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.

So, thank you for that, Andreas. Well, we are aware of two reports that were released yesterday and I'd like to clarify some facts here. We have not digged into details. We will of course do so coming week and then we will disclose something. But if we say some words about what we disclosed regarding Standing volume on SEA land, I can just state that this is 100% in line with statistics from Swedish National Forest Inventory, what we in Swedish call Riksskogstaxeringen. So that is by other words the official statistics from Sweden. The second item was the forest valuation and I think we have a very clear transparent model that is used from many companies within Sweden and I think that the main part of you already know how we work with this but we base the price on official price statistics in the areas where we have our forest holdings. The third thing was about the harvesting rate, and I can guarantee that SCA harvests less than 70% of available annual growth. But on the other hand, we can say that we're happy to say that we had a record level when it comes to harvesting on our own forest last year, close to 5 million cubic meters, and that will continue to increase coming years up to 5.4 million cubic meters. The policy in SCA is, by the way, also to manage our forests in a way that we should never have to reduce the annual harvesting level, and that has been a successful policy since 1929, I would say. When it comes to net debt, I like to state that utilized commercial papers are reported in the net debt as current financial liabilities. Utilized credit facilities are reported in net debt as non-current financial liabilities. So that is, by other words, just to take a look in our financial statements. So, and then I'd like to summarize the quarter. And again, I must say that We have had a rather challenging time during 2023. We are happy to deliver a solid result of 6.8 billion SEC on EBITDA level, an EBITDA margin of 38%. We have seen already now an effect of our strategic investments and we deliver higher volumes than we've done before in pulp and also container board. We are also happy to say that our segment Renewable Energy, which was the closed first time 1st of January 2023, has delivered a very good result and we reached almost 700 million SEK on EBITDA level during this year. And as already mentioned, we had record high harvesting volumes from our own forest during the past year. The EBITDA level is down and that is of course due to tougher conditions in the market and it is related to lower prices and also higher wood raw material costs. So by that I think that we can open up for some questions please.

As a reminder if you would like to ask a question or make a contribution on today's goal please press star 1 on your telephone keypad. To withdraw your question, please press star 2. We'll take now our first question from Charlie from BNP Paribas. Your line is open now. Thank you.

Thank you. Good morning, gentlemen. Thank you for taking my questions. I'll stick to three, please. Firstly, on the container board segment, you were commentating about stability in the price of container board. I think, according to at least some sources, such as RISI, there has been material slip in the craft liner price in Europe in January. I just wonder whether you would agree with that. I appreciate it's kind of developed on a polling basis. The second question relates to the revaluation. Just in terms of the biological component, which you passed through the P&L, that was obviously a bigger number in the fourth quarter than we have seen so far in the earlier quarters of this year or last year. Were there any changes in assumption in particular that drove that larger biological revaluation gain in Q4? And lastly, could you give some guidance on the amount of total capex you expect for the business in 2024? Thank you.

I think we can start with revaluation, Andreas.

I can start with revaluation. So going forward, we expect around... 1.8 to 1.1 billion. We had, as you know, a quite large price increase this year, also driven by higher raw material prices, both on soil logs and on PolPod, which goes into the DCF model for the biological assets. On the CapEx side, this year we had current CapEx of around 1.6 billion, and we expect something similar next year with some inflation. And if we talk about strategic CapEx, then we have almost finalized our ongoing project. 200 million left in payments on Obola and Sittinpi. We have around 450-500 million payments of our Fasig and Windmill next year. And we have just below 100 million in Gjellesåmel, and then we have some minor projects. And of course, if it depends on if we do any forest acquisitions in the Baltics.

And I didn't catch your first question. I heard it was something about the container board market. But if you can please repeat that question.

Yes. You were commentating that you had seen stable pricing in the craft liner market in Europe. It appears from... RSI pricing that there has been a slip, though, in January. Do you recognize that decline as we enter the first quarter of 2024? Yeah.

And I mean, we have seen it in test liner and that was minus 20 euro per ton and and Now, I mean, one can expect maybe a small price decrease also for a craft line. Typically, they follow each other. And so that might be the case for the first quarter. But all in all, I mean, we saw that demand picked up in the end of last year. And again, I say that we are in the bottom. You might see some small volatility for a while, but we have a reasonable positive view on container board market going forward anyway. But it might be so that we see minus 20 in the beginning of this year.

And we mainly, our price are mainly linked to Oivid, and I think that index will come shortly, probably next week.

We'll take our next question from Robin Santarpita from Carnegie. Your line is open now.

Thank you very much, and good morning, everybody. Three questions. First of all, in terms of the pulp segment, what kind of order intake activity is you sell mainly into Europe and a bit into North America? What is the order intake activity now in January versus what you saw in December and at the end of Q4? Is there any improvement or is it still at the low level? Related to PALP, can you share the increase in the discount on the list prices? Is it a couple of percent or is it more?

Well, first, I think it's a rather stable market. As I said, we had record, not SAA, but all in all, it was a record volume to China in the fourth quarter. Then we have the Chinese New Year now, so it has come down a little bit. On the other hand, we see increasing activities in Europe and also in the US. And as you saw in the graph, the inventory level is on a very normal level, I would say. So we are rather optimistic there. When it comes to discount rates, I can say that in the US, there were no further discounts for this year. In Europe, you had something, and again, it differs a little bit between different customers and so on, but some extra discount will come in from January in Europe.

Okay, thank you very much. Related to cash for a second question, your working capital seems to sort of, you did not have a decline in the working capital, a release. And we could see, for example, one of your pieces yesterday reporting quite a significant release. And we also see sales prices coming down during last year. What is the reason for the working capital that are remaining at a bit of an elevated level, and what should we expect going into 2024?

Yes, if we talk about working capital, I think it's several effects. First effect is that you have a higher wood, raw material cost, which, of course, increases the value of the inventories. The second one is the biggest one, and that's that we are ramping up both our CTMP mill, our Obla mill, our Bolsta mill, and now we're also starting a ramp up of our biorefinery, which of course has impact of working capital. I think those are the two biggest reasons.

I understand. And the final question I have is related to forest segment. If we deduct the re-evaluation gains, you have a quite massive increase in the cash EBITDA, 70% in 2023. It probably reflects the the increases in pulpwood and log prices of what you sell out of the forest have surged. First of all, how do you expect log and pulpwood prices to develop in your areas in 2024? And how do you expect the cash EBITDA in the forest? Will it remain at these much higher levels than you have seen in history? Or are there elements caused increasing that might take it down?

Yeah, what we can answer on is the price development. And as it is just now, and that is a little bit of an unusual situation, but I mean, what we have seen in the market is that both prices for saw logs and pulpwood has continued to increase. And recently we saw in the very northern part of Sweden and also in the very southern part of Sweden an additional increase both for saw logs and pulpwood. And that is Probably it's an effect of what we've talked about before, reduced flow from Russia over to Finland. And also it is announced that the state-owned forest in Sweden, Sveaskog, they will reduce the harvesting level. I mean, that might have an impact, of course, in the market. So yes, now, yes, raw material prices, they have continued to increase and we see nothing else going forward. They will at least, I think, remain on this level for a while. And so that is the situation. In that perspective, it's good for us. I mean, we are a big forest owner and by that we can handle our supply, but it puts an extra pressure in the market for sure. And we don't give forecasts. I mean, you know what we had this year in the forest, and I think you can expect what we will have coming year also based on that.

Good. That is clear. Thank you very much. Thank you.

We'll take now our next question from Johan Brunselius from DNB Markets. Your line is open now.

Yes, good morning, everyone. It's Johannes here. I have a question on how we should think about your strategic investments, Obola, the CTMP mill, etc. Is it possible to quantify the positive impact in the fourth quarter from these, and how should we be thinking about the coming quarters? Will you get a benefit just from the fact that you will absorb more fixed cost? That's my first question.

We can take that one first. And I would say in fourth quarter, I don't believe that you saw too much. I mean, we had an increase in volume that you could see. But on the other hand, when you ramp up these big mills, you have lots of extra costs. But of course, step by step, it will improve. And what we have said about Obola is that we would reach full capacity in 2026. And I guess that will be more or less the same case for the CTMP line.

So yeah, would it be fair to assume that the benefits will be sort of coming off through in 2024? Or is it more back and loaded the positive step up in earnings?

I think it's more back and loaded, to be honest. I mean, it is the biggest craft liner machine in the world. And I mean, we have different challenges. And for me, it's more important to do it the right way than to be in a very hurry. So I think it's so important now that we find the right quality. And I mean, if we find some problems now, then we are stopping. We rebuild or we repair or we do things and then we start up again. But I think it's good timing also to get it right just now when the market is a little bit slow. So we are not in a hurry in that perspective.

Then my second question is on your renewable energy business, which is showing good momentum. Is it fair to assume that this sort of growth will continue in the foreseeable future, and will it be a big change when the biorefinery in Gothenburg is fully ramped up?

I think we will continue to grow this segment. But then again, we always work with the market prices. I mean, when they are selling the sawdust to Renewable Energy, they have to pay a market price. And we see also that the price for sawdust will come up quite substantially in this year. But I mean, that is internally. But for me, it's so important that we keep a solid market price between different segments. The growth will continue and we are very happy now that we see that the biorefinery in Gothenburg is under commissioning now and it looks very promising.

Final question is on on the line you have in the in the accounts called intra group which was unusually negative 150 it's sort of typical is below 100 negative was there anything unusual in in the fourth quarter and and yeah if you can comment what we should bake in in our modeling going forward you mean in the segment other Yeah, segment other, correct.

Yeah, we are, but one of cost around 70 million for quarter, which we don't expect in Q1. Okay, yes, that's good.

Thank you.

We'll take now our next question from Linus Narsson from CEV. Your line is open now.

Thank you very much, and a good day to everyone. Returning to capital allocation. It's been quite a few busy years. You've been very active, actively investing in your assets. It seems to me, correct me if I misheard you, the line wasn't perfect, but I think you said current capex 1.6 and then some additional 800 million of strategic capex in 2024, correct me if I misheard that. But is it fair to think that CapEx is coming down somewhat here? And also, generally, your thinking, is that different given a changed interest rate environment? Or doesn't that really impact your capital allocation decisions?

I can just start. General, I mean, just now we are 100% focused on... Well, ramp up what we have already built. We have the Craftliner machine in Obola. We have the CTMP line in Ortviken. We have also done a rather big investment in Obola sawmill, the biggest pine sawmill in Sweden. And that ramp up is also progressing according to plan. And we have this biorefinery. And we are just now also building a new wind park. so i mean we have a lot of ongoing projects so i think it's fair to say that now we will we will be very focused on on these projects and secure what we have promised when when we have got the money for these investments so that that will be the main focus yeah on the complex side i mean you're right helenos but that 800 million is excluding any potential forest acquisitions in the baltics right

Great, thanks for that clarification. And then just on ST1 Gothenburg, could you just, what's the status and maybe more importantly, how does it enter into your P&L accounting-wise and is there kind of any startup costs that we should be aware of that would be helpful?

We can start with the startup. I mean, it's under commissioning now. We have the first product to tank. Typically, the startup curve would be much steeper than in comparison with the sawmill or pulp mill or paper mill. So, I mean, I think we will have a rather sharp startup curve now.

And accounting-wise, it's a joint venture, so we will get the net profit from the JV in our books. or our share of the net profit in our books.

Right, so no depreciation or anything like that?

No, no, just the net profit.

Great. Thank you very much. And then maybe just one final question on forest valuation. Could you please remind us when you last did your forest survey and when the next one is coming up?

I mean, typically, I think we had the last one between 2016 and 2018. I mean, it takes a while. And then we did some extra survey back in 2019, I think. And that was also when we calibrated our own survey So that's why I'm very sure that the standing volume that we have today, it's not overestimated at least. It's not overestimated. And typically we do it every 10th year. But as you know, we have seen that the growth is just now a little bit faster than we thought in the past. And that might be due to the climate change. We have had a little bit of warmer climate for a while. In order to find the right timing also for thinning operations and things like that, we have done it a little bit more with a little bit higher frequency, but typically so.

And when do you think the next one is due?

Yeah, I'm not 100% sure. I have to come back on that one. But if we said 16 to 18, I suppose it will be 2026, around 2026 or something like that.

Great. Perfect. Thanks a lot.

That was very helpful.

And just to add to that, Linus, also, I mean, we do the check. All the time when we harvest, I mean, then we compare what we had in a certain stand with what we had in the register. So, I mean, that's also a sanity check. Every time when we do a harvesting operation, then we compare what we had in the register.

And just now that you say that, what's your... conclusion from those intrasurveys? What conclusions can you draw when you make those benchmarks?

We underestimate the standing volume that we have. Continuously, we underestimate, which I think is the case.

In a significant way?

No, but I mean, we underestimate the standing volume. But maybe we have also step by step a little bit more of nature conservation. So I think that is plus and minus. So it's more or less zero effect.

All right. Perfect. Thanks.

Thanks.

We'll take now our next question from Andy Jones from GBS. Your line is open now.

Thanks for the good question. I've got a few here. Firstly, just on the forest valuation aspect and some of the aspects of this report. I mean, they were referencing, you know, a much higher forest density compared to piers. I'm just wondering what your view is on what's driving that. And then also just on the harvesting. I mean, you've been very clear that you grow more than you harvest. You know, this 70% sort of rate, you know, sounds pretty reasonable. But, you know, they obviously highlight that, the proportion of the harvesting done by yourselves compared to the proportion of your land is higher, implying that, like, others are harvesting relatively less. And given the high price of saw logs and pulpwood, how do you explain, you know, why some of the peers are not harvesting at the same rates as yourselves? Could you try to explain, you know, those two discrepancies between yourselves and peers that's referenced in that report?

I'll start with the second one. I cannot really talk for my colleagues. But I think when we have read through the report, we can see a lot of things that are not correct. But we have to answer for ourselves. And as I said, we know pretty exactly what we have in our forests, both the standing volume, what we harvest, and what we will have in the future. We have done this since 1929, and we have step by step been underestimating the standing volume but also the harvesting potential and and i'm 100 sure that that is the case also going forward here so but but i mean our peers they have to answer for themselves but as i said we haven't really bothered to get into details yet but but we will do that and we will release something in next week or the week after

And just on another topic, the Red Sea shipping issues and increased freight rates, as far as your business is concerned, how do you see them? What are the biggest impacts? Are you having a major impact in terms of shipping pulp to China or is it impacting your sales channels for some of the? Can you just talk about some of the potential impacts you're seeing from that issue?

For us, it's, I would say, only pulp, mainly pulp that is impacted here. And I mean, of course, if you have to go around Africa, that will cost you an extra $40 per ton or something like that. But again, then it's always a discussion who should pay for that. And I don't think SEA will pay for that. But on the other hand, you have some disturbances in the supply chain just now. Of course, short term, that is a problem. Long term, that will create some kind of lack of volumes, of course, and that might have a price impact in one way or another. But just now, And we are not doing big volumes to Asia. We do some in solid wood products, and there, of course, we have some disturbances. That's for sure. Understood.

And just on wood and the timber market, in terms of the outlook for 2024, we've seen rates starting to come down, at least on the 10-year. Maybe we should get some follow-up from the central bank and so forth later on in the year. I mean, how optimistic are you about a recovery in the timber market over the next few months or in 2024? Or is it likely to stay at relatively depressed levels for longer than maybe it's more the 2025 story? What's your best

was it solid wood products was that is that the yeah yeah okay yeah but as i said i mean we we see that we will have a solid price increase in the first quarter now in at least for sa but also in in sweden and finland according to statistics we are on record low level when it comes to inventory level Maybe we were a little bit lower in 2020 when we had a pandemic. So that will create some kind of price increase in the first quarter. And again, it's not an increase in consumption. That is the reason for that. It is the supply-demand balance and the supply has really went down. And I mean... So it is, I think in some areas for some products it is a problem now to get access to wood. That's one case. And by that I also think that this will remain over the second quarter. I'm positive for the second quarter in solid wood products. But again, You cannot really, it is a very special geopolitical situation just now, so if you have something that will happen in that area, I mean, we cannot really forecast that, of course. But otherwise, I believe that we will see a rather positive development in solid wood products. On the other hand, as we said, we have also seen that log prices have went up now, and they continued up in the beginning of this year. And the raw material is 70% of the cost for a sawmill, so that will have a an impact on the profitability for sawmillers. But for us, again, as having 50% of what we need in our own forest, we will, of course, not be too badly impacted by that.

But timber margins net-net should improve in the first quarter with... Depends on your log supplies.

I mean, that differs between different players. But for us, it will, yes. Yes, okay. Okay, thanks very much. Thanks.

We'll take now our next question from Oscar Lindstrom from DanceBank. Your line is open now.

Thank you. This is Oscar Lindstrom. So three questions from my side, starting off with forest and forest valuation. You gave us the average price here for northern Sweden, or your areas in northern Sweden, based on SWIFA and Ludvig & Co. data, minus 5% year-on-year. What were the number of transactions included in that sample? a couple of questions you know are you still seeing uh interest from corporate buyers or are these mainly private buyers and are your own transactions included in that sample um that's my first question

Yes, number of transactions. If we start with number of transactions, we usually have on average around 200, just below 200 transactions, both for Ludin Company and also for CFA, just below 200. And then on corporate activity...

I don't think we have had too many. I mean, again, we are limited by the legislation, so you don't have too many corporate transactions.

And the third question, we do some selling. We try to sell off less non-productive land far away from our industries and buy closer to our industries. So we do some transactions in Sweden just to sell far away and buy closer. But most of our transactions are in the Baltics.

But sorry, just to follow up on that last one. In the case where you do sort of land swaps, as I understand that you do with other forest owners, are the prices quoted in or decided on in those land swaps, are they part of the sample when you do your forest valuation?

We don't do land swaps. Usually we sell to one buyer and then we buy from someone else. What we do swap is wood volumes. to reduce the transportation cost. But in terms of land, we usually sell and buy somewhere else. But yes, in some regions, we are a big player. So we will have some transactions in those regions. But they are included.

They are included.

They are included. All right. Thank you. And just a final question on capital allocation, if I may. I mean, you have a You have a strong balance sheet. As you say, you have no big CapEx projects decided ahead of you, and the share is now trading at quite a bit below where just the book value of the forest lands is per share. Would you consider share buybacks at this point? No. No. All right. Quick answer. Good. Thank you. Those were my questions.

We'll take now our last question from Christian Koffer from Handelsbank. Your line is open now.

Right. Thank you very much. Just some quick follow-ups here. Just trying to get a little bit of grip on the cost base going forward for container board and for pulp. I mean, I guess you have taken on a lot of new fixed costs with the new factories and so on. Just trying to understand a little bit more how much the cost will increase when you are fully up and running, if you could just give some picture of that.

Yeah, the indirect cost per ton will decrease as we ramp up, since we have the same number of people to run the mill, regardless if we are ramping up or at full capacity, it's rather the When you're full capacity, the mail runs smoother. So then you usually have, now we have startup costs, so the cost per ton will decrease as we reach the ramped up mail.

Yeah, that's perfectly fair. Just trying to get a little bit more understanding on the absolute cost level, how much it is.

Yes, the absolute cost level will, I mean, you will have some inflation, but we don't need any more personnel as we ramp up, and we don't need any more. I mean, you have an annual maintenance stop as before. I think we have most of the cost base in now, but then we will start ramping up volumes, so the cost per ton will go down.

Yeah, okay. Fair enough. Thank you for that.

I've already not taken any more questions, so I will hand you back to the host to conclude today's conference. Thank you.

And that concludes our year-end report presentation. And welcome back on April 26th for the first quarter report. Thank you for watching and listening in. Thank you. Thank you.