Svenska Cellulosa Aktiebolaget SCA (publ)

Good morning and welcome to this presentation of SEA's full year results for 2024. 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 also from my side a good morning and welcome to the presentation of SEA's result for the full year and for the fourth quarter 2024. During 2024 SCA showed that we can deliver good profitability even in a challenging environment. And despite substantially higher costs related to wood raw material, SCA reached 7.1 billion SEK on EBITDA level and by that an EBITDA margin of 35% for the year. During 2024 we have continued to gradually increase production in the sites where strategic investments have been made. This has resulted in higher delivery volumes in comparison to last year due to the new paper machine in Obola and the new CTMP line at Ortviken. These investments will contribute to increased productivity and cash flow generating during upcoming years. Another factor contributing to the result, and partly offsetting the higher costs of wood-drawer material, was steady increasing harvesting from SAE-owned forest, where we reached record high harvesting volumes in 2024, a bit over 5.2 million cubic meters. We will continue to ramp up harvesting of our own forest according to plan during coming years. The book value of SEA forest assets was in line with last year and amounted to 107.3 billion SEK at the end of 2024. And as you already know, SEA bases the valuation of the forest on complete transactions in the region where SEA owns land. Turning over to some financial KPIs related to the full year 2024. As already said, our EBITDA reached SEK 7.1 billion for 2024, which corresponds to 35% EBITDA margin. Our industrial return on capital employed came out on 7% for the full year 2024 in line with last year. The leverage was at 1.5 and we have now finalized our big strategic investments in Obola, Utviken and Gothenburg, which will all contribute positively coming years. The proposed dividend for the AGM to decide on is 3 SEK per share. This is in line with our aspiration to provide a long-term stable and increasing dividend to our shareholders. Last year, we gave 2.75 SEK per share. And finally, earnings per share was 5.8 SEC. This slide will give you an overview of KPIs for the fourth quarter 24. Our EBITDA reached 1.65 billion SEC during the fourth quarter, which gave us an EBITDA margin of 32% for the period. despite high costs of planned maintenance stops in the quarter of SEK 338 million. Our equity continues to increase and despite the fulfillment of several large strategic projects, net debt to equity remains on a solid level of 11%. So before looking into each segment I want to mention a few words on our capital allocation strategy. We have continuously developed our value chain by investing in superior mills and in additional production capacity of products with long-term growing demand such as pulp, container board, solid wood products and renewable energy. But we have also closed our production of publication paper, a product with long-term decline in demand. The investments made are generating additional cash flow now and in the years ahead. The generated cash flow has allowed us to increase our forest holdings by investing in forest land in the Baltics. We have also continuously invested in forest management on our current and new holdings and this increases net growth in the forest which in the long run both increases raw material supply to SA industries and generates a higher cash flow. The investments in the forest and the value chain are creating profitable growth, which enable us to pay a long-term stable and increasing dividend to our shareholders. I will now make some comments for each segment, starting with forest. High harvesting levels of our own forest have contributed to a stable supply of wood, raw materials to our industries during the period. We have seen a continuous long-term trend of increasing prices for both pulpwood and saw logs, as can be seen also in the graph in the bottom left. When one compared Q4-24 with the same period last year, sales were up 16%, mainly due to higher prices for pulpwood and saw logs, as well as higher delivery volumes to SEA industries. When excluding the effect of lower evaluation of biological assets of 356 million SEK Q4-24 in comparison with Q4-23, EBITDA was up 18%. And that was mainly due to higher prices for pulpwood and saw logs and higher delivery volumes to SCA industries. Turning over to business area wood. In general, we still have a slow underlying market for solid wood products. Despite the generally low demand, we continue to see some signs of improvement in the repair and remodeling sector. Stock levels are at normal levels among producers and mainly on the low side at customers. I estimated that price for solid wood products in the fourth quarter in comparison with Q3 would be close to unchanged, which also happened. Our deliveries last quarter were on a normal level that consequently also gave a close to unchanged stock level of sown goods. As expected, the cost for saw logs has increased from the third to the fourth quarter and we also expect them to continue to increase going into the first quarter. Sales were up 12% and EBITDA was up 260% in the fourth quarter 24 in comparison with the same period last year. The reason behind this were mainly higher prices. The EBITDA margin consequently increased from 5 to 17 percent. 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 inventory is on a normal level. As can be seen in the diagram to the bottom left, the Swedish and Finnish SOMIs production has also been on normal levels accumulated for 2024. In the diagram to the top right, we can see that prices increased during the first half of 2024 but has leveled out in the second half. Now coming into the first quarter 2025, I estimate that prices will increase with low single digits due to an improved balance between supply and demand. In the construction sector, we can conclude that starts of new buildings continue to be low. Looking forward, we believe that consumption in the repair and remodeling sector will be early to respond in a positive way to lower interest rates. Over to PALP. When one compared Q4-24 with Q4-23, sales were up 27%, mainly due to higher prices as well as higher delivery volumes. EBITDA was up more than 300%, mainly due to higher prices and positive currency effects. The yearly maintenance stop at Östrand had a negative impact of 215 million SEK in the fourth quarter. MBSK prices peaked in Europe in July at 1620 USD per tonne after increasing for 10 consecutive months. We then saw decreasing prices and weaker demand during the remaining part of the year and prices reached the bottom in December at 1480-1490 USD per tonne. In the US, MBSK prices have had a similar development as in Europe, and after a slow summer in China with weak demand and decreasing prices, we reached the bottom at the end of August, and we now see approximately 10% higher prices and an improving demand. Looking at CTMP, prices decreased in Europe during the fourth quarter, while being rather flat in Asia at the low level. In January prices have been more or less unchanged. Inventories on softwood and hardwood pulp have been decreasing lately and are back on rather normal levels, as you can see in the diagram. CTMP inventories, on the contrary, have been increasing in the last months and are on a rather high level. In January, MBSK prices was unchanged in Europe at 1480 USD per ton while increasing further in China. And we have now similar price levels in Europe and China and a bit higher in the US. As earlier announced, SEA has increased the price on MBSK pulp in Europe by 50 USD per ton and the new price will be effective from February 1st. And maybe just as a reminder, I can mention that we had increased discount rates from 1st of January. In U.S. we have seen that the indexes went up by 35 USD per ton, which also will be used when we invoice our customers in February. And some words about short fiber. Susano announced 100 USD per ton for January. We think that will come through in February. And we have also seen another announcement of 60 USD per ton in March. So, moving over to container board. Sales were up 11% in Q4 in comparison with the same period last year. We can note higher prices on the positive side, while lower volumes due to planned maintenance stop in Obola had a negative impact in this comparison. EBITDA was down by 17% due to the maintenance stop. The stop went well but had a negative impact on the result in the quarter of 120-130 million SEK. The negative effect of the maintenance stop and the negative effect of higher costs related to wood raw material was met by higher prices. We have seen box demand moving sideways compared to Q3, but a solid growth in comparison to last year, and by that we are now almost back to historical growth trend levels. We can see an improved retail demand supported by increasing consumer confidence, which should support the continued growth in box demand over time. On the other side, we also note the continued negative growth in the European manufacturing industry, which for the moment drives the demand in a slightly negative direction. Nevertheless, the European demand of container board has improved in Q4 compared to the same period last year, and the full year demand growth for container board will end with the growth above historical trend levels. Moving into 2025, supply and demand balance will be impacted negatively by additional supply coming on stream, with the vast majority coming in test liner. Craft liner inventories have been slightly above average level in Q4, with a seasonal increase in December. The availability of OCC improved in Q4 and consequently we have seen OCC prices declining and we expect prices in the beginning of 2025 to be rather stable. European prices for brown craft line have decreased in Q4 by 40 euro per tonne and white craft line has during the same period decreased by 20 euro per tonne. We have seen a continued price pressure in the beginning of this year and prices for brown Kraftliner have decreased by another 20 euro per tonne in January. However, we now feel a more solid underlying demand in combination with strong cost pressure and due to that we have this morning announced a price increase for both brown and white Kraftliner from March with 90 euro per tonne. So over to renewable energy. In business area renewable energy we had a weaker quarter compared to the same period last year. The market for solid biofuels remained stable. Higher prices for sawdust in our pellets business were met by higher prices. In line with previous quarters, the green premiums for tall oil and liquid biofuels are substantially lower in comparison with the same period last year. Main reasons are lower blending mandates in Sweden and increased imports from China, creating an imbalance in supply-demand and in the renewable fuels market. Ramping up Gothenburg Biorefinery together with ST1 in this market environment has put a short-term pressure on the segment during 2024. We expect market volatility in renewable fuels to remain relatively high as Europe ramps up the blending matrix both in HVO and SAF. Long term our outlook is positive, but in the short term we expect continued low refining margins and buyer premiums. However, we have seen some recovery in prices and buyer premiums towards end of the quarter. Electricity prices were low during the quarter, which impacted our wind business negatively. SEA continues to grow in leasing out land for wind power and has now reached around 10 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. And finally I can mention that the execution of our windmill project Fasikan is progressing according to plan. And by that I hand over to you Andreas.

Thank you Ulf and good morning everybody. I'll start off with the forest valuation and the free average price which we use in the forest valuation to get enough transactions decreased by 2% to 388 sec per cubic meter. The market for forest transactions was slow in the beginning of the year but improved during the second half of the year in both volume and price. On the next slide, we have the forest price weight by reading and supplier, which you can also find in our report. The standing volume, as you can see, is concentrated in the southern part of Norrland. The freeage average price for 2024 is based on approximately 700 to 900 transactions from both Ludvig and Svefa. The valuation of SCA's forest assets totaled 107 billion in 2024, which was in line with the previous year. The decrease of the three-year average price in Sweden was offset by continued increase in standing volume to 274 million cubic meters. Biological assets increased by 1.8 billion, driven by increasing long-term prices for wood-row materials and net growth in standing volume, while the value of the land decreased. Prices for wood-row materials continued to increase. The slide shows the index price development for soil logs and pulpwood paid by SE's industry delivered to site. Prices are at record high level and is expected to continue to increase in the beginning of 2025. If we move on to the income statement and focus on the full year to the right, net sales increased 12% to 20 billion driven by both higher prices and higher volumes. EBITDA increased 5% to 7.1 billion, driven mainly by high prices, which was partly offset by higher costs for wood, raw materials. The EBITDA margin was 35%. EBITDA increased to 5 billion, and financial items totaled minus 506 million. With an effective tax rate of just below 20%, bringing net profit to 3.6 billion, or 5.18 sec per share. If we look at the fourth quarter to the left, EBITDA totaled 1.6 billion and was affected by planned maintenance stops in both Östrand and Obola with 338 million. Net profit for the quarter totaled 820 million or 1.17 sec per share. Looking at the dividend, we have proposed dividend of 3 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 financial development by segment for the full year. Started with the forest segment to the left. Net sales increased to 8.8 billion and EBITDA was in line with the previous year at 3.5 billion. High prices for pulpwood and soil log and increasing harvest from SCS-owned forest was offset by lower evaluation of biological assets. In wood, prices were 10% higher in 2024 compared to 2023. At the same time, prices for soil logs continued to increase, which was partly offset by higher income from byproducts. Net sales increased to 5.5 billion, and EBITDA decreased to 927 million, corresponding to a margin of 17%. In pulp, net sales increased to just below 8.1 billion due to higher prices and higher volumes. EBITDA increased to 1.7 billion, corresponding to a margin of 21%. In the fourth quarter, we had a planned maintenance stop, which impacted the results by 250 million. In Container Board, net sales increased to 6.4 billion, driven by higher volumes from Obola and positive currency effects. EBITDA declined to 942 million, driven by higher costs for raw material. The EBITDA margin totaled 15%. In the fourth quarter, we had a planned maintenance stop in Obola, which impacted results by 123 million. In renewable energy, the cost for sawdust increased, which affected the profitability in silo and solid biofuels negatively, but affected our wood division positively. The market for liquid biofuels and tall oil was weak, and in wind we had lower electricity prices. EBITDA decreased to 451 million, corresponding to an EBITDA margin of 22%. On the next slide, we have the sales bridge between Q4 last year and Q4 this year. Prices increased 14%, with higher prices in pulp, wood, and container board. Volumes increased 1%, and currency had a positive impact of 2%, bringing net sales to 5.1 billion. Moving on to Ribbita Bridge and starting to the left, price mix had a negative impact of $588 million and higher cost for mainly wood-drawn materials had a negative impact of $154 million. Energy had a negative impact of $67 million, mainly due to lower energy income and a turbine revision in pulp. with a positive impact from currency, and a quarter was negatively impacted by higher costs for planned maintenance stops and lower revaluation of biological assets. In total, EBITDA was in line with the previous year at 1.6 billion, corresponding to a margin of 32%. Looking at the cash flow, we had an operating cash flow of just below 3.2 billion for the year and 1.3 billion for the quarter. Moving on to the balance sheet, the value of the forest asset totaled $107 billion. Working capital increased to $4.8 billion. And capital employed totaled $115 billion. Net debt stood at $10.9 billion. Equity totaled $104 billion, corresponding to net debt to equity of 11%. Thank you. And with that, I'll hand back to you, Ulf.

So thanks Andreas and I mean just to summarize I think that we have delivered a strong result during last year. We have had rather tough market conditions and despite that we deliver SEK 7.1 billion and a 35% EBITDA margin. We have seen a rather strong price increase when it comes to raw materials, wood-raw materials, and that we have to some extent mitigated by record high volumes from our own forest. We can also state that we see step by step higher production capacity related to our strategic investments in container board and pulp. which is positive of course and we can also see that the market has bottomed out at the end of last year and now we see a rather positive development in each area, wood, pulp and also container board. So by that I think we open up for questions.

Thank you. Ladies and gentlemen, if you would like to ask a question, please press star 1 on your telephone keypad. Thank you. We will now take our first question from Johannes Brunzeles of DNB Markets. Your line is open. Please go ahead.

Yes. Hello, everyone. It's Johannes. I have two questions. First on Obola and the ramp-up. You touched upon it, Ulf, that you talk about step-by-step higher volumes. Will it be possible for you to sort of give us some kind of guidance on how much more volumes we can expect, 25 versus 24, due to Ebola? And if you can talk a little bit about improved cost position when Ebola is producing more and is presumably more stable. That's my first question.

Yeah, I will not give you a figure, but again, it's fair to believe that we should reach maybe 15-20% more output from Obola this year in comparison with 2025. We are still in the phase where if we need, we stop and we do what we need in order to long-term have a high-quality output. But I mean, it's fair to expect that we will increase by 15-20%. About improved cost, Andreas, maybe you should say.

We still had some ramp up, cost is a quarter, around maybe 60-70 million. And of course, that will continue to decrease over time. And what we guided on at investment was that when fully ramped up, it should contribute with around 800 to 1 billion second total EBITDA, assuming trend prices.

Yes. And then my other question is, yeah, on your general comment on the cycle here, Ulf. You said you're expecting the cycle to have bottom out here at the end of last year. Can you elaborate on that? I mean, do you see any risk for any backlashes here? I'm particularly thinking about how where you go for price hikes and the risks at all in the market or is it sort of you're seeing evidence of improving markets now?

It's always a risk to be in the market. I mean, we cannot really forecast what's going to happen in the second half of this year. But we feel, if we talk about pulp, I mean, we feel a stable demand now. We have also seen that the stock level has come down. I mean, we also today, I would say that we have more or less the same net price in China and Europe, a little bit higher in the US. But that is a good starting point for further price increases, to be honest. I mean, we feel that we have a rather strong pulp market a little bit earlier than I thought maybe but still there we are. I mentioned also that we and that was a little bit of a surprise that we will increase prices a little bit in the first quarter and that is mainly for solid wood products and that is mainly related to higher cost for wood raw materials of course. But then I believe we will have a seasonal effect in the second quarter with another price increase in the second quarter. I think it will be nothing dramatic, but still we will have a positive development there. In container board, I was maybe a little bit surprised myself. We actually reduced the prices in, as I said, in January by 20 euro per ton. And all of a sudden, we feel that we have a rather balanced market. We also, of course, we feel a strong cost pressure in all areas. And we also see that test line produces there now. go for price increases and that's the reason also why we among others we have announced a price increase from from effective from from first march by 90 euro per tones i mean in all these three areas we we are fairly positive as it is just now okay that's helpful thank you thank you and we will now take our next question from ephraim ravi of city group the line is open please go ahead

Thank you. Just a couple of questions. Firstly, on the container board, sorry, specifically Kraftliner, price increases that you have announced today of 90 euros. Is it more a function of cost push inflation that you're seeing around the industry with higher pulp prices and purple prices, or is it more a function of demand? Because inventories for Kraftliner looks a little bit on the higher side, and also the shipment rates are pretty much flattish versus the third quarter. So what gives you confidence that these price increases will go through? And secondly, again, on a similar vein on the wood division, can you give us a sense as to historically what has been the lag between saw log prices going up and the wood product prices kind of going up. I appreciate kind of demand may be a little bit weak right now, but in your experience, what's the historic kind of pattern or lag been? Thank you.

Thank you. In general, I think it's better to take one question at a time because then I can remember what you asked for. But if we start now with the Kraftliner anyway, I mean, no doubt, I mean, we had a stronger consumption in 24 in comparison with 23. So that is one, of course, underlying factor. I said that also that in the retail sector, we start to see quite good demand for boxes. While we all know that the manufacturing industry is not perfect, but we have listened to some reports now from Volvo and other players, and they also feel that they have an increase in the underlying demand in the market. So let's see where we come. No doubt that for the moment it is the cost pressure that really push prices upwards now in both Kraftliner and Testliner. So I mean that is of course the main reason. In wood and we were talking about the lagging effect. I would say that I don't know if I can give a general answer to that. Of course if you have a very high price for wood raw materials then you need to increase the prices for solid wood products otherwise when you cash negative then of course producers they start to stop production and that has happened and I mean even if we did 17% DBTA margin in in the fourth quarter we can see that many players they are in in red figures for for the fourth quarter so so it differs for different reasons it differs the profitability differs between different companies and and also different geographical areas so i don't know if i can say uh give you a general answer on that one like to add something under us

No, I can just add that, I mean, as we mentioned before, that we will see continued increase in both pulpwood and solar prices going into Q1.

That will, of course, mitigate the effect of the price increase that we now will perform during the first quarter, for sure.

Thank you.

Thank you. And we'll now take our next question from Lars of Spiffel. Please go ahead.

Thank you. I just want to come back a bit to the assets you're ramping up. You mentioned $67 million in the quarter for ramp-up costs in Obola. Could you share what you've had through the year, both at the CTMP mill and Obola, and then how we should think about a gradual reduction as a delta in 2025?

If we look at the ramp-up cost for Obola, I think I guided in Q3 for about 45 million, and then in Q1, Q2, I think it was similar level to what we have in Q4, around 60, 70 million. And then we will see how it develops in the next year. But as I've said, ramp-up, and then we fix something, then you have to... to reduce the production. And that, of course, increases the amount of chemicals and things you need. So that will gradually decrease, but it's hard to say exactly. If we look at CTMP, there I think the ramp-up costs are less. We're still trimming the mill, but I think we are at a good level there now.

All right. A question just on the harvest levels. You said it's record harvest levels and you have a positive trajectory over time, of course, to increase your harvest. But these sort of levels that we have now, are they compatible and can they continue with the growth you have in the forest?

Yes, so if you look at our harvesting plan, we have a target over the next 5-10 years to go up to 5.4 million cubic meters on average. For the last couple of years, we have gradually been increasing to that level. So this year, we had around 5.2 million.

Very good. Thank you.

Thank you. We'll now move on to our next question from Patrick Mann of Bank of America. Please go ahead.

Thank you. Good morning. There are two big forest packages up for sale at the moment, one in the Baltics and one in Sweden. Are you interested in adding significantly to your forest holdings in the near term, or can you just talk about how you're thinking about that? Thank you.

I mean, in principle, we are interested in buying forest land. That we have done in the past and we will continue to do so also going forward. Then it's as always a question about timing. And I would say the sale that we now see in Sweden, we are not in the process. And you have lots of... limitations I guess in that process and I don't know if it's open for industrial players really. We are not involved, we have not been invited so that's the clear answer on that one. The Baltics is of course of some interest but again it's a question of timing and what you can afford for the moment being. Just now we are very much focused on our balance sheet and to consolidate and ramping up what we have started in terms of big investments and so that is mainly our biggest focus for the moment being.

Thank you. And then if I could have another one. I mean, wood prices, the raw material costs, I mean, you flagged a couple of times record highs. You continue to expect that to increase into the first quarter. I mean, what's the longer-term outlook here? How high can they go? What factors could we watch as sort of leading indicators that potentially it could come down or consolidate? Thank you.

Yeah. Yeah, I mean, just now we see that it is easier to get access to pulp wood at the end of last year, but also in the beginning of this year, while I think in some areas at least you still have a lack of saw logs and I mean if you have a lack of saw logs that will push prices up to the level where producers start to lose money of course. How long will it last? In general I would say that we will have slightly tough balance when it comes to supply and demand in different parts of the world, Canada, Central Europe and so on. And that's the reason why I think that SEA is very well positioned as we can take around 50% of what we need from our own forest. As we've also discussed before, I mean, we are We are still impacted by the Russian invasion of Ukraine. And you know that we have lost into the European system about 10 million cubic meters per year. And at the same time, Sveaskog, they have announced that they they will or they have reduced the harvesting level on their own forest by one million cubic meter. And I guess that's mainly in the very northern part of Sweden. So, I mean, I guess that it will be a tough balance also going forward. And by that, we will have rather high prices for wood, raw materials.

Thank you.

Thank you, and we'll now take our next question from Robin Santavirta of Carnegie. Your line is open. Please go ahead.

Thank you very much. The first question I have is regarding the container board segment. Andreas, did you comment on the expected ramp-up cost in 2025 versus 2024? I guess you spoke about 2024, but what about the outlook for 2025?

We expect to continue to have some ramp-up cost in 2025, but the exact numbers is hard to say. We have to wait and see, but we expect them to gradually decrease as we ramp up production.

All right, thanks. I thought that the palm wood market, now you call an increase in Q1 versus Q4 as in P&L impact, if I understand correctly, is that the laggy impact of prices going up throughout the end of last year or are these sort of, in a way, spot prices that you buy now, are they still increasing versus the end of last year?

I will say it's a lagging effect. For pulp wood, it's a lagging effect. And in some areas, I also guess that we have a rather big portion of lagging effect when it comes to saw log prices. But in some areas, the competition to get saw logs is quite tough. In some areas, I guess that we can also see somewhat higher prices for saw logs. But again, when you look at the result for many players just now, they are on negative or red figures, and that cannot really continue because then production, of course, will decrease. But just now we feel a little bit of a surplus of pulpwood, I would say, in the market. Andreas?

All right, thanks. Yeah, just to add, I saw a log that some players recently added a price with around 100 sec per cubic meter. So I think it's also a log, it's both underlying prices increasing, but a lag effect on pod put is more of a lag effect.

But also just to clarify, we have a two price system. So what you see in the price list is not always what you pay in the market, of course. Yeah.

No, for sure. Regarding the pulpwood surplus you're seeing in Finland, there's a lot of talk about what the energy would market that it has collapsed because of the very mild winter. Is this something that plays in or is it just pulpwood sort of balance becoming better because of the tough market environment and weaker demand?

I guess that the mild winter definitely is playing in. And I mean, as I described, we don't see a tougher end market this year in comparison with last year. I mean, we see coming price increases. I mean, we will not maybe have an effect the first quarter, but definitely the second quarter in all areas, both in pulp and also in container board. So, I mean, the demand will be, I think, good, but availability of pulpwood is higher as it is just now in comparison with the past. Might be connected, related to the energy market.

Yeah, yeah. The final question I have is, Related to the wood segment, how do you see the impact of potential tariffs in the US from Canada? What would the impact be on the market and any impact on you directly?

I mean, I think it would be a mess if we have these tariffs. I mean, we haven't seen them and we don't know what kind of... in what shape we will have them. And I don't think it's so easy to foresee what's going to happen because the pattern will, of course, change. If you have tariffs between Canada and US, that will, short term, it will maybe it might be good for our products. Long-term, of course, these products must find another place. It will have no impact on the consumption. For us, I think, for Sweden as a country and for us as very dependent on export, I think we like to have a free trade and a level playing field. So we don't like tariffs. We can gain in some area and we can lose in some area. But long term, I think it's so important that we can have a free trade.

I understand. Thank you very much.

Thank you. And we will now take our next question from Gaurav Jain of Barclays. Your line is open. Please call the hike.

Hi. Thank you so much. I have three questions. One is your comments on pulp prices. Can you just please repeat them? Because I think there are a few moving parts. So what I got is that Susanna has increased prices by $100 in Feb and another $60 in March. And you have also announced a price increase now and you will look at another price increase in Q2. Did I get that correct?

Yeah, I mean, first, if we take short fiber first, I mean, and then what Susano has announced is 100 US dollar per ton up from January. We believe that that will come through in February, maybe. But that's not up to us to say. And then they have announced another price increase from first of March by another 60 US dollar per ton. So all in all, 100 plus 60, 160 USD per ton. On MBSK, we have, I would say that we have increased prices now from effective from 1st of February, above 50 USD per ton. And I mean, it's still to be seen what's going to happen in coming months, but we believe that the price will continue to move upwards. But again you have to take into consideration when you do your calculation that we had an increased discount rate from 1st of January in Europe and that one was a little bit higher in comparison to the discount rate that we increased in US. So I mean that must be taken into consideration when you calculate on the net effect. And as always, we have a lag effect before we can see it in the P&L.

Sure. Thank you so much. My second question is on, you know, what should we expect in terms of biological gain to be put in P&L for next year? And, you know, if I look at that forest valuation graph, then clearly over the last two years, prices are down. So that average of three years' lines should be flattening out. which it has, so does it mean that you will start taking lower biological gain in your PNL?

gains is mostly driven by the net growth and the increase in the price for wood, raw material. And we have in our model several year average price for raw material, and then that is expected to continue to increase as we move that forward. But currently we expect something around 1.8 billion for biological assets, but it depends on how things will develop during the next year.

Okay, thank you so much. And my last question is on CapEx plans for FY25 and beyond. So could you just reiterate them? What should we put in the model?

So CapEx, if we start with current CapEx, we came in a bit lower this year, but we have some spillover effect to 2025. So we expect maybe up to 1.7 billion in current CapEx and on strategic CapEx just below 1.5 billion, but also depends on the payment, timing of some payments, but as a round figure.

Sure, and where should it step down after F525, if you could comment on that?

After 2025, Mr. 3D CAPEX will decrease as the largest payment we have now for 3D CAPEX next year is our windmill FASICAN, and that is around 1, 1.1 billion for the next year. We also have some payments left in pulp and our container board division. But in 2026, the strategic capex will go down a lot if we don't do any new big investments.

Thank you so much.

Thank you. And we'll now take our next question from Oskar Lindström of Danske Bank. Please go ahead.

Thank you, Operator. A couple of questions from me, and maybe I'll start with the first one then. Talking about net debt, which is now just under $11 billion, about one and a half times EBITDA, and you say that presently you're focused on strengthening your balance sheet. What level of net debt are you aiming for and do you believe is sort of appropriate for you medium to long term, say? And sort of an additional question on this, would you be willing to significantly increase your net debt short term? And if so, what would be the sort of upper limit that you would be willing or able to go to, you believe?

Firstly, I mean, we want to keep an investment-grade credit rating. That's our target. And as Ulf said, our focus now is to ramping up our investments. And that will, of course, increase EBITDA and decrease the leverage. So that's our current focus. We don't want short time to... increase our net debt significantly. We are committed to staying at investment grade.

And to stay at investment grade, you believe you need to be at roughly where you are now, sort of one and a half times CBTA. Is that how I should interpret your reply?

We have, I mean, for us, I think FFO to debt is what limits us. And to be investment grade, we need an FFO to debt over 20%. Currently, we are at around 32%, something like that, but to keep our current rating, We need FFO to debt around 30%, but to keep investment grade has to be above 20%. So we still have some headroom, but our aim is to be around 30% FFO to debt.

Right. Thank you. And so there's no sort of leeway for you to short-term significantly, you know, to go below 20%.

No, we don't want to go below 20%.

And then on the forest land, I mean, you stated now earlier in the call that you are interested in buying more forest land, including in the Baltics. And I believe you have a target in your strategy to increase your Baltic forest land holdings to about 100,000 hectares. And if I look at your webpage, you say, I think you have now about 70,000 hectares of land, of which I believe about 50,000 is forest lands in the Baltics. You know, how hard is that target? I mean, is it an absolute ceiling? Would you be willing to sort of go significantly above this or, you know, what's your thinking here about owning forest land in the Baltics and, you know, how much, you need or would you like to have?

As you know, LCA is a forest company with industry, and step by step we have increased the area of forest land within LCA, and that we will continue to do. Preferably, we will buy in Sweden, but the problem is to get access to legal entities, which we need to do. You know the legislation. And the reason then for us going to the Baltics is that we can continue to increase the forest land and that we will do when we have the money. I mean, that's no emergency. I mean, the plan and we did announce something just in order to give a figure and we said that we should reach 100,000 hectares in five years. I mean, if it takes seven years, it doesn't really matter. It's also a question about timing and what kind of price level you have in these different regions. And I mean, when you get the opportunity. So I mean, so that's our view. We will continue to buy forest land when we can. If we can, preferably we will buy in Sweden. If we can't do that, then we think that the Baltics is a good opportunity and a good option. If we take care of the forest land in the Baltics in the same way as we do in Sweden, then we think it's a great potential to have land there.

Great, thank you. Just a final question, a quicker one. on pulp you mentioned that the uh discount rate had increased in january uh how much roughly sorry does your 50 yeah the discount rate i'm just trying to figure out you know if uh the discount has increased by roughly 50 us dollars per ton And then now you're announced a $50 per ton price increase.

I can say that the price increase has not fully compensated for the increased discount in January. It will do when we have done another $50 per ton. Then we have a little bit more than compensated. So then you have the range. Wonderful. Thank you. Those were my questions.

Thank you. And we'll now take our next question from Charlie Massans of BNP Paribas. Please go ahead.

Thank you very much. Most of my questions have been answered, but just one more on pulp. The revenue per tonne drop was a bit sharper than at least I'd anticipated in Q4. I just wondered whether there was any mix effects, whether it was particularly a mix to more CTMP as you took maintenance downtime in the main mill, or whether it was a mix between contract and spot, which was adverse in the quarter compared with Q3. Thank you.

I think the largest effect is, of course, we have a larger portion of CTMP now as we're ramping up our new CTMP mill, but also had the maintenance stop in Östrand.

Thank you.

Thank you, and we'll now take our next question from Jonas Masloss of Morgan Stanley. Please go ahead.

Thanks very much for the presentation. Most of my questions have been answered, but I had one on the container board and regarding, again, the price hike of 90 euros you've announced. Could you perhaps clarify where that gets your brown and white craft liner price levels? And if we were then to look at your queue for profitability per ton, if we get a full 90 euro to come through your your P&L for that division going forward feels like profitability would move towards historical average levels? Is that the right way to think about it? And is that realistic given where inventory levels are and where utilization rates are across the industry? Thank you.

Yes, to start, if our price level, we don't comment on the exact price level, but what you can do is if you look at the sales and divide that by our delivery volumes, then you would get a very good estimate of where our current price level is on container board. And I think in... In pulp, when you have price increases, that's gross, so they have to remove the rebate. In Kraftliner, the discounts are very, very low. So if prices, for example, go up X euro per ton, that's also roughly what the prices increases on. So that's a bit different dynamics between pulp and container board.

Okay, thank you. And so just the second part of the question around whether it gives you profitability per ton feels like it does improve profitability quite significantly from current levels. Do you think there is enough impetus today given utilization levels, given inventory levels that you show in your slide deck? Or for the full 90 euro to stake, you need demand to continue improving?

Yeah, I mean, it's hard to say really, but again, I mean, the reason for this price increase is, of course, mainly related to the cost pressure. But we're also underlying, we see an increased demand during 2024 in comparison with 2023. And I think, personally, I think we will see a continued recovery in the economy during 2025. not at least 2026 if nothing very unexpected will happen in coming years. I think we will, step by step, we will see the recovery. And again, when we, as one indicator, when we look at the box demand, you can see that we are now back on trend levels. And I guess that will continue. So I don't know if you'd like to add something or no.

Thank you. If you find that your question has been answered, you may remove yourself from the queue by pressing star 2. Thank you. We will now move on to our next question from Andrew Jones of UBS. Your line is open. Please fill the hike.

Hi, Jess. Just on the €90 craft runner price hike, I'm curious to what extent potential supply disruption from Finland is filtering into your thinking around that. Obviously, last year you benefited from a lot of capacity being shut in due to the port strikes. Is that something that's part of your thinking there? And also, just as a broader question, for this year, there's obviously loads of new test liner capacity coming into the market. Usually, and move together. Given the vast difference in where the supply additions are coming from, do you think there is potential for that spread to significantly widen this year as that capacity hits? Thank you.

Yeah, I think if we start with the second one, we shall remember, I mean, the spread has step-by-step increased, and I think in, I mean, to some extent you have a connection between Craftliner and Testliner, but it is, of course, also a question about function, and what we see now in the market is that the capacity of test liner is step by step increasing while craft liner capacity is I mean stable it is more or less our own expansion in Obola that have an impact so I guess that you will see and yeah you We have seen an increasing spread between craft line and test liner. I guess that will remain for a while. It might be also bigger because, again, it's a question about supply and demand. The first question, Andreas, I don't remember, so maybe you can take it.

Can you take that question again?

Yeah, just asking about, you know, you obviously have potential for supply disruption again in Finland. Is that filtering into the way you're thinking about the price hikes I mean is this opportunistic given there may be some disruption over in Finland and you could benefit from that maybe I didn't

get it right. But was it if we have any relation with the potential strike in Finland? Was that the question? Yeah. I mean, what we have seen in the, I mean, we have seen a lot of strikes in Finland for some reason. And I mean, if we have a strike in Finland, that will, of course, have an impact depending on how long will it be. And I mean... how many will be impacted by the strike, but that we have definitely seen in the past. We don't speculate in the Finnish strike, and definitely not now when we're talking price increases from 1st of March. I mean, that has no connection at all with the Finnish situation. Okay, thank you.

Thank you, and we'll now take our next question from Linus Larsen of SEB. Your line is open. Please go ahead.

Thanks a lot for squeezing in one or two follow-up questions towards the end of the call. You talk about rising wood costs in your P&L Q1 compared to Q4. I'm just curious whether you could quantify that either on a per cubic metre basis or even better on an absolute level, please.

Yeah, you're talking about six, seven percent. Yeah, six, seven percent increase on both Palpo and Solang around that. Sorry? Six to seven percent.

On a sequential basis in the first compared to the fourth quarter?

Yes.

Okay. And that was on the pulp wood side?

On both, on both.

On both, okay, great, thank you. And then also, you touched upon it, but maybe just on the wood product side, your market outlook, any green shoots, any early cyclical signals that you're picking up in any geographies? If you could comment on that, please.

I think it's a fairly stable demand all over the area just now. I mean, as I said, typically we don't It's hard to manage to increase prices in the first quarter, typically, but that we will do now. It's not much, it's low single digits, but anyway. And then, of course, I believe that we will have a seasonal effect also in the second quarter, and by that we can continue to increase prices for... solid wood products. Then on the other hand, and as Andreas just mentioned, I mean, we will see increasing log prices in the first quarter, so by that the margin for the solid wood business will, whether they will remain stable or not, it remains to see, but we feel I mean, if you also look at the inventory level, it's on a rather normal level. I guess we have a normal level by producers, but I guess that among customers it's on the low side. That we don't know, but I guess so. We feel that when we talk to customers and when you try to find out what kind of demand you have out there.

Right. Great. That's helpful. Thank you. Thanks.

And that, ladies and gentlemen, concludes our full year report presentation. We'll come back in April for our first quarter report. Thank you for listening and asking questions.