Good morning and welcome to this presentation of the SCA half-yearly report for 2024. With me here today, I have President and CEO Ulf Larsson and CFO Andreas Ewertz. With that, over to you, Ulf.
Thank you, Anders. Good morning also from my side, a warm welcome to the presentation of the results for the second quarter 2024. When I summarize the second quarter, I can state that the markets for all fiber-based products in all areas are sequentially stronger, with higher prices in Q2 in comparison with Q1. We can also note that we have a delay effect in pricing for containerboard and pulp, with 1-2 months. In renewable energy, we have seen a negative market development in Europe for liquid biofuels, also affecting tall oil prices. So when we compare Q2 2024 with the same period last year, this is of course not the least due to reduced mandate for biofuels in Sweden since January 1st this year.
Due to a seasonal effect, we also see 40% lower deliveries of wood pellets in the second quarter versus the first one this year. Also this quarter, we note a high demand on wood raw materials and by that continued increase in prices. We have in SCA also increased volumes from our own forest, which in comparison with the second quarter 2023 has strengthened the result in business area forest. Sales increased with 15% and EBITDA with 11% Q2 2024 versus the second quarter 2023. Higher prices, increased volume, and a positive currency effect explains the improvement. This slide will give you an overview of KPIs for the second quarter 2024. Our EBITDA reached, as you can see, SEK 1.9 billion during the second quarter, which corresponds to an EBITDA margin of 36%.
Our industrial return on capital employed came out on 4% for the second quarter, counted for the last 12 months. The leverage is at 1.8 and net debt to equity was 11%. We have now finalized our big strategic investments in Obbola, Ortviken and Gothenburg. Just now they are under ramp up, but coming years they will of course contribute in a positive way. I will make some comments for each segment, starting with forest. High harvesting level from our own forest has contributed to stable supply of wood raw materials to our industries during this period. In general, we see a remaining high demand of wood raw materials in the market during the second quarter, and by that also continued increase in prices for both pulp wood and saw logs, as can be seen in the graph in the bottom left.
When one compared the second quarter 2024 with Q2 2023, sales was up 15% and EBITDA was up 8%, mainly due to higher prices and a higher harvesting level in our own forest. Regarding forest valuation, the market has since the beginning of the year been slow, and we have had very few transactions in the area where SCA owns forest land. For that reason, forest valuation remains unchanged. Then I turn over to business area wood. In general, we still have a continued slow underlying market for solid wood products. Despite the generally low demand, we see some early signs of improvement in the repair and remodeling segment, which is good for SCA, as that segment is where we are mainly present in. Stock levels are on normal levels at producers and mainly at the low side at customers.
I estimated that price in the second quarter should increase with 10%, which also happened. Deliveries and prices increased due to a seasonally higher demand in the second quarter, but the cost for saw logs also increased during the same period. Sales was up 11%, EBITDA was up 46% in the second quarter in comparison with the same period last year. The reasons behind this were mainly higher prices and higher volumes, and the EBITDA margin consequently increased to close to 20%. Today's stock level of solid wood products in Sweden and Finland is in relation to the average for the last five years described at the top left on this slide. As mentioned earlier, we note that the inventory is on a normal level.
As can be seen in the diagram to the bottom left, the Swedish and Finnish sawmills production has been slightly below normal levels accumulated so far 2024. In the diagram to the top right, we can see that prices started to increase during the first quarter 2024 and has also continued to increase going into the second quarter. Coming into the third quarter, I estimate close to unchanged prices due to balanced stock levels and also due to high and further increasing raw material costs. In the construction sector, we can conclude that the starts of new building are low. On the other side, the repair and remodeling sector, as mentioned before, is performing better, and that will also respond positively to coming lower interest rates. Over to pulp. The ramp up of our new CTMP mill is running according to plan. Production optimization work continues.
Our CTMP products have been very well received in the market. Consequently, CTMP products represent now an increasing share of our pulp sales. Sales and EBITDA were up 22% and 34% respectively when comparing the second quarter this year with the second quarter 2023. We can note higher prices and volumes on the positive side, while higher raw material costs have had a negative impact in this comparison. During the second quarter, we have had an unplanned production stop at Östrand pulp mill due to leakage in the recovery boiler. The total negative impact was approximately SEK 60 million in second quarter, and a similar amount will be recorded also in the third quarter. The pulp mill is now back in stable production again. After a rather weak 2023, demand for pulp improved in Europe and U.S. during the first half of this year.
Export volumes to China normalized during the first half of 2024 after, as you remember, very high volumes in the fourth quarter of 2023. The Finnish strike in March substantially reduced supply of NBSK in the beginning of the second quarter. In Europe, prices on all grades of pulp continued up in the second quarter, with NBSK index pricing increasing from $1,400 per ton in March to over $1,600 per ton in June. In the U.S., NBSK prices have had similar development as in Europe, but with a small delay. Looking at the CTMP prices, they have been increasing in Europe, but at a slower pace, and we have seen more of a flat price development for CTMP in Asia. In July, we see prices stabilizing in general, but with some regional differences.
Inventories of both softwood pulp and hardwood pulp are on average level, as you can see in the graphs. As mentioned before, pulpwood prices continue upwards, supported by limited supply. Moving over to containerboard. The ramp up of the new kraftliner machine in Obbola is progressing. During the quarter, we have taken extra stops to adjust the machine line. We also continue to see high operational cost, which is absolutely expected in this phase of the ramp up. As we have earlier communicated, we plan to reach full capacity in Obbola by 2026. Sales and EBITDA was up by 11% and 6% respectively in the second quarter in comparison with the same period last year. We can note higher prices and volumes on the positive side, while higher raw material and other costs had a negative impact in this comparison.
We see a healthy growth in box demand in comparison to last year, and we are now back to historical growth trend levels. As you can see top right, as inflation and the interest rates go down, we foresee retail spending to strengthen, leading to continued growth in box demand. European demand of kraftliner has improved in the second quarter compared to last year, following, of course, the box demand. We expect a positive demand development of containerboard in coming quarters. Supply and demand balance will be impacted by additional supply coming on stream, with the vast majority coming in testliner. European prices for brown kraftliner have increased in the second quarter with EUR 100 per ton, and white kraftliner has increased by EUR 80 per ton. Both price increases divided into two steps.
We, SCA, we have recently announced another price increase from August 1st by EUR 60 per ton for both brown and white-top kraftliner. Containerboard inventories have been kept on an average level in Q2, driven by improved demand. Several kraftliner producers are now planning for annual maintenance shutdowns in the autumn, which will put some pressure also on the supply side during the autumn. The supply of OCC will probably become limited in the autumn, driven by the historically low supply of boxes. And consequently, we have also seen OCC prices increasing during the second quarter with EUR 70-EUR 80 per ton. So finally, over to renewable energy. And in business area renewable energy, we have had a weaker quarter with lower market prices for tall oil and liquid biofuels in comparison with the same period last year.
Bio premiums and prices have decreased to substantially lower levels compared to last year. The main reason is, of course, blending mandates in Sweden and increased imports also from China, creating an imbalance in supply and demand in the renewable fuels market. Ramping up Gothenburg Biorefinery together with St1 in this market environment put a short-term pressure on the segment. We expect market volatility in renewable fuels to remain relatively high as Europe ramps up the blending mandates both in HVO and SAF. Long-term, our outlook is positive, but in the short term, we expect continued low refining margins and bio premiums. The EBITDA level decreased by 53%, mainly due to lower market prices for tall oil and bio premiums in liquid biofuels. The market for solid biofuel remains stable.
SCA continues to grow in leasing out land for wind power and has now reached 9.7 TWh of wind power on SCA land by the end of the second quarter, and that is equal to 20% of installed capacity of wind power in Sweden. Finally, I can also mention that the execution of our windmill project, Fasikan, is progressing according to plan. By that, I hand over to Andreas.
Thank you, Ulf, and good morning, everybody. I'll start off with the income statement for the second quarter. Net sales increased 15% to just below SEK 5.3 billion, driven by both higher prices and higher volumes. EBITDA increased 11% to just below SEK 1.9 billion, driven by higher prices, which was partly offset by higher costs for wood raw materials. The EBITDA margin was 36%.
The EBITDA margin was 26%, and financial items totaled SEK -144 million, with an effective tax rate around 20%, bringing net profit to SEK 960 million or SEK 1.37 per share. On the next slide, we have the financial development by segment. Starting with the forest segment to the left, net sales increased to SEK 2.2 billion, driven by higher prices for wood raw materials. Adjusting for the capital gain of SEK 128 million in the previous quarter, EBITDA
increased slightly to SEK 883 million. Seasonally higher harvest from SCA's own forest was partly offset by seasonally higher costs for forest management and fertilization. In wood, prices increased by 10% compared to the previous quarter, while the cost for saw logs continued to increase. Net sales increased to SEK 1.5 billion, driven by both higher volumes and higher prices. EBITDA increased to SEK 294 million, corresponding to a margin of 20%.
In pulp, prices continued to increase throughout the quarter. Net sales increased to SEK 2.1 billion, and EBITDA increased to SEK 509 million, corresponding to a margin of 24%. In the quarter, we had a negative impact from a planned maintenance stop of SEK 29 million. We also had a leakage in the recovery boiler, which had a negative impact of approximately SEK 60 million in Q2 and will impact Q3 with a similar amount. In containerboard, kraftliner prices increased during the quarter. Net sales decreased to SEK 1.6 billion compared to the previous quarter, driven by lower volumes. EBITDA increased to SEK 231 million, corresponding to a margin of 15%. Higher prices were partly offset by higher costs for wood raw materials and higher OCC prices. Ramp up costs were in line with the previous quarter at around SEK 65 million-SEK 70 million.
In renewable energy, EBITDA decreased to SEK 85 million, driven by seasonally lower deliveries of solid biofuels, lower prices for liquid biofuels and tall oils, ramp up costs, as well as higher costs for sawdust. The higher cost for sawdust, we get back as a positive in our wood segment due to our integrated value chain. On the next slide, we have the sales bridge between Q2 last year and Q2 this year. Prices increased 7% with higher prices in primarily pulp and wood. Volumes increased 5%, driven by the new paper machine in Obbola and the new CTMP mill at Ortviken, as well as higher volumes in wood. Lastly, currency had a positive impact of 3%, bringing net sales to just below SEK 5.3 billion.
Moving on to EBITDA bridge, and starting to the left, price mix had a positive impact of SEK 287 million, and higher volumes had a positive impact of SEK 15 million. Higher costs from mainly wood raw materials had a negative impact of SEK 76 million, with a negative impact of energy of SEK 99 million, and a positive impact from currency of SEK 130 million. In total, EBITDA increased to just below SEK 1.9 billion, corresponding to a margin of 36%. Look at the cash flow, with an operating cash flow of SEK 526 million in the quarter and SEK 1.2 billion for the first half year, which means that we're continuing to fund our strategic investments with operating cash flow. Look at the balance sheet. The value of the forest assets was SEK 108 billion.
The beginning of the year was a slow market with very few transactions, and we have therefore left the three-year average price used in the forest valuation unchanged. Working capital increased to SEK 5 billion, driven by higher prices, higher volumes, and higher costs for wood raw material. Capital employed totaled SEK 160 billion, and net debt increased to SEK 11.8 billion due to the dividend. And we have now almost finalized our large ongoing investment projects in Obbola, Ortviken, Bollsta, and Gothenburg. Equity totaled SEK 104 billion, and net debt to equity was 11%. Thank you. With that, I'll hand back to you, Ulf.
Thank you, Andreas. And yeah, again, when I summarize, I think we can now see a stronger market for more or less all fiber-based products. We have a tough market for liquid biofuels, increasing wood raw material costs.
By that, we are, in the relative game, benefited from the big share that we can take from our own forest. And sequentially, this is a better result than first quarter, and also when we compare this quarter with the second quarter last year. So with that, I think that we can open up for questions.
Thank you. If you'd like to ask a question or make a contribution on today's call, please press star one on your telephone keypad. To withdraw your question, please press star two. You'll be advised when to ask your question. We will take our first question from Charlie Muir-Sands, BNP Paribas. Your line is open. Please go ahead.
Good morning, gentlemen. Thank you for taking my questions. I've got three, if I may. The first one, on the forest valuations, I understand very much like the half-year last year, you weren't in a position you felt to revalue, given the limited number of transactions. But you did give a chart at the half-year last year, at least showing where the half-year pricing was coming out. I just wondered if there was enough data for you to at least share where prices have moved for forest land over the last six months. Secondly, on the pulp segment, I note that there's been some amount price cuts now by some of the radiata pine producers, not yet northern pine. But I just wondered if you're starting to see any kind of pushback from customers on the kind of recent rally in prices there.
And then lastly, on renewable energy, I wondered if you could break out at all, quarter-on-quarter, how much of the decline in profits is due to the fall in the price of tall oil and biofuels versus some of the seasonal and other effects? Thank you.
So we'll try to take them one by one. We can start with the pulp question. I mean, as you know, we have had a strong development in the pulp market during this year. Fourth quarter of 2023, I mean, we had record deliveries to China. Then the Chinese market started to slow down a little bit or normalize in the beginning of this year. But at the same time, we've had a stronger market in Europe and the U.S.
Recently, we have seen that spot prices in China have come down, and now we have a delta of $100-$150 per ton. And as I said, I mean, that might create some kind of stabilization in the market. I mean, Chinese prices must come up a little bit, or European U.S. prices might come down a little bit. So that might be the case. Price-wise, we are on a peak or top level, at least. But at the same time, when we compare margins with 2022, I mean, raw material costs have increased quite substantially. So that's the reason why the margin is a little bit lower. But still, we have a rather good demand out there, not least in the U.S. and in Europe.
And as I think Andreas said, I mean, we have also a delay in price effect with 1-2 months. So that was the second one. The third one was renewable energy, Andreas. Maybe you should.
Yeah, I can take that. So we start with the seasonal impact between Q1 and Q2. We have approximately 40%-45% lower pellets volumes in Q2 compared to Q1. And we also have higher sawdust prices compared to Q1 with about 25%. And that, of course, impacts renewable energy negatively, but impacts wood positively. So I would say that the seasonal effect and the higher sawdust, I mean, that lowered the profits in solid biofuels with just about 50% compared to the first quarter. Then in terms of the liquid biofuels, the prices for liquid biofuels and tall oil have gone down. That also has an impact of around 50% compared to the first quarter.
And then finally, the price on forest land. And I mean, in fact, we haven't seen any official statistics yet, neither from Svefa or from Ludvig. We know that it has been a slow market for a while. And I think the reason for that is, of course, that for a while we saw increasing interest rates. And also normally, I mean, when the ground is covered by snow, you don't do too many transactions. Last year was maybe an exception. So it is a slower market today. I believe that the market has stabilized. I mean, on our own, we do some transactions every year, and we feel that the market price is maybe a little bit lower than last year.
But it's hard to compare because it depends where in the geography you are and, I mean, what kind of estate it is. Now we know that we will see decreasing interest rates for a while. I think that will have an impact on the market. We also know that raw material prices have increased substantially. And as we feel it just now, they will continue to increase. But that is what we can say just now. Do you like to add something, Andreas, or?
No, you usually have a very slow market in the beginning of the year, as in northern Sweden. You don't do any forest transactions when it's covered in snow, and then it picks up during the summer and autumn. So we'll have to wait and see how the prices develop now when the seasonal activity picks up.
Thank you. Sorry, just to clarify what you said about renewable energy. You said 50% in solid and 50% in liquid. Were you talking about half of the quarter-on-quarter decline in profits? Is it true to each, or are you saying that those subdivisions saw their own profits fall 50% quarter-on-quarter?
Subdivisions. So the subdivision of solid biofuels, for example, they saw the profit in Q2 compared to Q1 drop with just about 50% and a similar amount for liquid biofuels. On the solid biofuels, it's more of a seasonal effect and higher sawdust prices, while on the liquid biofuels, that's a market-related development.
Very clear. Thank you.
We will take our next question from Lars Kjellberg, Stifel , your line is open. Please go ahead.
Thank you. Good morning. Thanks for taking my questions. I have three questions. Starting with the bigger picture, capital allocation, as you've now exited your big CapEx programs. How should we think about the priorities over the next two to three years? Second is on CTMP. With any pulp mill.
Excuse me. I think we take one by one. It's easier. So if we start with CapEx, sorry to interrupt you, but I mean, just now we are so focused on ramping up all big projects that we have started up a couple of years ago. Mentioned Obbola and also Ortviken and the Gothenburg biorefinery. In addition, we also have that process with the grading mill in Bollsta and the CT scanner and so on. So I mean, we have performed quite a lot of big projects. And for the moment being, we are 100% focused on ramping up what we have, and we will be very cautious with new investments now for a while.
Yeah, I understand that. I was just more thinking about generally capital allocation priorities as the cash starts coming in. Would that be primarily debt reduction at the first stage and then at some other stage, other consideration in terms of capital returns and/or potential new projects?
Yeah, so as Ulf said, now we will focus on finally analyzing our big projects both in Obbola, Ortviken, and in Gothenburg. And then we are committed to having a stable and increasing dividend over time. And then long term, we also have some interesting potential projects going forward. So I think we will focus now on ramping up, and we want to have a stable increasing dividend. We want to keep an investment-grade credit rating.
So on the CTMP side, just wanted to understand what markets you serve and what the uptake has been of the new pulp.
Yeah, that's a good question. I mean, we have had good development in Europe, and that is our main market, and that is our main target. And you know that in the old mill at Ortviken, we produced around 80,000 tons of CTMP, and that was more or less all allocated for the European market. Now we have more or less doubled the capacity. We are in a ramping-up curve, but our main focus is still Europe. And we like to place as much volume as we can in Europe, and we have been successful in that perspective. It's also a question of price.
I mean, the price development in Europe for CTMP has been progressing, while the market in Asia more or less has been standing still. So I mean, it's also a stronger price development, not as strong or good as in NBSK, but still it has been a positive price development in Europe for CTMP. So for us, just now, it's more important to, I mean, work with yield when it comes to chemicals, wood consumption, energy, and so on, than try to push the volume. We already had the volume. We have the capacity. We know that. But just now, it's more profitable for us to look into other details.
And from an end-use perspective, is this predominantly hygiene-oriented or hygiene and packaging? Can you just share the mix?
Hygiene and packaging.
And then final question for me. Containerboard, obviously, sequentially somewhat better demand in the market, yet your deliveries are down. Is that due to any disruption internally or any other considerations?
I mean, the market is up in containerboard, as you could see in the graph. And I mean, by that, the demand of kraftliner will follow. We also feel that, I mean, it is just now a lack of OCC in the market, so that will push testliner prices upwards. And that will, of course, also help kraftliner prices upwards. We increased prices by EUR 100 per ton in the second quarter. We haven't seen any effect of the second step there. And we have also announced another step from August 1st by another EUR 60 per ton.
That is not yet accepted in the market, but we know that test liner producers, they have come through with price increases in the first step.
Your own volume on a sequential basis, you stepped down from 250,000 tons and changed to 240,000 in Q2. Any reason for that downtick?
No, I mean, as I said, we are in the ramp-up phase. I mean, we take two steps forward and one back, and we stop, and we justify the line, and we do what we need in order to ramp up this mill in the best way. So I mean, that is what is happening in the ramp-up phase.
Sure. Thank you.
We will take our next question from Cole Hathorn, Jefferies, your line is open. Please go ahead.
Good morning. Thanks for taking my question. I'd just like to get some more color on what you're seeing on repair and remodel, just some insights in what the customer inventory levels are like and what green shoot you're seeing in the repair and remodel. And then a longer-term question on softwood pulp through the cycle. The supply-demand dynamics for softwood pulp is tighter than hardwood. And I know there's new supply coming on stream in hardwood, but do you expect the premium of softwood pulp to kind of extend through the cycle and the volatility to be lower in softwood pulp than on the hardwood side? I'd just like to hear your thoughts of how you see that price premium through the cycle. Thank you.
If we start with solid wood products, I mean, yeah, as you say, I mean, we have seen some improvements in the repair and remodeling sector, while new housing starts, I mean, are on a very slow level. That is also what you can expect. At the same time, as you could see on the graphs, I mean, the stock level is normal at producers. We believe in, sorry, in many cases, among customers, the stock level is on the low side. I mean, I think normally the first step is to improve the repair and remodeling sector, and then the second step will be new house constructions. I think that will come. I mean, that will also be dependent on what kind of development will we see now when it comes to interest rates and things like that.
But it's not easy to, when you have stopped that market, as you did for a while. I mean, then it takes some time before you can start up again. But I believe, I'm not sure, but at least more than 50% of the total volume is going to the repair and remodeling sector. And as I said, we feel normal market in that market. And again, I said also earlier that I believe that we will see more or less flat prices going into the third quarter. But at the same time, I mean, we will also see that raw material costs will continue to increase. So by that, the margin might be a little bit squeezed, depending on where you are and what kind of region you have your operations within. Then the second one was supply-demand in pulp and premium softwood pulp and so on.
Yeah, it's hard to say. I mean, we know that we have no new, after Kemi now, we have no new capacity on stream, no capacity announced. We have seen lots of closures in the softwood pulp market. And I feel that we have a very strong balance in softwood pulp going forward now. And at the same time, I mean, some kind of impact you have from the short fiber market in pulp. But I guess my guess should be that we will see at least the premium that we have today for NBSK, at least. Because in some areas, you need softwood pulp. When you need the strength, when you need the long fiber, I mean, then you need softwood.
Thank you.
We will take our next question from Oskar Lindström, Danske Bank. Your line is open. Please go ahead.
Good morning, gentlemen. Yeah, three sets of questions from my side as well. First one is just on sawn timber. Did you provide any guidance now for Q3 pricing quarter on quarter? That's my first question.
Yeah. And as I said, I believe that the price will be more or less flat comparing the third quarter with the second quarter. But the margin might, in some areas, be squeezed as raw material prices will continue to increase.
Right. And on pulp, quite good volumes despite this leakage in the recovery boiler. I'm not sure if that impacted the volumes. Will that impact volumes in Q3, or how should we sort of expect the impact of that other than on earnings?
Yeah, of course. I mean, as I said, I mean, we had a negative impact of 60,000 tons in the second quarter. We have said that we will have more or less the same negative impact in the third quarter. And I mean, we have lost a couple of days in the pulp mill, and they are gone. So by that, we will be forced to reduce the volume. And then, of course, in the autumn, we will see regulatory maintenance stops. So that will also impact the volume. And I think that that's not only in the SCA that will come in other mills than our mills. So I think it will be, I mean, you can speculate what will happen in the pulp market, but I think you will see again a rather tight market for pulp after the summer.
Yeah. Also on pulp, sorry, just to follow up on that, how much was your CTMP volume in the quarter? I mean, I know you're ramping up from 80, 90 to 200. But what was the actual CTMP sales in the quarter?
We have not provided that. Still, boss. We have not provided that detail, but we are ramping up towards our 300,000 tons in annual capacity. We're not there yet, but we have seen a good increase in volume from the CTMP mill.
Okay. And just a final question, perhaps following up on capital allocation. You've now invested quite a bit into your industrial assets. And as you said, you've more or less completed those investments and are now ramping up these new or rebuilt facilities.
Thinking about forest land, because that's something that you've set out as one of your aims to buy more forest land, I mean, this would seem to be a good time for somebody like you to actually buy more forest land, because as you said, probably the market is still fairly subdued compared to where it was a couple of years ago. What are your opportunities for buying more forest land? And would that be in Sweden, or do you really prefer the Baltics? I know there was a forest or forest lands for sale there earlier this year, which I believe you did not end up buying. What's your thinking here on that forest land acquisitions?
Okay. Yeah. I mean, if we can buy forest land in Sweden, we will do that. But you know that we have a legislation in Sweden that says that we have limitations.
But if we see some possibilities, if we can, yeah, if a legal entity is for sale, I mean, then we would be interested, of course. Otherwise, we are a little bit cautious now. Now we like to focus on ramping up what we have started. We are also, I mean, we try to take care of the balance sheet. And by that, we will be a little bit cautious when it comes to acquisitions of forest land in other areas than in Sweden. So that's the case just now.
Okay. Great. Well, thank you. Those were my questions.
We will take our next question from Gaurav Jain, Barclays, your line is open. Please go ahead.
Hi. Good morning. Thank you for taking my questions. And three questions from me as well. So first of all, there was a comment made earlier that the forest valuation, it seems it is down on a very wide basis on the few transactions you have seen. Could you indicate how much is it down? Is it like down 2% or 5% or higher than that?
I'm not sure if I had you right here. You were asking about the price development when it comes to forest land, I suppose. I mean, we see some percentage down. I mean, as I said, we are always present in the market. Normally, we sell some land in the western part, far away from the industry. Then we try to buy back closer to the industry.
I mean, again, that is due to the legislation that we have that we cannot really buy forest land from a private forest owner without selling the same amount to another one. So I mean, we create some space, and we try to move the forest, so to say, a little bit further closer to the industry. And typically, the value of the land closer to the industry is a little bit higher than it is in the west. But as I said, I mean, we see it's hard to compare because it depends on where you are and how dense forest you have and what kind of forest you have, age distribution, and things like that. But the market is, first of all, it's a little bit slower now. You have few transactions, and the price is a little bit lower.
I don't know if I like to estimate, but say 5% or something like that in the transactions that we have done. But again, as I said, we haven't seen no official statistics. And I suppose that will come from Svefa and Ludvig. And then I think that figure will be more representative.
That's very helpful. Thank you so much. And secondly, we have had the discussion that wood costs and Nordics are now structurally higher. And you have commented also again that they should continue to go up. But is there a limit to how high they go in your view? Because clearly, it makes the downstream industries uncompetitive. So where do you think they level out?
Yeah. We see, I mean, if you look at our margins, I think we still have very good margins in our wood division, also in pulp and container wood. So we feel that there is room for the wood prices to continue a bit further. And that's what we see going into the next quarter. We see that the cost for wood raw materials will continue to increase a bit. And then long term, it is hard to say, but we believe that forest will be a strategic resource going forward and that the demand globally will be higher than the supply. So I think we like the forest industry. We think that will be a scarce resource in the future.
I mean, we clearly now see the effect of the Russian invasion of Ukraine. And I mean, 10 million cu m is not coming over from Russia to Finland, Sweden, and so on. We also see the effect of reduced harvesting level in the northern part of Sweden from the state-owned forests, Sveaskog.
We have some big investments also in the northern part that will put an extra pressure in the raw material market. I think we definitely will have a scarce situation also going forward. And by that, I suppose that the price level will remain, or it might be also even the prices might be even higher, which in the long run, of course, will support the value of the forest land in combination with lower interest rates. So I think that is the long perspective.
And also globally in Canada, you've seen that the harvesting level has gradually decreased. So also there you have wood as a scarce resource. In the western side.
Yeah. Okay. And my third question is on the pulp segment. So there is this sort of view that pulp prices probably are lower in 2H versus 1H, and we can debate whether that's correct or not. But assuming that pulp prices are lower and the wood costs are higher, and then the plant maintenance stops are also much higher in 2H than 1H, then is it fair to say that Q2 pulp EBITDA was the high point of EBITDA for this year? And sequentially, the pulp EBITDA will go down.
We don't give any guidance, but the cost for pulp wood will increase slightly in Q3 compared to Q2. But as we've mentioned before, you also have a lag in the price development. So you have one to two months lags in both pulp and container board. So you will have some lag effect, but you also have some higher cost. And then we'll see how the prices develop into Q3.
Thank you so much.
We will take our next question from Johannes Grunselius, DNB Markets, your line is open. Please go ahead.
Yes. Hello, everyone. It's Johannes here. I have one question, and that's regarding Obbola and the ramp up. You said earlier, I think it's what you said before, fully up and running 2026. I mean, could you get us a feeling for profit contribution, well, in Q2 from Obbola? And how would you think about it over the next few quarters? Will it be sort of very back-end loaded in 2025, or when do you think most of the profits will be seen?
Yeah. I can start to mention on, I mean, we have still startup costs in the ramp up. In the last quarter, they were around, in Q1, around SEK 70 million. In the second quarter, we estimate around SEK 65 million-SEK 70 million. We expect similar ramp up costs going into the third quarter.
Okay. So basically, you have a loss. I mean, it's an isolated cost of Obbola because of the ramp up position, yeah, of SEK 65 million-SEK 70 million now.
Yeah. And that's because, I mean, you ramp up, and then we need to fix something. So you reduce the speed and shut it down, and you ramp up again. And then you have higher chemical consumption. You also have lower volume, things like that. Sure. I think it's very normal. I mean, when we look back to Östrand, I mean, I think we had three years of extra costs, and it takes some time to fine-tune the operations. So I think that is what you can expect when you ramp up a brand new mill.
Yeah. When do you think you can sort of reach break-even in the current, given sort of current market prices?
We're still profitable. I mean, EBITDA, we still get the contribution from Obbola. We have never been negative.
No. No, no, no. Okay, okay. But could you sort of indicate what kind of more commercial volumes you will have 2025 versus 2024 or something like that?
That's too early to say.
Okay. Okay. Fair enough. Yeah. Maybe I can also ask you another question, and that's about, I mean, we talked a lot about wood costs being up, I suppose, a few percentage quarter-over-quarter in the third quarter. What about other costs? Do you see any sort of meaningful deltas there?
No, I think wood costs will increase slightly, as I said. For chemicals, I think they will be fairly stable. Distribution costs, I think, will be slightly lower, but slightly lower. We also had our three big RORO ships on the yard for maintenance this quarter. So I expect distribution costs to be slightly lower. OCC has increased a lot, and it, of course, could increase further. But the main cost that will increase is wood costs slightly up in Q3 compared to Q2, and the rest are fairly stable.
Yes. Okay. Thank you.
Thanks.
We will take our next question from James Perry, Citi. Your line is open. Please go ahead.
Hi. Thanks for the presentation. I think most of the questions have been asked, but just one quick one on CapEx. Would you be able to update us on the strategic CapEx remaining for the current projects and the sort of level of CapEx you expect for 2024 and even 2025, if you can?
Well, very rough. I mean, if we start with strategic CapEx, we expect just below SEK 1 billion plus on forest acquisition. So with some forest acquisition in Baltics, just above SEK 1 billion for 2025. Then we'll have just below SEK 1 billion left on our Fasikan investment. And then in terms of current CapEx for this year, we expect around SEK 1.3 billion.
Okay. Thanks. Any comments on 2025 or too early to say, really?
On current CapEx or strategic, as I said, we have Fasikan left is around SEK 1 billion on current CapEx in 2025. It's a bit early to say, but I mean, now this year will be at around SEK 1.3 billion, but then we sold Henvålen for around SEK 200 million. So if you adjust for that, we'll be around SEK 1.6 billion in current CapEx next year.
Okay. Thank you.
As a reminder, please press star one to ask a question. We'll take our next question from Andrew Jones, UBS. Your line is open. Please go ahead.
Hi, Ulf. I've got a few remaining questions and some follow-ups. Just on the solid wood side, I was encouraged by the fact that you were going to sort of flat price quarter on quarter when seasonally it's usually weaker. Will we see that negative seasonality through lower volumes? And can you give us any expectations around that? I'll wait for an answer to that before I ask the next one.
Yeah, I'm not sure if I heard you right, but yes, we believe in a flat price development. Of course, seasonally, we'll see somewhat lower volumes in the third quarter in comparison with the second, but not too much, maybe. But then it's always a question about margin.
And again, I mean, more than 70% of the cost is related to raw material in the sawmills. I mean, if raw material prices, prices for saw logs, if they continue up, then of course, we might see a squeezed margin in the third quarter. But otherwise, we feel that the market is quite okay. And I mean, we had 20% profit margin in the second quarter, which I think historically is a rather good level.
And do you think we've seen the lows in that market? I mean, could we see further price declines in the fourth quarter? Or do you think that underlying demand improvement is enough to support prices at these levels or higher?
Sorry, if you can see a third, what did you say?
Sorry, just saying that do you think we've seen the worst of the pricing on the wood side? Do you think by the fourth quarter, prices could fall again? Or do you think that underlying demand is improving enough that basically this is the sort of low?
It's hard to say. I mean, if you look at the price now and compare it with the history, we are on a high level. But at the same time, when you look into raw material prices, log prices, they are also on a historically high level. So again, it's always a question about the margin. So if we will see a continued pressure in the raw material market, then I guess that prices will remain on a rather high level. And it might be so that we have big differences now, not the least in Sweden. I mean, we can see big differences when it comes to result for solid wood products producers nowadays. And that must, in one way or another, also be related to the raw material market, I guess.
Yeah. And just on renewable energy, you've talked through a lot of moving parts for 2Q. What are the moving parts going into 3Q? I mean, what are your expectations there? Do you expect any improvement or something fairly comparable? What are the moving parts to sort of move that number for 3Q?
Yeah. So if you look at solid biofuels, Q3 is also a seasonally slow market since you have July and August. You don't use that much heat. And then in terms of liquid biofuels, we don't see any improvements going into the third quarter. I think that will come in maybe in 2025 when you have an increased mandate for both HVO and SAF in the European market. But I think when we came into this market, I mean, and you had a reduced mandate in Sweden, and Sweden was a big part of the HVO consumption in Europe. So that had a big impact.
And many players, they had rather big inventories. And when the mandate came down, then of course, they just stopped. They didn't buy anything for a while. So now we feel that it has started to move again. But again, as you say, Andrew, I totally agree. I mean, we will not see anything before 2025, and we will see the effect of the new mandates.
Understood. And then just one on working capital. You had a big build in the first half of the year. Do you expect that to revert in the second? I think that build-up relates.
I mean, we see higher volumes from our ramp up of both Obbola, PM1, and Bollsta. And then also we see some higher prices and higher costs for wood raw material. I think that's what has driven working capital.
And do you expect it to reverse in any way or fairly stable in the second half?
No, I think if prices continue to and volumes continue to increase, of course, that will drive working capital. So we don't expect a release in the second half of the year.
Okay. And just finally, the lack of forest transactions. There was obviously some scrutiny about your methodology for valuing the forest earlier in the year from some investors.
Is the fact that the market is so thin that it's hard to actually appraise it, does that make you question that approach or think about alternative ways in which you could actually value the forest land?
We think the best approach is to look at the transactions in the market. And that's why we use a three-year average to get a good amount of transactions. And then we have this seasonal effect, as I mentioned, in northern Sweden, that you don't do any forest transactions when it's covered in snow. And the forest is covered in snow quite late into the spring. So the market really picks off in the summer and autumn. So we'll have to wait and see how the prices develop now when the market picks up.
Yeah. Okay. And that 5% lower, are you talking year on year or are you talking since the end of 2024 in terms of the transactions that you've seen?
And that's compared to 2023?
Compared to the average of the whole year?
Yes.
I also think you have some uncertainty related to the development of interest rates now. I think people, they are, I mean, you had lots of transactions for a while, and it was a boom in the market for a while. And I mean, I guess that it is related to the business cycle we have in all other areas. That will also be in the market for forest land. So I also think that people now, they sit down and they wait and see what will happen with the interest rate and how many times will it shrink this year and next year and so on. So that will also have an impact.
Yeah. No, I agree. Okay. Thank you very much.
Thank you.
And that concludes the presentation of the half-year report. We'll come back on October 25 for the third quarter report. Thank you.