Svenska Cellulosa Aktiebolaget SCA (publ)

Good morning and welcome to this presentation of SEA's first quarter results for 2024. With me here today, I have President and CEO Ulf Larsson and CFO Andreas Evert to go through the results and take your questions. Over to you, Ulf.

Thank you, Anders. Good morning also from my side. A warm welcome to the presentation of SEA's result for the first quarter 2024. We can now state that the market for all fiber-based products has turned up and that we have a sequentially stronger position in comparison with Q4 2023. It has started to drive price increases in all areas, but as always with a delay effect. In general, we see a high demand on wood, raw materials, and by that continued increase in prices. In addition, we have increased volumes from our own forests, which in comparison with the first quarter last year, substantially has strengthened the result in business area forest. We continue our efforts to gradually increase production in the sites where strategic investments have been recently carried out. and this has resulted in slightly higher delivery volumes in comparison with the first quarter last year. These investments will successively contribute to increased productivity and cash generation during coming years. Sales decreased with 5% and EBITDA with 22% versus first quarter 2023. Increased volume and currency are on the positive side in this comparison, while price is negative. This slide will give you an overview of the KPIs for the first quarter 2024. Our EBITDA reached 1.6 billion SEK during the fourth quarter, which corresponds to an EBITDA margin of 35%. Our industrial return on capital employed came out on 4% for the first quarter 24, counted for the last 12 months. The leverage is at 1.8 and we have now finalized a big strategic investments in Obola, Ortvik and Bolsta in Gothenburg. And they will, as mentioned, all contribute positively to the coming years. I will now make some comments for each segment, starting with forest. In general, we can note the continued high demand of wood draw materials. In SEA, we have nevertheless had a stable supply to our industries during the first quarter. As can be seen in the graph in the bottom left, prices for both pulpwood and saw logs have continued to increase. and in the Baltics wood raw material prices have started to increase again after a period of stability. When we compare first quarter 24 with first quarter last year sales was up 12% and EBITDA was up 24% and that is mainly due to higher prices and also higher harvesting level in our own forests. Turning over to business area wood. In general, we have a continued slow underlying market for solid wood products. Despite generally low demand, we see some early signs of improvement in the repair and remodeling segment. Stock levels are still low in the market and in a decreasing trend, especially in spruce. Last quarter I estimated that the price should increase in the first quarter with the high single-digit which also happened. In SEA we saw an increase of about 8% between the two quarters. As we forecasted when we released the Q4 report, our deliveries during the first quarter have been slow due to the very low stock levels when entering into the quarter. Sales was down 60% and EBITDA was down 10% in the first quarter 24 in comparison with the same period last year. And the reasons behind this were mainly lower volumes and higher cost of wood raw material. The EBITDA margin anyway increased with close to 1%. 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 mentioned earlier, we note that the inventory is on a low level. As can be seen in the diagram to the bottom left, the Swedish and Finnish sawmills production has been below normal levels since mid-year 2023. And finally, in the diagram to the top right, we can see that prices started to increase during the first quarter 24. Due to low production and low stock levels, I estimate that the price to increase with another at least 10% as we enter the second quarter. We have seen some early signs of improved activity in the repair and remodeling sector and when interest rates start to decrease, we might see further improvements giving support to positive development going forward. So, over to PALP. First, I'm happy to say that our CTMP expansion has been well received in the market. The production ramp up, optimization work continues according to plan. Sales and EBITDA were down 6 and 46% respectively when comparing the first quarter this year with Q1 2023. We can note lower prices on the negative side, while currency and volume have had a positive impact in this comparison. I can also mention that we have an ongoing reorganization and efficiency improvement program in business area PALP and the program will impact approximately 70 employees with full effect end of 2025. After a rather weak 2023, demand for pulp improved in Europe and the US during the first quarter of 2024. Export volumes to China normalized during the first quarter from a very high volume in the fourth quarter last year, but are still on a good level. Global supply of MBSK was substantially reduced due to the four-week strike in Finland in March. In Europe, we saw increasing prices on all grades of pulp, with MBSK increasing from US$1,250 in December to US$1,400 in March. The price then continued up in April to a little bit more than US$1,450 per tonne, and the supply-demand balance looks promising from a producer point of view, and we expect further price increases in this area. CTMP is following the same pattern with increasing prices in Europe, while prices in China and India are almost flat. In the US, MBSK prices had a similar price trend as in Europe. So, moving over to Container Board. The ramp up of the new Kraftliner machine in Obola is progressing fine, although we have taken a few stops to adjust the machine line during the quarter. We see high operational costs during the quarter, which is expected in the phase of the ramp up. As earlier communicated, we expect to reach full capacity in Obola in 2026. Sales was up 4% in Q1 in comparison with the same period last year due to higher volumes and positive currency effects. On the negative side was again lower prices. EBITDA was down as much as 69%, mainly due to lower prices and ramp-up cost effects. Volumes and currency effects had a positive impact. So container board market development. Well, we can see an emerging growth in box demand in Q1 compared to last year. As inflation and interest rate ease, we expect retail spending to improve. European demand of Kraftliner has improved in the first quarter compared to last year following the box demand. We believe that the market will gradually improve during 2024, driven by improved consumer spending. On the other hand, there is additional supply in test liner ramping up in the coming quarters, which will of course put some further pressure on the supply-demand balance for container board. European prices for brown and white craft liner have declined in the first quarter by 25 euro per tonne for brown and 15 euro per tonne for white top. From April prices have increased by 60 euro per tonne for unbleached and 40 euro per tonne for white top. And we have this morning announced another increase of prices from 1st of June by 60 euro per tonne for both brown and white top craft liner. Prices for test liner have already increased with 60 euro per tonne in the first quarter and another price increase of 60 euro per tonne is announced from 1st of May. Container body inventories have been on an average level fourth quarter and we have seen stocks declining in the first quarter due to improved demand. OCC is still in good supply but lead time is expected to be longer as demand continues to increase during 2024 and we can assume that demand will exceed supply for OCC in the second half of the year and with that probably increasing prices. So finally renewable energy and the biorefinery in Gothenburg is under commissioning and is currently ramping up. Full design production capacity with products on specification was reached already at the end of first quarter. It is of course still at an early stage but so far everything looks promising I must say. We continue with another quarter of strong profitable growth with higher prices and deliveries in comparison with the same period last year. Due to increasing prices and high demand, sales was up 24%, the EBITDA level decreased by 2% and that was mainly due to the higher prices for raw materials in our solid biofuel business, mainly sawdust. The market for solid biofuels remains stable. Lower volumes are expected in the coming quarter due to a normal negative seasonal effect. SEA continues to grow in leasing out land for wind power and reached 9.4 TWh of wind power on SEA land by the end of Q1, which is again equal to 20% of the installed capacity of wind power in Sweden. The execution of our FASECAM project is progressing according to plan and we will see the first startup in 2025 in this project. 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 first quarter. Net sales declined 5% just below 4.6 billion, driven by lower prices, which is partly offset by higher volumes from the new paper machine in Obola and the new sitting PML at Orteviken. EBITDA reached 1.6 billion despite a weak market driven by high results in our forest division and continued strong results in renewable energy. The EBITDA margin was 35%. The EBITDA margin declined to 24% and financial items totaled minus 123 million. with an effective tax rate of below 20%, bringing net profit to 789 million, or 1.12 SEC per share. On the next slide, we have the financial development by segment. And starting with the forest segment to the left, net sales increased to almost 2.2 billion, driven by higher volumes and higher prices for wood, raw material. The EBITDA decreased to 970 million, driven by low reevaluation of biological assets and seasonal overharvest of SE zone forest compared to the previous quarter. Continued increase in wood-grown materials and a capital gain of 128 million had a positive impact on earnings. In wood, prices increased by 8% compared to the previous quarter, while the cost for soil logs continued to increase. Net sales declined to 1.1 million, driven by lower volumes. The delivery volumes were negatively impacted by low inventory at the year end. EBITDA increased to 111 million, corresponding to a margin of 10%. In pulp, prices continued to increase throughout the quarter. Net sales increased to 1.8 billion, and EBITDA increased to 323 million, corresponding to a margin of 18%. In the quarter, we took a provision of 26 million for the ongoing reorganization to reduce headcount. In container board, craft line prices declined compared to the previous quarter. Net sales increased to 1.6 billion, driven by high volumes, and EBITDA decreased to 141 million, corresponding to a margin of 9%. Lower prices, high cost for raw materials and energy, partly relating to ramp-up had a negative impact on earnings. Renewable energy with another strong quarter with an EBITDA of 177 million corresponding to a margin of 28%. On the next slide, we have the sales pitch between Q1 last year and Q1 this year. Prices declined 11% with lower prices in pulp and container board. Volumes increased 3%, driven by the new paper machine Nobola and the new C&P mill at Ortviken. And lastly, currency had a positive impact of 3%, bringing net sales to just below 4.6 billion. Moving on to the EBITDA bridge, and starting to the left, price mixed with a negative impact of 570 million, and higher volumes had a positive impact of 67 million. Higher cost for mainly wood, raw material had a negative impact of 24 million, which shows a high degree of self-sufficiency. We had a negative impact from energy and a positive impact from currency. And in total, EBITDA decreased to approximately 1.6 billion, corresponding to a margin of 35%. Look at the cash flow. We have an operating cash flow of $677 million in the quarter, which means that we're continuing to fund our strategic investments with operating cash flow. Looking at the balance sheet, the value of the forest assets totaled just below $108 billion. Working capital stood at $4.4 billion, and capital employed totaled $115 billion. Net debt increased to 11.7 billion due to the dividend, and we have now almost finalized our large ongoing investment projects in Obola, Ortviken, Bolsta, and Gothenburg. Equity totaled 103 billion, and net debt to equity was 11%. Thank you. With that, I'll hand back to you, Ulf.

So thank you very much and I mean to summarize we see stronger prices in the first quarter in comparison with the end of last year and we also feel that we have a good momentum for further price increases in all product areas. increasing wood raw material costs and by that also of course also for us a little bit higher cost for wood raw materials as we buy 50% of what we need from private forest owners and other companies. But still we benefit again from our integrated value chain with a high degree of own supply in wood, in energy and also in logistics. When we compare this quarter with the same period last year, I mean in all areas we see lower prices. So by that I think we can open up for questions.

Thank you. Ladies and gentlemen, if you wish to ask a question at this time, please signal by pressing star 1 on your telephone keypad. If you find that your question has already been answered, you may remove yourself from the queue by pressing star 2. And please make sure the mute function on your phone This will allow your signal to reach our equipment. Again, it is still one to ask a question. And our first question comes from Charlie from BNP Paribas Exam. Please go ahead.

Good morning, gentlemen. Thank you for taking my questions. I've got two topics, really. One on volumes and one on operating costs. Firstly, on the volume side, can you tell us how much volume contribution the new CTMP line contributed in Q1 or how much more you think it can contribute in Q2 versus Q1. And similarly for the biorefinery, how much was already recognised in Q1 versus how much more in Q2. The second question is really around costs. Obviously you keep you have flagged that wood costs are up again. Can you just remind us of the lag into the P&L? Presumably the recognition in the forest segment is very immediate, but I just wondered if there's a lag to whether the cost increase will be further recognized into the industrial segments in the coming quarters. And if there's any other particular cost elements we need to be thinking about in major moving parts. And finally, some winning costs. Obviously, there was a small restructuring cost booked in the pulp segment in Q1. Do you anticipate further costs in that regard in Q2? Thanks.

Yes, maybe I'll start with volume. So if we start with pulp, I mean, if you look at MBSK, we have no real difference there. So the change, the increase in volume has come from the ramp up of the CTP mill, and we expect that to reach around 300,000 tons in 2025, 2026. We'll continue that ramp up, and that will contribute more to the volumes in the quarters ahead. And then I think the next question was on biorefinery, and I would say that we didn't get any contribution in terms of EBITDA results from the first quarter as we have started up because that had a minus contribution to our profits in the quarter. And then in terms of our cost base, we see that the wood cost is continuing to increase and we expect that the wood cost will continue to increase somewhat also in Q2 compared to Q1. On the chemical side, we saw some cost increases in Q1 compared to Q4. But now I think that the chemicals will be fairly flat going into the next quarter, with some, of course, some currency effects. I don't know, Ulf, if I missed anything. I think that was complete.

Just on the restructuring costs?

Yeah, restructuring cost. Yeah, so we took a restructuring cost of 26 million in the pulp division in the quarter, but we don't expect anything further during the next quarters. So we took for all those 70 employees.

Many thanks.

We will now move to our next question from Gaurav Jinn from Barclays. Please go ahead.

Hi. Good morning, and thank you for taking my question. A couple of questions is, you know, one is on the structural sort of tightness in the Stanley wood market, which we are hearing from a lot of companies. So wood prices are structurally higher. Then does it mean that the biological value gain that you look every year from the forest, can it be higher than the number you had indicated, which is around 1.8 billion?

Yeah, so if we look at biological assets, we expect it to be somewhere between 1.8 to 1.9 billion this year. And we have a long-term average price. in our DCF model for calculating biological assets, and that has gradually increased. And with those price increases, of course, that will help. But we expect somewhere between 1.8 to 1.9 billion this year.

Okay. And second, you are clearly one of the largest forest owners. So if this candy wood market is tight, what can be done? Can you increase your own production, or do you think How will this cancel? Construction activity hasn't even picked up yet. So once it picks up, you could argue that the market will get even tighter. So what are the options that then all the industries or customers would have to essentially source wood? You yourself are a player in pulp and container wood, so how would that work?

I mean Wood will be a limited resource for all players in this field and I mean And I mean, we all know that one impact is from the fact that the Russian flow has stopped now. We have seen a lower harvesting level from the state-owned forest in Sweden and so on. So I mean, let's hope that the legislation that is now more or less set in the European Union, that we can handle that in a clever way in Sweden when it comes to the national implementation. And I think we will do that in a good way for the business and for the climate and so on. Continue to operate the forest in a good way. But I mean, if we have a scarce situation, that means that capacity has to close down sooner or later. But we feel... We feel rather confident in that perspective. I mean, as we've said many times, we are the biggest private forest owner in Europe, and by that we have a high degree of self-sufficiency in raw materials, which is beneficial in a situation like we have just now.

Okay, and if I could just make a last one. So clearly the Chinese pulp market demand has been very, very strong over the last 18 months. Well, the end market, if you look at any macro indicator in China, it is pretty weak. So what do you think has happened in China? And if it is really just restocking, then it will end at some point of time. So if you were to look out for Chinese demand over the next 12 months, what would be your best sort of estimate?

It's hard to say. I mean, we more or less, we don't... supply almost nothing to the Chinese market. But I mean, we had record deliveries to China in Q4. last year. And you're right, it has been a slightly slower market in the first quarter, but still on an okay level. On the other hand, we see a rather sharp pickup in demand from US, and also what we feel is that the European market has stabilized quite a lot. I mean, this is a global market, so I think the situation for pulp is stable just now. And I mean, we have increased, as I said, I mean, we have increased prices from 12.50 in the beginning of this year up till a little bit more than 14.50. And we will see further price increases in pulp.

Thank you so much for taking my questions.

We'll now take our next question from Oskar Lindström from Danske Bank. Please go ahead.

Yes, a couple of questions from me. First on Obola, you mentioned that there were a few stops there, and I thought I heard also something about a negative impact from the ramp-up on earnings. What's been the quality of the production in Obola, and how is the ramp-up going? That's my first question.

Yeah, we take that first. And I think if we start with the quality, we have a good quality from Ovala. So that is as good as we had in the past, which was very good. So we are happy with that. But, of course, we struggle with availability, which is absolutely normal when you have a ramp-up like this. So step by step we increase the volume, but it is... tough period when we ramp up a big mill like Obola and as we also said I mean we will reach design capacity in 2026 725 000 tons and but we take step by step but again if we see that if something is wrong then we then we stop and be correct and then we start up again so but just now it's more a question of availability quality is good and well also perceived in the market, I would say.

Thank you. My second question is on Kraftliner. I mean, you now announced this morning another 60 euro per ton price increase from 1st of June on top of the, was it 80 euros per ton for April. What's driving Kraftliner? this market given that there's new capacity out in the wider sort of container board segment and the markets don't appear to be very strong if you look at the macro. So what is driving this market and can it continue?

we increased the prices by 60 euro per ton from from 1st of april and then we have announced another 60 from 1st of june so that's the case and as i said test liner they are one months ahead of us so 60 from 1st of march and and another 60 from 1st of may and i think if you look at the stock level Well, it's on a normal to low level, I would say. And if we also look at the demand side, so can we now state that the consumption has started to pick up and we are back to the level where we were before the pandemic. So, I mean, you have a not super strong, but you have a healthy demand in these markets. I mean, it's as always, it's a supply-demand balance that gives the conditions for price increases or price decreases. And just now we have a stable market in this area.

All right. Thank you. My final question um is on the you have a very strong balance sheet uh and you have positive cash flow even at the sort of trough of the of the cycle and you've got now sales prices improving you say and then most of your large capex projects have been finalized what are your capital allocation plans for for the coming years yes now we will sit on our hands for a while i mean we we feel that we we um

We have a number of good projects, but still, now we need to stay focused on ramping up what we have already started. I mean, we have four really big projects that we have to take care of, and we are happy with the ramp up so far. But again, it's 100% a question of focus, to focus on what we have started now. So we will be very cautious for a while now with new investments.

All right, thank you.

Those were my questions. Thanks.

We'll now move to our next question from Robin Santavirta from Carnegie. Please go ahead.

Thank you very much, and good morning. First, in terms of , can I ask what was the least price in Europe? in April, and what are the current price increases that are out there for May?

I think the official PIX price for Europe was around, I think it was up to 1456 and then back to 1455 or something like that. And I mean, we don't really give forecasts in solid wood products, but maybe not in power. But we already now know that we will have a substantial price increase again in May.

All right. And what is it that drives the European power market? Is it improved And if so, is that because of the Red Sea situation, less import of end products to Europe? Or is it the underlying demand or restocking? Or then is it the supply side of things with the Finnish strikes and the problems in chemi for meta fiber?

Yeah, I think you've mentioned... Yeah, but again, of course, I mean, the Finnish strike, that have impacted the market. I mean, the problems from one of our colleagues, I mean, that is, of course, also impacting the market. We have seen closures in MBSK, so I mean, also an impact, but also we feel that we have we have an underlying increasing demand, but not substantial. But I mean, the total balance just now is, from a producer point of view, very positive. So I mean, that is what we will see in the price development going forward from this point, for a while at least.

All right, I understand. And finally, just in terms of... growth projects down the road. I saw in some of the industry press that you would be contemplating a growth expansion in Munchund. Is that something you could comment on already now? Would that be a major expansion or a smaller expansion? What kind of investments are we talking about?

Again, I mean, that depends on how you count. We will look into possibilities to put in a new saw line in the Munchsen sawmill. That is not a major thing, but still, it is an investment. And let's see when we will do it. And then on the container board side, we feel that we can increase the capacity, but also increase the flexibility and use somewhat more recycled fiber in the production in that area. I mean, in comparison to what we have done, they are rather small investments. But as I said, just now we are 100 percent – it's also a question about personal resources, and just now we are 100 percent focused on ramping up what we have already started. So that will be the case for a while now.

I understand. Thank you very much. Thanks. The next question comes from Johannes Grunserius from D&B Markets. Please go ahead.

Yes. Hello, everyone. It's Johannes here. I'm going back a bit to Oskar's questions on the Obla ramp-up. I'm not sure if you're able to answer it, but is it possible to give any kind of financial guidance how much the ramp-up cost amounted to in the quarter and how you see basically the positive delta from you being, more efficient on Obola over the next few quarters.

Yes, so we had some, it's hard to say exactly, but as Ulf mentioned, it's about availability. When high speed and then we have to fix something and it goes down and then you increase the uses of chemicals, things like that. that the ramp-up costs are maybe around 70 million, something like that, in the quarter, and they're a bit more this quarter than compared to the previous quarter. It's hard to say exactly.

But in general, I would say that we have a tendency to underestimate the ramp-up costs. I mean, we are – first, you like to come to the right volume and after that you have a period where you need to fine tune cost and I mean it can be yield when related to raw material, it can be chemicals, it can be energy and all these kind of things. I mean big lines and they are all individuals and we have to tackle them in different ways. I mean you have a period with high ramping up costs. But the main focus is to get the volume, and then we can start the next phase to fine-tune the cost level.

Right. Then my second question is on your pursuing, you're looking into the opportunities of allocate capital into wind parks, obviously. Are you still in active discussions about acquiring some wind parks? How should we think about sort of the capital allocation per year. I understand it's difficult, but... Oh, that is easy.

We have said that we shall stay on 100% degree of self-sufficiency in energy, and when we have Fasikan up and running, the new project in Bräcke, I mean then we are then we have 100% supply so in that perspective we are also willing maybe to sell the first wind park so this is we will not allocate more capital into wind parks. If we don't increase the consumption of energy, then we will find out how to secure the supply. But as it is just now, when Faselkamp will be up and running, then we are oversupplied for a while, and we don't like to stay there.

Okay. And as you said before... Right, all right. So you don't want to go into a position being Significantly, you know, big, long electricity generation. Not for the moment. Not for the moment.

And as we said before, we have three business models in terms of wind power. The first one is lease that we continue on to maximize. We also have project development. And the third one is, as Ulf mentioned, own wind power. And there we are at 100% self-sufficiency now. Okay, thank you.

Thank you. We'll now take our next question from Andrew Jones from UBS. Please go ahead. Hi, Jones.

Just focusing on the products business, can you just give us some guidance around the second quarter and how much you expect prices to lift there? My alarm was a bit bad. Apologies if I missed that. And also, just on the volume side, I think I was definitely expecting a bit more in the first quarter on volumes. Were there any or kind of timing of shipments, which might have distorted that? And could you give us a bit of a steer for kind of how much you expect volume or demand to pick up in the second quarter with the seasonality? And furthermore, just on CapEx guidelines, you said about 2.7 bill for this year. Is that still valid or could we come in lower than that? Thank you.

The first part was that about solid wood products, was it? Yeah, yeah, that was that pricing in solid wood.

Yeah, I think I said that. But I mean, again, we saw an 8% increase of prices in the first quarter in comparison with the fourth last year. And we will increase prices by another at least 10% during the second quarter. Volumes will be higher in the second quarter as they always are because that is a seasonal effect. I think we guided already when we released Q4 that it should be low volumes in the first quarter because the stock level was very, very low. So that was also a reason for slow deliveries in the first quarter. But again, we are on the low side when it comes to the inventory level. But, I mean, both prices and volumes will be increased in the second quarter, definitely.

CapEx. If we start with current capex, we previously got a 1.6, but as you know, we had a divestment this quarter of more than 200 million. So with that, we expect current capex to be just below 1.4 billion for the year. In terms of strategic capex, our ongoing strategic projects are just below 1 billion, but then we have still some acquisitions of forest land in the Baltics. I would say just above 1 billion, 1.1 billion, something like that, but it depends on how much forest we buy in the Baltics.

Okay, that's clear. Just to clarify on the volume side, could we see volumes go back up to the 4Q level, or are we thinking they're weaker just given the ongoing issues in the construction market?

You're still in solid wood products? Solid wood, sorry. Solid wood, yeah, okay. Yeah, I mean, we will see substantially stronger deliveries in the second quarter. I mean, as I said, that's a seasonal effect. And we also start to see signs of an improving market for solid wood products and not the least in repair, remodeling sector where we are present. We are not too much present in new housing and things like that. But I suppose that will also come if we find the stability when it comes to interest rates and so on. But I mean, in the repair and remodeling sector, we see signs of improvements, which is good. The season will support us. And also the fact that we have had a good production in the first quarter. And so we have increased the stock level a bit and that gives us more room for deliveries.

Understood, understood. Yeah, just... Sally, on the Kraft Larner, you called out 70 million of costs associated with a ramp up. I wasn't sure what you were saying about, you were talking about it being higher this quarter. Are you saying in the second quarter it should be a more than 70 million negative impact from a ramp up? Or were you referring to this quarter you just reported being higher than 4Q?

this quarter was hiding a fourth queue but it's hard to predict i mean as i've mentioned you you you have capacity increases and they have to fix something and then you drive and drive across and that's normal for ramp up but it's hard to predict the exact amount but for this quarter it was slightly higher than the last quarter

We will not stress the ramp up. We never do that. I mean, we like to do it right, and we like to focus on quality volume, and then we will fine-tune the cost side. And if we need, then we will stop. I mean, we are not focused on volume either, to be honest. This is long-term. I mean, this machine will stay here for 30 years. I mean, it's so important that we do it right from the very beginning now.

Yeah. Okay. That's great. Thank you very much.

Linus Larsen, SEB. Please go ahead. Your line is open.

Thank you very much. Good morning, gents. On the Gothenburg refinery, how far have you come in terms of ramp-up qualifications, et cetera? What do you expect in terms of contribution into your own P&L once fully up and running, fully optimized?

If we start with the biorefinery in Gothenburg is something completely different to what we are used to. So we started up in the end of the first quarter and I think after one week we reached perfect quality for SAF and HVO and whatever. And we also, some days we reached more than designed capacity. And then we had some breakdowns, of course, with some pipes that was corroded already after two weeks. We had to stop for one or two weeks and so on. But this is, I think, will be a different journey. So still we have a lot of start to stop and so on, but when we run, we run at design capacity already now and we run with perfect quality according to specifications. So that is where we are.

Yeah, and in terms of what we previously guided when we took the investment is that over the cycle it should give around 200 million in EBITDA. And then account-wise, we take in the net profit of that, so that would be a bit lower. Currently, I would say that you have a weaker market at the moment, but we think that in 2025, when the new SAF mandates will kick in, that will improve it.

But we're absolutely impacted by the decision from the Swedish government to reduce the blending this year.

Right. And then, Andreas, the net profit contribution would be what?

So it's EBITDA depreciation. So that's 200 million, and that's over a cycle, of course. You have to deduct depreciation, deduct tax, basically.

Right. Okay. Thanks. And then just to follow up on the container board margins and the decline that we saw in the first quarter and the $70 million that you are estimating as a ramp-up impact in the first quarter, if I understood you right. I mean, thus far into the second quarter, are you back on track, so to say, or are there certain impacts – lingering.

We will continue to have ramp-up as we had last year as well, and we'll continue until we are up at our full capacity and trimmed in the machine. And then, as I've said, it will vary between different quarters, depending on what we do, of course.

Great.

Thanks. As a reminder, to ask a question, please signal by pressing star 1. The next question comes from Cole Hawthorne from Jefferies. Please go ahead.

Morning. Thanks for taking my question. I'd just like to follow up on the container board market, and I've got three kind of longer-term questions. The first one is around the M&A that's been happening in the industry now with international paper effectively being the frontrunner for DS Smith. and indicating that they're going to integrate to more container board volumes. We're just wanting to see how that impacts SEA. I mean, you're a very low-cost producer, so just wondering how you'll adapt to that as the market adapts. Secondly, staying with container board, but it's just as relevant to pulp, is there's been a lot of commentary around the non-visible components. costs for maintenance services of these products over time going up, particularly in the U.S., and people being forced to raise prices. So I'd just like to hear what your views are over the years. How have you seen those costs develop, and how do you manage that? And then I've got one follow-up after that. Thanks.

Maybe I'll start with the M&A and I think we will be more or less not impacted at all by this acquisition. I mean, you can always speculate what kind of impact the more consolidated market will have and if it will have an impact on the pricing for imported volumes from the US and things like that. But as we see it just now, we we will have more or less no impact from that murder. That's my view.

And then in terms of cost for all our segments, the biggest cost is, of course, wood, raw material. And that has gone up significantly the last couple of years. But there, I mean, we benefit from our integrated value chain where we get half of that from our own forest. And of course, it gets higher earnings in our forest segments. And then our second biggest cost is, of course, chemicals and energy in our container board division. And in terms of chemicals, they went up a bit in Q1 compared to Q4, but we expect fairly flat in Q2. And in terms of maintenance cost, I think that follows more normal inflation. Inflation has been a bit higher the last couple of years, and also the maintenance cost has followed that inflation.

Maybe I'll just follow up on the container board. I mean, if international paper or the US decides to export more volumes of craft liner into Europe, Is it a case of we just need more of the virgin grades for food contracts, et cetera? Or will the European industry need to potentially react a little bit to that by maybe sending some volumes back to the US if they get too aggressive on the exports? And then on softwood pulp, I'd just like your thoughts. in my mind, a tighter market considering greater level of supply disruptions. But it's really been hardwood pulp that's seen greater increases of the lows. I'm just wondering if there's any difference between the softwood and hardwood markets. I would have thought softwood would be a tighter market, whereas hardwood is where all the LATAM producers are pushing prices more aggressively. Thank you.

I mean, it is a global market, so I mean, as I said, it's hard to predict, really. I mean, where we will meet IPs on high-grammage products, and it might be food content, but it will also be boxes for fruits and things like that. And, of course, I mean, for us, no major things. If it will be, I mean, in the bigger picture, well, it's really hard to say, really. it's a weak answer but i don't know we for us i don't think we will have a major impact anyway when it comes to self soft softwood and hardwood i mean yeah we also see that it is a tight it and will be a tight supply for for softwood pulp and i believe that will be the case also when kim is up and running and in hardwood i mean we see a new capacity coming on stream and and it is uh bigger supply and and maybe the balance is not as good as in in softwood but on the other hand it's more consolidated market and and as it looks like just now i mean i think the producers they are keep they are keeping an eye on the on the balance which is from a producer point of view a positive thing so thank you thank you and it appears there are currently no further questions at this time

And that concludes our first quarter report presentation. And I welcome you all back in July for our half-yearly report. Thank you very much for tuning in today.