Good day, welcome to the Stora Enso Q4 Earnings Conference Call. Today's conference is being recorded. At this time, I would like to turn the conference over to Ulla Paajanen. Please go ahead.
Thank you, Elaine. Good afternoon, everyone, welcome to Stora Enso's Q4 Earnings Call. We will start with the presentation as usual. Then we go ahead to the Q&A session. Our CEO, Karl-Henrik Sundström, will start. Then CFO, Seppo Parvi, will follow. Please go ahead, Kalle.
Thank you, Ulla, good afternoon or good morning, ladies and gentlemen, very welcome to this call. I would like to start with the first slide. I am going to talk about the results in the fourth quarter, also touch a little bit about the full year. Sales decreased by 2.3%. If I then deduct the structurally declining paper and the divested business of Corenso that was sold at the end of last year, we actually increased sales by 1.4% in the quarter. Our operational EBIT ended at EUR 209. That is almost a 38% increase versus the year-ago period. We did get some tailwinds and lucky timing in the fourth quarter. We received some CO2 subsidies, mainly in Germany. We did know they were coming, we did not know when, they ended up in our fourth quarter.
We did also do some land sales in our associated company, Bergvik. Those transactions landed on this side of the year, not as we thought on the other side of the year. We have also got the reversal of about EUR 5 million for some provisions for restructuring that we thought we needed. Now when we concluded the project, we had to reverse it. Then, as you all know, in our NRI release, we mentioned that we have done an impairment of assets, mainly in the paper business, that reduced the depreciating by some EUR 7 million. That is one point.
The other area that I would like to highlight now is that we actually improved the net debt to EBITDA from 2.9 to 2.6 times, which is a very good sign given the high level of investment we've been running for this year and last year, and we will do for next year as well. The operational return on Capital Employed was increased by 2.7 percentage points to 9.7%. Excluding Montes del Plata as well as Guangxi project, we are actually above 13%. We are proposing a dividend of EUR 0.30 to the AGM on the 22nd of April. Next slide, please. I think it's important to remind ourselves that if you excluded a structurally declining paper in the divested businesses, we are actually growing both for the full year as well as the last quarter of this year.
Given the negative growth of the business, we have actually improved the profitability or the EBIT by 38% in the fourth quarter versus year-ago period. That is coming out of our tail end of the reshape, but also new initiatives of reducing fixed and variable costs, making sure that we are competitive going forward. For the full year, we actually improved profitability with the same declining top line by 40% from the same concept. We call this report Transformation in Progress. I think it is important to remember how many things in Stora Enso have been started and what we are going to start going forward. We have the Guangxi mill in China that we have finished the piling. We also announced today that we are going to start up that in the middle of 2016.
A slight change versus the previous time plan that we've had for basically a year and a half, where we said early 2016. The reason for this is that we got some permits delayed and making sure that we have a robust process going forward. We are investing EUR 27 million in increased competitiveness of the Imatra mill. We are doing the conversion of the Varkaus paper mill to a board mill, which will be ready in the fourth quarter of 2016. Montes del Plata have started operating. We actually managed to get 240,000 tons out of that mill during last year. We also managed to get to a positive EBIT result in the month, as planned, of December. The Sunila mill has in early 2015 been able to deliver lignin. The Virdia acquisition as well as the demonstration plant being built up is on plan.
I would like to also highlight a new investment that we actually announced today, that is an additional investment using the Varkaus- Infrastructure to be able to build another mill there, but it's a mill who is producing wooden building elements. That is a project of EUR 43 million. It's going to be ready in Q2 2016 and it has a profitability well above the 13% return on Capital Employed. At the same time, we are finishing off the Murów sawmill, where we have moved basic sawmilling from high-cost countries in basically Austria into a more competitive market in Poland. That mill will be up and running in Q2 2015. During this year, we have actually managed to sell off non-core assets for a total amount of slightly more than EUR 170 million.
It includes the Kaolin, Corenso, and I am very happy at the end of the day we managed to get the approval and sign the deal to be closed within the first quarter of 2015, the Uetersen mill at a slightly lower price than we had before. Unfortunately, we have been also forced to close down capacity in paper. We have actually closed down 420,000 tons of capacity from one paper machine in Veitsiluoto at the end of March last year, but we also had a closure of the total mill, Corbehem, in France. These transformational investments that I briefly touched upon is actually one of the driving forces behind the transformation journey. We have gone from having 30% of sales in non-paper to having 62% at the end of 2014. Profitability has gone from being 38% not coming from paper to today 79%.
This is something that I feel very excited about and I think we are absolutely on the right track. Please, Seppo. Please.
Thank you, Kalle. I will first summarize the financials key figures that Kalle already shortly commented previously. First of all, sales line for the quarter reached at EUR 2.552 billion. That is a reduction of 2.3% compared to year ago. Please keep in mind that there was actually increase of 1.4% on sales line excluding decline in paper business and divested businesses. Full-year sales at EUR 10.2 billion. Operational EBITDA, first of all, I want to remind you there that our forest associates, Bergvik Skog and Tornator are not included in operational EBITDA as they are reported and treated as equity accounted investments and included therefore only in our operational EBIT. That affected the result by EUR 35 million for the quarter and previous quarter that was EUR 28 million and a year ago, EUR 17 million.
They play an effect here if you compare the difference between EBITDA and EBIT. Operational EBITDA as such improved by 2 percentage points and was 12.1% for the quarter and 12.4% for the full year. Our operational EBIT was EUR 209 million for the quarter and there was a clear improvement compared to a year ago. We can also see a clear improvement for the full year operational EBIT that was at the level of EUR 810 million. A year ago we were at EUR 578 million, so 40% improvement there. Profit before taxes excluding NRIs was actually down by 70% and was EUR 32 million. That is affected by the changes in the fair valuation of our forest assets in China where assumptions were a bit adjusted due to changes in harvesting plans and future cost estimate.
Nothing dramatic as such, very typical changes you make in the assumptions and especially keeping in mind that these are fresh plantations and we are just starting the harvesting operations there. Earnings per share excluding NRI for full year EUR 0.40 a share and including NRI EUR 0.13. Return on capital employed excluding transformational investments at 13.1% and 12.7% for the full year. This is something we want to highlight that excluding these transformational projects, Montes del Plata Park in Uruguay and Guangxi project we are already at our targeted level. Moving forward and look at the cash flow from operations. You can see on the graph that Q4 this year we had good cash flow, we had good profitability as well as reduction of working capital.
We believe and trust that we can also continue to generate good cash flow going forward, which is very important keeping in mind our large investment projects in China at the moment. On the following page you can see our balance sheet development. Look at the net debt and ratios. Net debt actually was up only, and I say only about EUR 80 million compared to end of 2013 and that we feel is a good achievement keeping in mind that our investments in 2014 were about EUR 790 million. That is again another proof point of the good cash flow generation capabilities of the company. Some comments on the different divisions, I start with Renewable Packaging, where Q4 sales increased by 3%. Full year sales were up 2%.
Operating EBIT for the quarter was stable at EUR 74 million, full year EBIT was up 30% and reached EUR 410 million. Again here, good to notice that operational return on operating capital was 16.9%, excluding the project in Guangxi. Moving to next page and Biomaterials, where the sales for the quarter increased by 18% due to Montes del Plata ramping up and increasing the deliveries to the market. Worth to notice that like we were already communicating earlier, Montes del Plata broke even in December as expected, which is a major milestone in the project. Operating EBIT increased 42% for the quarter and it was affected by higher pulp prices and sales volumes. Especially sales volume is of course increasing thanks to Montes del Plata. Operational return on capital was 13%, excluding MDP.
We have been excluding MDP since 2014 as it is in the ramp-up phase and not really generating income. Of course, in 2015, we will not do the same anymore. Full year sales was up about 16%, excuse me, 7% for the division and operational EBIT 15.6%, mainly due to lower wood cost in the Nordic South. Moving to Building and Living, where sales declined by 11% in Q4 compared to Q4 a year ago, due to lower volumes in non-European markets. Operating EBIT was at 10%. There is a reduction of about 47% year-over-year. That's due to lower volumes and higher net raw material costs. Full-year sales declined about 5%, operating EBIT increased almost 19% across EUR 89 million. That is a reflection of lower fixed costs and the positive development has been visible in this business already for some time.
Also very important and worth to notice, and we are very happy with this, that operational return on the capital was 17.3% for the full year we started Building and Living. There's a clear improvement to previous year, which was at 13.9%. Last but not the least, Printing and Reading, where good cash flow generation continued on a high level, as Kalle already commented earlier today. Their sales declined by 7% to EUR 684 million due to capacity closures that have taken place, and of course, affected by the sales price development. Operating EBITDA increased by 26.7%, EUR 209 million. Here we are referring to EBITDA rather than EBIT, as we have these effects from impairment charges and depreciation, as well as highlighting the fact that we see this business as cash flow generating business.
These are most positively affected by lower energy and fixed costs, as well as indirect CO2 cost subsidy and reversal of the restructuring provision. Full year sales was down 9%, and cash flow after CapEx at EUR 243 million, which is almost 6% of the cash flow after CapEx to sale. Looking at the capital expenditure levels for 2015. We forecast that to be between EUR 780 million and EUR 840 million. That includes about EUR 350 million for our project in Guangxi, China. If you want to compare that range to our 2014 capital expenditure level, it was EUR 787 million for the full year. Depreciation is expected to be in the range of EUR 520 million to EUR 540 million for the year in front of us. Back to you, Kalle.
Thank you, Seppo, for a good explanation of the financial situation of the fourth quarter and the full year. When it comes to the guidance for the first quarter of 2015, it is a guidance on EBIT and it compared to the Q4 2014. Q1 sales are estimated to be roughly similar compared to the Q4 amount of EUR 2,552 million. Q1 operating EBIT is expected to be in line with the Q4 amount of EUR 209 million. If you go to the next slide, the dividend proposal that we are going to give to the AGM in April is EUR 0.30 per share . It's the same amount as last year, and it is in accordance to pay the half of the net profit over a cycle. It corresponds to totally EUR 237 million, the same amount as last year. Next slide.
Before going into the Q&A session, there are two things. This is the conclusion. This is a transformation in progress, and we are going in the right track. With limited growth in the non-paper areas and declining paper sales, we have continued to increase the profitability both in the quarter as well as for the full year. We do have strengthened the balance sheet compared to a year ago situation, and operational return on capital employed have actually reached 13.1, excluding transformation and investment of Guangxi and Montes del Plata. Dividend proposal is EUR 0.30 per share . Finally, I would like to remind you or invite you to our Capital Markets Day the 20th of May in London. With that, I hand over to Ulla to lead the Q&A session.
Thank you, Kalle. Elaine, yes, please remind everybody how to join the Q&A session, and we are ready to take the questions now.
Thank you. Ladies and gentlemen, the question and answer session will be conducted electronically. If you would like to ask a question, please press the star or asterisk key, followed by the digit 1 on your telephone keypad. Please ensure that the mute function on your telephone is switched off to allow your signal to reach our equipment. We will take questions in the order received, and we will take as many as time permits. If you find that your question has been answered, you may remove yourself from the queue by pressing star 2. Again, please press star 1 to ask a question. We will pause for just a moment to allow everyone to signal. We will now take our first question from Lars Kjellberg from Credit Suisse. Please go ahead.
Good afternoon, thanks for providing all the good details in the presentation. I just wanted to start with China. Seppo, you mentioned that this is like a normal practice, that you have a fair value change in some harvesting operations. Can you just talk us through exactly what this is about? Would this mean anything for your cost estimates going forward from that? Also when you talked about now, it's pushed out 6 months in the startup of the paperboard machine in China, given that some delay in the permits. I was under the impression the permit's already done a couple of years ago or a while ago. Has anything changed with the permits?
Can you also talk us through if the permits actually stipulate you building a pulp mill, or is that is still an option for you to do or not to do?
When it comes to the fair valuation of the Guangxi forest, I hand that over to Seppo, and I will cover the mill and the permits.
On the valuation issue of the forest, I just feel like I mentioned earlier, we did and we do fair valuations on continuous basis. Due to the change in the harvesting plan, we are harvesting a bit at a lower pace than originally expected. Nothing dramatic in that. It's more experience and learning curve and process there as well as replanting at a slower place than originally expected. That is having an effect in the assumptions where we then have this negative effect of EUR 79 million due to this harvesting plan and cost estimate. In total, the variation is around EUR 340 million about. Kalle,
Regarding permits, we have all the NDRC permits that we need. To dry affluent and sewage channels, getting permits or building certain connections, that's the problem I'm talking about. These are not automatically approved just because we have an NDRC approval. It's like in any other country, you need to have the detailed building plans, and you need to get them in agreement with the local authorities. That's what we're saying. The other one was that it's not pushed out half a year. It's moved from being basically early to mid, and early doesn't mean it's the first day of 2016.
Understood. Is there any conditional approval with regards to building a pulp mill or not to build a pulp mill?
We have an approval to build a pulp mill from NDRC. That's part of the whole concept. We have not any board approval, we will not do the pulp mill until we got the board machine up and running. That's a separate decision that we have to take to our board.
Understood. Just a clarification also. When you talk about the CO2 and reversal, et cetera, of the restructuring, that was all coming into the Printing and Reading division. Is that correct?
To be very clear about these two things you're asking about, yes, since most of the restructuring provisions were done in Printing and Reading, when you're getting to them, the people are leaving. You're trying to clean out the provisions against the cost. We had, in that area, overestimated the restructuring cost with EUR 5 million. When it comes to CO2 subsidies in Germany, you know you are getting them, but you don't know when. We were probably expecting them in the beginning of 2015.
Understood. Thank you.
Thank you.
We will take our next question from Antti Koskivuori from Danske Bank. Please go ahead.
Yes. Thank you. Few questions. Firstly, on your Q1 guidance of sequentially flat EBIT. I think this is a bit of a difference of the historical pattern where you are typically improving Q1 versus Q4. Could you walk us through your expectations for Q1, basically, or the differences between Q4 and Q1. Secondly, on Montes del Plata, could you give us a number on EBIT level? What was the contribution in Q4, and what should we expect? What kind of margins we should expect during 2015? Lastly, your competitors have been announcing different plans of restructuring production assets, and general cost cuts recently. Do you see opportunities for similar or other action that would help you to improve your profitability in short to mid-term? Thanks.
If I start, I think when it comes to the guidance, I think since both the CO2 and the Bergvik Skog were expected to be happening next year, and they came in this year, that is one of the parts that you should have in consideration. Otherwise, this is pretty much the normal seasonality. That is what I would like to say. When it comes to the MDP, we do not give out MDP details. We have also said from the beginning that it takes about six months to get to full capacity, and after that, you do the yield management for about a year, and then you are running in the optimal way. That is what you need when you start a new process. I think when it comes to paper, or in general.
Looking at our results for both Q4 and as well as for the full year, it is all attributable to cost management. I think we're going to do what is necessary. When it comes to further paper restructuring, we are running at a very high level on most of our paper machines. That's a very individual thing. The operating or the utilization for paper machines in this fourth quarter was in between the very high 80s and the mid-90s. The way we look on our paper machines is we run them until they start getting into cash flow negative. We close them and try to move the most profitable business into another paper machine if we can. That's the way we run it. That's why we closed down 420,000 tons of capacity last year.
On MDP, just to add what I mentioned earlier, that in December we broke even, as I said, which was important milestone in the ramp-up process. In 2015, we expect full capacity to be reached, as we have said earlier.
Maybe still on the Montes del Plata, is this something that gives us significant issue between quarters Q4 and Q1? Is it something that falls between?
Since we were ramping for the first time and got to break even in the month of December, I expect them. I think there's going to be a maintenance stop in Montes del Plata. When? It's in the report.
I think Q1.
In Q1, we will have a maintenance stop to do some of the things that we've done. Excluding that, Q1 should be better than Q4, obviously.
All right. Thank you very much.
Thank you.
We will now take our next question from Mikael Jafs from Kepler Cheuvreux. Please go ahead.
Yes. Hello, good afternoon, everybody. I have two questions. The first one ties in a little bit into the first question there about China and pulp mill. Can you say a couple of words on how we should longer term view your CapEx profile? You have given excellent guidance for 2015, should we then expect this high level to continue, or what should we basically think around? The second question is around currency effects. Could you say a couple of words around how the current weak euro versus the US dollar and the weak krona versus the US dollar will impact you going forward? Thank you.
I give a little bit of the longer-term CapEx guidance, I hand over to Seppo to talk about the currencies. As we said already in Q3, we are peaking now and for the next four to five quarters. The expectation is that we will see CapEx coming down in 2016 and going forward. Once the decision or when and if we take the decision on the pulp mill, that decision will be taken when we have the board mill up and running, which means that that is not done, and then equipment will come in, and we have to do all that. We're talking something, a decision Earliest in the second half of 2016, which means that construction will be starting, if starting, if we get an approval from the board in 2017.
The peak years of transformation investment have been done in the last three years, including next year. Did that answer your question?
Yes. Thank you.
At the currencies and sensitivities there, to put into perspective, if you think that if there is a 10% strengthening of the dollar, that is about higher than €12 million positive on our EBIT. The similar move on Swedish krona is SEK 84 million, negative. Pound sterling, which is our third important currency, 10% move would be positive by GBP 46 million. When putting that into perspective, you should keep in mind that our policy is to hedge about 50% of our sell amounts cash flow on ongoing basis. It goes a bit up and down around that, 50% is pretty good rule of thumb there. If you look at the effect of the FX movements in the past quarter, Q4, it was about €12 million net. The quarter before Q3 it was EUR 16 million.
Keep in mind that the big move in dollar happened towards the end of the Q4, how much it is in Q1 will depend where it moves from here. It is giving us a nice tailwind as we talk, you never know how it develops.
Okay. Many thanks.
We will now move to Fabio Lopes from BAML. Please go ahead.
Hi. Good afternoon. Thanks for taking the questions. I have two questions. Three questions, actually. One, given the discrepancy between the performance on the EBITDA and the operating profit versus the market expectations, I would like to ask you, what is implied for depreciation and amortization and equity investment in your guidance of around EUR 209 million in operating profit so that we could derive an EBITDA from that? The second question would be, you're talking about the performance excluding the decline in paper business. The paper business was 28% of EBITDA this year, 2014, and it was 27% the previous year. It's actually increasing. Do you have any strategic plan for this business to reduce, since you're talking about as if it's a non-core because you give a performance excluding that business. What is the plan with that business?
The third question would be on pulp. Some people in the market are talking about pricing pressure in dollar terms because of the weaker euro in Europe, because Europe is a substantial component of global pulp demand. I would like to ask if you're seeing any of these developments from your side. Thank you.
That was a number. I will give this with the EBIT and EBITDA to Seppo.
Yeah.
I think I can take the paper. Then I take the pulp. The paper business, the reason why it is a declining business, and we have been very clearly using. We are running probably the best paper team in the business. The cash generating capabilities has been excellent. If you look, we've basically been around, as Seppo demonstrated in his charts. We've been generating around EUR 250 million plus or minus of cash flow, free cash flow, that is operating cash flow after CapEx for a number of years. That is important because that is the funding engine of Stora Enso. It's actually paying for the whole dividend that we are proposing. The plan we are having here is we are going to continue to run a good paper business and run it as good as we can. We know that paper will never disappear.
That is clear, and it's going to be a good tail end, though one day it meets some sort of equilibrium. However, if somebody's offering me cash to buy that for what I think it's worth, given this very strong cash generation, I might be able to discuss. Any other things, I'm not interested in.
How much do you think it's worth?
You are the expert on multiples and stuff like that. That one was too easy. That one I will not answer. Going to the first question.
Yeah, Seppo here. As you know, we guide EBIT, and we don't go into details when it comes to EBITDA as such. We gave guidance on full-year depreciation by 20 to by 40. It comes difficult with investments, I can only refer to history. Of course, between the quarters, there can be variations, but full-year effect, if you compare 2013 and 2014, they're actually pretty close to each other. EUR 91 million for 2013 and EUR 88 million for 2014. Between the quarters, there are some differences. Like I said earlier today, Q4 2014, it was EUR 35 million, the quarter before EUR 28 million. Q4 2013, it was EUR 28 million, and the quarter before, EUR 17 million. There are some variations. I think if you put that into perspective, you can work it out.
You had a question about what I think about the European Q1 pulp prices. I think softwood pulp probably slightly lower, hardwood pulp slightly higher, fluff pulp slightly lower.
Hello?
Was that okay answered?
Yes. Just a quick follow-up on the depreciation. If we divide the full year guidance by four for the quarters, given that we have no visibility on the detail, would it be a fairly decent assumption?
Yeah, I think it's fair way to put it into your model.
Okay.
Then you have to be attentive when we do NRI press releases, which is coming out usually somewhere in January.
Okay. Thank you very much.
We will now take our next question from Mikael Doepel from Handelsbanken Capital Markets. Please go ahead.
Yes, thank you. Good afternoon. Just one question essentially on pricing. You just talked about the pulp pricing in Q1, but what are you seeing in terms of publication paper prices now that the negotiations are more or less completed?
No, they are not all completed. That's number 1, and that's where it makes me a little bit hesitant to give some there, because we are in negotiation right now, and I think the whole industry is that right now. I take uncoated fine paper, it's probably slightly lower. Coated fine paper, I would say, is kind of stable. Supercalendered, slightly lower or I don't really know, but stable. When it comes to newsprint, it is not going up, but I don't know the end of it.
Okay. In terms of packaging prices in the consumer board and corrugated packaging, what kind of pricing trends are you seeing there?
If I look on consumer board, they are stable. I think containerboard might go up a bit, and corrugated packaging also.
Okay. That's clear. Thank you.
As a reminder, to ask a question in today's question and answer session, please press star one. Please ensure that the mute function on your telephone is switched off to allow your signal to reach our equipment. We will take our next question from Lars Kjellberg from Credit Suisse. Please go ahead.
I just wanted to follow up on the growth area of Building and Living. That is the business that typically has shown great cyclicality in the past, and as you highlighted, of course, there was a meaningful weakness in the fourth quarter. Putting more money behind that business, are you seeing any possibility of reducing cyclicality by having more value-added products, or what is your thinking and strategy behind developing that business?
Look, we have been working since sometime. To be very fair, this is a volatile business. It's also part where you sell to industrial customers or customers carrying inventory is less cyclical. Okay? We all know that traders, they live on volatility. What we are trying to do is to drive a higher percentage of the sales and growth in the areas, what we call value-added products. I think that will mean more in wood for windows, more service and logistic solutions, more into the kind of investment that you saw that we presented today, which is this wooden construction element. I also think that in the last two years, I think we have shown that we have been able to cope with the volatility on a higher profitability level in performance.
We have acted also, which is something we also guided for in the fourth quarter, that we were basically going from 3% curtailment two years ago in Q4 to 7%. We also had higher curtailments already in Q3 to be able to cope, not to be part of the channel stuffing. Basically with the currency, Swedish sawmills has been selling a lot and filling the inventory. We have been having the same inventory basically in absolute amount in the Q4 of 2014 as we had in 2013. It's very much about how you act in the market and how you move yourself into customers holding inventory. Building starts are going up in Europe.
That was going to be my next question. Where do you see this business going in 2015?
I think we would see, as we have guided a bit, a seasonally weak as usual Q1 because it's Northern Europe, which is a big part of our market, it's winter season, it's not a lot of construction. I expect it to grow next year, or 2015, sorry, building stocks are going up.
Okay. Thank you.
As a reminder, to ask a question, please press star one on your telephone keypad. We will now take our next question from Linus Larsson from SEB. Please go ahead.
Yes, thank you very much, and good afternoon to everyone. First, a question on the non-core asset dispersal program. I understand it has not yet come to an end. You still have more things to sell. Could you say anything about that? What should we expect for 2015? Is the magnitude of proceeds in line with what we saw in 2014 or any color on that, please?
I think the area of EUR 150-EUR 170 is probably something you could expect.
Like we said earlier, don't forget that we are not a stressed seller. Of course, if we don't get the value we want, we are not forced to sell. We can be opportunistic here also. That's why we are not pushing it unless it's moving.
Sure. When you say EUR 150 million-EUR 170 million still to come, you mean beyond what has been announced at this stage?
Yes.
Great. Thank you very much. Just coming back to CapEx and capital allocation. When you look around in your company, I appreciate you have done some investments in existing plants, what scope is there still for further conversions or other types of high-return projects in your current asset base? Any thoughts around that?
Obviously, this is an area where we are looking at, we are working quite a lot to find. Converting in mill, it is a lot of stores that have to correspond in a certain way before we actually get a lucky combination like in Varkaus. We are looking, it is not that easy as many people think. It has to be the right pulp balance. It has to be the right power balance. It has to be the width and all these things. You need to know something about the product because you are going to sell it as well. It is a number of combinations you need. You want to say something more about the CapEx, Seppo?
No, well, typically, if you look at the guidance, we of course have about 2% of maintenance. That is about EUR 200 million-EUR 250 million, 2% of the sales. That is the big one is, of course, the Guangxi, EUR 250 million. If you look at what we have announced earlier, we have this Varkaus conversion, something you are referring to, about EUR 100 million for this year. Virdia projec t in biomaterials, 30 something. Imatra liquid port investment, logistics improvement there, a big build, 30 some, EUR 27 million. Varkaus wooden elements, what we just announced today. That is about EUR eight million payment this year, the rest the year after.
That basically gets you to just below the lower range of the guidance, which means that we do not have a lot of space for additional things not announced yet. Is that clear?
Very good. Thank you very much.
As a reminder, to ask a question at this time, please press star one. We will now take our next question from Cole Hathorn from Jefferies. Please go ahead.
Good afternoon. I am just looking to find out what the demand outlook is like for your Testliner in Poland region. Then also what you believe the impact of the Varkaus conversion will be on Testliner prices in Q4. Thank you.
Okay.
Sorry, Kraftliner prices.
If you take the Polish containerboard, the demand is stable. When you talk about the Testliner is going to come out of Varkaus, we don't have a real price view what it's going to be in Q4. For Q1, we see that is probably slightly higher. We don't have an absolute guidance on the prices in Q4 of 2015.
Maybe I have to remind that don't forget that when it comes to Kraftliner, the market Varkaus is targeting, lot of stuff is imported to Europe. Europe is short.
eight to 900,000 are imported from U.S. and Asia.
Also it's a growing market, 2%-3% a year. We think that there's good demand and space for the capacity we are bringing in market.
Do you have any further plans to integrate into the corrugated space using the Kraftliner from Varkaus?
Yeah, we use part of it. I think it's 20%? 10% we will use internally.
Great. Thank you.
As a final reminder, to ask a question today, please press star one. We will now take a follow-up question from Mikael Jåfs from Kepler Cheuvreux. Please go ahead.
Yes. Hello again. I had a question.
Hello
around energy pricing, and now we see a low oil price compared to last summer, and I'm wondering how would this have any effect on you, if you could just say a couple of words.
On Finland, very limited because we are basically self-sufficient on energy in Finland through our ownership in PVO. We are sitting on long contracts in Sweden, which means that in the short and medium term, it's having very limited impact. However, the important part is to remember that we use a lot of inbound and outbound logistics. I would say if it stays at this level, on a yearly level, it's around EUR 40 million on lower transportation cost.
part of that also from lower energy billing, because we use some oil, but not a lot.
Yes, very little. it's about EUR 40 million.
Okay. Many thanks. By the way, would you expect this to have any sort of indirect positive effect on you, for instance, on chemical costs and things like that?
It's included in this. On the chemical cost, it's included. What we have not included, and this is the harder, what will the lower energy prices do on the economic environment? Is this a way where we get some GDP growth and you can transport our products further and stuff like that? That we have not really understood yet, and it's quite complicated.
Yeah. Okay. Many thanks for your answers.
Thank you.
As there are no further questions remaining in the queue, that will conclude today's question and answer session. Ulla, I would now like to turn the call back over to you for any additional or closing remarks.
Okay. Thank you, Elaine. I want to thank everybody on my behalf for this call, and I will hand it over now to Kalle for his final remarks.
Thank you very much for listening to us here. I just want to remind you, we are proposing an unchanged dividend. We are actually in a situation we feel very strongly about the future. The transformation is ongoing, we actually did a pretty strong improvement on results despite the falling top line of some percentage points for the full year of last year. We are very motivated for the future. This is going to be an interesting transformation journey. Thank you very much.
Thank you.
That will conclude today's conference call. Thank you for your participation, ladies and gentlemen.