Earnings Call: Q1 2020

Apr 24, 2020

Thanks for joining this webcasted conference call. We have today released our Q1 report and our acting CEO, Lena Tom and our CFO, Sverd Wasne, will now hold the presentation. After that, I would now like to turn the call back over to you. So with that, I hand over to you, Good morning, everyone, and thanks for calling in. Well, we're going to talk about the Q1 report from Wilbur Korsnes and the headline sales record sales volume and continued price pressure is what I think characterized the last Q1. If we switch to the first slide, key highlights. What we can say is we had a stable production and a solid demand over the the or throughout the quarter. As I said, record sales volumes, up 9% compared to last year. And we also had, I'd say in the quarter itself, limited financial effects of the COVID-nineteen. I'll come back to that. Earnings were, though, heavily impacted by continued lower market prices, especially then on brown sack paper, which has been continuing development over the last three quarters basically. We also have ramp up effects from KM7 that affects the result with $200,000,000 compared to the reference period. We'll come back to that as well. During the quarter, we started up the coater in according to plan. So if we take the next slide and just have a quick look on the effects of the corona pandemic. So far, I'm happy to say that we've had no major disruptions and limited financial effects. We do monitor the situation on a daily basis. We have actually, since roughly a little bit more than a month back, implemented a crisis management team, and we put that in place. And it's working in 6 work streams where we basically cover all the different aspects of corona. And this group is reporting directly to me. We have daily updates on it. So I think we have a fairly good understanding of what's coming up, and we are preparing ourselves to be able to deal with matters that become urgent. We have, as it all set a consequence of corona initiated additional cost saving measures, and we're pushing through those. If we look on division solutions, the sales there were affected already in Q1, contrary to the other two divisions. Mainly that is, of course, due to the fact that a lot of the business we do in Solutions is related directly to China, and China had its big hit of corona directly after the Chinese New Year. What we see there going forward, just to make a comment on that, is Q2 is also going to be a tough quarter for Division Solutions. Another change, first half year planned maintenance stops. We have maintenance stops in a number of our mills. We have basically postponed all those stops into the second half of the year. In Gruvon, that led to negative effect of roughly SEK 40,000,000 as the cancellation of the stop came very late, and we had we got some costs to do the rescheduling. On KM7, we will also we're also expecting to have an additional negative impact of roughly €100,000,000 in the year due to the fact that at the planned maintenance stop, we were going to do some rebuilds and some upgrades, basically some baby problems or whatever you call it in English with a new machine that we were going to correct. And now we cannot correct them until second half of the year, and that will have some effect on the product mix going forward, but we can deal with that. Rescheduled maintenance shutdowns at Sravlak, Agavele, Pietasare Mills, we had a bit more time there. So the full cost additional cost for those postponing those stops will be roughly $35,000,000 And as you know, the Board of Directors has withdrawn the proposal for an extra dividend also as a consequence of the corona pandemic. Next slide, please. If we look on the market perspective and contents, I already said that the demand in Q1 was solid. We could see strong market conditions for liquid packaging board. We could see stable markets for carton board and container board. The market for sack and kraft paper stabilized, but at lower prices. So there we could see that especially once again brown sack prices continued downwards in the Q1. Much of this, however, we need to remember is a consequence of contracts that we entered into during the Q4 that now come in, in effect. So for additional contracts coming in, in the Q1, they were, I would say, on level with the 4th quarter, not lower. What do we then think about the future here? Well, 2nd quarter, there is a high uncertainty of or concerning effects of COVID-nineteen and the impact of that still. However, I would say that we continue to see stable market conditions for products we deliver into Food and Beverages and Medical and Hygiene segments. Surprisingly strong, I could say. So that looks quite okay. Market conditions for consumer and luxury goods, there we do expect that they will become more challenging. But then they are smaller segments for us relative, Food and Beverage and Medical and Hygiene. Segments, we do expect weaker market conditions for the Q2 compared to the Q1. We have some right now some logistical challenges, and we believe those will continue to affect us in the second quarter, which means that specialty shipments to Asia in containers is somewhat difficult for us right now to keep the time schedules. And there is a certain risk that, that will have some impact on the volumes that we can ship over to Asia. Next slide. KM7 and the ramp up of KM7. I'm happy to say that we started up the quarter during the Q1, and that start up went overall very well as perhaps could be expected. There were some initial challenges around that, but we have overcome those. And the quota today is running quite good actually. So now we're starting to do test runs with coated carton board products and coated white top liner, and we delivered those with good results to customers. So that looks really promising. We have also initiated certification of liquid packaging board products together with our big clients. And that process is still in its infancy, but so far so good. Solid volume output centered around uncoated liner, which is our main product for the time being. Challenges initially around the quality have gradually been overcome. We also, during the quarter, started to produce some cup stock. And there, we had actually initially quite big problems with sizing and some other topics around quality. I'm happy to say, though, that we now, in April, have had very good runs with that. So it seems as if we're getting that in order as well. Continued uncertainty, though, were connected to the ramp up in production mix, mainly production mix, I would say, because we want to move into higher value products as soon as possible. But that takes some time because we need to be cautious about really delivering the right quality. Negative impact on EBITDA for the Q1 was roughly $200,000,000 and we have guided for the full year for an impact of up to $450,000,000 And this is let's say, we are in the range $350,000,000 to $450,000,000 right now where we believe we will come out. From 2021, we continue to foresee that we will have a positive impact of JM7 on EBITDA versus then the 2018 base year level. Next slide, please. What has been good during the quarter is that we the fact that we've had excellent production, record volumes, and we have really focused a lot during the last couple of quarters here on safe and stable production. And there, I think the different mills have done a fantastic job, and we see a clear stabilization of production. So the actions that we have taken start to show results. For sure, we still will have challenges ahead, and we have still a lot of work to do, but at least we're moving in the right direction. We also see that safety development is developing in a good way. So lost time injuries have basically close to be reduced by half since 12 months ago, which is very, very positive. Next slide. Cost and efficiency program, it's on track. Positive impact in the Q1, roughly $50,000,000 as expected. So we are, I would say, on track to deliver the $250,000,000 that we committed in cost savings and efficiency in 2020. We expect a bit back heavy delivery during 2020. So a lot of the results or the impact is kicking in the later half of the year. Work is then, of course, also in progress to identify additional building blocks to deliver the 6 $100,000,000 run rate that we set for Q4 2021. Okay. I think we can jump to the next slide. Raw material costs. Well, we can see that we have a cost of pulpwood increasing in the Q1. We have guided that we've said that we expect that level to remain flat in the second quarter, but it's a bit uncertain due to the corona. Why flat? You might believe that they should continue downwards. Well, we most likely expect that the list prices will continue downwards. But what is happening is, of course, also that the sawmills now are reducing their production capacity, which means that we are getting less sawmill chips from the sawmills. And that means we need to use more round wood, which means that we have to have increased transport distances on some of the stuff that we source, and we have some additional costs around chipping these, etcetera. So that gives that results in some higher costs. We also have the spruce beetle, which is affecting forest to try to take care of that problem. So we're taking more and more volumes of this spruce beetle infested wood, which means also longer transport distances. And processing that wood is also somewhat more expensive in terms of we to use more chemicals, we get less bark for energy production, etcetera. So there we have some negative effects. We had a bit of a challenge during the Q1 when it was very wet out in the forest. That will also result in some, let's say, delays and some extra costs for the Q2. We were quite close getting into a problem with Birch wood supplies into especially Groove and Mill during the Q1. But we managed to get through that, and now the situation looks better. If we look on chemicals, also there, it's a bit uncertain where saving. Also when it comes to pulp pricing and the pulp that we're buying for Pitasare Mill, there we also could see an impact in terms of decreasing prices in the Q1. On energy, spot prices for energy have dropped drastically, but of course, we hedge our energy So with that, I think I will leave or let Ivar step in and take over and talk about the key financial figures. So please, Ivar. Yes. Thank you, Lennart, and good morning. So some highlights on the financial and focusing mainly on the Q1 2020 result and versus year ago. Net sales is down 2%, certainly highly impacted by pricing. Volume growth is up, as we mentioned earlier, by 9 percentage points. And you also see that we have a positive net sales development since Q4. We'll talk more about these items impacting net sales in a bridge in a couple of minutes. In terms of profitability, certainly significantly down versus year ago and is also below where we want to be, certainly long term. The decrease is surely impacted mainly by negative market pricing implication. And that's the trend that we've seen then since end of Q2 2019. Now I think as some of you remember for the last different quarters, it's also very important that we look into our profitability excluding the KM7, to get a view of what the underlying performance really is, and I'll cover that into the profitability bridge also in a second. Just one last point on this slide, and that is that the return on capital employed is further down. I think there's two reasons for that. One is just a pure calculation on how it is computed. It's based on a rolling 12 month average. And now when we take out the Q1 2019 EBITDA result that was very strong. The last four quarters EBITDA has come down versus what we saw in the previous ones as well as we have the full the KM7 asset base in the numbers. So you can certainly say that this is in theory now really the lowest piece of that KPI, and it should go upward from now on. So if you move into the next slide and look into the net sales bridge, if you then start by looking at the top on the green arrow there. So we are flat on net sales if excluding the KM7. I think the building blocks speaks for themselves, but just to quickly go through them. I mean there's a significant pricing impact a year ago. It's not every quarter. I can tell you we have a 7 percentage point negative pricing impact. I mean, that pricing bucket is coming from several segments. Most of it's within the Vision Paper, where in particular, the SAC pricing has had a very brutal development since last year. There is as well a certain pricing impact within division board, clearly though much less than on paper. Carton board and container board are somewhat down, while liquid packaging board is keeping the level up due to our longer term contracts. Currency impacts of 2.5 percentage points, very much linked to a continued weakening of the Swedish kroner. Then there's the sizable volume and mix impact reflecting then the strong quarter end of the production demand that Lennart was talking about. And then last but not least, the KMSM with an impact of 2.5 percentage points. This is very much down to a negative mix impact. And that is a little bit also, as Lennard did refer to, lower value or somehow, on average more lower value segments or grades within division board and also to a certain extent higher waste than we expected. So if you then move into the next slide and look to the similar one, just the EBITDA bridge, you will recognize there's a lot of the same impacts that I was just going through the net sales bridge. I mean, EUR 460,000,000 of pricing impact that wipes up 45% of the profitability versus last year, which obviously is massive. Now having said that, covering after the pricing, there are some positive building blocks that brings the numbers back up. Currency is obviously one of them, volume and mix, then the raw material of 235, which is then a combination of some of the things that Lennar went through. Wood fiber cost reduction of roughly €80,000,000 We have pulp pricing coming down, and that's the pulp pricing we are buying of SEK 125,000,000. And then there's smaller or more limited impact coming from energy and hedging. In terms of our cost and efficiency program, that's a €50,000,000 delivered. And I think when we launched this program, we talked about that, that will come from different streams, and that's also what we see now in Q1. Most of this effect this quarter is coming from operational efficiencies inside and within procurement where we've done some good progress. There is also a smaller contribution from fixed costs, mainly from reduced external services, starting to see the impact of some of the employee reduction and just in general a lower level of SG and A activity, very much in the wake of what the COVID-nineteen has imposed to us as a business. But as I said, we certainly have expectation for that number to come up from Q3 and Q4 in other cost bucket of minus €65,000,000 is a combination of several offsetting items. In this context, the biggest items are I mean, it's cost and an impact associated with the late maintenance delay we did in Gruven of SEK 40,000,000. There's also a timing issue of products produced versus sold in last year's base. So that's hitting more of a timing issue in the Q1 2019 number. But I said that the bigger item here is certainly the late delay of the Gluber maintenance stop. Then the SEK 200,000,000 of KM7 that also been mentioned, it follows very much a lot as we had from Q3 and Q4. It's mainly a volumemix component and versus then the 3 machines that we had in Juiven in before we started to initiate the KM7. And as well, there is a certain fixed cost component in there that the vast majority is than the volumemix impact. So if you just go to the next slide and just a couple of comments per division. I mean, board had another good quarter and continued some very strong sales growth figures that we've seen for most of 2019, 5% sales and looking at the volume is up 13%, which is very, very solid, clearly done and driven by stability production in pretty much all of our machines and sites and certainly also new capacity coming in from AM7. Yes, liquid packaging board, another strong quarter. I think everybody have realized that in the wake of COVID-nineteen, shopping behavior, in particular within food and drink, has accelerated, and that also spills over for us. Cartonboard had another quarter, and we've had some quarters now in the row where we've seen double digit net sales growth for cartonboard. So that's also positive to see. Yes, on container board, so fueling and liner, another growth quarter, certainly driven a lot by more volume also coming out from KM7. Net operating expenses up by 10%, mainly driven by the volume growth I was just talking about. EBITA margin then of 16%. But keep in mind in the last comment there that it's excluding then the KM7 impact, then we certainly believe this temporarily and will structurally go away, we're up to 21%, which is on a very acceptable acceptable level and certainly within the range that we have as of a target. Moving to the next slide and into division paper. And it is a a different story than on board, and that story has been also quite different for some quarters. Minus 18% net sales is pretty significant. Very much of that is coming from a negative pricing impact versus last year. You actually see volume being pretty flat. And well, at least that is positive in the sense that we don't really see that accelerating, continuing, and we start to see probably the bottom now in terms of the volume. If you look then at what else is happening into the net sales, yes, the pricing on SAC is the main, main point. Kraft paper holding up much better. White MG on the summer decline. We actually have a solid growth on some one of the segments within kraft paper. Operating space and coming operating expenses coming down, partly due to the volume, which is slightly negative, but as well as some of the cost shift base between the machines, we also had some good operational savings in divisional paper, which is starting to show. EBITDA, 14%, which is down 6 percentage point versus year ago. And there is no doubt that, that's also a level that we are not really happy with. And of course, we're doing really what we can to improve that number going forward. Moving into the Vision Solution. Net sales coming in flat, which is actually a pretty good number given the circumstances. Decline in Managed Packaging, which shouldn't be a big surprise given the exposure that we have in Southeast Asia and China has certainly been impacted from early on into the quarter. A good news there is that Fiberform has really managed another quarter of strong growth and offset the decline from Managed Packaging. Yes. EBITA margin, pretty flat versus year ago. EBITDA in absolute down versus year ago. Most of that is due to some one offs in the Q1 2019 base more than anything strange happening in this quarter. And the Q1 2019 base, basically, it's a favorable outcome of some claims reversal we did last year. Moving into the next slide and talking a bit on our balance sheet and some of our net debt to EBITDA ratio. Net debt has gone up a bit versus what we had in Q4 ending, and I'll come back to this. You also see that from the table that the ratio has increased from 1.9 to 2.3. And I should probably spend a bit of time to explain why that is. Well, there's two reasons for it. First, as I mentioned a bit earlier, the rolling 12 months EBITDA has come down, the There is also another piece around which is related to our energy hedging. And we have inserted SEK 400,000,000 as a collateral deposit for negative value of electricity derivatives. And you can say that is a mechanism that is happening pretty much automatically through the instruments that we are engaged in under the energy. And now given the difference between the spot rates and some our hedging positions have been quite significant, that value is certainly much bigger than it would normally be. In terms of the debt maturity, we have limited positions over the coming calendar year. So that's certainly good news. In terms of CapEx, we are also taking what we can a little bit into the points Leonard mentioned around the 6 streams that we're doing to manage the COVID-nineteen as good as we can. I mean we looked over all of our investment choices and the list in trying to do the tough choices we believe are fair, but certainly not hampering operation in any significant manner. And we have found, at least we are working very close now to finalize the details around $200,000,000 So it's certainly our ambition to bring down the expectation of CapEx by $200,000,000 So that means the total goes from 1 point 5 billion down to SEK 1.3 billion, which is the last number we communicated in Q4. And I think the dividend part has already been covered that we're staying with the original the base dividend while the extraordinary dividend has been pulled back. So with those comments, I just hand back to Lennart for summary and some Q2 comments. Thank you, Ivar. So trying to summarize what we have been presenting. Limited financial effects of corona so far, but of course, increasingly uncertainty going forward And finally, strong financial position. And we have taken precautionary measures to secure position. I think that pretty much wraps it up. So with that, I suppose we Yes. We will now I think yes, we have 1 more slide. 1, actually. Yes. Yes. Okay. Perhaps that's of a certain outlook. We stable market conditions expected for products that we deliver to food and beverages and medical and hygiene, we see a continued strong market there, which is, of course, our biggest segment. When it comes to market conditions for consumer and luxury goods, we see that they will most likely become more challenging going forward as will then the deliveries of products into the industrial segment, which mainly then affects our paper business. Fiber costs, we said are expected to remain flat compared to Q1 due to the fact that we have certain higher cost in getting the wood out of the forest. We do expect some logistical challenges that might affect our sales or, let's say, our possibilities to deliver some volumes to Southeast Asia and that region. Remaining KN7 start up effects in 2020 estimated somewhere around $150,000,000 to 2 $50,000,000 I think we will actually be able to. And when it comes to then the IA 841 revaluation exercise of biological assets, I don't know if we mentioned that, but we are undertaking that in Q2, which might have some impact then on our results in Q2. I think that's roughly it then. No more slides forgotten, I think. Yes. So that was the end of the presentation. And we will now open up for questions. And we would appreciate if you limit yourself 3 questions each and then get back in line. By that, please, operator, we are ready for questions. Thank Our first question comes I'd like to ask around paper and the market outlook, especially now going into the Q2, given that sales has come down a long way, I'm curious to hear a bit more about how much potential downside you see. And maybe if you could open up a bit on your price visibility within paper and your order book situation? And if you like, any type of guidance in terms of year on year volume development in the second quarter, please? Okay. I guess I can start and Eva can continue. Order book for BrownSach right now is around 40 days, which is not bad at all. But that is partly due to the fact that we didn't comment that so much, but we had the production problem in the Shavlacamil on the Sac Paper line early April, which meant that we lost roughly 8, 10 days of production or something like that. So order book right now is pretty decent, actually quite good. However, of course, we see that inflow of new orders is coming down. So I would guess that deliveries in April May will continue on level where they should be, but then we probably will have a weaker June. We haven't felt so much price pressure yet, but normally that comes as a consequence of a lower demand on the market. So I think we need to expect some further drop on prices on brown Sac. On white Sac, the story is a bit different because on white Sac, you need to remember that most of the white Sac actually goes to smaller Sacs and packages for sugar and flour and stuff like that. And that market is actually pretty strong. 2nd big market for white SAC is then bags for various kinds of chemicals. That goes a lot to automotive, etcetera. And of course, there we probably will see a certain impact, but that is compensated then by strong demand for other segments in white Sac. So it's mainly brown Sac that is affected. I don't know, Ivar, if you have any additional comments. No, I think you summarized it well. The only maybe caveat I want to add, and I think this should be clear, but the whole market on paper started to move quite a lot in Q2 last year. We really did what we can to hold back quite well on pricing in Q2. So actually, our Q2 'nineteen is still a relatively strong quarter on paper. And if I just look at some of the average for division pricing level now that we're trading on versus how we did Q2 2019 and maybe are 15 percentage point lower. So certainly versus Q2 2019, this will be another quarter which you would expect a hefty quarter impact on pricing. But then I think it really should be, to a large extent at least, at the end of it since from Q3 'nineteen, it started to go down. But I fully share with what Leonard said that Q2 versus Q1, it starts to be at least limited of what we should expect to further price drops with some exceptions. That's very helpful. And now just on the technical kraft papers, just to maybe complete the picture on paper? What are you seeing there? Well, on products then delivered once again to Food and Healthcare, actually, we're pretty optimistic. We think that, let's say, prices will probably be flat. Volume outlook is probably slightly growing on that segment. If we look on the non food retail industrial, we don't see much changes of prices. They will probably also be flat. But there, I would say that volume wise, it's probably slightly declining. So overall, no dramatic changes. Great. That's very helpful. Thank you very much. And just one final question from me, and you did elaborate a bit earlier on your fiber cost situation. I was a bit surprised that you're seeing flat fiber costs from here, but I understand better now that you gave some additional information there. Having said that, is it your anticipation that later in the year, we might start to see a more favorable trend? And also, if you could please update us on your current or should we say 2020 net pulp balance for the group? Okay. If I start with the situation in the forest then, well, we are uncertain where the market will go during 2020 considering corona. I think it depends much on the development. And there is a strong connection to how the sawmills will be able to operate. But it's not unreasonable to believe that there will be further price reductions on pulpwood going forward if the market stays fairly normal. But we're a bit cautious to as uncertainty is so significant right now. Then what was the Yes. On the pulp, Eber. Yes. No, I can try to cover that. And it's a good question on what kind of net pulp exposure do we expect to see. Just a bit of a reminder that our net balance, our long position in 2019 was 140,000 tonne. I mean, as a starting point, we certainly expect that number to come down. A lot of that is driven through KM7 being well, coming into gear and will consume quite a big chunk of what that balance normally would have been. Now having said that, given now what's happening in terms of COVID-nineteen and also the uncertainty of what we see in the different channels playing out, there's no doubt that, that can also probably trigger some, call it, some internal optimization where we might actually produce some selective pulp a little bit more than expected. So it's kind of there's minus of that number for the KM7 absorbing more and then some big uncertainty what else could happen in the wake of some channel uncertainty. So it's probably the best I can give you. Number should go down, but it's very tough to say how much it should go down with. What could happen is, of course, also if it turns out that the brown sack paper market weakens further, we have now done a small modification of our in shablaken. So we can as an alternative to produce brown sack, we can also produce brown market pulp. And there is a big demand for brown market pulp in shablaken. So that means that Schiblak might be producing more brown market pulp than previously. And that's sort of a hedge in a way or a contingency plan if market goes down further for brownsack. Great. Many thanks. And the next question comes from the line of Robin Santavirta from Carnegie. Please go ahead. Yes, thank you very much. So first a question on the KLM7. Could you just provide some details on what did you produce in Q1? And is the target basically at the end of the year in terms of volumes and in terms of split that volume? And also related to the KM7 disqualification process, can you do that now normally with this coronavirus pandemic? Or is that limiting you or prolonging the process? So that would be my first question. Thanks. Okay. I can start and Ivar can continue. Well, talking about the Q1, we've actually I'm quite happy with the way that the coater started. I think we were expecting more problems than turned out. It started out pretty well. And that means that during the Q1, we have made more trials with coated grades than we were expecting. And of course, the reason for pushing that a bit in timing is that coated products pay better than uncoated products. So we want to move into coated products as soon as possible. The drawback of that is, of course, that those trials means that the output was reduced somewhat compared to if we just had been running flat out with uncoated white top liner. Uncoated white top liner production now is actually very stable, and quality output is great on KM7. So we could produce a lot of tons if we want to uncoated liner. But considering the overall market there, as we don't have existing, let's say, existing customers for white top line that can take substantially larger volumes, we need to send those volumes to new customers. And then the market is not very strong. So we're a bit cautious of doing that. And when we do it, of course, we don't get the highest prices. So therefore, it pays off over time to do more coated products. So that's why we're focusing on that. Distribution of products, basically, we said 350,000 tons roughly in the year. Between 250,350. Between 250,350,000 tons, 350,000 tons. And I think we will most likely be in the upper end of that. I don't know, Ivar, if you have any breakdown on the volume. No, but I can make some comments, though, that as Lennox said, when we also guided on the interval, it's certainly between well, the methodology of this. There's a volume range and there's also contribution of the ton range. And between $250,000,000 $350,000,000 is probably where we expect to land. Now the vast majority of that is coming within containerboard and will be linked to uncoated white top liner. There will be some coated white top liner, but that should be very minor. And there will be some production of cartonboard and cupstock, but I would also say that, that's on the minor side. So I think that's pretty much the summary we can give at this stage. Actually, as you all know, if you look on volume versus margin contribution per ton, the volume itself is not so interesting. What's interesting is the margin contribution we get on the tons that we produce. So therefore, of course, we were trying to push for higher quality board rather than just running the white top liner. Certification was also a question. You're correct. I think our liquid packaging board customers right now, they're experiencing very strong market, which means that they are just trying to produce flat out. And that, of course, as always, does reduce a bit their interest to do spend a lot of time and efforts on certification. However, I think they also see the strategic importance of supporting us in that process. So we have ongoing work with certifying our products for their filling machines. But you're probably right that it might have some implications in terms of a certain delay when it comes to the certification process. But it is ongoing. I hope that roughly answers your question. Yes. Definitely. Thank you for that. Secondly, I was wondering about thanks for shedding light on the CapEx 2. I 2? I know it's early, but just sort of a rough indication and maybe related then to you have spoken a little bit about Frevia and Aevela recovery boilers. When should we expect decision for that? Is that now pushed forward? So a little bit sort of more details on that, please, if you can provide. Yes. Okay. Well, I think we have as I think I said when we had our last quarterly report, we have been reviewing the status of our machinery. And I think the picture is becoming increasingly clear. So I think we're building up a picture of what we need to do. And I think what you can expect is that we will do an investment in Fruhvi. The scope is still to be determined. And that means also that the size of that investment is still to be seen. I don't think that will have any major impact on the investments we do 2021. Likely, that will come 2022, 2023 in that space. 2021, we haven't, of course, looked so much into levels of investments there. But I would guess that we're basically on par or slightly above the level that we see for 2020. So that means 1.3%, 1.5%, somewhere in that region. But it's still early days. All right. Thank you very much. And then finally, just on the share buyback program that you have spoken about, is that still something that you are looking into? And what is the sort of reasoning for that if you still sort of plan to proceed with it, I guess, net debt to EBITDA of 2.3 percent is not really very low. The outlook is fairly uncertain for you and for a lot of your customers. So what is the reasoning? Surely, it cannot be a too strong balance sheet at the moment. So a little bit color on that, please, if you can. Yes. No, it's a fair comment, Robin. And let me just try to say something around it. We said from the start that we wanted to keep a close eye always on our kind of market conditions and how our performance is proceeding forward, and certainly, as you say, within the internal targets we do have. I guess the projection, if you talk about 3 months ago, the world was also a little bit different. We probably see that now the market has certainly changed, and there's much more uncertainty. So I mean that certainly impacts, I guess, you can call it the ambition of when we start and how much we will push the button. I think you will probably say that the Board wants to go and they will proceed towards the AGM asking for a mandate. But we will have a very, let's call it, yes, closed dialogue and be careful of potentially when and how much we go for this in terms of executing. Given our prognosis, I mean, just looking in terms of the ramp of how much you should do, some efficiency programs, some of the potential, it has been pretty clear that there should be room for doing this and still keeping it within our all parameters and targets. But this is a dynamic world and things have changed. And I guess that also means it's just a natural evaluation we take with the Board of if we do it and when and by how much. So more information to come, I think. That's the best I can say. I understand. Thank you for that. Thanks. And the next question And the next question comes from the line of Oskar Lindstrom from Danske Bank. So very impressive sales volumes during the quarter. A couple of questions on this. First off, I mean, did your production volumes match the sales volume? Or was there any over hang? And then second here on the volume theme, could you please describe some of the actions that you've taken to improve the production stability? And does this mean that we should expect sort of these higher volumes going forward, notwithstanding the COVID-nineteen situation, of course, but is this a new production level that we're seeing? Thanks. Okay. Thanks for the questions. I can start. Well, production volumes and sales volumes match pretty well actually in the Q1. So there is a I would say that, that means that stock levels were more or less on the same level. So we had a good production in all factories during the Q1 of this year. And you're right, I would say that is due to specific actions that we have taken. And a lot of that has to do, I would say, with focus, let's allowing the different mills to focus, but also really challenging them, putting in the right resources, following up very much on actions taken and putting in some experts in systematically identifying where we've had, let's say, bottlenecks and production issues. So we've spent a lot of time during the first, let's say, last couple of months last year and the Q1 this year on improving stability in production through specific actions. Normally, there is a tendency to think that you solve availability issues with investments, but a lot of it is actually down to a lot of small actions taken in everyday operation. I think this is what we really spent a lot of time on. And I have to say that the different mill teams have done a fantastic job during the Q1. And I would be I'm not saying that all problems will disappear forever, but I think with the way we're working right now, I do expect us to have a production level that is higher than we've seen in the last couple of years and also going forward. On top of that, of course, we have KM7 that now also will start to contribute to more and more volumes. I don't know if that's okay as an answer? No. I think that's very interesting since just production stability has been the issue for the company for a couple of years now, and it's nice to see production stability returning. A second question here on a different theme is you talk about sort of stable food and beverage, potentially weaker consumer and luxury and industrial segments. Respectively, how large are those segments for you in terms of sales? And what are you seeing right now or, let's say, in April in terms of demand for those various segments? Okay. Well, just to try to give you a rough figures, I think if you talk about food, beverage, medical, that corresponds to roughly 60% of our volume. What we define then as consumer luxury, I would say, is 20%. The remaining 20 is then roughly industrial applications, just to give you a rough overview on that. And what are you seeing in these segments? I realize you've touched on it already a little bit, but I mean Yes, I can try to give Now in April. I can give you a little bit of a flavor, just to give you some more data points at least. So if you talk about food and beverages, shouldn't be a big surprise that, that is dominated by liquid packaging board. And there's also a big chunk I mean, the majority of containerboard also belongs to that section. And then there's a minority, let's call it 15%, 20% from cartonboard. And then there is a good chunk, let's say 30% to 40% of white sack and then kraft paper also belonging to that piece, medical hygiene all coming from kraft paper. And if you're thinking about the consumer luxury, that split between more segments, but just doing a bit the rough and fast, EU cup stock certainly belongs there. You talk about carton boards, not a big surprise. The majority of that belongs to Consumer Luxury. Smaller piece, 10% -ish of containerboard coming in there and then somewhere between 20% to 25% of white Sac and kraft paper sitting there. Then on the industrial, dominated by brown Sac, but there's also a good chunk from kraft paper, 40%. And then there's about onethree of Whitesack as well. So it might be going a little bit fast here. I hope you got most of the points, but that should give you. Great. Thank you. And the next question comes from the line of Mark Yevonen from Handelsbanken. Please go ahead. Hi, this is Mark from Handelsbanken. I had a few more questions. You mentioned that energy prices are lower as we have seen. Could you just remind us how much power do you purchase? And then give a description of what your sort of hedging strategy is? I suppose you mostly deal in annual forwards. So this year, probably not that much of an impact. But what's the situation for next year? And when does that fully roll in the lower price? I think it's a question for Ivar. But as you know, spot prices for energy have dropped by where they're basically less than half now than they were a couple of months ago. I don't know if do you have the figures in our own consumption? Yes. So the total is SEK 3.6 of terawatts that we have in general consumption and then 1.8, so about half of that we purchased basically and the other one we produce. I think in terms of the hedging policy, we can say that within the next 12 months, we hedge the vast majority. And that typically means somewhere between 80% to 90%. So that means for the coming 12 months, that's the level we are. And a lot of those positions were locked on well, locked into kind of end of last year and beginning of this year. Certainly, before we see a lot of this dramatic decline that now has happened. Now going into then 2021 2022, I mean those hedging positions starts to dramatically decline. So a bit roughly, you can say that for 2021, we have somewhere between 40% to 50% already locked in. And then from 2022, we're down to 20%. At least that should give you a favor of the current position we have. Okay. Very good. And just further on that, what's your sort of spend fossil fuels? Yes. I think to be honest, Marco, that's a fair question. I don't have that trade off. So thanks very need to come back to you on that. It shouldn't be crazy amount. But let we can send you a note on that. So we don't have that upfront here. Yes. Yes. Okay. Then I guess you mentioned that you had some issues at Sjalpalka in the beginning of April. Perhaps you already mentioned what the sort of the beginning of April. Perhaps you already mentioned what the sort of financial impact of that will be in Q2, but maybe you could just remind me because I maybe missed that. I'm not sure if we gave anything or not, but it's around SEK 30,000,000. Dollars Okay, great. Great. Okay, that's all my questions. Thank you very much. And the next for the coming quarter? Could you be more specific on brown stacked paper, the price decline for Q2? No. You tell me. No, I think price is we don't see any big price change right now here in April, May. I think there is some possibility that prices might drop further. I don't know, some further down in, let's say, around June. But to give a figure on that, my guess is probably as good as your guess, but possibly another further 10%. I have no idea. It depends on the development of the world. And then you talked about maybe hiking the value of the forest. Can you give a rough magnitude for Q2, how much that could be on EBIT? It's a tough one because I mean we're literally in these discussions, and it's basically too early to say. But I can say that when we talk about the book value we have, it's currently €70,000,000 And I think we will be looking into the biological assets of 18,000 hectares. And there start to be some external benchmarking that you can do on this to give a bit of a flavor, but they also vary a lot. And I think we also will definitely have a thorough discussion and including the methodology The several stakeholders on this before we decide. So I don't want to give you any number more than that, but at least then you have some coordinates of the starting points of where we are. Okay. And on this remaining ramp up cost on Gruban, will that be booked in Q2 mainly? Or is it spread over more quarters? Sorry, once again, didn't hear the question. These remaining ramp up costs on the KM7, will those be mainly booked in Q2? Or is it later in the year as well? I can try to answer that. I think it's fair to say that we expect the vast part of that balance to come into Q2. There should be maybe something coming in second half, but our Great Great. Last question for me. These wood costs that dropped maybe less than one could have thought, is that biliary specific? Or is it more a reflection of the market, do you think? No, I think it's a reflection of the market. Okay. Excellent. Thank you. And the next question comes from the line of Johannes Consilius from Kepler Cheuvreux. Please go ahead. Yes. Hi, everyone. It's Johannes here. I have a couple of questions on liquid Packaging Board. And could you just remind us about your pricing sort of structure there? I know a lot of those volumes goes on annual contracts. So if you can remind us about how the contracts looks like going forward here. And if you can sort of elaborate a little bit on prices over cost, what you see in liquid packaging board for the near future? Thanks. Yes. I can start and then probably Leonard can jump in. I think, as you know, I mean, it's a very consolidated market. So we're not talking about many players who constitute the customer base for us. And the contracts typically are done somewhere between 1 to 2 years basis. That means that typically 1 out of the 3 is due up for discussion negotiation almost at some point of the year. We don't really guide any specific of what contracts are negotiated when. So I think that is just let's call it the 3 parties kind of rolling over in cycles of 1 to 2 years. I think in particular on the cost base, I'm not so sure if there's anything particularly I want to add on that since a lot of it is down to the fiber costs that we have already mentioned, quite a lot of it, and some of the chemical energy. I don't think there's anything specific that I feel is worth mentioning unless there's something in particular you have in mind. No. I was just wanted to get a feeling if you help me on about your thinking about EBIT per ton here. If what we see in the Q1, is that sort of representative for the next few quarters? Or do you see sort of an EBIT per ton improvement or EBIT per ton decline? That's sort of what I'm thinking about. Yes. I mean, I think the answer is on net sales per ton, that ton tends to change a lot over the quarter. So I think that's we did some, again, caveats around new contracts coming in and out because that tends to be pretty stable. Certainly, the mix can have some impact. But in general, that's one of the very flat segments we have. I think liquid packaging cost base is impacted like everybody else, depending on how we're obviously in the market. So yes, I think we already went through that. I think that's pretty much the best information we have. And I don't know, Leno, if you have anything else to add. No, I think I would say that, that is a very stable business. Sure, sure. But thanks for sharing that. And just continuing with liquid packaging board, but on volumes, I mean, could you mention what sort of capacity utilization you're running at? Could you sort of take out more volume since this appears to be very good demand for liquid packaging at the moment? Well, I think you can expect that we will do some marginal increase But until we have KM7 certified for liquid packaging board, we don't have too much additional capacity to put in there. But stepwise, as we get KN7 into liquid packaging board, of course, we intend to increase our volumes there. Yes. Then I have kind of a detailed financial question because I saw in the report that net working capital was impacted, I think, in the magnitude of SEK 400,000,000 because of some sort of how you book basically hedging on the electricity side. So I guess that's more of an account technical accounting thing. But should we assume that this was a negative one off? Or can you reverse this net working capital change? Yes. I mean, as I said, it's a SEK 400,000,000 and that sits now and it's moved out from our cash balance and sits in other receivables. And then you can certainly say that we will get that back. I mean, I hope so. I think it really depends then on the spot price. And if the spot price will come up, part of this will be automatically coming back to us. And certainly, if it stays like this, then that's how it is based on a contract. But anybody's guess, I'm not going to sit here and say that I'm an expert on how to read the energy market. But yes, I think if the spot rate will go up, then that will start to come back to us in the coming quarters. Okay. Thank you. That's all my questions. Thank you very much. And the last question comes from the line of Cole Hathorn from Jefferies. Please go ahead. Good morning. Just one follow-up on brown sack kraft paper. You mentioned that skull blocker, for example, you can produce some brown market pulp if sack demand declines. What else can you do among your production portfolio to kind of manage production to demand? Good question. We are putting quite a lot of efforts into looking into product mix and product mix alterations right now. So of course, there are opportunities to go into other niches. And we might very well do so if they give a better margin contribution per ton. I wouldn't expect that we can do that for all our products considering that the market is as it is and the fact that we have certain limitations on our different paper machines. But let's say we might be able to move some 10%, 15% of our SAIC production into other segments, disregarding now more pulp. Great. Thank you. As there are no further questions, I'll hand it back to the speakers. Okay then. So that concludes this conference call. Thank you all for participating and welcome back when we report our Q2 results, which is 17th July. Thank you. Thank you. Thank you.