Good day, and thank you for standing by. Welcome to the Billerud Q1 Report 2025 webcast and conference call. At this time, all participants are in the listen-only mode. After the speaker's presentation, there'll be a question-and-answer session. To ask a question during the session, you will need to press star one and one on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star one and one again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your first speaker today, Lena Schattauer, Head of Investor Relations. Please go ahead.
Thank you. Hello and welcome to Billerud's Q1 2025 presentation, and thanks for joining us this morning. Billerud's President and CEO, Ivar Vatne, and our CFO, Andrei Kreis, will hold the presentation, and after that, they will take questions from the conference call. By that, I would like to hand over to you, Ivar. Please go ahead.
Thank you, Lena, and good morning, everyone, and thanks for listening in this Tuesday. I'm excited to present the Q1 results, which we think represent an encouraging start of 2025 for Billerud, and we certainly have plenty of results we feel good about. Let's get into it, please, and next slide. 2025 is the first year of our way forward strategy. Hence, I'm excited to see so many of our outspoken priorities already going into the right direction. Recorded net sales growth, 7% versus year ago, with positive growth figures coming from both regions and almost all categories. We make a significant profitability improvement, EBITDA up 19% and EBITDA up 42% versus year ago, with a margin uplift of two percentage points. Region North America continues to impress us and come in yet again with a very strong quarter and 21% EBITDA and 15% sales growth.
That is rock solid. I also want to highlight Region Europe, which also comes in with a clearly improved profitability with 15% EBITDA margin, and that is four percentage points up versus a year ago. Our cash conversion and cash generation is greatly improved since the comparable period last year, and that is yet again what is highly important for us. We reached a milestone also in Q1 when we sold our first batch of locally produced container board in the U.S., and more on that later. Next slide, please. Now, to get a proper read of the market, and that can be a handful these days, but at least for Q1, the sentiment was pretty much what we had expected with normal or normalized conditions for most categories and channels. Not strong, not weak, but somewhere right in the middle.
Okay-ish demand and some upward pricing moves towards the end of the quarter, first and foremost in containerboard, sack and kraft paper, and graphic paper. The only exception to call out is carton board and the consumer luxury channel. That is still performing weaker with slower demand and quite a lot of available capacity. Now, going into next quarter into Q2, we would expect more or less unchanged conditions from what we've seen so far in 2025, and we do have solid order books for most of our categories until the summer. I want to highlight that this is short-term guidance for Q2 and not a reflection for the full 2025. Next slide, please. Over to the topic that seems to be on everyone's lips these days, tariffs and implications.
I would start with probably the same narrative that most companies refer to, that if the situation is to stay long-term, right now it's too early to assess any financial impact with credibility. Having said that, Billerud is well-positioned and probably one of the better players within our industry. Looking at the direct impact and starting with region North America, we have available production capacity at our U.S. mills ready to serve both current and new customers. We are placed in an attractive Midwest region with close proximity to a wide range of customers and can offer both high service levels and a reliable and predictable supply chain. That is of key importance, not least since 25% of the category is imported in our competing paper grades.
For Europe, we only export around 2% of our total volume to North America, so our exposure is clearly limited. The much more difficult question to answer is any potential indirect implications when you see changed trade flows for the full industry leading to a new competitive landscape. It is too early to say anything, but there will quite likely be both opportunities and challenges coming to surface if the situation will prevail over a longer period of time. We will monitor the situation and adjust if needed and continue to focus on items we can control. With that, I hand it over to Andrei.
Thank you, Ivar, and we can take next slide, please. Good morning, everyone. Our total sales growth of 7% was supported by price increases in our Europe region and volume growth in the North American region. For Europe, year over year, the volumes were down with 6%, while the pricing had actually a positive impact of 9%. Despite strengthening of Swedish krona during quarter one, the year-over-year FX impact on net sales was minimal. In North America, we had an excellent volume growth of 14% and largely unchanged pricing versus year ago. Next slide, please. Summarizing our profitability, it was on a solid level in the first quarter, and I'm particularly pleased with the profitability uplift coming from both regions. Our EBITDA margin improved with 2 percentage points versus last year and was in line with our Q4 performance.
Pricing was the main driver behind the uplift and more than offset total input cost increase. The input cost increase was primarily driven by the pulpwood costs in the Nordics. Strengthening of the Swedish krona during the first quarter of 2025 was a headwind. Revaluation of our receivables and payables balances had a negative impact of approximately SEK 160 million in the first quarter. As a reminder, the major impact was from revaluation of the payables and receivables balance, which is a one-off in nature now in the first quarter, and we do not expect the same impact heading into the second quarter. The positive other bucket is primarily favorable year-over-year effect from inventory revaluation. There was no major impact in the first quarter this year, but we had a negative impact last year. Now, let's move over to the regions. Next slide, please.
Region Europe had a broad-based sales growth across all categories except liquid packaging board. Quarter one last year was a record high volume quarter for liquid packaging board, but this year saw a somewhat slower start to the year. Demand for liquid packaging board in Europe is at a normal level, but exports to Asia are somewhat slower as expected. Pricing has been the key driver for profitability uplift for the region, and we will see impact from earlier announced price increases for container board and second craft segments starting from the second quarter this year. In summary, strengthened performance for the region in the first quarter is in line with the region's key objective to strengthen financial performance from existing asset base. Heading into the second quarter, we expect overall positive pricing impact of approximately 1% and volumes in line with the first quarter.
Quarter two will be the heaviest maintenance shutdown quarter for the region, and we expect total cost impact of approximately SEK 380 million compared to the SEK 40 million we had now in the first quarter. Now, let's move over to region North America. Next slide, please. As I mentioned, we had an excellent volume growth with volumes up 14% versus last year, and with that, also the highest sales volume in the quarter in more than two years. The volume improvement moved also our operating rates to 74% for the quarter. EBITDA margin for the region improved significantly versus last year, entirely related to volume uplift and improved operating rates. The price increases we announced in the first quarter on coated free sheet reels will be materialized, and we expect a positive pricing impact of around 1% for the region into the second quarter.
At this point, we expect flat volumes and operating rates for the region in the second quarter. Next slide, please. Now, we have an overall strategic objective for our region, North America, to evolve towards packaging materials, and in that regard, we reached an important milestone on that journey with first commercial sale of coated liner from our Quinnesec Mill. We are now active with several trials with our existing and also new customers and expect to ramp up commercial volumes in the remainder of this year. Another part of this project is, of course, the capital investment program of SEK 1.4 billion, and that is progressing according to plan. In 2025, the major investment will be made in upgrade of wood yard at Escanaba Mill and also upgrade of the binders. These investments will enable large-scale production of paperboard at both of our mills in North America.
Very good progress both from commercial and investment perspective, and we will, of course, provide more updates on this journey as we go along. Next slide, please. A couple of words on cost development, and this slide illustrates the input cost movements in the first quarter for our both regions. Seasonally higher energy costs in both regions and also pulpwood prices in Nordics were the headwinds, while all other input costs were flat to slightly down. Overall input costs were flat sequentially, with Europe being up by about SEK 20 million, but that was offset by a corresponding decrease in North America. Heading into the second quarter, we expect input cost tailwinds in the region of SEK 30 million, with the majority of it being in Europe and driven by lower energy prices. I would also like to comment on the pulpwood cost situation in Nordics.
We are continuing to have all-time high pulpwood costs, but expect no changes in costs into the second quarter. Our view currently is that we now have a much more balanced pulpwood market, which should support short-term price stability. On the fixed costs into the second quarter, firstly, we will have a full impact of annual wage increases, which means sequentially our employee benefit costs will go up with approximately SEK 60 million-SEK 80 million into the second quarter. Also, we have a heavy maintenance schedule with a cost impact of around SEK 380 million in the second quarter. Next slide, please. A couple of points on our cash flow. We had an expected working capital buildup in the quarter, and change in working capital was also in line with what we saw the last year.
With that said, we did improve our cash conversion to 41% for the quarter, and we target 80% cash conversion for the year in line with our updated financial target. I'm also pleased with significant improvement in return on capital employed, with now return on capital employed being at 7% versus 1% last year, moving towards our target of above 11% over a business cycle. We maintain our solid balance sheet position with healthy leverage level, and we look to invest SEK 3.5 billion in our operations this year, where approximately one-third will be targeted towards strategic investments primarily in North America. I would like to hand it back to you, Ivar.
Thank you, Andrei. To round it up, uncertainty has increased since the beginning of the year, but we do enter Q2 with pretty stable market conditions for both regions.
It is too early to assess any financial impact of tariffs if they will prevail long-term, but we are well-positioned with our industry, with local production in the US with available capacity, and only marginal export exposure from our Nordic mills into North America. We do expect higher sales prices for the quarter with lower input costs. As we tend to have, there is planned an extensive maintenance quarter in Q2, first and foremost here in region Europe. With that, I hand it back to operator for Q&A.
Thank you. To ask a question, you will need to press star one and one on your telephone and wait for your name to be announced. To withdraw your question, please press star one and one again. We will now go to your first question. Your first question comes from the line of James Perry from Citi. Please go ahead.
Hi, thanks for the presentation. I'd just like to ask a couple about North America and Europe. In North America, you mentioned the higher sales volumes in all the products and the strong margin. I know it's difficult to determine, but do you have any sense as to whether customers could have been bringing forward the orders as we've heard from some other players, or are you seeing the good demand sustain into Q2 and the rest of 2025? In Europe, you said you expect normal conditions except for carton board and coated liner. What do you think it is about those products that's leading to the relative weakness, and what do you think we should be looking for in order to see carton board picking up? Thanks.
Yeah, hi, good morning, James. I think on the first part around North America, it's a good question, and I have to be boring in the sense of trying to be too clever of estimating kind of long-term second half of 2025 into 2026. It's just not very feasible at this stage. I can confirm, as Andrei also went through, that Q2 looks solid. Order books are good, and we have no real signs of any inventory buildup or problems per se on the customer side to, yeah, to not be able to pass that through. I mean, uncertainty has increased. Consumer sentiment in the U.S. clearly has taken a drop, but the key figures still are pretty good. Order books tend to be, at least for the coming months, in a good place, and that should enable us to deliver a strong Q2.
Beyond that, it's very, very difficult to say anything certain. I think for Europe, and in particular, if you go into carton board and consumer luxury, I think it's a bit of probably our view coming from Billerud, maybe more than what you will hear from some of the other players. We have a pretty large exposure into the premium side of carton board, and clearly that is categories, if you think about that as a fine fragrance or chocolate or champagne, etc., that tend to be more sensitive to consumer uncertainty. I think that has still been a little bit of a wet cloth over the whole category and channel going into 2025. I think if you couple that as well, that there is quite a bit of available capacity out there in that field.
It's just pointing towards that that channel is still being a bit more difficult. It's not really bad, but it's certainly not the more normal side as we have labeled the other categories.
That's helpful. Thank you.
Thank you. Your next question comes from the line of Robin Santavirta from Carnegie. Please go ahead.
Yes, good morning. I was wondering if you could detail what price increases you have made in North America when it comes to your paper grades and when it comes to pulp.
Yeah, good morning, Robin. In terms of the price increases in North America, these were announced during the first quarter, in the beginning of the quarter, and it was up to 5% on the coated free sheet reels, which is approximately 60% of our graphical sales in North America. We are implementing those price increases starting from quarter two, up to 5%. In terms of pulp, we announced $80 per ton price increase. They are to a large extent following the index, and we will have some pricing impact now heading into the second quarter.
Thanks. Can you just, I know it's a bit of a speculation, but with the tariffs on imports, what are you hearing and seeing in the markets related to what the importers will do, what the exporters will do with their prices? Could that open up an opportunity to more price increases, or could you just sort of give some color on those dynamics and what you see at the moment?
Yeah, hi, good morning, Robin. I can take that one. The question is good, and I can say that probably we see all colors of the palette in terms of, yeah, behavior at the moment. That means that we see examples of exporters for the time being absorbing this tariff fully versus others passing it fully on, and also other players choosing to go somewhere right in the middle. I think it's not really a full theme that you see. I think it also depends a bit on the category and the competitive landscape. I think our view is that this will stay long-term.
It's difficult to absorb it fully, and I think there is certainly some speculation going in in the industry players that they are thinking, hoping, probably a combination, that this is still some kind of a short-term play, and it might go out, and they do not want to go overboard too fast. Again, this is where it starts to get more into a speculation. It is not unreasonable to think that this could potentially open up for pricing opportunities if tariffs are staying at this level or they are increased in long-term. Again, right now, I think that's just more speculation than anything else tangible.
All right, thanks. Two quick technicals: inventory revaluation, Q2, Q1, Q2, what do you see? Also, just to clarify, with respect to FX rates, what is the Q1, Q2 earnings impacting Q2 that you see at the moment, including the receivables revaluation?
Yeah, I can take those, Robin. In terms of inventory revaluation, really no drama. I mean, we have previously talked about normal variation there of 0-50 million, both on positive and negative 50 million. In quarter one this year, it was positive 20 million, so really no drama, but we had slightly higher inventory revaluation impact last year, so that's why we had positive deviation year over year. In terms of FX and the impact heading into the second quarter, now, first of all, we, as you know, hedge our FX exposure, and we have approximately 80% of our euro exposure hedged for the coming 15 months and closer to 70% of US dollar exposure.
Now, in the first quarter, the reevaluation of our accounts receivables and accounts payables balances had the biggest impact, and that is determined by the FX rates on the last day of the quarter. If we look at the end of the first quarter FX rates, and I assume that those rates prevail for the second quarter, we would have a positive impact of SEK 200 million within other by not having the same hit on accounts receivables reevaluation, but we would have a negative impact from transactions within the Europe region of SEK 100 million. Net, a positive impact of SEK 100 million heading into the second quarter. Again, this will be dependent on the rates ending up at the end of the quarter, so this is an early indication for the Q2 impact now.
Thank you very much.
Thank you. Your next question comes from the line of Linus Larsson from SEB. Please go ahead.
Thank you, and good morning, gents. I'd like to continue on North America, if I may, and you have been commenting on the price increases in the coated fine reels business. Could you just talk us through what's going on with coated fine in sheets and the specialties business? What are the dynamics? Why aren't we seeing some similar price moves there? That would be my first question, please.
Yeah, hi, good morning, Linus. I can take that one. I think the simple answer on the first one is on the kind of other parts of the graphic paper. You do have the coated free sheet sheets, as you mentioned. You also have the groundwood, but again, those are smaller in comparison to the free sheet walls. And that part of the business is certainly slower. It's also exposed to pretty heavy competition. So it's simply our view that that category is which is much more challenging to take pricing in the same manner. I think on specialty, the situation is a little bit different. I mean, specialty is going well. As you know, it's first and foremost our label business. I mean, we are fully sold out on the E3 machine than in Escanaba that we produce that on. Margins are still pretty good.
There is also pretty intense competition pressure. There have been pricing moves also there for the last couple of years. Right now, our view is that that market is still all right. It is certainly something we continue to evaluate, but right now, there are no immediate plans to also do pricing on specialty.
Okay. If you compare, say, the import share in these various categories, how do they differ roughly?
Yeah, I can give you a bit more directional figure. It's around 25% on graphic paper, which we see is coming from import, and that is a bit of a, yeah, diverse market of where is it coming from. Quite a big piece is coming from Asia, but not the usual suspect in this. Actually, Korea is a pretty big market, and it's also coming quite a bit in from Europe, Germany, and Italy in particular, also Finland. I think on specialty, it's a bit higher. It's more in the 30-35% range of import share, and that we have mainly coming in from Finland. That's the big piece of import source on specialty.
Great. That's super helpful. Also, on North America on volumes, you had a pretty decent operating rate comparing history, at least in the quarter. Do you expect that to increase going into the second quarter? If you have any thoughts beyond the second quarter as well, and as part of that question, what type of contribution or what's the pace of ramp-up in container board? Is that in any way meaningful for the remainder of the year? Maybe start with Q2, and then if you like, some additional comment on the second half, please.
Yeah, I can take this, Linus, and good morning. In terms of the volumes for our North American region, as Ivar was mentioning earlier, really difficult to assess anything beyond quarter two. Right now, we are looking into the second quarter and flat volumes compared to quarter one. This is the best estimate we have now based on continued solid order books in the region. In terms of the container board ramp-up, as I mentioned, we have made the first commercial sale and are now in several trials. The uncertainty surrounding tariffs is certainly increasing interest in locally produced container board, but we will just need to do the trials, prove ourselves with North American production within those segments, and ramp up those volumes for the remainder of the year. Anything to add, Ivar?
No, I can just add quickly.
I think, yeah, it's not going to be very meaningful volume now in the beginning. It's maybe not unreasonable to say that 15,000 ton for the full year might be a bit of a stretch goal that we put out for ourselves, and most of that coming into the second half of the year. I think margin-wise also for this, it should be solid, but it's not unreasonable to think that it will be a little bit lower than the average that you see for the total region, given that also that this period includes quite a lot of trial and errors and also a re-loop of trying to get the qualification through. We will come back to this with a decent interval to update on the progress and how we are doing.
That's great. Super helpful. Thank you.
Thank you. Your next question comes from the line of Cole Hathorn from Jefferies. Please go ahead.
Morning. Thanks for taking my question. I'd just like your thoughts on the European packaging market by area. I'm just wondering if you're seeing any kind of restock or ordering from customers because we've seen quite a big divergence between US and European markets. I mean, the box data was something like down 5% in the US, and it's been pretty robust in Europe. I'm just wondering what you're seeing across your container board segment, what you're seeing across sack and kraft, and any thoughts around customers kind of restocking or kind of any inventory effects impacting what is a decent Q1?
Hi, good morning, Cole. Again, another good question. I think in general, we're not picking up any big worries or tangible items around inventory being built up. Again, I'm continuing to kick in the most open door in the world. That uncertainty has certainly increased. Consumer confidence is probably a bit more troublesome. Yeah, the situation is certainly worried, and what it might even then start impacting on consumer demand is just very difficult to say at the moment. If I do a quick round the table, if you may, per category of what we're seeing right now, I'm in container board. Yeah, demand is what I referred to a bit earlier as lukewarm, right in the middle between strong and weak. You probably expect that going into Q2.
We have pretty specific niches also within our containerboard proposition, particularly on fluting, and that is performing still well. We are moving up on pricing. I think also Andrei touched on that on fluting, on coated liner. In general, the situation is pretty okay. Uncoated liner still for us is doing relatively well. Coated liner is in that containerboard time. It is still a little bit a black sheep. It was weak going into the year, and it is still relatively weak. That is also partly because a chunk of our coated liner is exported into the U.S., and surely that is now more troublesome with everything happening also on the tariffs. Carton board, I still come back to that, is a bit weak. That is our part of it with also a relatively high exposure to the more premium side of carton. Europe is doing all right.
It's maybe smaller steps that we could see improvement, but right now, it's still on a relatively low level. We are taking some new business opportunities, specifically within the kraft side of Carton board. Also here, we do export some of it into the U.S., and seeing the situation there now is much tougher. Might create opportunities in Europe if there will be counter tariffs on import from the U.S. There is quite a lot of both virgin and recycled carton board coming into Europe, but at the moment, we do not see any big impact either of counter tariffs or any implications there. On our kind of kraft paper and sack family, still solid. We had a good quarter in Q1. We would expect also relatively stable conditions going into Q2. Yes, some risk with tariffs, but for us, at least, it should not be too bad.
We're pricing up the white sack and kraft paper now with getting impact from Q2. Pretty normalized conditions on demand in our geographical side on paper. I mean, Central Europe not necessarily doing too well. Quite a bit of exposure there on some of our cement bags, and construction is certainly now a bit more back to this wait-and-see mode. Latin America and Southern Europe for us is doing better. In general, food for us within paper, so that will be dry food and any deliveries to food service, actually doing quite okay. Same for medical. Good. It's a smaller segment for us, but we're growing and good conditions. It is a resilient channel. E-commerce is pretty solid. SAX in general, still with what I talked about this term all around the construction, it's actually performing pretty okay.
All in all, mostly stable, but slightly different temperature based on the category that at least we have exposure to.
That's very helpful, Colin. Maybe if I just follow up on how are you encouraging your sales team not to get carried away and kind of run production to demand? How are you kind of managing the risk so you do not overproduce if there is a demand softness, firstly? Secondly, it is nice that you are not calling out incremental wood cost inflation for the first time in a long time, but your recycled peers are calling out higher waste paper costs. Are there any categories that you as a virgin producer might be able to benefit from better margin or future pricing? Thank you.
Why do not I start maybe on the first part? On the last part, maybe I should take that first. I do not know if there are any specific categories right away that come to mind. I think there is always a bit of a delta between what you would expect from recycled versus virgin. If that starts to go out of line, surely it creates kind of like this magical market, yeah, almost like a hand who takes care of that. We do not really see that right now. It is so, as Andrei also went through, that we are at all-time high prices for fiber, but the market is much more balanced, and right now, we would expect that to be pretty stable. I have nothing further to add.
Now, on your first part, all I can say is it's quite linked into the strategy that we just launched, as you know, at the end of last year. The value of a volume, a cash generation is very important, and we have a clear target to deliver 80% cash generation of our EBITDA. We're not going to be able to do that if you produce much more than what we sell. This is a quite moving target because clearly, if things change on the market, we need to adjust. I can say that we've gotten better at getting used to this over the last years with these fluctuations going quite hard. I can only say that cash generation is a very important target. We will continue to do that, and that should drive the sufficient discipline across the organization to not go overboard.
I don't know if there's anything else, Andrei.
No.
No? Okay.
Thank you.
Thank you. Your next question, of course, on the line of Lars Thunberg from Swedbank. Please go ahead.
Thank you for taking my question. Most of the ground has been covered, but I just wanted to come back to a bit your demand outlook because it does seem, given all the uncertainty, relatively positive compared to what one maybe could have expected. I maybe rephrase the question a bit. Have you seen any changes in the order patterns as we enter increasingly a more uncertain environment? Also, are you seeing any differences in the customer behavior in North America where the consumer sentiment seems to be turning down quite sharply while in Europe it seems to be holding up? Any directional changes overall patterns and any meaningful differences between the regions?
Yeah. Hi, good morning, Lars. I can only reiterate the point because I think you're touching on something very important.
The comments that we provide are first and foremost for the very short-term Q2, where we can say with pretty high certainty that should look pretty solid as we had in Q1. We can say that also because our order books are still in a pretty solid manner. That tends to be a very strong indication that we would land that quarter also well. It is very difficult to start predicting into the second half. We also saw last year how things could change relatively fast going into the summer and then coming out of the summer. The situation might be a little bit different this time, but it is certainly something that we are extremely aware of, how fast this can change. I mean, the main KPIs of the U.S. economy are still solid. Production is well in general.
It's a good and low level of unemployment. Right now, there is nothing really that screams out short-term. As I already mentioned, the consumer sentiment has changed also in the U.S., and it's taken a sharp dive downwards to the level, even to the level we saw in the pandemic. That's clearly a sign that people are distressed, worried. This uncertainty that the tariffs bring certainly does not help. Surely there is a question mark of the solidity of the North American business when we're coming into the second half or going into 2026. Right now, it's not something that we wanted to try to get any numbers into because it's just very, very, very difficult to do that. I think Europe is slightly different.
I mean, you know that the Europe economy has not performed as well as we've seen in North America for the last couple of years. I think there was a hope going into 2025 that with falling interest levels, you would start to see consumer confidence picking up. It's maybe a notch better still of what we saw for 2024, but I can only confirm that it is now starting to be shaky, more uncertain. It's, again, very difficult to say anything else than for the next couple of months. We don't see necessarily a big change of consumer behavior, but we are picking up comments from certain customers to say that, "Hey, let's wait and see." Meaning, again, from also the customer side, it's a little bit of a worry about how strong now the full-end market really is, and that's not what you want to hear.
There is surely also a question mark in both of the regions about a bit of this wait-and-see mentality, but nothing that should at least impact us going into Q2.
Just to be clear, you're not seeing any of those uncertainties in your orders as of yet? They continue to come at a fairly regular basis and no particular change from what it's been in the prior months?
Yeah, I can confirm that.
I just want to lean in a bit on liquid packaging board, which, of course, is the only category in Europe that actually saw a decline. Can you comment a bit about how that translates into mixed effects in your EBITDA margin, but also should we read anything into this? Is this market behaving differently from the other markets, or is there anything else that is driving that number down?
For example, your price increases that you've implemented in Q1.
I can take that. Good morning, Lars. I mean, we will not comment on profitability per our segments, but I mean, if we look at the situation here in the beginning of the year, we guided for lower volumes heading into the first quarter compared to the fourth quarter of 30,000-60,000 tons. We come at a lower range of that. There were really two product groups impacting that. First of all, half of it was market pulp, where we had very high deliveries in the fourth quarter, and now they are more on a normal level. The second half of the decline was liquid packaging board. Liquid packaging board demand in Europe is looking solid, but we talked about high inventory levels in Asia and also slower demand. This is also what we experienced now during the first quarter.
We expect that to actually continue into the second quarter. A bit slower demand in Asia also due to tough competition and generally lower demand from the end customers.
A final question for me then. If you look at only carton segment, of course, [DORA] is now starting to launch the order product. Are you seeing any heightened competition? I mean, you commented that demand remains weak, of course, right now. We've got incremental supply. Does that make any difference or not?
I do not think that piece yet would impact, but it also saw that when you ramp up a new facility, it takes time to get to the certain grades, which can match some of our more premium propositions. There is no doubt that that would be another pillar a bit further down into the future that, yeah, again, puts more capacity out there. Right now, we do not. The only caveat just to add on this is, again, if these tariffs will stay and also there will be potentially some import tariffs into Europe, it could also then just open up some new opportunities and challenges. Again, a lot of the export of carton board from the U.S. goes to Europe, and we would expect that to change the whole flow within the industry, but nothing that we see big signs of at this point in time.
Understood. Thank you.
Thank you. Your next question comes from the line of Johannes Grunselius from DNB. Please go ahead.
Yes. Hello, everyone. It's Johannes here. I have a question on the volumes in Europe, which were down. I think it was 5% year over year. Is the volumes or shipments influenced by your sort of pricing strategy or being very price disciplined, or does this sort of reflect your end market development?
Yeah. Hi, good morning, Johannes. I can start by taking that one. I mean, in general, as you know, we've had a pretty clear, outspoken strategy that we also talked in the capital market about value over volume. We do evaluate continuously certain positions that we just will not be able to fight for given the low margin that it potentially generates. I think in the case of what we see right now, I think Andrei also touched upon it. We came from a Q4 level where the pulp sales was unusually high. That is much more now on a normalized level for Q1 and onwards. There has also been a little bit drop in the liquid packaging, which is, again, related to higher inventory levels and more fierce competition, particularly in Asia. Most of the categories are performing well. Liquid packaging in Europe is performing well.
There is not a lot of movements that we have. Also keep in mind the Q1 last year, comparable base, was very, very high because of unusual one-off deliveries. This is now the level that we saw in Q1. We would expect pretty much for Q2 as well.
Okay. Yeah. That's helpful comments. Thanks for that. I also have a question on your ramp-up of packaging now in the U.S. If you could remind us about what kind of volumes you are foreseeing for the coming quarters. I mean, does it have any sort of real impact on the divisional earnings or even group earnings, or is it more smaller numbers, smaller dollar tickets? Yeah. Thanks.
Yeah. I can repeat that one. We have a, call it a stretch target of around 15,000 tons for the full 2025. That should come first and foremost in the second half of the year. That is not significant. Again, you have to start somewhere, and it should be gradually coming up quarter by quarter. A clear ambition that going into 2026, it should be more. Right now, for 2025, this should not be in any way a meaningful impact of either the region or the group.
Okay. Thank you very much for helping me. Thank you.
Thank you. Your next question comes from the line of Martin Maltby from ABG Sundal Collier. Please go ahead.
Yes. Good morning. A couple of questions. First, clarifications on FX. You say plus SEK 100 million. Is that also including the underlying FX exposure, or is that just FX hedging quarter to quarter and the inventory revaluations, etc.?
Yes, Martin. Good morning. The positive SEK 100 million is really a combination of two things: negative impact of SEK 200 million within other or currency hedging, etc., as we report, and positive SEK 100 million within the Europe region. That is the transactional exposure we have in the Europe region.
There's also covering the underlying exposure. The quarter to quarter effect from FX is plus SEK 100 for you?
Yes. Again, based on the currency rates at the end of the first quarter, which will, and of course, the revaluation will be determined by the FX rates at the last day of quarter two.
Excellent. Second question. There have been several pulpwood price increases announced, yet you say that the price will be flat for you in Q2. Does that mean that there is no price increase, or does it mean that you have a lag and you get it in Q3, Q4?
Yeah. In terms of the pulpwood, there were price increases or price changes announced during the first quarter. First of all, if we look at who announced or the players that announced, we do not source that much from these suppliers, which means that if we look at our sourcing mix and our outlook for quarter two, we see stable pulpwood prices for our part. We would not stretch to any comments into the second half. As I said, we for now see a much more stable situation on the pulpwood market in terms of demand and supply, which should support more stable pricing also going forward.
Excellent. A similar question on output prices. There is a 1% price increase in Q2. You have announced more on sack and kraft and coated fine in the US. Is there a spillover effect in Q3, or is everything handled in Q2?
The absolute majority of it is within Q2. Again, those are parts of the segments. One percent is for the whole region. It is 1% both for Europe and 1% for North America. Of course, the announced price increases are not on all the categories.
Sure. Thank you.
Thank you. As a reminder, if you would like to ask a question, please press star one and one on your telephone keypad. We will now go to the next question. Your next question comes from the line of Oscar Lindström from Danske Bank. Please go ahead.
Thank you. Good morning. Really just one question left here for me. That is talking a little bit about how you will handle the more long-term effects of the strengthening of the Swedish krona versus euro, US dollar. I mean, this will, everything else being equal, move your mills relative to foreign competitors up on the cost curve. Maybe not immediately, but once hedges have run out. Do you see the need for you to take further action in terms of either more incremental cost reduction or perhaps structural actions to mitigate the cost increase or the worsening competitive position of your mills in Sweden?
Yeah. I can start, and maybe Andrei jumps in. I mean, it's another good question. I can say the following, though, to also give it perspective, right? I mean, we had a weakening Swedish krona for more than 10 years, and that certainly also helped in many ways the competitiveness for Swedish export business. Now it's gone slightly the other way around. I think in that sense, it's not a major drama for us. We don't have tremendous exposure into US dollar. I can say that as more of a principle, more as a kind of overall theory, that if we would see the Swedish krona appreciating more against both the euro and the dollar, that just means that we need to evaluate the options.
That could be everything from further going into pricing, as I think you alluded to, absolutely right, what even further can we do with internal cost base. If this is just the Swedish krona phenomenon, it does impact the competitiveness. Right now, not anything that causes a lot of alarms and drama for us. Again, if it will stay, accelerate, and also spread in many ways to the euro, surely that is something that we will then look at what options could be. Probably the answer is a mix of certain actions.
All right. Thank you. Just more of a check with Andrei on the bridge going into Q2, just so that I have everything or that we have everything. You said prices up 1%, energy costs down, and then volumes flat. Wages between SEK 60 million-SEK 80 million negative in the quarter, and then FX positive SEK 100 million, and then maintenance negative, I guess, SEK 330 million. Is that a good summary of the impacts that we should have in looking at?
Yeah. Yeah. No, that's a good summary, Oscar, of what we went through. Yes.
On the ramp-up in North America for the packaging lines, is that going to give any one-off costs or heightened OpEx either in Q2 or second half for that matter?
No, it shouldn't. The only thing to keep in mind is when we build up new positions, as we will do in this case, tend to be a bit margin delivery on the total. The margins probably should be a little bit below the average we see for the region, maybe a bit longer payment terms to get our portfolio through the door. Given this is so marginal now, at least for 2025, this shouldn't impact and move the needle in any shape and form.
Wonderful. Thank you very much. Those were my questions.
Thank you. There are currently no further questions. I will hand the call back to the room.
Thank you, everybody. That concludes today's meeting. Our next earnings presentation will be on the 18th of July. Thanks again for participating and goodbye.
Thank you. This concludes today's conference call. Thank you for participating. You may now disconnect.