Svenska Cellulosa Aktiebolaget SCA (publ)

Good morning and welcome to this presentation of SCA's 2025 third quarter 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 Anders and also from my side a good morning. Happy to present the result for the third quarter 2025. So, and when I summarize the quarter, we can state that the CA continued to deliver a solid result in a rather challenging environment. Our high degree of self-sufficiency in strategic areas continued to be an important factor to mitigate higher costs, not the least related to wood-raw materials. Our EBITDA reached 1.64 billion SEK and by that an EBITDA margin of 33% for the third quarter. In Q3 2025 we had substantially lower prices in the pulp segment in comparison with the same period last year. Our planned maintenance stops in pulp and container board were also considerably more extensive compared to the same quarter last year. Delivery volumes in the container board segment increased this year compared with the same quarter last year, driven by the continued ramp up of our Obola container board mill. The uncertain market situation, mainly dominated by changing tariffs, continues to affect market conditions. The forest industry in general is momentarily challenged by a weaker, with a market with soft underlying demand in many product areas. Turning over to Siam Financial KPIs for the third quarter 25. As already mentioned, our EBITDA reached 1.64 billion SEK in the quarter, which corresponds to a 33% EBITDA margin and a 22% EBIT margin. Our Industrial Return on Capital Employed came out just over 6%, counted for the last 12 months. and the leverage was at 1.7 times with our ViolaNet debt to equity reached 11.2%. I will now make some comments for each segment starting with Forest. Higher harvesting levels from our own forest have not the least contributed to stable supply of wood-raw materials to our industries during this 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. Regarding pulpwood, we have now passed the peak, I guess, and prices have started to come down during this quarter. Demand for saw logs continues to be high, especially for spruce logs. When one compares Q3 2025 with Q3 2024, sales were up 14%, while EBITDA was up 17%, mainly due to higher prices for wood raw materials. Turning over to wood. In general, we still have a slow underlying market for solid wood products. As said before, we have noted signs of improvement in the repair and remodeling segment this year in comparison with the last year. But the uncertainty in general economic development continues to affect the market recovery negatively. Stock levels remain on the high side among producers for pine but are on normal levels for spruce. Stock levels at customers continue to be on the low side. The volumes in both production and deliveries were good for SEA during the quarter, resulting in a close to unchanged stock level of zone goods. The price for solid wood products decreased by 5% in the third quarter of 2025 in comparison with the second quarter of 2025. This development is in line with what I said when I presented the report for the second quarter. As expected, the cost for saw logs has increased from the second to the third quarter and we also expect them to continue to increase going into the fourth quarter. Sales were in line with the same quarter last year. EBITDA margin decreased from 19 to 15 percent due to higher raw material costs and a negative currency effect. 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 level is on the high side, especially for pine, while the SCA level is rather normal. As can be seen in the diagram to the bottom left, the Swedish and Finnish sawmill production has been on a normal level during the first eight months of 2025. In the diagram to the top right, we can note that the price decreased during the third quarter. The decrease in pine has been larger in comparison with spruce products. Going into the next quarter, I estimate that prices on average again will decrease by up to 5%, somewhat more for pine and somewhat less for spruce. And this is driven by the momentarily high availability of pine products. the construction sector we can conclude that 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 the level of duties now put in place on wood products from canada delivered to us about 45 percent in comparison to the level for wood products from european union delivered to the us about 10% has strengthened the competitiveness for EU producers in comparison with Canadian producers. And I guess it's likely that the price level in US will increase when stock levels are coming down from today's high levels. So, over to PALP. When comparing Q3 2025 with Q3 2024, sales were down 21%, mainly due to lower prices. a lower delivery volume and a negative currency effect. EBITDA was down 57% compared to last year, mainly due to lower prices, a negative currency effect and higher cost for wood-drawn materials. The cost for the planned maintenance stop was SEK 83 million this quarter compared to SEK 35 million in Q3 2024. Global demand for pulp was at a healthy level during the first quarter of 2025. During the second quarter, the market changed with reduced demand and prices came under pressure, much due to uncertainty related to US tariffs. During the third quarter, prices on MBSK pulp were stable at low levels. On the demand side, we saw increased activity in China during the quarter. The weakening of the US dollar in relation to the Swedish krona, which started already in Q1, continued to have a negative impact on the price in SEC, also in Q3. Tariffs on MBSK pulp from the European Union to the US were removed during the third quarter, and this allows us to maintain a competitive offering in the US. Looking at CTMP, prices have been unchanged in Asia at low levels and have decreased slowly in Europe during the third quarter. Inventories of softwood and CTMP have been increasing in July and August as you can see in the diagram and are now on the high level. Hardwood inventories, on the contrary, were stable during the third quarter. Moving over to container board. Sales were up 10% in Q3 in comparison with the same period last year, driven by higher delivery volumes and higher prices, somewhat mitigated by a negative currency effect. EBITDA was down by 39%, very much driven by a long planned maintenance stop with a cost of 204 million SEK versus 87 million SEK in Q3 2024. Higher costs for wood raw materials and a negative currency effect also had an impact. We have seen a softer box demand during the last quarter, but still with a positive development on a year-to-date basis. The retail business remains on a positive driver. On the other side, we continue to see a weak European manufacturing industry, which for the moment drives the demand in a negative direction. After a stable first half of the year of European demand, our container board has started to decrease in Q3. Due to the current turbulent macro environment, it's difficult to have a view on the long-term demand. In Q3, we have seen additional supply coming on stream, with the vast majority coming in test liner. We do not expect further capacity increases in Q4, except from the ramp-up effect of newly-start machines. Kraftliner inventories remain above average level in Q3 as you can see in the graph. During Q3 the availability of OCC has been good, driven by the lower demand in the quarter, which in its turn has led to decreasing prices of OCC. Moving into Q4 we see the availability of OCC to be stable and expect prices to be more or less unchanged. Prices for Brown Craft Liner in Central Europe has during Q3 decreased with 20 euro per tonne driven mainly by slow demand and reduced prices of OCC. White Craft Liner has remained stable. Finally, I will say some words about renewable energy. In this area we have had a weaker quarter compared to the same period last year, mainly due to lower prices in wind power and solid biofuels. Continued improvements in ramping up Gothenburg biorefining are partly compensating for this. The market for solid biofuels in northern Sweden continues to be weak due to warm weather and low electricity prices. This fact increases our export share and by that reduced margin. For liquid biofuels we have seen higher margins compared to previous quarters. The main reasons are tighter supply due to maintenance stops in biorefineries, European countries implementing RED3 and better control mechanisms within the EU regarding imported feedstock. 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 low during the quarter, which impacted on our wind business negatively, but is good of course for SEA as a net buyer of electricity. SEA's land lease business is stable at 9.7 terawatt hours, which is equal to 20% of installed capacity wind power in Sweden. Installed capacity on our land is expected to reach 10.5 terawatt hours by the end of the year. And by that, I hand over to you, Andreas.

Thank you, Ulf, and good morning, everybody. I'll start off with the income statement for the third quarter. Net sales decreased 5% to 5 billion, driven by negative currency effects and lower prices, which was partly offset by higher delivery volumes. EBITDA decreased 18% to 1.6 billion, driven by negative currency effects, lower prices, and higher costs for planned maintenance stops. EBIT decreased to 1.1 billion, and financial items totaled minus 103 million. With an effective tax rate of just below 20%, bringing net profit to 0.8 billion, 1.19 SEC per share. On the next slide, we had the financial development by segment. It started with the forest segment to the left. Net sales decreased to 2.4 billion, driven by lower delivery volumes compared to the previous quarter due to several planned maintenance stops at SES Industries. EBITDA decreased to 912 million due to seasonal lower harvest from SA's own forest. In wood, prices decreased compared to the previous quarter, while the cost for solos continued to increase. Net sales decreased to 1.5 billion due to low delivery volumes and lower prices compared to the previous quarter. EBITDA decreased to 232 million, corresponding to a margin of 15%. In pulp, net sales decreased to 1.65 billion driven by lower delivery volumes and lower prices. EBITDA decreased to 242 million, corresponding to a margin of 15%. High cost for planned maintenance stops and lower prices were offset by lower cost. We had lower energy and raw material cost in the quarter, and Q3 is also a low-cost quarter for indirect costs in all segments, which had a positive impact. In container board, net sales decreased to 1.8 billion and EBITDA decreased to 194 million, corresponding to a margin of 11%. The result was negatively impacted by planned maintenance stops in both Mungsund and Obola of 204 million. The market for renewable energy continued to be weak. EBITDA decreased compared to the previous quarter and amounted to 79 million, corresponding to a margin of 21%. The decrease was mainly driven by lower deliveries of solid biofuels. On the next slide, we have the sales pitch between Q3 last year and Q3 this year. Prices decreased 2% driven by lower pulp prices. Volumes increased 1%, driven by higher volumes in container board, which was also set by lower volumes in pulp. And lastly, currency had a negative impact of 4%, bringing net sales to 5 billion. Moving on to the EBITDA average, and starting to the left, price mix had a negative impact of 99 million, and higher volumes had a positive impact of 14 million. Higher costs for mainly wardrobe materials had a negative impact of 57 million, which was mitigated by our health highs degree of self-sufficiency. We had a positive impact from energy of 37 million and a negative impact of currency of 169 million. This was impacted by higher cost for planned maintenance stops. And in total, EBITDA decreased to 1.6 billion, corresponding to a margin of 43%. Look at the cash flow. Operating cash flow increased to 1.1 billion for the quarter and 2.5 billion for the first nine months. And as you know, other operating cash flow relates mostly to working capital currency hedges and should be seen together with changes in working capital. Look at the balance sheet. The value of the forest asset totaled 108 billion. Working capital decreased compared to the previous quarter, and totaled 5.6 billion. Capital employed totaled 160 billion, and net debt decreased compared to the previous quarter to 11.7 billion. We have now almost finalized our large ongoing investment projects. Equity totaled 104 billion, and net debt to equity was 11%. Thank you. With that, I'll hand back to you, Ulf.

So thank you Andreas and well just to summarize I mean as I said we have continued to deliver a solid result in a rather challenging environment. I guess the market has bottomed in more or less all areas except from solid wood products. On the other side we will see a cost pressure coming in our solid wood business. While the price for pulp wood has now stabilized and are on its way down, I would say. In pulp and the craft line, I guess the market is going sideways now and we are 100% focused on what we can have an impact on ourselves. which is meaning that we are focusing on the ramp up of our big projects. And they are going very well, did go very well during the third quarter. So by that, I think that we open up for some questions.

Thank you. Ladies and gentlemen, if you would like to ask a question, please press star one on your telephone feedback. Thank you. And we will now take our first question from Jonas Masvelas of Morgan Stanley. Please go ahead.

Yes, good morning, and thank you very much for the presentation. I've got three questions, if I may. I'll take them one at a time. First, on pulp good costs, given the small decline that you show in your slide deck for Q3 and the typical lags in your business, what shall we expect for cost development in your industries in Q4 this year and also Q1 2026. Thank you.

You asked about pulpwood and as I said I mean we see that now that the prices for pulpwood is coming down in the market but as you say we have a lagging effect and I could say that we have it's around six months more or less Andreas.

Yes, so in the fourth quarter, I mean, fairly flat. Maybe we're talking about 1% decline in pulpwood prices, so fairly flat, while the cost for soil logs will continue to increase a bit into Q4. and in the beginning of next year. Then I think that pulpwood will slowly continue to decrease, but as Ulf said, I would say it's around six months of lag effect. In terms of soil logs, I think they will start to peak also around maybe Q1 next year.

Thank you for that. And then going back to PALP, looking at NBSK inventories on days of supply, we're pretty much at the top of the historical range. Do you see the recent temporary curtailments among your peers to help rebalance the market in the short term, or do we need to see more aggressive supply response?

It's hard to say. I mean, maybe I didn't say that, but I mean... We are still at a very high operating rate in MBSK, and we should because we have a very low cash cost, of course. But on the other hand, we see announcements now from many areas where they have started to take retainments. I guess also in the statistics that you see now, we haven't included the typical longer maintenance stops that we have had now during the So I guess that the inventory will come down. And as always, it's a question, it's a supply-demand issue. And I guess we will see a better balance. But I mean, underlying, we have to wait for an increase in consumption before we can say that we have a stronger market.

Yeah, understood. Thank you for that. And then just last question from me on the FX hedging. Looking at your disclosure, you seem to have brought down your USD hedge ratios for the next four quarters. Is that a conscious decision to avoid locking in an unfavorable FX rate? And could these ratios come down further in the coming quarters if spot FX rates persist?

we use a statistical model for our hedge strategy so we have for the next six months we hedge around 50 to 85 percent of our net exposure then it goes down but then depends on statistically how favorable the currency is so we use a model and for the us dollar we're currently in the low range of that while For Euro, we are on the normal range.

Very clear. Thanks very much.

Thank you. And we'll now take our next question from Linus Larsson of SEB. Please go ahead.

Thank you very much. And a very good morning to everyone. A couple of questions on use of funds. It seems to me that you have a very strong balance sheet. Cash flow is robust through the cycle. you're running at high operating rates like you say if your competitiveness is is strong uh how do you look at buybacks in this context given where your share price is trading and given your investment plans for the time being

If we start with the investment plan, as I said, we are just now 100% focused on ramping up what we have started, and we feel that we are doing that in a good way. As I've also said, I mean, just now we sit on our hands. We will not start up new big projects. And I guess as all other companies, we also try to... yeah not too too many current investments because we have an uncertain market coming going forward so i mean that that's the position we have just now and and the question about buybacks i mean that that is uh more question for for for the board honestly so so let's see we are now focused on ramping up what we have started and by that as you say we we expect that we will increase our cash flow capacity substantially

Yeah, that's great. But I mean, principally, how does the board look at buybacks? Is there like a principle view on whether or whether not buybacks is part of the toolbox?

Again, that's a question for the board, but as far as I understand, we have no principles in this matter. I think we have done since the split 2017, I mean, we have invested 20% of the net sales in the company every year. For us, that's a lot of money. For all companies, it's a lot of money. So we are more focused just now to realize the cash flow that we suppose that we will have from these ongoing investments. So that's our focus now.

Yeah, no, that's clear. And just to finish off that, what's your CAPEX guidance for 2025 and 2026 respectively?

if you look at capex for for 25 i think that the current capex will be around 1.5 you might have some spillover to next year so 1.4 1.5 and then in terms of strategic capex also depending on timing of some payment but around 1.3 1.4 so maybe 2.8 in in total for current and strategic but it depends on certain on certain timing of certain payments. For next year, strategic capex will go down. We have some payments left in the ramp ups, but strategic capex will come down. And then I would guess that current will be slightly higher than this year since we have some spillover from this year to next year.

Okay, but how much will the strategic capex go down? half a billion or a billion or around about what?

It depends on some timing, but I would guess we have a couple of hundred millions left on our current projects.

Great. Thanks a lot.

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

Yes, good morning, Councilman. Thank you for taking my question. I want to start on the roundwood market. So you mentioned, obviously, log prices are high and, if anything, still are slightly moving up due to high demand. But equally, it sounds like the wood product market in general is still quite soft. So I'm just trying to understand, is this a a demand that's for other uses, or are you basically saying this is more of a supply issue for the market? And if so, is this just a hangover from the bark beetle delivery from prior years, or is there any other reason why we could expect some better balance coming back on the supply side soon? And then just on the pulpwood cost side, very helpful, the detail you've given so far, but just In terms of the timing effect, do the changes in pricing of pulpwood hit the forestry and then the industrial segments at the same time, or is there a phasing effect whereby the P&L benefit on forested reduced before the cost tailwind on the industrial segment come through, anything like that to be aware of?

Thank you. Yes, if you look at the pricing, I mean, we base our internal prices of what the forest division pays for its sourcing. And a lot you buy on stumpage, so you buy the right to harvest. And then you optimize the harvesting to try to have some larger areas to have efficient harvesting. So it can be varied. Some of what you harvest is a couple of months you bought it from, some might be three months ago or six months ago. And then that average price, the industry gets to pay. But the pricing is once, I mean, when the prices goes down, the industry will get a lower price. But then, of course, our forest division will earn less money on their own harvest. But on what they source externally, that they get paid for. And then the second question, the first question was around the demand for saw logs.

Yeah. The coming demand, I mean, as we see just now, we have, as you saw on the graph, in Sweden and Finland, the production is still on a normal level, even if we know that the log prices are very, very high, and profitability in the business is, in general, rather low we feel rather confident with the profitability we have in our own wood division but I mean we up till today we haven't seen any signs of decreasing log prices actually yeah okay and also

It's also a difference between pine and spruce saw log. On spruce saw log, you have a much lower supply compared to pine saw log. So it's also a pricing and demand difference there.

Thank you. And then just on the wood product side, you mentioned the relative competitive advantage for EU exporters to the US now versus Canadians. Can you just talk about the relative profitability of your your U.S. business compared with your European business today? How big an opportunity might this be?

First, if we take the tariffs, I mean, as I said, the tariff just now going from Europe over to U.S. is 10%, and coming from Canada over to U.S., then the tariff is 45%. As it is just now in U.S., the stock level is on the very high side. So far, we haven't seen any impact on, let's say, the local price in the US. But I guess when the inventory level is coming down, then, of course, customers, they have to start to buy. They can buy some volume from Europe, and they have to buy some volume from Canada. But then I guess that prices can, in a short while, increase quite dramatically. We don't have a big... volume for for us we do let's say 80 000 cubic meter per year but again it's a global market so if we start to see a better trade in us i mean that will of course have also an impact on the on the european market and also the asian market and so on so so on So we have to wait and see. But I mean, as it is just now, I guess it's more a question of time. We will have a slow fourth quarter as we always have. And I guess it will be rather slow also in the first quarter. But then I guess in the beginning of the second quarter next year, then we might start to see something.

But Canadian volumes can't get displaced into other parts of the world or even coming into Europe to offset that benefit?

Yeah, not really. I mean, of course, you will see some Canadian volumes in China, and I don't think you will see too much of it in Europe. Again, you have the distribution cost, and many of those sawmills, they are located inland, and so it's also a question of distribution, inland distribution cost within Canada. I guess if this remains, which you never know, I mean, then you probably will see further closures and capacity reductions. And honestly, I don't know really how the U.S. I mean, we know that U.S., they need a lot of solid wood products coming into U.S. So I guess it might be so that we see some further changes going forward now. Also, when it comes to tariffs and things like that. But all this... I think we had a question before, but tariffs, we are not directly too much impacted by tariffs. We can handle that in a good way. But I guess that... This discussion has created uncertainty globally, and that's the reason also why we have a rather slow demand in Asia, in more or less all product areas. So, I mean, that is, I guess, the worst thing with tariffs. It is creating some kind of uncertainty in all areas and globally.

Yeah.

Thank you.

Thank you, and we'll now take our next question from Robin Santoverta of DNB. Please go ahead.

Thank you very much. Firstly, I have a question related to the container board business. Looking at the delivery volumes now this year, they have been quite steady, but it seems still Obola is not running at full capacity, and now you have the long maintenance shot. So could you give some guidelines on volume for that segment in Q4 and early 2026? Should we expect a bit of a step change or more of a slow gradual ramp up during the end of the year and next year?

When it comes to Obora, we have said that Obora will produce 600,000 tons this year, and they will do so if nothing unexpected will happen in the fourth quarter. Then it is a tough market in Kraftliner, so we have seen during the third quarter increasing inventories in Kraftliner. And so that's the case. And as you said, we also had a rather long maintenance stop in Q3. So that also had an impact on deliveries. But production-wise, Obola will reach 600,000 tons this year. And then the plan is to reach 700,000 tons next year.

Okay. Okay. Thanks. Can I ask about this EU deforestation regulation? How do you view that? Will that have any kind of impact for your businesses in Europe either way? Why is it EU?

I mean it has also created a lot of uncertainty but I guess for us we can manage EU DR but of course it will be an administrative burden which we don't like but we can handle it.

But what about your competitors could there be a setup where some power that has been imported from some countries or some paper board that has been imported from Asia or America, they could end up in a bit of difficulty to do so in future. Or will this impact trade flows at all in your view?

Yeah, it's very hard to predict. I mean, we have been working quite hard to find out a system which will not create a lot of administration. And I mean, typically we are for free trade. I think that's good. And I think that the EU in the long run, they will benefit from a free trade. We don't know how this will be implemented in the trade up till today. So again, this is also another thing that really creates uncertainty. But the honest answer is we don't know how this will play out. The only thing we can do is to focus on our own ability to meet the requirements that might come.

Yeah, for sure. For sure. Follow-up question related to the pulp market. What is going on in the softwood pulp market? There's a lot of curtailments now during early autumn, certainly in Finland, some in Sweden and Spain. I understand some in Canada as well. Historically, when you do that, you tighten up the market quite quickly. Now, we're not seeing that. Is this a bit of substitution into hardwood pulp? Is it some Chinese volumes that, I mean, historically they do not produce a lot of softwood pulp. Now I understand there's some production going on in China as well. So why is not the market tightening despite the quite significant production curtailments in the market? northern hemisphere?

I guess the first thing is that the underlying demand is weak. So that's the first explanation. The second thing is substitution. I don't think that we will see more of substitution today than we did last year. I mean it's not as easy as that and we've always had a delta between hardwood and softwood prices. So I mean If possible, I guess it would have already been done. So I haven't heard anything, no structure changes in that area. What we know is that a lot of capacity in pulp is will be built up in China, and that, of course, sooner or later, that might have an impact. As it is just now, we are more concerned about the C10P volumes, and as we have understood, I mean, the board market is very weak, and while companies in Asia, while they close down the converting and stop producing boards, I mean, they still produce CTMP, and that will, of course, give a surplus in the market. Then also, I guess, that the statistics that we also saw on our slide was from August, was it so, Andreas? And I guess we will see some other figures now coming into September, October and so on. We also have had a lot of big maintenance jobs in pulp. But you're right. I mean, we also hear that companies, they are taking curtailments now. So far, no big changes. But I mean, and the price is maybe, I mean, I guess that the price has already bottomed because at this level, we see that curtailments are taken instead of continue to produce and of course, creating a negative cash flow. So we have reached the bottom. I guess we will see some result of actions taken now, later this year. But again, the fundamental challenge is the underlying demand. That must come back.

I understand. Thank you very much.

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

Yes. Four questions for me, if I may. The first one is just on the lower wood costs. You mentioned this in the pulp division, but not in container board. Sorry, not lower pulp costs, lower wood costs having a positive impact on pulp, but it didn't seem to have it on container board. What's the reason for that? Should we go on with the other question?

No, we take one at a time. We had maybe 1% lower pulp wood prices in both container board and in pulp. In pulp, we had a better yield in the quarters. We had lower consumption of both energy and wood and i may generally have a low cost cost quarter but i would say it's more on the consumption side that we have lower cost on pulp in this quarter and and in container board was it just the maintenance stop that sort of In the container board, we had a large maintenance stop in both in Mungsund and Obla that cost around 200 million. So that court was impacted by that stop.

Right. Moving on to cash flow, you say that you will increase your cash flow significantly in 2026, and I presume beyond as well, while CapEx looks as if it's going to come down quite a bit. If we only look at the ramp-up of Obola, can you say anything about what kind of contribution you expect from that, 2026 versus 2025, if you reach the 100,000 tons? Could you put a monetary value on that?

Currently I would say it's hard to put money on the excess volume because Ulf said that we currently have a weaker market and that means that the extra volumes you have a worse customer mix and country mix on those extra volumes. That will, of course, depend on how the market develops. If you have a stronger market, volumes will be placed in customers in Europe and places nearby and that will have a larger impact but if you have a weak market of course then we'll have to put it further away so it depends on how the market develops.

And also to add, I mean, if you have, yeah, maybe that was exactly what you said. I mean, if you have an additional volume already this year, if you go from a little bit over 400 up to 600, I mean, that puts a pressure in a tough market. That puts a pressure on the market side, of course. So, I mean, you also have ramp up production-wise, but you also have a ramp up in the market. So, of course, we have to find markets overseas, not least as it is just now. Of course.

And my third question is, I mean, we've seen other companies in your sector announcing cost savings and even structural changes as a consequence of the tough market, which both they and you seem to feel is... is not about to change anytime soon. Do you see any need for you to take actions if demand does not improve, either cost-saving actions or structural changes?

I mean, if we go back to 2017, as I said, we've been invested 20% of the net sales more or less every year. And by that, we have also top-class sites, as it is just now. We have also, during this period, closed down our publication paper business, and we have focused on pulp, container board, and also solid wood products, and to some extent, also renewable energy. And step by step, I mean, as soon as we see that we can reduce the manning or if we can do something else to improve our cost position, we will do that. So for me, I don't like those programs, because that means that you haven't done your work, your ongoing work, so to say.

And we have had, for the last one and a half year, we had a program to reduce our personnel at our PALP division with around 80 people, and that has gradually begun to give an effect.

And we reduced the manning by 800 people. people when we closed down the publication paper business. So, I mean, if you have structure changes, then, of course, you have to follow up with the personal reductions. But otherwise, that is something that you have to do. That's the everyday work.

Right. Thank you. My final question is on CapEx, which you talked a little bit about here. You say that you expect next year for CapEx current capex to be, I can't remember the exact wording, but slightly higher? And then, you know, how much higher is that? And then you said the strategic capex would be, I think, a couple of hundred million. How many couples of hundreds of millions are we talking about? Is it possible for you to be a little bit more precise? I'm just wondering.

It depends, of course, on how overspill we have to next year and then it depends. I mean, we have our base CapEx for next year and then we have some potential projects and it depends on which of them we go through with and which timing. But if we go around 1.5 this year, then we're talking maybe yeah one two hundred millions more next year on current capex but again it depends on what projects we do and also on the strategic side it will um i mean it will be between zero and one one a billion but it depends on on the timing of of of our strategic capex for example we have one payment that would either go in the end of this year or or early in next year which around 150 million, then we have a couple of hundred millions next year. So it depends, but just to give a rough figure. But CapEx will come down? Yeah, CapEx will come down, yes.

Great. Thank you very much. Those were my questions.

Thanks.

Thank you. And we'll now take our next question from Martin Melby of ABG. Please go ahead.

Yes, good morning. Given tariffs and new volumes to place, could you give some hints on Prices for pulp and container board at volumes heading into Q4, quarter to quarter?

I mean, we don't know. That's the honest answer. But as I said, I guess we are in pulp at the bottom level just now. I mean, as we said before, I mean, we have seen substantial containers taken now. And so I guess pulp prices will, if they, the only way from this point, I guess, is upwards. When will that come? Well, remains to see, I guess. I think for container board we have more capacity has come on stream during the third quarter. No additional capacity will come on stream, but we will see some ramp ups. I guess we will see some closures in test liner going forward. The balance for Kraftliner is much better, of course. I mean, the only additional volume coming in now is our own from the ramp up in Obola. On the other side, the inventory level is on the high side, coming down a little bit now when we had the new statistics. So it's a question of supply-demand balance, of course. But my best guess is... sideways a little bit maybe we will start to see upward trend in pulp and maybe sideways in container board and as I already said we I guess we will see somewhat decreasing prices in solid wood products I guess another five percent in the fourth quarter and then the first quarter is always it's tricky to increase prices in the first quarter. If something is happening now in the US, that might have a faster impact on the pricing for wood products. But otherwise, I think we have to wait for the second quarter next year.

And in terms of volumes, forest, we harvest a bit more from our own forest in the fourth quarter. In solid wood products, as I mentioned, you have a seasonally weaker quarter compared to the summer months, so there you have lower delivery volumes. In container board, it will be slightly higher since we had a big maintenance stop in the third quarter, which we won't have in the fourth. And in pulp, I would say it's slightly up or flat.

Okay, thank you.

Thank you. And we'll now take our next question from Ko Hazon of Jefferies. Please go ahead.

Morning, thanks for taking my question. I'd just like to ask, what do you see would be the positive catalyst for each of your segments? I'd like to take it in turn. But maybe starting on pulp, what do you think is truly needed extra demand? Do you think it's going to be capacity closure, potentially something out of Canada, considering they've got elevated wood costs and you see a sawmill go down and then pulp will closure that tightens the market? wood product, is it ultimately just a demand that's needed rather than any form of supply response? And container board, I'm just wondering, what are you looking for in the market for Kraftliner? Do we need to rely on the recycled closures and to follow that or Are you seeing the ability to keep this premium versus recycle, considering there are less imports from the US and much better supply-demand balance in Virgin?

If we start with pulp, I guess, again, it's about demand. The tissue business is rather slow, of course. It might be impacted by closures. Also, again, it's the supply-demand balance. issue and it might be so that just my speculation but I mean if we will have a tough if tariffs will remain in Canada for solid wood products that will have a negative impact on the raw material supply to the pulp mills that might have an impact over time of course otherwise it's a demand and mainly then in the tissue segment In wood, as already said, I mean, we are in a slower season just now in Q4 and Q1. I guess that sooner or later Americans, they must start to buy solid wood products. And if the tariff level from Canada over to US will remain on 45%, that definitely will mean that we will see increasing prices in solid wood products. Even if you're not a big supplier to US, which we are not, but still that will have an impact on the global trade rather immediately, I would say. And then we know that it can start to move quite fast. But I guess if you look at the inventory level in the US, we have to wait for at least a quarter before we can see something. In container board, I mean, we look at the box consumption and we feel that We have a slow demand from the industry, while in other businesses for food and maybe trade and that part, that is going quite in a normal pace. But the industry for us, I mean, heavy duty, spare parts and things like that, where we typically can find a premium for Kraftliner. I don't know, but my guess is also that we will see closures in Testliner. I guess that the main part of Testliner produces just now, don't make money and I guess we have a chicken race on the test liner side as this just now the balance both for container board craft liner and also for mbsk it's much much better than for for recycled based production thank you and then maybe just following up on capital allocation you were clear that you know you're ramping up your projects you passed peak capex and beyond that you've got

flexibility for consider capital returns via dividends and buybacks. But you didn't mention anything on M&A, and I'm just wondering how you think about that and what are your criteria there? Would you consider anything in Central or Eastern Europe if a very low-cost asset came available, or are you staying with your production base in Sweden? Just like your thoughts. Thank you.

mean typically we are a company based on organic growth and typically we are a company focused on on sweden where we have our own forest we don't like to stay in countries where we can see a higher risk really so i guess we are but on the other hand if i mean you shall never say No, but typically we are based on and focused on organic growth as it is.

And as Ulf mentioned before, currently, I mean, we're focusing on our ramp up of our current project before we add some too much complexity. Thank you.

Thank you. And we'll now move on to our next question from Andrew Jones of UBS. Please go ahead. Andrew, you might want to unmute your audio from the end.

Can you hear me okay? Hello? No, we hear you.

Ah, cool. Sorry, apologies, I missed the start of the call. So if you mentioned this, my apologies. But on the actual solid wood products, what usually you give a bit of a sort of guidance in terms of pricing? I mean, how do you look at pricing going into the fourth quarter on... in the wood division and then also I think in the last quarter you sort of gave us like percentage changes you expect in the forest division in both logs and and in pulpwood what sort of changes are you thinking about in the forest for those two categories? Thanks.

The first one, yes, we did mention that one. And as I said, I mean, we lost 5% in terms of price in the third quarter in comparison with the second quarter. And I guess that we will lose another 5% in the fourth quarter. And that is mainly a seasonal effect as the demand always... We always have a slow demand in the fourth quarter and in the first quarter.

Forrest, Andreas, you can... Yeah, so for Palpod, I mean, they have peaked. We saw a very slight decrease here in the third quarter, maybe 1%. you expect fairly flat, maybe 1% down in Q4 because of this lag effect. In terms of soil logs, they will continue to increase a bit in the fourth quarter, maybe 5% compared to Q3. But that's also because you saw that the logs were quite flat between Q2 and Q3. But as more of a mix effect, we had a lower dimension on the logs, which have a lower prices. So we didn't get that. So underlying, the prices increased also in Q2 to Q3. But since we had that mix, we didn't see that increase. But now we'll get that in Q4, so maybe 5% up.

So it sounds like a pretty tough quarter, a tough quarter here. So saying price is 5% down, log input price is 5% up. And you probably think some seasonal volume weakness, I guess. Maybe it's about 5% last year. So anything to mitigate or offset those moving parts?

Yes, but on the solid wood products, I mean, as Ulf said, the prices will go down 5% and also the log will continue to increase a bit. We're, of course, continuing to focus on cost and what we can affect.

Okay, and just one question just about the structural issues. change. On Craftliner, I mean, you've kind of talked about the market being more balanced in Craftliner, obviously, compared to Teslider. But I mean, how wide can the actual premium for Craftliner with Teslider be in the medium term, given the sort of substitution potential? I'm curious to see whether that premium can be maintained in the near-ish term.

It's hard to say. I mean, the Delta just now is 280 euros, something like that. So that is a rather wide gap. And I guess if customers, if they can substitute, they will substitute. And we see the same trend and we have the same question always in softwood and hardwood pulp, but the same answer. I mean, if if customers if they can substitute they will do it because if something is cheaper of course they will use that instead. So I guess my perspective is more that I think we will at least remain on rather high delta between test liner and test recycled products and based products and virgin based products as virgin fiber will be scarce resource going forward. So strategically I guess we will widen this gap which we have also seen in in the in the past years so i think that will remain honestly and also when you look at the capacity increase i mean the absolute main part capacity is coming in in in the in the recycled business but in order to get raw material to the recycle business you you must have some virgin based production Go ahead. Thank you.

Thank you. And we'll now take our next question from Pallav Mittal of Barclays. Please go ahead.

Good morning. Pallav Mittal on behalf of Gaurav Jain. A few questions. Firstly, you and your peers have all highlighted good availability of pulp work, because of which we are now seeing this decline in pricing. Now, given demand is weak and there are a number of production curtailments, how do you think these pulpwood costs could change if you start seeing some sort of improvement in demand?

Of course, it might be so that you have... bottleneck again in raw material supply so again to have a stable long-term increase in the market then the consumption must come up the demand must come up so that's the simple answer and I mean then it might be so that if when solar prices if they come down, but pulpwood prices when they come down, then it might be so that you see additional capacity coming on stream. And by that, of course, the supply will increase for a while. And if then the demand is not picking up, then of course you will have a pressure in the market again. So it is as easy as that. It's always a question about supply and demand.

And your question on, I mean, of course, if demand for the finished product goes up and the production goes up, that will of course increase the demand for wood or material, which already has been tight.

Sure. And then if I can add something on CTMP, So you did mention that CTMP prices have declined in Europe, and now we are seeing new capacity in China as well. Does that impact your CTMP ramp-up?

I mean, as it is just now, we have a rather profitable business within Europe in CTMP. But as you say, I mean, we have very... the margin is not too big in Asia so yes in that perspective we are maybe in it's always a marginal calculation so if we have days with high electricity price or if not now but before when we saw that we had a scarce situation when it comes to pulp then we of course the first production site we took containers in was in Ortviken and CTMP so as it is just now we are a bit more focused on fine tuning I mean also try to validate products for the European market and so on so it is very small or from time to time negative market going from Sweden over to Asia in CTMP as it is just now Great, thank you

Thank you. That was our last question. I will now hand it back to the host for closing remarks.

Thank you. And that concludes our presentation of the third quarter results. Welcome back in January for our full year report. Thank you for watching and thank you for listening.