Svenska Cellulosa Aktiebolaget SCA (publ) (STO:SCA.B)

CMD 2018

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May 22, 2018

The roots of our partnership go back 1000 of years. Trees and humans, we've served one another, helped expand our shared living space. Together, we've built houses all over the world, kept families warm, kept babies dry, powered everything from toasters to schools and industries, carried news, cargoes, and food and drink in to virtually every country in the world, Fostered prosperity and well-being across the generations. And yet, our journey has only just begun. The world has decided to live without fossil fuels. Oil and other finite resources are being phased out in favor of renewable spruce and pine. A great many markets are facing massive renewal. This is the world in which SCA stands tall as Europe's biggest private forest owner. This is a leading global industrial ecosystem where the growth and renewal of our 2.6 1,000,000 hectares of trees and the people who live and work with them never stops. We renew, we refine, we use everything, trunks, branches and bark to generate sustainable profitability in every respect. Trees and humans, a partnership that's fostering prosperity and well-being once again, and a journey that has only just begun. And here, our journey continues. Welcome to SCA's Capital Markets Day. My name is Bjorn Linkfeld. I'm SVP, Communications. We are now in Galsturm, an ironworks located somewhat south of Sonzval. It is actually the deepest root of the industrial ecosystem that SCA has created and is developing. It was founded in 16/73. And here, we will now be presenting our operations with a focus on our forest, but we will also touch upon interesting items of the rest of our operations. Ulf Larsholm, President and CEO, please, the floor is yours. So thank you for that, Bjorn. And also from my side, most welcome to SCA, to Gadsden, this beautiful place and to which I hope will be an interesting Capital Markets Day. I'd like to start with this slide just to give you a flavor of what we are doing within SCA. As Bjorn said, we have a unique asset in our forest and based on this unique asset we have also created a fantastic industrial ecosystem, a strong integrated value chain. We are the biggest private forest owner in Europe, 2,600,000 hectares of forest land, which is equal to the size of Belgium. We harvest annually about 5,000,000 cubic meters, which give us a degree of self sufficiency of about 50%, slightly more now before Ostrand and in August slightly less than 50%. All our forest holdings are certified according to the FSE and PFC standard. If we then walk over to wood, we are number 2 in terms of sawmill capacity. But what's maybe more important and interesting is that we've been able to grow this business by close to 10% per year as an average during the past 10 years. In pulp, we are just now finalizing which we think is the biggest industrial project ever in Sweden SEK 8,000,000,000 in order to double capacity of MBSK at Ostrand Mill. And Ingle Ekebro in charge of the project, she will give you some more details. But I can say, as I've already had that question many times now, on plan, in budget. Then we have our paper business, which consisting both packaging paper and the publication paper, 1,700,000 tons, a little bit more than half in packaging papers where we have a clear growth focus. And then we have our publication paper business where we have a clear cash flow focus. To the right hand side, you can see our KPIs for 20 17. And as I mentioned when we released the Q1 report just recently, we have a strong and a continued strong trend in the business as it is today. Our EBITDA margin for the Q1 was 26.7% and our industrial return on capital employed was close to 17% for the Q1. I did forget renewable energy because forest wood, pulp and paper, these 4 are our external segments. Renewable energy is the part which is maybe growing fastest overall. And in renewable energy we are I think the biggest producer of bioenergy in Europe, 9 terawatt hours based on residues from our mills. Today we have 2.5 terawatt hours of installed wind power capacity on SEA land. And also we are doing a lot of research ST1, which ST1, which Mikael Kjellgren will talk more about later on. But to summarize, we have the critical mass. We have a well invested asset base, strong cash flow, a strong brand and growth opportunities in all areas. In the United Nations Climate Meeting in Paris 2015, it was clearly stated that forest industry and the forest active forestry is an important, if not the most important part to mitigate the negative effect of the climate change. And we can do that in 2 ways. Firstly, in a growing forest, we capture 2017, we captured more than 4,000,000 tons in our forests, which is much more than we release in our entire operation from harvesters to distribution to end consumer. But maybe more important is that we have the opportunity. With this renewable fiber, we can replace fossil based and nonrenewable materials and that is maybe more important than the carbon dioxide capture. We also have a fast growing demand for virgin fiber. And today, it's not easy to get access to high quality recycled fiber. It is also so that we can see in the trade that e commerce digitalization is also driving the demand for high quality packaging grades, which is for us in S. A. A perfect fit because we are based on fresh fiber products and we also have our great forest holding. But it is a positive momentum for the whole industry as such. I did mention that we have good growth opportunities in all areas. And at the same time, we have to meet some certain criteria in order to go into different projects. First, we have to create value. We need to have a decent return on capital employed in each project. We also like to stay with a healthy leverage, and we also like to stay with our investment grade rating. But maybe most important is that each project has to fit in, in our integrated value chain. And if you look to the right hand side, you can see that first we have ongoing projects. Ostrand is already mentioned, our SEK 8,000,000,000 project which will give a healthy growth on top line 10% to 15% depending on the pulp price. It will also give a good contribution on EBIT or EBITDA level and again on plan. We have also taken the decision to increase the share of white top kraftliner with 50,000 tons. We think it's the right thing to continue to develop our portfolio to move forward in the value chain and this project is a perfect example of this. Today, we also know that we will reach our goal to have 5 terawatt hours of installed capacity of wind power on SCA land 2020. We already have all agreements in place in that perspective. What are we doing now? Well, we have different opportunities. And as said yesterday, we did announce a new strategic cooperation with SD WAN. The first step here will be to start up a facility for producing 100,000 tons of liquid biofuel. We found a cost efficient way to do that together with SD WAN and we feel that we have good further opportunities in this field. As I also announced earlier, we have started a pre project in order to see in what way we can increase the capacity of Kraftliner. And the scope just now is to increase the capacity in Obbola, a machine which is already today the biggest machine in Europe, but we think that we have a good potential for a brownfield project here. And Mats will tell you more about this, but we will have a clear view on this, I think, in Q1, Q2 next year. And last but not least, around Ostrand, it is a fantastic project. And of course, the main product will for many years be the pulp as this mill will be the biggest in the world producing NBSK. But we've also created a fantastic infrastructure around Ostrand, which will give us great opportunities in the field of green chemicals, liquid biofuels and things like that. So we are not at least together with ST1 looking into these opportunities going forward. So our forest, a unique asset and based on this unique asset we have created a fantastic industrial ecosystem, a strong super strong integrated value chain. And to summarize our growth strategy in a simple way, we can say that, 1, we like to maximize the growth in our forest. We can do that in 2 ways. 1st, we can be even more efficient and intensive in our silviculture operations. Today, we have an available growth of about 8,000,000 cubic meters per year. We think that we can increase that amount further. We can also add forest holdings to our portfolio, which we are also interested in, of course. Secondly, we like to maximize the value from each tree through our strong and integrated value chain. And if you look to the right hand side here, that is pretty much the agenda for the rest of the day up till lunch. So we will talk about our possibilities that we see in forest paper, pulp, energy and wood. So by that I think I hand over to Jonas who is in charge of our forest business since 1st April. And before that he's been in charge of our wood business since 2008. Okay. Thank you, Ulf. What a nice and interesting day we're going to have. As Ulf mentioned, the best way for us to create long term value from our forest land is to maximize the growth. We have been able to increase the growth dramatically over the years. Today, we have more standing volume and faster growing forests since ever since we started measuring last century. And this is made possible by those devoted foresters that has made smart investments and worked hard when it comes to silviculture. And when we talk about silviculture, we talk about soil preparation, using the right species on the right site and fertilization and so on. And we also during this period introduced some new species. You will hear more about Venus Contorta later on today. Increased growth also enables our long term harvesting levels. As a result of our well managed forest, the harvesting levels has more than doubled since the 1950s and the harvesting level will continue to increase also in the future. Increased growth and harvesting levels strongly support increased land value. But of course, the land value is also extremely important or extremely dependent on a well invested and well managed infrastructure in the region. And of course, an industry that refines what the forest produce, and you will hear more about this during the morning. So if we move on to this picture and but before I start to explain why our forest management is such a fantastic success story And before I go deeper into these figures and graphs, I want to explain the difference between the measurement cubic meter FO and cubic meter SUB because that will help to understand this day or this presentation. Most of you may already know this, but just to be sure that you all follow me, I will clarify it further. Cubic meter, F. O, stands for Forest cubic meters and includes the entire tree, including the bark and the top of the tree, but excludes the branches. This measurement is used to describing a living and growing forest. The measurement cubic meter SUV stands for solid cubic meter under the bark and the volume of the bark and the volume from the top of the tree is excluded. This measurement describes the part of the tree that is sold and used as an industrial raw material. As I just said, our forest management is a fantastic success story. We have been able to increase the standing volume by more than 50% and at the same time, we have doubled the harvesting levels. This is partly due to historical reasons, partly to professional forest management and partly to our ambitious silviculture management. I'm proud to say that, yes, and I will come back to this also later on today and explain it more in detail. Our ambitious silver culture program with soil preparation, the right species for the site, improved ceilings and fertilization has increased standing volume from our forest land by 60% since the 1950s. And today, you can see we have a standing volume around 232,000,000 cubic meter FO. I'm also proud to say that SC strategy has always been to raise or keep the harvesting levels. We never fall short for a short sighted rise, which forces to lower the harvesting levels in the future. With our management, harvesting level has more than doubled since the 1950s and we will be able to raise the levels robustly also in the future. During this period, we have been able to increase both harvesting and growth while maintaining a high ambition for nature conservation and biodiversity. As Ulf mentioned, SCA certified according to FSC and PFC standards, 2 certification systems that verify a responsible and sustainable forest management. We have a fast growing asset. We are increasing harvesting levels and as an effect, our land value rise. Land value in our region has more than doubled during the last 2 decades. As we have said, our long term strategy is to continue to maximize the growth in our forests and also increase the growth the harvesting levels. As you have seen, we've been able to increase growth dramatically over the years. Today, we have more standing volume on our forests and faster growing forests than ever. With a sustainable forest management we apply today, standing volume and harvesting level will increase also in the future. Up an efficient timber sourcing and logistic organization. As Ulf mentioned, about 50% of the raw material we need comes from our own forests. The other 50, we buy primarily from forest owners in the region. Most of it comes from private forest owners, but we also buy from bigger suppliers like other forest and sawmill companies. For ensuring the increased wood supply to expanded Ostrand pulp mill, we have started the cooperation with a couple of major timber suppliers companies in Sweden. For example, state owned Svyasgaard and Forest Association Melansgaard. With these two companies, we have already signed long term contract to supply Ostrand. We also import a minor volume from the Baltic States where we have our own purchasing organization. To further strengthen the raw material supply to our expanding forest industry, we also look at opportunities to acquire more forest land as Ulf mentioned. The forest management system we apply today give us a good balance between high growth and harvest in our forests and biodiversity and nature experience. In the future, SCA forest will be as rich in timber as biodiversity and nature experience as today. There's an ongoing debate today how to use forest land in the best way. To us, it's extremely important to mitigate further restriction in ownership rights. To further restrict the use of forest is counterproductive when it comes to reducing CO2 emissions and producing sustainable products from our sustainable forests. So by that, I will hand over to Mats and as I said, you will hear more about SA Forest Operation later this morning. So thank you and good morning, everybody. Happy to be here. And as the subject is on the screen now, I'm mainly going to talk about kraftliner expansion. But first, starting with our strategic priorities within paper, I think this has been clear now for some time. But our focus here on the publication paper side being approximately half of our business is a cash flow focus. Here, our success is built on operational and commercial excellence and, I would say, our ability to renew our product portfolio. And I'm quite proud to say that today, 45% of our product portfolio didn't exist 5 years ago. And we have a funnel of new products that I'm also quite proud of. We are having, as an example, a very important new product launch coming now in 1st July. So we are working very hard on maximizing this business with limited CapEx spend, and it's working quite well. On the other side, on our kraftliner business, we have a growth strategy. We are building our strategy, I would say, basically on our strength, both on the publication paper side and on the kraftliner side here. We have had a plan. We have a road map for that where we have started implementing the first two steps of that road map. We took the decision to invest almost SEK200 1,000,000 in our Mungson Mill, expanding the white top liner capacity there going from 150,000 tonnes to 200,000 tonnes. And by this, we are gradually focusing the whole mill into what we would call specialties or niche products within the containerboard segments. And our idea is also then to transfer the since the total capacity is not expanding, we will transfer 50,000 tonnes from Mungsund over to Obbola in Phase II. It happens to be so that the 50,000 tonnes of leased profitable products in Munson is the most profitable products in Obbola. So it fits very well. The Grammich range and the sweet spot of these 2 paper machines and mills are overlapping. So the least profitable products in Munson becomes the most profitable products in Obbola. So there is a gain, a significant gain of that product optimization. The 3rd step of our road map is to expand the capacity and I would say also by that reduce the cost of goods in Obbola. And we are now in the process. We have an environmental permit process, but we are also in the pre project phase where we are preparing for this expansion. And the pre project for us, that means that we have set aside a full organization now. We have a Project Director in place. Same role as Ingela is having here. And we are having an organization of 20 plus people in full swing of preparing and doing this project. Not yet decided. Of course, we are working on the time line there as well. And why would we do this? Well, first of all, the market is there. We are having a long term view on the positive outlook of the packaging market in general, the containerboard market and I would say specifically the kraftliner market. And it's driven by long term trends that are very favorable for us. You all, I think, know it. You know it from your private daily life, but we can see it also in the demand picture that we are seeing here. And for us, at least up till 2026, we are seeing an annual demand increase of 2% coming into the market. But this demand increase can't be met by today's capacity. So that is one thing. If we are looking into the operating rates as we see today, you can see here on the virgin, that means the virgin means the kraftliner market and recycled means the testliner market. Up till now, the operating rates on the testliner markets is hovering around a little bit above 90% and that is met also going forward by capacity expansions. The barriers to entry or the barriers to expand capacity on the recycled paper side is they are not that high. It's more the availability of raw material. The technology of making the product or the access to other types of assets like virgin fiber or pulp mill capacity, you don't need that there. On the virgin fiber side, the kraftliner side, it's much more complicated. It's much more complicated to build capacity and it's much more expensive also to build capacity. Here, the operating rates now are almost up to 97%, 98%. So it's completely full. And if of course, with an operating rate as this and with a growth going forward where we see that we believe that the need for products will increase by 800,000 tonnes according to our estimations approximately by 2026. It's not possible. So that won't happen unless new capacity comes on stream. Of course, what will happen then is that products needs to be transferred from virgin fiber based products into recycled fiber based products. So there is a cannibalization, of course, between these 2 product types. So there is a clear need in the full capacity. And I would say the good news for us there is that I think I believe that we have almost a unique opportunity to expand the capacity in a profitable way because this is not easy to find the right opportunity or the right location or the right circumstances for a good expansion project in this area. But here in Obbola, I believe we have one of the best opportunities that I can see. We have all the basic things that you need to have in place. We have access to the fresh fiber that we need. We have the pulp mill. Large parts of the pulp mill is renewed. We have invested in the last 10 years, we have invested SEK3 1,000,000,000 into the pulp mill. But we have hardly invested anything into the paper machine during the last 10 years. And we were standing in front of a renewal or lifetime extension of the paper machine now once the pulp mill was ready. So we have many things that we have done in the pulp mill has prepared ourselves for this expansion. And of course, we have a very, very strong market position here. We are the leading non integrated supplier into this market And we know how to do this. So what we are planning or preparing and planning for and analyzing in Obbola that is to build a new 800,000 tonne paper machine that would be the world's biggest paper machine in its kind for its segment, which is very, very interesting. And by that, we would close the existing paper machine that has a date from 1975. That is the biggest kraftliner machine in Europe today. So that's also very interesting. We have hardly or we have no asset capital left in that machine, so it's possible. And we would replace it by the biggest paper machine in the world. So we would start with an 800,000 tonne paper machine. Our plans are not to debottleneck the full pulp mill as a starting point or so we would start with a capacity of around 700,000 tonnes and then we would have the opportunity or option of debottlenecking the rest of the pulp mill at the later stage, taking it up to 800,000 tonnes. So it would be a 2 step approach. So as I said, the second part of that project is to expand the existing pulp lines. We would expand the recycled fiber pulp line and we would debottleneck parts that make sense in the existing pipeline. And an investment decision is something that comes after this pre project when we have kind of confirmed that we are our analyzers are correct and that we have a profitable project going forward. We have our time line, so we are on schedule and on plan for this project going forward. With this, I would like to hand over the word to Ingela. Thank you. Thank you, Mats. Today, it is exactly 999 days since the Board of SDA took the decision to invest SEK 7.8 1,000,000,000 in expanding the pulp capacity in Ostrand pulp mill. We started the preparation work immediately on-site. And today, we are around 100 people in the project management teams and around 1800 people on-site. This 999 days, we have tried to use as efficient as possible. And thanks to the fact that we have an ongoing production at the site, we have been able to start up quite a number of new process areas. The new control center was ready for use the 1st July last year, and the new wood processing plant has been in operation also since July last year. The new evaporation plant, the biggest and most energy efficient of its kind for softwood pulp, has been in operation since December. And the 1st full production month, the availability was 99.2%. In February, it was 99.9% and in March, 100%. At least I consider that as a successful start up. The new drying machine had pulp on the wire 3 days before the planned startup. And out of the first 8 web threadings, 7 was successful. It has been an extremely stable production on the new machine, even more stable than on the existing one. During 2017 2018, we have also been able to start up a lot of equipment for the increased white liquor capacity, all that on time. And white liquor is the chemical that is used in the digester for dissolving the chips into free fibers. Besides the hardware preparation on-site, we also have used the time for setting up a new enhanced market organization in order to be well prepared to bring the new capacity to the market. We have a really strong organization in place, and the preparation is ongoing for the new capacity on the market. And we have been the preparation has been ongoing for quite a while now. The new control center has been used since the last summer for training and commissioning works. All operators at Ostrand have been able to run their new departments in process simulators. So with the right operator interface, the right configuration and process control programs. So they have been able to start the production lines, solve problems during production and shut down the production lines prior to the actual start up. And that is something that we believe very strongly will affect the process stability during the ramp up period. Now we are in the middle of the final important preparation for the start up, and that is to fiber line and the expanded recovery boiler in place. And we will push the buttons in June, and we foresee a After the start up, the total capacity in the mill will be 1,000,000 tons, 900,000 tonnes of MBSK and 100,000 tonnes of leached CTMP. We expect a fixed cost reduction for the kraft pulp of SEK350 per ton compared to the situation in the old mill. And at full production rate, we will be able to produce 1.2 terawatt hours of green electricity, from of which 0.5 terawatt hours will be supplied to the grid. The wood supply is, as Jonas mentioned, secured mainly from domestic forests. The cost impact will then be reasonable, but of course, the transportation costs can be somewhat higher due to longer distances. Regarding pulp quality, we have high ambitions. We aim for being the benchmark for pulp for tissue products. We have focused our process design mainly for being a strong supplier to the tissue market, And the market conditions looks promising. We can see a growing market demand for all pulp segments, also for beach softwood kraft, where the growth has been stable for the last years. The driving force for that is mainly a strong growth of tissue production. As both virgin fibers and white recycled fibers are used for raw materials for tissue products. Sorry. The shrinking consumption of printing and paper, writing papers also creates a shortage of recycled fibers that has to be covered with virgin fibers. And that is, of course, unfavorable for the pulp market. So to wrap up the situation for the pulp business at SCA, we have a very strong focus to finalize the investment project to start up the new pulp line in efficient and safe way, then to ramp up the production, so we can as fast as possible, of course, so we can start to fine tuning the production and pulp quality in order to reach the new pulp quality to reach the leading position for softwood pulp for tissue products. That is what we are aiming for. Thank you. And now I will hand over to Mikael Scheldgren, he is President for the Energy Business. Thank you, Ingela. So we've just heard a compelling presentation of the fantastic Ostrand pulp project and the business development of pulp within SCE. However, the Ostrand expansion is equally a fantastic project in terms of developing renewable energy. And let me explain why. The expansion of Ostrand give us 3 important potential future assets. First, the fact as one is the fact that we're doubling more than doubling our production on Taloyl at Ostrand. And Tal Oil is a residual product when producing chemical pulp. And asset number 2 is the shift we now have been able to make going from being a net energy consumer to a net energy producer at Dostan, giving us a surplus not only of green power production but also in solid biofuels, black liquor and capacity to produce more heat and steam. Asset 3 is the way we can deploy this energy surplus internally to maximize cost savings and therefore profitability for future biorefineries but also for Ostrand. I'll walk through these assets during my presentation. As announced yesterday and mentioned by Ulf in the introduction, we are now taking the next step of creating more value out of asset number 1, the Thaler Oil. We do this by forming a joint venture with ST1 that gives SCA access to the full value chain within of biofuels within transport the transport sector. And this means that we're going from being a raw material supplier of tall oil to other industries to becoming a biofuel producer. And as you know, mandates and targets have been decided and are being decided both in Sweden and within EU and the market for liquid biofuels for transportation is growing fast. And on the chart behind me, you can see the Swedish HVO market and its development last year. So together with SD-one, we now plan to invest SEK 500,000,000 in a commercial scale plant to produce biofuel from tall oil such as HVO, but also potentially biojet for aviation. The capacity will be about 100,000 tonnes of biofuels annually and SAE will be able to supply this joint venture with about 60,000 tons of tall oil every year and that's about a third of the total demand. Commissioning is as we speak planned during 2021 and the production of biofuels from tall oil will be equal to SA usage of fossil fuel in our value chain from the forest to end customers. And that includes forest machines, trucks, cars and ships. So this joint venture to produce tall oil is a little bit of a sprint with commercial technologies in place and hopefully it will be a very successful sprint. However, we all know that the future of renewables, especially within transportation is more of a marathon and the Ostrand expansion will allow us to be a highly success participant in the marathon as well. And I'll tell you why. As mentioned in the beginning, the asset 23 are the energy surplus created by the great energy efficiency at restaurant, which can be utilized in 3 ways for future biorefineries, if done right. Firstly, Ostrand will have the capacity of producing an excess of heat and steam that can be used for drying sawdust and bark and other feedstock for future play refinery. And this means that we can avoid additional major investments in new CHP plants and boilers compared to a greenfield biorefinery. Secondly, Ostrand will produce 700 gigawatt hours of bark, which can be used for future feedstock. And this means lower cost and security of supply. And in this context, I like to mention that renewable energy within SEA, we have about 2.5 terawatt hours of solid biofuels today in our portfolio, such as pellets, sawdust, bark, residuals from forestry. This can also be used at future feedstock. And thirdly, Ostrand will have an energy surplus also in the black liquor, which can be extracted to produce biofuels. And here we have invested SEK 50,000,000 in a pilot plant developing this technology further. However, the synergies also work in reverse. By the extraction of lignin from the black liquor, we can free capacity at Ostrand allowing us to increase pulp production further in the future. So, this is some of the background and framework of why we're now looking into 2 biorefinery Estrand for the future. 1, where we want to convert solid biofuel to liquid biofuels and 1 biorefinery line where we want to extract lignin and lignin oil from the black liquor to produce biofuels. And hand in hand with technology development, we are also meeting external requirements such as obtaining environmental permit and detailed site planning so that when the time is right and these technologies are ready to go commercial, we will have the decision in our own hands. So, we have now looked into one aspect of renewable energy and how to make money by reducing emissions within transportation. Let us look at another asset, our land. Let me start by ask you a couple of questions. Do you know how many wind turbines that were under construction in Sweden during 2017? Let me tell you, it was 6 70 wind turbines. And do you know what percentage of those were under construction on our land? The answer is more than 35%. So, what does this mean for SAE and value creation? I'll go through some details. We have great wind conditions on our land and our business model is mainly leasing out this land to investors being an active partner with in house competence and wind power. We also in some cases develop our own project until environmental permit is granted and then we sell these to potential partners or investors before construction. And with the 35% from last year, we not only know that we now will reach a very important sustainability target of SEA and that is 5 terawatt hours of wind power capacity on SEA land by 2020. We also know that we have secured an EBITDA contribution of at least SEK60 1,000,000 to SEK70 1,000,000 for a very long period of time. Our land lease agreements are often 25 years or longer. And even though the conditions of getting permits for wind power in Sweden today are more complex than before, there are a lot of ongoing projects on our land and our growth strategy within wind power will continue. So in terms of renewables, we now ticked all the major boxes for future value creation for SAE, at least as we know today. We talked about wind power and our land lease and growth opportunities. We talked about the Tal Oil in cooperation with ST1 and the synergies with Ostrand for the future in key biofuels within transportation. And we believe that renewable energy has the potential to be the next value creator for SAE as referred to by Ulf in the introduction. Thank you. And then I hand over to Jari Lauchson. Thank you, Mikael, and good morning, everyone. To begin with, I would like to underline the importance of our sawmill business to SAA as a big forest owner. This is because we represent twothree of the revenue debt to SEA Forest, thus supporting the asset value of our forest land. Later in the presentation, our CFO, Mr. Torbjorn, will go through this in more detail. We have, during a long period of time, worked to create 1 of Europe's largest and most efficient sawmill operation. This is done mainly through large investment but also, very importantly, by consolidating our mills. When moving from 11 to 5 sawmills during a period of 10 years and at the same time, increasing the total volume output. We have now all our mills within the top ten size in Sweden, and 2 are actually among the top 5. In other words, we can also say that our average size on approximately 450,000 cubic meters per unit and year is 3x as high as the average in Sweden. Together with the fact that we are very well situated close to SCA's Forest Holdings, we have created an efficient and valuable asset for SCA, playing an important role in the whole company's integrated value chain. Our annual growth rate the past 20 years has been close to 20%, and we've done that in a profitable way. It has been done partly by growing the total volume of sawn goods output but mainly by moving forward in the value chain. To begin with, we targeted the wood industry, where our very high quality sawlogs were appreciated. For example, we are now producing and selling knot free finger jointed glulam blanks for the window industry, for example, to our customer, DuVista. Secondly, we created distribution platforms and further processing units in order to supply the building material trade. Customers in that aspect are, for example, here in Sweden, Bayer and BUGMAX and, for example, in U. K, Travis Perkins and Wickes. This has given a higher and more stable margin over a business cycle because we have focused on a part of the business that is less volatile. Actually the repair and remodeling part of the business. By moving forward in the value chain, we have gained customer insights that has given us better possibility to work with innovations product innovations. And when talking about product innovation, I would like to give you 2 examples. The first one is our pine heartwood decking. You could see it in the picture and for you here present in Sonsovaal, you can see it behind me on the wall. This garden product we use to produce to produce this, we use advanced X-ray technology in our log sorting department where we find the suitable logs with a high share of hardwood. Then in the second state, we cut those logs in a specific cutting pattern that ensures the fact that we have a 99% share of heartwood in this garden product. This then we can create a very beautiful, durable, sustainable and 100% chemical free garden product. Secondly, we have also our outdoor cladding with concealed fitting. You can see it on the summerhouse also presented in the picture. It is painted in a controlled industrial environment, and it is also equipment concealed fittings. This gives the possibility for us to offer a product that does not need to be painted at all in the building site. When doing that, we, of course, save a lot of time for the builder and also cut cost in the total value chain. To sum up, our strategic direction within Wood, we will continue to look upon a profitable growth within the building material trade in Scandinavia, U. K. And France, But we will also work a lot with our industrial customers, especially those where we can utilize from our naturally high quality logs that we have up here in the North. We want to continue to gain from our well invested big sawmills and also develop our further processing units. We will do that, for example, by atomization, where we work with very advanced measurement techniques in order to increase the yield from log to finished products. We will also work with optimization to find the right log for the right end use, for example, when we are producing these window blanks that I described earlier for the window industry. Finally, we also work extensively Finally, we also work extensively with digitalization all through the value chain. And one example of that is that we now offer a home delivery solution for the growing e commerce market. This is done together with our customers within the business material trade and through their e platforms. By doing all this, we will continue our profitable growth and increase the customers' experience of wood and also the customers' experience in how to buy wood. Thank you. Thank you. We have now had an overview of our respect of different businesses in the morning going from the forest all the way to the gas station. We have now disturbed coffee, which we will have. After the coffee break, we will dig deeper into the focus of the day, which is the forest, and learn more of how we can create more value out of a tree. So we will break now for coffee. Coffee is served behind the technology department. We will reconvene here in 20 minutes. And bon appetit. Welcome back to SCA's Capital Market Day in Galtstrum. We will now tread deeper into SCA's forest. So show us the way, Jonas Mortensen, President, Forest. Okay. Thank you, Bjorn. So in this session, I will give you a more detailed description how our ambitious forest management will create value today in the future. But I will start actually with the history of the Swedish forests as a business operation. Industrial forestry has been conducted in Northern Sweden since 17th century, starting primarily with production of charcoal for the mining and iron production. The mining industries in mid Sweden overused the forest to such a large content so that the surrounding areas of the mines and the industries were more or less one great clear cut. As Jon mentioned, new iron works were established in new areas with good access to forest and running water. Gulfstream, where we are today, as you heard, are one good example. The sawmill industry then started to industrialize the northern part of Sweden by the end during the second half of the nineteenth century. All forest far up north and to the west to the mountains to the west of Sweden were subject to repeated selective exploitive selective cutting. Big timber trees were harvested and small growing trees were left. No measures were taken for regeneration. And the result was, of course, a poor forest with small volume and it was also slow growing. And that you can see on the picture on the right hand side, which is a picture from that time beginning of 1920s. During the 1950s, selective cutting were replaced by final felling and silviculture. As a result of that, the forest industry in Sweden has since the 1950s being restored being refocused restoring these old forests. This leftover stands with poor growth has been harvested and reforested with ambitious silviculture, creating young forest with high growth. This has resulted in considerable gains in production, but also a need for improved nature conservation. In the 1993s, a new Swedish Forester Act were approved, which sets equal goal between production and biodiversity. The consequence of this was a totally new way of managing our forests. The management system we have today that we apply today give us a good balance between high growth and harvest in our forest as well as biodiversity. And the result is illustrated on the right hand side and you will see it for yourself also during the afternoon during the forest excursion. As I think most of you already know, we are Europe's largest private forest owner. So Olof already has mentioned, we manage 2.6 1,000,000 hectares of forest land, as Solif said, close to the size of Belgium. After this, 2,600,000, 2,000,000 hectares also called productive forest land used for timber production. That's 8.5% of the productive forest land of Sweden. And the definition of productive forest land is a holding where the forest grow more than 1 cubic meter per hectare and year during a rotation period. The total standing volume on SA Forest land today amounts to a bit more than 230,000,000 cubic meter FO. And as you can see on the map, our market our forest holdings that are marked in green, they are located close to our well invested and well managed industry along the coast. I hope you remember the difference between cubic meter FO, forest cubic meter and cubic meter SUB solid cubic meter under the bark because that helps to understand this picture. SEA forest are currently in a high growth phase as shown in the table. Annual gross growth is currently about 9,500,000 cubic meterfo. From the 9,500,000, we have natural losses such as windfalls, damage caused by animals and so on. So together with the precommercial thinning, this give us a total loss of around 1,300,000 cubic meter FO. So the annual available net growth is 8,200,000 cubic meter FO. As I mentioned and as you've heard, we have a total standing volume of 232,000,000 cubic meter FO. So with a growth of €8,200,000 that gave us an annual real growth rate of 3.5%. Out of this 8,200,000 cubic meter, we harvest 5,200,000 corresponding to 4,300,000 cubic meter SUB and the annual harvesting level are based upon our long term harvesting plans at present a bit more than 5,000,000 cubic meter. And as you understand, this is what gave us a strong current cash flow from our forest operations. As you can see, we harvest less than 2 third of the annual growth and the reason for that is that our young well managed forests are not yet ripe for harvesting. Therefore, harvesting and cash flow from the forest will increase over time. Silviculture has been developed step by step since the 1920s, and it's based upon the importance of soil preparation combined with the plantation of seedlings of the right species on the right site. Trees can be fertilized like all plants. In the soil of Northern Sweden, we get a good effect from adding nitrogen combined with some other nutrients. When we add around 150 kilos of nitrogen per hectare, the trees managed to grab that and increase the growth by 15% and the effect last for about 10 years. Natural regeneration is quite risky at our latitudes and height above sea levels. The chance of getting a good seed years goes from 100% around the area of Javal down to 10% when you reach Oslo. So planting is a much safer method up here. It also enable us to use genetically improved seedlings. You can breed seeds the way you breed dogs and or horses. And we are now coming into the 3rd generation of seeds where the seedlings will give about 25% higher growth than a natural seed and the breeding will of course continue. Penus contorta or largepulpine were introduced in Sweden in the mid '70s after a long research and testing of different species, species that could work in Sweden and could fit the Swedish sawmills and the forest industry. Seeds were picked in British Columbia, Canada and seedlings were produced in our own nursery. As of today, we have planted in total large pulpine on 300,000 hectares of SA land, which corresponds to around 15% of our total area. And large pulp pine, what is so fantastic with this species is that it's growing 40% faster than natural Swedish pine penis Silvestris. As you can see, our growth plan has increased after every taxation due to developed forest management and has increased our standing volume per hectare significantly during the last decades. SEI have a high share of young forests currently in a strong growth phase. As you can see on the left hand side, onethree of the today's standing volume is younger than 50 years. A very high proportion of the growth is around 60% takes place in our young well managed forests. However, these stands are so productive that we like to keep them and let them grow for another 20 to 30 years before we start to harvest. On the right side, you can see that Lodgepole Pine at present stands for almost 10% of our total volume and stands for close to 20% of the total growth. Lodgepole Pine will continue to boost our biological growth. And there are no legal restriction concerning the harvesting age of the Lodgepole Pine Stand. But in order to maximize the growth and the future harvesting levels of all three species. The plan is to start to harvest multiple pine on a larger scale in about 10 to 20 years when our stands are 50 between 50 to 70 years old. Planning is the keys to increase growth in our forest, but also to reduce cost when managing forests as well as managing nature considerations. Every 6 to 8 years, we conduct a new forest taxation to recalculate the standing volume and future harvesting level. As you may know, the rotation period in our area, our part of Sweden is between 80 to 100 years. Therefore, we need a very structured and long term planning process, for example, to identify forest habitats with high conservation value before we start to build forest roads or before we start to harvest. It also allows us to interact with other forest owners when we build forest roads or it also can give us a chance to purchase timber from private forest owners in the area where we're going to harvest. And of course, at the end of the period or the end of the planning, it enabled us to harvest several stands in the same area to be cost efficient in terms of harvesting and logistics. SCA have the world's largest forest tree nursery with 18 greenhouses located close to Sundsvall. We have a capacity to grow 100,000,000 ceilings per year, enough to cover about 50,000 hectares or about an area of 100,000 football fields or and greater than the populated area of Stockholm. A bit less than 50% of the seedlings produced in our nursery are used on our own forest land. The rest are sold to other forest owners externally. Since the 1970s, we have been monitoring seed 50,000 seedlings from the time that they are planted until they are 10 years old. The data is used to find individual trees with high quality and high growth. Today, we use cultivated seedlings from the 3rd generation of seed plantations and the result is a forest with 25% better growth than natural regeneration. And we have also recently developed an improved ceiling system called PowerPot that is 15% more effective than traditional systems when it comes to planting the ceilings. Global warming will have a significant impact in our part of Sweden. The effect of global climate change has been well studied in Scandinavian forests and the effect on forest growth will be largest in the North. With a significant longer growth season and with a projected increase of 3 to 4 degrees in temperature, the growth will increase by 25% to 30% by the end of the century. However, there is also an increased risk for damages to forest and soils such as increased risk for storms, fires, infestation and snow damage. And we will also have periods of and periods of ground frost will also be shorter, which might have a negative impact on harvesting or logistics. We are already planting seedlings that are better adapted to the warmer climate, but these will, of course, not be harvested within 60 to 80 years or so. As you saw earlier this morning, we have been able to more than double the harvesting level since the 1950s. And at the same time, we have increased the standing volume in our forest by 60%. And if you take a look at these two graphs, you can see that the sustainable growth will continue. Our harvesting levels will continue to increase. Within 30 years, we will reach a harvesting level around 5,000,000 cubic meter SUB. During the same period, standing volume will continue to grow from today's level to over 270,000,000 cubic meter FO. But I also want to emphasize that these calculations, they are based upon current practices. We have not included the positive effect from a warmer climate into these figures. This diagram shows our forest divided in its different age classes. The majority of our stands are young forest up to 60 years old with high growth. However, because of the high growth, we should wait to harvest them until they are about 80 years. From inventories, we also know that the older forest is, it is also often more valuable for nature conservation. This is also clear from the diagram as you can see. The younger stands are the result of silviculture and good forest management with higher volumes per hectare and more average nature values. The younger when they reach when these stands reach harvestable age around 2,035, the harvest will increase considerably. With our responsible forest management, we preserve the forest biodiversity through, 1st of all, voluntary set asides, that is forest areas that have a high conservation value, for example, woodland key habitats. Today, both the FSC and PFC certification standards require that woodland key habitats are set aside from forestry or that they are managed to promote biodiversity. 5% to 8% of SCA's productive land is set aside voluntarily and at their own cost to preserve biodiversity. Nature consideration during harvesting are a common practice in Swedish forestry. When we harvest 10% to 15% of the felled area is retained for nature consideration and the behind the idea behind this type of nature conservation is to retain trees or areas that are important for value. For example, retention of individual old trees, tree groups and deadwood or retention of buffer zones around streams, lakes and wetlands. Last year, 13% of our productive forest land planned for harvesting was saved. And we also conduct alternative forms of forest management to promote biodiversity. Today, around 20% of our forest land is excluded from harvesting, But in the future, we need to find more effective ways to promote and keep the biodiversity. We can't just continue to set aside more forest land. We need also to do it in a more efficient way, especially when we also know that our young forests binds 4,000,000 tons of CO2 every year. Since 1950s, forestry has gone from being more or less manual to highly mechanized and automated. In the 1950s to the 60s, tractors, forwarders replaced horses and chainsaws were replaced by various types of harvesting machines. And of course, by that dramatic gains in productivity were achieved. There were rapid development of new more efficient machine systems until the 1990s. And in the 1990s, the single grip harvester and forwarder replaced more or less all other machine systems in Sweden. And this is still the most efficient machine system and what we use today. As the machines used in forestry became more automated and more complex to operate, the need for instruction, training and education also grew. During the mechanization period, the forest machines were typically owned by the forest company and the operators are employed directly by the forest company. The next step to drive productivity and reduce harvesting cost was to reorganize with contractors and we started that during the 1990s. Today, the main part of the harvesting we do is done by independent contractors. Around 2,005, as you can see from the diagram, we started to see a fall in productivity in our harvesting operations. From our own logging teams, we discovered that basics such as time utility and speed is still crucial. So we started a dedicated program in SEA in 2010 to help our harvesting contractors to improve their productivity as well as their financial performance. Now we're starting to see the result of that improvement program. Productivity has started to increase again and we had an impressive all time high year in 2017. And I'm proud to say that SEA is today the benchmark when it comes to productivity and cost efficiency in harvesting operations. Just to give you a feeling of the speed of harvesting, a harvester fell more than 100 trees per hour or 2 trees per minute and you will see it for yourself in the afternoon during the forest excursion. As you have heard and seen, SCA's forest consume more than 10,000,000 cubic meter SUV of wood raw material annually. To secure the wood supply to our industry, we have built up an efficient wood sourcing and logistic organization. As I mentioned during my first session, about 50% comes from our own forest. And the other part will primarily buy from private forest owners in the region. To be cost efficient in logistics, SCA have today 6 timber terminals located in the inland of Northern Sweden. And SAE is unique in that perspective. The majority of the transportation work is done by railway. All wood sourced to the left of the yellow border or to the west of the yellow line and border on the map is hauled to a terminal and then transported by railway to our industries along the coast. And this, of course, also helps us to be competitive when we purchase timber from forest owners in inland. We purchased between 3,000,000 to 4,000,000 cubic meter annually from private forest owners in our region. And SCA has a unique competence and performance when it comes to silviculture and harvesting productivity. So that together with our well invested and highly competitive industry, we have an attractive proposition for forest owners. The forest owners also see us as a strong financial and long term industrial partner that is investing 1,000,000,000 of SEK every year in Northern Sweden. 2 years ago, we launched a digital tool where the forest owners get help managing their forest land. With Skuxwingen, forest owners can get a good overview of their forest holding. They get measured and calculated data to help them in the management of their holdings such as when and where to do thinning or final felling. They also get integrated with our ERP system, so it makes it easy for them to do business with SCA. Finally, they get assurance that their forest is managed in the best way and hopefully they also sleep better at night. As you have heard, and I hope it's very clear, increasing the growth has been our strategy for decades, and we have been able to increase the growth dramatically over the years, as you have seen. Today, we have more standing volume and faster growing forests than ever. This is made possible by those dedicated foresters that has made smart investments for in silviculture such as improved seed material, introduction of faster growing tree species and fertilization. Each tree harvested in SCA Forest is replaced by more than 2 new trees. Net growth, as you have seen, is now today 8,200,000 cubic meter FO. And since the 50s, we have been able to increase the harvesting levels by more than 100%. Today, we harvest around 5,000,000 cubic meter FO corresponding to 4,300,000 cubic meter SUB. And as you understand then, the net growth is 3,000,000 cubic meter, binding 4,000,000 tons of CO2 every year. Both our net growth and harvesting levels will continue to grow over time. As you have seen, 50% of the raw material we use come from our own forests. And of course, this helps us to secure the supply of our expanding forest industry. We have an efficient value chain. I'm proud to say that SEA is today the benchmark when it comes to productivity and cost efficiency in harvesting and wood logistics. We have developed a strong improvement program to help contractors to improve their business, both in terms of productivity and financial performance. As you have seen, we have efficient transport system. We have 6 terminals inland in northern part of Sweden. With the sustainable forest management we apply today, standing volume and harvesting volume will continue to increase. At the same time, our ambition is that the forest conservation and nature experience values must be maintained for future generation. Thank you. Now I will hand over to our CFO, Toby. He will come into forest, I hope. Thank you, Jonas. Good morning, everybody. I think you just saw Jonas presented to you about our growing forest asset and how we manage that forest asset to actively increase the harvesting rate in the future and grow the harvesting rate in the future. He also explained about our extensive forest and wood sourcing organization with a well developed local presence we have in Northern Sweden with uniquely invested terminals and so on and rail terminals that give us a stable and competitive buying platform for the fiber needs which we secure over that which we harvest from our own forest. And now I would like to focus on how we increase and maximize the value which we extract from each tree in that value chain. But first, before I jump into that, I have one slide here on capital allocation to show you how we think about capital allocation. And here at the bottom of this slide, firstly, you can see our forest asset, which is the largest part of our valuation and of course our market capitalization and therefore the most important asset we have in SCA. And this asset is built upon the good growth which we have with our relatively young forest with that 3.5% annual growth and the value of this asset is also secured and enhanced by that integrated value chain that we have with our industries which are closely connected to the forest geographically. We have this tight geographical area with a close connection between the forest and the industries. Then at the top, we have our strategic investments and these could be CapEx or they could be M and A and these must build either build upon that forest asset or build upon integrate that integrated value chain. And these strategic investments have to deliver a sufficient return, have to deliver an enhanced return on capital And they have to be well grounded with realistic assumptions and they have to create significant value. So that's the ground of our strategic investments. And if we have strategic investments that do that, then of course we have to look at our capital structure on the right hand side to see how we look to finance these strategic investments. And here we have a clear statement or financial target which we've talked about which we want to maintain an investment grade credit rating. And we will therefore only fund these future investments if we believe they can be funded within that investment grade credit rating. And of course, the rating is built on many factors and net debt to EBITDA is probably one of the most relevant. And here we aim to keep a stable level and to maintain that rating which is normally viewed as something below 3x net debt to EBITDA. And finally, we have the dividend on the left hand side here. And here we expect to pay a stable and increasing dividend, which we've also stated clearly. And this is of course supported by the strong cash flow generation which we have from the business. And to the extent that we have money over after funding the dividend, we expect that to use that to fund strategic investments as long as we maintain that capital structure that we have with the investment grade credit rating. And of course, if we do not have attractive value creating strategic investments, we'd expect to return funds to shareholders. So that's how we think about capital allocation. Okay. Now I'll move on to value creation if you look from the perspective of a typical pure forest owner. If you pure forest owner, then you have 2 main sources of income. You have the sawlogs, which is sold to make sawn timber, which represent, yes, almost 50% of the volume from the harvest, but almost 2 thirds of the value as Gerry mentioned earlier. And this is because the price for the sawlog, which is the lower, wider, straighter part of the tree is significantly higher than that for pulpwood. And it's also why it's so important that we have an efficient sawmill operation in close connection to our forest. The pulpwood is the other half and this is obviously needed to use needed to make pulp and paper and pulpwood typically attracts a price a little over half that of the sawlog and but it's still obviously a very valuable and important raw material to the pulp and paper industry. Okay. This is a fairly busy slide, but the diagram on the left here, if I start there, the diagram on the represents our integrated value chain and it's probably too small for you to read clearly, but we have the forest in the center of our value chain and this is surrounded by SCA's different industries in a tight geography and we have a very extensive and and efficient logistics operation which links up the various parts and manages also the distribution out to our end markets and end customers out in Europe and beyond. Then we have the byproducts which are used from 1 industry which are used to create another income stream and this could be pellets which are made from sawdust, it could be the wood chips from sawmills going into the pulp and paper mills. It could be heat or green electricity from the mills. It could be wind power on the forest land as you've heard about or potentially green chemicals from the pulp process. And this means that we're not just vertically integrated downstream from the forest and towards the end consumer, but we're also horizontally integrated, especially within our tight geography with a close proximity between the forest and our mills. We have this horizontal integration to also then maximize the value that we can create from each tree. So if you look on the right hand side here, this is the typical income from 1 cubic meter or probably an average or smallish sized tree. You can see that a pure forest owner, a typical forest owner would receive around SEK 390 for that cubic meter, which is the blended price then that they would get from the sawmill from the sawlogs and the pulpwood. And of course there would be some costs for harvesting that wood in the first place, but that would be the income, the sales. Where it comes to SCA, we haven't we received an income of over SEK 2,000 for that cubic meter because of this integrated value chain and all these vertically and horizontally integrated industries. And of course, we don't do the integration at any price. It's not just to integrate. It has to generate a sufficient return on capital and be value creating. But we have an opportunity then to earn a margin on a much bigger number with more than SEK2,000 per cubic meter. And of course, this is a bit of a simplified picture and you could easily ask, okay, what's unique about that? Why does this all have to sit under one roof or in one company? Can't other companies do this and create value in different companies? But what we think makes SCA unique in this value chain is that we sit on the raw material through this integrated value chain. So whether it's harvested from our own forest or it's sourced through our forest sourcing organization, which I mentioned. We have the long term security of knowing exactly where that raw material will come from, where those 9,000,000 cubic meters which we source per year come from. And that means we can take long term decisions in developing this value chain And we can develop it in our geography without the risk that someday the raw material might disappear or we might depend on a supplier who might change their mind or get another idea. We might have a sourcing contract, which is up for renegotiation in 2 years or so on. So we can manage that risk. And we can do that only because we sit on that raw material and not just the raw material, but the flows of the byproducts also from the manufacturing processes or the industrial processes. So that allows us to invest and create value, but not only that, it also by reducing this risk we managed to secure and maximize also the value of our forest land in the middle, which is dependent on having long term competitive industries nearby to buy the wood. So that's how we think about our value chain and maximize the value from each tree. And as for examples, there are many examples of this value chain. I mean, I talked about the pellets business making pellets and sawdust or we have a very efficient logistics operation. But here, these are examples into the future and this staircase of cash flow funded growth opportunities which Ove presented earlier are all about further developing this value chain which we have. The growth of the kraftliner, both white top kraftliner and the growth of kraftliner in Obbola are all about increasing the vertical integration in our value chain, while particularly the growth of both wind power and the green chemical production either in the JV with SD-one or the biorefinery in Ostrand is all about the horizontal integration and creating another profit stream from the byproducts which we already have because we sit on this raw material. Okay, now I'll move to a bit about some of the economics of the forest segment and firstly, the seasonality. On the left hand side here, you can see the net sales from the forest segment which are pretty steady net sales and the forest segment supplies all the industries with their raw material needs. So whether it be from SCA's own forest or also sourced from other forest owners from third parties. In the middle, you can see the EBITDA development also per quarter. And this is also pretty stable, but I think you can clearly see a seasonality in our EBITDA where every other quarter the EBITDA is a little bit stronger. And this is all related to the seasonal harvesting practices we have where we harvest more from our own forest in the second and fourth quarters when the ground conditions are wetter and more from 3rd party forest owners in the 1st and third quarters when the ground is either dry or frozen. So that's the pattern. And when we harvest more from our own forest, we have a higher EBITDA of course and when we harvest less from our own forest, we have a lower EBITDA, but it's compensated somewhat by the revaluation of the forest which is a little bit larger because we leave more growth in outstanding volume in those quarters than we otherwise do in the other quarters. So this compensates somewhat for that lower profitability, but not completely. Now I know many like to make comparisons between forest companies and forest divisions and here I want to show that there are unfortunately a lot of factors which affect this relative profitability that make it a little bit harder to compare and you need to understand what drives these factors. If I start, it's quite a busy picture as well, but on the left hand side, you can see this graph which Jonas has already presented as well on the aged distribution of our standing timber in our forest. And here we have a relatively large amount of younger forest as you've seen and the younger forest means that if we take the income side on the top left, we have a larger share of thinning than you would have had if you had an even aged distribution. And thinning delivers a lower average price than final harvesting and also has a higher harvesting cost than final harvesting. So the gross profit when you have a higher share of thinning is lower than you would have had with an even aged distribution. And on the bottom left here, you can see that a number of the cost drivers are also age related to some extent. The pre commercial thinning and the fertilization tend to occur on younger trees and the road construction more on mid aged trees while the silver culture costs are spread throughout the age span. So with a younger forest, we have comparatively a lower profitability than you would have had with an even age distribution in your forest. And as the forest ages, you would expect to see the profitability steadily increase as a result of that aging and the age span becoming more even. And secondly, on the right hand side here, some of the other factors. The pricing model is of course important. Here SCA uses market prices between the forest business and the industries. As we source around 50% of our wood externally, we use the external price that we have from our external source wood, which we then apply to our internal sales from the forest division. And that of course means that when it comes to the external wood, we make no profit in the forest division from the external wood. It's simply supplied on to the industries at cost. The efficiency of the harvesting operation number 2 here is of course one of the most important KPIs for our forest business units. And Jonas as Jonas presented earlier, due to the strong focus on best practice, which we've had over many, many years, we have the leading industry leading harvesting cost, yes, in our industry. And thirdly, third point here, this is the same point on the left hand side, the younger forest drives a comparatively lower profitability. Then the 4th point relates to wood swaps. Now I'll come back in a moment to this, but we swap wood with other forest companies and we do that in order to reduce overall cost. And for us, this cost benefit we allocate to the industry which receives the wood. You could equally allocate it to the forest, but that's not our practice. And finally, the last point, the 5th point here, we make a number of smaller transactions every year in order to buy and sell forest land, which I'll also come back to this, but the capital gains on these transactions will vary depending on the size of the transaction at the time. So that could be another factor. Okay, I'll come on a bit to internal market prices and our wood sourcing. So as I said, the forest industry the forest segment supplies the industry segments with wood which is sold at market prices and these are based on the external prices for externally sourced wood. We also we charge a small premium for certified wood. And it's important to understand again that there's no EBITDA earned on externally sourced wood from the forest to the industries, it's sold on a cost. So what this means is that when the Ostrand investment comes online and is up fully up and running, the sales from the forest division will increase, but the EBITDA will not increase because that increase will mainly come from externally sourced wood. On the right hand side, you can see then the effect of the change in the sourcing volumes, particularly from the Ostrand investment and showing when the pulp line is at full volume post Ostrand. And today, you can see in 2017, we have firstly, we have a self sufficiency of just over 50% in wood. The externally sourced wood comes from both locally purchased volumes from smaller forest owners and from larger central sourcing arrangements, which these volumes, the external volumes are today split sorry, the overall volumes today are split fifty-fifty between the sawmills and the pulp and paper mills. After Ostrand is fully up and running at full capacity, we will expect to buy more pulpwood and this will be sourced both from the locally purchased smaller forest owners and also to a little bit lesser extent from the centrally sourced suppliers. Our total wood sourcing will then increase from today's level of around 10,000,000 cubic meters to around 12,000,000 cubic meters as a result. And our self sufficiency will then be slightly below 50%. Here you can see the development of our harvesting cost over the last some 30 years and as I said, we are confident that we have the lowest cost in the industry when it comes to harvesting. And as Jonas presented, the focus on both technological development and organizational development has driven this harvesting cost year after year to significantly beat this inflationary pressure, which you also see on the graph here. So over the last 30 years, inflation has increased by over 100%, which we all know about, but the harvesting cost has increased by less than 20%. So it's been a constant focus. And one significant factor and this is of course our size where we have a large number of harvesting teams they can develop new techniques and practices and of course compete with each other in established benchmarking and coaching programs. As I mentioned before, every year we buy and sell land and we do this for a number of reasons or a couple of reasons. Firstly, to move our land, our forest land closer to the industry. So we end up with land closer to the industry. And secondly, to improve the consolidation of our forest land which makes it easier and more efficient to manage. Thirdly, sometimes we do swaps of land in order to create nature reserves as well. And the point on the bottom left here with under legal restrictions is you have to remember we're only allowed to increase our overall forest holding by buying land from legal entities. When it comes to private individuals, we're only allowed to buy and sell land provided that these purchases and sales balance each other out. So we're not allowed to be a net buyer from private individuals. And while we do this activity every year, you can see that they are small pieces of land. So even in the largest year here in 2014, you can see this is less than 1% of our total forest holding. So it's not large pieces today. But the good thing with this data is you can also clearly see what the market prices that we have for our forest land in our area, both on the purchase and the sale side. And I think you can see here it demonstrates a pretty stable level around the SEK 270 per cubic meter of standing forest. And just this is a a couple of pictures or maps to show you a few examples of what we do. And the left hand side here is a typical land swap and here you can see the purple land area is an area that we then swap for the shaded area saying you can see SCA gains and that you can clearly see from the picture improves our consolidation on our forest land on the left hand side. While on the right hand side you can see an area around Rogfun, a nice hand drawn map from 1955 and the second one in 2017 here where you can also see the area has become much more consolidated and that enables us to be much more efficient in managing the forest and lowers the cost of building infrastructure or roads for example which can make quite a significant difference. So that's why. When it comes to wood swaps, which I mentioned earlier as well, we swap around 1,000,000 to 1,500,000 cubic meters annually and we do this if the swap makes logistical sense to both parties. So this has gone on for a number of years. And our wood maybe, I mean, typically our wood maybe closer to the partners industry or some of their wood maybe closer to our industry. So it's quite a straightforward logic. And this overall generates savings both in lower logistics costs and of course reduces emissions in the logistics process. The total saving in our swaps is around SEK60 1,000,000 per year. And as I explained earlier, this benefit is allocated to industry that's acquiring wood depending which industry it is. Okay. Now, a few words on our valuation methodology that we use in our accounting valuation of the forest asset. And the forest valuation in our books is divided into 2 components. Firstly, we have the land valuation which is accounted for using IAS 16 and it's booked at acquisition costs. So as many of you know, most of our land was acquired a very long time ago. So it's a very small acquisition cost. Whereas the biological asset is the trees that are standing on that land and these are valued according to IAS 41, which is the standard used for biological assets and a lot of typically farming as well. And under this principle, the valuation is a discounted cash flow valuation and it's based on our current harvesting plan and that's made using growth assessments and using current technology and practices in our plan. We then base the prices and costs on a 5 year average and we use an inflation of 2% per year for both costs and for prices. And when we combine this with the cost of capital which we use which is a cost of capital for a typical Scandinavian forest company of 5.25 percent, this gives us our book or accounting valuation of SEK 31,000,000,000 which is equivalent to, you can see at the top right here SEK 135 per cubic meter. And when you put this accounting valuation up against a market valuation, which I showed earlier, there is of course a difference and you can ask yourself why should there be a difference between an accounting valuation and a market valuation? And there's no exact answer or right or wrong answer, but some of the potential areas of differences, of course, one is in the assumptions in which cost of capital or which projection you have on market prices or costs. Other potential differences could be on different views in harvesting plants or potential harvesting levels in the future. It could be perhaps some higher growth rates from seedlings which have not yet been developed or used. It could be improvements in the future on silviculture or fertilization. There might be technological developments that occur either affecting harvesting or growth. The impact of climate change as Jonas mentioned is not really yet fully understood and it's not included. And finally, of course the valuation under the land, the valuation of the land under the forest is not included in our accounting valuation. But wherever it comes from, it does seem I mean, it seems pretty clear to us that there is a difference. And the accounting valuation of $135,000,000 is around half that you would see from typical market values in our region and you can see both from what we buy and sell for, as I showed you earlier, and also the market statistics from LRF who typically collect statistics for market valuation of forest assets. Okay, that was my last slide. So with that, I will hand over to Ulf. So by that, I think that we have more or less gone through the material that we have prepared for you today and I will give a short summary. It's not too easy. I did some notes here. But one thing is that the forest industry today is seen maybe as the most important component in order to mitigate negative effects of the climate change. So one thing is that we capture carbon dioxide when in our growing forests, not only in ACH forest, but in general. But also and maybe more important, we can replace fossil based materials with the renewable fiber. That is a fantastic thing really. And that is also contributing to the strong general situation that we have for the industry just now. And if we just look at SCA, I think that we are in a good position. I mean, we are more or less 100% virgin based in our industry. We have a great asset in our big forest holdings. Upon this great and unique asset, we've built up a strong integrated value chain and we like to continue our profitable growth in different ways. We like to grow increase the growth in our forest asset and Jonas more or less promised that we can do that. We can also buy some forest land, but we have some restrictions as long as we are in Sweden as we can't buy from private forest owner, but we can buy legal entities. When it comes to the second step to increase or maximize the value of each tree, In paper, it's obvious much that we are really looking forward to the results from the pre project in Kraftliner. We see Kraftliner as a good growth opportunity. We feel just as we speak a fantastic market for Kraftliner, but over time it has been a really strong market for Kraftliner. We have a good position. We have 2 strong machines, machine number 1 in Europe in Obbola and machine number 3 in Munksund. But nevertheless, it can be better, even better. In pulp, we are looking forward to the start up that we are going to do in mid June. Ingela has left, so maybe she's a little bit bored, I don't think so. She's there. Good. And it is a fantastic achievement to run a project like this and be able to start up exactly at the same time and to keep the cost. So we're really looking forward to that. But that is the first step, of course. Then we see a lot of different new opportunities in Ostrand related to more pulp production. I think we can do more than we've done now. But also we are looking into the field of green chemicals. We've been talking about liquid biofuels and things like that. So I mean we have a great future. We have created a fantastic infrastructure around the Ustana and we shall utilize that further going forward. In renewable energy, yesterday we did announce the cooperation with SD WAN, which we think is a perfect fit. I think we share we have good we share values, which is not the least important. The first step now will be to start up facility that can produce 100,000 tons of liquid biofuel and we think that we can do that in a really capital efficient way as we utilize the asset and facility that SD WAN already has today in Gothenburg. SEK500 million is a lot of money, but if we compare that with what others have spent in order to produce the same amount of liquid biofuel, it is rather cheap. So that will be a really strong and good project. We have also today we know that we will reach our target to have 5 terawatt hours of installed capacity Wind Power 2020, which will start to give a good contribution at that point of time. And last but not least, our wood business. As Jari said, that is the part that contributes most to the value of the forest. We've done some big investments in the Somi business. We will consolidate a little bit, but when we see possibilities for further development, further growth, we will also take care of them in a good way. So I think by that we are ready to open up for Q and A. And I think I can stand here and then we just hand out the microphone when it's appropriate. So please. There are microphones available for those asking questions. So please wait for a microphone and you will have them. Thank you very much. It's just to speak. Great. Thanks. Very educational. I'm Alexander Bergland from Bank of America Merrill Lynch. Three questions from me. First one on Strand. You talked a bit on expanding your marketing and sales division. I was wondering if you could give a bit more color on kind of those negotiations of those new tons that you're going to sell. And is it common when you have a new mill like this that you need to give some kind of discount due to all kind of the risk related to that kind of ramp up, I mean increased discount compared to market conditions. Maybe I'll leave it there and you can answer that first. Yes, we can stay with that question. Well, I can start at least and someone can complement maybe. But I mean, as you know, we have a super strong market as it is just now. So I believe that we've done thorough preparations for the market side in the project. And as mentioned before, I mean, we do a lot of work in the technical part in a project like this, but we have also done a thorough yes, thorough work in the market side. So we feel that we will be able to place this volume rather easy as it is just now. I mean, you have lack of pulp in all areas all over the world. But long term, we think that we will today we are 100% based in Europe. With this additional volume, we will place some volume in Asia, mainly China maybe and also some volumes maybe in U. S. But as it is today, we could place everything in Europe. But long term, we think we should spread it out a little bit. Thank you very much. And my second question, just a bit on the JV that you announced yesterday. Of these SEK 500,000,000, how is that split fifty-fifty within the JV? And then also if you maybe could expand a bit on kind of the strategic rationale of expanding into downstream and doing biofuels rather than just kind of selling the CTO to another player. Perfect. Then I hand over to you, Mikael. Yes. Please come here. The plan is to set up the JV fifty-fifty. And when it comes to moving forward in the value chain, we can see that there are potential big value creation possibilities moving forward. So that's why. And at the same time, we're gaining competence with this partnership as well. And we learn more about the markets. If we look at future potential for SCE and Oost picture with the biorefinery lines next to Ostrand somewhere in time, this is a good way to start moving forward. Okay. Maybe just a follow-up on that. Is there any can we look at some any other business where we can see some specific return measurements in biofuels? Is this some comparable that we can look at? Sorry, I'm not super educated in there. It's okay. I don't know if I mean, short answer, I mean there's not really a exact comparable to the model we're looking at, but I think you can see how much I mean it's pretty public how much HVO is worth as a product. And I think it's pretty public how much can tell oil is worth a lot less. So if you can develop it as a significant value added, you can take a piece of. I think there are some other companies that do not exactly the same thing, but similar things and have pretty decent returns. So yes. Thanks. We'll look into that. I think I'll leave it there and let my colleagues ask some questions. Thank you. Linus? Thank you very much. It's Linus Larsen with SEB. And I actually would like to come back to the announcement from yesterday and Mikael's previous presentation. And it's a relatively small investment for the capacity that you're looking to produce. So my first question is if you could just expand a little bit on whether the JV is going to buy in some processing capacity and how this is going to work and how this will affect the return on your, if I understand it correctly, euros 250,000,000 investment? Yes. As Ulf said earlier, the plan is to we always seek the best synergies also when it comes to future biorefineries in Erstmann to be sure that we build the most competitive facilities. And in this case, our plan is to, as I said, utilize both existing and new infrastructure within the refinery that SD-one has in Gothenburg. So that's why one of the reasons I think why you get different numbers when you look at capacity versus investment. But JV has to buy capacity from SD WANs to cost based. Right. Thanks for that clarification. And in relation to that and just continuing on this topic and what you're potentially looking to do at Ostrand, you mentioned the 2 potential lines to be built at some point at some cost at Ostrand. I wonder if you could just talk a bit about the time line and the scope of such a potential investment, please. Right now, we are looking into these 3 potential feedstock or asset, as I call them. And the first thing is the tall oil. That's those technologies are already commercial today. There you can buy this from different suppliers. That's why we're moving forward now. When it comes to converting solid biofuels and extracting lignin from black liquor, that's technologies that are under development around the world. There are different technology developers and companies doing this. So and the technology development is in demo scale today. So it's quite hard to say are these technologies ready to go commercial 1 year or 5 years period of time? Time will tell. But I think the agenda of climate change and the political pressure right now are driving these developments of new technologies. So we think they will come. It's just a matter of when. And then we want to make sure from our side of view that we make sure that we then have all the prerequisites in place so that we have the decision in our own hands, not starting with, for example, an environmental permitting process and the technology is ready and then we have 5 years just waiting. So that's our plan. But I mean, as you saw, it's pretty long term. It was placed 2025. We don't know that's the case just now, but we put in a lot of efforts. We do a lot of research. We have also started up our pilot in Obelai in order to see if we can extract black liquor to use. I mean, we do a lot of things and we think that ST1 will be a perfect partner also in this field because they have a lot of competence and maybe we also had some other partners. But again, you also have to start from the starting point is what we have at Thurstan today. I mean that is the biggest MBSK mill in the world now and the infrastructure is perfect. We have some bottlenecks in the production and we shall try to utilize this development in order also to increase capacity in pulp, which I think is a very perfect fit. Great. Many thanks. Maybe it's better we are standing here. Oskar? Thank you. Oscar Lindstrom from Danske Bank. Three questions. 2 to Mats Nordlander, if I may. The first one there is for the Obbola project or the potential Obbola project, what kind of timing should we expect if this project goes ahead? When would we should we expect start up? What kind of investment cost and impact on wood consumption? Yes. There was a number of questions there. But I think it's at this point, at the time of decision, we can't really foresee the delivery time of equipment at time of decision. But I think it would be fair to assume from decision until startup 24 months. Can be a little bit shorter, might be a little bit longer, but I would set 24 months as the reasonable project time. So if we would be ready for a decision in the beginning of next year, you can calculate from there. And the second question was? The investment cost, would you need to do sort of major refurbishment of the site? Or is it taking out the old machine and putting in a new machine? The paper machine would be a brand new machine. We have the choice of a lifetime extension of existing capital or noncapital as we are having there in the paper machine. But we found it much more efficient and I would say gives a better return going in with new capital because then we can increase the capacity significantly on a new machine. So it would be basically closing the old machine or in parallel building a new machine. When that is ready, we basically switch valves and then we walk over to the new machine. That would give us the shortest possible downtime or basically, in theory, no downtime. Okay. My second question to you concerns the Oortviken mill. Although times are pretty good now, if graphic paper consumption in Europe continues to decline, I suppose the capacity utilization on that machine could come down to such a level that you have to question. Are there options to convert any of these machines to other capacity or other qualities? Or is this a site that you see significant development potential for? I think, 1st of all, we are in our strategic planning phase or in our outlook long term, we haven't changed our mind to the outlook of the graphic paper sector, although we are experiencing a much better or healthier situation currently. But long term and in our planning, we have the same view as we have had before. We are looking upon Utviki as a mill site with, I would say, it has a great strategic value, the mill site and its location. It's a few kilometers or kilometers away from the harbor. We have the water. We have the electricity there. We have a lot of know how in the mill. So of course, we are having conceptual ideas and studies of how to utilize that even if it would go the way you are presenting it now. But our current focus, our main focus is extracting most of the value of what we have today. Great. Thank you. So just my final question is regarding growth and strategy. So I don't know if it's to you, Ulf or maybe to Toby. As you continue to grow, it's going to be in the industrial operations. Your level of self sufficiency will go down most likely. Is that a limitation do you see that as a limitation to your growth of the industrial operations that you would like to be at a certain minimum level of self sufficiency? I wouldn't say that we have a clear limit. But as I said before, we are interesting in increasing the forest tolling if possible, if you can do that in a good way. I think that 50% is a high degree of self sufficiency. So I think that we can develop a lot more even if the group self sufficiency would go down a little bit. At same time, we have strong flexibility now in the mills that we have with Ostrand up and running. I mean, we can we know that we can secure and increase the value of our own forest and that is also a good position to have going forward. So it was a very unclear answer. But I mean, we are in a good position. Yes, now we can see that we can increase industrial capacity and lower the degree of self sufficiency a little bit. That's absolutely possible. All right. Thank you. In the longer term as well and we are talking longer term, but the harvesting rate we expect also should steadily increase. So to that extent that brings it back. And again, just to add, when we announced this project in Ostrand, I mean, 10 years ago when we did build a new recovery boiler, it wasn't possible to take the full step just due to the wood supply situation. That was the reason why we didn't do it as we've done it now in the stand. But now when we did announce the project 2015 something like that, I mean many place they really contacted us in order to have the opportunity to supply the mill. So we have been positively surprised in that perspective. So I think also forest owners, they really understand that we need a well invested industry in order to put value on the forest, of course. Thank you. Thank you very much. It's Kristian Kopfmann from Nordea. Just on required returns on capital, is it possible to say anything what kind of levels do you have on required returns on capital for new projects in the industrial operations? I was expecting that question. I mean the short answer is we don't have a hurdle rate or a specific rate. I think we don't look at return on capital any differently than you would. We need new projects to have a good return and a return well above cost of capital and to enhance our return on capital. And we had I think our industrial operations had 13% return on capital last year. But we don't think it's either we don't have a hurdle rate and it's not all about one number either. Equally important is that we have realistic and reasonable assumptions for the future about how we look at maybe pricing, how we look at market growth. So we and different industries maybe have different levels of risk as well. So we prefer not to fixate on or fix one number, but we want to continue enhancing and improving our return on capital, absolutely, and it must create value. On the pilot plant that you are building, is that based on certain patents that you have? Or are you buying into existing technologies or? Making the your baby. We have applied for some patents around that technology, yes. And so there's no partnering in the pilot plant. And how far are you from having, say, final results from the pilot plant? The project plan is for 3 years and then we will evaluate it. So we're in the middle of it right now. So it's too early to say. But just now we produce a bucket per day, don't we? Yes. Some days and some days don't. So it's the normal It's working. Yes. Small scale. It's the normal challenging going from lab to pilot and further on. So Right. And finally for me, you said that you are open to acquire more forest. Are you also open to going over to short fiber? I mean, in the forest, we have also short fiber. Okay. Sorry. I was going to say South America, that kind of I think we like to stay I mean, we try to build on the integrated value chain and that means that we like to have the forest where we have the industry. But you can have a pulp mill there as well. Yes, you can. But then you need some money also. So I mean that's a huge investment. So as it is just now we prefer to stay in our integrated value chain and build on that. Hi, this is Gustav Hansen with Perko. Two questions from my side. First of all, for you Jonas. You showed a graph of your estimated development of your standing timber volume. I think the number was about €270,000,000 by 2,050. Sorry, I can't do the CAGR calculation in my head. So just wondering, is that a net number after your increasing harvesting volumes post 2,035? And is that also then a good proxy to estimate your long term harvesting levels? Not needed. Okay. As you saw, we recalculate the standing volume and the harvesting plans every 8 to 10 years. And with the figures or the calculations that we have today with the current practices we use today, then we see we will reach this 270,000,000 cubic meter FO in standing volume on our land. But that is, as I said, based on the harvesting levels that we have in our harvesting plants based on current practices. All right. Fair enough. Secondly to you, Toby, is it fair to say that your only real financial target is to keep an investment grade rating? So I'm thinking, do you want to comment anything on dividend policy going forward? Given that you have a large investment potentially in Obbola, at least with the numbers I have in my head and keeping that rating, your potential for increasing dividends in the coming years seems quite limited. Do you want to comment anything on that? No, I mean, I think you're right. We have you can say we have 2 financial targets. 1 is to maintain investment grade rating and the other is to have a stable and increasing dividend. So those are our 2 financial targets. And then within that, we will look at the Oberlo project like other projects to live within that within those financial targets and to grow value. And I think it's important to me, we are operationally we generate a lot of cash flow. So right now, last year in Q1, we funded for example the entire strategic investment in Ostrand through operational cash flow. So we get a lot of operational cash flow coming through which can help. All right. Thanks. We have a tight schedule for the forest excursion in the afternoon. We will have 2 more questions here at this table. And the other questions, we will have to have over lunch and in the forest. So please. Nick Aljos from Kepler Cheuvreux. Two questions from me. The first one is around forest preservation and potential political risks. You mentioned that this must become more efficient. Could you please elaborate a little bit around this? Efficient nature conservation. Well, there is a lot of focus on areas and percent and so on. And we see that the main focus of nature conservation is really preserving biodiversity, meaning that you need to preserve biotopes, habitat, species and so on. And that can be done in various ways in order to increase the productivity and the efficiency of nature conservation as well. That's not really where the general debate is going, but we definitely see that you can get more conservation value out of the same land. You can balance production and conservation in a better way, and that we are trying to do. Okay. And how difficult is this with the current political landscape to get sort of acceptance for your way of thinking? There is a quite heated debate, but the political decisions are, so far, fairly balanced, I would say. We have an election approaching. There are parties that need to make a position, understand. Let's see where we are after the election. But again, I must relate to the current situation. I mean, more and more and not least politicians, they see the forest as the solution to mitigate the climate change. And also, I mean, the fiber should be used for anything, for liquid biofuels, for renewable materials and things like that. I mean, in one way or another, you need to balance. So I think we have a more balanced discussion today than we had yesterday, to be honest. No, that's good. And then my second question is around wood costs and the changes we see with Ostrand expansion, Metze Group's expansion last year. Potentially, there is at least 1 Chinese pulp mill in Northern Finland. So two questions really within that. Why do we see all of these pulp expansion plans in the Nordic region when we've learned historically that you should build pulp mills in South America. Can we take that one first? Because I think the reason for that was that we saw also a lot of closures in the mechanical pulping industry. So that is the main reason. And also as Jonas mentioned, the forest is growing faster and faster and you had a surplus of wood for a while. And if you look down to the situation that arrived when Tofte was closed down, that was a real surplus of wood. So the wood was more or less worthless for a while, which also put had a big impact on prices and things like that. So I think that was the main reason for all these three projects coming on stream at the same time, Werre and of course, and Ostend. And as you can see us now, we are lucky, of course, but the market can simulate more or less everything of that. Okay. And then the obvious sort of last question, wood pricing, how should we think about that going forward longer term? You can think whatever you will. I mean, it's a market. For us, it's we have a rather strong position. I mean we have our industry where we have our own forest and I mean we always ask a lot about why other companies makes such money on their forest and we don't I mean it is a part of the game more or less. I mean we have a really strong position and we are not afraid of the wood supply and we think that can do it in a cost efficient way. So Rovi Santo Werder, Carnegie. Now perhaps to Ulf, historically, this industry has been quite cyclical. And you now, Stav, for almost 2 years, we have joined a very good market situation basically across the board. Now there are a lot of structural things you are talking about. So how should we is this now only a cyclical upswing? That's sort of how a lot of people look at it. Or is I mean, you've been in the industry for a very long time. Is it really so that we have sort of more structural elements, sort of fiber substitution, plastic, panic, Asia, shortage of easily accessible forest. Is this really driving demand? What is your opinion? I know it's a broad question, but it's probably very important for you. It's so hard to say. I mean, yes, now we are in a very positive momentum, as I said. I mean, we have strong markets in all geographies in Asia, in Europe, in U. S. At the same time. We can see some fundamentals, as mentioned already, the forest and forest industry seen as some kind of solution to mitigate climate change, which is, of course, positive. For us being in the fresh fiber business, we are really privileged just now as it is a problem to get access to recycled fiber. But and also we have the weak Swedish krona, which is also effective result for Swedish companies a lot just now. And I mean this situation will not remain, but will it be less or more cyclical than in the past? I mean it's really, really tricky to say. I think we have some positive elements now that we haven't maybe seen in the business in the past, but of course, it will continue to be cyclical. Right. And then in terms of pulp, I mean, you will be a major market pulp sort of player in 6 months' time or something like that. Now what do you see in terms of supply demand for softwood in the midterm? I mean, as it is just now, we have a super strong market and no further investments are announced up till today. And from an investment till we have something up and running, you have 3 years at least. You will do some bottlenecking and you will do some, I mean, capacity creep and productivity creep and things like that, but no major things. So that, of course, will keep the balance on a healthy level. But if something else, will we have a war? Will you see something else that can dramatically change the situation? We don't know really. But as it is just now, it is strong and it is a balanced situation and no capacity announced neither in short fiber or long fiber. I think we've said before as well, but we see 1.5%, 2% growth year after year in softwood growth. It's and that's driven by the growth in tissue and packaging grades around the world. So and the 3 projects also mentioned in Werra, Anakovsky and Ostrand basically amount to that growth over the period of 3, 4 years or 4, 5 years. So it's not the capacity growth is not higher than the growth in the market. So it's not really changing the balance picture. If anything, the capacity more capacity will be needed. Sure, sure. But in terms of the wood cost, why would wood cost go up in 'nineteen, 'twenty as we have basically no capacity coming on stream. I mean, you would assume Barre and Estrand and Korsk, this is what we have now, and it's this year. But next year 2020, there aren't any. So the demand increase will not be that higher. Is this something that I'm missing? Mr. Frau, have you used the situation? I mean, I think perhaps already answered, but we see potentially some higher wood costs from having to source them further away because of the higher wood usage in Ostrand. We expect that to be balanced or overcompensated by the fact that we also be selling green electricity from Ostrand which would be an additional income. So we don't see any dramatic, we see quite a stable situation at the moment. But from time to time, I mean this Q1 you also saw especially in the southern part of Sweden, they had some the struggle with the wood supply and the reason for that was the wet winter in that part. And in this area, we had 2 meter snow. Still that is also a sign of our strength because we have our own organization. We have 50% of groups have sufficient. I mean we never really had a big problem with our industry. We didn't have to stop the industry just due to the wood supply. So but that, of course, is driving the prices. If you have that kind of climate for a while, then that will drive prices. Thanks. And then the last question to Toby. Don't you think that the size of forest land is an extremely important factor in terms of valuation of land because the sample you have is sort of 0.01 percent of total. There must be a totally different sort of reasoning if you buy 2,600,000 hectares of forest land or if you buy a small sort of part on the backside of your cottage? There's very few examples of big pieces but I think what I would say is when if a legal entity comes up for sale that has a commands a premium because then you have a much bigger potential buyer universe. Companies like us can buy legal entities. So if anything, forest owned by legal entities commands a potential premium. But yeah, it's very hard to say when there's no benchmarks, how a large plot compares to a small plot. I mean as long as you have a zero interest environment then of course forest holdings are interesting for many investors. Yes, for sure. Yes. Thank you very much. Thank you. And by that, we conclude the indoor session of this Capital Markets Day. I say farewell to those of you who have participated through the webcast. Thank you because the rest of us will now go for lunch. And some instructions regarding the lunch. We will leave here. We will take a walk in the sun to the manor house, the white building that is located a bit east of here. And there, you will be served lunch. After that, you will walk some distance back in order to get onto the buses. On the way back, you will have backpacks, backpacks with all the equipment you need for the forest excursions. It will be extreme expedition conditions, as you realize. You will also have information in these backpacks, and you can sit on them. But you don't need them for the lunch. So lunch by the manor house and then come back to the buses for the forest excursion. At about a quarter to 1, I will start urging you to go and get your backpacks and get onto the buses. And 1 o'clock sharp, the buses will leave. Otherwise, we will miss the plane on the way back, and that would be a pity. So thank you very much for this session. Look forward to the rest of the day.

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