been stable in the third quarter this year. Prices for craft liner white top have also been stable in Q3. And we have now seen unchanged prices for both brown and white craft liner from May until today. And probably we have also reached the bottom in this segment. Container board and especially craft liner 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 the current stock level will support a rather sharp volume and price recovery when the demand comes back. Availability of OCC is still good because of historically high supply of corrugated boxes and lower current demand of test liners. Today's PPI index price is around 75 euro per tonne, which is 110 euro per tonne lower than the peak in July 2022. Since we see demand to be stable and strong demand in the second half of the year, we can assume that OCC prices will start to increase again based on a limited supply at the end of the year. Renewable energy. SEA continues to grow in wind power and has recently announced an acquisition of a wind project 100 kilometers west from Sundsvall. The total investment cost is 1.7 billion SEK. All turbines will be located on SCA land and the production capacity will be a little bit over 0.3 terawatt hours per year. The commissioning will start early 2026 and I will come back and give you some more details in a short while here. In business area renewable energy we continue with another quarter of strong profitable growth and higher prices in comparison with the same period last year. Due to increasing prices and high demand, the sales were up 27% and the EBITDA level by 89% when we compare with the same period last year. The market for solid biofuels is stable. Volumes are also expected to increase in the coming quarter due to seasonal effect. In wind power, land lease agreements on SCA land reached 8.3 terawatt hours in Q3 and that is exactly in line with the communicated plan. We have seen lower energy prices in the northern part of Sweden during Q3 and that is due to warm weather, strong wind and also strengthened hydrological balance. Finally, the biorefinery in Gothenburg is under construction and the first product to tank is planned during Q4 this year. So by that I hand over to you Andreas.

Thank you, Ulf, and good morning, everybody. I'll start off with the income statement for the third quarter. Net sales declined 14% to 4.3 billion, driven by lower prices. EBITDA reached 1.4 billion, despite a weak market, driven by growth in renewable energy and high results in our forest division. The EBITDA margin was 33%. Depreciation increased to 404 million due to activation of the new paper machine in Obola and the new sitting pin mill at Ortviken. Debit margin declined to 21% and financial items totaled minus 111 million. We had an effective tax rate of below 20%, bringing net profit to 663 million or 0.96 SEK per share. On the next slide, we have the financial development by segment. And starting with the forest segment to the left, net sales total 1.9 billion and EBITDA decreased to 724 million due to seasonally lower harvest from an overforest compared to the previous quarter. In wood, prices decreased in the third quarter compared to the second due to the seasonally lower demand. Net sales decreased to 1.2 billion and EBITDA totaled 161 million, corresponding to a margin of 13%. In pulp, prices have bottomed out after several quarters of declining prices, and we announced a price increase in October. Net sales declined to 1.6 billion, and EBITDA decreased to 173 million, corresponding to a margin of 11%. Lower pulp prices, lower energy prices, and ramp-up volumes from CTMP Ortviken had a negative impact on earnings. At the end of the quarter, we started plain maintenance stops at Örstrand, which had a negative impact of 47 million. In Container Board, craft line prices have been stable since May. In Q3, Net sales total 1.4 billion, and EBITDA increased to 253 million, corresponding to a margin of 18%, and the planned maintenance stop in Munchson had a negative impact of 68 million. Renewable energy with another strong quarter, with EBITDA at around 155 million, and a margin of 38%, despite a seasonal weaker quarter and lower electricity prices. On the next slide, we have the sales bridge between Q3 last year and Q3 this year. Prices declined 30%, with lower prices in wood, container board and pulp. Volumes increased 9%, driven by the new paper machine in Obla and the new CTMP mill at Ortviken. And lastly, the current set of positive impact of 7%, bringing net sales to 4.3 billion. Moving on to Rebit Average, and starting to the left, price mix had a negative impact of 1.6 billion, and higher volumes had a positive impact of 152 million. Higher cost for mainly wood, raw materials had a negative impact of 51 million, while energy had a positive impact of 36 million, 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. And Q3 last year was also negatively impacted by transformational costs at Ortviken. In total, EBITDA decreased approximately 1.4 billion, corresponding to a margin of 33%. We continue to have a strong operating cash flow, 1.2 billion for the quarter and 3 billion for the first nine months. And this means that 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 decreased to 3.6 billion, driven by lower prices and maintenance stops in Q3. Total capital employed increased to 107 billion. Net debt was stable at around 10 billion, corresponding to 1.4 times EBITDA. And we have now almost finalized a large ongoing investment project in Obola, Ortviken, Bolsta, and Gothenburg. Equity increased to 97 billion, and net debt to equity was 10%. Thank you. With that, we'll hand back to you, Ulf.