Svenska Cellulosa Aktiebolaget SCA (publ)

Good morning and welcome to this presentation of SEA's year-end results for 2023. With me here today, I have President and CEO Ulf Larsson and CFO Andreas Everts to go through the results and take your questions. Over to you, Ulf.

Thank you for that, Anders, and good morning. Also from my side, a warm welcome to the presentation of our result for the full year and fourth quarter 2023. I'll start with this slide to summarize 2023. During last year, SEA showed that we can deliver good profitability even in a challenging world. Despite higher wood, raw material costs and despite that the weakened market has led to substantially lower prices, SEA reached 6.8 billion SEK on EBITDA level and by that also an EBITDA margin of 38% for the year. During the year, we have had ongoing efforts to start up and gradually increase production in sites where strategic investments recently have been carried out. This has resulted in higher delivery volumes in comparison to last year due to the new paper machine in Obola and due to the new CTMP line at Ortviken. These investments will successively contribute to increased productivity and also increased cash generation during coming years. SEA's growth in renewable energy, which became a separate segment during 2023, continued and the result doubled in comparison to 2022. Continued increase in harvesting level from our own forest and high degree of self-sufficiency in wood, raw materials, energy and logistics have also contributed to strong results. The book value of SEA forest assets increased by 9.6 billion SEK during the year and was 107.5 billion SEK at the end of 2023. And as you already know, SEA bases the valuation of the forest on complete transactions in the region where SEA owns land. So, turning over to some financial KPIs related to the full year 2023. As already said, our EBITDA reached 6.8 billion SEK for last year, which corresponds to a 38% EBITDA margin. Our Industrial Return on Capital Employed came out on 7% for the full year, which of course was lower than our record year 2022. The leverage is at 1.6 and we have now finalized our big strategic investments in Obola, Ottviken and Gothenburg, which will all contribute positively coming years. The proposed dividend for the AGM to decide on is 2.75 SEK per share and this is in line with our aspiration to provide a long-term stable and increasing dividend to our shareholders. Last year we gave 2.50 SEK per share and finally earnings per share was 5.23 SEK. This slide will give you an overview of KPIs for the fourth quarter 23. Our EBITDA reached 1.64 billion SEK during the fourth quarter, which gave us an EBITDA margin of 37% for the quarter. Our equity continues to increase and despite the fulfillment of several large strategic projects, net debt to equity remains on a solid level of 10%. Then I will give you some comments for each segment, starting with the forest. In general, we can note the continued high demand for wood-raw materials. Even so, we have had a stable supply of wood-raw materials to our industries during the fourth quarter. As can be seen in the graph in the bottom left, prices for both pulpwood and saw logs have steadily increased over a long period. In the Baltics, prices have been stable during the fourth quarter. When we compare Q423 with Q422, sales were up 13% and EBITDA was up 56%, mainly due to higher prices and the positive effect of a revaluation of biological assets. Turning over to business area wood, in general we've had a continued slow underlying market for solid wood products in addition to a seasonally slower fourth quarter. Despite the general low demand we can see an uplift in housing starts in the US and also good demand in North African countries. Last quarter, I estimated a stable price in the fourth quarter in comparison with the third. Including currency effects, we saw a minor price decrease of 3% in the fourth quarter. Sales and EBITDA were down with 11 and 8% respectively in the fourth quarter, 23 in comparison with the same period last year. And that was mainly due to lower prices, higher wood, raw material costs and also somewhat lower volumes. 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. As you can see, the stock level is on a record low level and also in a decreasing trend. SEA has maintained stable deliveries during the fourth quarter and due to some planned production curtailments over Christmas, LCA stock level is on a very low level today, and that might have a small negative effect on deliveries for the first quarter this year. As can be seen in the diagram to the bottom left, the Swedish and Finnish SOMIs production has been substantially below normal level. Outside the Nordic countries, we have also seen continued production curtailments, mainly in Canada and Germany. If you look to the top right in the diagram there, we can see the price development and due to low production in many regions, we estimate stock levels to stay low for a while. Based on that fact, we also forecast a price to increase with mid single digits during the first quarter this year. And if inflation continues down in the interest rates level out or even decrease, we might see an increased activity in the repair and remodeling sector, giving support for further price increases in the second quarter. So over to PALP. First, I'm happy to see that our CTMP expansion has been well received in the market and production ramp up continue according to plan. Sales and EBITDA were down 11 and 89% respectively when comparing the fourth quarter this year with the same period last year. We can note lower prices and higher wood, raw material costs on the negative side, while currency and volume have had a positive impact in this comparison. The yearly maintenance stop at Östrand took a bit longer time than planned, which had an additional negative impact of 10 to 15 million SEK during the fourth quarter. The strong demand of pulp in China continued in the fourth quarter and the import of pulp was on a record high level. This offset the somewhat weaker demand we still saw in Europe and US. and consequently produce inventories of pulp are on a good level as you can see here. In Europe we saw increasing prices on all grades of pulp with MBSK increasing from 1150 USD per tonne in September to 1250 in December. The price then continued up in January to 1300 USD per tonne and SEA is now informing customers about the new base price for MBSK pulp of 1350 USD per tonne valid from February. CTMP is following the same pattern with increasing prices in Europe. In US prices were still on the bottom in October and November before starting to increase in December. Prices in Europe were partly offset by increase in rebates from 1st of January this year. So over to container board. The ramp up of the new Kraftliner 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 as we have communicated earlier, we expect to reach full capacity in Obola in 2026. Sales was down by 10% in the fourth quarter in comparison with the same period last year due to lower prices, while EBITDA was down 48%, mainly due to lower prices and also higher raw material costs. On the positive side, we saw high volumes and a positive currency effect. Box demand has stabilized during Q3 and Q4, while retail spending and manufacturing remain weak due to the economic situation in Europe. European demand of Kraftliner has also been stable to slightly positive in the fourth quarter this year, which indicates stability and also stopped to decline in demand. We believe that the market will gradually improve during 2024, driven by stabilization and lower inflation and interest rates, which will impact the consumer spending in a positive way. On the other hand, there is additional supply in Testliner ramping up in the coming quarters, which will put some additional pressure on the supply-demand balance. Prices for brown and white craft liner have remained stable from May and including fourth quarter 2023. Test liner prices have declined with 20 euro per tonne in the fourth quarter. Despite lower demand for the full year, inventors have been stable with a normal seasonal increase in December and the current stock level will support a rather sharp volume and price recovery when end-user demand picks up again. Availability of OCC is still good because of lower current demand of test liner. Prices of OCC have remained stable in Q4 and today's PPI index is around 75 euro per tonne, which is 110 euro per tonne lower than the peak in July 2022. Since we see the amount to be stable to somewhat positive moving into 2024, we can assume that OCC prices will start to increase again based on limited supply. Then over to business area renewable energy and we have continued with another quarter of strong profitable growth in this area. We have higher prices in comparison with the same period last year. Due to increasing prices and high demand, the sales were up 17% and EBITDA level by 48% when we compare Q4 last year with the same period 2022. The market for solid biofuels is stable and the demand is high. Continued high volumes are expected in the coming quarter, not least due to positive seasonal effect. SEA continues to grow in leasing out land for wind power and has reached 9 terawatt hours of wind power on SEA land by the end of Q4, and that is equal to 20% of installed capacity of wind power in Sweden. Finally, the biorefinery in Gothenburg is under commissioning and is currently ramping up, and I'm happy to say that first product to tank was produced during January. So by that I hand over to you, Andreas.

Good morning everybody. I'll start off with the forest valuation and forest prices in northern Sweden decreased in 2023. In the graph we have the forest prices development in SCA's region according to average of Ludvig & Company and Svefa and the prices decreased 5% to 398 SEK per cubic meter. In NCS Forest Valuation we used the 3-year average, which increased by 8% to 395 sec per cubic meter. The valuation of OSCE's forest assets increased by almost 10 billion to 107 billion in 2023. The increase was driven by both the price increase of 8% and the increase in standing volume of 1.5% to 271 million cubic meters. Approximately 2.2 billion of the increase went through the P&L. If we move on to the income statement and focus on the full year to the right, net sales decreased 13% to 18.1 billion, driven by lower prices, which was offset by higher volumes from the new paper machine in Obola and the new C&P mill at Ortviken. EBITDA reached 6.8 billion despite a weak market driven by almost double results in renewable energy and high results in our forest division. The EBITDA margin was 38%. Depreciation increased to 1.95 billion due to activation of strategic investments. Debit margin declined to 27% and financial items totaled 414 million. Benefactive tax rate of just below 20% bringing net profit to 3.6 billion or around 5.23 sec per share. If we look at the fourth quarter to the left, EBITDA declined to 1.6 billion, driven by mainly lower prices. Net profit for the quarter totaled 833 million, or 1.22 sec per share. Look at the dividend. We have a proposed dividend of 2.75 sec per share, a 25-hour increase compared to the dividend last year, which is in line with our target to have a long-term stable and increasing dividend over time. On the next slide, we have the sales bridge for the full year. Prices declined 23%, with lower prices in wood, container board and pulp. Volumes increased 4%, driven by the new paper machine in Obbola and the new sit and pee mill at Ortviken. And lastly, currency had a positive impact of 6%, bringing net sales to just above 18 billion. Moving on to the beta average, price mix had a negative impact of 4.7 billion and higher volumes had a positive impact of 186 million. High cost for mainly wood, raw materials had a negative impact of 410 million, while energy had a positive impact of 71 million, which shows our high self-sufficiency in both energy and wood, raw material. We had a positive impact from currency and a positive impact from higher revaluation of biological assets and lower distribution costs. In total, EBITDA decreased to approximately 6.8 billion, corresponding to a margin of 38%. On the next slide, we have the financial development by segment, starting with forest to the left. Net sales increased to 7.7 billion, and EBITDA increased to 3.5 billion, driven by higher pulpwood and solar prices, as well as higher valuation of biological assets. In wood, prices declined with over 20% in 2023 compared to 2022, while prices for wood raw materials increased. Net sales decreased to 5.2 billion, and EBITDA declined to 550 million, corresponding to a margin of 11%. In pulp, prices have bottomed out after several quarters of declining prices and increased somewhat in the fourth quarter. For the full year, net sales declined to 6.9 billion, where lower prices were partly offset by higher volumes. EBITDA declined to 1.2 billion, corresponding to a margin of 18%. And as Ulf mentioned, the fourth quarter we had a planned maintenance stop with impacted results with 147 million. In container board, craft line prices declined significantly in the end of 2022 and the beginning of 2023, but have now been stable since May. For the full year, net sales declined to 5.9 billion, driven by lower prices, which are partly upset by higher volumes from Ebola. EBITDA declined to 1.2 billion, corresponding to a margin of 21%. In renewable energy, we almost doubled EBITDA from the previous year, almost 700 million, corresponding to a margin of 47%. On the next slide, we have the sales bridge between Q4 last year and Q4 this year. Prices declined 25%, with lower prices in wood, container board, and pulp. Volumes increased 10%, driven by the new paper machine in Obola and the new CTMP mill at Ortviken. And lastly, currency had a positive impact of 5%, bringing net sales to 4.4 billion. Moving on to Ebitda Bridge, and again starting to the left, price mix had a negative impact of 1.2 billion, and high volumes had a positive impact of 202 million. High cost for mainly wood-rode materials had a negative impact of 66 million, while energy had a positive impact of 86 million, which shows our high self-sufficiency in wood-rode material and energy. We had a positive impact from currency, and the quarter was also positively impacted by one of items of approximately 270 million, 340 million from high revaluation, which offset by 70 million in one of costs. In total, EBITDA decreased approximately 1.6 billion, corresponding to a margin of 37%. In another year with strong operating cash flow, almost 3 billion for the full year despite the weak market. For the quarter, we had an operating cash flow of minus 55 million, mainly relating to the timing effect of working capital between Q3 and Q4. In Q3, we released 700 million working capital, which we go back in Q4. And as you know, our operating cash flow of 398 million relates mostly to working capital, currency hedges, and should definitely be seen together with changes in working capital. Looking at the balance sheet, again, the value of the forest assets increased to $107 billion. Working capital increased to $4.3 billion. And total capital employed increased to $115 billion. Net debt stood at $10.8 billion. And we have now almost finalized our large ongoing investment projects in both Obola, Ortviken, Bolsta, and Gothenburg. Equity increased to 104 billion, and net debt to equity was 10%. Thank you. With that, I'll hand back to you, Ulf.