Thank you for joining us today for our first quarter result presentation. In my presentation, we will cover the financial result and our strategic progress. We will also go through how we are managing the more challenging market conditions, short and long term, and finish with an outlook. Sustainability is, as you are aware, deeply embedded in our strategy and corporate culture. Our purpose, to do good for people and the planet, is more important and relevant now than ever before. By replacing fossil-based materials with our renewable products, we can leverage on this opportunity for long-term earnings growth and can at the same time positively contribute to mitigate climate change. This is what drives both our underlying performance and our opportunities for innovation and growth. Please take a look at the image of the building on the right-hand side.
This is how Stora Enso's new building of the headquarters in Helsinki will look like next summer when it's finished. I'll come back a little bit to this building a few moments later on. Looking at the key highlights for the quarter, we have acted on some major strategic initiatives. By discontinuing the paper division, we have reduced cyclicality, and we optimized the business portfolio with a focus on key growth areas. We've also completed the tactical acquisition of De Jong Packaging. It is doubling the size of our Packaging Solutions division, gives us the opportunity to integrate our long-term position in containerboard and advances our growth in renewable packaging by entering new markets in Western Europe.
In Consumer Board, we are targeting growth in high-end renewable packaging by allocating capital to the Oulu site, and after that investment, it will be a mega site with the lowest cost curve in Europe. Lastly, the divestment process of our Beihai site in China is progressing according to plan with good interest from potential buyers. Now let's take a look at the key financials for the quarters. Group sales decreased by 3% to EUR 2.7 billion. We can see signs of weakening demand in most of our product segments, excluding liquid packaging. Higher sales prices in all divisions except in Wood Products and also favorable foreign exchange rates had a positive impact on the top line year-on-year. On the downside, we had lower deliveries, mainly due to market curtailments, a long-planned shutdown in Veracel, and the logistical strike in Finland.
We also had negative effects from structural changes, mainly related to the paper site disposals at Nymölla in Sweden and Maxau in Germany, as well as the exit from the Russian operations. The group operational EBIT decreased by 53% to EUR 234 million and led to an operational EBIT margin of 8.6%. The operational return on capital employed excluding Forest for the last 12 months was 16.5%, which is above the long-term target of more than 13%. If we now take a look at the operational EBIT variance, you can see here that the increase in sales prices and product mix could not mitigate the continued year-on-year escalation in variable costs from fiber, chemicals, energy, and logistics.
The fiber costs increased due to higher pulpwood prices as the market is very tight, especially in Finland and Baltics, and fixed costs increased mainly due to maintenance costs, consumables, and services. Other variable costs increased due to distribution of unit margin decrease because of lower sales prices in Wood Products. Impact from logistics strike for the group was approximately EUR 26 million, with majority of that impact happening in Packaging Materials due to lost volumes and production disturbances. On this next slide, you can see the quarterly impact on our operational EBIT due to maintenance activities, including both costs and lost volume.
For Q1, the impact was EUR 119 million, slightly higher than the estimated in conjunction to the Q4 report and up by EUR 12 million year-on-year due to operational issues that we had during the maintenance shutdown at the Veracel site in Biomaterials Division. In Q2, the impact is expected to increase year-on-year to EUR 143 million due to maintenance shutdowns at five of our sites. Last year, we only had three maintenance shutdowns in the second quarter. The last years, we have accelerated our actions to fulfill our strategic roadmap and have successfully accomplished a significant transformation of our product portfolio towards our growth areas. You can see on the left that in 2006, 70% of sales were generated by the paper business. Today, we no longer have a paper division, and 53% comes from strategic growth areas.
In the 2025 projections, we have excluded Anjala's paper line that is planned to be closed later this year. We have made sure that we continue with our investments in Oulu site to be able to take advantage of the growth that we have there. In 2030, our ambition is that 80% of sales would come from packaging, building solutions, and biomaterials innovation. With this ambition, we can profitably grow with our existing and new customers in current markets and build market share in new markets and with new products and solutions. In January, Stora Enso finalized the acquisition of the Dutch De Jong Packaging Group, now a major part of the Packaging Solutions division. The integration process is proceeding according to plan and will deliver annual synergies of about EUR 30 million in EBITDA over the cycle.
When the ongoing expansion projects in packaging converting are fully ramped up during this year, an additional EBITDA of EUR 40 million is estimated to be delivered. A divestment of Beihai would include both the industrial side and forest operations, and the released capital will support our already decided investments in Europe, improving our long-term profitable growth opportunities in existing sites such as Oulu site in Finland. Existing and new customers in China and other Asian markets will continue to be served from Stora Enso's other global sites. We are working very closely with our joint venture partners in China to manage the interest from potential buyers. We have no committed timeline yet for the completion. On January first, we discontinued the paper division.
The divestment of the Nymölla and Maxau paper sites were completed during the first quarter, and the divestment of the Hylte site was completed in April. After evaluating available options, we decided to discontinue the divestment process of the Anjala paper site in April. The paper market continues to structurally decline, and, due to the prevailing weak demand and high input costs, we recently announced a plan of closing down one paper line producing uncoated mechanical grades in Anjala. The union negotiations have been initiated, and we will revert once that process is finalized. I will now cover a few examples of developments we're working on in partnerships and cooperations with other companies to advance our innovations. For the development of lignin-based products, we are collaborating with a Polish company called Paged to meet market demand for bio-based and more sustainable plywood.
By using Stora Enso's bio-based high purity lignin, Paged can replace up to 40% of fossil-based glue in plywood. We're also collaborating with the Finnish company Valmet to advance the next generation of lignin process development and optimize the process machinery and asset design. The objective is to capture the growing demand for lignin-based products and increase the supply further by developing the quality and customer value of lignin. Lastly, we signed a joint development agreement with a Korean company Kolon Industries to develop industrial bio-based polyesters and their applications as well as renewable binder for resin formulations. This is a very early phase of the technology of using sugars extracted from wood.
That is not there yet, having the insight, we are now testing and developing future bio-based materials which can replace fossil-based materials in this field. Applications area for this material covers packaging, car, tire reinforcements, for instance, display films for electronic screens and panels. I would also now like to show you a couple of recent examples of how we are innovating to advance a renewable future in Wood Products division. Looking at the image on the left, you can see how our new headquarters in Helsinki will look like when it's finished in summer 2022. This is a one of its kind construction. There is no comparable wooden frame anywhere else in the world.
The first mass timber elements have been installed, and the building will be owned our own headquarters, also host a hotel and functions for the public. This spectacular building will be a landmark for sustainable and climate-smart construction, built with our own Stora Enso's applications. The timber structure stores around 5,900 tons of CO2 removed from the atmosphere while the trees were growing. The CO2 stored is equivalent to driving 1,260 times around the world by car. The building on the right is a wooden landscaper in one of the wettest places on Earth, which shows that wood construction is doable also in rain-soaked climates. Nanyang Technological University in Singapore is one of the first timber skyscrapers in the world, with an enormous 42,000 square meter footprint.
The horizontal megastructure would be the second tallest building in the world if stacked vertically, and is Stora Enso's largest delivery to a single building. Also here, the timber structure stores around 5,800 tons of CO2, and it will be safely locked in the structure for the duration of the building's total life cycle. Now let's move over to the financials. All of the group long-term targets, with the exception of the growth targets, were achieved in the first quarter. Our sales decreased by 3%, even though the sales prices were higher. This was because of lower deliveries and impact from the structural changes, as I mentioned before. For the divisions, Biomaterials, Wood Products, and the Forest division outperformed their ROC targets, while Packaging Materials and Packaging Solutions underperformed.
Now I hand over to you, Seppo, to give us some more flavor on our financials.
Thank you, Annica. I start by looking at the cash flow that was impacted by working capital development and high CapEx. Going forward, we are putting now focus to improve cash flow. Cash flow after investing activities was EUR 1 million, and working capital increased by EUR 120 million, mainly because of increased inventories. That was somewhat offset by lower trade receivables and increased payables. Cash spent on capital expenditures was EUR 253 million, which is mainly related to strategic investments like Oulu conversion. We are now putting focus to reduce our working capital, turn around the trend that we have been facing now, and also restrict capital allocation to improve cash. In current business environment, cash flow is very important to focus on and work on.
We are reviewing our strategic CapEx initiatives, as well as other CapEx projects that we have in the pipeline. We are now then making a decision on a conversion of Langerbrugge site somewhat later, so that will be postponed due to the cash flow related issues and the business environment. We are also assessing the investment in Lingbo when it comes to phasing and timing of that project. Higher CapEx estimate is mainly due to growth investments in consumer board. It is increasing from last year's EUR 778 million to range of EUR 1.2 billion-EUR 1.3 billion. In the strategic projects, we have included projects like Oulu conversion, Skoghall capacity increase, and Skutskär bleach plant.
If you look at over the time, you can see that maintenance and development CapEx has been rather stable, remained stable, somewhat up now in 2023, mainly because of the De Jong transaction and acquisition. Strategic CapEx is more or less doubled compared to historical averages. It is obvious it is something temporary that will come down over the time and the strategic projects are finalized. Looking over three-year, 10-year trends, looking forward, roughly half of the CapEx is expected to go to strategic projects, somewhat less to maintenance and development, and then typically around EUR 80 million to biological CapEx. Let's look at the divisional results and overview when it comes to pay development.
I start by looking at the Packaging Materials, where high operating costs continued in the quarter with weakening market demand outside liquid packaging board. Liquid packaging board market has been holding well and remains rather stable. Sales were down 1 percentage point year-on-year, and price and volume decline was only partly offset by contribution from De Hoop recycled container board side that was part of the De Jong acquisition and higher consumer board and paper prices. There was clear trend when it comes to demand, weakening demand of carton board towards the end of the quarter. Operating EBIT was down EUR 167 million year-on-year. That was a reflection of higher operating costs, lower container board volumes and prices, as well as impact from the logistics strikes in Finland.
Like Annica mentioned, EUR 26 million in total for the group, and majority of that in Packaging Materials. These negatives were only partly offset by higher consumer board and paper prices. Looking at the price development, in Packaging Materials business, and in the container board side, we have seen since last summer a downwards trend when it comes to selling prices, both kraftliner and testliner, and that has continued now also in first quarter of this year. When it comes to consumer board and especially folding box board prices, we can also see there that now beginning of this year, prices have started to go down. Moving to Packaging Solutions, where we could see strengthened result despite challenging overall market demand also in this business.
Sales were up 46% year on year, thanks to acquisition of De Jong that more than offset the impact from the divestment of Russian operations in second quarter last year. Sales from the Northern and Central Eastern European businesses, that is the business that we had before De Jong acquisition, those decreased slightly due to the soft market and lower sales prices. Operating EBIT was up EUR 3 million at EUR 8 million. Acquisition of De Jong contributed positively as well as Northern and Central Eastern European markets where performance was improved. That mitigated the negative impact from soft market and the divestment of the Russian operations in the second quarter last year. In Biomaterials, all-time high first quarterly sales did not offset cost escalation as the pulp market turned softer during the quarter.
Sales were up 10% year-on-year, and this was if you look at the sales, all-time high first quarter. Sales were driven by stronger year-on-year prices, solid byproduct sales, as well as favorable currency rates. We could see increase in global market pulp inventories due to low demand, and weaker-than-expected Chinese market, and that was also reflected in the, in the price development seen recently. Operational EBIT was down 22% at EUR 91 million. Higher sales, as mentioned, did not offset higher wood costs, chemicals, and fixed costs. Also worth to note is that the Veracel site in Brazil had a planned major annual maintenance shutdown, which had a significant impact on the result. Next we have a graph on global pulp inventories development.
As I mentioned already on the previous slide, we are seeing now increasing trend when it comes to pulp inventories, and especially in the case of softwood pulp, we are at the record high levels historically. Hardwood pulp price, pulpwood inventories have been trending upwards from the beginning of the year. This is of course then reflected on the global market pulp prices, where we see now the turn when it comes to price development and we are seeing now clearly downwards trend, both in hardwood and softwood pulp prices. Moving to wood products, the sales and profits were impacted by a significantly weaker softwood market and the exit from Russian operations a year ago. Sales were down 21% year on year. Construction market was impacted by market slowdown, with fewer building permits and projects.
Lower sales were impacted by lower volumes and sales prices, especially for sawn wood, and exit from Russian operations, as mentioned. EBIT was down EUR 129 million compared to first quarter last year due to lower prices and volumes, and together with increased costs, mainly for logistics and electricity. Moving to Forest, where strong and stable financial results continued. As expected, Forest business should be more stable and less cyclical. Sales were up 10% year-on-year at EUR 687 million, driven by higher wood prices year-on-year. Especially that is visible in pulpwood, whereas the wood demand was lower year-on-year. Operational EBIT up 16% year-on-year, driven by stable and strong operational performance in our own forests, as well as in the wood supply operations.
About the Forest asset fair valuation, that remained stable at EUR 8.3 billion compared to year-end last year, that is about EUR 300 million up compared to a year ago when it was standing at EUR 8 billion. That is equivalent to EUR 10.49 per share. Just to remind that we are updating market-based Forest property prices end of Q2 and Q4 report. With that, handing over back to you, Annica.
Thank you, Seppo. A few words now about our changed market guidance and the demand outlook for quarter two. We can see materially lower earnings forecast for the full year results of 2023, and therefore we have issued a new guidance for the full year, estimating that the operational EBIT being significantly lower than last year's result, which was 1.8, roughly EUR 1.8 billion. That means being more than 50% lower compared to 2022. We expect uncertain market conditions and continued inflationary pressures to be more challenging during 2023 than in 2022 as the market outlook worsened during the latter part of Q1 this year.
Compared to last year and for the full year of 2023, group margins are expected to be adversely impacted by higher costs, particularly in relation to energy, wood, and chemicals. We continuously take decisive actions and measures such as pricing when it's possible. We have reinforced cost control for our own fixed and variable costs. Operationally, we focus on decentralization, and that continues throughout the organization together with reduction of overhead costs and focus on cash flow and lowering CapEx, as Seppo described. Capacity adjustments are also in place to respond to fluctuations in demand, we adapt our products mix, and we manage our inventories according to the market development. I will now cover the market demand outlook for Q2 compared to Q1 this year per division.
For Packaging Materials, we can see signs of weakening throughout the product portfolio related to reduced consumer confidence. Consumer board serves packaging of premium applications within liquid and food, pharmaceuticals, cosmetics, et cetera. Overall, we expect demand in Q2 for consumer board to remain stable, even if we see weakening signs for some consumer board grades, such as folding box board and food service board. And as I mentioned previously, liquid packaging board is more stable and resilient. Container board serves end users such as e-commerce and slow-moving consumables such as electronics as well as industrial packaging. Here demand is expected to remain weak, and in combination with the current supply demand imbalance, due to the many capacity increases in the later years, the market will be challenging for the full year.
For corrugated packaging and Packaging Solutions, demand is improving from low levels, mainly due to seasonality effects as the agricultural season now is picking up going forward. At the end of the quarter, as mentioned also by Seppo, we saw the global pulp inventories increasing and a weaker demand for pulp in both Europe and China. Prices started to drop during the end of the quarter, and in combination with continued high pulpwood prices, we expect this to put pressure on the margins of Biomaterials division. The construction sector remains challenging with a lower number of issued building permits and new housing starts, and also private home renovations. Normally, there is a positive seasonality impact from sawn wood between Q1 and Q2, but we expect that to be limited.
Of course, this is expected to have an adverse impact on demand for the Wood Products division this year. As mentioned also by Seppo, the Forest division is the most stable of our divisions, and for this quarter, the tight wood market conditions in the Nordics are expected to continue. We expect the demand for sawlogs to remain stable, while pulpwood demand is expected to decline due to the slowdown in the overall pulp market. To summarize, we continue to adapt and take decisive actions to navigate the challenging market environment. Our financial performance in Q1 was weak and disappointing, caused by external factors such as weakening demand in most of the segments and continued high cost inflation.
We have ongoing actions in place to manage market volatility, being flexible and adapting to the conditions, taking sourcing measures combined with reinforced cost control and efforts to lower CapEx. We have taken several strategic initiatives to streamline the company for long-term resilience and growth. We are optimizing the business portfolio to focus on the long-term value creation by growing in renewable packaging, sustainable building solutions, and biomaterials innovations. We are positioning ourselves for long-term growth and a lowered environmental impact to serve all our business sectors and our customers. With that, I think we are ready to open up for the questions and answer session.
If you would like to ask a question, please use the raise hand function at the bottom of your Zoom screen, or if you have dialed in, please press star nine. Please only ask a maximum of two questions at a time. If you wish to ask more than two questions, please rejoin the queue. We'll pause for a moment to allow questioners to enter the queue. Our first question comes from Justin Jordan .
Course of action to postpone the Langerbrugge potential conversion. Can you give us some outline of the options you have potentially with regard to postponing some of the Lignode CapEx? Secondly, just can you outline your confidence in the ongoing interest in the Beihai disposal? I'm just curious whether this is a good time to be disposing of a consumer wood asset given weakened market demand. Secondly, just a quick question for Seppo. You know, working capital increased by about EUR 100 million quarter-on-quarter in Q1 relative to December 2022, or about some EUR 300 million year-over-year, despite lower volumes and lower prices across most of the products. Can you help us understand what happened there and your ongoing efforts to reduce working capital as we go through 2023? Thank you.
Hi, Justin. Unfortunately, I didn't hear the start of your first question. If you could repeat that.
Sure, Annica. Apologies. really what I was getting at was, you know, I can fully appreciate the decision the board has taken regarding Langerbrugge. Can you help us understand what decisions might be possible in terms of rephasing or postponing some of the potential Lignode CapEx? Similarly, on the Beihai disposal. You know, you've indicated clearly there's a considerable interest in the asset. can you help us understand, given end market conditions for consumer wood remain slightly weak, the board's confidence in achieving a compelling disposal proceed?
Thank you. When we look at project postponements, this is a natural part of course, being responsible in the current market environment, and we are reviewing all projects that we have in our strategic pipeline. Referring to Langerbrugge, we have completed the feasibility study. We've gotten an environmental permit. If and when the container board market is improving and we're seeing cycle to turn, we are ready to push the button and continue, but so far we have taken a pause in the project as such. If we look at Lignode, it's one of many projects that we have in our pipeline, that we now will finish the feasibility study that we are conducting in Sunila during this year, as we've said.
Depending on how the market looks like, we will take a decision of when to start such an investment. On the Beihai disposal, as I said, the interest is strong, and we haven't committed a timeline for such a divestment, and of course, we will take consideration to how the discussions are going before making a final decision on that disposal.
Then, George, on your question when it comes to working capital and, like I mentioned during the presentation, especially inventories went up. Inventories went up during the first quarter. Obviously, that is one key area that we need to address. That is something typical that happens when the cycle turns, and we need to put more focus on sales and operations planning as well as inventory management. Obviously, we also put focus when it comes to payables, payment terms from our suppliers as well as when it comes to receivables and collections from our customers. Typically, we follow ratio to sales and, we see that that should be below 11%, rather closer to 10%. I think there's potential EUR 100 million-EUR 200 million at least to reduce.
Thank you both.
Our next question comes from Lars Kjellberg from Credit Suisse. Please unmute your line and ask your question.
Thank you. Just first, a quick follow-up on Justin's question. Can you help us think about CapEx in 2024? Should that be in the range of EUR 800 million-900 million if we assume then you only continue with Oulu? Then my question is essentially, a lot of these markets were weak in Q4 and heading into Q1. What are the biggest changes you've seen in the progress of the first quarter that has shifted your view on the current year in terms of I mean, consumer board, is that an incremental new because container board has been weak pretty much since Q3 and... The second point then would be on costs.
Most of these cost items certainly we've seen coming up for quite some time. I'm a bit curious about what you're talking about energy because most energy prices are materially down. Does that relate to hedges expiring in your business? Then if I may just the strike impact, if you can call that out, what that cost you in Q1. Thank you.
Okay. Well, thanks, Lars. If I start with CapEx and energy and then hand over to Annica when it comes to more market-related comments. First of all, 2024 CapEx, as you know, we don't give guidance for 2024 yet. As said during the presentation and as well what we said in the report, we are now reviewing CapEx pipeline when it comes to this year. Obviously, for this year, some CapEx is already committed, and we need to see then what is uncommitted and what can be reduced for this year. Then we do the same for next year. Like already mentioned, we are postponing Langerbrugge conversion as well as we are looking at the timing and phasing of Lignode project.
We come back to 2024 CapEx in due course. When it comes to energy, you are right that energy costs, especially recently, have been going down. There was some negatives still in Q1 because of winter months and like you said, the hedges, et cetera, that have been in place. We see now that the energy cost and pressure, especially on electricity is going down, that is easing. If you look at the costs, that is then more than eaten up by higher pulpwood cost especially. Pulpwood cost is also a reflection of high demand and at least so far, paying capability of energy industry.
Yes, and just an addition to the energy question. Yes, it's going down, but it's still higher than last year.
Absolutely.
In terms of CapEx for next year, Oulu CapEx is roughly evenly distributed between the two years. Therefore we, as you know, we are not giving a guidance for 2024, but we will revert on that. On the markets, what shifted during, I would say, March, was the increase of inventories in the biomaterials and pulp market. The global inventories went up. China opening, even though it's been kind of seeing a resumed kind of consumer spending, it was not as strong as we had seen before. The pandemic. We could see then pulp prices in biomaterials going down and spot prices going down.
We know that local Chinese pulp producers are taking standstills in China, which is indicating kind of that there is a weakening in the pulp business. In consumer board, we have had, as you also mentioned, stability or more stability. Liquid packaging and also packaging diverted to food is resilient. We have seen other segments being impacted in also consumer board at the end of Q1. Mostly in folding boxboard and end users that go to cosmetics or electronics or other applications where consumer spending is simply down. Having those two shifts at the end of quarter one, we thought it was prudent to come out and give a guidance to the market that we see the weakening starting now in the pulp business.
Just for clarity on the consumer board, you still called stable volumes in Q2 versus Q1. How does that stack up with what you just said?
Well, if we look at the overall, the majority of the consumer board is stable, but it is a difference in the grades. You asked why we made a shift in our comment and this is the shift that we see. Between Q1, Q2, it's stable, but we give guidance for the full year.
Gotcha. Thank you.
Our next question comes from Charlie Muir-Sands from BNP. Please unmute your line and ask your question.
We can't hear any question here.
Yep. Our next question comes from Charlie Muir-Sands . If you're there, please unmute your line and ask your question. Okay, we'll move on to the next question. Our next question comes from Robin Santavirta from Carnegie Investment Bank. Please unmute your line and ask your question.
Yes, hello. I have a few questions. The first one is related input cost. Now we spoke about energy a bit, but if you look at overall your key input costs and compare then the outlook for Q2 versus Q1, should we expect input costs to increase Q on Q in Q2? What are sorts of the drivers there?
Yes, thanks for the question. If we see between Q2 and Q1, totally on the variable cost side, they will increase. Between the different categories, we see different movements, of course. Energy prices, as we have described, are expected to go down, even if they are gonna be elevated compared to last year. Also, easing in logistic costs and transport. We see continued elevated costs within wood and fiber and that side, which is of course one of the major categories we have. They have a share of 33% of our total variable cost kind of structure. Overall, we see an expectation of continued increased variable cost compared between the two quarters.
Thank you, Annica. Can I ask about pulpwood prices? They seem still to increase quite clearly in both Finland and also apparently in Sweden still increasing. Could you explain what do you see sort of for the latter half of 2023 and 2024? Could you explain the dynamics that we have at the moment? Historically, when pulp prices and end product prices start to decline, pulpwood prices in Finland, Sweden have also started to decline almost immediately after that. Now that doesn't seem to happen. What is going on here, and what are your expectations for the rest of the year in 2024?
Yes, you're totally right. That has been the historical situation, and of course, there are always lagging effects. When the industry starts going down, you will at some point see an ease of pressure on the pulpwood. However, the Russian war on Ukraine has cut the pulpwood availability and the influx of wood by 10%-15% to the Baltic and Nordic market as a whole if we look at kind of the inflows of wood. That, since the war is expected to be long term and we don't see a solution on that, it means that there is a structural tightness on the market that is going to continue to impact us.
You're right, as kind of the. Then of course, in the trail of that, during the wintertime, we also saw more wood, pulpwood being used for energy generation, especially in the Baltics area. All in all, I believe we are going to see a decline in pulpwood, but I don't expect us to go down to the levels that were before the Russian war on Ukraine, if I would summarize.
I, like, I would add there that also the fact that less peat is used nowadays for heating, that has then increased consumption of pulpwood for energy purposes as another driver.
All right. Thank you. The final question I have is that, if we look at you had a fantastic 2022 obviously, and 2021 was good, but now you have quite steep declines in earnings and sort of, my view based on also your comment is that apparently, the next few quarters will not be by any means easier from profitability standpoint. What can you do on fixed costs? Sounds like this is the place you need to sort of, revise not only CapEx but also sort of cost structures. Anything that you are looking at at the moment, or doing, or how should we think about this?
Yes, you're totally right. As I mentioned, the fixed costs are of course in a high focus. We focus on everything we can impact ourselves, and fixed cost is part of that. It's part also of continuous improvement way of working. If you remember, three years ago, we implemented a EUR 410 million profit protection program. We are working internally with similar actions, and all the divisions have plans, and we follow that up in a very structured way. However, fixed costs can by far not mitigate the pressures that we see on variable costs. How we are working is, of course, we are making sure that we can defend and protect the pricing situation by taking curtailments where we can. Or where we need.
We have negotiated furlough agreements, so we are able to adapt the production according to market demand. If we look at the variable cost side, our sourcing and logistics organization is of course negotiating the contracts and kind of making sure that we put the right pressure there as the logistics, for instance, market is easing up after the pandemic. We have opportunities there to reduce costs and those will become visible going forward. Yes, we work with everything that we can impact.
All right. Good. Thank you very much.
Our next question comes from Joffrey Bellicha Meller from Bank of America. Please unmute your line and ask your question.
Good morning, Annica and Seppo. I hope you can hear me well. I have two questions from my side. The first one is I'm trying to gauge where is underlying demand compared to destocking across your businesses. If you could help us with any view you have there, that would be super helpful. The second one is around CapEx. You made an interesting comment earlier on the call saying that Oulu was split evenly between 2023 and 2024. I'm trying to understand in your strategic CapEx, what is roughly EUR 300 million-EUR 400 million left over, and what are they targeting? More importantly, if CapEx optimization is going to target those EUR 300 million-EUR 400 million as well. Thank you very much.
Well, in the strategic CapEx, I can start with that. We also have the rebuild of Skoghall for new capacity in liquid, the investment in energy efficiency in Enocell, and so on.
Sure.
Skutskär energy efficiency. All in all, the strategic CapEx is kind of in accordance to what we have communicated. If we look at... And it will improve the cost competitive situation of our pulp mills, which I believe is the right thing to do, both now and for the future. If we look at destocking, if I start then in consumer board, we saw destocking in folding box board taking place, and we have reached and also seasonality, of course. We see that for the demand going forward in Q2, there is destocking going on. If we look at container board, the inventory levels there are still quite high, and the demand is weak.
We know that there is a lot of curtailments taking place in Europe, but the inventories are still on elevated levels. I should add for consumer board, the inventories are stable, so we don't see any increase in inventories in consumer board. On the paper mills that and the paper business as such, there are this is going to customer orders directly and inventories are limited. If we look at the corrugated packaging, this is tailored according to customer needs, so no significant inventory is there. On pulp side, here as Seppo also mentioned and showed in the graph, we can see the first increase now in global inventories.
In, for instance, if we look at softwood and hardwood, they are above the 5-year average. 11 days above the average in softwood and four days above the 5-year average. All in all, this is, as I've mentioned before, if you will, we follow the global pulp inventories because it's the first indication of the market starting to turn. We also know that there are major pulp projects coming on stream in the coming two years. It will be a challenging situation, I believe, if the market continues to be weak. If we look at the Wood Products, even though it has been weak, the inventories in sawn timber are still at a relatively high level.
There also we expect as I said, that It's gonna be some time before we start seeing the decline in those inventories, even if there are now improvements here and there on several kind of markets, depending on market activity.
Thank you very much for your reply, Annica. Seppo.
Our next question comes from Charlie Muir-Sands from BNP Paribas Exane. Please unmute your line and ask your question.
Good morning. Apologies for last time. Hopefully you can hear me. I just had a couple of follow-up questions, please. Firstly, on capital expenditure, could you just quantify what are the total expansionary CapEx commitments that you have that go beyond 2023, just so we have an understanding of sort of what's the minimal spend likely in 2024 if none of the new projects that are not already up and running go ahead, please. Secondly, on De Jong, obviously good to hear that the synergies are still envisaged to be as per your original guidance. But I wondered if you could talk about the operational performance of De Jong at the moment, whether that has continued as you had anticipated.
Finally, just on Beihai, can you just disclose what is the current annual profit contributions, just so we can understand what may be the potential scale of the disposal proceeds? Thank you.
I can start. The De Jong business is, as we said, showing a visible contribution to our Packaging Solutions business. De Jong, if you remember, one of the big areas of kind of end uses that they are focusing in is on agricultural kind of products which are more resilient if you look at it from a long term. Seasonally, not a lot of vegetables are grown in the greenhouses during the first quarter. Also the high energy costs that we had this winter delayed the start of the agricultural season. Seasonally, the end users of agriculture with De Jong will pick up. The spring was also a little bit cold, delaying the start. In that sense, yes, they are.
For the division, as I said also, we had the disposal of exiting the Russian units in Packaging Solutions, which were very profitable. De Jong had to pick up that slack compared to last year. If we look at Beihai, unfortunately we do not comment on individual mills' performance. Once we get further ahead in the divestment process and we can communicate, we will of course disclose kind of the particulars of the site.
On the capital expenditure commitments going forward, beyond 2023, I think the main project there is what Annica already mentioned, this Oulu conversion, roughly EUR 1 billion CapEx, which is evenly split over the three-year period. We have the maintenance and development CapEx, which typically has been EUR 300 million-EUR 400 million. That is more or less giving the sort of the range. Obviously then there are smaller and bigger carryovers typically from one year to another. On top of that, we are reviewing the pipeline. That gives you sort of the ballpark where we are.
Great. Thank you very much.
Our next question comes from Cole Hathorn from Jefferies. Please unmute your line and ask your question.
Please say split over three years. Sorry.
Sorry, we didn't catch your question.
Morning, Annica. Thank you for taking my question. Just following up on the impact into Q1, is there anything you can comment on, you know, is there any call-out for EBIT impact for the destocking, and downtime at the mills Finland strikes that you can quantify or a rough range that you can give? Cause I imagine that, due to the port strikes, there was probably downtime that was less efficient than if you'd planned it and given notice to the unions, and you were able to get some cost savings. Firstly, just trying to understand if there's any item you can quantify for Q1. Secondly is following up on pulpwood.
The commentary that, you know, it's gonna be elevated, but will ease but not go back to the prior levels. Will there be a divergence between what we're seeing in wood costs in the Nordic region versus potentially somewhere in central Eastern Europe? I know you've got sawmills in central Eastern Europe, so just trying to understand if you think maybe central Eastern European wood costs might ease before the Nordics. Finally, just following up on capacity closures, how are you thinking about your wider portfolio? Is there anything that you could do from a temporary basis to manage capacity? Thank you.
I can start with the last question and then work myself through. For capacity, we are flexible, and of course, if we see that, depending on where prices are going, and we see that we have a product mix improvement, so we move products to more profitable sites and take capacity closures at sites we estimate are not kind of performing as well, and this is a part of the continuous arsenal that we have, and we utilize it, as I said, when we need it. Regarding to wood flows in central Europe, the markets kind of in central Europe and Nordics are not really connected in terms of moving wood from one region to the other as such.
You are right that in the central European part the influx of wood from Russia is not as evident as it was in the Nordics where there was quite a significant kind of, you know, capacity of wood that was used in particularly Finland. Regarding the strikes, yes, as I said, they did have an impact on how efficiently we could run our sites. As on some of the sites we had to reduce kind of the speed of production, and our internal stocks got filled up. Of course, even though the strike is over, it takes some time before it kind of eases up in the value chain.
I would not compare to kind of the global demand weakening that we see and the inventories kind of out on our markets. That's not an effect that will stay for long in that sense. I said the impact was EUR 26 million for the quarter, and that involved both volumes and increased costs that we had due to that. I think we have reached.
Thank you.
... kind of the end of our time now. I thank you once again for all your questions, and, I look forward to meeting you again at our next, quarterly report in Q2. Have a great day, and thank you.