Good day, and welcome to the Storo Enso Q4 Earnings Conference Call. Today's conference is being recorded. At this time, I would like to turn the conference over to Ula Pajanan. Please go ahead.
Thank you, Elaine. Good afternoon, everyone, and welcome to Stora Ensys Q4 earnings call. We will start with the presentation as usual, and then we go ahead to the Q and A session. And our CEO, Carlos Dunstrom, will start and then CFO, Zef Boffary will follow. So please go ahead, Carlos.
Thank you, Ola, and good afternoon and good morning, ladies and gentlemen, and very welcome to this call. I would like to start with the first slide, and I am going to talk about the results in the fourth quarter, but also touch a little bit about the full year. So sales increased by two point decreased by 2.3%. And 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 SEK $2.00 9,000,000.
That is almost a 38 percent increase versus the year ago period. We did get some tailwinds in lucky timing in the fourth quarter. So we received some CO2 subsidies mainly in Germany. We did know that they were coming, but we did not know when and they ended up in our fourth quarter. We did also do some land sales in our associated company Bergvik.
And those transactions landed on this side of the year, not as we thought on other side of the year. We have also got the reversal of about SEK 5,000,000 for some provisions for restructuring that we thought we needed. Now when we concluded the project, we had to reverse it. And then as you all know, in our NRI release, we mentioned that we have done an impairment of assets, mainly in the paper business. And that landed some reduced the depreciation by some 7,000,000.
So that is one point. The other areas 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'll running for this year and last year and we will do for next year as well. And then the operational return on capital employed was increased by 2.7 percentage points to 9.7 Excluding Monte De Plata as well as Guangxi project, we're actually above 13%. And we are proposing a dividend of $0.30 to the AGM in the April 22. Next slide, please.
And 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, And I think it is important to remember how many things in Stora Enso has been started and what we are going to start going forward.
We have the Guangxi mill in China that we have finished the piling and we also announced today that we are going to start up that in the 2016, a slight change versus the previous time plan that we've had for basically a year and a half where we said early twenty sixteen. The reason for this is that we got some permits delayed and making sure that we have a robust process going forward. We have invest we are investing EUR 27,000,000 in increased competitiveness of the Imatra mill and we are doing the conversion of the white glass paper mill to a board mill, which will be ready in the 2016. Montes Del Plata has started operating and 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 Sunilam mill has in early twenty fifteen been able to deliver in lignin and the Virdia acquisition as well as the demonstration plant being built up is on plan. Now I would like to also highlight a new investment that we actually announced today, and that is an additional investment using the Varicau's infrastructure to be able to build another mill there, but it's a mill who is producing wooden building elements. And that is a project of EUR 43,000,000. It's going to be ready in Q2 twenty sixteen and it has a profitability well above the 13% return on capital employed. At the same time, we are finishing off the Murrow 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 twenty fifteen. During this year, we have actually managed to sell off non core assets for a total amount of slightly more than EUR 170,000,000. It includes the Kaolin, Corenso, and I'm very happy at the end of the day, we managed to get the approval and signed a deal to be closed within the 2015, the Utashen 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 Weizelotto in
at the March,
but we also had a closure of the total mill Corbeheim 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 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, Stefo, please. Thank you, Karl. And I will first summarize the financials key figures that Carlo already shortly commented previously. First of all, sales line for the quarter reached €2,552,000,000 That is a reduction of 2.3% compared to year ago.
But please keep in mind that there was actually an increase of 1.4% on sales line excluding decline in paper business and divested businesses. Full year sales at €10,200,000,000 Operational EBITDA. First of all, I want to remind you there that our ForEx associates, Paretox Kug and Thornaster 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 €35,000,000 for the quarter. And the previous quarter that was €28,000,000 and the year of €17,000,000 So they play an FX here if you compare the difference between EBITDA and EBIT.
Operational EBITDA as such improved by two percentage points and was 12.1% for the quarter and 12.4% for the full year. Our operational EBIT was $2.00 €9,000,000 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 €810,000,000 The year ago, we were at €578,000,000 so 40% improvement there. Profit before taxes excluding NRIs was actually down by 70% and was €32,000,000 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 post 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 to harvest in operations there.
Earnings per share excluding NRI for full year €0.40 a share and including NRI €0.13 General capital employed, excluding transformational investments at 13.112.7% for the full year. And this is something we want to highlight that excluding the transformational projects, MGC Monte De Plata, Palca in Uruguay and Guangxi project, we are already at our targeted level. Then 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.
And 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 €80,000,000 €1.2 of 2013. And that we feel is a good achievement keeping in mind that our investments in 2014 were about €790,000,000 And that is again another proof point of the good cash flow generation capabilities of the company.
Then some comments on the different divisions and I start with Renewable Packaging, where Q4 sales increased by 3%. Full year sales were up 2%. Operational EBIT for the quarter was stable at €74,000,000 and full year EBIT was up 30% and reached €410,000,000 And again here good to note that operational return on operating capital was €16,900,000 excluding the project in Guangxi. Then moving to next page and biomaterials, where the sales for the quarter increased by 18% due to Montes De Plata ramping up and increase in the deliveries to the market. And where to notice that like we were already communicating earlier Modeste Plata break broke even in December as expected, which is a major milestone in the project.
Operational EBIT increased 42% for the quarter and it was affected by higher pulp prices and sales volumes, especially sales volumes of course increasing than the last. And operational return on capital was 13% excluding NTP. We have been excluding NDP still in 2014 as it is in the ramp up phase and not really generated income. But of course, in 2015, we did not do the same anymore. And 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.
Then 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. And operational EBIT was at 10%. There is a reduction of about 47% year on year. That's due to lower volumes and higher net raw material costs. Full year sales declined about 5% and operator EBIT increased almost 19% across €89,000,000 And that is a reflection of lower fixed costs and the positive development has been visible in this business already for some time.
And also very important and worth to note is that we are very happy with this that operational return on the capital was 17.3% for the full year. We started building a living. There's a clear improvement to previous year, which was at 13.9%. Then last but not the least, building our reading, where good cash flow generation continues on a high level, as Karl already commented earlier today. And fair sales declined by 7% to €984,000,000 due to capacity closures that have taken place and of course, affected by the sales price development.
Operational EBITDA increased by 26.7% to €109,000,000 And here we are returning 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 both positively affected by lower energy and fixed costs as well as indirect CO2 for subsidiary reversal of the restructuring provision. Full year sales was down 9% and cash flow after CapEx at €243,000,000 which is almost 6% of the cash flow of the CapEx per share. Then looking at the capital expenditure levels for 2015. We forecast that to be between $780,000,000 and €840,000,000 That includes about €350,000,000 for our project in Guangxi, China.
And if you want to compare that range to our 2014 capital expenditure level, it was €787,000,000 for the full year. And depreciation is expected to be in the range of 120,000,000 to EUR 140,000,000 for the year in front of us. Then back to you, Karl.
Thank you, Seth, for a good explanation of the financial situation of the fourth quarter and the full year. So when it comes to the guidance for the 2015, it is a guidance on EBIT and it's compared to the Q4 twenty fourteen. So Q1 sales are estimated to be roughly similar compared to the Q4 amount of SEK 2,552,000,000.000. Q1 operating EBIT is expected to be in line with the Q4 amount of $2.00 €9,000,000 If you go to the next slide, the dividend proposal that we are going to give to the AGM in April is €0.3 per share. It's the same amount as last year and it's in accordance to pay the half of the net profit over a cycle.
It corresponds to total EUR $237,000,000, the same amount as last year. Next slide. So before going into the Q and A session, there are two things. This is conclusion. This is a transformation in progress, and we are going in the right track.
We had with limited growth in 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 the transformational investment of Guangxi and Montes De Plata. Dividend proposal is $0.30 per share. And finally, I would like to remind you or invite you to our Capital Markets Day, the May 28 in London. With that, I hand over to Ula to lead the Q and A session.
Okay. Thank you, Karl. So Elaine, yes, please remind everybody how to join the Q and A session. And we are ready to take the questions.
Thank you. Ladies and gentlemen, the question and answer session will be conducted electronically. We will take questions in the order received, and we will take as many as time permits. We will now take our first question from Lars Kjellberg from Credit Suisse. Please go ahead.
Yes, good afternoon and thanks for providing all the good details in the presentation. I just wanted to start with China. Sepi, you mentioned that this is like a normal practice that you sort of have a fair value change in some harvesting operations. Can you just talk us through exactly what this is about? And would this mean anything for your cost estimates going forward from that?
And also when you talked about now the pushed out six months in the startup of the paperboard machine in China given that some delay in the permits. I was under the impression that permits were already done a couple of years ago or a while ago. Has anything changed with the permits? And can you also talk us through if the permits actually stipulate you building a pulp mill or is that still an option for you to do or not to do?
So when it comes to the fair valuation of the Guangxi Forest, hand that over to Sefo and I will cover the mill and the permit.
Yes. On the valuation issue of the forest at this stage, like I mentioned earlier, we did and we do fair valuations on continuous basis. And due to the change in the harvesting plan, we are harvesting a bit at the lower stage than originally expected. Nothing dramatic in fact 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 then we have this negative effect of €79,000,000 due to this harvesting plan and cost estimate.
In total, the valuation is around €340,000,000 about. Then, Kali,
want comment Yes. Regarding permits, we have all the NDRC permits that we need, but to dry affluent sewage channels, getting permits or building certain connections, that's the problem I'm talking about. And 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. And the other one was that it's not pushed out half a year, it's moved from being basically early to mid.
And early is not doesn't mean it's the 2016.
Understood. And about the is there any conditional approval with regards to building a pulp mill or not to build a pulp mill?
So we have an approval to build a pulp mill. For NDRC, that's part of the whole concept. We have not any board approval and we will not do the pulp mill until we got the board machine up and running. And 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 etcetera of the restructuring that was all coming into the Printing and Reading division, is that correct?
So to be very clear about these two things you're asking about. So yes, since most of the restructuring provisions were done in Printing and Reading and when you're getting to the end and people are leaving, you're trying to clean out the provisions against the cost. And we had in that area overestimated the restructuring cost with CHF5 million. When it comes to CO2 subsidies in Germany, you know you are getting them, but you don't know when. So we were probably expecting them in the 2015.
Understood. Thank you.
Thank you.
We will take our next question from Antti Koscivari 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 typically improve in Q1 versus Q4.
Could you walk us through your expectations for Q1 basically or the differences between Q4 and Q1? And then secondly on Montes Del Plata, could you give us a number of on EBIT level what was the contribution in Q4? And what should we expect what kind of margins we should expect during 2015? Then lastly, your competitors have been announcing different plans of restructuring production assets or 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.
So if I start I think when it comes to the guidance, I think since we since both the CO2 and the Bergvik land sales 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's what I would like to say. When it comes to the MDP, we don't give out MDP details.
And 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 in the optimal way. That's what you need when you start a new process. And then I think when it comes to paper, I think or in general, looking at our results for both Q4 and as well as for the full year, it is all attributed to cost management. So I think we're 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.
And that's a very individual thing. So the operating or the utilization in the for paper machines in this fourth quarter was in between the high very high 80s and the mid 90s. So the way we look on our paper machines is, we run them until they start getting into cash flow negative, then 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. And on MTP, just to add what I mentioned earlier, that in December we broke even as I said, was important milestone in the ramp up process. And 2015, we expect full capacity to be reached as we have said earlier.
Maybe still on the Monde Seltalata, is this something that gives us significant issue between quarters Q4 and Q1? Or is it something that falls kind of between?
Will since we were ramping in for the first time and got to breakeven in the month of December, I expect them and I think there's going to be a maintenance stop in Monte Dei Plata,
which I think we when.
And it's in the report. In Q1, we will have a maintenance stop to do some of the things that we've done. But 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 Michael 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? I mean, you have given excellent guidance for 2015, but should we then expect this high level to continue? Or what should we basically think around? And then the second question is around currency effects. Could you say a couple of words around how the current weak euro versus the U.
S. Dollar and the weak krona versus the U. S. Dollar will impact you going forward? Thank you.
Okay. So I give a little bit of the longer term CapEx guidance.
And then I hand over to Septi to talk about the currencies. So this as we said already in Q3, we are peaking now and for the next four five quarters. And 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. So we're talking something a decision earlier in the 2016, which means that construction will be starting if we get an approval from the Board in 2017.
So 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. And then at the currencies and sensitivities there, to put into perspective and if you think that if there's a 10% strength in of the dollar, that's about €112,000,000 positive on our EBIT. And the similar move on Swedish krona is €84,000,000 but negative. And pound sterling, which is our third important currency 10% move would be positive by €46,000,000 Now when putting that into perspective, should keep in mind that our policy is to hedge about 50% of our Belmont's cash flow on an ongoing basis. Of course, goes a bit up and down around that, but 50% is pretty good rule of thumb there.
Now if you look at the impact of the FX movements in the past quarter Q4, it was about €12,000,000 net. The quarter before Q3 it was €16,000,000 And keep in mind of course that the big moving dollar happened towards end of the Q4 then of course how much it is in Q1 will depend where it moves from here. But of course, it is giving us nice tailwind as we talk, but you never know how it develops.
Okay. Lovely. Thank you.
We will now move to Fabio Lopez 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 EBITA and the operating profit versus the market expectations, I would like to ask you what is implied for depreciation and amortization and equity investments in your guidance of around $2.00 €9,000,000 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. So it's actually increasing. So 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? And the third question would be on pulp.
Some people in the market are talking about pricing pressure in euro in dollar terms because of the weaker euro in Europe, because Europe is a substantial component of global pulp demand. So I would like to ask if you're seeing any of these developments from your side? Thank you.
That was the number. I will give this with the EBIT and EBITDA to Setyp. But I think it's when I can take the paper and then I take the pulp. So 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. And the cash generating capabilities has been excellent.
If you look, we basically been around as demonstrated in the short, we've been generating around $250,000,000 plusminus of cash flow, free cash flow that is operating capital after CapEx for a number of years. And that is important because that is the funding engine of STORENZ. It's actually paying for the whole dividend that we are proposing. And 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.
So that is clear and it's going to be
a good tail end. One day it needs some sort of an equilibrium. However, if somebody is offering me cash to buy that for what I think it's worth, giving this very strong cash generation, I might be able to discuss. Any other things I'm not interested in.
And 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 Yes. First Zeppey here.
As you know, we guide EBIT and we don't go into details when it comes to EBIT as such. We gave guidance on full year depreciation by '20 to May. And it comes technical investments I can only refer to history. Of course quarter between the quarters there can be variations, but full year FX if you compare 2013 and 2014 they were actually pretty close to each other, 91,000,000 for 2013 and €88,000,000 for 2014. But then between the quarters, there are some differences.
Like I said earlier today, Q4 twenty fourteen was SEK 35,000,000, the quarter before SEK 28,000,000 and Q3 sorry, Q4 30,000,000 was SEK 28,000,000 and the quarter before SEK 17,000,000. So there are some variations. And I think if you put that into perspective, think you can break it out.
So and then you come in 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, flat pulp slightly lower.
Hello?
Was that okay, answer?
Yes. 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?
Yes, I think it's fair to put it into your model.
Okay. And 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 Michael Doppel from Handelsbank and 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 one. And that's where it makes me a little bit hesitant to give some because we are in negotiation right now. And I think the whole industry is that right now. But if I take so I take uncoated fine paper, is probably slightly lower.
Coated fine paper, would say is kind of stable. Supercalendar, slightly lower or I don't really know about that or stable. Then when it comes to newsprint, it's not going up, but I don't know the end of it.
Okay. And then in terms of packaging prices in Consumer Board and corrugated packaging, what kind of pricing trends are you seeing there?
Yes. If I look on Consumer Board, are stable. I think containerboard might go up a bit and corrugated packaging also.
Okay. That's clear. Thank you.
Please go ahead.
Yes. I just wanted to follow-up on the growth area of Building and Living. That is a business that typically has shown great cyclicality in the past. And as you highlighted, of course, it 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?
We have been working for some time to be very fair, this is a volatile business. But it's also part where you sell to industrial customers or customers carrying inventory is less cyclical, okay? Because we all know that traders deliver volatility. What we are trying to do is to drive a higher percentage of the sales and growth in the area of what we call value added products. And I think that will mean more wood for windows, more service and logistics solutions, more into the kind of investment that you saw that we presented today, which is this wooden construction element.
And 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. If we have acted also, which something we also guided for in the fourth quarter that we were basically going from 3% curtailment two years ago in Q4 to 7%. And we also had higher curtailments already in Q3 to be able to cope not to be part of the channel stuffing, because basically with the currency Swedish sawmills has been selling a lot and filling the inventory. We've been having the same inventory in basically in absolute amount in the 2014 as we had in 2013. So it's very much about how you act in the market and how you move yourself into customers holding inventory, because building starts are going up in Europe.
That was going be my next question. Where do you see this business going in 2015?
I think we would see as we have guided a bit seasonally weak as usual Q1 because since Northern Europe, which is a big part of our market, it's winter season, it's not a lot of construction. Then I expect it to grow next year or 2015, sorry, because building starts are going up.
Okay. Thank you.
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 noncore asset disposal 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?
So I think the area 150,000,000 to 170,000,000 is probably something you could expect.
But like we have said earlier, don't forget that we are not a stressed seller. And of course, if we don't get the value we want, we are not forced to sell. So we can be a bit opportunistic here also. That's why we are not pushing it unless it's moving.
Sure. But when you say 150 to €170,000,000 still to come, then you mean beyond what has been announced at this stage?
Yes. Great.
And then just coming back to CapEx and capital allocation. When you look around in your company, and I appreciate you have done some investments in existing plants, but what scope is there still for further conversions or other types of high return projects in your current asset base? And any thoughts around that?
Obviously, this is an area where we are looking at, and we are working quite a lot to find. But converting in min, it is a lot of stores that has to correspond in a certain way before we actually get a lucky combination like in Valkau. But we are looking, but it's not that easy as many people think. It has to be the right power balance, it has to be the right balance, it has to be the width and all these things. And then you need to know something about the product because you're going to sell it as well.
So it's a number of combinations you need. And 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's about $20,000,000,250,000,000 euros 2% of the sales. And the big one is of course the €200 €50,000,000 And then if you look at what we announced earlier, the Abidshwarikau conversion, somewhere you are referring to about €100,000,000 for this year, Virtia project in biomaterials 30 something. Himachalitri, fourth investment, logistics improvement there, 50 about 30 from €27,000,000 And then Varkas Wood and Elements what we just today, that is about $8,000,000 payment this year and
the rest the year after. And that basically gets you to the just below the lower range of the guidance, which means that we don't have a lot of space for additional things, not announced yet. Is that clear?
Very good. Thank you very much.
We will now take our next question from Cole Hawthorne from Jefferies. Please go ahead.
Good afternoon. I'm just looking to find out what the demand outlook is like for your testliner in Poland region. And then also what you believe the impact of the FarCraft conversion will be on testliner prices in Q4? Thank you.
If you take the Polish containerboard, the demand is stable. And when you talk about the test line, it's going to come out of Varkaus, don't have a real price view what it's going to be in Q4. But for Q1, we see that is probably slightly higher. But we don't have an absolute guidance on the prices in 2015. Maybe I just to remind that God forbid, when it
comes to kraftliner, the market where our cost is targeting, a lot of stuff is imported to Europe. Europe is short. Yes, 800
to 900,000 are imported.
From U. S. And Asia. And also it's a growing market, 2%, 3% a year. So we think that there's good demand and space for the capacity area premium market.
And then do you have any further plans to integrate into the corrugated space using the kraftliner from Farcross?
Yes, we are we will use part of it, I think, 2010% we will use internally.
Great. Thank you.
We will now take a follow-up question from Michael Japs from Kepler Cheuvreux. Please go ahead.
Hello again. Had a question 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?
So
on Finland, very, very limited because we are having this we are basically self sufficient 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. So I would say it's about if it stays at this level, on a yearly level, it's around 40,000,000 on lower transportation cost. And part of that also from our energy bill,
because we use some oil, but not small.
Very little, but it's about SEK40 million.
Okay. Many thanks. And by the way, would you expect this to have any sort of indirect positive effect on you on for instance, on chemical costs and things like that?
It's included in this on the chemical cost, it's included. But 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 use our you can transport our products further and stuff like that. That we have not really understood yet and it's quite complicated.
Yes. 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. And I want to thank everybody on my behalf for this call. And I will hand it over now to Karl 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 and 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. And 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, and gentlemen.