Earnings Call: Q2 2020

Jul 21, 2020

Good morning, and sincerely welcome to this presentation of SCA's Half Year Report for 2020. The report will be presented by CEO, Ulf Larsson and CFO, Toby Lawton. And after the introduction, we will there will be an opportunity to ask questions on the report. So please, Ulf, take over. Thank you for that, Bjorn. Also from my side, good morning and a warm welcome to the presentation of the SA results for the Q2 2020. And I'd like to start with this slide, a summary of the Q2. And I can state that also during the Q2, we have been clearly impacted by the corona pandemic. The main priority has been to secure the health of our employees and by doing so, we have also succeeded in securing a stable operation in a quite challenging time. The sales was generally well maintained during the Q2 2020 compared to the Q1 'nineteen, owing to stable development of volume for all product areas except from publication paper, and I will come back to that later. The prices within all product areas have, however, been substantially lower during the 1st part of 2020 compared to the same period 2019 And the sharp decline in prices has, of course, had a negative impact on the sales, but above all on EBITDA, which dropped 25% versus the same quarter last year. When looking to the demand for each product area, we have been differently affected by the corona pandemic. Apparent demand in the full value chain is hard to predict and we clearly saw effects from hoarding and inventory buildup immediately after the outbreak of the corona pandemic, not the least in pulp and kraftliner. And now we feel in these areas that we are in a destocking phase. The demand for solid wood product has been surprisingly good to strong during the whole period, while we see more or less a collapse in the demand for publication paper. During the quarter, we have also seen continued lower cost for raw materials such as wood, chemicals and so on. Based on the survey made of our forest holdings during the summer of 2019, we have now confirmed the increase in harvesting volume in our own forest from today's level of 4,300,000 cubic meter to 5,400,000 cubic meter. And this increase will be gradually implemented up to the year 2025, resulting in successive increase in long term cash flow of SEK300 1,000,000 to SEK400 1,000,000 per year. When looking at our financial numbers for Q2 2020, we can establish that we delivered a little bit more than SEK1 1,000,000,000 at EBITDA level. This is more or less at the same level as we had in the Q1 2020. But when we compare with the Q2 2019, it is a reduction of 25%. We have an EBITDA margin of 21%, which is equal to the margin level for the first quarter 2020. And by that, we also had an industrial return on capital employed of 6% calculated over the last 12 months. And as you can see here, the SEA model maintains the margin level even in tough time due to the stable contribution from our forest holdings. Our leverage increased to 2.1 due to current lower EBITDA level, but the absolute debt level is still lower than last year despite the big investment in Obbola, which is running according to the plan. So I'd now like to make some comments for each segment and I start with the forest. And we have also during the Q2 had a stable supply of wood to our industries. We have seen a continued steady drop in pulpwood prices both for the pulpwood we purchased through import as well for the wood we buy on stumpage from private forest owners in the region. And today, we have in the SEA area no real impact from spruce beetle damages on either price or quality. Sales was down by 14% due to lower volumes and prices versus last year. EBITDA increased by 21% despite the lower prices and volumes and that is mainly due to the increase in net growth in the forest from 3,000,000 to 4,000,000 cubic meter annually and the increased earnings from revaluation of biological assets. In wood, we have had, as I said, a surprisingly strong consumption during the Q2 2020 and that cost mainly for Scandinavia, but also in U. K, U. S. And Central Europe. We have seen especially high demand from the Building Materials sector, but also from the DIY business. Asia has been a bit slower for us during the Q2. We have seen rather big volumes coming in from Russia to China. And in Japan, we have seen lower building activities during this period. We had expected a somewhat bigger impact from the corona pandemic in this area. So we have reduced production levels somewhat during the quarter and also over the summer. Otherwise, we could have delivered high volumes. My expectation last quarter was that we should see a small price increase for solid wood products between the Q1 and to the Q2 this year and the actual outcome was for us was about 2% and a bit higher than in local currency. And I believe that we will see another small price increase for wood in the 3rd and maybe also for the 4th quarter. Versus last year, sales was rather flat, but EBITDA was down 24% due to lower prices. As I said earlier, apparent demand for pulp in the full value chain is hard to predict. And we clearly saw hoarding and an inventory built up immediately after the outbreak of corona pandemic and now we feel that we are in a destocking phase. Still inventory levels are on the normal level for both softwood and hardwood pulp. European MBSK pigs price went from $8.40 per tonne up to $8.60 in Q2, but now it's come back to $8.40 again in July. Pulp sales decreased by 10% in the Q2 2020 compared to the Q2 'nineteen, and that is entirely due to lower prices. And as you can see from diagram below to the left, prices have fallen sharply during the corresponding period and this has resulted in an EBITDA drop of 47%. During July, affecting the Q3, a leakage in the recovery boiler was detected and the pulp mill was emergency stopped. The inspection after days of cooling down the boiler show that a black liquor injector had been slightly wrongly positioned and had damaged the water tube in the boiler. After repair and during the restart of the pulp mill, further consequences of the emergency stop were detected and the screen basket in the boiler had been damaged and had to be replaced causing several days of additional stoppage. So we estimate today that we will lose around 50,000 tonnes during the Q3 and that will give a financial effect of around SEK150 1,000,000 in the 3rd quarter. So if we then turn over to paper, exactly as it is in pulp, it is also in Kraftliner, hard to predict the current demand as we also here saw an inventory built up during the Q1. And now we feel that we are in a destocking phase. Demand for boxes has come down a bit, but kraftliner inventories are still on a normal level. The price for unbleached kraftliner increased by €30 per ton in the Q2, but that will be reduced again by €30 per ton during the Q3. If we then turn over to publication paper, we can see that the demand has fallen dramatically 30% to 40% depending on grade during the quarter due to the corona pandemic and immediate cuts in marketing budgets and print advertising. And we have then had to make market related downtime due to the lower demand and had a low capacity utilization as a result. This is the main reason for paper sales down 21% and EBITDA was also down 53% versus last year. When it comes to price for publication paper, they have been stable in the Q2, but the weaker market situation described will lead to price reductions in the Q3 of some €20 to €30 per tonne from an already low level. I'm pleased to say that we have managed to complete the planned maintenance stop in Obbola during the second quarter, and we made careful plans and managed to carry out all activities as expected, allowing us to keep the project on track, the big expansion project in Obbola. So as mentioned last quarter, we conducted a forest survey of our Swedish Forests back in 2019. And among other things, we could state that the annual growth was 1,000,000 cubic meter higher than we earlier measured. We also could note that the standing volume was 11,000,000 cubic meter higher than earlier estimated. Based on this information, we can now confirm the annual harvesting volume in our own forest will increase from today's level of 4,300,000 cubic meter per year to 5,400,000 cubic meter per year. And this increase will be gradually implemented up to year 2025, resulting in a successive increase in long term cash flow of SEK300 1,000,000 to SEK400 1,000,000 from 2025. So as I mentioned at the start, the business during Q2 has been clearly impacted by the corona pandemic. And with us, our main priority has been to secure our employees' health. And by doing so, we have succeeded in securing a safe operation. So the impact on production, deliveries and demand for SAE products related to the corona pandemic has, in other words, so far been limited with one big exception and that is in publication papers. Here we have in one goal lost 30% to 40% of the market and we have also been forced to make substantial curtailments during the period with, of course, a big negative impact on the result for the quarter. So by that, I hand over to Torbjorn. Thank you, Ulf, and good morning, everybody. I'll turn first to the income statement. And here you can see for the quarter, we had, as Ulf mentioned, an EBITDA of just over SEK1 1,000,000,000 for the quarter, which gave an EBITDA margin of 21.3 percent this quarter and then an EBIT of SEK 600,000,000 in the quarter. We have financial items of SEK 31,000,000, a bit lower than we had last year. And as Ulf mentioned, the net debt is slightly lower than it was at the same time last year. I'll come back to that. We also have some effect here that we are capitalizing interest on the part that's financing the new investment project in Obeler. That had some impact as well in reducing the net financial cost. The tax is SEK 110,000,000 with an effective tax rate of 20%, which leads to a net profit in the quarter of SEK459 1,000,000 and an earnings per share of SEK0.65 per share. If I turn to the next page with the contribution by segment and quarter, and I start on the left hand side for the Forest. And on the top left, you see the net sales development for the forest. And here you can see versus the previous quarter, we have a lower net sales, and this is really due to the lower delivery volumes from the forest this quarter, partly related to the volume issues mentioned in the industries. I'll come back to that. On the EBITDA side, we had a higher EBITDA this quarter, which is really due to the higher share of harvesting from our own forest compared to the Q1, which is a seasonal effect that we see every year. And then over a bit longer perspective here, you can also see that we have a higher revaluation effect that we've implemented from this year coming from the new method for valuing forest assets, and that's offsetting the effect of lower wood prices, which have come down successively since last year. In the Wood segment, you can see an increase in sales, which is a result of higher delivery volumes and particularly a seasonal effect. We have seasonally higher volumes this quarter, but in the supply operation, we also had strong volumes. So it's better than expected on the sales side. And then also on the bottom line side, we had the positive effect of those volumes. We have slightly higher selling prices and lower raw materials as cost as well. So the EBITDA increased from the Q1 from €95,000,000 to €143,000,000 this quarter. When it comes to pulp, the sales were down on Q1, which is due to the lower delivery levels versus Q1. Even though production was on the same level as Q1, we had lower deliveries in the second quarter, which led to a lower top line. And the bottom line is slightly down, more or less flat with the Q1. And here, we have the effect of the lower delivery volumes. We do have a positive effect from slightly higher prices this quarter. We also now have a lower negative effect from lower electricity prices. So the net electricity that we're selling from Ostrand is impacted that we have low electricity prices in our region at the moment. When it comes to the Paper division, you can see on the top line, there's a 16% decline quarter on quarter on sales, which is really driven by the lower publication paper volumes this quarter. And on the bottom line, that also has a significant impact on the EBITDA with the low capacity utilization that we have in publication paper as a result of the low volumes. In addition, we had a maintenance stop in Obbola, which had an impact of SEK68 1,000,000. So those two effects together result in the declined EBITDA versus the Q1 for the Paper segment. If I turn to the next page and the bridge of net sales, here you can see versus the Q2 of last year, the impact of price mix was negative 9% versus the Q2 of last year and more or less impacts all segments. The volume impact is primarily from publication paper, but there's a 4% negative impact on net sales. Then we have a positive currency versus the Q2 last year of 3% as well. So overall, a 10% impact on net sales. When it comes to EBITDA, you can see here the impact of the prices, the lower prices impacts EBITDA with SEK550 1,000,000 And then we have an impact of the lower volumes on publication paper of SEK67 1,000,000. It's mainly publication paper, and this is really the impact of the lower capacity utilization and lower volumes we have in publication paper. And we have a positive impact from raw materials with lower cost, particularly for wood raw materials. We have a worse energy balance this quarter versus last year, which is, again, as I mentioned, the impacted by the impact of the net lower net income from energy sales in Ostrand. We have a positive currency of SEK67 1,000,000 and then a small positive impact also of SEK23 1,000,000 in terms of other and fixed costs. If I then turn to the cash flow, and here you can see in the quarter, we had an EBITDA of 1 €1,000,000,000 in this quarter. And then when we take away the effect of the revaluation of biological assets and other non cash items. We had an operating cash surplus of SEK 768,000,000 in the quarter. We had working capital outflow of SEK 151,000,000 dollars We have a cash outflow seasonally in the first half year. We usually see a cash outflow in the first half year. This year, it's helped a bit by the lower volumes and prices. So net, we have an increase of 151,000,000 in net working capital. I can also mention here that to date, we have not seen any impact here from the corona pandemic in terms of working capital positions. Current capital expenditure is €338,000,000 in line with last year, which leads to a total operating cash flow for the quarter of SEK 273,000,000. We then had strategic capital expenditures this quarter of SEK655 1,000,000, which is mainly Obbola. We had a significant down payment this quarter on the paper machine. So we had a large strategic capital expenditure outlay this quarter also. Then the next slide just I just show can show the development of our net debt. And as Ulf mentioned, our net debt is lower than it was at the same time last year. We are SEK 300,000,000 lower than we were at the same time last year. And at the same time, we have financed strategic investments during 2019 and the first half of twenty twenty of more than SEK 2,000,000,000. And now, of course, that's mainly the Ostrand project that we are financing in terms of strategic investments. And then in addition, we also have, just to remind you, an unutilized credit facilities of SEK7.7 billion as of the 30th June this year. And finally, turn to the balance sheet. And firstly, here you can see on the top line, you can see the forest assets. And here, we have had an increase versus the end of last year of about SEK1.2 billion from SEK69.7 billion up to SEK70.9 billion. And if I bring your attention to the last line here where you see the line market price for forest assets, here you can see the market price in our region as we measure it over a 3 year average, and you can see that it's now SEK 5 per cubic meter higher than it was at the end of last year. And that shows that the attractiveness of the forest asset category is relatively unaffected by the current situation. And if you apply this price increase to the expected volume that we're going to have at the end of this year, then it would lead to an increase in the forest assets of SEK2.4 billion, and we apply this proportionally throughout the year. So, so far, with half the year gone, we have SEK 1,200,000,000 reflected in the forest assets that we have in the balance sheet. Then the next line down is the working capital. And here, you can see it's increased versus the last year. Again, at the half year point, we seasonally have an increase in working capital. So are some CHF200 1,000,000 higher on this point than the end of last year. We have deferred tax and then we have other capital employed, which is some SEK 700,000,000 higher than it was at the end of the last year, which is mainly the investment in Obbola and the fixed assets associated with the buildup of the new mill in Obbola. So we have a total capital employed now of some SEK79 1,000,000,000. Of that, some SEK9.4 billion is financed from net debt. So we have SEK 9,400,000,000 of net debt. And we have a debt to EBITDA multiple of 2.1x. This is higher than it was in the last quarter, and this is mainly due to the run rate of EBITDA over 12 months, which has come down rather than an increase in net debt. And then we have €69,000,000,000 is financed from equity. So net equity is SEK69.4 billion, and we have a debt to equity ratio of 14%. So by that, I will hand back to Ulf for a summary. Yes. I mean, I think we have told the story and we can open up for questions already now. Thank you for the participants. If you have any questions, kindly press star 1 on your telephone and return name to be announced. The first question is from the line of Alexander Berglund from Bank of America. Thank you. Good morning and thank you very much. I have a 3 part question on the decline we're seeing now in publication paper. You mentioned prices coming down now between €20,000,000 €30,000 per tonne into the second half. Is that locked in for the whole of the second half? Or could there be potential for further price negotiations in the coming months? The second question is more of a bit of a medium term view. And I know it's obviously very hard to forecast here. But do you think that the demand in publication paper will gradually bounce back as the economy is reopening? Or should we consider the possibility that COVID-nineteen could actually also accelerate the structural shift that we're seeing from print to digital? If you have any comments on what your customers are telling you, that would be helpful. And then thirdly, as a consequence of these developments, are you evaluating any further permanent mill closures or potential future conversions into packaging grades? Those were my questions. Thank you. Yes. If we start with the first one. As I said, we've had a rather flat price development in publication papers for a couple of quarters and on a low level, I would say. And now we see that we will have price reductions for the second half of this year. And I mean, for publication papers, I would say that the absolute majority prices are set for 6 months and that means that we will have this price level for the coming 6 months more or less. That's my thinking. The second one was maybe if we have reached some kind of new normal. And yes, I believe so more or less. I think that we I mean, after the financial crisis, we have a structurally declining market in publication papers. We've had that for many, many years. And the industry has been quite good in closing down capacity. So I mean, keeping the balance in a reasonably good way. After the financial crisis, I mean, we saw a sharp drop in consumption and it never went back to what it was. And I think that we will face more or less the same thing here going forward now. So I think it might be possible that we have we will reach some kind of new normal in publication paper. And I mean publication paper for us is not our core business and since 2012, we have reduced the capacity from 2,000,000 tonnes per year down to today 700,000 tonnes per year. And we have also said that we will sooner or later reduce the exposure to publication paper further. So this is not the place where we should be in the future. Thank you very much. Thank you. The next question is from the line of Robin Santavirta from Carnegie. Thank you very much. Just still related to publication papers, you say prices had to come down some €20, €30, per tonne for H2. What is the input cost or overall cost outlook for H2 compared to H1? And also, you said you're fairly cautious on sort of a bounce back in demand, but I guess the lockdowns in Q2 have been quite harsh on demand. Do you expect Q3 and Q4 demand to be in line with Q2 or better? Hi, Robin. Tobey here. I can take the first question. I mean, basically, input cost when it comes to the key raw materials, if it's wood or chemicals, are pretty flat now between have been pretty flat development over the first half year. So we don't expect a big change in that for the second half of the year either. The main input costs are pretty flat. The biggest impact that by far, to remember in terms of cost, is really the capacity utilization, which has a big impact. I think you see these kind of lower volumes, then your capacity utilization goes down and your basically your fixed cost coverage as a result is not as good. So that's really what affects the result in publication paper with these lower volumes. Yes, that's the biggest effect. And then the second part of the question, I think As I said, we have taken substantial curtailments during the Q2, 30%, 40% of the market just disappeared. And it is in this area, I would say, it's hard to judge the consumption for the rest of the year. But I mean, we don't really forecast that. We are in a tough position when it comes to publication paper, and we have a very low capacity utilization in this field. And I feel that goes for the whole market as it is just now. All right. And then related to you said it's non core publication paper for you. That's understandable. And that you basically long term will not be in that field. What are the sort of options for you to do in Nordviken? Could you comment a little bit on that, both midterm and long term? Yes. I mean, we have many options in Nordviken, but for us, it's not I mean, we cannot just look at 1 mill. We have to develop the total portfolio. And then if that includes Ludwig and that's not necessary that's not important really. So I mean, we have done substantial investments in pulp. We've done it in kraftliner. We do it just now. And we're also investing in forest, and we have a very solid business in wood. And I mean, we will put our money into this field. So it is better really to invest where we know that we will have a good return on the money. So we don't just look at one site. I understand. But I guess you have revealed some kind of plans for expansion of CTMP production. Yes, that is one That might be a very good option for us. I think we will if we do that, it will be a very cost effective production. But I mean, we are still in a thinking phase when it comes to tweak and so but that is one good option. And that would fit well to our strategic view on pulp. So that is a good option. Good. And then finally, just on pulp, weak delivery volumes in the quarter. Could you just comment on why is that? I do understand there will probably been some destocking among customers late in the quarter. But I guess, early in the quarter, there was still some hoarding. So why such weak volumes in the quarter? Also, what should we expect for the rest of the year in terms of delivery volumes and capacity utilization? And then finally, on the cost side, when I look at H1 in pulp and look at volume weighted cost and then compare it back to what you had in 2015, 2016, Shaw, the mill is not running at optimal capacity yet, but still it feels like the costs are quite high. So could you give any kind of guidelines about sort of the outlook for either mid term or long term for both the volumes and the cost expectations you have in pulp? Yes. If we start with deliveries, I mean, we did prepare for a maintenance planned maintenance shutdown in the autumn. So that's the reason why we had to hold back the sales in the Q2 and deliveries. So that is by purpose. And but then again, as I mentioned, we had a breakdown now in the beginning of Q3, which is absolutely unplanned, and that will have a huge impact. It is 50,000 tonnes, and it was a rather small thing to start with, but then we had consequences in the also in the fiber line. And just now, we are starting up and now everything seems to work well again, but it will have we will lose 50,000 tonnes in the Q3 and the negative effect on the result, we have estimated to SEK150 1,000,000 for the Q3. So I mean but deliveries, production was good in the Q2 and deliveries were planned due to the fact that we have to take a planned stop in the between the 3rd Q4, I think. And maybe you Torbjorn can comment on the cost side. Yes, absolutely. And I think here it's important to remember also that the deliveries will lower in the second quarter, as Ulf mentioned, but the production was on a similar level to Q1. So you can't take the delivery volume as a guidance for the cost. But in fact, the cost development in the Q2 versus Q1 was in the right direction and was okay. We still have some way to go, but it was in the right direction. And we have an impact ongoing as well, which I mentioned in my presentation from electricity prices, which is versus last year is negative that we're a net seller of electricity in partly Q1 has been very low in the northern part of Sweden, lower than other parts of partly Q1 has been very low in the northern part of Sweden, lower than other parts of Sweden. So that has an impact as well. But overall, the cost development is heading in the right direction. Can I just follow-up on that? Do you believe that you can reach the same electricity and the same input cost, the same cost level per ton that you had in 2015, 2016 sort of once everything is fully up and running? Yes. We expect to improve on the cost level we had in 20 15 because we now have the significant improvement in from the new mill. So absolutely, we expect to improve versus, yes, 2015. We have the benefits cost covered from the high end. You have to do the unchanged. Yes. Yes. Yes. And remember, a lot a big proportion of the cost is wood as well. And therefore, wood prices now, wood prices are lower this year than they were last year. So the dynamic on wood prices plays an impact as well. For sure. Thank you very much. Thank you. The next question is from the line of Martin Albi from ABG. Two questions. One first, you gave comments about price changes per segment, excluding the forest segment. Then you gave some comments also that lower prices would be offset in that segment by the value increases. Did I read that correct that there's no price change on the forest segment quarter over quarter for Q3? Yes. We expect it to be relatively flat Q2 to Q3 in terms of prices wood prices between the forest and the industries. That's true. I was talking historically when you look versus last year, particularly then we have when you look at the forest segment, we have lower net sales from lower wood prices. And then in the bottom line, that's offset by a higher revaluation effect. Okay. And then the last question on the paper segment. You commented that kraftliner prices would drop €30 Was that relevant for Q3 already? Or is that an effect more for Q4? I think we will see some effect in August and September. So it will affect also the result for Q3. And that goes for unbleached. I mean, in White Oak, we have seen prices have been flat and or flat. Okay. Yes. So that goes for unbleached kraft. So what you reckon is the price change on packaging quarter over quarter in Q3 overall? For us, I mean, as I said, I think that we will see it depends on I mean, we have different agreements in different with different customers. But I mean, we will start to see price decreases in August for unbleached kraft. And I suppose that will be fully implemented for unbleached kraft in September. Our next question is from the line of Oscar Lindstrom from Danske Bank. Yes. I missed the first part of your presentation, but so maybe you mentioned this. But I have a little bit of a question about the geographic sales mix of the pulp division in Q2. What percentage of volumes were you forced to sell or did you sell to the spot market and to Asia, I presume? And how do you expect that to develop in the coming quarters? Yes. I think we did have a higher level of sales to Asia and export than we had in the Q1. So that our mix a is worse in the Q2 than the Q1. So that's true. We don't kind of give a forecast of how that's going to develop going forward. That depends on how the market develops. But we had in the second quarter, we did have an effect from more export sales. And as Ulf mentioned, we had in probably the beginning of the second quarter, the volume was strong. We had this hoarding effect and then it's the destocking effect has come towards the end of the quarter. So that's where we place more volumes outside our core markets. Right. And a follow-up question regarding the mix is more in terms of end markets. And you've touched on the very weak demand from publication paper customers. What about the demand from tissue producers? Now you mentioned the hoarding effect at the beginning of the quarter. What's the demand looking like right now from tissue producers? I think it's rather stable when you look into, I mean, press conference from other companies dealing in tissue. I mean, they are it's a rather strong market, I would say. So I think we had this hoarding effect. And how long will this, let's say, destocking phase last? It's hard to predict. But I mean, for us, yes, now it's not a problem for us to deliver to find customers for pulp. The problem for us just now in the Q3 is that we had this breakdown in the boilers. So for us, it's more to I mean, to find a good way to supply our customers, to be honest. But I feel that the market for tissue is stable. And as you might saw in Asia, you had really strong Q2 for some place there. So I think it's the hoarding effect. All right. But I mean that means that tissue producers are what sort of twothree of your sales volume in About 70%. About 70% of the sales, yes. All right. Super. That's great to know. Thank you. That was my only question. Thank you. Thank you. Our next question is from the line of Mikhail Dopo from UBS. Thank you. Good morning, everybody. Just coming back briefly on the publication paper side. Would you be able to quantify the demand declines that you saw there on a year over year basis in June and also perhaps in July, just to get a feel of how things are trending there? Yes. When you look at the 2nd quarter overall, it is a 30% to 40% year on year decline like in the Q2 versus the Q2 last year. So that's what we've seen in the and that's what you see month by month at the moment, 30% to 40% decline. Then on a full year basis, Q1 was much more flat because I don't have the figure in front of me. But then year to date, then the effect is more like 20% decline in volume first half of this year versus the first half of last year. And then for the second half, I mean, it really that's a prediction then. It really depends how the market develops. But month on month, we're still at this 30% to 40% decline at the moment. Okay. So the 30% to 40% is also what you see in July? We don't have statistics for July yet. So it's we don't see July yet. We have to wait for those statistics, but it's still weak. Okay. Then in terms of on the kraftliner side, you talked about some destocking effects there. What kind of volume trends do you see in that part of your business right now? Sorry, what kind of I didn't catch you. Well, volumes trends again. I mean, are you seeing volumes declining? If so, by how much? Or are you seeing volumes up right now? Or what kind of the trends do you see there for your kraftliner business? But I mean, it's a rather stable demand for kraftliner steel. I mean, again, I think you had the hoarding effect in the Q1 also in I mean, with boxes and by that also for kraftliner. And you had also this destocking phase in Kraftliner. But I mean the underlying demand for containerboard is good and the stock level is, I mean, on the normal more or less on the normal level. But then it's hard to again, I mean, what kind of impact will the corona pandemic have for the society in the 3rd and fourth quarter. That's I mean, we cannot say and you cannot say. And will we have a second wave of corona in the autumn? That will, of course, have an impact if that will come. Will we start up and come back to some kind of normal then? I think it will I mean, we will quite soon go back to normal consumption in containerboard also. So but I mean, we as I said, we had this effect, but now we feel it's a rather stable situation. Okay. And then switching gears a bit in terms of working capital, which Toby talked about previously. So could you give some thoughts around I mean, you mentioned that the seasonality there in the tie up and release. But for the full year, what would you expect as things stand today on a net basis? Do you expect to see a release or a tie up in working capital for 2020? Again, we don't give predictions, but I think you can say the lower prices, we would see reflected through in a lower working capital. And then it depends a bit also on the volume development in the Q4 in particular because that's what drives the working capital at the year end. So but I think the big impact of prices that you've seen on bottom line versus last year, you will see reflected also through working capital for the full year. So I think everything else all else equal, then you would expect to see a reduction in working capital for the full year. But it also depends. If it's a very strong volume in the Q4, that leads to an increase in working capital. But I think I would add also to mention that we I mentioned it briefly in my presentation, but we don't really see any impact in terms of customer receivables at the moment from the crisis. It's not impossible that, that effect begins to come through more in the second half of the year depending how things develop. But so far, we've actually had a good tight development in terms of payment practices and over dues, so no impact on that front. Okay. And then just finally on CapEx, what kind of a CapEx level do you expect for this year? And perhaps also if you can say anything about next year? I think we've guided before for SEK1.2 billion in CapEx for the full year. So and we're with current CapEx, yes, current CapEx. So we're following that plan. And then for strategic, we expect around SEK 1.5 billion for which is the Obbela project primarily in strategic CapEx. Our next question is from the line of Linus Larsen from SEB. On wood products, we've been positively surprised on the volume side we were expecting a quarter ago to see some potentially steep volume declines year on year. Now we have a 6% volume growth instead. I wonder now looking into the Q3, do you think the Wood Products business will still continue to grow volumes year on year? I would say that if we would have known what we know now, then it should have been growing. But I mean, we took the decision to not put in extra people into the sawmills during the summer and that was the main reason was, of course, not to expose our employees for risk due to the corona pandemic. But also from my point of view, I thought that the market should be quite slow because of the corona pandemic, but that was a mistake. I mean, we have seen high activity, not least in Scandinavia and in the business merchant sector, as I said, and DIY and so on. So if we would have produced more, then we could have easily sold it. But now we have taken the decision to go for some yes, we have closed down some of our sawmills during the summer. Normally, we don't do that, but we did that this year. So due to that fact, I think that we will not have the same volume this year as we had last year, but that is not due to the market. It's due to misplanning or planning or yes, we don't I mean, the main reason is, of course, we don't like to expose our employees for the risk to be infected. Okay. And I understand it then that you are much more held back by planned downtime in the Q3 compared to that effect that I guess you had at least to some degree in the second quarter? Yes, you're right. And I mean I cannot really give you the proportion, but I think we are maybe to onethree affected in the Q2 and twothree in the Q3. Yes. I think it's much more we're talking about the wood in with much more effect in the Q3 that we're taking the reduced the lower volume produced in the sawmills. The stop will come in the Q3. Yes. That's very helpful. And then just for maybe clarification's sake. In publication paperwork, we have spent a lot of time already, but you said demand market demand was down 30% to 40% in the relevant markets in the Q2 year on year, whereas your volume in publication paper was down only 24%. What's the reason for that deviation? I think we managed a bit better than the market overall. That's when we look at the market statistics, it's 30% to 40%. But we had, as you said, around a 26% decline in volume versus last year. So but the market overall is down more. Exactly. And have you changed how have you adapted? How have you changed your marketing behavior? Is it a matter of different geographical mix? Or how what do you think is the driver for this difference? I think it's I mean, it's customer mix. I think there might be some impact that we've managed to keep production very stable and operating throughout the whole period, whereas some other mills have had to close earlier on due to the pandemic that could have had some impact. We did more pressure, I think, during the Q2 and so with a much I mean, the price was has been lower, of course, that anyway had a negative impact on the result. It's not much that you can do. I mean, we cannot travel. We cannot meet customers physically. So we have to I mean, you have to work by phone and so on. So I mean but you can always do what you can to get the volume, but it's really tough out there. Yes. Okay. And then just finally, and I'm not sure if you did already comment on this, but for the full year, what's your estimate for the revaluation of the forest land over the P and L in full year 2020? Yes. I can say we had SEK571,000,000 in the first half year, and I think we expect more or less double that for the full year now, so around €1,200,000,000, you could say for the full year in terms of revaluation effect based on where the prices are that we see now with that SEK 5 per crown increase in the prices and the net growth that we know we have. That's what we expect. Our next question is from the line of Cole Hathorn from Jefferies. Good morning. Thanks for taking my question. Just on sawlog and pulpwood prices, if you look forward with the decline in demand for graphic paper and possible mill closures reducing wood demand. How do you see this impacting kind of demand and pricing in pulpwood and sawlogs in the coming years is the first question. And then secondly, with the spruce beetle impact seemingly increasingly a concern in Southern Sweden, how do you expect the industry to adapt to this? We take the pulpwood and sawlog prices, I think, I mean, you will have more or less no impact at all on pulpwood and sawlog prices in our part of the world at least. I mean, you have both for sawlogs and for pulpwood, we have to import and so I mean, we have we are underbalanced in our region where we have the forest, if that was the question. So we are not. I think you've seen the effect over a number of years of declining publication paper volumes and those volumes being shifted towards other towards Pulp and Packaging segments. So it's those are the more dominant segments now. When it comes to the spruce beetle, I mean, in the SCA area, so to say, from mid Sweden and North, we haven't seen any big impact from the pine beetle. We know that you have some still problems in the southern part of Sweden. And I mean, you have big really big issues with it in Central Europe, not least last year and I think also still this year, we have some problems. And I mean, short term, in regions where you have the spruce people, some companies can buy wood to a lower price, of course, because you have to cut, otherwise the wood will be destroyed. Long term, it is a problem, of course, because then you have less availability of wood. So definitely, we prefer to have a stable situation as we have just now in the northern part of Sweden. So I mean, due to the climate, I think we are a bit less exposed in the northern part of Sweden than you are at least in the central part of Europe. Great. And then finally, just on kraftliner, your inventory levels are broadly at a balanced space. Am I right to assume that recycled inventory levels are probably more elevated and putting a bit of downward pressure relative to Kraftliner? Or am I reading too much into that? I think I mean we've seen a price pressure on Pest liner come first and that usually is then kraftliner follows the testliner development. So that and what has caused the testliner, I mean OCC prices is one thing, of course, and there's been some new capacity in test liner as well. So those two factors have probably played a role in the testliner price development. Okay. Thank you. Our next question is from the line of Ioannis Gruntoulis. You may ask your question. Hi, everyone. It's Johannes Gronsoulis here, Kepler Cheuvreux. I have two questions, but my first question is on FX rates and your hedging because you're providing the information about hedging levels for the coming quarters and also the but the average rate for the whole sort of hedging portfolio for euro and the whole hedging portfolio for dollar. How should we think about the rates you are giving? Let's say, the dollar exchange rate here averages 9.59%. Is that sort of stable for the coming quarters? Or is it fading down towards the spot rates at the end of the period? Could you help me with that, please, to give some comments? Yes. It's not exactly the same in every quarter of the period. But it's at the moment, it's slightly better slightly better towards the end of the period than it is at the start of the period. But because it's the bulk of our hedging is for the next 6 months. So there's not a big difference between the rate we quote here, say the 9.59 for the dollar and the rate you see coming for the next 6 months, which is where we're hedging 75% of the exposure, then we ramp down during the two quarters after that. So Okay. So FX rate should be quite limited quarter over quarter in the Q3 and quite limited as well for the Q4 basically. Yes. I mean we you have a 25% exposure, yes, in terms of FX. Yes. So that Yes. Then also on the what you said today about the production issues, the unplanned one for the pulp million, Ostrand. Is there any possibility that you could get insurance compensation or anything has to do to with failure on the equipment side or something like that? Do you foresee any sort of chance for compensation? Yes. I mean, we will go for that, of course, but I don't like to discuss the chances because we have discussions to take with some of our one of our suppliers. I mean, the main reason for this damage, as I said, was that a black liquor injector had been wrongly positioned. And in I think in 12 to 18 hours, the damage was done. And then, I mean, we had to stop in the recovery boiler, but then you have other consequences also. I mean, one was, as we said, the screen basket, but we had also some, I don't even know the English words of everything. But I mean, we had several engines that broke down. We had as the pulp after a while get colder, then you have another density and it's I mean, it creates a lot of problems. I mean, we have had a disaster there now for more or less 2 weeks. So of course, we will try to have a discussion with one So in terms of the effect of that, it's also true that the It's just speculation. And the main cost is not the equipment, it's the loss of production and the consequential effects in both in the pulp and in logistics and so on around for deliveries and wood supply. So it's not the equipment that costs a lot. Okay. Sure, sure. Okay. Then my final question. Maybe you talked about this and I missed it, but you obviously take up the price assessment with this kroner per cubic meter of Sanding Forest. I mean, is it because the recent transaction that are relevant for you has been on a higher level over the last, let's say, for the first half year compared to 2019? Or you compare it are you replacing transaction values longer back? Because if I remember it correctly, you're rolling transaction prices for 3 years. That's the methodology you are using for your valuation? Or could you give some comments on this, please? No, you're correct. It's a rolling it's a 3 year average that we have here. So when you take in the effect of the higher prices in the first half of this year, and those are higher than the prices were 3 years ago. So that's the effect. Yes. What would you say about prices for the first half this year compared to 2019? Are they roughly at the same level? Or do you also see an increase there? No. We yes, I would say it's pretty stable. We see we saw actually an increase towards the end of last year and then pretty stable, I would say, during the first half of this year. Thank you. Our next question is from the line of Marco Parvane. You may ask your question. This is Marco from Handelsbanken. I had a few more questions. Maybe just continuing on the forest valuation. You put on a release today that your sort of initial assessment of 5,400,000 cubic meters is accurate and that will come into play. Is that now fully reflected in your valuation of the biological asset, the sort of cash flow estimate that you have there and the CHF 5,400,000? Yes. So the new harvesting plan is now reflected in the discounted cash flow calculation, which is the basis for the biological assets, yes. And that's all on the balance sheet now? That's in the biological assets, which we report on the balance sheet, yes, and which is the basis for the revaluation effect. Okay. Very good. Then on Palk, I suppose you've had some issues in Ostrand. If I understand correctly, you were sort of talking about roughly 90% utilization for this year for your pulp mills. Should we now assume that to be sort of 85,000,000 or what's the thinking at the moment? I mean, as we said, we will lose 50,000 tonnes due to this damage. So that's maybe right. Okay. And then going to next year, should we sort of you have maintenance in Q4 as well. Should we anticipate that you'll have full production in 2021? Yes. I think that is what you can calculate on. We have a maintenance stop every year in Q4, of course, but that's not that's included in the expected capacity, yes, yes. So full production, does that mean 1,000,000 tonnes or what's the number? 900,000,000 in NBSK and then slightly less than $100,000,000 in I think we've said $90,000,000 or something in CTMP. Yes, yes. So if no other problems, we should expect 990,000 tonnes of production next year and similar deliveries? I think we don't give forecasts, especially not that far out, Mark. But I mean, we're ramping up and trimming production this year. Obviously, we've had a setback now in July, which is means we're not going to come to the level we hoped this year. And then yes, we want to get to full capacity as quickly as possible. If we're if maybe you're a bit realistic, I think, then you should probably include some effect of ramping up also next year probably with we won't be at absolute full capacity, but Okay. Good. That clarifies that. Then finally, on the energy issue. I suppose you suffered from lower energy costs from energy prices from Ostrand. But overall, are you still a net buyer of electricity? Yes. You can say overall, we're a net buyer primarily in publication paper. So that's where we're a net buyer of electricity. Ostrand is a net seller of electricity, and publication paper is a net buyer of electricity. And there we hedge the position that we have in terms of electricity cost for publication paper. So we have a pretty stable energy cost for publication paper. But obviously, the lower volumes have an impact there as well if we're not utilizing all the energy that we're hedging. What is the sort of logic of hedging the energy cost but then not hedging the energy sales? No, we you could say we hedge our net position. We do hedge our net position. What you could say is happening right now is that we have a significantly less use of electricity than we would normally expect if we were at full volume and publication paper. So that has an impact that we're that our net position has changed during the quarter. We are a net seller of electricity in Ostrand where the lower price has an impact, but we're not as big a net buyer as we were in Northweaken. And there we have almost all the electricity purchases are then externally hedged. Does that make sense, if you follow my logic? Okay. But you are still a net buyer of electricity even in Q2? We're pretty balanced. It's we're still a small net buyer in Q2, but much more much less than we were previously. Okay. And we expect you to continue to be a sort of spot seller of electricity in Ostrand? Yes. We will continue to sell electricity in Ostrand, yes. But in spot, not like hedged or anything like that? Yes. Well, we look yes, I think we don't give full forecast again, but we largely were exposed to the spot electricity price in Ostrand. And then you see the balancing effect in Autweaken if Autweaken is fully up and running. But that effect is what has been reduced now with the lower volumes in Auteweeken because that's the balance is what we hedge externally. There are no further questions at this time sir. Please continue. Further questions? There are no further questions now. Okay. Then thank you all for taking part in this press conference presentation of the half year report for SCA. I hope you will all have a nice summer and look forward to hearing from you again. For example, at the report of the Q3, which will be on the 30th October. Thank you. Bye.