Good morning, and welcome to this presentation of SCA's 2026 first quarter report. With me here today, I have President and CEO Ulf Larsson, and CFO Andreas Ewertz, to go through the results and take your questions. Over to you, Ulf.
Thank you for that, Anders, and also from my side, a very good morning. Despite the increase in costs and the continued challenging market for forest industrial products, we delivered SEK 1.1 billion on EBITDA level and by that an EBITDA margin of 23% for the first quarter. S egment for renewable energy had a record high result during the first quarter, and that was driven by electricity prices, strong deliveries, and also a very good market for liquid biofuels. Our new wind farm, located in Jämtland, started operations during the quarter and contributed to a high profitability within the segment. Our high degree of self-sufficiency in strategic areas continued to be an important factor to mitigate higher costs, partly offsetting higher wood raw material and energy costs. Turning over to some financial KPIs for the first quarter.
As already said, our EBITDA reached SEK 1.1 billion, and that corresponds to a 23% EBITDA margin. Our industrial return on capital employed came out on 2%, counted for the last 12 months, and the leverage was two, while our net debt to equity reached 11.9%. I will now make some comments for each segment, starting with the forest. Stable harvesting levels from our own forest have contributed to balanced supply of wood raw materials to our industries during the period. We have seen a long-term trend of increasing sawlog prices, and they continued up also in the first quarter. However, availability of sawlogs has increased towards the end of the quarter due to the big storm, and that will also gradually reduce prices coming quarters. Regarding pulpwood prices, they have been rather flat for a couple of quarters, and now they have started to come down.
When we compare the first quarter 2026 with the first quarter 2025, sales were up 2%, while EBITDA was up 1%, mainly due to higher prices for wood raw materials. Over to solid wood products. In general, we still have a slow underlying market for solid wood products. We continue to note signs of improvement in the repair and remodeling segment, and we also see a decreased production in Scandinavia and Germany, generating a better supply and amount balance, especially for spruce. Stock levels remain on the high side among producers for pine, but are on normal levels for spruce, and stock levels at customers continue to be on the low side. Delivery volumes were lower in Q1 2026 in comparison with the first quarter of 2025, but first quarter of 2025 was an exceptionally strong quarter.
SCA stock level of sawn goods is currently on a very balanced level. The price for solid wood products increased by a bit less than 4% in the first quarter of 2026 in comparison with the fourth quarter of 2025, and this development is in line with what I said when we presented the report for the fourth quarter last year. Sales were 13% lower in comparison with the same quarter last year. EBITDA margin decreased from 16% to 4% due to higher raw material costs, lower deliveries, and a negative currency effect. Today's stock level of solid wood products in Sweden and Finland is described at the top left on this slide and is shown in relation to the average for the last five years. As mentioned earlier, we note that the inventory level is on the high side, especially for pine, while the SCA inventory level is balanced.
As can be seen in the diagram to the bottom left, the Swedish and Finnish sawn wood production has been lower than average in the beginning of 2026. In the diagram to the top right, we can note that the export price index decreased in the first quarter. SCA's prices, however, increased due to a better mix. Going into the next quarter, I estimate that prices in the market will increase. On the other hand, increase in freight costs will have a negative effect, resulting in a slight net price increase for SCA. Looking forward, we will probably see a stable development going into autumn with an okay balance between supply and demand. Over to pulp. When comparing the first quarter 2026 with the Q1 2025, sales were down 16%, mainly due to lower prices and a negative currency effect.
EBITDA was down 88%, which was also driven by lower prices and negative currency effects. During the third and fourth quarters of 2025, demand for NBSK pulp was rather weak, and prices were stable at low levels. Net prices on NBSK then decreased further in the first quarter of 2026, very much due to the higher year rebates in Europe and U.S. At the same time, gross prices increased in Europe and U.S. despite weak demand. In China, demand for NBSK pulp was on a normal level during the first quarter, but prices remained low. The conflict in the Middle East is adding complexity in the pulp market, and it also increases the cost pressure. Looking at CTMP, demand was very low in January and February, and prices were at the bottom. However, during March, we saw an improvement in demand and prices started to increase.
Inventories of the NBSK were on a high level during the first quarter. Hardwood inventories, on the contrary, were below average level. Finally, CTMP inventories have been on a rather normal level. Moving over to containerboard. Sales were up 4% in Q1 in comparison with the same period last year, driven by higher delivery volumes, somewhat mitigated by lower prices and a negative currency effect. EBITDA was down by 56%, driven by lower prices, negative currency effect, and higher energy costs. We have noted a rather soft box demand during the start of the first quarter, but it has since then developed in a cautious, positive direction. The retail business remains a positive driver, and we have also seen the manufacturing industry recovering in the beginning of the year. European demand of containerboard has been moving sideways during the first quarter, in line with the box demand.
There is no new containerboard capacity expected to start up in the first half of 2026, although we can expect a ramp-up effect of new capacity started in 2025, with the vast majority coming in testliner. Kraftliner inventories remain above historical average in Q1, as you can see in the graph. During the first quarter, the availability of OCC has been in balance with supply and demand, which in its turn has led to stable prices in the first quarter. Prices for brown Kraftliner in Central Europe has, during the first quarter, decreased with EUR 25 per ton, and for white Kraftliner with EUR 20 per ton. Anyway, we now feel a more solid underlying demand in combination with strong cost pressure.
Due to that, we have implemented a price increase of EUR 60 per ton for brown Kraftliner and EUR 40 per ton for white Kraftliner from the 1st of April. Finally, I will say some words about renewable energy. In the segment, we have had a stronger quarter compared to the same period last year, and maybe the strongest quarter ever. That is, of course, mainly due to high production and strong margins in our, with St1, jointly owned biorefinery in Gothenburg. In addition, we have also had a positive impact from a new wind farm in the county of Jämtland. Electricity prices were high during the quarter, which had a positive impact in our wind business. Our new wind farm, Fasikan, was taken over in time and on budget and has been ramping up production during the quarter.
SCA's land lease business is stable at 10.6 TWh, according to plan, and this is, as said before, equal to 20% of installed capacity of wind power in Sweden. The market and price for solid biofuels were strong due to cold weather during the first quarter. Anyway, the positive effect was mainly offset by higher costs for raw materials compared to same quarter last year. For liquid biofuels, we have seen continuous high margins compared to previous quarters. The main reasons are the implementation of RED III across European countries, as well as strengthened EU control mechanisms regarding imported products and feedstocks. In March, we also see additional price increases due to the situation in the Middle East. We expect market volatility in renewable fuels to remain high as Europe ramps up the blending mandates, both in HVO and SAF. With that, Andreas, I hand over to you.
Thank you, Ulf, and good morning, everybody. I'll start off with the income statement for the first quarter. Net sales decreased 8% to SEK 4.7 billion, driven by lower prices and negative currency effect. EBITDA decreased 33% to SEK 1.1 billion, driven by lower prices, negative currency effects, and higher cost for wood raw material. EBIT decreased to SEK 543 million, and financial items totaled -SEK 86 million, with an effective tax rate of below 20%, bringing net profit to SEK 380 million or 0.54 SEK per share. On the next slide, we have the financial development by segment. Starting with the forest segment to the left, net sales were in line with the previous quarter at SEK 2.5 billion. High prices for sawlogs were offset by lower delivery volumes to SCA Industries.
EBITDA decreased slightly to SEK 884 million, due to seasonally lower harvest from SCA's own forest compared to the previous quarter, which was offset by higher prices for sawlogs. In wood, prices were slightly higher compared to the previous quarter. Net sales decreased to SEK 1.3 billion due to lower delivery volumes. EBITDA decreased to SEK 49 million, corresponding to a margin of 4%.
High cost for wood raw materials and lower delivery volumes were partly offset by higher prices. In pulp, net sales decreased to SEK 1.6 billion compared to the previous quarter, while EBITDA increased to SEK 40 million, corresponding to a margin of 3%. Lower costs for planned maintenance stops were offset by negative currency effects and lower prices. In the quarter, we took market-related downtime in our CTMP mill due to high electricity prices. In containerboard, net sales were in line with the previous quarter at SEK 1.7 billion.
EBITDA decreased to SEK 104 million, corresponding to a margin of 6%. Lower prices, negative currency effects, and higher energy costs were partly offset by lower costs for raw materials and higher delivery volumes. Renewable energy, with a record quarter, EBITDA increased to SEK 206 million, corresponding to a margin of 31%. The increase was driven by higher electricity prices, the new Fasikan wind farm, and higher results in liquid biofuels.
On the next slide, we have the sales split between Q1 last year and Q1 this year. Prices decreased 4%, with lower prices in pulp and containerboard, partly offset by somewhat higher prices in wood. Volumes were flat, with higher volumes in containerboard, but lower in wood. Currency had a negative impact of 4%, bringing net sales to SEK 4.7 billion.
Moving on to the EBITDA bridge and starting to the left, price mix had a negative impact of SEK 255 million. Higher costs from mainly wood raw materials had a negative impact of SEK 111 million. We had a positive impact from energy of SEK 34 million and a negative impact from currency of SEK 203 million. In total, EBITDA decreased to SEK 1.1 billion, corresponding to a margin of 23%. Looking at the cash flow, we had an operating cash flow of SEK 569 million in the quarter. As you know, other operating cash flow relates mostly to working capital currency hedges and should therefore be seen together with changes in working capital. Looking at the balance sheet, the value of the forest assets total SEK 104 billion. Working capital decreased to SEK 5 billion. Capital employed total, SEK 112 billion.
Net debt stood at SEK 12 billion, and equity totaled SEK 100 billion, corresponding to a net debt to equity of 12%. We have now almost finalized our large ongoing investment project. Thank you. With that, I'll hand back to you, Ulf.
Thank you, Andreas. Just to summarize, we have had a challenging first quarter. I think we have controlled what we can control in a good way. We see a positive effect from the ramp-up of our big strategic investments, and we are looking forward to the time when we can move over those extra volumes to our main market in Europe and the margin that can create. We've also started up our new wind farm outside Bräcke in Jämtland, and the project was done on time and in budget. By that, I think we open up for questions.
Thank you. Ladies and gentlemen, if you would like to ask a question, please press star one on your telephone keypad. I will pause for a brief moment. Thank you. We will now take our first question from Ioannis Masvoulas of Morgan Stanley. Your line is open. Please go ahead.
Yes, good morning. Thank you very much for the presentation. Three questions from my side. I'll take them one at a time, if that's okay. First, on containerboard, so you're starting from a fairly depressed EBITDA margin level in Q1, and going into the second quarter, you should be benefiting from lower fiber costs, as well as lower power costs. How about other input costs around logistics, chemicals, et cetera? Just trying to understand the overall development into the second quarter on the cost side. Related to that, is it fair to expect another increase in Kraftliner prices in May to help restore margins? Thanks. I'll stop here for the first one.
Yeah, thank you for that. I'll start with the market, and then Andreas will give you the cost perspective. I guess, as you realized, we did increase the price for Kraftliner from 1st of April. First, we reduced the price by EUR 25 per ton for brown Kraftliner in the first quarter and EUR 20 for white top. Then from 1st of April, we have announced and we will also come through with price increases of EUR 60 per ton for brown and EUR 40 per ton for white from 1st of April. That will stepwise be implemented in the price for the first quarter. I guess we see no price movement in May. We haven't heard anything more from testliner producers, and I think it's fair to say that they have to start, and then I believe that Kraftliner can come after.
Nothing is planned for May, but if we'll remain on this level when it comes to gas prices, I guess we'll see some attempts later in Q2 or in the beginning of Q3. That's my view. Andreas, about the cost situation.
Yeah. On the cost side, if we start with pulpwood, the pulpwood will continue to go down slightly in Q2, but very slightly. As we talked about earlier, we have this six-month lag effect, so the pulpwood prices will go down mainly in the second half of the year. OCC prices are fairly stable. If you look at electricity prices, they're very high in January, February, so depending how the electricity prices develop, but most likely it will be lower compared to Q1. In terms of transportation cost, depending on the oil price development, but the oil price will of course affect transportation. That's the big moving parts.
Okay, thanks very much for that. The second question, can you comment about the current pulpwood prices? I know you mentioned a slight benefit in the industrial units in Q2, but just trying to understand, where are we now on pulpwood prices versus the peak of 2025?
Yeah. Pulpwood prices, they went down slightly in Q4, slightly in Q1, but we're talking about maybe 1%, 2% down. It will continue to go down 1%, 2% in Q2, and then you'll get a larger effect in Q3 and in Q4 because of this lag effect.
Okay, thank you. Just the last one from me. You talked about the CTMP market where demand remains low, same with prices. Could you give us an update on operating rates, in Q1 here and your expectation for Q2? How are you feeling about this business given the depressed market backdrop? Are you willing to run the asset? I know it's a low-cost mill, but just trying to understand how you're looking at optimizing the business here. Thank you.
Well, in the first quarter, I would say that we have maybe around the CTMP mill at 50% or something like that due to high electricity prices and also the marginal cost for pulpwood. That's the case for first quarter. CTMP has been a very bad business in the first part of this year. Now we see that the CTMP market is picking up, and I guess, one part of it is that short fiber pulp is picking up step by step, and maybe we see some kind of substitution. I also feel that we have a better consumption by board customers, not the least. I mean, just now we are running more or less full for the moment being. Of course, we keep an eye on the electricity price, and if it's too high, then we just close down.
We are rather positive for the CTMP business in the second quarter.
Thanks again. Thanks very much.
Thank you, and we'll now move on to our next question from Linus Larsson of SEB. Your line is open. Please go ahead.
Thank you, and a very good morning to everyone. I'll start with a follow-up on the input cost side, and if you could maybe elaborate a bit on the pulpwood cost declines that you're seeing in your wood-consuming operations over the course of the next few quarters? If you could quantify, in any way, what you're expecting, going into the second half of 2026, please?
Yeah. As I said, now we got maybe 1% down on pulpwood cost in Q1 compared to Q4, while the sawlogs prices increased with around 7% in Q1 compared to Q4. In the second quarter, we expect both pulpwood and sawlogs prices to go down slightly, but we're talking about 1%, 2%, maybe 3% on pulpwood and 1%, 2% on sawlogs. Then we'll see a bigger effect in Q3 and in Q4. It's hard to say exactly now because now we're gonna in second quarter, then we're gonna get more of these storm volumes, which will, of course, help to get the price down. We'll see, but we expect a bigger decrease in Q3 compared to in Q2.
Great. Thanks. I hate to ask this, but if you could maybe please help us dissect the other line, which was weaker in the first quarter, and if you could help us understand what the normalized level might be going forward. The reason I'm asking is that this is actually where more than the entire deviation compared to consensus occurred. If you could just help us understand, that would be super helpful. Thanks.
Firstly, we have a seasonal effect, but the biggest thing is, of course, profit in stock. When we sell something, for example, from the forest business to the wood business, then the forest segment, of course, makes a profit. Until the wood division sells that final product, you eliminate that profit. That's why you have this cyclicality in the bottom line between different quarters. Because of the increased prices of sawlogs and a bit lower delivery volumes in our wood segment, you have a higher other cost, but that's only periodization between different quarters.
Right. That's really helpful. Given what you just said, Andreas, any pointers for what to expect in the second quarter?
I think if you look at the full year, because then these periodization effects, they get canceled out. If you look at the full year, then you get quite a good picture of the yearly other costs.
Sorry, what do you mean? If I look at the past couple of years, that's
Yeah, exactly.
for what to expect for this?
Yeah.
Okay, great. Thanks. That's helpful. Thanks a lot.
Thank you. We'll now move on to our next question from Robin Santavirta of DNB Carnegie. Your line is open. Please go ahead.
Thank you very much. Now, in terms of the Middle East crisis, you mentioned in the report that it increases uncertainty, and of course the oil price is also higher and you call out this as an indirect negative. You have high energy self-sufficiency. Don't you think you have a competitive advantage to continental European producers, especially in containerboard?
Yeah, we are not dependent on Russian oil and gas or oil at all, more or less. That is, of course, a positive thing. The other thing is that when it comes to distribution, we used to say that we have 40% degree of self-sufficiency due to the fact that we now produce liquid biofuels in Gothenburg and on our part, count for around 40% coverage of the total cost. That is, of course, very positive. As you could see also in this quarter, I think we did the strongest quarter ever for renewable energy. A big part of that was, of course, liquid biofuels.
Right. Thanks. Also, related to containerboard, from what I hear from not only you but from other companies in the market, it seems demand has increased quite significantly in March and April, and it's certainly in containerboard grades in Europe, and the start of the year was much slower. What explains the pickup in demand? Is this just pre-buying before prices go up or are there other dynamics in play?
It's hard to say, really. I think one thing can be that you have, I guess, people, they are securing the raw material supply in different areas due to the geopolitical situation. That might be one thing. We also feel that the retail sector has been quite good for a while, and now we feel also that the industrial customers, they are coming back. Not least today, we have seen some reports, and also yesterday, from some companies, and they all say that the order inflow is quite strong, and also from the more heavy industry, that will have a good impact also on our Kraftliner business. Yeah, the market is definitely strong just now. The balance is still we are a little bit on the high side when it comes to the inventory level.
We all know that we have a lot of testliner capacity out there, curtailed just now, I guess. On the other side, if gas prices will remain on this level, I guess many of them, they lose money. I guess we will see. It's a mix between supply, demand, and cost pressure and so on, but I guess we might see some further price increases coming into the autumn.
I understand. Thanks. Finally, just on saw timber. This market, of course, is tricky, but when I look at log prices in Europe and when I speak to companies there, they complain about scarcity essentially of sawlogs and log prices that are much higher than you have in upper parts of Sweden. Why wouldn't you sort of have better, primarily in black figures, most of the quarters, even in this tough environment, but could it be a certain way? You basically do not need the construction market to come back and still get higher prices. Or is there something I'm missing with the mismatch of sawn prices in Europe versus northern part of Sweden?
I don't know if I fully took your question, but you talked about the price deviation from northern, southern part of Sweden.
They are paying two times more for sawn.
No, they don't.
or more.
No, they don't. I think that's a misunderstanding.
The statistics.
No, you look at public price lists and that is of course not the price in the market. I guess, when we do some comparisons, it doesn't really differ too much. Also when it comes to log size, the log is much more narrow in the northern part in comparison with the southern part and so on. I don't think that delta is. Yes, we are favored.
The prices are roughly the same.
They're maybe not the same, but it's not, as you say, it's not the double price.
No, I know. Yeah.
Of course, now you have the storm effect, and we haven't seen really the result out of that. You see a big difference between spruce logs and pine. You see also in the end market that now we have a deviation for sawn goods by 300 SEK per cubic meter, more or less, if you compare spruce and pine, to the advantage of spruce, of course. I guess that's a result of the spruce beetle effect that we had in Central Europe a couple of years ago. They have a deficit of spruce logs. It's a more complex market than that. You cannot really look at the official price list. That's my clear message. You have to, because what we buy in the market is something completely different in many cases, where you have add premiums and things like that.
I understand. Thank you very much.
Thank you. We'll now take our next question from Johannes Grunselius of SB1 Markets. Please go ahead. Your line is open.
Yes. Hello, everyone. It's Johannes here. I have two questions. I would like to zoom in on your energy business and the containerboard business. On energy, you said it already, Ulf, but you had a nice tailwind from higher biofuels. I was wondering if you could provide some color on what that means. I think your earnings delta were like SEK 60 million Q1 versus Q4. How much did biofuels supported that earnings growth?
Yeah. I can first start with the production. We are also in the ramp-up phase with the biorefinery in Gothenburg, and that is the first thing. We have had record production in that unit and we are far above design capacity. That is a very positive thing, of course. In addition to that, of course, we have had a very good price development. Andreas, you can-
Yeah. If you look in Q4 compared to Q1, the solid biomass pellets and unrefined fuels basically had the same profitability in Q4 as in Q1. The increase comes roughly half from the wind segment and roughly half from the biofuel business, roughly speaking.
Okay. What you're saying, it's more of ramp-up benefits, not pricing benefits. Could you comment on Q2, how we should think about the pricing effect here coming from higher prices?
I'd say both. We got both a higher margin in the biofuel business compared to Q4, as well as a good production. We'll have to see how the market develops. For energy, if fuels continue to be high, that of course will benefit our fuels business. Of course, Q2 is a weaker market for our solid biomass segment compared to-
wind
Wind compared to Q1.
Yeah. Got you. On containerboard, if you could elaborate a bit on basically operations and also the mix, because I assume you're still in sort of a ramp-up phase in Obbola. Do you foresee tangible benefits from more efficient operations in the coming quarters and also benefits from a more commercial mix? If you can elaborate on that one, please.
Step by step, we produce more in Obbola, and by that, we also will be, if you count it per ton, then you will be more also cost efficient. First the volume and then we fine tune the cost level. This year, as we've said before, we will probably produce around 100,000 tons more in 2026 in comparison with 2025. Step by step we will be more and more cost efficient. That is one thing. As you say, all surplus volumes today, they are placed in overseas market and the margin is completely different if you have to place those volumes in Asia or U.S. or South America or wherever. When the market comes back in Europe, that will, of course, improve the margin quite a lot, I would say.
Okay. Thank you for that.
Thank you, and we'll now take our next question from Gabriel Simões of Goldman Sachs. Please go ahead. The line is open.
Hi. Thank you for taking my question. I have two. They're both on the forestry side, but the first one is related to your forestry, to your silviculture cost in the first quarter, which are usually lower, but then I would expect some of that to come back in the second quarter, right? Overall, if you could guide us toward the level of expected profitability on a per cubic meter basis for wood harvested, maybe excluding the revaluation, of course, for the remainder of the year and for the second quarter specifically, that'd be very helpful. A longer-term, more strategic question here, would be basically on the valuation of these forests, right? The company now trades at a significant discount to the book value of the forests.
I just wanted to pick your brains on whether this is something that bothers you and if there are any measures to try and unlock some of that value of these forests. Thank you.
Yeah. I can start with the seasonality of the forest. I won't go into exact figures, but just to get some flavor. As you know, we harvest seasonally more from our own forest in Q2 compared to Q1, so that's a net benefit. You're absolutely right that in Q2 and Q3 especially, we have our fertilization and silviculture cost, because it's then we replant, we do this fertilization, and that's maybe roughly speaking, what can it be, SEK 50 million-SEK 80 million per quarter in Q2 and Q3. Of course, we will see how the higher oil prices, of course, will also affect the transportation and the harvesting business. On the plus side, we harvest more from our own forest. We'll have slightly lower prices, and we will have higher seasonal cost for silviculture and fertilization.
When it comes to the valuation of the forest and if we plan something to unlock the hidden value of the forest, we don't. You have had a couple of big transactions recently, and they show that the booked value is also the market value, and we trust that. Forest and forest business is a cyclical business, so you have to like that and see opportunities when you have them. I guess we are looking forward to what's going to happen now when Stora Enso will split, of course, and that might have an impact on the view of the price of the forest. Otherwise, we are following continuously the local market for when you buy and sell forest estates, and we can just see that we are more or less on the same level as before. Nothing has changed.
All right. Thank you.
Thank you. We'll now move on to our next question from Oskar Lindström of Danske Bank. Your line is open. Please go ahead.
Yes. Three sets of questions from Danske Bank here. First off, I'm just very curious, are higher oil prices and talk of possible aviation fuel shortages in Europe creating a greater interest from you or from others in your aviation fuel project in biorefinery in Östrand? That's my first question.
Yeah, I should say, just now it is good profitability in the biorefinery in Gothenburg, and by that you can say that conditions for the Östrand project should also be very good, and I guess they are. That is, of course, a much bigger bet. As we've also said, this market will be very volatile, and it's also very capital intensive.
I guess if before you start a big project like that, you need to have some security when it comes to some kind of offtake agreement or at least a price level for SAF long term. You can talk about resilience and degree of self-sufficiency and things like that, both in the Union but also in Sweden. Will that come? We don't know. The tricky thing, I guess, with this kind of projects is always the political risk.
We are used to take the technical risk, the project risk, and we can handle that. The challenge is really the political risk. Will something change when we have a new government in place, both in Sweden and in the Union, and what kind of impact will that have? That will of course. It's more challenging to raise the money needed for such a big project.
To follow up on that. Thank you. Would you be open to doing that as a JV then?
Absolutely.
I presume, I mean, you're not.
Yeah, I think that's the only solution, really. We can provide a fantastic place close nearby Östrand. Lots of synergies. We also have from now the energy supply, which is really important, but maybe the most important thing, we are maybe the only player in that part of Sweden can provide with the raw materials, the feedstocks. I guess we are a perfect partner in the JV, but this project is, of course, too big for us alone. We have to talk with some friends if this should come through.
Very interesting. Thank you. My second question is, continuing on that with the Middle East conflict causing disruptions as you mentioned. We hear a lot about how this is having an impact on continental European producers, perhaps especially of containerboard, who are dependent on natural gas and oil for energy. Is it causing other shifts, sort of, that you're noticing, for example, in Asia or having impacts on logistics costs, which is causing shifts in the market or in the cost curve that are meaningful for you?
Yeah. I don't know if we see some structure change. For everyone, we see that the freight costs, they will increase, of course. In our case, as I said before, we have maybe a degree of self-sufficiency due to the biorefinery we have in Gothenburg, up to 40%, and that is different for different companies. As you also say, we are not depending on oil and gas prices, as we have a fantastic energy supply situation in not only SCA, but Scandinavian companies. That is, of course, in our advantage. Input costs will increase, and, freight costs, oil, one thing. The other one is, of course, chemicals into the industry. On the other hand, that will have a, I guess, a bigger impact from the plastics and other competing materials. It's really hard to say how this will turn out.
If you will see a big restriction now when it comes to aviation and things like that might create the same situation as we had during the pandemic, that people, they will stay home and build verandas and do a lot of work in their gardens and the houses and so on. That might create some kind of better market for solid wood products. It's hard to say, and it's hard to speculate. We are so focused now on trying to control what we can control, and that is also something that we are very happy at in the first quarter. We have had a good production. The cost level is good, very strong energy business.
We see a positive effect of those strategic projects that we have launched, but still, we are at the bottom of the business cycle just now, and let's see when it will recover.
My third and final question is more straightforward. In the renewable energy division, you've obviously been able to benefit here in Q1, partly from the ramp-up, of course, which will be hopefully sustainable for the rest of the year, but also from higher prices, due to the situation in the Middle East. Are you able to lock in any of the higher prices, through hedging or something like that, so that we get a little bit of that benefit for the rest of the year as well?
If you start with the wind business, and there we don't hedge anything. That's just our self-sufficiency, so then we're exposed to spot prices. If we look at our solid biofuel business, there I say you have much more long-term stable contracts, and they have some spot volumes, but a large share is long-term contracts, and there we have quite stable prices. While the spot, of course, that moves up and down with the market. With the biofuel business, there you do some contracts in advance, but not very far. I would say we are exposed to spot, and that's part of our strategy to have a high self-sufficiency. As I said, on oil, we are around 40% self-sufficient. We would want to have, when the cost goes up or down, our renewable energy income goes up and down as well.
Obviously, we don't have that long hedge exposure on the renewable energy. More spot.
Thank you. Those were my questions.
Thank you.
Thank you, and we'll now take our next question from Andrew Jones of UBS. Please go ahead. Your line's open.
Hi, gents. I've just got a couple of questions. First of all, on containerboard, you mentioned that you got a EUR 60 hike through in April, nothing expected in May. The index realized EUR 30. I'm curious what you're seeing from some of your competitors. Were some of them hiking but, with a bit of a delay, maybe coming through in May? Or what explains the lower index move? J ust to confirm, are your customers in April already paying that EUR 60? Has that been fully implemented?
Good question. Yes, I guess many of them, they have announced price increases from 1st of May. What you see now in the index is the price hike from SCA. As I would say, the major part of our business is also related to the index movements. We will not get even 50% of this price increase in April, but we will get it in May. That's the case.
Yeah. Okay. No, that makes sense. Just on the wood products business, I think you guided last quarter, it's a flat price development in the first quarter, and it looks like it went up about 7% on a revenue per ton basis. Curious what changed versus your initial thought process, and can you give us some guidance on how you see prices developing in the second quarter? Thanks.
Maybe you have a better memory than me. I think I said 4%, and I think we had 4%, more or less. I'm not sure. Anyway, we had a small price increase, but the price development for sawlogs was even higher. That's also the main reason for the profitability coming down. In the second quarter, it was a little bit of a disappointment for me. I thought that we should have a higher price increase in the second quarter in comparison to the first quarter. I guess we will have around 4%, a little bit more for spruce, a little bit less for pine, a little bit more in some markets, a little bit less in other markets. We try also to work with a mix, of course. Now this quarter, we see that log prices will come down a bit.
On the other hand, I guess that 50% of the price increase will be mitigated by higher freight costs. It will be a small positive effect from increasing prices and also a small positive effect from decreasing log prices, I would say, in the second quarter.
You're right. As Ulf said, we probably expected prices to be a bit more flat in Q1, but then again, a larger effect in Q2. Now we've got a bit of that Q2 effect already in Q1. I think the increase was about the same as we thought, more in Q1 versus Q4, but less in Q2 versus Q4.
Yeah. Related to what we said.
Yeah.
My thinking was that we should have a stronger market really in the second quarter.
Yeah.
That has not come through. It is much stronger for spruce in comparison with pine. Spruce is maybe a little bit better and pine is a little bit less good, I would say.
Yeah. That's clear. Actually, just on the freight question, I know you have some of your own vessels. Obviously, that probably doesn't protect you from bunker fuel and all that sort of stuff. Can you quantify the impact on your freight costs across the various divisions, from what you're seeing now and, it may be compared to what you think your peers might be paying, but without that self-sufficiency in vessels?
Just to get some figures you can work with, if you took both bunker oil, we took oil for burning and then also diesel for trucks and everything, I think our total exposure is around 130,000-140,000 tons. Then we get back 50,000 tons is from tall oil, and that's linked just to fossil price plus a green premium. There we are self-sufficient at around 40%. Then, of course, our Skogberget and our pellets business will be also an indirect hedge. If you remove those, our total exposure, 130,000-140,000 ton - 50, that's around 80,000-90,000 tons of exposure. Of course, this indirect effect from pellets and Skogberget.
Okay. That's clear.
Good.
Thanks.
Thanks.
Thank you. We'll now take our next question from Cole Hathorn of Jefferies. Your line is open. Please go ahead.
Good morning. I'd just like to ask on the pulp markets for softwood pulp in particular, what do you think is ultimately needed to bring down those inventory levels and tighten this market here? Because we've seen some kind of demand shift to the hardwood side. We've still got a lot of inventory levels in China. Softwood futures have come lower. It just seems like quite a disconnected market, softwood versus hardwood. I'm just wondering, what do you think needs to play out over the next few months to help balance the softwood market and ultimately, support further pricing?
It's a very good question, and we are a little bit surprised ourselves, I must say. We have heard also talk about the investment in plantations in China, and that swing capacity is now running long fiber and so on. Honestly, I don't know really. What we have seen is that a positive price development step-by-step for eucalyptus pulp. Just now, you have a small delta between hardwood and softwood. I guess that is the first sign that we will see some kind of substitution going forward. Again, when you look at the inventory level, you are still on the high side for softwood and on the low side for hardwood. Also we have big producers in hardwood. They have announced some curtailments. On the other hand, we have also heard that some Scandinavian producers, they have also announced curtailments now.
Short-term, it's always a question about supply-demand balance. I guess the price difference now between short and long fiber, that will help a bit. We see that on CTMP already now, definitely for March, but also, I guess, coming in now in the second quarter, that will help us. I don't feel that we have any structural things that dramatically have changed the situation. As long as something is a little bit cheaper than something else, then you try to substitute as much as you can. Long-term, I don't think this is a structural thing. It's more a question about supply, demand, and so let's see. A little bit annoying, of course.
Well, hopefully we see some capacity closures, but if I look at some of the softwood producers, there's some listed players that have seen their debt trade down. It seems like a lot of the market is really under pressure. If assets do become available, how does SCA think about M&A in that context at the right price? Or are you just comfortable staying with your business in Sweden? Thank you.
Yeah, I think we are an integrated forest company with industry, and I have a great respect to move into other geographies if you can't guarantee the raw material supplies. I think the integrated model we have today, I think has been very profitable over time and also in relative terms, we perform well. As it is just now, we have also done a lot of big strategic investments, and we will be very cautious now. We will focus on ramping up what we have started and also to consolidate the balance sheet, so for us, no M&As, at least not short term.
Okay.
Thank you, and we'll now take our last question from Pallav Mittal of Barclays. Your line is open. Please go ahead.
Good morning. Thank you for taking my questions. Firstly, just following up on oil and appreciate all the self-sufficiency and hedges, that you have highlighted. If I just look at your transportation and distribution, it is almost 25% of your cost base. Say roughly around SEK 4 billion, and diesel is up 30%-35%. How do you plan to offset that SEK 1.5 billion cost headwind that you have? Just as a follow-up to this, are you seeing the roadside pulpwood increasing on the back of diesel costs going up?
As I said before, we have around 140,000 tons of exposure to bunker oil and diesel and oil in our industries. Roughly half that, we produce 50% we get back from tall oil. The net exposure of 80,000-90,000 tons. Of course, if the prices of diesel or oil goes up, then we have around 90,000 roughly exposures, then you can calculate the figure. That's the pure oil part, and then transportation part of our business, we have our own ro-ro ships, so there is only the bunker exposure. Of course, some especially to U.S., and there we freight ships, and of course then it depends on how the market for renting those, or freighting those vessels, move forward. To bunker and diesel, our net exposure is around 80,000-90,000 tons.
Okay. Just how should we think about your capital allocation now going forward, given the pressure on the market and the free cash flow generation? Do you think maintaining dividend is possible in this market environment?
In terms of CapEx, I would say that we will have around SEK 1.5 billion in current CapEx this year, and then around another maybe SEK 400 million-SEK 450 million in strategic CapEx. In terms of capital allocation with dividend or with share buybacks or other strategic CapEx, I think that's something for the board. Now we're focusing just ramping up and getting the cash flow for our investments.
Okay. Thank you.
Thank you. With no further questions on the line, I will now hand it back to the host for closing remarks.
That concludes our presentation of the first quarter report, and we wish you welcome back in July for our half-year report. Thank you very much for joining us today.