Svenska Cellulosa Aktiebolaget SCA (publ)

Good morning and welcome to this presentation of SEA's 2025 half-year results. 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, good morning and warm welcome to the presentation of our results for the second quarter 2025. During the second quarter we continued to deliver good profitability in a challenging environment and our high degree of self-sufficiency in strategic areas mitigated higher costs, not the least related to wood-raw materials. We reached a bit over 2 billion SEK on EBITDA level and by that an EBITDA margin of 38% for the second quarter. In the quarter, SEA had higher prices and a really strong production, good delivery volumes in both wood and container board. The volume increase has not the least been related to Bålsta sawmill and Obola container board mill, where we have performed strategic investments. Due to higher availability in production in our container board mills, we also generally noted a lower specific cost level in the second quarter. And all strategic investments will step by step contribute to increased productivity and cash flow generation during upcoming years. Global uncertainty remains driven by discussions around new and changing tariffs. This clearly affects the global demand and business climate in a negative way. Especially the pulp market has been hit so far. Turning over to some financial KPIs for the second quarter. As already mentioned, our EBITDA level reached a bit over 2 billion SEK, which corresponds to 38% EBITDA margin. Our industrial return on capital employed came out at 8%, counted for the last 12 months, and the leverage was at 1.8 times, and our net debt to equity reached 12.5%. I will now make some comments for each segment starting with forest. Higher harvesting levels from 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 in the graph on the bottom left. Although we now feel that the market for mainly pulpwood cools down, at the same time we will have a lagging effect until we get the full impact cost-wise. When one compared Q2 2025 with Q2 2024, sales were up 14%, mainly due to higher prices for pulpwood and saw logs, as well as higher delivery volumes to SA industries. EBITDA was up 21% mainly due to higher prices, higher harvesting of own forest and higher delivery volumes to SEA industries. Turning over to business area wood. In general, we still have a slow underlying market for solid wood products. Despite the general low demand, we have noted signs of improvement in the repair and remodeling segment this year in comparison with last year. The uncertainty in general economic development continues to affect the market recovery negatively. Stock levels are on the high side among producers, but we believe mainly on the low side at customers. The price for solid wood products increased by 4% in the second quarter, in comparison with the first quarter 25, although the increase has been almost double, counted in local currencies. Our production level was very good during the quarter, but deliveries were even stronger, resulting in a decreased stock level of sown goods for SEA. As expected, the cost for saw logs has increased from the first to the second quarter and we also expect them to continue to increase going into the third quarter. Sales were up 15% in comparison with last year. The EBITDA margin reached 18% in the second quarter, driven mainly by higher prices and higher delivery volumes. Today's stock level of solid wood products in Sweden and Finland is described at the top left on this slide and is shown in relation to the average for the last five years. As mentioned earlier, we note that the inventory is on the high side in general, while the SA level is rather normal. As can be seen in the diagram to the bottom left, the Swedish and Finnish sawmill production have been on a rather normal level in the first five months of 2025. In the diagram to the top right, we can note that the price increased during the second quarter with a somewhat stronger development for spruce. Going into the third quarter of 2025, I estimate that the prices in average will decrease with up to 5%, somewhat more for pine and somewhat less for spruce. This is driven by the higher availability of pine products. In the construction sector, we can conclude that the start of new buildings continues to be low. As said before, uncertainties are still present, but we see improved consumption in the repair and remodeling sector, which is early to respond in a positive way to lower interest rates. Over to PALP. In comparison Q2 2025 with Q2 2024 sales were down 16% mainly due to lower delivery volumes and lower prices. EBITDA was down 49% compared to last year mainly due to higher costs for wood raw material and lower prices. Global demand for pulp was at a healthy level during the first quarter of 2025 and we saw increasing prices on all markets. Anyway, during the second quarter the market changed with reduced demand and prices came under pressure, much due to uncertainty related to US tariffs that were introduced in the beginning of April. The weakening of the USD had, in comparison with Swedish currency, a negative impact on the price in SEC in both Q1 and Q2. MBSK prices increased during the first quarter and reached 1600 USD per tonne in Europe in April. Today we are around 1510 USD per tonne after three consecutive months with decreasing prices. In the US, MBSK prices have had a similar development as in Europe. In China, MBSK prices have fallen from 8.10 USD per tonne in March to 6.80 USD per tonne today. And in real terms, they are today on historically low levels. Regarding tariffs, all pulp supplies exporting to US except for Canadian producers are currently subject to tariffs. Canada and Europe are the main suppliers of MBSK pulp for the US market. Europeans are of course at risk of losing market shares in the US if having higher tariffs than Canadian suppliers over time. Looking at the CTMP, prices have been unchanged in Asia at low levels and decreasing slowly in Europe during the second quarter. Inventories of softwood and hardwood have been increasing in April and May, as you can see in the diagrams, and they are now on the high side. CTMP inventories, on the contrary, have been reduced during the second quarter. So, moving over to container board. Sales were up 15% in the second quarter in comparison with the same period last year, driven mainly by higher prices and higher delivery volumes and high production. EBITDA was up by 95% driven by higher prices, higher delivery volumes, lower cost related to strong production. The positive effect was partly mitigated by higher cost for wood raw materials and negative currency effects. We have seen box demand developing in a positive way during the first half of 2025, although slowing down in the later part of Q2, but still almost back on the post-pandemic growth path. The retail business remains a positive driver of growing box demand over time. On the other side, we continue to see negative growth in the European manufacturing industry, which for the moment drives the demand in a negative direction. The European demand of containerboard has increased in Q2 compared to the same period last year. Although due to the current turbulent macro environment it's difficult to have a view on the long-term demand. In Q2 the supply-demand balance has been impacted by additional test liner capacity coming on stream. In Q3 we expect no further increase in capacity. Craftliner inventories remain above average level as you can see in the graph. During the second quarter the availability of OCC tightened and we saw prices increase significantly. Moving into Q3 we see the availability of OCC moving into a more balanced situation and prices are sliding downwards. Prices for brown and white craftliner increased in Q2 by 40 euro per tonne in Central Europe. So last but not least, renewable energy. In the business area of renewable energy, we've had a quarter in line with the same period last year. We delivered a healthy EBITDA margin of 18% during the second quarter. The market for solid biofuels has weakened due to warm winter and by that lower power prices. For liquid biofuels, we see margins improving from low levels during the end of the quarter. Main reasons are increase in oil prices, European countries implementing RED3 and better control mechanism within EU. We expect market volatility in renewable fuels to remain high as Europe ramps up the blending mandates both in HVO and SAF. Electricity prices were extremely low during the quarter, which impacted our wind business negatively. SEA Landly's business is stable at 9.7 TWh, which is equal to 20% of installed capacity of wind power in Sweden. And finally, I can also mention that the execution of our windmill project Fasikan is progressing according to plan. And by that I hand over to Andreas.

Thank you Ulf and good morning everybody. I'll start off with the income statement for the second quarter. Net sales increased 2% to just below 5.4 billion, driven by higher prices and higher volumes. EBITDA increased 8% just below 2 billion, driven mainly by higher prices, which was partly offset by higher costs for wood, raw materials. The EBITDA margin was 38%. EBIT increased to 1.5 billion, and financial items totaled minus 114 million, with an effective tax rate of around 20%, bringing net profit to 1.1 billion, or 1.55 SEC per share. On the next slide, we have the financial development by segment. Starting with the forest segment to the left, net sales increased to 2.5 billion, driven by higher prices for wood, raw materials. EBITDA increased to just below 1.1 billion due to seasonally higher harvest from SCA's own forest and higher prices compared to the previous quarter. In wood, Prices increased compared to the previous quarter, while the cost for soil logs continued to increase. Net sales increased to 1.7 billion, driven by higher volumes and higher prices. EBITDA increased to 310 million, corresponding to a margin of 18%. In BALP, net sales decreased to 1.8 billion driven by lower delivery volumes and negative currency effects. EBITDA decreased to 261 million, corresponding to a margin of 15%. In the quarter, we had a negative impact from a planned maintenance stop of 25 million. In Container Board, Craftliner prices increased during the quarter, net sales increased to 1.8 billion, and Ibinta increased to 451 million, corresponding to a margin of 25%. The result was positively impacted by higher prices and lower ramp-up costs in Obola. The market for renewable energy continued to be weak. EBITDA decreased compared to the previous quarter and amounted to 87 million, corresponding to a margin of 18%. The decrease was mainly driven by seasonally lower demand for solid biofuels. On the next slide, we have the sales pitch between Q2 last year and Q2 this year. Prices increased 3%, with higher prices in wood and container board, which was partly offset by lower prices in pulp. Volumes increased 1%, driven by higher volumes in wood and container board, which was offset by lower volumes in pulp. And lastly, current selling a negative impact of 2%, bringing net sales to just below 5.4 billion. Moving on to EBITDA Average and starting to the left, price mix had a positive impact of $174 million and high volumes had a positive impact of $76 million. High cost for mainly wood raw materials had a negative impact of $77 million, which was mitigated by our high degree of self-sufficiency. with a positive impact of energy of 55 million and a negative impact from currency of 106 million. In total, EBITDA increased just above 2 billion, corresponding to a margin of 38%. Looking at the cash flow, operating cash flow increased to 953 million for the quarter and 1.4 billion for the first half year. And as you know, other operating cash flow relates mostly to working capital, currency hedges, and should therefore be seen together with changes in working capital. Look at the balance sheet. The value of the forest assets totaled just below 108 billion. The first half of the year has seasonally few transactions, and we therefore left the three-year average price used in the forest valuation unchanged. Working capital increased to 5.9 billion, driven by higher volumes and higher prices. Capital employed totaled 170 billion, and net debt stood at 13 billion. And we have now almost finalized our large ongoing investment projects. Equity totaled 104 billion, and net debt to equity was 13%. Thank you. With that, I'll hand back to you, Ulf.

Thanks, Andreas. Well, just to summarize, I mean, we are happy to deliver a solid second quarter in a rather challenging market. I can also underline strong production, good cost control, and I'm also happy to see that our strategic investments, they are now starting to deliver and still we are in a ramp up phase, of course. And we also see that we benefit from our business model. When we are investing in our strong value chain, we also have a strong resistance in the tougher business climate. So by that, I think that we open up for questions. Please.

As a reminder, ladies and gentlemen, if you would like to ask a question on today's call, please press star one on your telephone keypad. We'll take our first question from Ioannis Masvoulas from Morgan Stanley. Your line is open. Please go ahead.

Ioannis Masvoulas Hello. Good morning, and thank you for the presentation. The first question from my side on container board, if we look at the realized price ASP for the quarter was up strongly sequentially and seems to have exceeded the sequential increase in the Kraft Liner price in SEC that you show in your slides. Was there any mix shift or anything else to highlight that would explain the strong development? And then second question, again, on container board, on the volume side, we've seen a stable development sequentially, suggesting that the overall ramp-up is potentially moving a bit slower, despite what you call a normal demand backdrop. Can you provide a bit of color on the volume development here, and are you still considering expecting to deliver the 15 to 20 percent growth for the year?

Thank you. We start with the price and I mean we had price increases both in the first and the second quarter 40 euro per ton and as we always say we have a step by implementations I mean we step by step we benefit from these price increases and no shift in mix, market mix, or anything else. I mean, it is a rather stable situation.

And also, on top of that, as mentioned before, when we had a good production, which means we have a higher quality, and then you get a lower share of B-grade quality, and that will have an impact on the mix with the higher A-grade prime quality.

And the other one was according to the ramp up and the ramp up is going very well. And we have a pretty much stronger volume this quarter in comparison with the last quarter, but also the quarter one year ago. And the delivery volume was somewhat, it's not really reflecting that because we are now coming into a rather long maintenance stop. So we prepare also for that one. But the production just now, is where we thought it should be. So we are happy with that.

That's very clear. Thank you. And if I can squeeze one more, when we look at your revenue split by region, it seems that the U.S. is still holding up around 10% share, both in Q1 and Q2. So there hasn't been any major shift in your business so far. If we end up with a trade deal with 15% tariffs against Europe, how do you see that volume development? Do you still think you can be competitive across all your products in the US, or would you look to potentially redirect volumes elsewhere?

I mean, it depends on... It's a relative game, because if Europe will have 15% tariffs and Canadians in MBSK, for example, will have zero, I guess that might start to impact the flow a little bit. And maybe in that case, we will see more European volumes over to Asia and somewhat less to US. But also, I guess, on 15% level, our strategic customers in the U.S., they like to have a certain spread in the supplies. I guess they still prefer some European volumes. And so far, as you say, we haven't... I mean, US is still a good market for us and we have a high profitability to go to US in comparison with Asia as it is today. And we haven't really redirected any volumes, 15%. I don't think that will have a major impact. But of course, if you get 30 and Canadians have zero, then we start to see something, I guess.

Very clear. Thanks again.

Thanks.

Our second question comes from Linus Lawson from SEB. Your line is open. Please go ahead.

Thank you very much, and a good morning to everyone. A couple of follow-ups on container board, actually, and I wonder, in addition to what you already said, how much there is still to go on the ramp up at Obola, and also if you compare margins, where is Obola right now compared to the business area as a whole?

If we start with a ramp up, I guess we said 600,000 tons during 2025, and my firm belief just now is that we will reach that one. Margins, Andreas?

No, I mean, if you look at the profitability in Obola compared to Munchson, I would say the margin was a fairly similar level, but we still have ramp-up costs in Obola. And as we improve the volumes, we will also get lower indirect cost per town, as we can split those costs on larger volumes. We still have

good way to go, cost-wise, in Obola. And one quarter is just one quarter, but anyway, when we see the production that we've had in the second quarter, we also can see that the cost will develop in a very positive way, which is good to see, really. As we said before, first we focused on the volume, and then we focused on fine-tuning and the cost level, but this quarter we clearly saw a positive impact on the specific cost Paton produced.

Sure, sure. But just, Andreas, what you said, did I understand you right, that right now the run rate margin is pretty similar in Obola, as mentioned?

Yes, no major differences. It depends what quality you sell and things like that, but no big differences.

Right, great, thanks. And then another follow-up on the same business area, on pricing, which I've touched upon it already, but could you maybe share some more thoughts on the market value for Kraft Liner in Europe in the third quarter? So like I said, I think we exited the second quarter on a higher note, but then we've seen some negative price moves in the market, especially on test liner, but also to some degree maybe on craft liner. So how do you see that market balance and that price direction in, call it, July, August, September?

As I said, I mean, we've had two price increases in the Kraftliner during this year, 40 in the first quarter, 40 in the second quarter, and we haven't seen the full effect, I guess, from the second one yet. And as you mentioned also, I mean, We also have heard that test liner producers, they have reduced the price by 40 euro per ton for test liner. We have no price decreases for craft liner up till today and I don't like to speculate in that going forward, the market going forward. I mean, we see that we have a healthy consumption in the retail part of our business, while industry is more hit by the ongoing discussions and negotiations about tariffs.

That's great. And then just maybe if I may squeeze in one on wood product. You said that wood product prices may decline up to 5% Q3 and Q2. How do you see cost developing Q3 on Q2? Is that also an adverse trend sequentially?

It's a little bit tricky. We believe that prices will come back to the level we had in Q1 in wood. I mean, then something can happen in terms of currency. But except from that, then I guess that the cost for saw logs will maybe increase a little bit in the third quarter. In the market, we see that, I mean, we have seen price decreases on pulpwood and more stable prices on saw logs. So that's the case, but then we have this lagging effect. But what might impact the saw mills in the third quarter is reduced price on sawdust and byproducts, so to say, and that us, might be so that we move some part of the result from the soil mills over to renewable energy and so on. So that kind of changes you might procure.

All right. Thanks a lot.

Our next question comes from Lars Delberg from Stifel. Your line is open. Please go ahead.

Thank you for taking my questions. Most of them have already been answered, but just to follow up on You mentioned cooling, and now you've seen some price declines. Can you please quantify that? And is this a function of relatively high wood products production, meaning a lot of residues coming out, or is this a structural, cyclical change in the wood price? And in a scenario with a normalized demand on pulp, et cetera, would you expect a continued reset down or would that help to stabilize pulpwood prices in your view?

I mean, pulpwood prices have started to come down, and you see it south of the SEA area, you see it in officially announced price lists in our region, so to say, from Sundsvallen north. I mean, we have an official stable level, but as you know, it's a two-price system, so one part of it is the price list, and the second part is what you add to the price list, typically. And... due to the inventory levels we see now all over the place. I guess we are, in many companies, oversupplied by pulpwood, and that, of course, will have an impact on the pricing. And again, short term, I mean, we will have a lagging effect, but I guess step-by-step prices for pulpwood now will start to come down. Not a dramatic development, but still they will start to come down. And as I said, we are well supplied, and I guess in some areas, companies are oversupplied of pulpwood as it is just now. While we have a slightly different situation in saw logs, because there, I guess, many companies, they are, I mean, pine logs, yes, well supplied, but in spruce logs, in some areas, we lack some volumes.

Just add to that, if you look what realized cost would be in the third quarter. Pulp, as Ulf said, is going down. We have a lagging effect. So talk about maybe 1% decrease in pulp prices while the solar prices are still going up a bit.

Gotcha. And I just want to clarify also the current situation. You, of course, have extensive hedges, which is, of course, necessary to stabilize your business. But could you help us understand if we stay where we are today, what would the impact be in terms of the FX cost rates that are relevant for you? In other words, what was the hedge benefit in the second quarter?

I mean I think in our quarterly report you have our average hedges and I think for dollar which has the main positive impact now it's around I think it is we have in our quarterly report but it's around 10 20 and that is most is related to our pulp division because the list price are usually set in the dollars, so they will have the largest impact on pulp. In wood products, in container board, it's the euro is the largest currency, but also larger in SEC. Now you have the British pound, but the British pound we don't hedge.

I get that, but you don't have a number to share. I can do the math, of course, or try to.

We have the net exposure in our annual report. You have our net exposure in each currency with our sales minus our purchases in each currency. You have the figures there.

Very well. Final point. And you mentioned that in terms of potential changes in direction of travel of pulp. But are you also seeing any trade flow changes from the U.S. into other markets? What I'm referencing then is You know, there's quite a lot of capacity closures in line aboard in the US. Most of those mills are export oriented. So have you seen any other trade flow changes, for example, the Latin America of line aboard from Europe into that market and or opportunities elsewhere?

I mean, not really. I mean, we don't do too much of container board over to U.S., maybe 40, 50,000 tons per year or something like that. And as it is just now, I guess many companies, they are It's a little bit of a wait and see mode. I mean, we have ongoing negotiations now. We don't know what will happen. US customers, I guess they also like to stay with the supply they have because you build up some kind of relation and you have a strategic work together. So, again, we have to wait and see. I mean, we have to wait and see what tariffs we will get for European supply and for Canadian supply and so on. And then when it's settled, then I guess we might see some changes in, I mean, redirect the volumes and so on. And we have all said so far we have had good discussions with customers. So we also share, I mean, we shared the impact of tariffs and so on. to a big degree soon.

My question was really about other markets that you may enter following U.S. capacity closures.

As I said, as it is just now, we are in a wait-and-see mode. Of course, we investigate what possibilities we have in other markets for container products. For example, Mexico is a good market, and you have other options. And I guess all other companies, they are doing the same. But as it is just now, it is a wait-and-see mode. So we haven't started to redirect. We haven't really seen that other companies have started to redirect volumes. Understood. Thank you.

Our next question comes from Ephraim Ravi from Citi. Your line is open. Please go ahead.

Thank you. Just a quick clarification question, couple of them. Firstly, on the pine versus spruce price kind of diversion, can you just remind us what your current mix is and is it kind of stable or or changing between pine and spruce in terms of impact on your profitability? And secondly, in terms of the renewables profitability, you mentioned that solid fuels market is looking strong, liquid is looking weak, and has been weak. Again, can you just remind us of the mix in terms of profitability between those three sub-components? Thank you.

If we start with the share of pine and spruce, I would say that we are pretty much 50% of each, so 50% spruce production or whitewood and 50% pine. And as you say, I mean the market for spruce or whitewood is stronger. And when we're coming in now to the third quarter, I guess we will have more or less unchanged prices for spruce products, while we will see a price decrease in pine, maybe close to 10%. So the average will be around 5%, as we've announced. The other question, I guess, Andreas, you...

Yeah, we haven't, we don't give the exact split on profitability between each sub-segment in renewable energy, but just to give some flavor on it, I would say that in the second quarter, a large part of the profitability comes from tall oil, and compared to Q1, in Q1 you have seasonal very high deliveries of So in Q1, you have a larger change between Q1 and Q2 profitability is the change in the profitability between bioenergy. And then our wind leases, they're around 100 million each year. So that's just some flavor on the profitability. Thank you.

Our next question comes from James Perry from Citi. Your line is open.

Good morning. Thanks for the presentation. Just a couple. So firstly, on wood, you reported about 10% volume growth year-on-year in Q2, and that seems to be about the highest quarterly volume since 2021. How much should we read into that, and how much was due to the new sawmill? And would you say you're expecting similar year-on-year volume growth into H2? Secondly, on forest, I know you mentioned limited data for forest transactions based on seasonally fewer deals, but are you able to give any commentary or guidance on what you've seen from the few deals that there have been or where you think we are in the forest price cycle at the moment? Would you be expecting to incorporate a positive 2025 spot price moving to the three-year average?

Maybe I'll start with the wood, and I guess No, I mean, no big impact in that perspective from the new investment in Bolta. It's working well. It has been a cost reduction. And we have reduced the manning due to the fact that we have a new grading mill. We also benefit from a higher yield, both volume-wise and quality-wise from the new scanner. But I guess otherwise we have been... It has been a strong month in general for production, and we have been very focused, which you are. I mean, when you are entering a more challenging market, you are even more focused on things that you can have an impact on by yourself. And maybe that is what's happened. Then typically the springtime is very, and this spring is very, very favorable for production, not the least in the saw mills. So the weather has been good and so on. So I guess that's, That is what has happened in the wood business.

And then Andreas... In the forest, as you said, you have seasonal low amounts of transactions during the first half of the year. But those few that we have seen, And they're fairly similar to what we saw at the end of last year, but still very few transactions. And fundamentally, we see that you have higher wood prices and lower interest rates, but you have a more uncertain market with all these global uncertainties. But the wood prices and the discount rates has gone down.

Okay, thank you.

Our next question comes from Charlie Moore Sands from BNP Paribas. Your line is open. Please go ahead.

Good morning, guys. Thank you so much for taking my questions. A few short ones on the forest. First of all, are you still expecting to reach a harvest of around 5.4 million cubic metres for your own forest this year? And secondly, can you just remind us on the accounting for the price transfer on your own internal sales. I believe it comes with a little bit of a lag. And then on a different topic, back to a follow-up from Lars. Just on the currency side, you obviously, as you say in the statement, give the currency hedge rate. But can you just clarify the 1020 per dollar rate? Is that what the hedge rate going forward, not the the figure that was applied in Q2. I wondered if you could just give us what the rate was on the blended rate of Q2, just so we can understand how much headwind is left to come through and what rates still hold. Thank you.

I start with the harvesting volume and I mean the plan this year is to harvest a little bit more than 5 million cubic meters and that plan remains. So we had maybe stronger Q2 than usual and that is also to some extent due to weather conditions and if we have favorable conditions in the forest.

But we are on the plan, but the total volume for the year will be, I guess we have said, five point... I mean, over the next five-year period, it will average be 5.4, and it might be a little bit less, a little bit higher in certain years, but around... Between 5.2 and 5.4.

We are in a ramp-up phase also in that perspective. We have gone from 4.5 and we shall reach around 5.5. And still we are leaving 30% of the gross growth in the forest. I mean, the net growth would be still 3 million cubic meters per year in the forest.

So yeah, and then on the forest question, so half of it we get from our own forest and the other half we buy from other forest owners, primarily private forest owners in our region. And then we buy the right to harvest that. But you buy on stampage, you have a bit of, you have an inventory until you harvest it. So, and we charge the same price to our industry as we pay for what we externally source. And thus you buy the right to harvest, and then you get the average price when you harvest it. That's why it takes a while for it to have the lagging effect when you harvest those rides to the forest you have bought. So that's why you have the lagging effect. It's a mix. Some you might have bought the same month you harvest straight away by something you might bought a couple of months ago and you harvest it then because you want to optimize the harvesting so that you harvest everything close together so that's why you have the lag effect and then the last question currency yeah and I mean we have hedged around 70 percent for the next two quarters and then goes down to 50 and then to 25 percent and you have the average hedging figures in our report, but I think for the next couple the average was periods around 10 20 i think for the dollars and 11 15 something for for the euro and looking what we had in in in q2 hedges now you can look in our q1 report you saw the average hedges we had for the period going going forward and i don't have the exact number in my head but But if you look at in the Q1 report, average hedges, and then you have it going forward as well.

So the Q1 report would be a weight of all the future hedges at different rates. So I was just wondering what, and obviously also then the weight of the unhedged portion. So I was just wondering if you could share what the blended rate was that actually applied in the quarter.

We don't have the exact figure here, but it's fairly, if you look at what we have now, the hedges are a bit better during the next couple of quarters. And then as we have filled on new hedges, they are a bit worse than the old ones. So you have a bit better on the near period and a bit lower on the ones going more far away.

Okay.

All right. Thank you very much.

Our next question comes from Martin Melby from ABG. Your line is open. Please go ahead.

Good morning. First question. You've talked a bit about the lagging effect of pulpwood, but given that you know already this, could you share some information on the pulpwood cost impact for the industry in Q3 and Q4, quarter over quarter?

In Q4, it will be around 1% down for pulpwood. And for soil logs, it will be around 3%, 3% up.

That was Q3 or Q4?

Q3, Q3.

And then for Q4?

In Q4, we have not set prices for industries yet. We usually do one quarter, quarter ahead.

But given the lag structure and you talk about lower pulpwood costs, Does that mean pulp would cost down the Q4?

Yeah, it will go down a bit, depending on what happens in the market, of course. But as we see it now, it'll go down a bit more in Q4, but soil logs will increase slightly.

Thank you. And could you also talk a bit about the CTMP market? That is obviously very weak with low prices, but where are we on the Utviken CTMP project, please?

Yeah, as you say, I mean, the market is weak. The production is very strong. So in Ortvik, from time to time, we take curtailments because we don't make money when we send it to Asia. We do it from time to time, but just now we are focused on increasing our market share in Europe, and we have been rather successful there. And in Europe, we have... not fantastic profitability, but still we make a profit within Europe. And also we try to qualify ourselves for new qualities in Europe, because that will help us to increase the market share further. So that is the focus. But the production is very good and the ramp up is very good. We could easily run more than we do today but we are limited by by a tough market which is related to the to the i guess the board market in in in asia sorry i think thank you thanks our next question comes from cole halfon from jeffries your line is open please go ahead

Morning, Andres. Thanks for taking my questions. I'd like to start on capital allocation first. You are at the point now where you're done mostly with your CapEx into 2025. How do you think about capital deployment in 2026 and 2027 post all your major projects that you've done over the last number of years, particularly when you think that your share price versus the forest value on your balance sheet and also your ambition to grow further in forest ownership. Let's start with that one. Thank you.

I mean, we will be cautious with new investments. Of course, we will do our, I mean, what we have to do to keep our mills in good shape. So that we will do. Otherwise, I mean, we will be very cautious when it comes to strategic investments. As we've said before, I mean, we are so focused now on ramping up what we already have. And we are also very positive when we see the effect of... the higher production and when we can utilize the investments that we have done in a more let's say foreseeable predictable way so we are happy with that and yeah and I guess that goes for 26 and 27 so I mean we will be cautious when it comes to new investments I suppose just pushing you on whether you think about buybacks or you know potentially some M&A on

forestry assets be it Latvia, Nord, Baltic?

I mean if we start with the Baltics I mean we will also in that perspective we will be careful now we will buy we will continue to buy some small areas in in the Baltics but as it is just now no big things I mean it is a I mean, the conditions are a little bit unsecure as it is just now. But again, the most important thing for us just now is to focus on ramping up what we have started. And then when we get to market, then I think we will see very positive effect from these investments.

And then container board, it's positive to see Opela improve. In time, at mid-cycle pricing, that'll be 25% to 35% EBITDA margins. But near term on virgin container board, do you see ability for the virgin price premium versus recycled to expand, considering that besides yourselves, there's no major new supply being added versus recycled?

Yeah, I mean, as I said before, we know what we've had up till today and we know the price development for Testliner. And we are just now in negotiations, of course, for the autumn. And I don't like to negotiate with myself. So, I mean, we will try to defend the price we have for Craftliner. And from my point of view, it's okay with the wider gap than we have today. But let's see. We have ongoing, not maybe just now, because now we are going into holidays and so on, but I guess we will have some ongoing discussions during the autumn and very much will depend on US tariffs, OCC prices, gas prices and that kind of things. Yeah, I think I'll stop there. Yeah.

And then I'm just wondering how you think about softwood here. I mean, I know global pulp inventories are elevated and the market has been impacted by tariffs, but we've got downtime from meta-fiber, UPMs extending their maintenance, which should be helpful. And we've also got a situation in Canada where, you know, if Brazil tariffs are implemented, I imagine some of the tissue producers at the margins will shift a little bit more to softwood, and that means less exports to China. So do you feel that the softwood price is pretty close to the bottom? And do you think we could get some more positive dynamics in softwood pulp versus hardwood pulp? Should it ultimately be more resilient? Thank you.

Yeah, I think so. And as you say, I mean, I think we are, if we are at the bottom or if we are close to the bottom, I don't know. But as you say, I mean, we've seen many companies, they are announcing curtailments. And I guess that will be the case now. We cannot, I think we have Chinese prices now at 680 or something like that. And I think we have more or less reached the bottom. How far will the market recover? Well, I guess that also depends on the ongoing discussions now with the US. And I think it is maybe more important for the market development that we have some kind of agreement, whether it's 10 or 15 percent. Maybe that's... not so so important the most important thing is that we have something that we can believe this will be the case now going forward so and of course we like to have some yeah let's say fair comp competitive conditions so It's also a question about relations. If Canadians, if they get nothing and Europe will get 15%, I mean, that will change. Then I guess we have to redirect some volumes, but all in all, the consumption will be more or less the same. If Brazilians, if they get 50%, yes, I guess then we will see some substitution favoring long fiber for a while. But it's hard to predict. Where we are just now, I guess we are at the bottom. I guess we have to wait to the end of this year or maybe beginning of next year before we see a general market recovery. And as you all know, I mean, pulp is volatile. And yeah, that's my view. Thank you.

Our next question comes from Oscar Lindstrom from Dansk Bank. Your line is open. Please go ahead.

All right. Good morning, gentlemen. I have three questions for me. First off, just on the wood costs. So you're saying market prices are coming down in Q3 quarter on quarter, but that your costs will only come down in Q4. Is that how we should understand it?

In pulpwood, the cost is coming down a bit, and it's starting to come down in Q3 by only 1%, and then depending on the market, it develops, but it will continue to go down. But for soil log, the prices are not coming down yet.

Good. Thank you. My second question is on pulp or your pulp operations. Your shipments were down 6%, I think, year on year. Did you take production curtailments or did you build up inventories? How should we understand that negative volume number?

In MBSK, we haven't taken any containments and we will not do that, but we will have our rather long maintenance stop in this, I think it's in the Q3 and 50% in Q3 and 50% in Q4. And during that stop, we will also replace our economizer, so it will be a prolonged, it will be a little bit longer stop than normal. So that's why we are... increasing our inventory level.

All right, thank you. My third and final question is on forest land valuation. So we're seeing one of your peers initiating a strategic review of their forest land assets with a possible outcome that they will list those forest land assets separately or hand them out to current shareholders. Would having a publicly listed forest land company impact how you value your forest lands i.e that sort of accounting standards would say that because currently you're valuing your forest lands based on comparable transactions would there be a need for you to base your valuation of your forest lands on the the the valuation of a publicly listed forest lab company?

I mean, we don't know what will happen with the potential split in Stora Enso. So it's far too early to speculate about that. What we can see now is the transaction that is already done that supported the forest valuation that we have today. I mean, it was, as far as I've understood, the price was a little bit higher than the booked value. And so that is more supporting the model that we have today already.

Yes. My question was not what the outcome of the strategic review will be, but if you had a publicly listed pure play forest land company, from the accounting perspective, would you need to base your valuation on that rather than on transaction prices?

I understood your question, Oskar, and I gave my answer.

All right. Thank you. Those were my two questions. Thank you.

Our next question comes from Andrew Jones from UBS. Your line is open. Please go ahead.

Hi, James. Most of my questions have been answered, but just one final one on Obla. Obviously, volumes are still pretty low compared to the long-term rates. I mean, we're probably a few years into the ramp-up now. I'm just curious as to when you... expect to get to that kind of peak production or normalised production level. Can you remind us what that should be? Because I was thinking it would be closer to, you know, between the craft liner mills, your container book production would be up. You know, it's sort of... about 1075 or something long term, is that still achievable? Or have you encountered any operational issues which might preclude you from actually getting there eventually? And given it's been a while since we had like a sort of the original EBITDA kind of forecast on the project when you commissioned it, I mean, from where we are today, at sort of current price levels, what sort of incremental EBITDA would you expect from that project in the medium term?

I mean, we are where we, as I said, we are where we expected to be. We've said 600,000 tons this year, and I guess we will come pretty close to 600. The target for next year, 26, will be 700, around 700, and I guess we will reach that one also. We see now that we absolutely have the capacity. Many days today we are far over design capacity, but it's more a question of availability, which is quite common, I guess, when you ramp up a new machine. So no doubts about that. Then, of course, you will have some Depending what kind of product mix you run in the mill, that will also have some kind of impact. It's gramage, but it's also how much Eurocraft you run and so on. And you will, I mean, a mill is never finalized. I mean, you have to fine tune the production all the time. In Mönchshund this quarter, we made a production record and the last one was 17 years ago. So, I mean, step by step, you try to do what you can to improve the productivity and cost efficiency and so on. But at the same time, you develop a new product mix and so on. But the project so far, I mean, we are, I guess we will come close to 600 this year, as we've said. I guess we will come close to 700 next year, as we've said. I guess we can further improve the, not the least, the cost efficiency in the mill coming after that. And then something about margins, and maybe Johan and I should...

Yeah, we have guided on around 800 to 1 billion when fully ramped up. And so far, I would say in 2024, we had ramped up because we didn't have any net contribution. This year, I would say that it has very minor contributions. I think we still have the potential still to come. Okay.

And then just on into the third quarter, I mean, you talked about pop-up costs coming down slightly. I guess OCC was a bit of a bit of a cost headwind in the second quarter. I mean, that is probably coming off now. Can you just talk through overall how you see the variable costs evolving in the third quarter and give us some help, potentially quantify that if that's possible?

Yes, so we start with soil logs I mentioned around plus roughly 3%, pulpwood down maybe 1%. OCC will go slightly down if we look at fuels, chemicals, I think no major changes, also in transportation, fairly stable. So the biggest impact will of course be we have our maintenance stops in starting in Q3 and going into Q4, both in Obelamungsund and Östrand. I think that will be the biggest cost. And then we, of course, have seasonally higher costs for road maintenance in the forest division during the third quarter.

Okay, that was quick. Thank you.

Our last question comes from Pallav Mittal from Barclays. Your line is open. Please go ahead.

Thank you. Pallav Mittal on behalf of God of Drain. All my questions are answered, but if I can just ask, one, on how you're thinking about the renewable energy side of things going into the second half, and if you can provide any update on the wind farm expansion project.

Yeah, I mean, we described the renewable energy business earlier, and Just online, we are happy with 18% EBIT margin in the second quarter. When it comes to the development for the new mill in Gothenburg, we are already, I would say, at design capacity as it is just now. So that was... Was it the wind or the biofuels? Yeah.

On the wind side.

On the wind, sorry. That one is according to plan, so we will start up now in the autumn, so that is perfectly fine. And then the biorefinery is also working very well, so we have already reached the design capacity in Gothenburg, which is very positive. Then the margin is low, but it's slightly better due to Increasing oil prices in the second quarter, we've seen a little bit higher margins in the mill, but it's more a market issue. When it comes to production, it's working very well.

Thank you.

Thank you.

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are no further questions so i will hand you back over to your host to conclude today's conference and that ladies and gentlemen concludes our presentation of the half yearly report welcome back in october for our third quarter results thank you