Stora Enso Oyj

Hello and welcome to Stora Enso's second quarter 2025 results presentation. My name is Jutta Mikkola. I'm the Head of Investor Relations. I'm joined by Hans Solström, President and CEO of Stora Enso and CFO Niklas Rosenlev. The title of today's presentation is Solid Business Performance in a Volatile Demand Environment. The agenda will begin with key highlights and strategic focus areas presented by Hans. Then Niklas will review the company's financial performance. And then Hans will conclude with a summary of key takes and focus for 2025. Thank you for joining us today. And I will now hand over to Hans Solström.

Thank you, Jutta. During the second quarter of 2025, we continued to make good progress in building a stronger and more competitive Stora Enso. While market conditions remained challenging, we focused on the areas within our control. Driving efficiencies, insourcing operations, commercial excellence, working capital and fixed costs. In addition, during the second quarter, we took significant steps to strengthen our strategic focus on renewable packaging. To begin with, it's notable that all operational segments achieved positive adjusted EBIT for our second consecutive quarter, despite continued weakness in board and pulp markets. Consumer demand remained at relatively low levels and was impacted by geopolitical uncertainty. Sales at 2.4 billion euros grew 5% year on year supported by high demand for wood products and packaging solutions. Adjusted EBIT was 126 million euros as the old ramp up had an approximately 50 million euro negative impact on the second quarter adjusted EBIT. Our continuous dedication efforts to improve cashflow resulted in operating working capital to sales of 7%, a decrease of two percentage points year on year. During the quarter, we reached a major milestone with the agreement to divest approximately 175,000 hectares of forest land equivalent to 12.4 percent of our total forest land holdings in Sweden for an enterprise value of about 900 million euros. The value is in line with our Swedish forest book value. This transaction reduces our debt and enhances our financial flexibility as well as confirms the true market value including a long-term wood supply agreement. Tuura Enso will retain a 15% ownership and will enter into a 15-year wood supply agreement with a possible additional 15 years extension. Following this, we initiated a strategic review of our remaining 1.2 million hectares of Swedish forest assets, reinforcing our commitment to attractive portfolio managing and shareholder value creation. As part of this review, Stora Enso will explore various options, including a potential separation and listing of the forest business through a demerger into a new company that would be wholly owned by all Stora Enso shareholders. Over the past months, Stora Enso has taken decisive steps to sharpen our strategic and operational focus. These actions are not isolated. They are part of a broader transformation, focusing on profit, performance and portfolio with people in the center and to become a more focused renewable packaging company. These initiatives are guided by three objectives. Firstly, we are increasing strategic business and operational focus and simplifying the corporate structure. Secondly, we are realizing synergies and improving cost competitiveness. And thirdly, we are deleveraging and unlocking asset values. This recent initiative, the sale of 12% Swedish forest and the strategic review of the remaining Swedish forest assets, the Oulu Consumer Board ramp up the acquisition of Junnikkala and the new leaner organizational structure mark a significant phase in Stora Enso's transformation. This puts Turainso in a good position to deliver sustainable value creation, both operationally and financially. We are building a more agile, focused and resilient company to maximize value and deliver long-term returns for our shareholders. Let's then look more closely on the strategic rationale behind the recently initiated strategic review of the Swedish forest assets. In June, we announced that we initiate a strategic review of our Swedish forest assets. With the review, we aim to enhance business focus and unlock the full potential of both our forests and industrial assets. Initiating this strategic review highlights our commitment to maximize shareholder value. If we then have a look at the two different parts of the business. Stora Enso, the industrial part, is a global leading renewable packaging company with sustainability at the heart of what we do. We have leading market positions with a customer-centric offering and one of the market's broadest offerings within packaging. We have strong culture of innovation and sustainability underpinning the business. The business has a leading asset base with cost-competitive integrated sites and diversified material supply, including pulp. With several ongoing initiatives, we are continuing to strengthen the company. If we look at the Swedish forests, we are a leading Swedish forest owner with optimally located assets in central Sweden with proximity to strong sources of demand, such as pulp and soils. There are strong tailwinds when it comes to renewable materials and the forest is the raw material. And this will drive market growth in both short and long term. We are a leader in biodiversity where we have a long history and culture. We have strong assets and an adaptive forest management. The Swedish forest is a source of consistent and strong cash flows and growth. We also see new emerging business opportunities within renewable energy, carbon credits and beyond. The rationale of the strategic review is to look at the two parts of the business and to conclude whether it is better to have them as separate businesses or continue as is. As said, this is the start of a strategic review and we have not concluded anything yet, but we have a clear hypothesis of what creates the best business and shareholder value. And we will come back with the conclusions of this review at the end of the year. As said, we are in our strategy emphasizing growth within renewable packaging. Nearly 80% of investments over the past decade have been allocated to this area. The following outlines the approach and focus on enhancing synergies to support the profitability and growth of renewable packaging. Let's start with our consumer board, the core of Stora Enso. This business includes liquid packaging board, bleached and unbleached folding box board, and barrier coated board for food and beverage applications. We serve global consumer facing brands, which demand the highest standards in quality and sustainability. Stora Enso owns the three largest integrated consumer board mills in Europe, including the most cost competitive Oulu site ramping up. These sites combine large-scale board production with integrated pulp manufacturing with efficient wood supply. This is a critical competitive advantage and highly valued by our global customers who rely on consistent quality across multiple sites. Regarding the Oulu ramp-up, customer feedback on product quality has been very encouraging. While the ramp-up will continue to wait on earnings in the short term, we remain confident the Oulu board line will be very cost-competitive and deliver some of the best quality products in the industry. This investment is central to our strategy of growth in renewable packaging. Then if we look at our container board production, we produce fresh fiber-based liner in Finland and recycled fiber-based test liner in Poland. Our Langebrygge mill in Belgium currently produces newsprint and magazine paper. We have publicly stated our intention to convert it to test liner when market conditions and financials allow. Our largest liner customer is ourselves. enabling significant synergies between liner production and box conversion. We have conversion capacity across Poland, Sweden, Finland and the Baltics. In 2022, we acquired the Young Packaging Group in the Netherlands, now the largest and most modern conversion facility in Europe. Conversion is a local business. Empty boxes are not economical to transport long distances. Our strategy is not to be the largest converter, but to maximize synergies, especially between recycled fiber liner production and conversion. We have 2.5 million tons of market pulp capacity split evenly between eucalyptus pulp from Latin America and Nordic production. A significant portion is virtually integrated with our board mills with flows from the Nordics and Latin America to both Europe and China. we are increasing focus on this integration. Internal access to eucalyptus pulp reduces exposure to volatile markets and improve margins. No other European or North American packaging material producer has internal cost-efficient eucalyptus pulp access at this scale, giving us greater flexibility and optionality. Coming back to wood supply, it's good to note that we have many sawmills, including the recent acquisition of Junnikkala in Finland, around our production sites. Our sawmills produce, on top of sawn products, wood chips and sawdust, which are cost-efficient raw materials for our pulp and board mills. This is the strategic rationale behind the Junnikkala acquisition. You'll notice many new orange dots around Oulu on the map. To sum things up, Stora Enso is establishing a strong position in renewable packaging, leveraging recent investments and strengthening the focus on integration, efficiency and cost competitiveness. Now, I will hand over to Niklas to go through our financial performance during the second quarter.

Thank you, Hans. And hello, everyone. Now let's look at our second quarter financial results, which marked a solid performance given the volatile demand environment and ramping up of our new Oulu line. In the second quarter, our sales increased by 5%, bringing the total to 2.4 billion euros. This growth was mainly driven by stable prices and improved deliveries. Structural changes had a smaller positive impact as both the unical acquisition and the Oulu consumer board line ramp up increased the top line. Our adjusted EBIT decreased to 126 million euros, mainly due to ongoing Oulu consumer board line ramp up, impacting second quarter results negatively by approximately 50 million. Furthermore, as Hans mentioned, all segments achieved positive adjusted EBIT for the second time since the third quarter of 2022. Now let's take a closer look at the EBIT bridge. Here, as you can see, the main impact in the second quarter is the old ramp up weighing on earnings. Adjusted EBIT was 126 million, a decrease of 27 million euros compared to last year. Price and mix had a negative impact of 6 million, mainly driven by biomaterials with pulp prices coming down. This was more than offset by the positive 12 million impact from higher volumes. Variable costs were flat as higher wood and paper for recycling costs were offset by lower energy, logistics and chemicals costs. Fixed costs decreased slightly. FX had a positive 6 million euro impact. So in summary, solid performance with the main impact coming from the Oulu ramp up. If we then turn the focus to cash flow, the cash flow from operations was positive 145 million and after investing activities negative 37. This was, as expected, driven by the final investments at the Olo site. When looking at EBITDA, you can see that it has been gradually improving since 2023. Even though market conditions have been and still are challenging, we have focused on the areas within our control, being enhancing sourcing, operational efficiency, commercial excellence, working capital, and reducing fixed costs. During the previous year, cash flow from operations has benefited from the significant operating working capital reduction actions that were in focus throughout 2024. This focus on reducing operating working capital continues, but naturally the amount of decrease isn't as large as we saw in 2024. On the other hand, when it comes to CapEx investments, the heavy investment phase related to Oulu is now coming to an end, and we expect CapEx to come down from the high levels of 24 and 23. If we then turn to net debt, the ratio of net debt to the last 12 months adjusted EBITDA improved to 3.3 times from 3.5 in the same period last year. Net debt increased slightly to 4 billion as we are finalizing the whole project. As the intensive strategic capex phase of the last two years nears finalization and profitability gradually improves, net debt levels and the ratio are expected to improve. In addition, when completing the divestment of the 12% of Swedish forest asset, which, as Hans mentioned, has an enterprise value of approximately 900 million, being in line with the Swedish forest book value, our net debt will go down further, which improves our financial flexibility. Operating working capital to sales was 6.9%, which is an improvement of 1.8 percentage points year on year. The operating working capital reduction is stabilizing and we intend to keep it at this level and further decrease when possible. So with that, let's move on to the segment performance. Starting with packaging materials, sales increased slightly, driven by higher prices for container board and a slight increase for consumer board. Packaging materials profitability declined primarily due to the ramp up of Oulu. Adjusted EBIT was 29 million with Oulu accounting for a negative impact of 50 million on adjusted EBIT. Deliveries excluding the new machine in Oulu decreased slightly driven by weak market conditions in China. Fiber costs remained persistently at the high level, offset by lower other variable costs. Packaging solutions had a positive result for the second quarter in a row. Adjusted EBIT increased by 4 million euros, driven by actions taken to improve the business, as well as higher prices and reduced depreciation following the previously announced impairments. In general, markets continue to be challenging with both overcapacity and oversupply. Moving from packaging to biomaterials. Biomaterials is navigating in challenging market conditions with the weaker pulp demand, a weaker dollar and lower prices. Sales decreased due to lower sales prices and a negative currency rate impact, partly offset by higher volumes. Adjusted EBIT decreased, mainly due to lower sales prices. This was partly offset by lower costs as we continued to work on making the operations more efficient. Wood costs remained high. On the other hand, wood products had a positive adjusted EBIT for the second quarter in a row. This was driven by higher prices and volumes, partly offset by increased raw material and fixed costs. Forest had another record high quarterly adjusted EBIT, reflecting strong operational performance and high prices. The forest assets fair value is 9 billion euros, equivalent to 11.4 per share. With that, I hand back to you, Hans, for the key takeaways and our focus areas for 2025.

Well, thank you, Niklas. We are confidently navigating through volatile markets, building a stronger, better, more resilient and more profitable Stora Enso by focusing on what we can control. We continue the work across the whole company to improve profitability, cash flow and cost competitiveness through a focus on sourcing, operational efficiency, commercial excellence, working capital and fixed costs. We are focusing on completing the sale of 12.4% of Swedish forest assets while also conducting a strategic review of the remaining Swedish forest assets, including the assessment of a potential separation and public listing of the forest assets through a demerger. We focus on the ramp up of production in the new packaging board line at the integrated mill in Oulu to strengthen Stora Enso's competitive position. I am proud of the resilience and dedication shown by our teams across the company. We are navigating through a volatile world with determination and discipline, and we remain firmly on track to deliver long-term sustainable value. Thank you for your continued support. With that said, we are now ready to take your questions.

If you would like to ask a question, please use the raise hand function at the bottom of your Zoom screen. When it is your turn, you will receive a prompt to be promoted as a panelist. Please accept, wait a moment, and once you've been introduced, you may unmute yourself, turn your video on, and ask your question. Please only ask Max two questions at a time. If you wish to ask more than two questions, please rejoin the queue. Our first question comes from Robin Santaverta at DMB Carnegie. Please, you may unmute your audio, turn your video on and ask your question.

Yes. Hello, gentlemen, and thank you for the presentation. I have a couple of questions. First of all, related to the packaging materials segment, when I look at the Q2 earnings, the adjusted EBITDA of 29 million, and then if I add the 50 million sort of negative from the old startup, you know, the adjusted EBIT would, in a way, the underlying adjusted EBIT would be something 80 million euros are actually the best performance since Q3 2022. What is driving? We know market environment is quite difficult. We can see Metz aboard. We can see Bill Rouge performing quite weakly in comparison to a couple of past years. And now, in a way, your underlying paper board business is clearly better than you have reported in a couple of years. So what are the key sort of elements driving that performance compared to Pearson? And yeah, that.

Thank you, Robi, for the question. Well, first of all, as we said in the presentation, we have cost-efficient integrated board mills with big-scale board production and then also integrated pulp production on-site, as well as then sawmills on-site or close by to support cost efficiency and wood supply. And so it's really about cost efficiency and then also high quality products and long, very good customer relationships. I can say openly that I have never seen any company with this good, continuously good customer satisfaction feedback. I mean, and I met now with about 50 of the largest customers, CEOs, and this customer satisfaction is is strongly confirmed by also the top management of our customers. So doing the basics right and good in a cost-efficient way, that's I think the reason.

Would you say that the operational efficiency or the sourcing efficiency is now clearly better compared to two, three years ago? Is that one element and if so, Is the work done on that part or are there still things to come to drive up the underlying performance?

To answer your first question, yes, we are much more efficient internally than we were three years ago, absolutely. We have made clear progress there, but there is much more to come. This is not a project. This is our new way of working, continuous improvement, and it's really boiled down to our performance culture that we have strongly been developing and introducing into the company We have thousands of initiatives identified to further improve our efficiency. And we have hundreds of initiative owners working on these initiatives across the board. I'm truly proud of all the Stora Enso employees, how we have improvement actions ongoing in all mills, in all units, all sites. And that's the way how you can truly make a difference make a shift in competitiveness and performance.

Thanks. And the other question I have is related to Oulu. Do you have the deliveries in Q2? What do you expect for the remainder of the year in terms of deliveries and what segments are you producing and selling at the moment?

Well, we don't provide more precise guidance. We have in our report repeated, you know, the roughly 100 or slightly above total negative EBIT impact from the ramp up. And we have guided before that we expect EBITDA breakeven in the fourth quarter. So we stick to that guidance. And I said also in the report, Feedback on quality, both Folded Box Board, CKB has been really encouraging and good from our customers. So we are aiming for the best product quality in the market. Thank you.

Our next question comes from Efrem Ravi at Citi. You may unmute your audio, turn your video on and ask your question.

Thank you for the opportunity. Two quick questions. Firstly, on the forest options that you are exploring, does the Swedish forest include the stake in Tornator? And also, what is the thinking on either leaving out or putting in the Baltic forests also into that entity in terms of this way you're thinking about it strategically? Secondly, on Oulu, the previous guidance, I think, was for 800 million of revenues from that mill over the medium term. Given the current market conditions, what kind of profitability would you be expecting from that business over the medium term, just for us to get a sense of the return on invested capital that could be expected from that investment? Thank you.

Thank you for the question. The Swedish forest does not include Tornetor, where we have a 41% stake in the Finnish Tornetor forest company, nor Baltic forest assets. It's purely Swedish forest, what remains 1.2 million hectares after the divestment of the 12.4% of our assets in the forest assets in Sweden. The book value of this remaining part is roughly 6 billion euros. And when it comes to the Oulu ramp up, we have guided before that when fully ramped up in 2027, It is going to add about 800 million euros sales to the group. And that's what we stick to when it comes to profitability. We don't have any more exact guidance on that.

And just if I can push you on the first point, any rationale why Baltic Forests are not part of that entity? If it was to release the book value of that assets to the market, I mean, that would be a logical conclusion.

Yeah, we want to keep this as a very clear, pure, you know, Swedish forest company, 1.2 million hectares. It's a huge forest company. And I said, you know, rough book value about 6 billion euros. So it's a very concentrated, focused in the mid of Sweden. entity and therefore also very manageable and clear, also for investors from an equity and investment perspective.

Thank you.

Our next question comes from Charlie Moritz-Sands of BNP Paribas. You may unmute your audio, turn your video on, and ask your question.

Yes, morning, gentlemen. Thank you for taking my questions. I think the first one you'd actually already answered, which is to reconfirm the EBITDA breakeven target for Q4. I had a couple of others, though. you cite continued high input costs and I mentioned higher wood costs offsetting some falls elsewhere in Q2. I think some other people have started to talk about seeing on a look forward basis perhaps signs of pulpwood at least if not saw logs perhaps falling in price as we go into the second half i just wondered if you're seeing any of any similar signs on that yourself which could clearly help your industrial business but perhaps also though offset on the on the forest side thank you yeah thank you charlie yes we see some signs we see some early signs but we think it's too early to draw any conclusions here so So any quantification at all as to what you might be seeing so far?

Well, I mean, when it comes to wood costs and wood prices, we have seen some decline in the Nordics, in all the Nordic countries, in the areas where we buy wood. But as I said before, I mean, we want to have a more fundamental change and to really be able to talk about a trend change. So it remains to be seen.

Understood. And then just one slightly technical question. Your depreciation guidance for the year is still 610 to 660 million. You're only booked to 118 million in Q1 and 123 million in Q2. That kind of suggests a big step up into the second half, unless I'm missing a different moving part. I just wondered if if that's the case, if there should be a big step up in depreciation as we move into the third and fourth quarters.

Thank you. That's a good point. And I mean, let us come back to that offline. I don't have, honestly, a good answer to that. Thank you. Thanks.

Our next question comes from Lars Jellberg at Stifel. Please unmute your audio, turn your video on and ask your question.

Thank you for taking my question. Let's see if I can get my video going. So I just want to come back a bit to what you spoke to, Hans, about accelerating synergies. As much as underlying earnings are starting to improve, the earnings still remain very low. We're appreciating we're challenged cyclical market, but at the same time, the scene is to be in need for structural change. You call out yourself, excess supply. I keep harping on about the need for you to do something on your more structural. But obviously, in the light of today's presentation, you talk about synergies. So if you can... sort of help us think a bit about what sort of opportunity you are seeing for that synergies to generate that further integration and what hasn't already been done because you've owned these assets for quite some time. So that's my first question.

Yeah, thank you, Lars. Well, You know, first of all, all our businesses made a positive result for the second consecutive quarter. And even if, you know, on a low level, so of course our profitability targets are much, much higher, but it shows that, you know, the work, the hard work we have been doing on improving our cost efficiency, reducing costs and improving productivity pays off. And when it comes to the internal synergies, so we launched a new organization where one element is that we are organizing operational activities around integrates. So basically the sawmills close to Oulu, which is the Veitsiluoto sawmill, the three Jonnikkala sawmills, they are part of the Oulu business unit. So the integrate forms a business unit. So we optimize the totality there. And the same thing we have done in our other mills so that we integrate the nearby sawmills and wood products units with the local board and pulp manufacturing and forming them into P&L responsible business units. So so these business unit leaders uh they are then in charge of maximizing the ebit for those integrates taking into account you know wood supply uh wood products so sawmilling pulp production board production so the whole totality and here we see that there is uh potential to to find further synergies then as a part of the organizational change we we basically took out one management layer completely so previously between me as the ceo and and the mills and the heads of sales there were two management layers now there is one the business area leaders then we have also moved functional staff on a group level in order to be able to streamline and to do more with less also in this area. And this is a process ongoing. So there is more to do here also when it comes to addressing synergies and addressing fixed costs in our company.

I'll push you a bit on that. Can you share with us what sort of marginal opportunity or absolute number you're seeing? And just one more question. In terms of a potential spin-off of the forest assets, would that require bondholder consent?

Well, on the first question, we don't disclose any targeted numbers here, but I can assure you, Lars, that we are doing our utmost to continue to streamline the company, to improve our cost position, to reduce both variable and fixed costs. So we don't give a guidance number on that. And perhaps, would you like, Niklas, to comment on that?

Yeah, on the kind of strategic review, Lars, no further comment on that. I mean, we are in the midst, as you know, of the strategic review. So we'll come back by the end of the year with conclusions, including bond topics. But I don't want to comment on it as we are.

I appreciate that, but this is a factual comment, I suppose. Bond order consent, needed or not needed.

Again, we are in the midst of the review, so let's go through that first, and when we've concluded the review, we then come back. All right. Thank you.

Our next question comes from Cole Hathorn at Jefferies. Please unmute your line and ask your question.

Good morning, thanks for taking my question. I'd like to start with the demand trends. We've seen a lot of commentary around order books weakening and being a bit softer in June, and I'd just like a little bit of color what you're seeing from your customers and order books, particularly in packaging materials, and if you could differentiate between the container board and consumer board side, any trends that you'd like to call out. as well as comment on the weakness that you were calling out in Asia. Thank you.

Yes. Thank you, Cole. So, first of all, container board market is quite stable and solid. You know that there has been several price increases implemented throughout the beginning of this year. Also, order books are good. In container board, in consumer board, prices are stable on a somewhat higher level than last year, and also somewhat higher than end of last year. And I would say order books are satisfactory. But it is absolutely clear that if we look at our packaging business, the demand is driven by consumer spending. And we know that consumer confidence, consumer spending due to the macroeconomic environment, geopolitical uncertainties is on a relatively low level. So therefore, we can't speak about, you know, really strong demand environment. So that's how I would put it. But I would say that it's a stable situation, but still on a relatively low level.

And then if I look at your EBIT bridge, your variable costs year on year, you talk about higher wood costs offset by know some other lower variable costs and you know your profit improvement actions but i'd like to to push you a little bit more to try and quantify you know how material those profit improvement actions are and how visible they are to the numbers because we would have thought that the wood cost just on a year-on-year basis would still be a material drag i mean is it relief from the other cost buckets that is helping you get basically stable year on year variable cost, or is it really those profit improvement actions that are starting to come through? Because you've talked about it, but from the outside in, it's very difficult to put a number on those actions. And all those actions, the kind of the wood sourcing, what would you identify as those kind of profit improvement actions that's really offsetting those variable cost increases in wood?

If I take that one, I mean, you are right. I mean, if we dissect that variable cost flat kind of bucket, wood and paper for recycling is a significant or was a significant drag in Q2, kind of similar to what we saw earlier. And then as an offsetting, and we talk about a relatively significant amount tens of millions, and then offsetting that we had the others coming down. And of course, there's certain kind of market movements. I mean, we talk about energy, chemicals, logistics, and so on. But as you rightly point out, there's a diligent day in, day out work related to, I mean, we mentioned, Hans has mentioned before, the so-called value capture program, and that continues very actively. So in each mill, in each site, we have a number of activities addressing, for instance, chemical usage, how we source it and so on. So that's something that is seen in the costs as a positive and there's more to work on. We clearly have a good pipeline there also. I don't want to give an exact number because, again, it's a host of activities. Hans mentioned thousands of activities affecting that. And then, of course, we have the market movements up and down in those logistics, for instance.

And then maybe I follow up on the new organizational structure, which has been from, let's say, the 1st of July. But, you know, how are... the divisional management team incentivized to protect pricing in kind of a softer demand environment? And how are they incentivized to manage capacity to demand? And maybe following up on Lars's point, does this new organizational structure allow faster decisions? If you do come to the conclusion that improving your mix and operating rates by trimming capacity to make way for Olu is the right decision. You know, will your divisional team be able to act faster?

Thank you. I would say on the latter part of your question, I would say yes. I mean, that's one of the objectives with this structure, you know, a leaner, flatter organization, which is more agile. And the business area leaders and management teams are incentivized, among others, based on the EBIT generation. That's the part with the highest weight in their incentives. And let's remember that in this new organization, we have actually pushed down P&L responsibility even further into the organization. So we have now 22 new P&L responsible business units, which are formed by the pulp board and sawmill integrates. So also the former mill directors are now P&L responsible business unit leaders in charge of that whole integrate. And also they are incentivized based on EBIT. So to maximize the EBIT of those integrate and thus contribute to maximizing the EBIT of the business area, That's the main driver. If we look into sales, we have introduced also their margin steered sales incentives. So also our sales force is incentivized based on margin maximization. And we all know that maximizing the margins, it's a function of price and volume. And the best way is really to have a total profitability margin steering of that so that that that's the way how we are driving also profitability and results in in our sales action so optimizing price volume product customer mix there is a lot that we can capture in terms of value from these areas

Maybe just to add to what Hans was saying, because this is quite a powerful change actually. And of course, we then also are making adjustments to the kind of management cadence, how we go through things monthly. We can clearly see from the group level down to these 22 BUs, how things are progressing and developing. We set clear targets also on the BU level and then also the BA level and group level and so on. Naturally, as Hans was saying, 22 new P&L owners here. It will take a bit of time to see the results, but we are quite excited actually and confident that this over time will bring good things along. Thank you.

Our next question comes from Linus Larsson at SEB. You may unmute your audio, turn your video on and ask your question.

Thanks a lot and good morning, gents. It seems to me that you're increasingly focusing on your packaging businesses and you also mentioned integration, internal synergies and that the Europe map that you showed gave a very good overview, by the way. I just wonder how we should look at the parts of the business which are not necessarily or directly supporting the packaging businesses. On that map of yours, for instance, there are a number of sawmills which aren't adjacent to any packaging materials, units, and you also have a couple of standalone pulp mills which aren't necessarily supporting the packaging businesses. I'm just trying to sense if there's any change in any way in your strategy when it comes to your non-packaging related businesses.

Yes, well, thank you, Linus, for the question. So, yes, you are absolutely right. I mean, the strategic focus is very much on renewable packaging, representing today about 60% of our total sales. And if we look at the last 10 years, about 80% of our investments have gone into this area. So that's really the area where we have been investing for growth and will continue to invest for growth. We see that there is opportunities to develop and to create even more value, especially in this area of renewable packaging. You're also right that there are, for instance, some sawmills in Central Europe that are not directly synergistic. with the packaging material business that is also visible in our new organization as from the 1st of July. They have been organized into what we call business unit wood products south. So it's basically the sawmills in Central Europe, which are not then a part of the pulp and board mill integrates. uh and um uh so so all in all uh as we mentioned in our presentation you know we will continue focusing on on profit performance and portfolio uh streamlining the you know and focusing the the portfolio even further but that's i think what we can what we can now say at this time

So today in Europe, you are one of the biggest, if not the biggest, sawmill operator. I'm not sure. Is that a position that you find desirable? Is that in line with your long-term strategy? Or is that something that you're also contemplating? I mean... you've been clear that that you will leave no stone unturned and and you're really reviewing all aspects of of the group so how how do you look at that part of the business yes i mean uh

What we have said before, our strategic focus is on renewable packaging and growth within the area of renewable packaging. You are right, we are one of the largest sawmillers today in Europe. But our strategic focus is on renewable packaging growth moving forward. But then, of course, many of the soil mills, especially in the Nordic region, are very synergistic in supporting the cost efficiency of our renewable packaging. And that's also the strategic rationale for the Unical acquisition. We bought three soil mills, one of them being brand new, top efficient, very close to our Oulu mill, and therefore also supporting to reduce the raw material costs in our Oulu integrate.

Okay, great. And then just one follow-up on what you previously said on order books in packaging materials. Are you seeing some trends during the quarter? I mean, the end of the quarter compared to the beginning of the quarter. What sort of order in-float trends are you looking at right now?

Well, I would say in general, you know... US President Trump's liberation day in the beginning of April caused uncertainty in general to the market. And probably that could be seen as somewhat weakening the outlook, the confidence in the marketplace and among consumers and also customers partly going into more like a wait and see mode. So as we all know, uncertainty is not good. for economy and demand development in general. So I think that has caused some subdued outlook. But we are focusing on controlling what we can control. So we do our utmost to improve our competitiveness, cost efficiency, serving our customers better than ever before, and producing top quality. That's what we are focusing on.

Sounds wise. Thank you very much.

Our next question comes from Pallav Mittal at Barclays. You may unmute your audio, turn your video on and ask your question. Halav, if you would like to ask your question, you are unmuted.

Hi, can you hear me?

Yes.

Hi, good morning. So a couple of questions. Following up on a question asked earlier, given the weak demand conditions and weakening of order books, should we expect some potential closures in the near term in board or, say, the pulp side of things? Or because you're focused on the Swedish forest review, these closures are not a focus right now. So that's the first question.

Thank you, Paolo, for the question. All our businesses made positive results. Yes, we are far away from our long-term financial targets, so we have a lot of work to be done there. I think that's how we can conclude on the first question. We are... Even if we are operating in a high wood cost environment in the Nordics, we are producing the highest added value forest industry product mainly, so consumer board, where the price point is about twice higher than pulp and paper, and thus also the added value is higher, and thus also the impact of the wood cost is lower on the total cost structure. So the way to be able to be profitable and to deliver good margins in a high wood cost environment is to produce the highest added value, the most expensive product, which is consumer board in efficient big integrates. And that is exactly what we are doing in the Nordics.

Sure. And the second question I have is related to the strategic review. So of the 300 million EBIT that you have done more or less in the first half, the forest segment is generating almost 60% of that total EBIT. So when you think about separating the forest assets, essentially the remaining business will probably be a very lower margin business based on the numbers that I just highlighted. When you are evaluating various decisions or various options, how are you thinking about the split between your forest and the remaining industrial assets?

First of all, if you look at our forest division today, I think it's important to remember that the forest division EBIT includes also our 41% share of Tonator in Finland. There is also the whole wood trading part, which is a part of wood sourcing, which is also generating EBIT through sales, significant sales to external third party. It's a part of our wood sourcing organization. So So out of that 300 million EBIT, it's only a part which would be part of the Swedish forest company if we would move forward after our strategic review in that direction.

Yeah, and these are the things that we are looking into as part of the strategic review and of course commit to come back when we have a conclusion on that clarifying for instance as you say EBIT structures how much would move or not move so I would caution a bit and not draw too many conclusions yet based on how we report today.

Sure thank you.

Our next question comes from Detlev Winkleman at JP Morgan. You may unmute your audio, turn your video on and ask your question.

Morning team. Just two ones quickly from me, very technical. Just on your maintenance costs, if I go back, let's say 2022 to 2024, on average, we're talking kind of between 500 and 550, somewhere there. And if I take you know your current up to h1 then your kind of q3 guidance and we're tracking quite far below that is that purely cyclical i.e lower profit profitability at the moment um and therefore we should expect it to go up again as your profitability improves or is this something that we should be your maintenance costs coming through more in q4 this year is it a timing thing basically that's my first question please

If I take that one, to some degree it is a timing thing. So as we said, we will have slightly higher maintenance costs now in Q3 compared to Q2, 10 million we said. And then typically we also have quite significant maintenance plans for Q4. So in that sense, you'll see more in second half. and we've disclosed some of those plans also in our reporting how it goes you know by quarter or which sites at least but then of course goes without saying that maintenance is a pretty significant cost as you say it's also an investment but that's part of what we are looking into as well can we get more efficient can we keep our mills sites running with high quality at a lower cost. So of course, that is part of what we are looking into as well.

Okay, that's perfect. Thank you. And then keeping with maintenance, if we just go more specifically to Q2, I know we had a 20 million roughly headwind from quarter on quarter. Are you able to split that between roughly speaking between kind of packaging materials and biomaterials?

Oh, let's say same answers previously. Let me come back or let us come back to that. I don't have it in my in the back of my head.

That's perfect. Thanks very much.

It's all for me.

Our next question comes from Joni Sanville at Nordia. Please unmute your audio, turn your video on and ask your question.

I think you are mute. Nope, cannot hear you.

We can't hear you. I can still not hear you. There seems to be a technical problem here somewhere.

We still have the operator with us.

We will conclude our questions for today. I shall now hand back to Hans Sjöström and CFO Niklas Rosenlew for closing remarks.

Yes, thank you very much for participation. As you can see, we are moving forward with determination and speed to build a stronger, more competitive and better, more valuable Stora Enso for the benefit of all our shareholders. Shareholder value maximization is our guiding star. And I also want to draw your attention to the fact that we are preparing for a capital market phase day on the 25th of November taking place in London. So hope to see as many as possible of you also there. But until the next meeting. So thank you very much and have a good day. Take care. Bye bye.