Hello everyone, and welcome to Stora Enso's first quarter 2025 results presentation. Thank you for joining us today. I'm Hans Sohlström, the President and CEO of Stora Enso, and I'm here with our CFO, Niclas Rosenlew. Today's presentation, titled "Consistent Progress in Improving Performance," will primarily address our performance, market environment, and our plans to implement a new, leaner, and flatter organizational structure, reflecting a stronger focus on renewable packaging business. We have the broadest renewable packaging offering in the industry. Our packaging products include a diverse range of renewable wood-based materials and solutions, such as cartons, boxes, trays, cups, and bags catering to industries like food and beverage, e-commerce, pharmaceutical, and cosmetics. These products are daily essentials, as you can see here on the front page.
We will now guide you through our performance for the first quarter of 2025 and address any questions you might have towards the end of this session. I am pleased to present our financial results for the first quarter. Sales grew by 9%, and we have achieved a robust adjusted EBIT of EUR 175 million, representing an increase of 18% year- over- year, with an EBIT margin of 7.4%. Operating working capital decreased by 3 percentage points to 7%. This marks the fourth consecutive quarter of a year-over-year improvement in our financial performance. For the first time since the third quarter of 2022, we have achieved positive adjusted EBIT across all divisions. This milestone has been reached as a result of our cost-saving actions and efficiency improvements, which are yielding increasingly impactful results and solidifying our resistance in disruptive markets.
We are also excited to announce the successful production start of our new consumer board line at the Oulu mill, as well as the regulatory approval to proceed with the acquisition of the Finnish sawmills, Junnikkala, which brings significant operational synergies and reduced wood costs at our Oulu pulp and board mill. These developments are part of our targeted actions to build a stronger, more cost-competitive, and profitable company. Looking ahead, we have plans to implement a new, leaner, and flatter customer and business-oriented organization, set to take effect as of the 1st of July. This reorganization will reflect the importance of our core business in renewable packaging and is designed to enhance efficiency and performance culture. I will now give you an overview of our strategy. We are a renewable materials company focusing on replacing fossil materials with renewable solutions.
Our values are to lead and do what is right, and especially now, leading and doing the right thing emphasizes improving profits and strengthening the balance sheet, as well as increasing shareholder value. Our business areas operate in growing segments driven by strong sustainability trends. We aim to deliver high customer and added value through efficient and integrated production, maximizing shareholder value. Renewable wood-based and recyclable packaging is central to our strategy, representing over 60% of our sales and a main part of our investments over the last decade. In wood products, we are one of Europe's largest producers of sawn timber and a leading provider of sustainable wood-based construction solutions. Our sawmills also produce wood chips and sawdust, which is important cost-efficient raw material for our pulp and board mills.
The foundation in biomaterials is pulp, and our goal is to increase the added value and profitability of our northern pulp mills by specializing, as well as to further strengthening the good cost competitiveness of our South American mills. To utilize the full potential of wood, we use all parts of the wood to create innovative bio-based solutions that can replace fossil-based and non-renewable materials. Our pulp mills, especially the cost-competitive eucalyptus pulp mills in South America, are increasingly central raw material sources for our own board production. Stora Enso has four pillars that it has built its leading positions on and is the essence of the renewable packaging strategy. We focus on cost-competitive assets with flexible capacity and high vertical integration from fiber to final product. Owning the three largest consumer board integrated mills in Europe enhances our cost competitiveness.
Our internal supply of eucalyptus pulp from Latin America joint ventures reduces dependency on volatile pulp markets and improves margins. This is a unique advantage among European and North American peers. Our strong market position and close customer relationships facilitate co-development and pilot innovations. Large global customers value us as a scale partner capable of delivering consistent high quality from multiple mills. As the fourth pillar, sustainability is crucial. Our low carbon footprint is a competitive advantage and part of our customer offering. By controlling the entire value chain, we have unparalleled control over sustainability performance, including traceability, efficiency, and circularity. First comes strategy, then structure. Stora Enso plans to implement a new, leaner, and flatter organization with seven P&L responsible business areas, reflecting the importance of its core business of renewable packaging in the business portfolio.
This would remove one management layer and represents a further decentralization of P&L responsibility closer to customers and operations. The new flatter and streamlined organization has carefully been structured to maximize customer and business focus, operational efficiency, and synergies. This new structure will ensure the benefits of supply chain integration, reduce complexity, and ultimately reflect our performance and result-oriented culture. The new organizational structure for the group will, as mentioned, transition from five divisions to seven lean business areas with P&L responsibility. The global leadership team will welcome two new members, Markku Luoto, who will be leading Business Area Food Service and Liquid, and Andreas Birmoser, who will lead Business Area Cartonb oard. The current leader of the packaging materials division, Hannu Kasurinen, has been appointed to lead Business Area Containerb oard. After the changes, the global leadership team will comprise 12 members.
Following the planned change, the group's renewable packaging business will consist of four business areas accounting for about 60% of Stora Enso's revenue: food service and liquid board, carton board, container board, and packaging solutions. The group's remaining businesses accounting for approximately 40% of Stora Enso's full year revenue continue to be divided into three business areas: biomaterials, wood products, and forest. In addition to their respective businesses, they support Stora Enso's renewable packaging products through wood sourcing and their supply of raw material. To strengthen operational and supply synergies, sawmills and building solution sites in the Nordics will operationally and financially belong to their respective geographically closest board and pulp production sites. These integrated board pulp and sawmills form new P&L responsible business units reporting into the respective business areas. Central European building solution sites and sawmills will remain in the wood products business area.
Group functions are organized in a business-focused and efficient structure to support the seven business areas. In 2025, a key focus is the successful ramp-up of our new packaging board line in Oulu, Finland. This mill will become Stora Enso's largest production facility, an integrated mega-site specializing in folding box board and coated unbleached kraft. It will be one of the most modern and cost-competitive packaging board mills in Europe. The new line will primarily serve consumer packaging needs, including food, beverage, frozen and chilled products, and is expected to reach its full annual capacity of 750,000 tons by 2027. This expansion will also allow us to optimize production at other sites, unlocking further profitable growth. In addition, the mill produces premium pulp and fresh container board. We have signed an agreement approved by the Finnish Competition Authority to acquire the nearby Finnish sawmills company, Junnikkala.
This acquisition ensures a cost-efficient wood supply and enhances our competitive production resources. Adjusted EBIT for full year 2025 is expected to be adversely impacted by approximately EUR 100 million due to the ramp-up of the new packaging board line, with the majority of this impact anticipated in Q2 of this year. The new line is expected to reach EBITDA break-even by the end of this year. I would like to provide an update on the tariff situation that has been widely discussed in the markets. Firstly, I want to emphasize that the current tariff rates have a limited impact on our operations. Sales to the U.S. account for less than 3% of our total sales in 2024, so the main risk lies in the overall impact on the economy. Several factors help mitigate this situation.
We have production facilities in Europe, Latin America, and Asia, and our raw materials are primarily sourced from Europe and Latin America, with some from China. Additionally, we have a global sales network, and we are agile in our sales efforts. The limited sales to the U.S. can be repositioned, and sales prices are renegotiated. This situation also presents opportunities. We are Europe's leading producer of carton board and fluff pulp, as well as one of the leading kraftliner producers. As the U.S. is a major net exporter of carton board, about 800,000 tons per year, kraftliner about 3.4 million tons per year, and fluff pulp about 3.8 million tons per year, there are opportunities for us to grow our business in other markets, which are implementing countermeasures to U.S. import tariffs or otherwise prefer to reduce imports from the U.S.
I will now hand over to Niclas to cover the financial performance.
Thank you, Hans, and hello everyone. Now let's walk through our financial results, starting with sales and adjusted EBIT. In the first quarter, our sales increased by 9%, bringing the total to EUR 2.4 billion. This growth was mainly driven by higher prices across all divisions, as we implemented a number of price increases and improved deliveries in all divisions except biomaterials. Adjusted EBIT also saw an 18% increase in absolute terms, reaching EUR 175 million and a 7.4% adjusted EBIT margin. This improvement was primarily due to higher prices, increased volumes, favorable foreign exchange rates, and the positive impact of cost-saving and value creation initiatives, which helped mitigate the continued high fiber costs. Furthermore, as Hans mentioned earlier, all divisions achieved positive adjusted EBIT for the first time since the third quarter of 2022.
Our adjusted return on capital employed for the last 12 months, excluding forest, has continued its gradual increase since its low in the first quarter of 2024 and reached 3.8%. Let's take a look at the EBIT bridge. Our adjusted EBIT improved from EUR 149 million to EUR 175 million. The main positive contributor was price and mix in total EUR 98 million. We increased prices for several products late last year and during the quarter. Price mix, together with the higher volumes at EUR 15 million, almost offset the higher fiber costs. Fiber costs, mainly from wood, continued to increase and weigh heavily on the results, with the total negative impact in the quarter being EUR 131 million. What comes to other variable costs, such as energy and pulp, they decreased slightly compared to a year ago.
Other include a EUR 29 million positive impact from FX, as well as the lower depreciation of EUR 10 million. Also, unlike last year, we did not benefit from any larger energy compensation, but we also did not face political strikes that negatively impacted volumes last year. Moving on to the cash flow development in the quarter and in more detail. Cash flow from operations was EUR 192 million. While the profit was higher than last year, the cash flow was negatively impacted by approximately EUR 100 million increase in working capital. This was driven by our higher sales, which increased receivables, as well as the seasonally higher inventories, partly related to the ramp-up of the new machine in Oulu. Capital expenditure remained high at approximately EUR 240 million, but will start to decrease after Q2 as we come to an end of the Oulu project.
Cash flow after investing activities was negative at EUR 47 million, as said, driven by the last leg of the Oulu project. However, looking at the linear development of both cash flows, operating and after investing activities, the trend is gradually improving, mainly due to improved profitability, and in the future, also lower CapEx will support further improving cash flows. Moving on to our debt position and liquidity. The ratio of net debt to the last 12 months adjusted EBITDA improved to 3.2 times from 4.0 in the same period last year, driven by enhanced profitability. Net debt increased to EUR 3.9 billion as we are finalizing the Oulu project. As the intensive strategic CapEx phase of the last two years nears its finalization and profitability gradually improves, net debt levels and the ratio are expected to improve further.
The average interest rates on borrowings decreased to 3.7% from 4.2% last year. Operating working capital continued to decrease compared to the same period last year, thanks to the good actions taken across Stora Enso. Sequentially, operating working capital increased slightly due to the higher inventories in the first quarter, which is typical seasonality, while the operating working capital ratio to sales remained stable at 7%. Let's move on to the divisional performance. Packaging materials had a positive result development driven by price increases and seasonally improved demand. Adjusted EBIT increased by EUR 10 million to 62, driven by higher prices in both consumer board and container board. The higher fiber costs and negative impact from the startup of the new consumer packaging board line in Oulu was offset by lower energy, chemicals, and fixed costs.
The container board price cycle bottomed during the quarter, and impact from the first price increase started to come through towards the end of the first quarter. In packaging solutions, our team is working on a turnaround, and Q1 was the first positive results since Q4 2023, driven by China demand, efficiency improvements, and lower depreciation following earlier announced impairments. While there's good progress improving performance, price pressure caused by market overcapacity and oversupply continued in the quarter. Moving from packaging to biomaterials. In biomaterials, pulp demand was relatively weaker in the first quarter compared to the seasonally strong end of 2024. Adjusted EBIT decreased to EUR 36 million, mainly due to lower sales prices and higher costs, primarily wood costs. On the other hand, wood products improved the adjusted EBIT by EUR 10 million and reached break-even, resulting from active margin management more than offsetting the higher wood costs.
Forest had another record high quarterly adjusted EBIT, reflecting strong and stable performance. Adjusted EBIT increased to EUR 82 million, and the forest assets fair value increased to EUR 9.3 billion, equivalent to EUR 11.7 per share, with the increase being driven primarily by a favorable currency rate impact. With that, I will hand back to you, Hans, for concluding remarks.
Thank you, Niclas. 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. This marks the fourth consecutive quarter of year-over-year improvements in our financial performance. Sales grew by 9%, and we achieved a robust adjusted EBIT of EUR 175 million, representing an 18% increase year-over-year. Additionally, operating working capital decreased by 3 percentage points to 7%.
I want to emphasize that the current U.S. tariff rates have a limited impact on our operations, as our sales to the U.S. can be repositioned and sales prices are renegotiated. Sales to the U.S. accounted for less than 3% of our total sales in 2024, so the main risk lies in the overall impact on the economy. During the first quarter, we had a successful production start of the new consumer board line at the Oulu mill. Stora Enso also plans to implement a new, leaner organizational structure. These strategic initiatives are designed to position Stora Enso at the forefront of the renewable packaging industry, ensuring sustained profitable growth. Lastly, we invite you to mark your calendars for our Capital Markets Days, which will be held on the 25th and the 26th of November, and we will communicate further details in due course.
This event is a key opportunity for us to engage directly with you, our stakeholders, and outline our strategy, setting the stage for an exciting future together. 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 have 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. We will pause for a moment to allow questioners to enter the queue. Our first question comes from Lars F. Kjellberg at Stifel.
You may now unmute your audio, turn your video on, and ask your question.
Good morning and thank you for taking my question. I just want to start, Hans, with the change to the operational structure. I'm not sure that exactly they understand what's going on. Kasurinen, moved from Packaging Materials, Container Board, and the other two sellers are still in the same job. So it's essentially just the divisional sort of mega structure that is gone. What does that really imply for your real change? The second question I have on that specific is you talk about the pulp mills and wood products business that will now be sort of financially owned by these packaging assets. Will that also then be reflected in the reporting structure of those? Because you're saying that the external divisional heading will still be the same.
If you can clarify, because I would argue, of course, that would add some degree of volatility, maybe even into the numbers if you have wood products all of a sudden in consumer board, for example. Just clarify that. On the last point, really on tariffs, I think you told it exactly the way it is, risks and opportunities, but the biggest risk to the economy, of course, right? You also stated with the Oulu machine ramp-up that you would target the US. When we rethink that and the opportunity, where can you place those tons as opposed to now targeting the US for that output?
Thank you very much, Lars. First of all, about the organizational change. We are removing one management layer, and we are in fact adding P&L responsible units throughout this change. I will explain.
First of all, when we say that we are creating a flatter organization with seven P&L responsible business areas, it means that, so basically within packaging materials, which has been one division until today, we are splitting that into three business areas, but we are also moving one management layer away so that the mill managers, the sales managers, today there are two management layers between me, the CEO, and the mill managers and sales managers. We have the divisional leaders layer, and then below the divisional leaders layer, we have the business unit leader layer. We take one of those layers out. Between me, the CEO, and the mill managers and the sales managers, there will be only one layer, which is the business area, P&L responsible business areas. Furthermore, we are creating those integrates.
Basically, we are integrating the Nordic sawmills with the closest pulp and paper, pulp and board integrate. Giving some examples, we have, for instance, in Oulu, we have the Veitsiluoto sawmill, which is an important source of sawdust chips to the Oulu pulp and board mill. We have also now, or we are acquiring and closing the deal of acquiring Junnikkala, which means three other sawmills in the Oulu region. They will be a part of the Oulu integrate because that is how you get really efficiencies, having sawmilling, pulp making, and board milling together. They will form a new P&L structure. They are forming a P&L responsible unit. We will have in total in this new organizational setup, 21 P&L responsible business units formed around these integrates to the largest extent.
It is really an organizational change where we are delayering, taking one management layer out, making a flatter organization, and then at the same time, decentralizing even further P&L responsibility closer to operations and closer to sales and customers. That's important. Yes, those Nordic sawmills, they will financially be part of the integrate P&L and thus also part of the business, the new business area P&L structure. At the same time, it is important to remember that the non-synergistic central and southern European wood products units, they will form a separate business unit. They are not part of this Nordic new P&L structure because they are not synergistic from a wood sourcing and wood supply perspective with the pulp and board mills. That's important to remember also.
When it comes to the tariffs, as explained, I mean, the tariffs offer opportunities and some risks. Exactly as you say, Lars, the main risks really relate to the impact on the economy in general. I do want to underline that the U.S. is a net exporter of cartonboard, 800,000 tons, and a net exporter of kraftliner, 3.4 million tons, and fluff pulp, 3.8 million tons. We are the largest producer of cartonboard and fluff pulp in Europe, as well as one of the largest in kraftliner. We have seen already now that there are new sales opportunities opening up all around the world because of either new counter tariffs put in place or preparation for counter tariffs being put in place. However, we are not leaving the U.S. market. We continue to serve the U.S. market.
We are renegotiating our contracts and pricing in the U.S. We expect to be able to compensate for a major part, if not even all, of the tariffs. We are also continuing to focus on the U.S. market, but there are new opportunities also arising. Thank you.
Maybe if I add, Hans, Lars—yeah, Lars on the external reporting, just to kind of give you an answer on that as well. I mean, as Hans explained, this is about efficiency, operational improvements, seven business areas, 21 BUs, getting that kind of P&L responsibility even further kind of advanced throughout the company. That is the kind of core from a reporting perspective and following up perspective and really tracking performance and instilling that performance culture in the company. What comes to external reporting, that will remain the same.
Plus that now we have had, of course, functions in the divisions, and we are now organizing the functions on a group-wide perspective to gain also synergies and efficiencies, reduce duplication, reduce overlapping jobs, and in that respect, also creating synergies and efficiencies.
Very clear then. Wood products will be what it is. Packaging materials will be what it is. The way we see it from the outside. Okay. Very good. Thank you.
Our next question comes from James Perry at Citi. You may now unmute your audio, turn your video on, and ask a question.
Good morning. Thank you for the presentation. I'd like to ask about Oulu and the ramp-up. You said you expect the break even by the end of 2025 and full capacity by 2027. Are you able to share roughly how many tons you'd expect to deliver in 2025?
Also, on the EUR 800 million annual sales that you indicated, does that assume pricing roughly at current levels or higher? Obviously, the same EUR 800 million figure was disclosed when you announced the decision in October 2022, but FBB prices are about 10%-20% lower now. Just briefly as well on the organization structure, you've mentioned the operational efficiencies, but should we anticipate any kind of material P&L benefits or cost reductions as a result?
Yeah, thank you, James. First of all, I mean, we don't disclose any volume targets for Oulu this year, but as said, the startup has been successful both from a product quality perspective, actually very promising product quality, I have to say, and also from a production perspective. We are now in the phase of starting deliveries of prime quality customer trials. It's a good start.
The EUR 800 million of top line is based on, let's say, average long-term prices for both folding box board and CUK, coated unbleached kraft, which are the main two products of this production line. What was the other part of the question? Yeah, the cost reduction part of this organization. We are now, according to Nordic practice and legacy, negotiating with the unions about these changes. It can be seen as a formality, but it has to be done. Possible, let's say, impact on FTEs and costs will come in a later stage. It is clear that, of course, we are looking for efficiencies. We are looking for streamlining.
We are looking to avoid duplication, to reduce complexity, to make a flatter organization where the whole company, including me and Niclas, are much closer to operations, to sales, to customers, doing business in a way.
Okay, helpful. Thank you.
Our next question comes from Pallav Mittal at Barclays. You may now unmute your audio, turn your video on, and ask your question.
Hello? Hello. Now we can hear you. Hi. Can you hear me? Good morning. A couple of questions. Firstly, it seems that you have overproduced versus what you sold in the first quarter, especially in cartonboard. How much of a cost relief was that in Q1, and should we expect it to reverse in the second quarter?
Secondly, in terms of your ramp-up cost for Oulu, can you just let us know how much of that was in Q1 of the EUR 100 million that you were expecting for the full year?
Yes, thank you for your question. Out of the EUR 100 million for the full year of the ramp-up impact on full year EBIT, there was a small part in the first quarter. I think it was in the magnitude of EUR 8 million or EUR 10 million. That is roughly the magnitude. We expect the majority of these ramp-up costs to be visible in the second quarter. It really depends how the, now, as it looks like, the ramp-up is moving very smoothly, smoothly indeed.
Yeah, I think that all in all, this was our fourth quarter of year-on-year EBIT improvement in a row, and it shows just that we are doing the right things. I mean, we are focusing on lots of actions, value creation programs and actions, 4,000 in total in order to improve the efficiency and build a better, stronger, more profitable store. The Q1 result was good evidence of this.
Just to add on the seasonality, I mean, this is very much like a year ago, for instance. We produced in Q1 in anticipation then for the Q2 kind of seasonality, for instance, fruits and vegetables and so on in Europe is quite typically quite strong in Q2.
Sure. If I can just squeeze one more, on your FX benefit of EUR 29 million, is that entirely translation benefit or is that related to something else?
No, I think it's normal and translation mainly.
Thank you.
Our next question comes from Charlie Muir-Sands at BNP Paribas Exane. You may now unmute your audio, turn your video on, and ask your question.
Thank you. Good morning. Thank you for taking my questions. Just staying with the reorganization a bit longer, can you just clarify, are each of the mills now going to be sort of dedicated to one of the three, sorry, four subsectors of packaging materials? How will you resolve any conflicts between the decisions to produce one particular grade or another? Just on wood costs, I wondered, they're at a high level clearly for the Nordic operations.
Are you seeing stability or some of the public data suggesting that they might be starting to creep up again? What's your view on wood costs and indeed other input costs as you move through the remaining of the year? Thank you.
Yeah, thank you, Charlie. First, about the wood costs, we expect now the costs to stabilize on these levels. They are on record high levels today. Regarding the organization, yes, I mean, the mills will be dedicated to a business area. The business area, liquid and food service board, will include three mills, basically Imatra, Skoghall, and Beihai. There is one exception though, and that is our Oulu mill, which will be part of the business area cartonboard because that is the main part of the business.
As you know, we are also producing some container board, some Kraftliner in Oulu. That production line will then report into the container board business area. The whole business, the integrator as such, will be led from the business area cartonboard.
Great. Thank you.
Our next question comes from Patrick Mann at Bank of America. You may now unmute your audio, turn your video on, and ask your question.
Big day. I apologize. I can't get my camera to turn on. I wondered if you could just give us an update on the forest sales process and whether you still expect that to happen in the first half of 2025, and whether any of the volatility that we've seen in financial markets and currencies has impacted this process at all. Thank you.
Yeah, thank you very much, Patrick.
Yes, I mean, when we announced this deal towards the end of last year, we also said that we expect the deal to be made in the first half of this year. We are proceeding there according to plan. When it comes to the market volatility and potential impact, I would say that perhaps, yes, some positive, some negative impact. The negative impact is mainly a certain uncertainty, of course, in the operating environment, but there are also positive impacts. I mean, especially in this type of a volatile environment, the stable forest asset is quite attractive and even more attractive than before. I think it's important to remember also that, as you can see in our quarterly reports, the value of our forest assets have continued to move up.
The forest assets are more valuable today than what they were when we originally announced the deal. We are proceeding according to plan here.
Thank you.
Our next question comes from Detlef Winckelmann at JPMorgan Chase & Co. You may now unmute your audio, turn your video on, and ask your question.
Hi, team. Thanks for the call. Just a very quick one regarding your maintenance costs. I see obviously Q1 seems to be quite low. Q2 was a little bit lower than what I expect. Going into kind of H2, should we be expecting that H2 is higher than what we see in normal H2s, or should it be roughly similar or even lower? Just any guidance on that would be great. Thank you.
Yeah, I can take it.
No, I mean, we don't expect any major kind of changes from the normal quarter-on-quarter kind of operational activities when it comes to maintenance. As you know, I mean, we are scrutinizing all our activities and all of our costs, including maintenance, of course, but wouldn't expect anything major in a major way different in the second half of this year overall.
Cool. Thanks very much.
Our next question comes from Cole Hathorn at Jefferies. You may now unmute your audio, turn your video on, and ask your question.
Good morning. Thanks for taking my questions. I'd just like a little bit more color on the Oulu ramp-up drag. I know you said the majority in the second quarter, but are you talking kind of 50-60 million, or could it be as high as kind of 80 million?
Just even rough quantification just would be helpful as we think about the two Q numbers. Then on pulp, we've seen some declines recently from list prices towards the resale levels. I'm just wondering how Stora Enso's pulp portfolio might perform because you've got a lot of fluff pulp in Europe. You're the only producer there. Will your pulp dynamics potentially be more resilient considering your product portfolio? Any color on how you think about the price dynamics? Thank you.
Can take the all in one briefly. It really depends on the operational rhythm and how things proceed. As we currently see it, the majority, but being more towards the lower end of what you mentioned than the higher end of what you mentioned.
Regarding the pulp dynamics, I mean, we are clearly the major fluff pulp producer in Europe.
The U.S. is the world's largest exporter of fluff pulp into both China, which is the world's largest fluff market, and Europe, which is the second largest fluff market in the world. That can play out and will play out also opportunities depending on the tariffs, counter tariffs. We know about the counter tariffs already now in China. Let's see how it plays out. I think for us, it's good to be in the place where we are right now in this pulp business.
If you allow me just to follow up on price dynamics in container board, cost pressures for recycled container board have increased here. We've seen one or two players announce price increases for May despite the new supply that's ramping up. Has Stora Enso announced any price increases into the second or third quarter from here?
Yeah, we don't publish our price increases, but we for sure take them to our customers. We have implemented price increases in container board. We have also informed our customers about further price increases. Here, we are quite agile. Rest assured that we are taking every opportunity there is to increase prices. I can guarantee that.
Finally, on the reorganizational structure, you're creating the new business areas, which is helpful, but you didn't announce a specific number for potential cost savings for removing a management layout or any related asset rationalization. Is there any cost savings number we can think about for the reorganization structure, or is this a precursor to allowing the business units to act more decisively if they do need to close capacity?
At this moment, we don't disclose any, let's say, targets for cost savings because this is a legal procedure. In the Nordics, we are now starting negotiations with our unions and employee representatives about the organizational change. It's more formality, so it will eventually, within some weeks, be finalized. After that, we can start talking about potential implications for fixed costs and FTEs. We need to take these things, one thing in order, one step at a time.
Thank you.
Our next question comes from Brian Morgan at Morgan Stanley. You may now unmute your audio, turn your video on, and ask your question.
Hi, good morning. I can't seem to turn my video on, but just two questions if I may. First question is on the organizational restructure. You've been doing for a while now, right?
You've been doing for about 18 months, if I'm not mistaken, and this is just the latest of it. Just a question on that is, have you changed the remuneration sort of structure for the management team, sort of second and third layer down management team? Now they're more P&L responsible. Is there more variable pay? Is there profit-linked earnings, which there wasn't before? Just to get a sense of how motivated these guys might be to focus on P&L.
Yes, there are changes which have taken place. We have introduced and are introducing, for instance, for our sales force, profitability, gross margin-related incentives. Profit-based margins for our incentives for our sales. That's something we are implementing throughout the whole company. Also, the whole idea with this organizational change, I mean, we have described it now on the top level, the seven business areas.
As said, there will be 21 P&L responsible business units on the next level. We are decentralizing P&L responsibility further into the organization. Of course, that means that the key KPI for those 21 P&L responsible units is, of course, EBIT, but also then other, let's say, more operational and safety-related measurements. EBIT and maximizing and driving EBIT is the key KPI and also the key base for incentives. Decentralizing further P&L responsibility is a part of the accountability.
Cool. Can I ask a question on packaging solutions, if I may? It's been quite a drag on returns in the last little while. Could you just maybe give us a dive into what's happened? What's gone wrong with that business? Is it a function of low operating rates or just where we are in the cycle?
It is a business which has been, where there has been a lot of, or there is quite a lot of overcapacity in the market. We have also been there since 2023, ramping up a big new facility in De Lier. It is a EUR 200 million investment, which actually has made De Lier in Holland the world's largest corrugated site. It is a big investment that we have been now ramping up and successfully filling. That has been also burdening our P&L there. It is very much also a question of turnaround. We have a new Divisional Leader there in place since the beginning of November, Carolyn Wagner, who has worked her whole life in the corrugated business, leading corrugated mills, plants, sales, being General Manager, Managing Director, Divisional Leader. She really knows the business inside out.
She is now basically, with her help, we are turning that business around. It is a question of both market-related, overcapacity-related, ramp-up-related, and then our internal efficiency. Turning around and improving our cost efficiency in this business.
Our next question comes from Andrew Jones at UBS. You may now unmute your audio, turn your video on, and ask your question.
Hi, Hans. Just a follow-up to a question that was asked earlier. You talked about potential sales from Oulu into the U.S. and the potential for redirecting some of that material and the fact that the U.S. is a net export of cartonboard. Could you talk specifically about which markets you think you could redirect that into? Because clearly, China has massive overcapacity. They have been permeating into markets around MENA, which has been well documented by Metso and others.
I'm wondering where you see those opportunities because, frankly, I'm struggling to see where that material goes. And maybe, I mean, when you say that the U.S. is a net exporter of cartonboard, I mean, specifically in the grades that you're producing, where's that material going? I know the U.S. doesn't produce much FBB, but it may be in terms of SBS or other grades. I mean, where are those opportunities likely to come if there are reciprocal tariffs? Thanks. Yeah.
Well, I mean, there is market information available about the trade flows and where that net exports of 800,000 tons from the U.S. goes. But basically, it's all around the world. I mean, it is into Europe. It's into Canada. It's into Central and Latin America. It's into Asia. It really depends on the various grades. So there are opportunities, I would say, all around the world.
Also in Europe, and I'll give you one example. The U.S. is a major net exporter of coated unbleached kraft, which is one of our two main products on the Oulu mill. There are only two producers of coated unbleached kraft in Europe. We are producing in three mills. Then there is another peer competitor producing on only one mill. I mean, that's just one example to mention.
Okay. Thank you.
There are no further questions. I shall now hand back to Hans Sohlström and CFO Niclas Rosenlew for closing remarks.
Great. Hey, thank you very much for your active participation and for all your good questions. I just want to briefly repeat here that this was another quarter really demonstrating that we are on the right track for consecutive quarter-of-year-on-year improvement.
We are moving ahead, powering ahead to build a stronger and more profitable Stora Enso. All in all, as we also mentioned earlier on, you're all welcome to join our Capital Markets Day on the 25th to 26th of November. There, we want to share with you more about our strategy, our future direction. Hope to see all of you there. Thank you very much. Looking forward to meet you again latest in one quarter. Thanks. Bye-bye.