Earnings Call: Q4 2020

Jan 29, 2021

Good morning. My name is Bjoern Lingfeld. Welcome to this press conference where our Chief Executive Officer, Ulf Larsen and Chief Financial Officer, Toby Lawton, will present our year end report. And after the presentation, there will be an opportunity to get answers to questions. So Ulf, please, the floor is yours. Thank you, Bjorn, and also from my side, good morning and a warm welcome to This year end presentation of SEA's result of 2020. The year of 2020 can be summarized as a year formation and change. And SCA has, for a long period, aimed to reduce and also finally close the exposure to publication paper. And In August last year, we informed that negotiations to close the remaining 3 paper machines at Ludwigen would take place. Disclosure will now take place during the Q1 this year. At At the same time, we did announce that in line with our stated strategy, we'll invest SEK 1,450,000,000 to increase our pulp production, And this investment will be located at Utrecht's industrial site just in order to obtain a capital efficient investment By using existing equipment in the new project and the investment cost in this project will be around SEK 5,000 per tonne and if we compare that with the greenfield project, it would have been up to 20,000 secondtor tonne. We have our ongoing investment to build the world's largest kraftliner machine in Obbola, and that one is progressing according to time and budget And last but not least, we also announced last year that the growth in our forest is higher than earlier estimated, and we will gradually increase the harvesting level in our own forest by slightly more than 1,000,000 cubic meters Annually during the coming 5 years. And this will give us a step up increase in cash flow from our own forest of about SEK 300,000,000 to SEK 400,000,000 per year from 2025. The ongoing pandemic influenced sales Earnings negatively last year and especially in publication paper. Otherwise, production and also distribution were in principle And the sales declined 6% compared to 2019, and that was mainly due to price and product mix. And during the same period, EBITDA declined 17%. When it comes to cost we have successfully managed our cost position during 2020. After a strong Q4 EBITDA for the full year 2020 reached SEK 4.4 SEK 4,000,000,000 and our EBITDA margin during the 4th quarter reached 30% and thus reached an average of 24% EBITDA margin for 2020. If we take a look at our industrial return on capital employed, calculated as a 12 months rolling average, debt one amounted to 5% because of a lower EBITDA level for the industry. But at the same time, it can be noted that the EBITDA level for SC Forest was at record high during the same period. Thanks to a strong focus on cash flow and reduced net debt of SEK 600,000,000 Compared to the previous quarter, our leverage arrived at 1.7% despite the pandemic and despite the ongoing investment program. We're happy about that. Today, we are more confident with the conditions for dealing with the ongoing pandemic and will therefore propose a dividend of SEK 2 per share. This is this also corresponds with our policy of a stable and increasing dividend level. When I reflect on the outcome of the Q4, I can state again that we see an increased stability despite the fact that the pandemic and its effects are far from over. The sales during the Q4 2020 has compared to the corresponding quarter 2019 increased by 7%. This is entirely the result of an increase in volume, prices, currencies and our divestment of SAE Wood Supply U. K. Have gone in the other direction. EBITDA has increased by just over 30% in the 4th quarter, as mentioned. This is due to a lower cost, mainly lower raw material cost, lower maintenance stop cost, but also last but not least, lower other costs, they have also decreased considerably. On top of this, we have the positive effect of the forest revaluation. During the Q4, we also completed acquisition of 20,000 hectares of land in Latvia, and holdings today amount to just under 50,000 hectares. And as you know, we have a long term target to reach 100,000 hectares in 5 years and we have in a rather short time reached almost 50% out of that. In the wood business, we also divested wood supply U. K. At the end of last year. SEK 1,301,000,000 on EBITDA level during the Q4 2020, And the improvement versus the corresponding period 2019 was, as earlier mentioned, lower cost and a positive effect of the forest revaluation. Our EBITDA margin of 30% in the 4th quarter means that we are back on the level we could see at the end of 2018 and at the beginning of 2019. So then I like to make some comments for each segment, starting with forest. And we've had a stable supply of wood Industries. Sales were slightly lower when comparing quarter on quarter, mainly due to lower pulpwood prices and also somewhat lower volumes. EBITDA was up 23% due to high level of harvesting from our own forest this quarter and also higher earnings from revaluation of biological assets. On the other hand, we could see substantially lower pulpwood prices during this period and that you can also see it today in the bottom left in the graph. In wood, we have had a continued high demand in all markets during Q4, maybe with an exception for China. Nevertheless, the Chinese market has also recovered and is back on track again. And when I presented the Q3 report, I estimated the price increase for Q4 versus Q3 to be between 3% 4%. And we can see now that the outcome for SEA was 3.5%. So with today's strong market situation for wood. I estimate we will see a further price increase of more than 10% during the Q1 2021 compared with the Q4 in 2020. During the Q4 2020, we divested SA Wood Supply U. K. This business, which largely builds on trading, has a turnover of approximately SEK 1,400,000,000 and a normal EBITDA level of SEK 25,000,000 We will continue to sell solid wood products to our industrial customers in the U. K. Also after the divestment, U. K. Will continue to be one of our core markets for solid wood products. Otherwise, sales was rather flat when we compare quarter on quarter, EBITDA was up as much as 82%, mainly though then thanks to price and volume. We turn over to Pall. The planned maintenance stop was carried out during And this gave a negative impact on the result of approximately NOK 130,000,000 for the 4th quarter. After the maintenance stop, the production has been stable on a very high level, which we are happy for, of course. Sales and EBITDA were up substantially in the Q4 2020 compared to the Q4 2019, and this relates entirely to high volumes and also lower costs As prices, including the effects of currency changes and increase in discounts, remained essentially unchanged quarter on quarter. Another positive effect is that as the production stabilizes on a high level, the yield when it comes to wood consumption, when it comes to chemical consumption, energy generation and so on improves in all areas, resulting in a lower cost per tonne. The pulp deliveries went down during the autumn of 2020, and this was mainly due to limited supply. And I mentioned Last quarter that many producers had to move their planned maintenance stops from the spring to the autumn the same year just due to the pandemic. And this has led to both softwood pulp as well as hardwood pulp inventories now are down to normal levels. And what you can see in this slide is the level for November, and I expect that we see even lower inventory levels in December and also in January. The price increase from autumn 2020 from 8 USD 140 per tonne to USD 9.10 per tonne has been contracted by a weakened U. S. Dollar and from January also from increasing discounts. The price announcement of USD 9.60 for January will take effect from 1st February, And we now see additional announcements of increases up to $10.30 per tonne from 1st March. At the same time, we see a price rally going on into China. And the spot prices today is in the field of USD 800 to USD 8.50 per tonne, And that corresponds to more than USD 1200 per ton European peaks. We saw also that prices in China went up approximately USD 120 per tonne in 1 month, and I can't remember really that I've seen debt before, so strong pulp market for the moment being. If we then turn over to paper. As you know, we have decided to leave publication paper in September 2020, And this announcement has partly squeezed our prices in relation to our competitors during the second half of twenty twenty. Since the start of the pandemic in Q2, we have also seen 30% lower demand for publication paper generally. However, in Q4, we have produced some volumes against advanced payment for delivery during the first half of twenty 21. And this has increased our capacity utilization and thus benefited our result for Q4 2020. When we compare sales quarter on quarter, we can note that due to lower prices and lower publication paper volumes, sales has declined 6% during the Q4 2020 compared to the Q4 2019. And EBITDA has declined 10% Due to lower prices and despite lower wood costs and increased volumes within kraftliner. The kraftliner deliveries from Europe globally during the year have increased by 6% If we include increased exports, the prices for unbleached kraftliner have stabilized And increased by €30 per tonne during the Q4, the effect of which we should see first in Q1 2021 due to the time lag. We have also seen another price announcement of €50 per tonne. That one has been made and that one will be effective from 1st February, we can also conclude that the demand for boxes has been very strong during the Q4 2020, and the demand is back on a level above the trend line before the outbreak of the pandemic. And this has led to stocks being On a low level for Kraftliner. And again, this slide show the situation in for November here. So by that, I think I hand over to Toby. Thank you, Ulf. Good morning, everybody. I will start with this slide, just showing that we've updated our forest valuation at the end of 2020 with the latest market prices and the transaction prices in our region have increased. And here you can see On the left hand bars that our price is now SEK 2.91 per cubic meter, which is the average weighted price that we use in the region where we have our forest, and based on an average over 3 years as well. So the market prices have increased and we've applied the new market price level to our forest. We've also had a net growth in the middle there. We've had 5 we have 5,000,000 cubic meters more forest now. So there's a net growth of some 3,000,000 cubic meters and then we've acquired some forest in the Baltics, so we have 5,000,000 more cubic meters. And those two factors together mean now that the value of our forest has increased by SEK 5,000,000,000 and is now valued totally in our balance sheet to SEK 75,000,000,000. We then we've had a significant impact during 2020 from the decision to exit publication paper And I just show here the impact of those effects. We took a restructuring provision I've written down fixed assets related to the exit and the total effect on EBITDA is just over SEK1 1,000,000,000 for the full year SEK1.7 billion on EBIT, including then the write down of fixed assets. We reduced the level slightly in quarter 4, so this has a slight positive impact or some $70,000,000 on EBITDA in Q4. And that's because we've basically finalized the provisions and finalized The negotiations that we need in place to exit publication paper. So you can see the impact EBITDA on the right hand side for the full year, we had an underlying EBITDA of 4,400,000,000 But the total EBITDA including the onetime effects then is NOK 3,390,000,000. But all the figures we then present and go through in the report are excluding this one off item in the other slides. And here you see the income statement Again, yeah, excluding the one off item. And you can see firstly for the full year on the right hand side, we ended with net sales of 18.4 1,000,000,000, as Ulf mentioned, some 6% down on 2019, primarily due to lower average price is. And then on in the quarter, we then had a net sales of SEK 4 point SEK 5,900,000,000 which is a significant growth versus the Q4 of 2019 and that's primarily due to that we had strong volumes in the Q4. You should also note that in 2019, we had a significant positive impact on EBITDA from the revaluation that we've also And that was a one off item in 2019, but that's also excluded from the figures we present here, the underlying figures. We had an EBITDA margin for the full year of 24% and in the 4th quarter strong EBITDA margin at 30%. When you look further down financial items, we ended the year with the financial items of SEK 117,000,000 slightly Lower than last year and a tax of SEK483,000,000 lower than last year due to the lower profit before tax Also, so earnings per share ended the year on 3.19 underlying versus 4.05 in 2019. If I go to the next slide to show the bridge on net sales for the full year, We ended up with 6% decline in net sales for the full year and this was really driven by lower prices in all segments when averaged across the year. Volume was slightly positive and this we had a significant negative effect on publication paper of course From the lower demand in publication paper, some 15% lower volumes in publication paper, but that was more than offset with increased volumes From the other segments and particularly pulp where we had a 13% increase in volume. Currency, a small positive for the full year. And then we had the effect of the divestment, a small negative, minus 1%. If I take the same bridge for EBITDA, you can see here the significant effect of price on the left hand side had nearly SEK 1,800,000,000 impact, below average prices, we had a small positive benefit from the net volume growth. And then you can see on raw material, we had a significant benefit offsetting a significant part of the price impact of NOK 1,100,000,000. And here we had basically lower cost for externally sourced wood raw material. We had more wood sourced from our own forest Due to a higher harvesting level from our own forest and we also had an effect from an increased revaluation which comes in this line as well. We had a higher energy cost due to higher energy prices. We had a positive benefit on currency in EBITDA. And then in the other, you can see the impact, dollars 300,000,000 here, which is two things. It's the impact from the lower capacity utilization in publication paper, But also we had 2 divestments in France and Rotterdam in 2019, which had a positive impact of some 100 around 150,000,000 For the full year. So if you then here show the trend over number of years and you can see by segment and if I start off on the left hand side in forest, you can see the top line has grown since the last couple of years, mainly due to the ramp up of Ostrand, this year down versus 2019 slightly, which is really the effect of Mainly of price and a bit lower volume in publication paper. And then on the bottom line, we have the impact of EBITDA in the forest division which has increased significantly. Here we have the positive benefit from a higher revaluation effect, We have a negative impact from the lower average prices, which is offset also by the fact that we are harvesting more of our own forest this year Due to the increased net growth in the forest. Then the wood, the top line pretty stable. The bottom line, we're now at 10% EBITDA margin for the full year down a bit versus 2019, which is really the effect of lower average prices. In the pulp segment, the same. You can see sales is flat despite a significant volume increase of some 13% volume increase, but lower average prices again, which also then impacts the bottom line and that's why the margin declined in pulp between 2019 2020. And then into paper where we have the significant effect of publication paper, but we also have also lower average prices in both publication And Kraftliner this year versus 2019, but the significant impact from the lower volumes and the low capacity utilization in publication paper during the year. If I then turn to the quarter, so the Q4 and here we had sales growth. We still had a negative impact on price versus the Q4 last year, and particularly, yeah, kraftliner and publication paper prices were lower than they were in the Q4 last year, Even though, as Ulf mentioned, there's a more positive trend going into the Q1, but we're still lower than we were the Q4 last year. We have higher pulp and kraftliner volumes particularly, so strong deliveries this quarter and that's really what's driving the growth in net sales. Currency is now negative. So we have seen a strengthening Swedish krona, which is impacting of course negatively. And then we had a small effect from the divestment of Wood Supply UK, which only came in December. So there's only 1 month effect from that divestment in quarter 4. Then when it comes to EBITDA, Here we had a 30% growth in EBITDA versus the 4th quarter. We had a negative impact from the lower prices, which I presented. Then the volume growth has impacts positively and we have a significant positive impact also from the raw material cost, Which again is lower externally sourced lower cost for externally sourced wood raw material, but also especially now in quarter 4, we have strong level of harvesting from our own forest, which is really a seasonal effect that we usually have in the Q4 of the year. Then we have small effect on energy, currency is now negative as I said, and yeah, a positive impact on other which is the cost performance that Ulf mentioned in the 4th quarter. And then just showing the trend By quarter as well here you can see on the left, you can see the strong result in the forest which is really Driven versus previous quarters this year by the higher level of harvesting own forest in the Q4. And you can see also our Q4 last year was stronger and it's the same seasonal effect, but particularly strong this year. In wood, you can see that the margin is increasing versus quarter 3 and here is the impact of wood prices increasing, Which is coming through to the bottom line, top line slightly down, which is mainly seasonal. So but you should remember here we have the impact of the sale of Wood Supply UK going forward, which on an annual basis has a turnover of around SEK 1,400,000,000. Then in pulp, we you can see the volumes have increased and that's why the sales have increased. The bottom line is impacted allot by the maintenance stop which costs some $130,000,000 in the quarter. So if you adjust for that then it is better than it was in the 3rd quarter, not Driven by price because even though the headline prices have increased, we have a weaker currency situation or a stronger Swedish crown, but the higher volumes, if you adjust for the maintenance stock would have led to increased margin versus the Q3. And then in paper, here you can actually see the top line has increased versus Q3, we did have strong volumes in kraftliner in quarter 4, but we also had a better capacity utilization in publication paper that's what's really driven in the bottom line. You can see we ended up some $100,000,000 better than quarter 3. And here The impact of the fact that we brought forward orders on advanced payment before the closure of the machines has meant that we've had the better capacity utilization in publication paper and we've really cut the cost to an absolute minimum before the closure. So rather than previous quarters where we had loss of around $40,000,000 to $50,000,000 in publication paper. This quarter, we've actually had a positive $40,000,000 to $50,000,000 So that's a swing that impacts the paper division that we won't have going forward. So that's if you like a one time effect, but driven by the closure. Then a few words on cash flow. You can see here on the operating cash flow on the left hand side in the quarter. At the bottom you can see SEK 957,000,000 of operating cash flow come in this quarter And that's on top of SEK 1,000,000,000 in the 3rd quarter, so very strong cash flow performance in the second half year, which is really driving deleveraging, which also mentioned. And you can see then for the full year on the right hand side, we generated 2.7 SEK 1,000,000,000 of operating cash flow, which means that we're more than funding our strategic capital expenditures from our own cash flow. And this is driven really by strong control of working capital. We've had an extra focus our And here just a bridge to show the impact on net debt versus the quarter before we had $8,300,000,000 of net debt at the end of quarter 3. We've had a strong operating cash flow, and then we've funded our strategic CapEx in And the acquisition of the forest land in the Baltics from within operating cash flow. We also have a positive impact from basically net pension position, which is the other column here on the right hand side of $271,000,000 which benefits, so we've actually reduced then Down to $7,700,000,000 in net debt at the end of the year or 1.7 times EBITDA, Which is, yeah, 0.3 less than we had at the end of the Q3. So a positive deleveraging effect. And then finally on the balance sheet, where we ended up at the end of 2020, we had forest assets of SEK 75,000,000,000 in the balance sheet valued at the market price, SEK 291 per cubic meter. Working capital, you can see here you can see the strong effect of focus on working capital and cash flow with a SEK 1,000,000,000 reduction in working capital at the end of 2020, Which really helps the cash flow. And then total capital employed further down is now just short of SEK 80,000,000,000 net debt versus then here versus the end of last year is now $7,700,000,000 We had $8,600,000,000 at the end of last year, so we're nearly $1,000,000,000 lower now And 1.7 times EBITDA. And then finally, our net equity then is now SEK 72,200,000,000. Yes. So with that, I hand back to Ulf. Yes. Thank you. Yes. Just to summarize, It's been a special year for us, a year of transformation and change. We have decided now to finally leave publication paper and which I think is absolutely the right thing to do. We will be focused on growth areas and our growth projects in right segments, so we are happy for that. We have I mean, we are on time, on budget in the big project in Obbola. Even We have had some challenges with the pandemic, but so far so good. We will gradually increase level in our own forest by slightly more than 1,000,000 cubic meters annually during the coming 5 years with a positive cash effect of SEK 300,000,000 to SEK 400,000,000 annually from 2025. We have also been successful when it comes to manage our cost position during this year and also when it comes to focus on our cash flow. And We also deliver a strong Q4 with an EBITDA margin a little bit more than 30%. So by that, I think that we can open up for questions. Thank you. Ladies and gentlemen, we will now begin the question and answer session. And our first question comes from the line of Robin Santavirta from Carnegie. Please ask your question. Your line is open. Yes. Hello. It's Robin from Carnegie. Now I was wondering related to the pulp division now obviously the pulp market dynamics have improved quite clearly and prices are soaring In China and moving up in Europe as well. A couple of questions related to that. What is it what you are seeing now among your customers? I mean, the price increases in China are quite spectacular you operate in this market. Is this some kind of bubble or is it based On fundamentals, as you say, it seems as producer inventories are now below normal levels where in January, is that the driving force is in demand, what are you seeing among your customers? Then secondly, just a sales split. I guess you sell most of your pulp in Europe. Is that still the case? Do you have flexibility to change The location, for example, to China or Americas in the pulp. And finally, just on pulp, the capacity utilization For 2021, what should we expect for you guys now after a couple of years with basically subnormal capacity utilization in Yes. Okay. If we start with China, I mean, if it's a bubble or not, what you what we can see is that we really need this price increase to start with. I mean, We have had a currency effect with a strong Swedish krona. We've had, I mean, as always, increasing discounts from From 1st January, so that have had a negative impact on the net price. Yes. But I mean, we feel fundamentally, we feel that we have a strong market just now. Then we don't look too much at China because you have maybe more speculation when it comes to futures and things like that in the Chinese market. I mean, it is a super strong market there. And as I said, if we translate spot prices in China today from when we are on the level of USD 800 to USD 850 per tonne, That is corresponding to 1200 in European peaks. And I mean, we see now that prices will increase quite fast In Europe, 10.30 is announced now. And yes, I expect that, that will continue for a while. It's a stable consumption out there. I mean and then when it comes to flexibility, of course, I mean, we Europe is our main market first market. U. S. Maybe is a 2nd biggest market and then we of course do sales To Asia and we have the flexibility. I mean we have our own distribution company and so on, but still we have strong customer base in Europe, and we will, of course, stay loyal with that customer base. On the other hand, we have seen an increase in volume and that volume has to be placed somewhere. And I mean, Asia is one of several options for us. So that is good. And capacity wise, I mean, you should expect that we are I mean, as always, you can have a bad week or you can have some trouble in the production, but now we are on the level of very close to full capacity in Ostrand. So now we have started more or less to I mean, we always work with production and production and things like that. So you always have bottlenecks and other things. So but I mean it's more or less business as usual now in Ostrand. And as I said, we are very happy with what we've seen in December. I think it was more or less on record level. I think we have the same situation in January. So it's a stable production now. All right, thanks. And then just 2 short ones, if I may. First of all, pulpwood prices in Sweden have declined to quite low levels now At the end of last year, what is the outlook for 2021? If you look historically, actually, pulpwood cost or prices move along with pulp prices with a lag. Should we expect that to happen now in 2021 as well? And then secondly, for Toby, any chance you could give some kind of indication about FX impact on earnings net of hedges with the current rates we have now for 2021. Roughly what would that be? So those 2 ones. Thanks. If we then start with the pulpwood, I mean, you know the market as Good as we do. As it is just now, I would say in the at least in the northern part of Sweden, we have quite a lot of pulpwood and we have it ourselves and we also see that our colleagues In the surroundings, they also have good access to pulpwood for the moment being. But I mean, again, if we have a strong market and If that continues, that will probably have an effect on pulpwood prices Some times in sometime in the future, so but just now it's a rather balanced situation at least for us in SCA. Yeah. And then, I mean, when it comes to currency, we do give some information our Our annual report on the exposure and in the quarterly report. And as you see, we have some 60% of the currency hedged for the first half year and then we ramped down for the last two quarters of the year. So We've offset some of the impact and you can see the rates in there. We expect it to be negative. We will also have a slightly lower See exposure due to the closure of publication paper. So that will take away some 20% to 30% of the currency exposure and That's more of a euro exposure. But, yeah, so I think You can look at the average rates in 2020 and where you think 2021 will be, Robin, and make some calculations based on that. Sure. Thank you very much. Thanks. Thank you. Our next question comes from the line of Alexander Berglund from Bank of America. Thank you very much and I hope you're all doing well. It's like a specific question on some other kind of cost inputs, given that we seem to be in some kind of inflationary environment here. So I was just going to ask specifically if you have seen any kind of cost inflation or expect to see anything On the chemical side, I noted Chimera is trying to raise prices. And then also, if there's been anything that you've seen on freight or other logistic I think Nothing significant at this stage. I think I mean, we have seen also in 2020 with As the Swedish crown weakened, the chemicals that are priced in other currencies, of course, we've had a sort of currency inflationary effect, which is now It's the flip side when the Swedish crown strengthens, which offsets then some of that. But yeah, we do I mean, Yes, we do see a sort of inflationary trend, but nothing significant or yes, at the moment or in the Q4. Okay. Thanks. It's a bit of another question, different topic, more about kind of what's happening in the EU and the EU taxonomy. And it seems like there is a bit of a different And it seems like there is a bit of a different approach how they are thinking about sustainable forest management and how you are doing. If you could just kind of give an update on how those kind of conversations are going and how you are trying to inform the European Union on the benefits of sustainable forest management. I mean, first of all, you have an ongoing process just now, and I think they have close to 50,000 Notes on what they what's said before Christmas here. So So I mean and the forest is one big thing and the spirit this government has made one note. And I mean we From the industry, we are talking directly to people in Brussels, but also through our Swedish Forest Industry association, but also through the European organization, SEPI and so on. So I mean a lot of work is going on, and It's too early to judge, but it is much more balanced discussion now than I felt at least before Christmas. So I'm quite positive for the moment being. Great. Thank you very much. Thank you. Our next question comes from the line of Martin Berndby from ABG. Please ask your question. Your line is open. Yes, good morning. You gave us the price change on small goods for Q1. What could be the realized price change on containerboard and pulp to think about for Q1? I think yes, normally I do some forecast For solid wood products because that's not so easy to find. But as I said, when it comes to containerboard, I mean, we had a price increase in the Q4 and That will be valid from you will see it in the result from the Q1 2021, I would And then we will have another price increase at least another price increase is announced and I think that will come through from 1st February. But then you have the time lags. You will see the effect from that one in March maybe. In pulp, as I said, I mean, we've gone from 8.40 in the middle of last summer up to 9.10, but that has It's been eaten up by the strongest Swedish krona and also by an increased discount from 1st January. But the next step that will come now, NOK 960,000,000 that we will see in the result with the again, with the time lag And also the announcement to 10:30, I'm convinced that, that one will also come through. So I mean, you will see gradually prices will increase and gradually you will have a positive impact in the result, but as always You have a time lag. Sure. And then regarding the forest, very high EBITDA in the quarter, both very high harvesting and a bit higher revaluation than normal. How should we bridge that into Q1, which is usually seasonally down? Yeah, I think we expect the basically the full year revaluation effect to be relatively Flat, stable at this level. So we had just over NOK 1,200,000,000 in 2020, and we We expect more or less the same in 2021 and then that to be evenly spread through the year. So That shouldn't be a significant effect, but we then have the effect in Q4 that we had from basically from the harvesting on forest, which has a significant positive impact. So forest is not normally as strong in Q1 as it is in Q4. And I think you'll see that effect again. Okay. And say the last remaining effect from closing the paper mill, does that have a number We could think about the Q1. Yeah, I can give a bit of guidance there that we I mean, like I said before, we lost we had a loss In publication paper in Q2 and Q3 of some SEK 40,000,000 to SEK 50,000,000 per quarter. Then we that's turned to a positive profit this quarter because we've taken orders in advance of some 40 to 50. We expect that to be back to the negative 40 to 50 in Q1. So there will be a negative swing until in Q1 and then we've closed publication paper at the end of Q1. So that effect will stop. But we I should informed that we have we're keeping the Oortviken site running until we have the CTMP project up and running. And there we will have a cost for maintaining the site and keeping the site active, which will be around SEK 20,000,000 to SEK 30,000,000 per quarter, which we We'll take then until we start up CTMP at the beginning of 2023. So you have to factor that in. Okay. So that should be like NOK 90,000,000 negative then in Q1 on paper? No, this NOK 20,000,000 to NOK 30,000,000 I mentioned will not start in Q1, that will Starting Q2. So that I was just referring to you, you said you had plus 40. Yeah, okay. Yeah, I see what you mean. Yes, you have a negative effect, a negative swing from Q4 to Q1 of around 90. We expect, I mean, it's still we don't know precisely yet, but that's what we expect. Thank you. Thank you. Your next question comes from the line of Linus Larsson from ZEP. Please ask your question. Your line is open. Yes. Thank you very much and a good day to everyone. Just a couple of follow ups. On the forest, which had very strong EBITDA like discussed in the quarter, when it comes to the harvesting levels, I think it was up well, It was up quite dramatically year on year in Oren Forest. Do you have a number for that for the full year? How much Of harvesting we should expect for the full year 2021 compared to 2020. Yeah, so we have as Ulf mentioned, we're increasing the harvesting from the previous level was around 4,300,000 cubic meters per year up to 5 point 3 and that will be successively up to 2025. Then in one given year, we do vary depending on planning and so it can be a bit more 1 year, a bit less 1 year than the plan development. So We expect to over the 5 years up until 2025 to be on that track from 4.3 up to 5.3. So in 2020, we actually did have a strong level of harvesting own forest, some of it due to planning and so on, which we had 4,800,000 cubic meters, so we don't actually plan an increase in forest harvesting because we were above plan in 2020. So we don't see a significant increase in just in 2021. That's very helpful. And so your best guess at this stage is The same harvesting level 2021 compared to 2020? I think we don't To give a forecast at this stage, but I think it's unlikely to be higher than we had in 2020, if I put it like that. And we do want to keep this over the 5 year period, then we follow the plan, but individual years can be higher or lower. That's very helpful. And then just one more question. On CapEx, what's your guidance for 2021 CapEx including Obla and Otrviken? We have the current CapEx basically, I can start there. We have our level of say $1,200,000,000 to $1,300,000,000 which we expect as a current CapEx level. And then we have On top of that, the strategic projects, which is mainly Obbola, but also then CTMP, as the 2 main ones. And there we expect a significant CapEx outlay in 2021. So we expect some, yes, some $3,000,000,000 to $4,000,000,000 Of CapEx on Obbola and CTMP in 2021. Great. That's helpful. Thank you. Thank you. Your next question comes from the line of Oskar Lindstrom from Deutsche Bank. Yes. Good morning, everyone. Or yes, it's still morning. Two questions really from my side. The first one is on the forest values. You increased now your book value based on the higher average transaction prices over the past 3 years. And on this topic, I mean, what can you say anything about how prices developed specifically During last year, I know that we saw some big transactions in the market at very high prices. Would you generally say that prices have been tilting upwards, so to speak, in the past 3 years? And then a follow-up also on that. I mean, does the transaction data that you base your forest revaluation on, Does that include the full 12 months for last year? I think previously you've commented on that you've not gotten the last 1 or 2 months in there, is that still the same the case? And if so, does it have any material impact? And then finally on the forest side, I mean, I believe you've earlier talked about large, traps of sort of company owned forest land being priced at a premium by buyers compared to smaller privately held lands. How large do you believe this premium is? And if it is material, is that in any way sort of collected in your book valuation of your forest land. So that was my first question, which is actually 3 questions on forest land. Sorry. That's fine. It's usually 3 questions also. But we basically the market prices have increased just in 20 'twenty, if you see the statistics and I mean, 2 main suppliers, you have Sverfern and Ludwig and Company who publish the statistics, so you can follow them fairly Easily for yourselves anyway, but so you do see a significant increase in 20 20 versus 2019 and as you know, we take an average over 3 years. So that's how we come with our the value we apply in our balance sheet and our valuation of the forest. Then I think you also asked, we basically include all data up until November end of November 2020. So we because we have to close the books, the data for December doesn't come out in time. So that's so we get nearly everything for the year, but we're still missing the last month, if you like. So that you'll see then a slight difference maybe when the full year data come out, but essentially we're getting nearly all the transactions for the year. But then the second part, I think the data we use is from these public sources and they Such as Ludwig and Company and Swafer and they largely include private transactions and the transactions that are not public, where the price is not public, they normally cannot include. So it's They are definitely missing some of the and we believe they're missing some of these larger legal entity transactions, which you refer to, which have happened Recently and so they're not fully reflected in the statistics we believe, but that's For the Svein Lendering company to talk how they put together their statistics. Look into These transactions, I believe that what we've seen now is a premium of about 50%. That's my best guess. For legal entities of the size that we've seen now. If that is a market price or not, I don't know really, but that's the case just now. Would you say that's the premium That these transactions have been happening in sort of during 2020 or? That's my best guess. I just have a second but shorter question on sawn timber, which has been very strong. Quite surprisingly, I would say, given the pandemic and everything, and it seems to be strong right now as well, even though we're in the middle of winter. What's your sort of outlook for how this market will be When the season opens up in the spring and do you see it as just a sort of a cyclical recovery? Or is there a structural component to this with increasing building in wood or Is there something else that's happening in this market other than just sort of a cyclical recovery? I mean, fundamentally, I think You don't have enough raw material for the need in the markets. I mean long term, I think that you have a positive momentum for solid wood products. Then it will still be Nickel market definitely saw. And just now for the moment being, I mean, U. S. Is the biggest driver in the system just now. And I mean also the money that is just now put into the system in U. S. In order to, Yes, mitigate a little bit of the negative effects from the pandemic, that helps, of course. I mean, if we talk about USD 190 $1,000,000,000 that will have a positive impact on the demand of wood. And when you have the situation you have just now in U. S, that, of course, will give space also in other markets. We are ourselves, we are not I mean, maybe we do 50,000 to 100,000 cubic nit per year to U. S, but We will have better space in Europe. We will have it in Asia and in all other markets, and that is what we see us now. So for the moment being, It is a very strong situation in all geographical areas. Inventories are on the low level, But still, it's a cyclical business. And how long will this last? I mean, it's hard to say. It will definitely last The first part of next year, that we already know. Do you have any expansion projects going on or in the pipeline in this segment that we should could know about. Nothing at least that you should know about. So I mean, what we are doing just now We are investing close to SEK 1,000,000,000 in Bolstad, which is one of the if not the biggest, one of the biggest sawmills In Sweden producing close to 500,000 cubic meters of pine redwood. But you have to keep in I mean, long term, we like to have a balance between what we have in our own forest and in the region where we act and the sawmill capacity. I think that is wise because 70%, 75% The cost is related to the raw material in the sawmill business. So if you don't control The log supply, then you might have a much more cyclical business than if you control it. So maybe we are doing a lot of good things in our five sawmills that we have today and I mean the status technically and so on is very good in our mills. So that is the focus for the moment being, yes. Good to hear. Thank you. Thank you. Those were my two questions. Thanks, Oscar. Thank you. Your next question comes from the line of Col Averne from Jefferies. Please ask your question. Your line is open. Good morning. Thanks for taking my questions. Just a follow-up on kraftliner. Could you give a little bit of color of which areas you're seeing strong demand in kraftliner. And then also with read across to the U. S. Players, obviously, export prices from the U. S. Globally are rising. I know WestRock had some IT problems as well with the malware attack. What are you seeing on kind of the export markets to help support pushing through the kraftliner price increase is the first question. Thank you. Yes. I mean, we are not In the end segment of kraftliner, we deliver our kraftliner to box producers. And I mean, there we can see and you saw it On the slide that the consumption is not only back, it's above the trend line before the pandemic. And I mean, it's hard to speculate in the reasons why it's so, but I mean, I think we see a lot more of e commerce and things like that, and that might structurally help the business long term. It's also maybe a question of substitution where we replace plastics and things like that with paper and that might also help, of course. The balance is just now it's really good. But then we have to keep in mind in Kraftliner, we will See a new mill on stream from, I believe, maybe in the Q1 this year, and that will, of course, For a short while at least have an impact on the balance in the market. About export markets, I mean, just now we see small volumes coming in from U. S, smaller than normal. And we saw that quite a big volume went out from Europe to other markets during 2020. And I believe that, That will continue. And the export market has been quite good for many players during last year, and I think that will remain also this year. Thank you. And then on pulp, if you think about The wider market and inventory levels in softwood pulp, do you think the kind of the average inventory days number needs to move a little bit higher because there's going to be more shipments from Europe to China versus North America to China and The change longer as well as shipping disruptions. Do you think there's a kind of a demand for higher average shipping days as the market statistics, the first part? The second part, as you mentioned, a higher discount to or rebate versus the European index price. Could you just give a little bit of color what The reason for the higher rebate or discount price in 2021? Yes. If we start with a rebate, I mean that's more to ask our customers. It's been the trend for many, many years. And I mean, if you're in U. S, you the discount rate is much over 40%. And In Europe, it's much over $30,000,000 today. And but I mean, that will, of course, have an impact on the pigs price. I mean the most important thing is the net price and then you have another factor, which is the currency developments. I mean and you have to bring all these 3 together. So but I mean the trend is and what we see now in the European market is maybe 1% to 2% higher discount For 2021 in comparison with 2020, so that you have to take into consideration. Yes. And the other question, yes, I think you're right. The normal level should be a little bit higher than we thought was normal in the past, and that is due to You mentioned Asia, yes. And also, I mean, you have a step by step increase in demand, and that will also, of course, have an impact. So I think what was normal a couple of years ago that is on a low level today, definitely so. Thank you. Thank you. Our next question comes from the line of Mikael Doepel from UBS. Please ask your question. Your line is open. Thank you. Just one question from my side. And sorry, and you touched upon this already a bit earlier. But I was wondering about the overall cost outlook for 2021, as you see, I think you mentioned chemicals maybe moving in some direction, but of course, then we have the whole wood cost part and other cost items there as well. So I was wondering if you could give some color on that, what you expect overall for your good cost and variable cost into 2021. What kind of a trend should we expect in total is going to be deflationary or inflationary trends? Thank you. Maybe I can I mean, in general, I think you will have a small inflation and nothing special we discussed freights? And I mean freight prices for 2021 is quite stable. You see an increase for containers over to Asia, of course, as it is just now. That will have an impact for a while. Wood prices, raw material, I mean, if the strong market that we see is coming in just now, if that will continue, I Might expect that we will see somewhat higher raw material prices in maybe in the spring and in the autumn and so on. But for us, nothing big. I mean, we when it comes to raw material and wood, I mean, we have Around 50% in our own forest. I mean, in that perspective, we have a strong position, I would say. And we also have a relatively long time delay, especially with raw material prices coming through to our result, as you know, with the Structure we have with our own forest and our sourcing. So I mean, we see now you saw in the bridges the lower raw material cost we have now, whereas in the market raw material cost has been flat for 6 months pretty much, but we're now getting The effects after the time lag from reductions earlier last year. So now going forward, basically we yeah, we don't see any more of those reductions coming through at least. And then as also as it depends what happens in the market going forward. Okay. That's helpful. Thank you very much. Thank you. And our last question comes from the line of Alexander Bergen from Bank of America. Please ask your question. Your line is open. Thank you very much for taking my follow-up. I was just thinking a bit on your Slide 12 on the containerboard market and looking at kind of the box amount, which definitely seems like it's booming. But if I think about it from your customers' perspective and if I'm a box maker who's not integrated into containerboard, so I buy kraftliner from CEO, for example. I must be quite happy about the volume situation, but how am I thinking about the margins? And really, the question for you, I guess, is Have you felt any kind of pressure from your customers saying, okay, take it a little bit easy with these hikes, let us get our box prices up before we And is that something that you have seen kind of historically in up cycles that you need to sometimes wait for your non integrated customers To push that on to their end customer through higher box prices. I mean that discussion we always I have to say, I mean, we always negotiate and very seldom we have the same view on price. So that is one thing. But I mean many of our customers, they are integrated players. I mean they are both producing testliner and in many times also testliner and in many times also kraftliner and then they also do boxes. So for that kind of customers maybe doesn't matter too much where they take out the profit. But I mean, if you're an unintegrated player just doing boxes, then of course you have that then it might be tough. But if you look at kraftliner or containerboard prices In the loan perspective, I think we are not on a very high level where we are just now. I mean, it's always Depends on where what you compare with. But I mean, I think we are on a rather low level as it is just now. You can see that on the slide, Alex, on the top left graph on the slide you're referring to Slide 12. If you compare with the 2018, for example, I mean that So the kraftliner price today is not is below trend level and below where it needs to be. So Nelink. Yes, Fairen, I guess also on that slide, even if I look at the upcycle there in 2017, it was quite rapid. And You were still able to get kind of that upcycle if the demand dynamics were there. So thanks. Perfect. Thank you. Thank you for the interest you have shown in our year end report. We will come back and present the Q1 on the 30th April. And before then, you can learn some more about SCA as we publish our annual report in March. But until we hear from you again, take care and have a good winter. Thank you.