Good morning. My name is Björn Lyngfelt, Vice President, Communications. Sincerely, welcome to this press conference and the presentation of SCA's First Quarter. President Ulf Larsson and CFO Toby Lawton will present the report. There will be the opportunity to ask questions. Ulf, the floor is yours.
Thank you for that, Björn, and also from my side, a warm welcome to this presentation of SCA's performance in the first quarter 2020. I like to start with this slide to summarize the first quarter. During this first quarter, our business, of course, has been impacted by the coronavirus pandemic. Our main priority has been to secure the health and safety for our employees, and by doing so, we have, despite the circumstances, also succeeded in securing a stable production level in, I must say, a rather challenging environment. The effect related to the coronavirus on production, deliveries, and demand for SCA's products has, in other words, so far been quite limited in the first quarter. As a precautionary measure, we have worked to secure the long-term financial health of the operations.
We've had a firm focus on securing the current cash flow by avoiding unnecessary expenditures, stock manages, and things like that. When it comes to the demand, it has been affected differently within our product areas. We see, for instance, in increased demand for pulp, for tissue hygiene products, and also for specialty papers. While the demand for pulp for printing and writing paper has declined. In kraftliner, we see increased deliveries and declining stock levels due to an increased demand for packaging paper for e-commerce and essential products, and even electronics. On the negative side here, we have a decreased demand for industrial packaging in general, but packaging for spare parts is reasonably okay. During the latter part of the first quarter, the demand has been negatively affected, mainly for printing paper, but also for solid wood products.
There is, of course, uncertainties for these areas going forward. The sales level was well-maintained during the first quarter 2020 compared to the first quarter 2019, owing to strong volume development, mainly for pulp from our rebuilt pulp mill, but also for kraftliner. Prices within all product areas have, however, decreased substantially in the first quarter 2020 compared to the first quarter 2019. Here we should bear in mind that the prices, in principle, peaked around the fourth quarter 2018 and the first quarter 2019. The sharp decline in prices has, of course, had a negative impact on sales, but above all on EBITDA, which dropped 34% quarter-on-quarter. On the other hand, during the first quarter, we've seen lower costs for raw materials such as wood, OCC, and so on.
Finally, I will also, in this summary, mention that we have, based on the survey made out of our forest holdings during the summer 2019, verified that we can gradually increase the harvesting in our forest holdings from today's level of 4.35 million cubic meters to 5.4 million cubic meters. This is really good news, and I will come back to this later. When we look at our financial key figures for the first quarter 2020, we can note that we deliver SEK 1.03 billion on EBITDA level. This is a reduction by 34%, as mentioned, compared to the top quarter Q1 in 2019. That you can also see in the graph on the right-hand side. Although we still have delivered an EBITDA margin of 21% and an industrial return on capital employed of 9%, calculated over the last 12 months.
Our leverage increased to 1.9, as you can see, and that was mainly as an effect of a currently lower EBITDA level. Now I'd like to turn into each segment, starting with the forest. During the first quarter, we had a stable supply of wood to our industries, despite the mild winter. As you might know, SCA has a high degree of self-sufficiency. We have a geographically dispersed forest holding, and this means typically that we are in good position when it comes to our fiber supply, whatever the weather conditions. As I mentioned last time, we now have significantly lower pulpwood prices, both for the pulpwood that we import as well as for the wood we buy on stumpage. In addition, the price for sawlogs is dropping, but much slower.
Today, we have no impact on price or quality from spruce beetle damages in our region, which we are very happy for. As a result of high demand from the pulp and kraftliner industry, sales increased by 11% quarter-on-quarter, although wood prices fell. As you can see here also that the EBITDA increased by 37%, mainly due to the increase in net growth in the forest from three to 4 million cubic meter per year, and by now that we have increasing earnings from revaluation of biological assets. In wood, we have had a stable consumption during the first quarter 2020, and prices have been on a level due to oversupply in continental Europe. That is not the least because of the problems with the spruce beetle that we've talked about before.
My estimation a quarter ago was that prices for solid wood products should decrease by around 2% from Q4 2019 to Q1 2020. We now know that the actual outcome for us was more minus 2.7% for the first quarter in that comparison. Just now it's hard to foresee the market development for Q2. We have somewhat divided development on the market. I will come back to that in a while. Sales anyway was down 14% and EBITDA 68% when comparing quarter-on-quarter. You should bear in mind that the restructuring of SCA Wood France provided SEK 90 million in the first quarter 2019. We turn into pulp. The demand for pulp is back on a good level. For instance, we see a strong increase in demand for pulp for tissue, hygiene products, and specialty paper.
As we indicated in the annual report, the price has started to increase. We note that the European NBSK PIX prices come from $820 up to $840 in March. SCA, Metsä, and other players have now announced further price increases from $840 up to $880 to $890 per ton. Stock levels for hardwood as well for softwood pulp are now on a normalized level. Some capacity has also been closed down due to the coronavirus pandemic. Pulp sales increased by 5% in the first quarter 2020 compared to Q1 2019, entirely due to significantly increased volumes. As you can see from the graph below to the left, prices have fallen during the corresponding period, and this has resulted in EBITDA dropping 47%.
If we turn into containerboard, we have seen strongly increasing deliveries of kraftliner since last summer, as you can see in the graph in the upper left corner. We had new statistics early this morning showing that deliveries in March 2020 was 8.5% higher than March 2019. At the same time, we have noted lower production during Q1 2020 due to the Finnish strike and also because of the coronavirus. This has led to a continued decrease in inventory levels, and the levels are now low. Again, according to the statistics that came this morning, we have a 30% lower stock level in March this year than we had one year ago. We also continue to note a stable level in the demand for boxes.
The price for testliner has increased recently by EUR 30 a ton due to strong demand and gradually increasing prices for OCC. Suppliers have announced another price increase of EUR 30-EUR 50 a ton for testliner, and we estimate that the price for kraftliner will follow an increase by EUR 30 a ton as a first step. Overall sales went down 5% quarter-on-quarter for paper. As you can see from the graphs below to the left, prices have dropped while the volumes for kraftliner has risen. EBITDA dropped 38% quarter-on-quarter due to lower prices, but that was mitigated by higher kraftliner volumes and also by lower raw material cost and a positive exchange rate effect.
As I mentioned before, we made a new forest survey back in 2019, and this survey showed that the annual growth in SCA forests was 1 million cubic meter higher per year than we measured earlier. We have now done some work and calculated a new harvesting plan based on this survey, and the survey shows that we can gradually increase the harvesting volume from today's 4.3 million cubic meter per year up to 5.4 million cubic meter per year 2025. The ramp up is expected to be linear over five years. After that, we will remain on the new level. In terms of cash flow, we estimate the positive impact will increase gradually to reach an annual effect of SEK 300 million-SEK 350 million per year in 2025, all other things being equal, of course.
The effect will come from both an increased cash flow from own forest holdings and an improved mix, actually relative higher volume from our own forest. In terms of profit, the effect is estimated to SEK 150 million- SEK 175 million per year as an increased harvesting volume on own forest holdings will decrease the revaluation effect. Then my last slide before I hand over to Toby here. In SCA, as I mentioned, we can only see a limited effect in Q1 due to the coronavirus pandemic, but we expect a continued uncertainty going forward here. To summarize, in forest, we have had no effect whatsoever so far. In wood, we have seen only a limited effect in Q1, but we see, as I mentioned, the significant uncertainty going forward. As it is just now, we have stable volumes to Scandinavia and a well-working market here.
The demand in Asia is improving after a weak start of Q1. On the other hand, we can see that we have very low activity in Southern Europe, for example, Italy, France, Spain, and so on, and also in the U.K. We believe that we will probably need to reduce production in Q2 in order to meet the lower demand. We will keep a thorough eye on the stock level, and we will steer the production from that perspective. In pulp, we've seen an increased demand in Q1, as I mentioned, and especially for pulp to tissue and hygiene products. On the other hand, we see a lower demand for pulp to printing and writing, but that is a minor part of our supply, so less impact from that part. In paper, we see a higher demand for kraftliner and a significantly lower demand for publication paper.
If we start with kraftliner, an increased demand for e-commerce and essential products, but lower for industrial packaging. In publication paper, we have seen a significant decline in demand resulting in temporary production stops at Ortviken going forward. Our main priority has been to secure the health and safety of our employees and also try to reduce the infection risk, and we have procedures in place to minimize disruptions in production and distribution. We have also secured the supply of critical raw materials. We are in this period helped by the fact that we have our own logistic company, and by that we have good access to distribution capacity, which is really important these days. We have had a firm focus on securing the current cash flow by avoiding unnecessary expenditures, stock management, and so on.
Finally, I would also like to underline that we have a strong liquidity situation supported by our own forest holding. By that, I hand over to you, Toby.
Thank you, Ulf. I will start here with the income statement. Here you can see again on the net sales, we had a decline of 6% in net sales versus the first quarter 2019, where prices had a major impact negatively, while volume, particularly pulp, but also now kraftliner, has had a positive effect. Our EBITDA margin in the first quarter was 21.5%, which is down from the high point in Q1 2019, but still a resilient EBITDA margin level. Financial items further down are more or less in line with last year, slightly lower, and the tax has an effective tax rate of 20%, so normal, stable effective tax rate and a tax charge of SEK 121 million , which gives us a net profit for the period of SEK 483 million and an earnings per share in the quarter of SEK 0.69 per share.
Flicking to the next slide with a contribution by segment and quarter, starting on the top left with the forest. You can see here we've had an increasing trend over a number of quarters, which is really driven by the higher volume and demand, particularly from Östrand in the pulp sector. The higher volume used to supply Östrand is mainly externally sourced, that doesn't impact our bottom line in the forest division, which is really driven by the harvesting of our own forest and the revaluation effect in our own forest. When it comes to the bottom line, you can see we've had a higher EBITDA this quarter versus the Q1 last year, that effect is really due to the new revaluation, which is around SEK 100 million higher due to the new valuation method of our forest holdings.
We are down versus the fourth quarter when seasonally, we had some more harvesting of our own forest, we also had some capital gains on some sales of forest land in the fourth quarter, that had an impact versus the fourth quarter. When it comes to the Wood division on net sales at the top, we had more deliveries this quarter versus quarter four last year, we on the other hand, have lower pricing. On the bottom line, you can see also the effect of lower prices versus the fourth quarter and previous quarters last year, which is partly offset now by somewhat lower wood cost. On the Pulp at the top, you can see the effect of higher volumes versus quarter four . We had a maintenance stop in quarter four as well, which suppressed volumes a little bit.
We have now lower prices versus quarter four and versus earlier quarters last year, so that has a negative impact on sales. When it comes to EBITDA, again, we had no maintenance stop this quarter, so that's why we come up versus the fourth quarter. We also have a positive impact from lower wood costs, but offset by negative impacts, again, from lower prices, even though the price increase came through at the end of the quarter. On paper, we've had better kraftliner deliveries in quarter one versus quarter four, but average pricing is lower. When it comes to the bottom line, the result is similar, where we have a negative effect from lower prices, but we are offset by some better kraftliner volumes.
We had, again, no maintenance stops in paper either in the first quarter, whereas we had some in the fourth quarter. We have some positive effects from wood costs and FX here as well. Looking at the bridge now of net sales versus the same quarter last year, quarter one last year, you can see we had SEK 5.1 billion of net sales in the first quarter last year. We have a significant negative impact from price of 16%, which is across all segments. This is offset with an 11% positive effect from higher volumes, which is both from the higher pulp volumes from the expanded pulp mill, but we also had strong volumes this quarter in kraftliner. We have a positive impact on currency of 2%. We have a 3% impact from the deconsolidation of Wood France, which happened early last year.
On the next slide, on the bridge for EBITDA, you can see here we had the EBITDA of SEK 1.56 billion in the first quarter last year, and we have the significant impact of price on EBITDA of SEK 912 million. This is remembering again, that the first quarter last year was more or less the high point, price-wise, across most segments. This is offset then by volume, which is again, pulp and kraftliner of SEK 167 million. We have a positive effect on lower costs for raw material, both wood raw material and some other raw material, recycled fiber is another raw material, of SEK 174 million.
We have a positive currency effect of SEK 140 million, and then we have the effect in other, which is mainly the effect that we had a one-off item in Q1 last year from the divestment of Wood France, which was SEK 90 million. That's the bridge, and we land on an EBITDA level at Q1 2020 of just over SEK 1 billion and an EBITDA margin, fairly resilient level at 21.5%. When it comes to cash flow, you can see we start with the EBITDA, and then we take away the effect of the revaluation of biological assets. We have our operating cash surplus. We have a change in working capital this quarter of minus SEK 146 million.
The first quarter, it always seasonally has an expansion of working capital, but we're better than last year and tight this year, partly due to the fact that we have a very close control, as Ulf mentioned, on cash flow during the first quarter. We have current capital expenditures in the quarter of SEK 175 million and an operating cash flow of SEK 341 million. We have strategic capital expenditures of SEK 189 million. We are still funding our strategic expansion well within operating cash flow and generating a reasonable operating cash flow. Looking at the net debt bridge, you can see at the end of last year, we had a net debt of SEK 8.6 billion. We have the effect of the operating cash flow, which reduces net debt by SEK 341 million. We have the strategic CapEx, on the other hand, of SEK 189 million.
I want lastly to highlight on the right-hand side, on other, we have an effect this quarter from the net pension liability, which mainly comes from the asset side, where we have an effect of SEK 600 million versus the fourth quarter last year. Net debt at the end of the first quarter is SEK 9.1 billion. Just to give an overview now of our financing and liquidity situation. There's a lot of numbers on this slide, but if I just focus on the table on the top left, you can see the breakdown of our total debt of SEK 9 billion there and the different sources of that total debt of SEK 9 billion.
I won't go into the details. At the bottom left, we describe some of the actions we've taken since the end of the period, and particularly, we have a new loan from SEK, the Swedish Export Credit Agency, which we've used to reduce our exposure to commercial paper. We've also taken an additional RCF on board of SEK 1.6 billion . With those two, we've increased our liquidity reserve to SEK 7.5 billion , which means we both have a strong liquidity, and we have a large liquidity reserve. To just come to the next slide just to show the balance sheet. We have our forest assets, which are now valued just over SEK 70 billion SEK. We have a total capital employed, including all the other industrial assets of SEK 77 billion .
Our net debt is now SEK 9.1 billion, which gives a net debt to EBITDA of 1.9 times, an increase versus the end of last year of 1.6 times, mainly driven by a lower rolling level of EBITDA. We have an equity of SEK 68 billion and a net debt to equity ratio of 13%. I'll hand back to Ulf.
Thank you for that, Toby. Well, you have to summarize, as I said, so far, we haven't been too impacted by the coronavirus pandemic, of course, we have the portion of uncertainty going forward here now. Sales declined versus the first quarter 2019 and also EBITDA, then we should bear in mind that the first quarter 2019 and the fourth quarter 2018 was more or less the peak. The good news that the higher forest growth enables increased annual harvesting volume, we will gradually step by step increase from today's level up to 5.4 million cubic meters 2025. With that, I think we open up for questions.
Okay, ladies and gentlemen, we will now begin the question and answer session. As a reminder, if you wish to ask a question, please press star and one on your telephone and wait for your name to be announced. Okay, we will now take our first question. Our first question comes from the line of Christian Cooper. Your line is now open.
Christian? No. Shall we move to the next? Try and look for Christian.
Okay, sir. Okay, our next question comes from the line of Mikael Doepel.
Just starting off with your visibility right now. You talk about the COVID pandemic and that you haven't seen much of an impact so far. What's your visibility, across the different segments, in terms of order books and so on?
As I said, we are in pulp and in kraftliner, we have really strong order books. In publication paper, as I mentioned, we have had a decline in stock of orders, and also as I said, we will keep an eye on the stock level. When needed, we will take curtailments in publication paper. Finally solid wood products, it is a little bit more unsecured picture, I think for solid wood products. We have, as it is just now, rather strong stock of orders. At the same time, we know that the Mediterranean area is still more or less closed. U.K. is also more or less closed. On the other hand, we have a strong market in Scandinavia. We have strong markets in China and Japan as it is just now. We have to keep an eye on this.
We have to be flexible, and as it is today we plan for some curtailments also in solid wood products. As it is just now, we don't know how much and when really.
Okay. In terms of the graphic papers, what kind of magnitude of demand declines are you seeing?
Sorry, what kind of magnitude in terms of?
Demand declines for graphic papers in Europe.
Demand. You know that structurally publication paper is a declining market. Just now it's really tough for this business. As we see it just now, we have taken one week of curtailments. We are taking 1 week just now. We are planning for, let's say another three to four weeks to come. They will be spread out during the second quarter and maybe in the third quarter if needed. We have a short stock of orders in publication paper. That's true.
Okay. Just a final question on the kraftliner side. What's the mix in terms of end use for your products?
Yeah. Typically for containerboard, you have let's say 15% industrial, you have maybe 10%-15% fresh food, you have 25% processed food, you have beverages maybe 5%-10%, consumer products is maybe 10%-15%, then you have other. It's not so easy for us to know exactly the end use because we are not selling to end users, we are selling to converters. If we now look into kraftliner, you have a bigger part of course for industrial applications. Industrial is also divided between new production and spare parts, and we feel a little bit stronger market for spare parts than for new production. I think that the logic for us is more to industrial and fresh food and so on.
On the other hand, we have a big portion of Eurokraft from Obbola, and that is maybe more related to the general market for containerboard also including testliner.
Okay. Thank you very much.
Okay. Our next question comes from the line of Christian Cooper. Your line is now open.
Okay. Thanks, operator. Try again here. Sorry, I missed your comments all from the EBIT effects on the forestry side because of the higher harvesting. That's about SEK 170 million higher, or can you just go through that quickly again? Thanks.
Yeah. In terms of cash flow, we estimate that the impact will increase gradually to reach an annual effect of SEK 300 million-SEK 350 million per year in 2025. All other things being equal, of course. The effect will come from both an increased cash flow from own forest holdings and an improved mix, actually, a relative higher volume from our own forest. In terms of profit, the effect is estimated SEK 250 million-SEK 275 million as an increased harvesting volume on our own forest will decrease the revaluation effect. That's the thinking here.
Oh, thanks for that. On the pulp side, I was a little bit surprised on the costs here. If I deduct the maintenance top effect that you had in the fourth quarter of 2019, then it seems like costs have gone up per ton in the first quarter. Is that something you can comment on?
Yeah. We don't give a running commentary on cost per ton. Of course, in the fourth quarter, we had the maintenance stop, and in the first quarter we don't have the stop. As we said, we see some improvement in wood costs going forward, but it's limited so far. We do see some benefit in wood costs going forward. Yeah.
Okay, tell me about.
Yeah.
Was it something special that drove higher costs in Q1 if you adjust for the maintenance stop in Q4?
No. We had a relatively stable Q1. Of course, in Q4 we had the maintenance stop, and we also had some effects from the wood chip conveyor belt, which you can see. It's probably hard to split those out completely from the Q4 picture. We didn't have those effects in Q1. We didn't have a maintenance stop in Q1. Otherwise, relatively stable in terms of the main cost items. As I said, slightly lower wood cost. You do have an effect from electricity prices, somewhat, that we're a net seller of electricity in Östrand. The electricity price is lower in Q1. That's on the other side.
Right. On the electricity for the group, are you hedging that anything for 2020? Or how does the lower electricity price run through for you for the group?
Yeah. We basically hedge our net exposure. We are a net buyer of electricity for the group. Overall, we have a portion of that hedged, and we reduce that over time. For the next quarter, we have up to around 75% of the electricity cost hedged, and then it ramps down over a period of a bit more than one year.
Okay. Finally from me on the wood division, I don't know if I missed it, but Ulf, you typically talked about what you see in terms of pricing in the next quarter. Could you say something on that? Thanks.
I didn't, because we have a lot of uncertainties just now. As I said, it's also a very scattered market. Today, it is more or less strong in Scandinavia and in Asia, but other parts of the market is more or less totally closed in the Mediterranean area and North Africa, Morocco, Algeria, while Egypt is open and a rather good market. As you can understand, it's not easy to forecast today.
Yeah. Okay. I understand. Thank you very much.
Okay. Our next question comes from the line of Oskar Lindström. Your line is now open.
Yes. Two questions from my side. The first one here is, you seem quite certain about increasing prices for kraftliner. So far as I can see, prices in Europe have increased about EUR 10-EUR 15 per ton out of the total EUR 50 that you announced. What gives you the certainty about the further 30 being achieved, and when do you think that we should expect to see this? Also on kraftliner, do you believe that the difficulties in recovered paper sourcing are having an impact on demand for kraftliner?
First, I think we have seen that the testliner prices went up by EUR 30 per ton. Then we have also seen further announcements from some players now of another EUR 50 a ton. Typically in this market, I would say that kraftliner will follow testliner. I think we will reach, as I said, EUR 30 a ton as a first step. Of course, increasing OCC prices will have an impact on the pricing for testliner, and that is also maybe one of the drivers for the price announcements that we have now seen in testliner, and that will indirectly have an impact also on kraftliner. The market is strong, and as I said, we had new statistics this morning, and we have strong shipments. If we compare this March with March 2019, it's up 8.5%.
If we look into the stock level, it's 30% lower today than it was one year ago. Of course, all these things together will have an impact.
And are you seeing-
Oskar, I can just quickly add a bit. You mentioned the fixed price, but the PPI price for kraftliner is one many follow, and that went up EUR 30 per ton, I think, around a week ago. It's already in the market statistics that are coming.
Yeah. All right.
For kraftliner.
Yeah, super. A second question here is, you're now taking some actions to reduce production of publication paper at Ortviken, assuming the decline in demand that we're seeing now is not going to bounce back in a major way, does this whole sort of corona situation and impact on publication paper speed up or trigger any thoughts about restructuring Ortviken? Maybe sort of moving some pulp capacity from Östrand to Ortviken, et cetera. Your thoughts about that?
Just now we are focused on operational things. We have to keep an eye on cash flow, the financing, to keep the people staying safe, and also, as Toby mentioned, to keep an eye on the cash flow. We don't do smaller projects that we can now move. We do that, and we try to reduce the stock level and whatever, stay close to our customers, and all that kind of things that you have to do just now. We are very operational focused just now.
All right. Thank you. It doesn't speed up any sort of plans around this after the current sort of crisis situation?
I don't think this is the time for.
No
strategic plans. You have to do them when it's calm and easy, and you can think more clear and long term. Now we have to react and handle on this short-term situation.
All right.
You know the package that we have showed you for development projects, and they are there, and we have done a total work around them, and then it's always a question about timing, but just now we are 100% focused on operational things.
Super. Thank you.
Okay, our next question comes from the line of Linus Larsson. Your line is now open.
Thank you very much. I'd like to follow up on the forest side and the harvesting plans that you present. First, what will this lead to in terms of self-sufficiency in, say, 2025 for the group in terms of wood self-sufficiency, of course? You said what the implications are estimated to be in terms of P&L and cash flow. Just for clarification sake, what you're talking about now is reflected in your current valuation, right?
Yeah. If we start with self-sufficiency, today we harvest 4.35 million cubic meters per year on annual base, and now we release 25% in a five years time. Again, it depends, of course, on what kind of industrial capacity we have at that time. I should know, but the total consumption today is maybe between 11 and 12 million cubic meters. If we remain on that level, then you can calculate yourself.
Self-sufficiency also, we include the wood chips from our own sawmill.
From our own, yeah.
You could say today, we're around 45% self-sufficient. If you add on a million cubic meters of harvesting, we would presumably get wood chips back for another proportion of that. We would get well over 50% based on today's industrial volume used.
Everything equal, yeah.
Yeah.
Yeah.
Sorry, the other one, Linus, you have to forgive me.
Yes. No, I appreciate. That's very helpful. You gave Your estimate on P&L and cash flow impact from the increased harvesting, but just for clarification's sake, in terms of your value on the balance sheet, are there any implications apart from what you have already presented?
I think, firstly, it's a preliminary calculation so far, so it's not confirmed, but it's preliminary, and it will only be included in the books fully once it's been confirmed. As you know, we value our forest asset at market prices. The total value of the forest asset depends on the standing volume. That is really unchanged in our balance sheet by this. What might have some impact is then the proportion of biological assets versus land value, that we'd have to come back on. The total value in the balance sheet, again, is based on market value, so it's not impacted by this.
Great. That's very helpful. Also, I guess related to forestry, what's the current price trend in your area of operation?
It differs a little bit. As I said, when it comes to pulpwood, we have seen decreasing prices for imported wood. When we buy wood on stumpage, we see that prices are coming down. The official price lists that you have in this region, they have been rather flat in the northern part. When you look at the prices for sawlogs, I would say that they are slightly down, but not too much. Again, as I said, we are not impacted as it is just now by the spruce beetle disease, which we are happy for, of course. It's a rather stable situation here.
You're not expecting a relief in the next one or two quarters in terms of your wood costs?
We will not speculate in that. As it is just now, I think we have come down quite a bit when it comes to the pulpwood prices. As it is just now, I think we have high prices for sawlogs in this region, but they are where they are, and I think as it is just now, they are there, and I don't like to comment on what's going to happen.
Sure. Great. Thank you very much.
Thank you.
Okay, our next question comes from the line of Cole Hathorn. Your line is now open.
Good morning. Thanks for the question. Just following up on the pulp market, could you just go back and confirm your end demand in pulp? Is it 65%-70% to the tissue end markets? Have you got any color from your customers around effectively stocking up on that? How's the demand environment looking there? On kraftliner, if you just dig a little bit more into the industrial end segments, how are you seeing customers managing their decline in demand for products and production stops that you've gotten in the industrial end market segments?
Yeah, I'll give it a try, and Toby can maybe complement. Starting with the pulp, for us, a little bit more than 70% of what we produce goes to tissue and hygiene products, I would say. Then we have a rather big part that is going to our own publication paper mill, Ortviken, and close nearby. As you know, the market for printing and writing is structurally a declining market, we get less and less exposed to that kind of customers step by step here. What was your second question in terms of pulp? Was that the stock?
I'm just wondering, have there been any changes in the orders from the tissue manufacturers on pulp?
As I said, we have tremendous demand just now. We have more demand than we can deliver. From all regions, really. Strong market not at least in the U.S., but also from the European market. That is our view as it is just now. That might change, but just now it's super strong.
Yeah, I could give some flavor on the kraftliner. You were mentioning the mix. The kraftliner is a mix between, you have some fresh food and food sectors which are going strongly, and consumer goods are going strongly. You also have home electronics is a sector which is performing well at the moment. On the other hand, you have the industrial sector which is obviously weaker. It's a split picture. You could also add to that really, that Scandinavia, we are a bit more overweight in Scandinavia, where the market is more healthy, and we also supply a larger proportion to consumer and food end users rather than industrial. Overall, we feel a strong demand in kraftliner, and that's what's driving the market at the moment.
In industries, we are also a little bit more focused on spare parts and things like that, and I think that is much stronger than new production.
Thank you. That's very good color. One follow-up on kraftliner. Have you seen any benefit from the downtime? Well, production issues from IP and some of their mills not being able to export some volumes in the market.
It's always a question about supply and demand. If production comes down a bit, then of course you get a better balance. Just now you have lots of different components impacting the market, so it's really hard to predict what is what in this. Clearly, we have seen some production capacity being closed. We've seen some struggles with OCC supply. We have seen increasing prices for OCC. On the other hand, we see, of course, that in some markets the demand is coming down. In this balance just now, we feel that we have, as it is just now, strong momentum for kraftliner. As I said, we had the statistics now this morning, and deliveries was substantially up, and stock level is on a low level, and it's 30% lower than it was last year. It is a stable situation for kraftliner just now.
Great. Thank you.
Okay, our next question comes from the line of Robin Santavirta. Your line is now open.
Thank you very much. Three questions. Please, first of all, what is your own availability of OCC at the moment? Secondly, you postponed or canceled the dividend now for the AGM in March. What is the reason for that, looking at your liquidity, your debt level, and the asset backing? It looks quite strong. Just, could you explain what is the reason for not paying out the dividend this spring? Finally, could you share some light on the CapEx level for this year? What is the current plan? Thanks.
To the OCC supply, we are in a good position when it comes to the OCC supply. We feel very secure in that part. When it comes to the dividend, as you say, we are a very stable company, and we are well-financed. We have the backing from the forest. Still, it is uncertain times, and we feel that it is better now to wait and see. We don't know what's going to happen with this coronavirus pandemic, and now we have all the flexibility that one can wish. That was the reason for not taking the decision in the AGM that we had in March. CapEx, maybe you, Toby?
Yeah. I could say on CapEx, we previously guided SEK 1.2 billion , roughly, for the current CapEx level. I think that guidance stands. We guide the same level. I think for strategic CapEx, which is primarily driven by the Obbola project, of course, which is continuing according to plan. There I think we've guided previously around SEK 2 billion for the year. We won't be at that level this year. We'll be a bit under that level, probably nearer SEK 1.5 billion for the year.
All right. Thanks.
Okay, our next question comes from the line of [Marco ] Your line is now open.
Yeah, it's [Marco] from Handelsbanken. Maybe just continue on the CapEx. If the strategic CapEx comes down for this year, do you sort of expect that to be spent next year?
Yeah, I think the total cost of the whole project is the same. The project is on time. It's no delay to the project. Some of that will be shifted to next year and the year after, basically.
Sure. Perhaps further on the dividend, I suppose your policy is to stay stable and increasing dividend. How does that tie into your cash flow now? How do you look at that?
Policy remains, conditions are a little bit different than normal. Again, we took the decision not to pay out the dividends in March, but we also said that we have, as you can see, the underlying cash flow is stable. We have good stability when it comes to financing. We have the good backing from the forest holdings and so on. All these things are good news, of course. We live in uncertain times just now, and let us wait and see a couple of months and see the development. We don't know if we will have a second wave here of COVID, and we don't know what's going to happen. That was the reason why we took the decision not to pay out the dividends in March.
Okay. Very good.
Yeah. Wait and see and evaluate the development just now.
Okay, good. On maintenance, is your schedule for this year unchanged?
Do you mean the maintenance stops?
Yes.
Yes, the schedule is unchanged. Basically, we have a maintenance stop ongoing this week, actually in Obbola, which is unchanged. For the rest of the year also, we have remaining stops more in the autumn. They're in the schedule as before.
Okay.
No big change.
Good. On wood products, you commented on demand, and you saw prices down, was it 2.7% in Q1? How do you see pricing developing going to Q2?
As I said, that 2.7% was for us and Q1 compared with Q4 2019. Just now it is tricky. If we just look at pricing, we are on a very low level. In some markets we have seen that prices coming up. On the other hand, if you have restrictions when it comes to deliveries, that will have a negative impact. Again, Scandinavia, Asia, some other markets good to rather strong demand just now. On the other hand, you have some other markets that are totally closed in Mediterranean area, U.K., and so on. We cannot really judge here. We have to wait and see a little bit, again, we have to be flexible, we will adapt the production according to the stock level development. We will not let our stock level increase. In that case, we will rather take curtailments.
Okay. Thank you very much.
Okay, once again, if you wish to ask a question, please press star and one. Okay, our next question comes from the line of Johannes Grunselius. Your line is now open.
Yes. Hi, everyone. It's Johannes. Most of my question have been answered, but perhaps I just have a little bit of a follow-up on the forestry side on the new harvesting plan. Do you see any big implications here for the forest outtake for this year and next year, if you can sort of help me with what you forecast in terms of forest outtake there, please?
We've said that we believe in a linear increase.
Yeah
from today's level up to 2025. it will
Yeah
give approximate 200,000 cubic meter per year.
Okay. Yeah, got you. Then just a bit of a follow-up also on the wood product side. You already gave us a lot of color, how should one view the mix in Q2, Q3, and so forth? I can imagine that the do-it-yourself market is extremely strong here when it comes to wood products locally. On the other hand, we have a weak other sort of markets when it comes more high value sawn goods. Could you help me talking a little bit about that? Do you foresee any deterioration on your mix or even an improvement in the mix, please?
I wish I could help you, but I can't really, because it is so different between different markets. As I said, in Scandinavia, the B&M or DIY market is rather strong. I think when people are home now, and if they are okay, then they start to build things at home, and that is good for the consumption, of course. If you are in France and U.K., yeah, in U.K. also in against B&M sector, we have felt also some signs of improvements now. On the other hand, in France it's quite dull. Just now you have to be flexible again, you have to know your market, and you have to move volumes from one market to the other, and maybe also from one segment to the other in order to make it possible to continue to produce.
If you do that in a clever way, then you can run the production in a decent way. Again, too many things that we don't know about the future just now. It's just better to wait and see, follow the market, and try to be as flexible as possible.
Okay. Just a follow-up also on pulp prices. I have a feeling that you've had a little bit of discounts when it comes to Q1 deliveries. Am I right that those discounts will vanish here in Q2? In other words, that your realized prices will be slightly higher Q2 versus Q1 on pulp?
Yeah, you know the structure in this business. When we entered into 2020, you had somewhat increased discounts. The first step from $820 - $840, the effect was more or less zero if you compare year-over-year. What comes after $840, that will give us a net contribution. The discounts, they are typically negotiated one year at a time.
Okay
done now for 2020 more or less.
Okay, understood. Okay, thank you very much.
Okay, once again, if you wish to ask a question, please press star and one. Okay, sir, there are no further questions at this time. Please continue.
Okay. Thanks for the interest you have taken in our report. We look forward to hearing from you again in the 21st of July when we present our report for the second quarter this year. Let's hope that things by then are a bit more normal and foreseeable. Thank you, and have a good spring.