Good afternoon, ladies and gentlemen, and welcome to the SCA Year-end Report 2011. Let me just start with some key events during the year. Of course, the binding offer to acquire Georgia-Pacific tissue business in Europe is one. The divestment of packaging, excluding craftliner business in Sweden, is one. We also have strategic acquisitions in emerging markets such as Brazil and two acquisitions in Turkey, one 50% and one 95%. We also have established joint venture in Australia, as communicated. We have introduced an efficiency program, particularly in our hygiene business, and this is probably the first time in SCA's history we launched a major efficiency program, and that will bring us some cost savings, but mainly faster to the market, more efficient sales force, et cetera. We also have established a new wind power venture that will give us fully utilized 2 TWh per year in production.
Coming into the full year, we do have, if we compare like to like, a sales increase of 4%. We have a good growth in emerging markets, and this is all in local currency. Packaging volume for the year is flat. We have a substantial increase in corrugated prices of some 9%. In the forest area, publication paper volume is flat, and solid wood is up by 5%. Looking at the EBIT result, as you have seen, we have had some substantial cost increases in raw material of some SEK 3.2 billion. On top of that, we also have higher energy costs, higher transportation costs, and some other cost increases also. In spite of that, we have been able to keep the result flat compared to last year.
We have seen increased interest rates, and that's why you see the impact profit before tax decreasing, and the increase in interest was some SEK 174 million compared to last year. If we look compared to Q4 to Q4, we also have a small sale increase. We have higher volumes in our hygiene business and also quite good growth in the emerging markets. Packaging volume is down, but if you remember, we had an extremely strong Q4, in particular, very, very strong December in packaging last year. Normally, the packaging business is at least half of December closed down. Last year, we had very few red days, which means that we had an increased sale. This quarter was more normal compared to last year. We also have a decrease in publication paper. Publication paper, as we also have discussed, is less cyclically impacted and probably more structurally impacted.
We do have a decline of consumption of paper in Europe, not at the speed as we see in the U.S. where it's down more than 50%, but gradually, consumption is coming down. We have a slight increase of EBIT. Also in this area, we have higher raw material costs and a negative currency impact and increased interest rates compared to the fourth quarter last year. We also, this quarter, as you have seen, have a lot of items affecting comparability, and those in total are today SEK 5.6 billion, a little bit more than SEK 5.6 billion. The bulk of it is in packaging, the write-down of assets of some SEK 3.9 billion.
Then we also have, in relation to the divestment of the 50% in Australia, we also have, of course, transaction costs when we have been doing three deals of this size, and the restructuring costs communicated previously, all impacting this year and this quarter. Looking at the full year results, if we start with the sales, we have as much as SEK 5.3 billion negative currency impact in sales, and that is mainly or only translation. We have compensated that by SEK 1.1 billion higher volume and SEK 3.5 billion higher price/mix compared to last year. We also have the delta between divestment and acquisition, which is another negative impact of SEK 500 million. Very big movements in the sales line, of course, also impacting further down. We have today a debt/equity of 0.6, and you know that we have a target over the cycle of 0.7.
Of course, it's going to be impacted, as you have seen from communication, by the acquisition and the divestment. If we look at Q4 to Q3, we have, sorry, I think I jumped one, didn't I? Q4 to Q3, we have a flat sales increase in the EBIT of 4%, and also profit before tax. One big item in these numbers is that we have an inventory loss of SEK 280 million in Q4 compared to Q3, and that's, of course, due to raw materials coming down. Of course, we have to reevaluate our inventories. We have a substantial increase in profit in our hygiene business, both in personal care and in tissue. It's an improved price/mix. It's a lower raw material cost, but also higher volume. We had a good momentum, and we got through all our price increases that we were aiming for in tissue during Q4.
Part of that, though, also came, as you know, in Q3. Packaging profitability is going down. It's mainly the liner business that is impacted in this quarter. As I said, it's normally the weakest season for packaging in Q4. We have kept the volume in corrugated reasonably stable, some price decreases, but of course, when we had a liner decrease on price of 10%, that will have an impact also on the corrugated prices. Also, forests were impacted by lower prices compared to Q3. Coming into personal care, we have had a good growth in all our categories and also very good growth, as I said, in the emerging markets. The baby category is a combination of Europe and Latin America. We are gradually getting in the big contracts we managed to get last year, which all in all will be some 500 million pieces of baby diapers.
It's part of that that's come in order in Q4, but the bulk will come in during next year. We also have, as I said, a substantial increase of profitability, and if we take like-for-like, it's an increase of 12%. It's volume, it's price, it's cost saving, but also here we have higher raw material cost and a negative currency impact. The margin is now above 12% in personal care in all in all. Walking into tissue, also, sales increase of 3%, like-for-like. Consumer tissue is flat. Away from Home is growing quite well. We have had a very good development in the United States. You know that we are trying to lift the Away from Home from sort of a bulk product up to value-added products. During last year, we actually increased the value-added product by more than 17%.
Now we're up to 33% value added compared to somewhere around 25% previous year. We've been able to increase prices, and we have a growth in overall volume in the U.S. also. Away from Home Europe is doing well, and we continue to grow market share. The EBIT improvement is prices, product mix, but also lower raw material cost. There is a negative currency impact even in the tissue business. We are in Q4 above 10% in margin. Packaging, as I said, very strong Q4 last year, more normal Q4 this year. We have higher prices. We have increased prices by some SEK 200 million. We have increased raw material cost of some SEK 110 million and lower volume impacting it by SEK 90 million. There's a combination of increased prices but slightly lower volumes. The main part of this is still in test liner.
As you may have seen, we just announced today that we are going to increase prices on the liner side, €100 in testliner and €80 in kraftliner. That will be implemented during the spring. We anticipate, due to the fact that this quarter is the weakest, that we will have higher volume and higher margin in Q1 in packaging than we have in Q4. Forest products, we have in local currency increased prices by 20% in news during last year and 7% in magazine paper. That has all been consumed by currency or increased raw material costs. Even though we have been achieving what I think we communicated that we would like to achieve, it's sort of disappearing by the currency and raw material. Here it's mainly waste paper that we have seen increased prices in, but also clay, etc., that we use in producing our magazine paper.
Going forward, we believe absolutely that we will sell all we produce, and we have a very good contractual situation for the next year. It is very, very difficult to get any increased prices, both in news and in magazine paper. We are also proposing an increase of dividends with 5% up to SEK 4.20 from the SEK 4.00 that we had last year. We believe that this is a good balance between the uncertainty in the financial world that we see in Europe, the confidence we have in our own businesses, and of course, the intention we have to grow further in the hygiene business. Just a few words on the two transactions we are in. You have seen this, the binding offer on Georgia-Pacific. The process is going according to plan. We do not see anything that will stop this so far.
This will, of course, in the end, improve the profit per share. There are big synergies, bigger than we have with packaging in the SCA group. The process will be finalized sometime during the first half of this year. Packaging is also going according to plan. There will be an AGM in DS Smith, February 3. As I communicated in the press release, they already have more than 50% of the shareholders supporting this. Financing is in place. We need to have the normal consultation with the unions and the E-Commission to get approval to conclude the deal. This will have a negative impact on profit per share by SEK 0.73. Georgia-Pacific, a positive SEK 1.70. It will also, of course, reduce our debt/equity to 0.5, which means that we have some maneuver room to grow the hygiene business.
Since we are in the end of the year, just a few words on our strategy. As you may know, we have been focusing very much on efficiency. In efficiency, we include costs, cash flow, capital efficiency. We have innovation as a very important theme in the company. Last year, we also added growth as an important theme for the company. If we look at efficiency, we have restructured the baby system in Europe. That's finished now, up and running. We have an efficiency program, and now we have it in the hygiene business that will give us an annual saving of some SEK 700 million when it's finalized. The cost for that is SEK 1.4 billion. We have already taken SEK 955 million out of that. We have just launched a new hygiene organization.
The purpose of that is to cut costs, get faster to the market, faster innovation, more efficient innovation process, but also to speed up growth. That is gradually being implemented in the company during the first quarter. We also continuously, of course, invest in upgrades and new capacity. Innovation, we have a fortunate situation in the company today. A couple of years ago, we had the market screaming for innovation. Today, we have a market saying, "Please hold on. We can't launch anything more now." That's the situation you want to be in, and that's the situation we want to continue to be in going forward also. We have really made a huge effort to improve the innovation process, and that has so far been very successful.
We have had quite a lot of new launches in the market this year in the important incontinence area, but also in baby and in Away from Home. I will just show you a very, very short film on one of the innovations.
They're going to one to two to three . Yeah, I didn't take a baby step. Take a baby step. [audio distortion]
That's just, so this was our dance collection, with new pants for babies and, as you may know we are absolutely dominating the Nordic markets when it comes to the pant products. Growth, of course, of course, Georgia-Pacific is an important one. We are seeing high growth in emerging markets. We have, as I said, the strategic acquisition of the biggest Inco company in Brazil, and that's just a building stone in Brazil to continue to build incontinence, but also to add new categories, of course, in the Brazilian market. Turkey, very central for expanding in that region with the incontinence, the 95% that we acquired, but also the joint venture when it comes to baby and feminine. Also a very important step. Organization I talked about, wind power, capacity, and upgrades. We do accelerate the growth in the company, but we want to accelerate it in a way so we feel safe that it's the right thing to do.
Of course, that we pay the right price for anything we are acquiring. With this presentation, I would ask Lennart to join me here, and we will try to answer any questions you may have.
Thank you. I'm here.
Oh, sorry.
It's Linus Larsson with SEB Enskilda. I f I remember correctly, I think you guided on the tissue margin to exceed 10% by the first quarter. Now you exceed that already in the fourth quarter. I wonder if you have a new guidance for the first quarter or for the first half of 2012, what do you expect in terms of tissue margins?
The ambition is, of course, the same that we should be above 10% in margin. Having the 10.2% that we have in Q4 now, we have to remember that if the fourth quarter is the weakest in packaging, the fourth quarter is the strongest in hygiene. Normally, the first quarter is weaker because there's a lot of pre-buying in the end of the year. Still, of course, the ambition is to be above 10%.
Does what you just said go for the group as a whole, that we should expect a weaker operating profit for the first quarter compared to the fourth quarter as well?
We are not giving any forecast like that, but of course, what we do is comment on the seasonality, which we have every year. We will probably have it this year also. Having said that, looking at the volume in the start of the year here, we see good volumes in almost all our business areas. We also see, as I said, in packaging, volume picking up. We don't see yet any impact of a downturn of the economic cycle, at least the first two weeks of the year. It's still very early.
Excellent. Just coming back to those two big transactions that you have announced, the packaging divestment and the Georgia-Pacific acquisition, if you just update us where you are in the regulatory process, have you filed both of those? Are you in the phase one stage or even further?
When it comes to packaging, we have to wait until the AGM has taken place on the 3rd of February because we want the shareholders to say yes. After that, we will speed it up with a consultation with the union and with the EU. From a European perspective, at least from my point of view, it should be simpler than maybe the tissue business because we have very few overlapping businesses. We have to wait until the 3rd then. Of course, we are preparing for everything. In Georgia-Pacific, we are managing that in the way we expected, and we think that will be a longer process than packaging. So far, we haven't seen anything that is sort of scaring us off in any way.
Okay. That means that you expect the phase II process?
No, absolutely not.
No, okay.
No.
All right. Okay.
I would be very disappointed if that happens.
Okay, thank you very much.
Oskar Lindstrom here from Danske Bank. A couple of questions. The first one regards raw material costs, which benefited this quarter. Do you also expect to benefit from lower raw material costs in the first quarter, given where prices are today and the various lag effects in your P&L?
We have, if you take pulp as an example, we have normally a delay of some 40, 45 days before we get the price through in our system, which means that, I mean, even though we have seen pulp picking up slightly, slightly in the end of the year, there should be a benefit to us in Q1 if nothing dramatic happened just now. OCC, reasonably stable, up a little bit also in the end of the year. It is more flattish than going down just now. With the delay, it should be some positive impacts.
Your customers on the tissue side, of course, are aware of sort of where your major input costs are going or have been going. Are you seeing any price pressure on segments of your tissue market?
It is a war out there. Of course, it's pressure all the time, but so far, we've been successful in implementing what we are doing. It's absolutely necessary. If they want to have a long-term supplier, we have to make some profits so we can reinvest in the business.
We should not expect any further price increases sequentially in the first quarter?
No, I don't think so. Not as the situation is today.
Okay. A final question. I spoke to Lennart about this before, but the goodwill write-down was some SEK 8.5 billion, of which four, is that correct? Yes?
The asset write-down was not SEK 8.5 million.
No, sorry, the reduction in goodwill on your books.
Yeah, but.
I can't quite sort of add them up. There was SEK 4 billion that you wrote down, SEK 2 billion that went along with the packaging that you're set to be sold, and there's another SEK 1 billion in the Australian assets. That's SEK 7 billion. Am I missing SEK 1.5 billion in goodwill somewhere?
Yes, you are. I mean, the asset write-downs we have described in the one-offs. We have moved the remaining parts of the goodwill linked to Australia and also linked to the packaging to the two lines you have in the balance sheet, asset held for sales.
Okay. It's actually more than SEK 2 billion that's being sent along with.
Yeah, the remaining part not written off is transferred to the two lines.
All right, thank you very much.
Lars Kjellberg, Credit Suisse. Coming back to the packaging transaction first, obviously, you divided up in the French business and the balance. Could that even be considered to be two separate transactions? Could one be delayed more than the other, or would they come as one package?
No, I would say they will come as one package, because normally you would not go into the commission before you have done your consultation with the unions.
Okay. If I heard you right, you expect a margin, sequential margin improvement in the packaging business in Q1 versus Q4. What is that based upon? Better volumes, I guess, but anything else that you were considering when you talked about that?
It is better volume, a better cost position, but also some delay from raw material decreases that hasn't walked into the system yet.
When you talked about the raw material write-downs, so inventory losses, where did they actually hit specifically?
Mainly in hygiene.
Okay. Coming to the hygiene business, obviously, you're making various growth initiatives, which was way overdue, but they're coming through, which is nice. What are you looking at in terms of organic growth in your business? So far, it's sort of a bit of quiet on the Asian side if you want to elaborate a bit what's going on there.
We have a target of growing by 5-7% in personal care organic and 3-5%, if I'm right, Lennart. Three to four. Three to four in tissue, which we are doing just now. When it comes to the Asian side, I mean, Southeast Asia is where we have a strong position, is still doing well. We still want to have a bigger position in China. Our incontinence introduction is going much better than we anticipated, but still only in two of the major cities where we actually today already are market leaders. To reach the rest of the country, we need a distribution system, which we don't have today. We're working on how we could achieve that. Of course, as I said, we need to expand in Brazil when it comes to categories. Those are the main focuses. India is, of course, on the watch list on how to get into India in a good way.
Okay. Thank you.
Yes, thank you, Karri Rinta, Handelsbanken . A few strategic questions. Firstly, about the branded personal care business in Europe. Do you think that you would have a sort of an ambition or temptation to start growing in the branded business in Europe now that you have resources, you are putting the tissue and personal care together to some extent? Can we see that you actually put more resources in the branded business in Europe?
We have communicated that we do want to grow the branded business compared to the private label business. By acquiring Georgia-Pacific, we're actually reaching the target we set.
Sorry, on the personal care business.
On the personal care business?
Yeah.
I don't see any reason to change the strategy that we have today, because trying to do that organically will bring enormous investments. You could do it by acquisition, but not organically. I don't believe that.
Okay. Related to the tissue business, do you think that you could see yourself splitting the tissue business into professional and consumer in the future, like some of your competitors are doing, or reporting it separately?
As I stand here today, we don't have any plans for that.
Okay. Thank you.
Mikael Jåfs from Cheuvreux. Question on your personal care business there. You highlight at the end of that discussion that you have a lower operating cash flow for last year. Is this just a seasonal effect for the quarter, or could you just elaborate a bit on it?
It's mainly due, Lennart, you correct me, because we had such high sales in the end of the day. Receivables are growing, but.
Yes, that's correct. We have seen, if you compare with last year's fourth quarter, we have seen higher working capital this year due to mainly increased sales and by that increased receivables.
Okay. Perfect. Thank you. Just a short question on the Georgia-Pacific, you're talking about the synergies there. Should we expect some form of non-recurring costs added to the purchase price of Georgia-Pacific in the future?
I think it's too early to have a firm view on that. We'll come back to it when the deal is closed.
Perfect. Thanks.
Okay. Do we have any questions from the telephone audience, please?
Thank you. We have a question from the line of Jussi Uskola from Deutsche Bank. Please go ahead with your question.
Thank you. A few mechanical questions. The first being related to your packaging operations. Some of your U.S. peers have signaled that they might be reducing their imports of kraftliner to Europe now due to the weak prices and relatively strong local demand. Can you discuss a bit on how you see the kraftliner demand being right now, and also how you see pricing of boxes developing in Q1 and perhaps even Q2? The second thing relates to newsprint. Can you give any comments about the ongoing price negotiations or recent price negotiations, and what kind of contract periods have you been aiming for now in the year in negotiations? Thanks.
The first one is that we have seen kraftliner inventories coming down in the end of the year and beginning of this year. That, of course, is one reason why we are increasing the price.
The import or the export from the U.S. to Europe will come and go depending on the currency because the cost position in the U.S. is not any better than the cost position in Europe. It's only a currency game. If you have a weak U.S. dollar and a strong euro, maybe it's a good business. I think the development is the opposite now, which means that we probably will see less. Second question?
Newsprint.
Newsprint. Volume-wise, we are in a very good position contractually, both in news and in magazine paper. As I said, when it comes to pricing, we see an opportunity with very, very small price increases, if any.
Have you been able to conclude anything with regards to that?
We have concluded for the first half quite substantial volumes, yes.
Okay. I presume then that the first half, you are aiming for biannual contracts now.
We are trying to get that. Normally, you can also have the volume contracted, but not the price contracted. In news, it's the normal path. Previously, anyway, it was a yearly contract, but you see shorter contracts now. In magazine, you have everything from two, three months to half a year. It is different depending on the quality.
Okay. Thanks.
The next question comes from the line of Myles Allsop from UBS . Please go ahead with your question.
Yeah, just a few quick questions. Just on the test liner price increase, what gives you sort of confidence to go for about €100 per tonne increase in test liner? I mean, it's what, 20% price increase? I mean, how much have waste paper costs increased? Where are test liner inventories? Should we believe you're going to achieve that?
It is one simple answer, of course, that we need it and everyone else needs it also because of the higher raw material costs. I think I read in the paper that one of our competitors also increased prices today. The growth of inventories that we saw during at least part of last year hasn't continued, which also is a sign that it may be the right opportunity to increase prices. Of course, we will do whatever we can to push those €100 in because from a testliner perspective, it's absolutely necessary.
How much have waste paper costs gone up?
You mean during last year, or?
Since the trough, yeah, since December.
We have seen it come up this year during the first weeks. Not much, but anyhow, it has turned up.
Okay. Have inventories actually come down for test liner, or are they just so stable?
It's more stable.
Okay, they're slightly higher than average, aren't they?
It's not higher than average, but it's higher than it was during the recession.
Okay. On the demand side, you're saying it's fairly healthy as you look at it on the demand side. What's your demand expectation for 2012 for corrugated?
Yeah, I mean, as I said, it's a very uncertain time we are in. What we are trying to do is to follow it how we can during our order books. So far, we don't see any sort of reaction as we saw in the previous crisis. Guessing longer than that is probably you're as good as I am to guess on that.
Okay. It's kind of flat demand in Q1 as we're looking and no real visibility?
We will have higher volumes in Q1 than in Q4 due to the seasonality.
Okay, sorry, yeah.
Yeah.
In terms of the synergies with Georgia-Pacific, obviously, it's a big number and critical in terms of making the deal make financial sense. Could you give us a sense of the timing? Is it kind of a third, a third, a third, or is it upfront? Very broadly, what it relates to, what's underpinning it?
We will be absolutely happy to do that once we have closed the deal.
Has that number been audited, the SEK 125 million, or is it kind of back of the envelope SCA estimate?
It's not back of an envelope, no.
Okay. Just maybe very lastly on the tissue side, in terms of demand, how is demand holding up? In terms of prices, you're saying flat prices, just to be clear, in Q1.
We don't have any planned price increases for Q1, as the situation is today with the raw material prices.
Is there pressure on prices, though? Could prices actually come down in Q1?
That's nothing we have in our plans either. As I said, there's always a war out there to get volume. We are absolutely focusing on getting the right volume and not the wrong volumes.
What do you think Kimberly was kind of talking about prices being down a couple of pecentage for European tissue in Q4?
I haven't really had time to look deeply into their report, but we know that they are struggling in part of the business in Europe.
Okay. Thank you.
Thank you.
The next question comes from the line of Ross Gillardi from BIML . Please go ahead with your question.
Good afternoon. Thanks, gentlemen. Jan, I just wanted to ask you, the packaging divestiture is basically, it's more than funding the Georgia-Pacific acquisition, and you've got the proceeds from Australia and so forth. Would you be willing, if the opportunity presented itself, to make another sizable acquisition in the hygiene businesses overall, realizing you've got a lot on your plate now, but just your attitude on that?
Yeah, you're absolutely right. We have to digest what we're doing just now before we can think of anything else. We are absolutely looking into growing by acquisition, not in a way that we are risking our balance sheet and our debt payment capacity. There has to be a good balance there.
In terms of additional acquisitions you might do, would you envision that you're further focused on consolidating the European market, or at this point, would emerging markets be a higher priority for you?
The emerging market is a higher priority, but of course, we are generating our cash flow in Europe, and we still get some 70-80% of our revenues from Europe. It is very important that we have a market in Europe that really can have the profit level that is necessary. Priority number one is emerging markets.
Okay. Very good. Did I hear you correctly? I was in and out for a moment. You think you'll actually have the Georgia-Pacific acquisition closed by the end of the second quarter or approved, or what stage do you expect to be?
We are working on a plan now that will be finalized during the first half. Of course, we are extremely dependent on the process in the EU Commission, and we can't really impact that. That is at least the assumption we have.
Okay. Very good. What will your CapEx look like net compared to where it is now when you factor both transactions? Were you sort of on a forward-looking run rate? Have higher or lower capital spending requirements, do you think?
I think that's also a question I would like to get back to when the deals are closed.
Okay. Fair enough. Just, sorry, a couple more. I think you mentioned that on baby diapers, in association with your restructuring, you've talked about contract wins. Did you say that those aren't really going to kick in until the first quarter of this year? If so, would you expect a step up in margins in personal care as you bring on those volumes, or would there be any impact on margins to consider?
We have some of it in Q4, but the bulk will come in during this year. Everything else like it will have a positive impact on the margin.
Okay. Lastly, on the forest, have you had any reevaluation at all? Is it still going to be the SEK 26.1 billion, if I have that number correct, on your balance sheet for year-end?
We haven't done any reevaluation of the forest so far. We do it regularly. Every year, we look at it. We do it every 10th year when we look at the total sort of management of the forest. Of course, if things change and we decide to increase the harvest from our own forest, we need to look at the variation. As you know, today we grow our own forest by 1% per year as an example. It's absolutely possible to change that and grow it maybe 0.5%. Today, we stick with what we have.
One of your competitors obviously has got a different timing cycle for their harvesting plan and is coming up with a new plan, but it sounds like they're going to harvest more in the future. Is there demand? Do you see incremental demand for timber in the Nordic region that would allow you to actually increase your harvest?
I think, yeah, I mean, you're probably referring to Holmen and their reevaluation of the forest. Of course, they built a very big sawmill in the middle of Sweden that they need to supply. I think we have a very good balance of our own forest and private-owned forest, which is very important for us also to keep in the system. Within that system, you can, of course, change it. As from now, we continue with the growth of the forest and the value we have.
Right. Okay. Great. Thank you very much.
Thank you.
Thank you. Let's take some questions here from the audience in the room, please.
Okay. It's Oskar Lindstrom from Danske Bank again. A couple of questions. One, in their Q4 results, Kimberly-Clark referred to higher than normal rebates in the baby diaper side. Is that something that you've seen or had any effect from in your fourth quarter results?
We have an improvement of our baby business. Of course, I think, I don't know if I should talk for Kimberly-Clark, but there is, of course, a huge pressure between Procter & Gamble and private label in Europe. We have our branded business in Scandinavia and in Russia. In that pressure, you have Kimberly-Clark. We are then on the sort of private label side or the retail branded side and Procter & Gamble on the other side. Procter has been really driving the baby market.
A second question, more of a strategic character, is, I mean, presuming the acquisition of the Georgia-Pacific tissue business here in Europe is achieved, you will, of course, increase your net exposure versus the pulp market of your mind more than you do today. Do you feel any need to sort of hedge that or reduce that exposure by increasing your exposure to market pulp or increasing your pulp capacity? What's your thinking around that?
Yeah, it's absolutely true. On the other hand, we are reducing the OCC exposure, which maybe is even more difficult to predict. It will take down our hedge. We are today at 40%, 41%, and we'll be down to 30% something, if I remember rightly. I don't see any immediate need to increase our own pulp production. We are in the same situation as our competitors, and there will always be pulp to buy. It's only a question of price. As long as we can buy at the same price as our competitors, we will have to be more compatible in other parts of the business.
Will you maintain the pulp production in Mannheim, or has that gone?
We don't have any different plans today than we were. Of course, we have the option in Östrand, as we talked about, to go up to 800,000 tons. At some stage, that's probably something you should do, but not today, not in the near future.
It is not related to sort of increasing your exposure as a result of an acquisition.
No, it has to live by its own merits.
All right, thank you very much.
Okay. Let's go back to questions from the telephone audience, please.
Okay. The next question comes from the line of Nin Diaz from JP Morgan. Please go ahead with your question.
Good afternoon, gentlemen. My question was on the publication paper side. You did comment on newsprint pricing at best being slightly up. Can you comment on magazine pricing as well? Second, can you comment on the volumes? You said you're in a good position in newsprint volumes. Does it mean you think volumes will be up on a year-on-year basis? I'm just trying to understand what that statement implies. Can you make a similar comment for the magazine volumes? Thank you.
We have been producing at full rates and selling everything in last year and the year before that, and for almost every year. We will continue that this year also. From a volume point of view, it doesn't have any impact. When it comes to pricing, all the negotiations are not yet finalized. What I can see so far, it's a difficult situation. It's an overcapacity in Europe. Consumption is going down. There will be small, if any, possibilities to have any major price increases, both in news and in magazine paper.
Given that raw material prices have come down and you don't expect volumes to go down based on your production versus sales, do you expect your earnings on the EBIT line for the publication business to be higher year on year?
We don't give that kind of forecast. The main thing that will have an impact on that will probably be currency, and that's very difficult to forecast.
Okay. That's very helpful. Thank you.
Thank you.
The next question comes from the line of Marcus Almerud from Morgan Stanley. Please go ahead with your question.
Hi, Marcus Almerud here from Morgan Stanley. Most of my questions have been asked, but a couple of follow-ups. First on prices, magazine paper prices in particular, but also news. You're talking about it will be hard to increase prices, but you haven't seen any decreases so far?
No, that's true. I hate to decrease prices, that's why. Looking at news, it will be a slight price increase. When it comes to magazine, it is too early to have a very firm view. There is a possibility of price decreases on a European basis.
Okay. On corrugated, what did you see into the corrugated pricing?
Q3 to Q4, there was a slight price decrease of 1.5%, which was from a corrugated point of view well covered by the price decrease of liner.
Okay. Okay. Just to clarify a comment, I saw you quoted on one of the news entries. I just wanted to clarify with you where you had said that you do not expect or you do not want to sell any of your forest assets. I just wanted to clarify what exactly you were talking about, if you were talking about the forest assets, forest products, or both. If you could just clarify that quote.
The question was very wide, and the answer was as wide. No.
Okay. Okay. Perfect. Finally, on diapers, do you continue to gain share in diapers? I know that you did last year. I guess the question is, the 500 million, except for the new orders you have, you have gotten the 500 million units, do you also gain share with other customers?
In that part of our business is the private label or retailer brand. We are now at 100% run rates. To get more volume, we need to increase our production capacity.
Okay. Perfect. Thank you very much.
Thank you.
The next question comes from the line of Johan Sjöberg from Carnegie. Please go ahead with your question.
Thank you very much. Can you say something about the cost efficiency that you will receive following the new organization within hygiene?
Part of that has been communicated in the SEK 700 million saving. The remaining is still a work in progress. As soon as we have finalized that, we'll get back to the market and have an idea about it.
In Q4, the write-down of inventory, how big was that?
280.
280. That is foremost, I would say, or I would assume in tissue?
It's both, actually, tissue and personal care.
If you look at how the Australian business was fully included in the fourth quarter, wasn't it?
Yes.
That would be excluded as of Q1, right?
Yes.
What type of EBIT did that contribute, would you say?
I don't think we can comment on that today. We'll get back at the Q1 report.
All right. I understand that, seasonally, you see margins decline in personal care as you have seasonally better volumes of incontinence during the fourth quarter. I guess that is also the case now for Q1. In tissue, you were not giving any statements, I would say, or did you on the previous question? Are you looking for margin increases in Q1 quarter to quarter?
We also have seasonality in tissue, in particular in the U.S., in Q1. If you look in history, we normally have a weaker Q1 than Q4, both in tissue and personal care.
If you take all these things, I mean, I would assume that you don't have any inventory write-downs in tissue during the first quarter. You will also see lower pulp price and also lower recycle prices. Why are you being so cautious?
If we see lower raw material prices, I will have even further inventory losses. It is very difficult to say. I am cautious because I know that Q1 is normally a weaker quarter.
All right. Cool. Thanks a lot.
Thank you.
We have a follow-up question from Ross Gillardi from BIIML . Please go ahead with your question.
Were the proceeds from the Australia joint venture on the cash flow statement, are they in one of the line items, or do you get paid for that technically in the first quarter?
We got it 4th of January, Lennart.
Yeah.
Yeah. Okay. They're not in there yet. Great. Can you give us any help on the annualized sales and profit for the kraftliner business that you are retaining, what it was for 2011? Will you just roll that into the pulp, timber, and solid wood segment, or will you break it out separately?
We will include that in the forest industry when the deal is closed, yes.
Is there anything you could help us from a modeling perspective as to what sort of the run rate profitability is for the kraftliner assets that you're retaining?
It's nothing we have communicated directly, but of course, you can see it if you look at the statements of what we are divesting and compare it with the packaging business.
You've had some acquisitions and divestitures there also that would maybe skew it a little bit, if I'm not mistaken. Is that the math will get you close enough?
It will get you very close.
Okay, thank you very much.
Thank you.
Okay. Thank you. Do we have any more questions from the audience in the room? No? Any last comments, Jan?
No, I think we have touched upon all the important issues. I think the comment I may finish with is that it is from our perspective, we think we're going into 2012 as a stronger company than we went in 2011.