Earnings Call: Q4 2019

Jan 30, 2020

Sincerely welcome to SCA and to this press conference, where our President and CEO, Ulf Larsson and our CFO, Toby Lawton, will present the year end report and take questions after the presentation. So, Birk Larsen, would you please take the stage? Thank you, Bjorn. Good morning, everyone. And I'd like start by summarizing 2019. And 2019, in fact, is the best year ever we have done in SCA, SEK 5 point 3,000,000,000 on EBITDA level. Sales was up 4% and that is mainly related to our ramp up of Ostrand. And the EBITDA already mentioned up 1% versus 2018. We also had a very strong cash flow operating cash flow during the year. If one should mention some highlights for 2019, First and foremost, maybe the ramp up of Ostrand. We are more or less now on full capacity, which we are very happy for. We have also acquired 30,000 hectares of forest land in the Baltics and we have earlier announced that we should in 5 years' time reach around 100,000 hectares and we've done 30% out of that. We also just recently took the decision to invest SEK7.5 billion in a new kraftliner machine in Obbola. That one will be the biggest in the world by far producing 725,000 tons annually. We have also conducted a news for a survey in SCA and the result out of that was that we have 11,000,000 cubic meter more than we earlier thought standing volume. And that is also the base for one of the basis for the revaluation of our forest asset. And the new valuation is SEK 70,000,000,000 which is a little bit more than we expected in the Q4. We had a range of SEK 63,000,000,000 to SEK 67 1,000,000,000. And it's also important to underline that all these figures are excluding effects from the changed accounting method for valuation of our forest assets. Some KPIs for 2019. As mentioned, SEK 5,300,000,000 on EBITDA level. That gave us a healthy EBITDA margin of 27%. Our industrial return on capital employed came down to 12%, mainly of course due to weaker market, but also due to the fact that we now include the total Oerstand investment in the balance sheet. We had a stable leverage of 1 point 6, even if we now have started to pay on the Obbola investment. The proposed dividend is SEK2 per share, which is 14% increase in comparison with last year and that give us a payout ratio of about 50%. If we then say some words about Q4 'nineteen, one can see that we have had a decrease in sales of 12%. Volume is positive and that is, as mentioned, related to Ostrand. But on the other hand, we have had a stepwise weaker market during 2019, so price and mix has been negative had a negative impact of 12%. Anyway, we now feel that the market is stabilizing. We feel an increasing demand. We also feel that inventory levels, not only in SCA, but more generally has come down to a rather good level. EBITDA was down 29% versus Q4 2018 and one reason for that is, of course, the market and lower prices. We also have had some big planned and also unplanned stops during the quarter. The cost for planned and unplanned stops during this period has been SEK 255 1,000,000. And if we compare that with Q4 'eighteen, that is in Q4 'eighteen, we had SEK97 1,000,000. So that has had a substantial impact, of course, on the result. And the performance for Q4 'nineteen is €1,055,000,000 on EBITDA level and by that an EBITDA margin of 24%. So if I then say some words about each segment, starting with the forest, we can just state that we have a very stable situation in the forest, good supply, good availability of wood. And we also seen, as we mentioned before, that prices now new contracts are lower. But as also mentioned before, we have a lag effect when it comes to pricing. And that's also the reason maybe why the forest result is very good and up sales was up 10% due to volumes, but also due to prices and EBITDA was up as much as 42% due to prices, but also higher earnings from revaluation of biological assets that counts for SEK60 1,000,000 and we also had a capital gain from forest transactions and that counts for about SEK90 1,000,000. If we then turn over to Wood, we have had, as you might know, an oversupply in Continental Europe and that is mainly due to the spruce beetle disease. And that also give us a little bit scattered picture of the market. We see that we have a pressure on low quality white wood products due to the lots of damaged wood in these areas. On the other hand, we feel that we have a good demand in high quality products from spruce and also from pine, of course. When we also look into the market in China, Japan and also in North Africa, we've seen increasing prices for the Q1. On the other hand, we have also set our 6 months contracts in Scandinavia with somewhat lower prices in the 1st part of 2020 in comparison with 2019. And I think that I said last quarter that prices in Q4 'nineteen should be 6% lower than Q3 '18 and the outcome was more like 4.5 percent something like that. And I think that we will see the remaining 1.5% now in the Q1 before prices will start to pick up in the second quarter. Nevertheless, sales down quarter on quarter 12% due to prices and EBITDA down 45% due to prices and also higher cost for wood raw material. Pulp then, as I mentioned, we had a rather big long planned maintenance stop and that went very well. We did replace the economizer. We did more than 2,000 activities during this planned stop. But then when we started up the mill, then we had some disturbances when it came to our conveyor belt for transporting the ships up to the pulper and not only once but twice and that costed us SEK 50,000,000 during this quarter. You can also see on the production curve that we had bad production in October the beginning of November due to this breakdown, but now we are more or less on design capacity here. And we said earlier that the ramp up should take between 12 18 months and it's more like 18 months, but we are very happy with the achievement that we've done here and we now feel that we are 100% focused on maximizing the availability of this mill. Pulp market development. We have now seen increased global pulp deliveries as you can see to the upper left hand side. We can also see that we have decreased softwood and hardwood inventories. When it comes to hardwood, we are more like 48 ton days now in stock, which is more or less the average for this period. In softwood pulp, we are approximately on 34 days, which is also almost on average level. So that is good. In a way, prices lagging behind. We have seen that Chinese prices have started to pick up. So today, we have more or less the same price level in China and in Europe. We've also seen quite many announcements now recently for prices price increases from 1st February. In Europe, SCA, Metz, SEDRA. In North America, we've seen that Domtar, Canfor, West Fraser and so on all have announced price increases from 1st February. Quarter on quarter, sales was down 14%, increased volumes, but lower prices and EBITDA was down as much as 95% and prices, of course, high cost for wood raw material, but not the least these planned and unplanned stops. Then we walk over to paper, starting with containerboard and also a slide about the market. We can also here on the left hand side see that we have had a pickup in European prices and in European deliveries, sorry for that. And we also see that we have had a decreasing inventory level. Every December, we have a peak both in 2017, 2018 and 2019, but that is a seasonal effect. Otherwise, we have had rather we have had a very stable inventory level just now. We've also seen a stable increase when it comes to books demand and a good order inflow. Here we know that producers of test liners, they have started to announce price increases between €40.60 per tonne from 1st February and that is the situation just now here. When it comes to publication paper, we have seen increasing prices since Q4 last year or 2018. And just now, we feel that prices will come down a little bit in the Q1. We have a pressure here. Might be some effect from the Finnish strike, but it's yes, that is the market as it is just now. Sales was down all in all for paper by 13% due to lower kraftliner prices and lower volumes and EBITDA was down 29% due to kraftliner prices. And also we had a fire in Utviken during the Q4 that costed us around SEK 20,000,000 for the quarter. So as mentioned, we have conducted a new forest survey during 2019 and the outcome from that was that the standing volume is 11,000,000 cubic meter more than we thought. And in addition, we also have 3,000,000 cubic meter in the Baltics. And this 11,000,000 cubic meter increase is related to a higher growth, of course, but also to some extent from a refined measurement method. But the annual growth, as you can see on the right hand side, is 1,000,000 cubic meter more per year than we thought earlier. It's also fair to underline that we haven't done the harvesting plan. That one should be calculated now in the coming months. And as we can now see that the highest increase in growth is related to young stands, we don't know exactly what kind of impact this will have on our harvesting levels. So that has to be seen now during the coming months. So by that, I hand over to Toby. Thank you, Ulf. Good morning, everybody. I will start just with a few slides on the forest revaluation before coming to the result. And just a reminder here, I think you've seen this before, but we have our forest mainly in the north of Sweden. We also now have some forest in the Baltic states in especially Latvia and Estonia, which you can see, but our total forest is 2,600,000 hectares and the total volume as Ulf showed is just over 2 50,000,000 cubic meters. So that's and we are Europe's largest private forest owner. And when we look at the statistics, those market prices and market statistics have been around for quite some time for valuing forest land. But what we've seen during the last year, in particular, is that there's been larger transactions which have shown that those market statistics are also relevant for large pieces of forest land. And that has really led to this approach, this change in approach that we are now using the market statistics to value our forest land also in our balance sheet. And here on the right hand side, you can see some of the statistics in terms of SEK per cubic meter, which is the most relevant price benchmark to follow. And you can see firstly on the left, our old book value was around SEK 136 per cubic meter using the previous accounting method, which was not based on market. And then you can see we buy and sell small pieces of land every year just to improve our area. And we tend to buy in the last year, we bought closer to the coast, closer to our industries and sold pieces which are further inland. So we bought you can see here, for 334 and sold for 264 in the last 12 months. And the market statistics in our area and also the value that we then apply to our book value is SEK 276 per cubic meter. And that's a statistic that's weighted according to where we have our forest holding, and it's also an average over 3 years. So that's 276,000,000 is the number then we use to value the market value of our forest assets. And then if you look and you apply that 276 per cubic meter with the 250,000,000 cubic meters on the that Ulf presented before, then you come to the total valuation of our forest, which is now SEK 70 billion. And as I've said, this is a bit higher than we had guided a quarter ago, and that's because of this extra volume that we have now seen from the new forest survey, which we didn't have when we presented last time. And this increase in value, so it's a significant increase in the value of our forest from €34,000,000,000 as it was previously, up to €70,000,000,000 and that €70,000,000,000 is then split between the land value and the biological asset. And basically, the increase in value of the biological asset is something that goes through the income statement, while the increase in value of the land does not. That goes through the other comprehensive income. So you see different effects. And here, I think this is the only slide where I'll show the effect, including this big onetime effect. But if you basically, if you look to the EBITDA line, in particular, and on the quarter, you see that we have an EBITDA for the quarter of SEK17 1,000,000,000. But just next to that, we have the underlying EBITDA, excluding this revaluation effect, is just over €1,000,000,000 which also presented. So the onetime effect of this change in valuation is €16,000,000,000 on EBITDA, which is the effect on biological assets only, as I said. The only other line you can see here which is impacted is the tax line, where there's a onetime impact from deferred tax due to this change, which is €3,000,000,000 So the tax line is also €3,000,000,000 higher. And you see exactly the same effect in the quarter as you see in the year in the full year numbers. So and one other thing to mention here is that this revaluation has no effect on cash flow. Both the tax and the revaluation are not don't impact cash flow, of course. So yes, so if I move on, then all the figures after here will be the underlying figures, excluding the revaluation as Orf presented, which show the underlying performance in the quarter and the year. And here so here you see the income statement. And for the full year, we had sales for 2019 of SEK19.6 billion, an increase of 4% versus 2018. In the Q4, we had sales of €4,300,000,000 And because we the quarter 4 last year was basically the high point of last year and quarter 4 this year, the low point of this year, mainly due to the pricing. That's a decline of 12% versus Q4 2018. When you look at EBITDA margin, we had an EBITDA margin of 27% for last year on our €5,300,000,000 EBITDA. In the 4th quarter, we had an EBITDA of just over €1,000,000,000 but still the margin was 24.5%. It held up reasonably, which is really a product of our integrated model, our integrated value chain. So the margin held up relatively well even though it was a weaker quarter. When it comes to financial items for the year, we had SEK126 1,000,000, €25,000,000 in the quarter. This is higher than last year, mainly because there's one effect from the increase in interest rate partly, but also we had a positive effect last year because we capitalized interest on the CapEx in Ostrand before we started up the new mill. So that had a positive effect last year. Tax line, we had tax for the full year of SEK730,000,000. Here also, there was a positive effect last year from the change in Swedish tax rate. So that was a that had a positive effect last year. We had a smaller positive effect this year because the tax rate changed again, but less. So we have but the main reason for the difference between the tax in the 2 years is these effects of changes to the tax rate, which again is a noncash item. It affects deferred tax, but it doesn't it's not the main effect is not cash related. And that then results in an earnings per share of SEK4 per share, just over SEK4 per share for 2019. When it comes to the proposed dividend, the Board has proposed a dividend of SEK2 per share for 2019, an increase of SEK0.25 versus last year. And this results in a payout ratio of some 52%. We 52% is adjusting for these 2 special tax effects. But even if you don't adjust for that, it's 49%. So it's around the 50% mark in terms of payout ratio. Okay. Now I just come into the results per segment, and I'll show here the long perspective over some 6 years. And you can see starting on the left, you can see the forest business. And here on the top left, the increase in sales in the forest business is primarily the growth in volume supplied to the new Ostrand mill. So that really increases the volume of wood that we're sourcing through the forest business. But the bottom line is really driven by how much we harvest from our own forest, which is stable. So the bottom line is not volume driven. The bottom line is really increasing due to the increasing average wood price during 2019 versus previous years. And of course, that wood price is something that's passed on to the industry. So industry is having to bear that as a higher cost, of course. When it comes to the Wood segment, the sales have increased a number of years with growth in that segment. In 2019, it's come down a bit partly due to the average price being a bit lower. Also, we've deconsolidated our business in France, where we no longer own the majority of the French business, so that has some effect as well. And then the bottom line has also come down a little bit in EBITDA margin due to the average price being lower in 2019 versus 2018. It was really at its highest at the peak in basically Q3, Q4 2018. In the pulp, you can see the growth in top line obviously from the expansion in Ostrand. We're obviously we're not fully ramped up on a full year basis in 2019, but we are at the end of the year as I've presented. And the bottom line, you can see the overall value has increased. The margin is a bit lower, and here it's really the lower prices we have right now versus which are compensated by the higher volume coming through the mill. So those two effects counteract each other to some extent. And then on paper, we have the top line. It's really driven mainly by kraftliner and kraftliner pricing where, again, the average price this year is lower than the average price was last year. Again, it peaked Q3, Q4 last year. And that's really the effect you see also on the bottom line where the margin has come down a bit versus last year at 22%. And here are the bridges just to show the bridges. Net sales, firstly, we had an overall increase in net sales for the year of 4%. Pricing has a negative impact of some 8%, so quite significant difference in average price across our segments compensated by the growth in Ostrand primarily, which is the 11% volume growth. Then we have a positive currency effect and then a negative effect from this deconsolidation, which I mentioned in Wood. All right. Then the same bridge on the EBITDA for the full year. And here you can see the effect of the price, the €1,500,000,000 effect on the left hand side compensated partly by volume with plus €600,000,000 which is really due to the expansion in the pulp mill, as I said. Then we have a small effect from higher raw material costs from the raw materials we source from third parties, a better energy mix, particularly in the pulp mill, positive currency again, and then we have some lower costs for maintenance stops this year. We had a big maintenance stop to start up the pulp mill last year. We also have a positive effect from the change in accounting for leases. And we sold our Rotterdam terminal in Q3, which had a positive also positive impact during the year. Now just to come on to more or less the same picture but per quarter, so more short term. And here in Forest, you can see the top line a little bit lower in the Q4 versus the Q3. Our delivery volumes were lower partly due to these maintenance stops in the 4th quarter. The bottom line for Forest increased significantly in Q4. And here, we had some we had a onetime effect on the positive side from some of these forest transactions. So versus quarter 4 last year, we had an extra €90,000,000 from forest transactions. And we also had a higher revaluation versus the Q4 last year. But over the full year, it's yes, it's some €40,000,000 from these stops. We had the maintenance stop with the planned maintenance stop cost us €140,000,000 in terms of stop cost. And then these problems with the conveyor belt, which Ilf mentioned, cost a further €50,000,000 So those are the main reason for the EBITDA drop versus the 3rd quarter. Prices were also a bit softer in the 3rd quarter versus in the 4th quarter versus the 3rd quarter. And deliveries were affected also by this by the lower production volume. And then in paper, it's really kraftliner again that impacts the result and the top line down a bit due to kraftliner and the bottom line also impacted. And we also had a maintenance stop in kraftliner in the 4th quarter, which had an impact of some SEK 50,000,000. And the Oortviken fire off mentioned, which had cost some SEK 20,000,000 in the 4th So we had some significant negative effects and positive effects from these one off items. When it comes to net sales bridge, then we had a 12% drop in total net sales, and that's all driven by the price difference between the quarter 4 last year and the quarter 4 this year. I'll click on for the same for EBITDA, and you can again see the price impact was some $686,000,000 in the 4th quarter. The volume raw material and energy effects were basically flat. We had a positive currency. And then we have a positive basically net effect. We have the positive from these forest transactions that I mentioned and the revaluation, but they are offset by these negative effects from the maintenance stops, both planned and unplanned. Then in terms of cash flow, on the right hand side in the full year, you can see we had a cash flow for the year of SEK2.9 billion, an increase versus last year. And again, we're more than financing the strategic capital expenditures from operating cash flow, more than double in 2019. And in quarter 4, on the bottom line on the left, you can see we had some strategic capital expenditures in quarter 4. And here, they're mainly related to the first expenditure on the Obbola project, where we're making some of the down payments for particularly for some of the machinery. So that was nearly SEK900 1,000,000 in the 4th quarter. And so that looking at the EBIT sorry, the net debt bridge from 2019 quarter 3 to quarter 4, so just over the quarter. And here we have you can see the net debt has decreased due to operating cash flow, the $600,000,000 operating cash flow. We have the SEK 900,000,000 strategic CapEx, which increases net debt. We also acquired one of the acquisitions in the Baltics, where which had an impact of some SEK 250,000,000. We paid some tax, nearly SEK 200,000,000, and we had a positive impact due to the valuation on pensions of some €300,000,000 So overall then, at the end of the quarter, we had a net debt of €8,600,000,000 which is a net debt to EBITDA then of 1.6x. And finally, to show the balance sheet and here, obviously, we have a big change versus the end of last year due to this forest valuation. And there you can see on the top line, at the end of last year, we had SEK33 1,000,000,000 in forest valuation, and now we have just under SEK70 1,000,000,000. So that has a big impact. Working capital more or less on the same level. Deferred tax has gone up because of the related to the forest asset, but that's really an accounting item. And then other capital employed has increased due to the Ostrand project and now the start of the Obbola project. So overall, we have a net debt of €8,600,000,000 and as I said, a debt to EBITDA of 1.6x. But the equity, you can see, has increased nearly €30,000,000,000 from €39,000,000,000 at the end of last year to €69,000,000,000 at the end of this year. So and that's really driven by this revaluation. Okay. With that, I'll leave it to Ove to summarize. So if we then summarize 2019 again, it was a record year when it comes to profit and we can also clearly see the result from our profit growth strategy. By the Ostrand project, we have lifted up our EBITDA baseline and with the Obbola project, we will strengthen that position further. Strong cash flow and highlights from 2019 is, of course the ramp up of Ostrand. We are very happy where we are just now and we are looking forward to continue to fine tune the production in Ostrand in the coming years. We have started our program for acquisitions of forest land in the Baltics. We have done 30% out of 100,000 hectares in 5 years and we are also happy with that. We took the decision to go for a big kraftliner paper machine in Obbola and we are looking forward to the start up in 20 20 3. And last but not least, we could now state that we had 11,000,000 cubic more standing volume in our forests than we thought. So by that, I think we open up for questions. From the audience, I think that we can ask the operator to open up the line maybe. Thank you. Ladies and gentlemen, we will now begin the question and answer session. First question comes from the line of Linus Leersson. Please go ahead. Yes, thank you very much and good morning to everyone. Maybe if I may start with the pulp division and the Ostrand ramp up. You say that you are pretty much running at full capacity. So in the Q1, should we expect volumes in the magnitude of 95% of €1,000,000 that would be close to 240,000 tonnes? Or could you just spend a minute on what kind of volumes we should expect, please? I mean, we don't really cost volume. SEK 1,000,000 is the figure that you mentioned is also included CTMP. And I mean, we are now close to full capacity and we will now focus on, of course, availability in the mill, but we will be rather close. Okay. Sounds good. And then maybe on the forest side, you had forest land sales supporting EBITDA by EUR 115,000,000 in the Q4. What should we expect in the quarters ahead? Do you expect anything to come in the Q1? And what do you think about 2020 as a whole? Yes. Maybe I I mean, we basically, going forward, we don't expect impacts from forest land transactions, and that's a result of the fact that we are now valuing our forest land at market value. Then when we do these transactions, there is no difference to market value. So we had yes, we had we've always had some small effects in recent years from forest transactions, but that won't be the case with the new valuation of the forest land. But I mean, we are an active player in the market in the not I mean, we are in the Baltics, but also in the northern part of Sweden. But for obvious reasons, we don't know where we have good opportunities to buy forest land. But if we can buy forest land and if we can move the land closer to the industry, we will take the opportunity to do that. Great. And if we look at 2020 on the operational side, excluding revaluations, I understand revaluations will look somewhat different 2020 compared to 2019 after the write up of the assets. But if you look in the on the operational side of EBITDA, what potential change you expect 2020 versus 2019, please? Yes. I think I mean, obviously, the biggest impact is price. And as you know, we don't give forecasts, I think. But the main impact on our bottom line is what you think is going to happen in terms of the pricing environment in 2020. And that remains to be seen. Okay. What do you expect broadly speaking? Yes. Like I said, we don't give forecast. I think, yes. But I think anyway, you saw some slides in pulp that we've seen a lot of price announcements now from 1st February. We have a rather good level when it comes to inventories. So that is one picture. In solid wood products, we actually do some forecast and we know already now that we will have somewhat decreasing prices in the Q1. But after that, I feel that we have a good possibility for increasing prices in the second quarter. And already today, as I mentioned, I mean, in some grades and in some geographies, we have already started to increase prices in China, Japan, North Africa, better qualities of spruce, but also for many of the fine grades. In containerboard, we have also seen some price announcements now of increasing prices for testliner and normally they follow each other. So I mean that's the picture we have just now. Sure. Now I was I mean maybe I understood that. But I was actually asking you about the round wood prices, so the price for the Forest division? Okay. I mean prices in the market have started to come down and from a rather high level and we don't really expect too much of price changes in the market for the moment being because it's we have a good availability of Log Sjast now and I think it will be rather stable now going forward. Depends a little bit if we have any additional effect from the spruce beetle disease in Central Europe or so, but I mean, as it is just now, it's rather balanced situation. Great. And have you had any I mean, you're obviously quite far up north, but have you had any weather related issues with your wood supplies this winter? Do you see any clouds on that horizon? I mean not in our area. I mean, the normal summer in the northern part of Sweden is rainy and cold and that is good from this perspective because then we will not that will not be good for the spruce beetle. But I mean, you never know. We have had some wood damage in the very southern part of Sweden, but between 5,000,000 and 10,000,000 cubic meters in the very southern part of Sweden. But I mean, in our area, we haven't seen any really effect from the spruce beetle this year. Great. And then just one final question, please. On CapEx, what's your CapEx expectation for 2020? And how much of that would be relating to Obbola? Yes. I can say the so on the current CapEx, we our guidance of SEK1.2 billion per year is the same. We expect that to be our run rate on current CapEx. And with Obbola, we've had around just under €900,000,000 now in 2019. We expect around the same amount in the last year, if you like, 2023. And then the remaining amount is split pretty evenly between the years in between, if that helps. Next question comes from the line of Oscar Lindstrom. Please go ahead. Yes, good morning. A couple of questions from my side. First off, just coming back to the kraftliner pricing environment. You mentioned the price increase announcements for testliner and you say that usually kraftliner follows this. I mean is there some reason or some factor in the kraftliner market, which means that you don't see that this is likely to go into kraftliner as well? Or what are you seeing? Yes. I mean, not really. I mean, just now, as you know, we have a big spread between testliner prices and kraftliner prices. And so that is one perspective. For us, I mean, we saw not the least in the Ovid index and we relate 60% of the business, I would say, in Kraft Line to the Ovid index and prices came down in the end of Q4 in December and that will have a negative impact also in the Q1 of 2020. So that we cannot really avoid. Otherwise, when we look into the market, we see that inventory levels are very low. We have a really strong demand out there. We have seen price announcements for testliner and some announcements also in Latin America for kraftliner. So that is the position just now. Could you say something about, I mean, you say inventory levels are low. Is this due to good demand for kraftliner as well? We feel it's a good demand. And as you saw on the slide, I mean, the box production is rather high as now. So I mean inventory levels are on a decent level and also the demand is really good out there. All right. And the other question is on pulp and the geographic mix. I'm guessing you didn't sell that much pulp to China in this quarter. What's the outlook for Q1 when you should have better volumes? Yes. I mean, I don't think we will I think we will have a normal mix for the first quarter. We have had some problems, as you saw, in the production in the Q4. And by that, we are more or less out of inventory just now. So I mean, we will be quite focused on Europe and U. S. For the Q1. Okay. And then finally, on your summary slide here, you have a picture of a forest, but there's also some wind power mills in the picture. How's that build out progressing? It's progressing well. I mean, we have installed capacity now 4 terawatt hours at the end of 20 19 and step by step up till 2022, we will go up for 8 terawatt hours. I mean, it is progressing according to plan. But you're still doing this with through joint ventures? We don't invest ourselves as it is just now, no. Okay, very good. Thanks. Thank you. Thank you. Next question comes from the line of Marco Jarvinen. Please go ahead. Yes, good morning. Marco Jarvinen from Handelsbanken here. I had a few more questions. If I could start with the fair valuation. First of all, what do you expect the fair valuation of the forest to sort of on an operational level look like for 2020? Yes. I think well, what I can answer is I think you will see in the valuation of the forest one relatively easy to predict effect, which is from the net growth in the forest we have, where we have a net growth of around 4,000,000 cubic meters per year. So that effect is quite then easy to see. And then you know the price per cubic meter, so you can see the effect. You have to remember though that the value is split between land and biological assets. So around 70% of the value increase normally would go to biological assets and 30% to land. So if you do the math, you'll probably come out at around €800,000,000 value increase from that effect. Then the effect that's a bit harder to predict is what happens in terms of the price per cubic meter or the market value forest land. I think the latest statistics, it seems relatively stable, probably a small upward trend, but relatively stable in our area. But it remains to be seen what will happen during 2020, of course. And the value of the forest land based on transactions that you will value sort of end of 2020 or every quarter or all of that? No. I mean, if you like, the formal valuation is then at the end of 2020, and we have to basically include a quarterly effect based on where we think we're going to come out. So we'll probably be a little bit cautious in the beginning. But then if we see where prices are heading, we can also adjust towards the end of the year. But we won't know until the end of the year where the price picture for 2020 ends up, of course. But we will adjust throughout the year as we see that develop. And should we expect you to use this sort of 3 year market average as your primary? Exactly. That's what we expect to use going forward. So from next year, you then expect the average to roll forward 1 year, but it's still a rolling average. Okay. So if it's €276,000,000 for the last 3 years, could you just say what it was for 'nineteen, 'eighteen and 'seventeen, so we got a picture? Well, actually, I think probably the best thing is we have if you look in Note 3, you probably not got that far yet. But if you look in Note 3 in the report, we show the development of it over, I think, its 5 year history. So you can see that trend. Very good. Yes. Very good. And then just on pulp. You said that you don't really have any inventory now with the production issues that you had in Q4. Do you expect to build up some inventory during the year or during Q1? Or will deliveries sort of follow production is my question. Yes. I mean, it's too early to yes, really, if we have a strong market, I suppose we will follow the production and We normally want to have 1 month of inventory, and we're there more or less today. Next question comes from the line of Cole Hathorn. Good morning. I wonder if you could just give a little bit more color on where you're seeing the uptick in demand in pulp? Are you seeing it in specific end markets, if you have that color? And then just following up on kraftliner, I know you said that you're seeing good demand and inventory levels are lower. Can you frame that inventory levels versus history? And have you gone out or seen anyone else actually go out to the market with price increases in kraft either yet? If we start with Palt then, I mean, we have seen some reports from 70% of the pulp that we produce in Ostrand ends up in tissue. And I mean, if you look at some of the companies that have come out now, they announce rather good demand. And I mean, that will correlate immediately to the market for pulp. So that we feel. You can also see that inventories, they have started to come down, as I said, both for short fiber and long fiber. And now it's been as said also already a lot of announcements of price increases from 1st February. So that's the picture that we have just now. In kraftliner, I mean, we feel that we have a strong demand there, good order inflow, inventory levels are on the low level. And as I said, we've seen a number of price announcements in testliner. So far, I think the only announcement for kraftliner price increases is in Latin America. Great. Thank you very much. Thank you. Next question comes from the line of Martin Meldy. Please go ahead. Martin, your line is open. Hi, can you hear me? Yes. Good. So previously, you've given some comments about price changes for the next quarter by segment. You said now 1.5% down on sawmills. What would be the best guess on the containerboard and the paper and the pulp in Q1? Normally, we don't gas. We do it on solid wood products and I gave you 1.5% and that is due to the fact that we have already closed a lot of agreements now. And as I said, in some markets and in some product segments, we've seen increasing prices. And but for 6 months contracts, we have already agreed on decreasing prices, not at least in the Scandinavian markets. I mean, we pretty well know the outcome for the Q1. Then we feel also that the Q2 will be, I think, rather strong, not the least due to the Finnish strike. The inventories are starting to come down to a rather low level here. In containerboard, I said that we do a lot of business related to the OIBD index. And in December, we saw that OIBD came down quite a bit and that will have an impact also for our business in the Q1, so that we cannot avoid really. And pulp, I mean, you can judge yourself. I mean, we have not the least ourselves, we have said that we will start to increase prices from 1st February by $40 per tonne. On the other hand, you might see some increasing discounts for 2020 in comparison with 2019 and that have a negative impact on the net mill price. Okay. Last question. You say that your annual growth is now 1,000,000 cubic meters higher than you thought earlier. What does that mean for the actual harvest levels for say 2020? Yes. As I said also, I mean, it's far too early to judge that because we don't know really where we have the growth. We know that we have a high standing volume. But now we go into details and then we my personal view is that we have the main part of this increasing growth in younger stands and you cannot harvest in younger stands. But let us do the calculation and then come back on the final result here in maybe Q2, Q3. All right. Thank you. Yes. Thank you. Next question comes from the line of Michael Dekel. Please go ahead. Thank you. It is Michael here with UBS. Just one question left for me. On the graphic paper side, could you quantify a bit what magnitude of price declines you're seeing now in Europe in the newsprint and the magazine segments? And also, do you see any improvements in the trends in terms of the declines that we saw last year, which were quite heavy for the market as a whole? Any improvements or, let's call it, the mean reversion there to some sort of historical trend demand declines? Thanks. I mean, if we with the demand, I think structurally we know that publication paper is a declining market and that's the reason also why we step by step try to reduce the exposure to publication papers. We've had now a period of increasing prices for publication paper, but it's just a question of supply and demand. So the reason for this is, of course, that some capacity has been closed down. And I mean, what we see us now in the market for the Q1 is that prices will come down for both coated and uncoated grades. And if we start with coated grades, I think the situation is better than for uncoated grades. And again, we have a rather good demand for coated grades, but I believe the price decrease will be around €20, €25, €20,000,000 maybe per ton. And for uncoated maybe another €10, so €30 maybe for €30 per ton. But the demand, I mean, will continue to come down, that's for sure. Got it. Thank you very much. There are no more questions at this time. Please continue. Yes. But I think we're close to, yes, conference. Thank you. Yes. Thank you. That does conclude our conference for today. Thank you for participating. You may all disconnect.