Good morning, and welcome to this presentation of SCA's full year results for 2021. With me here today, I have President and CEO Ulf Larsson and CFO Toby Lawton to go through the results and take your questions. Over to you, Ulf and Toby.
Thank you, Anders, and also from my side, a good morning and a warm welcome to this presentation. I will begin by summarizing 2021, where we delivered the best ever result for SCA. We had an EBITDA of SEK 9.1 billion, and by that, an EBITDA margin of 48%. When we're comparing our EBITDA level for the full year 2021 with the outcome for 2020, we can see an improvement of more than 100%. As well as a strong market with the increasing prices in all business areas, we also delivered a good productivity level and also focused cost control, both of which contributed positively, of course. We can also see that the strong profit development was helped by a well-timed decision to exit publication paper.
Our turnover during 2021 increased by 2% compared with the previous year, despite the closures of the publication paper business in the first quarter 2021, and also despite the divestment of our wood distribution operations in U.K. fourth quarter 2020. The reason for that is, as already mentioned, increasing prices, better mix, and also a very good production level. During the year, we have also seen a continuing good trend in the market values for forest land, and prices in our core area has increased by over 10%. During the year, we have had a net growth in our forests of more than 4 million cu m , and we have also purchased a net of about 10,000 hectares of forest land, mainly in the Baltics.
In total, the value of our forest asset have increased by almost SEK 10 billion, from SEK 75 billion up to SEK 84 billion. Finally, last but not least important, I like to conclude this summary of the full year 2021 by stating that our two major investment projects in Obbola [audio distortion] are progressing on time and budget. Turning over to some financial KPIs, and as already said, we had a very strong year, delivering SEK 9.1 billion in EBITDA, as also already said, best year ever. Our EBITDA margin reached 48% for the full year, which is substantially higher than previous year when we did 24%. Our industrial return on capital employed came out on 33% for the full year, while our leverage decreased further down to 0.9, and that is despite our large ongoing investment program.
I'm happy to say again that we continue to finance all our investments, including strategic projects with our operating cash flow. The board proposes an ordinary dividend of SEK 2.25 per share, an increase of SEK 0.25, or a little bit more than 12% compared to last year. On top of that, a one-time extra dividend of SEK 1 per share due to the exceptional result in 2021. Finally, our earnings per share increased by almost 3x in comparison with last year and reached SEK 8.69 per share. From now, I will focus on the fourth quarter 2021, and as you can see here, our EBITDA level for the fourth quarter was SEK 2.8 billion, which is again more than double as much as the fourth quarter 2020.
That gave us a historically strong EBITDA margin of 59% for the quarter, which you also can see in the graph on the right-hand side. Our industrial return on capital employed reached 40% during the quarter, and the leverage is, as already mentioned, 0.9. I will now make some comments for each segment, starting with forest. We had another quarter of stable supply of wood to our industries. Sales was down due to lower delivery volumes, and we have also closed down our publication paper business, and we also had a long maintenance stop in Östrand impacting the fourth quarter 2021. EBITDA increased by 24% when comparing quarter-on-quarter, and the main reason for that is continued increase in prices for forest land, and by that, a higher valuation of biological assets.
As you can see in the graph on the bottom left, prices for sawlogs have also increased. When we compare pulpwood prices quarter-over-quarter, we can note that they are on a rather stable level, and this is mainly due to our exit from publication paper, and by that, a reduced share of imported wood. We turn over to wood, and, price levels for some wood products peaked in Q3 2021. They peaked at the historically high level, which you also can see in the graph on the bottom left. Average prices have dropped by just under 15% between Q3 2021 and Q4 2021. The seasonal low demand during the winter period means that prices are expected to drop further by another 15% during the first quarter.
I think that they will turn upwards again in the second quarter 2022, and I'll come back to that. In general, we can see a lower level of supply during the autumn, mainly from Canada and Central Europe. Demand is still good, and we can see that in most markets, inventory levels is going down also for customers now. As for SCA, we had a good production during the fourth quarter, and good delivery levels for the season, and that led to relatively low stock levels for us. As you can see from the graph, sales increased by 25% when we compare with the same quarter last year, and this is mainly due to increased prices, which also offset the effect of the sale of Wood Supply UK during the fourth quarter 2020. The profit level is still very good in SCA Wood.
EBITDA was up as much as 274% when we compare Q4 2021 with the same quarter 2020. I can also just mention that SCA Wood made nearly SEK 3 billion on EBITDA level during 2021, with a really strong EBITDA margin of 42% for the full year. Some words about wood market development. 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. We note that the inventory volumes are more or less back on a normal level. At the same time, the underlying consumption continues to be good, as I said, especially in the new residential building segment.
As can be seen in the diagram to the bottom left, the Swedish and Finnish sawmills production is also now on a normal level. Production in Scandinavia is now running at full capacity to meet stable and good demand. As mentioned, production in Canada and Central Europe is somewhat limited, and that creates also maybe a rather stable balance in this market. When looking at the diagram to the top right, we can see that the price peaked in the third quarter 2021, but the prices still are on a historically high level, and as I said, they are expected to rise again in the second quarter. We walk over to pulp, and I will come back to Q4, but I'd like to start by mentioning that pulp business deliver its best result ever during 2021.
The EBITDA for the year was over SEK 2 billion, and that gave also an EBITDA margin for the year of 37%. This increase in EBITDA is, of course, driven by high prices, but also by lower costs. Sales during the quarter were up by 17% compared to the same quarter last year, and that is mainly due to significantly higher prices, and despite also a long maintenance stop, which was also slightly longer than originally planned. EBITDA increased by over 300% compared with the previous year. Finally, I can mention here that our ongoing project to build the CTMP line at Ortviken industrial site, the one with a total capacity of 300,000 tons, is progressing on time and budget.
The pulp market is stable, particularly in Europe, with a good demand and prices that have bottomed out on a relatively high level for the time being. We peak price-wise at the beginning of the fourth quarter 2021. The official peak price at that time was $1,340 per ton. Since that point, prices have come down to $1,260 per ton in Europe, but SCA has now announced the price increase up to $1,300 per ton. We should remember also that we have to face a slightly higher discount rate from first of January 2021 compared with 2020, from 1st of January 2022 compared to 2021.
The demand in China and U.S. has picked up again, and we can now, after substantial dip in prices, mainly in Asia, see more or less equalized prices between Asia, Europe, and also U.S. On the negative side, we've seen sharp increase in transport costs, not least for deliveries between continents, and we can definitely say that the supply is heavily impacted by global logistical challenges. Inventories for hardwood pulp are on a normal level, while the level for softwood pulp is still a little bit in the higher end, and as you can see, that you can also see in these two graphs here, but mainly relates to increased inventories in transit because of the logistical challenges.
We move over to business area containerboard, and I like to start by stating that our expansion project in Obbola is progressing well, on time and budget. Sales and EBITDA for the containerboard business are up 27% and 142% respectively in the fourth quarter 2021 when comparing with the same period last year. This is again mainly due to increase in prices, where we now have reached all-time high prices, and that you can also see in the graph in the bottom left. Just to comment something about OCC prices, they have almost tripled now since the bottom in November 2020. That affects the result negatively to some extent, but it also supports the price development for testliner and thereby also indirectly, of course, for kraftliner.
The global kraftliner deliveries from Europe continued to increase also in the fourth quarter this year, and we can see a stable long-term growth of European deliveries. We can also conclude that the demand for boxes has continued to be strong also during the fourth quarter. When it comes to inventories for kraftliner, they are on an average level. We can see a seasonal increase in December, but that was expected. Since the prices bottom out in the fourth quarter 2020, the price for unbleached kraftliner has so far risen by approximately EUR 350 per ton, while white top kraftliner has increased by EUR 185 per ton during the same period, and that includes also the December increase.
The latest price increase came in December, and that one resulted in a further increase of EUR 50 per ton for unbleached and EUR 35 per ton for white top. These price increases will, as usual, successively take effect during the first quarter. I can also finally mention that with this, present price levels, the delta between kraftliner and testliner prices is approximately EUR 150 per ton, and that is historically, a rather normal level. I think by that, Toby, I hand over to you.
Thank you, Ulf, and good morning, everybody. I will start by talking about the forest assets, and here on this slide, you can see the higher transaction prices we have for forest assets, in our area. If I start with the graphs on the right-hand side, you can see from the first graph that, the market price of forest land in our region has increased from SEK 291 last year to SEK 324 this year, and that's an increase of SEK 33 per cubic meter, so more than 10% increase in transaction prices measured in northern Sweden.
When we also add on the effect of the standing volume, where we have a net growth in our forest of 4 million cu m this year, some 1.6% net growth in the forest land, net after harvesting, then we have an increase in the total forest asset of just under SEK 10 billion from SEK 74.9 billion to SEK 84.5 billion. Of that increase of just under, it's actually just under SEK 10 billion, SEK 9.6 billion, as you see on the left-hand side, we then report just under SEK 1.8 billion in the P&L as a biological asset change, valuation change, and the remainder is mainly the change in land assets, which does not impact the P&L.
A significant increase in the value of the forest this year. If I take you to the income statement, and there's a lot of figures here, but if I focus on the right-hand side, the full-year numbers and the column for 2021, as Ulf mentioned, you can see the increase in net sales of 2% this year, despite the divestment of Wood Supply UK and the restructuring of publication paper, exit of publication paper, which impacted net sales by more than SEK 4 billion. We then have an EBITDA of SEK 9.1 billion with a margin for the full year of over 48%. That means when we go down to operating profit or EBIT, we have SEK 7.6 billion of EBIT or 40.6% EBIT margin.
Financial items pretty stable. Net debt is also pretty stable, so it's a stable level, just over SEK 100 million in financial items, which we manage well. Then tax. Here we have SEK 1.4 billion of tax charge, which is an effective tax rate of just under 20%, giving a net profit for the full year of SEK 6.1 billion. In the, just to mention, in the fourth quarter, just under SEK 2 billion of net profit just in the fourth quarter. Earnings per share 8.69, also as Ulf has previously mentioned, but a best ever earnings per share.
When it comes to the proposed dividend, just a short recap, but we have a proposed ordinary dividend of SEK 2.25, which is a 25 year-on-year increase from last year, and then on top of that, an extra dividend this year of SEK 1, and you can put that in relation to the earnings per share, as I mentioned, of SEK 8.69 for the full year. I'll then show some bridge of the full year result in terms of net sales first. You can see the impact, significant impact of improved price and mix in all segments of 28%. A small volume increase overall, and then a negative currency impact. We were impacted negatively by the currency for the full year.
We have the impacts of both divesting Wood Supply UK at the end of 2020 and then exiting publication paper, which we exited publication paper at the beginning of this year. When it comes to EBITDA bridge, you also see the significant impact of the higher prices, which add some SEK 5.4 billion in terms of full year result effect, a small effect from volume. You can see a positive effect on raw material, despite I think a quite inflationary environment in other areas, in other segments, sectors. That's partly also driven by better productivity and better raw material sourcing through the productivity improvement. A positive on energy because we are balanced or a slight net seller in electricity.
As I mentioned, a negative currency effect, and then a negative effect in other. Partly here you see the inflationary effect, or mainly for us it's seen in logistics costs, where we have an increased logistics cost this year, and also some temporary costs related to the transition from publication paper and towards then growing particularly here in pulp in Ortviken. When it comes to contribution by segment, I'll start on the left-hand side here, the full year as well. You can see the Forest Division, the result has improved versus the previous year. A significant effect we have to remember here is driven by the revaluation of the biological assets which comes in the Forest Division.
The turnover, you can see, has come down a bit versus last year, and that's the effect of exiting publication paper and the lower wood supply through publication paper. In the Wood division, we have grown the top line a bit despite selling Wood Supply UK, and you can see a fantastic result in the Wood division of just under SEK 3 billion in EBITDA or 42% EBITDA margin. A very good result. In pulp, you can see the top line has grown with improved pricing and volumes, and then also a strong result on the bottom line, just over SEK 2 billion or 37% EBITDA margin, which is a good EBITDA margin level in the pulp division.
Container board paper, you see on the top line the effect of the exit from publication paper that the net sales has come down to SEK 5.4 billion. On the bottom line, we have an improved result versus last year showing the improved pricing in container board up to 32% EBITDA margin and just under SEK 1.8 billion EBITDA. If I just switch briefly to the fourth quarter and just show the same bridge, it's a pretty similar picture actually that we had improved prices in the fourth quarter versus the fourth quarter last year of some 37%, again in all product areas. Smaller effects from a bit lower volume, mainly due to timing of maintenance stops here.
Currency again, negative, and then the effects of the divestment of Wood Supply UK. And exit of publication paper. When it comes to EBITDA, it's also a similar picture here, with a strong price increase versus quarter four last year. The small effects from the volume, raw material, and energy, similar to for the full year, negative currency again, and a small impact from other as well, and logistics cost is the main item to mention here as well. Just to do the same with the quarterly picture, and I'll focus here on the bottom graphs in the picture. For the forest division, you can see an EBITDA of just over SEK 900 million in the quarter.
Again, remember here we have the revaluation of the forest asset, and we had in the fourth quarter, we had a one-off higher item in the from the revaluation because we increased the annual revaluation in the fourth quarter. Otherwise, we would have been more or less in line with the peaks in Q4 2020 and Q2 2021. Wood division, the EBITDA of SEK 850 million came down a little bit versus the high point in Q3, which is due to, as Ulf mentioned, the price impact coming down a little bit, but still a fantastic result and 46% EBITDA margin. In the pulp sector, we had a maintenance stop in the fourth quarter, so that's really what impacted both the top line coming down a bit and the bottom line.
33% EBITDA margin in the fourth quarter. In containerboard, we had the maintenance stop here had a main effect in quarter three. You can see the significant uplift in the result in quarter four, also with an impact of the improving pricing in containerboard in quarter four versus quarter three as well with 44% EBITDA margin. A little bit on cash flow, and I'll just here focus as well on the full year first. We had an EBITDA of SEK 9.1 billion, as we previously talked about. When we take away the effect mainly of the revaluation of biological assets and some other smaller non-cash items, we have an operating cash surplus of SEK 7.2 billion.
We have a small negative effect from change in working capital, but still, I think, very tightly managed working capital given the high, increasing price environment, which would normally drive an increase in working capital bigger than you see here. Some SEK 300 million outflow in working capital, restructuring costs related to the exit from publication paper of just under SEK 400 million, entirely according to plan, according to the provision taken last year. Current CapEx of just over SEK 1.2 billion, meaning we've delivered an operating cash flow for the full year of SEK 5.2 billion.
Given our strategic capital expenditures that we're investing in the growth of SCA in primarily Obbola and CTMP in Ortviken of SEK 3.7 billion, we are financing all of those growth expenditures through operating cash flow again this year. Finally, just on the balance sheet to show you the balance sheet of SCA at the end of 2021. You can see the top line here is the forest assets where the value has increased, as I said, by just under SEK 10 billion, and we now have a value of nearly SEK 85 billion in the forest assets of SCA. The working capital has SEK 2.8 billion, slight increase versus last year, but less as a proportion of sales, which reflects the tight management as I mentioned.
When we include the deferred tax and the other capital employed mainly related to the industrial businesses, we come to a total capital employed of nearly SEK 91 billion. Net debt has been stable versus previous year, a small increase, but SEK 7.752 billion in net debt and leading to a net debt to EBITDA at a very good level of 0.9x , equity of SEK 83 billion. All right, with that, I will hand back to Ulf for some more comments.
Thank you, Toby. I'd like finally to say some words about the future. SCA has delivered a substantial part of the strategic project portfolio that we communicated following the split back in 2017, and this transformation has gone faster than at least I thought. Following the exit of publication paper, we are now 100% focused on growing markets. Our continued focus will still be on organic growth in our existing value chain and within our existing geography.
We used to summarize our strategy for profitable growth in two components, as you can see here, and the first component is to grow our renewable forest assets, and we do this through significant investments in forest management in our existing forest land, and by that successively increase the growth in our forest and thereby, of course, to create conditions to successively increase the availability of wood for harvest. In parallel, we also continue to acquire forest land where possible in the Nordics and Baltics. The second component for profitable growth is to increase the value of each tree that is growing on SCA land, and we do this by investing in our integrated value chain, and the coming focus will be on pulp, containerboard, and wood.
In addition to this, we will also increase the focus on realizing the business opportunities that we have within renewable energy. On the next slide, I will take the opportunity to show you an updated project portfolio, just to show you how we will deliver our strategy. I like to start with the base. We will continue to reinvest in order to secure our superior asset quality. If we do not focus on maintaining assets, then over time, it costs a lot in terms of reduced availability, increased cost levels, and lower quality, and we don't like to see that. As you can see on the left of the slide, we have a number of ongoing strategic projects, and we are, of course, 100% focused in completing them in the very best way.
Here, we are talking about completing the big Obbola project that is mentioned several times already, the construction of our new CTMP line in Ortviken, finalizing the program to acquire 100,000 hectares of forest land in the Baltics, and finally to deliver on a joint refinery with St1 to produce 200,000 cu m of biofuels. The right-hand side shows the areas where we will deliver organic growth. From now on, we have the ambition to actively invest our own money in wind power, and that is a change if we compare with the past. There are a number of ways to grow in this area, and we believe that the most interesting are the case of repowering. I mean, where we can replace smaller turbines in existing wind parks with larger and more productive turbines.
Over time, we will invest where opportunities exist to remove bottlenecks in existing production sites, and in particular, for the manufacture of pulp and containerboard. At the same time, we will step by step our production capacity in wood business area while, of course, maintaining the balance to the raw materials availability. We have seen a number of exciting development projects for renewable energy. Last but not least, we will continue to acquire forest land in the Nordics and the Baltics. Toby, with that, I think I round off and open up for questions. Please.
Thank you. If you do have a question, please press zero one on your telephone keypad, and you'll enter a queue. Our first question comes from the line of Martin Melbye from ABG. Please go ahead.
Yes, good morning. Could you indicate, say, the new level of EBITDA from the forest segment after this last forest value write-up, including, you know, the revaluation gains to land on the EBITDA for the segment?
Yeah, maybe I can take that. Obviously, as I've mentioned, the revaluation of biological assets is the part I think you're referring to in the Forest, which is reported in the Forest segment, and we reported just under SEK 1.8 billion from the revaluation of biological assets in the Forest segment. Going forward, we'd expect that level to be relatively stable. What we've done this year is, when we look at the total value of Forest assets, which I think is by far the most important, we've seen obviously another good year of increase with the increasing prices in forest land in northern Sweden.
We value the biological assets according to another model, a DCF model, but we've seen the effect of the higher asset prices means that we've judged, and we've seen evidence also that return requirements from investors in forest land have come down a bit, and that's. We've reflected that in a higher rate of increase also in biological assets. I think going forward, you should expect this 1.8, roughly 1.8 level to be, you know, relatively stable going forward. Does that answer your question, Martin?
Yeah.
Yes.
This is, that is including one quarter, including Q4. If you... You've been, the value increase is forever. What does that mean on the EBITDA in a normal quarter?
I think obviously, in Q4, we took in the effect of this increased valuation of the assets. In Q4, you have the level increase due to that. That's probably around SEK 250 million in Q4 of that increase, which is from the one-time increase up to the full year level of SEK 1.8 billion. Going forward, you should expect around 1.8 divided by 4 every quarter.
Okay. Thank you.
Mm.
The next question comes from the line of Justin Jordan from Exane. Please go ahead.
Thank you and good morning, everyone. I want to do something unusual and just firstly say, genuinely well done to everyone at SCA for a remarkable operational performance in a very challenging 2021. Moving forward, I've got two quick questions if I could. Firstly, Ulf, your reward for being visionary in terms of talking of coming together of pulp prices three months ago at the Q3 results. Your reward for that is, clearly I'm gonna ask you again as to what your thinking is regarding outlook for pulp prices, globally, you know, going forward in 2022. We've clearly seen, as you expected or outlined three months ago, some recovery in Chinese pulp prices and moderate easing in European pulp prices.
Secondly, just speaking about containerboard, we've seen clearly some easing in OCC in recent weeks and months in Europe and North America. Potentially does that negatively impact testliner prices and therefore impact kraftliner prices. Also counterbalancing that, clearly we've seen U.S. peers recently announce spring 2022 U.S. kraftliner price hikes. I'm just curious about your outlook for kraftliner prices for SCA in 2022. Then if I could be greedy and have one third question, can I just ask Toby some initial guidance on strategic and current CapEx for 2022, please? Thank you.
Okay. Thank you. I'll try, starting with pulp. I mean, it's really hard to say here. What we can see now is that we have more or less equalized prices in all continents. I mean, we have more or less the same net price now in Europe, Asia, and U.S. I mean, one reason for that is, of course, that we see big logistical challenges, I think. On the other hand, we see some reports coming in now with a rather stable demand, not least from the tissue side. I mean, I don't like really to give you a forecast.
We as I said, I mean, we see a rather fairly stable market for the moment being now in Europe and we think the price will now for the time being level out on this level. I don't know if you'd like to say something more, Toby, or?
I mean, yeah, I think as you say, we've seen the prices more equalized between the different, yeah, world regions. Yeah, prices have come up from where they were in China. It seems to be, as you mentioned before, it's bottomed out and stabilized.
When it comes to containerboard, I'm not sure if I did catch your question, but I mean, the containerboard market is really strong. As I said, I mean, from the bottom, we have now increased prices by EUR 350 per ton for unbleached kraft and the last or latest price increase was announced in December, and that will successfully be implemented now in the first quarter. I mean, we still feel it's a very strong market for containerboard. It's a good balance out there and so I mean, we are quite confident for at least the coming quarter and coming quarters, maybe.
I think you've seen, I mean, we see a strong demand for the end markets in containerboard and, obviously, OCC prices have an impact on testliner, which has an impact on kraftliner, and energy prices is the same. I think you've also seen that there's a relatively stable gap between testliner and kraftliner, which we expect to see going forward as well.
some words about the investments.
Yes, sorry. Yeah. The CapEx levels, Justin. Yeah. I can say, I think, this, 2021 has been the heaviest year in the Obbola project, so we expect the strategic CapEx in the Obbola project to be lower next year. Overall strategic CapEx to be a bit lower next year. Probably we're guiding around SEK 3 billion in terms of strategic CapEx. We'll have a bit lower CapEx in Obbola. We'll have a bit more coming from the CTMP project, strategic CapEx there in growing CTMP in Ortviken. We're continuing our investment program in forest land in the Baltics as well. Depending what happens there, we might see some further investment there.
Total around SEK 3 billion is I think all I can say now. For current CapEx, yeah, we expect current CapEx to be a bit higher going forward than it's been in the past, around the SEK 1.2 billion level. I dunno if you mentioned the figure, Ulf, but yeah, increasing somewhat over the SEK 1.2 billion level around, yeah. Depending what happens, but one or two hundred million higher than the SEK 1.2 billion level we'd expect.
Great. Thank you both.
The next question comes from the line of Cole Hathorn from Jefferies. Please go ahead.
Morning. Thank you for taking my question. I'd just like to focus in on the wood division. Normally you give a little bit of guidance of where you see kind of construction pricing for the wood market going quarter-on-quarter. Looking to the second quarter, I know you mentioned that there might be some uptick there. What's driving that view of kind of a recovery in pricing? You would imagine that the DIY market would probably soften a little bit in Europe as we kind of return to offices and, you know, the U.S. lumber futures, while at a very high level is coming down. I'd just love to hear your thoughts on what's driving the view on the second quarter uptick. The second question on containerboard.
Are you seeing any increase in imports at all from the U.S. players or not yet at this stage? Thank you.
Yeah. If we take the first one then, I mean, we feel that, I think it's a rather balanced situation out there. As I said, I mean, we continue to produce in Finland, Scandinavia mainly on a good level, and I don't think that we can increase much more due to lack of capacity. That's been the case also for, I mean, for a number of quarters now. What we've seen is, a slightly lower production in Canada and also in Central Europe. We've also seen that the log prices has went up rather substantially in these areas and that might be the reason, but the balance in the market is quite good.
As I said, I mean, we feel that especially in new residential building segment, we have a really stable demand here and, yeah, that's the case. Seasonally, we always feel a slightly lower demand in the end of the fourth quarter and in the beginning of the first one. I mean, what we see now is more an adjustment. Still, we have to remember that still prices are on a very historically high level. When it comes to containerboard, no, the answer is no, we don't see volumes coming in from the U.S. I mean, typically we have a couple of hundred thousand tons over, but we haven't seen it for a while now, and we don't see it for the moment being either.
Thank you. Just a wider question on the EU kind of taxonomy environment. We've seen further updates and comments around voluntary carbon credit markets. Is there any update you can give on potential CO2 credits or even voluntary credits that SCA might have access to for your forest assets?
I mean, not really. As you know, I mean, we have. It is a discussion around LULUCF and what kind of harvesting level that will be possible going forward and so on. I mean, for me it's obvious, I mean, it is actively managed forest that can tie up carbon in a positive way. I mean, so that we have to continue with. I mean, from the fiber that you get from the forest, you can also have a positive substitution effect where you replace, as I mentioned before, where you can replace plastic with paper, steel, concrete with solid wood constructions and fossil fuels by biofuels.
I believe that we will see a continued positive development for the forest and for the forest industry. I mean, we are maybe the most important part of the solution in this area. At the same time, of course, we have to take care of the biodiversity and we can do more, and we are working also on that part. Like to add something, Toby?
No, I think, well, only to add, I think as you know, Cole, there's a lot of discussion on carbon credits and interest in that topic, but as of today, there's no real viable scheme that is relevant for our business. No, of course, we'll continue to monitor it.
Mm-hmm.
The next question comes from the line of Oskar Lindström from Danske Bank. Please go ahead.
Hi. Thank you. Three questions from me. The first one is on strategic projects. Toby, you mentioned the strategic CapEx coming down in 2022, and you know, although you still have a number of projects going on, they are nearing the sort of completion at the end of this year or beginning of next year. My question is, I mean, you're making good money at the moment, your strategic expansion projects are coming to an end. What other attractive growth opportunities do you see for you that could be of any more substantial size? I mean, are you looking at expanding existing volume or capacities in existing assets, byproducts, energy, buying things abroad? What are the main sort of avenues of growth do you see?
Yeah, if we start with that one, I mean, I think, yeah, I tried to explain some of that in my last page. I mean, we will build. We will be focused on organic growth, and I mean, I said that we from now will start to invest money into wind, and we can do that in different ways, and also you have a slightly different time perspective in this.
Yes.
Area. I mean, how much and when and so on, I mean, it depends a little bit on the opportunities that we can find in the market. We will be much more offensive in this area. As we always been, we will be interested in buying more forest land and, you know, the big program that is ongoing in the Baltics and we've done approximately 60% of that, and we will continue to finalize that one. If we find other opportunities in other Nordic countries, Sweden, Finland and so on, then we will be interested, of course. Of course, we will always look into possibilities to debottleneck and I mean, per definition that will be in pulp containerboard, but also in wood.
I mean, I think that, again, we have really to focus now on finalizing our big ongoing investment projects in the best way. It is even if we are now in the later part of these projects, but I mean, we have to be 100% focused now. It's more important than ever to fulfill these projects in best way. Then again, we have opened up for some things in the energy sector and so on.
All right. How far away is the biorefinery project? I mean, you mentioned in the report that it's on the design level. Does that mean that it's at least five years out before you can make a decision or?
I mean, again, it's very hard to say because as I said, we have the environmental permission in place, so that is done. In order to expand close to Östrand, we need to build some land, and that is project over a couple of years. That is a good project anyway because we always need land. That we will take, I think, rather soon. As I also said before, I mean, commercially, no one really has the right technique, but we are working on that, and we have big part of the resources in our research department on campus with Mid Sweden University working on that. But it's too early to say. I mean, it's much better that we get this right than we get it fast.
Mm.
I mean, that is a long-term work. We know that around Östrand we have created a fantastic infrastructure, and of course, we will do the best out of these possibilities.
Mm.
I could just add, you should also remember our ongoing investment together with St1 in a green-
Absolutely.
An investment in the refinery they have in Gothenburg to produce biofuels based on tall oil from our operations. That's an ongoing investment which we expect to start producing at some point during 2023. That's sooner in time.
All right.
Yeah.
Thank you. My second question is on sawn timber, and you have mentioned that there was weaker production in Canada and Central Europe. To what extent do you believe that weaker production is due to more sort of structural changes on, in terms of wood supply in those markets? And is that gonna get worse or what's the situation there?
I mean, it's hard to say. What we saw in Canada was that prices they increased quite substantially and we also heard that some companies they started to take curtailments because they, I mean, they didn't believe that they could make good money out of the business if they have to pay so much for the logs. I mean, that was maybe the main reason and I think that was also the main reason, of course, in Central Europe. Behind that, of course, in Canada, you still see negative effects from the pine beetle disease they had decades ago. In Central Europe, I suppose, I mean, you see some negative effects from the spruce beetle disease they had one and a half years ago.
I mean, that is I think the main reason. How long will it last? Hard to say. Again, as it is also fundamentally in the business for wood, I mean, the demand is increasing step by step and, I think that the bottleneck will be the supply of logs.
Of logs.
that will be.
Mm.
We will have to face a little bit different situation in different regions, but in that perspective, we are in a quite favorable part of the world in northern part of Sweden, I would say.
All right. Thank you. My final question is on forest land valuation. I think it was you, Toby, that mentioned that, I mean, the main reason why you're increasing the valuation of the forest lands here is because of higher transaction prices, which you use as a benchmark. Does that primarily still reflect the private forest land market? And if so, what do you believe is the premium for larger corporate forest lands?
Well, our forest land valuation is based on the market values which we see from market statistics based on transactions that take place. I mean, you're right, the majority of transactions are private transactions, but they also include other transactions, corporate transactions and so on. I think I mean, you're right in that it's dominated by private transactions. I don't think we can speculate on corporate transactions and what premium you would see, but I think we do agree that generally you see a premium based on the fact that there often are tax advantages, there often are companies can be interested in as a purchaser and also that the average quality of the land is usually better for corporate transactions than private transactions.
I think there's no statistics or it's speculation really, what kind of premium you could?
Personally, I think you have at least 40% premium, if you like my opinion.
All right. Thank you. Thank you very much. Yeah, those were my two questions. Agree.
The next question comes from the line of Michael Dupuis from UBS. Please go ahead.
Thank you. I have a couple of questions, but before that, if you could, Toby, just repeat what you said about the current CapEx moving up by SEK 100 million-SEK 200 million per year.
Yeah.
What was the reason for that? Sorry, I didn't catch that one.
Yeah. No, I think you could say, Ulf showed a slide earlier as well where he talked about the need to really maintain the superior asset quality that we have in our operations. Therefore, we see that going forward, you know, we've maintained at the 1.2 level for a number of years now, but we see that we need to increase that slightly to really make sure we maintain that underlying asset quality, which keeps our superior position, and allows us to continue making productivity improvements going forward in our existing business. That's really the reason.
Yeah. Okay. Great.
Just to add, I think it's really well-spent money into this area, and I think it's underestimated the effect and the return you can get from this money. I mean, it's not just to keep the status, it's also to ensure that you have a strong productivity development, which we can also measure from year to year. I think this one is really both. I think it's really underestimated to take care of what you already have.
No, that makes sense. Thanks for the clarification there. I have two questions myself. Firstly, on the containerboard market, you mentioned that there has been a very good demand there. Demand continues to be good, and the market seems to be quite tight. Do you see room for further price increase into Q1 of this year?
I mean, yeah, we have just announced the price increase in December, and that one will, as I said, successively take effect during the first quarter. I mean, that is the first step now. We feel that it is a strong market. We feel that you have. I mean, the delta between, as I said, between kraftliner and testliner today is EUR 150 a ton, which is on a normal level. We have seen that the OCC prices have almost tripled during a little bit more than a year now. I think price development from now on might be at least to some extent related to the cost development for OCC. That's, I think, an important part of it.
Okay. Thank you. Then just finally on the pulp, you mentioned that the discounts had widened a bit in this year. Could you clarify that, how big of a change you see there, and what's the average discount you see in Europe right now?
We see on average discounts have increased, if we take 2022 versus 2021, by maybe 2%-3% on average.
Yeah.
That's the level. I think if you want to judge the discount level, basically, you can look at the comparison between generally spot prices and which you can see particularly for Asia and Turkey and other markets and the sort of official prices for Europe, which give you a pretty good indication.
Toby, too, am I right when I say I think we have more 3% in Europe and maybe 1% in U.S. this year? The average.
Mm. Mm. Yeah
Okay. Okay, that's very, very clear. Thank you very much.
The next question comes from the line of Linus Larsson from SEB. Please go ahead.
Thank you very much, and great congratulations to an extraordinary strong 2021. I'd like, Ulf, to come back to your slide with the project portfolio, and you highlight own wind power, and it seems to me that you are slightly changing your strategy from historically having mainly collected the lease revenues and having external owners and operators on your land. Is that right that you are taking a more active role in the energy market in the north of Sweden, which are indeed very very dynamic and exciting? If so, if you take whatever five-year perspective or something, how much wind power do you expect to own and operate?
The first answer on the first question is yes, we will take a more active role in this business. I mean, we can do it in different ways, and I said that what we can see now, the most rewarding leg here is maybe the repowering leg, and that will maybe be actual five years from now. I mean, when we start to see wind parks that I mean, they are built up on 2 MW turbines and we know that the technology in five years will probably give us an opportunity for 10 MW turbines and that will give the wind park owner a substantial positive effect.
I mean, for that, you need another permission, but we hope and believe that it must be much easier to get a new permission on an area where you already today have a permission for running windmills. I mean, we will take part of that, and as you know, we have said that as of today, we have 5 TWh installed capacity on the SCA land. In 2023, we will have close to 10 TWh , and in all these areas, we sooner or later will have opportunities in repowering. We will continue to try to develop new projects, and maybe in some cases, instead of selling these, we will try to develop them ourselves.
I mean, we will do this in different ways, but I cannot really give you a clear plan as it is just now. It is a change. From now on, we are willing to put in our own money into this business.
I would just add, Linus, we're not new to the electricity markets and the power markets in northern Sweden. Obviously, we're active in wind power even though we haven't put our own money in wind power so far. We're very active in wind power, and we produce some 1% of Sweden's electricity in our operations today, and we sell around half of that on the market. We're not new to this area.
We have created good possibilities for the future.
Mm-hmm.
As we have 20% of installed capacity on SCA land.
Mm-hmm.
I think that is not least important.
Mm-hmm.
I think the time is right now.
Mm-hmm.
To be more active in this field.
Mm-hmm.
Are you looking to take over existing windmills, wind parks today operated by external parties apart from the development of new projects, which is more? Well, it's a slow process, can be at least?
I mean, as you know, it's much lower return on these kind of investments. I mean, let us look into this now and to see what kind of opportunities we have. Let us spread them out over the time and see what's good for us short and long term. I mean, just to buy and operate a windmill farm, that's maybe not the best choice for us.
Mm-hmm. Thanks. Maybe just one final question on the pulp market. You've yourselves been out pushing for the price hike that you mentioned. What's the update on that? How has that been received in the market?
The one from SEK 1,260 to SEK 1,300 I think is. I mean, no one likes price increases, but I think that one is accepted in the market, if that was the question. Was it?
E-e-exactly.
Yeah.
Exactly. That is sticking, you would say?
I would say so, yeah.
Okay, great. Thank you very much. Good luck.
Thank you.
We have one more question from the line of Harri Taittonen from Nordea. Please go ahead.
Yes, good morning. One more question. The sort of pulpwood prices have continued to be surprisingly stable or sort of for a long time, but could you see any events that could possibly change the stability? Just thinking, for example, the potential Russian export restrictions, I mean, if that could be something that could drive the Nordic balance to somewhere or any other sort of events that could sort of shake or change the outlook for the pulpwood pricing.
For us, I mean, as I said, the most important thing for us when it comes to stabilize the pulpwood prices is the decision to close down Ortviken and our publication paper business. That was really good from many perspectives, but not the least from-
Yeah.
From this perspective, that means that we haven't really. We have imported some pulpwood during this year because we have now a critical mass in the Baltics and by that, we can also buy pulpwood in, I mean, in a cost-efficient way. I think that is one reason why we have this channel open. As it is just now, I think that this year will be very stable when it comes to pulpwood development. As you saw on the graph, we have had some smaller price increase in sawlogs, and I think that level will remain during the coming year as we feel that the market can be quite good also next year.
In pulpwood, we feel that it will be a rather stable development during at least short and midterm.
Okay. Sounds clear. Thank you.
As there are no further questions, I'll hand it back to the speakers.
Thank you, and that concludes the presentation of the full year results, and we welcome you all back on April 29th for the first quarter results presentation. Thank you.