Earnings Call: Q3 2020

Oct 30, 2020

Good morning. My name is Bjorn Nykfeld. Welcome to this press conference where our President and CEO, Ulf Larsson and CFO, Toby Lawton, will present and comment upon SCA's report for the 3rd quarter. And after the presentation, there will be an opportunity to ask questions. Well, Ulf, would you please take the floor? Thank you. Thank you, Bjorn, and also from my side, good morning to everyone. When I summarize the Q3, it looks like this. We have during this quarter finally taken the decision to leave publication paper and we will do that sequentially during the Q1 2021. And at the same time, we've also taken to increase our production of CTMP pulp. Today we do 100,000 tons at Ostrand site. We will move that production over to Utviken and also add another 200,000 tons. So all in all, total production will be close to 300,000 tons. During the Q3 20 20 we have in comparison with last year declined sales of 13% and also our EBITDA was down 24%. And we have during this quarter clearly been impacted by the decision to exit publication paper. Obviously, customers, they have found other suppliers and we are also hit by our colleagues and competitors in the business, of course, and that was expected. As I mentioned already in the Q2 presentation, we have also been negatively impacted by the unplanned stop that we had in Ostrand, Ostrand Pulp Mill. At that time, we estimated maybe around SEK 150,000,000. The negative impact was slightly lower, a little bit more than SEK 100,000,000 for the quarter. Otherwise, when it comes to prices, we have lower selling prices in all areas expect from except from solid wood products. During this quarter, we have also acquired 20,000 hectares of land in Latvia and we have as we have earlier announced a long term program to acquire 100,000 hectares in 5 years and we have now done 50% of that program in 1.5 year. And last but not least, we have set a new target for a new group target for our contribution to fossil free society. We will by 2,030 reach 50,000,000 ton carbon dioxide per year in comparison with what we have today, 10,000,000 at our EBITDA level, we are 24% lower than same period last year, but on the other hand 3% higher than last quarter and that give us a stable EBITDA margin of 24%. And obviously, it's not the industry for the moment being that contributes to our business and these days we are very happy to have our forest holdings, which give a stable and strong support to our EBIT and EBITDA level. Our net debt in relation to our EBITDA has went down from 2.1 to 2.0 due to a strong cash flow during the period, but also due to the fact that our net debt has been reduced this quarter in comparison with last quarter. If we then walk into each segment, starting with the forest, we can summarize by saying that we have a very stable supply to our industries for the moment being. Sales was down this quarter in comparison with last year and reason for that is of course, as I said, the decision to exit publication paper and by that the capacity utilization at that mill has been substantially lower this year in comparison with last year. We also are negatively impacted by the unplanned stop at Ostrand. That was around 50,000 tons which is similar to around 250,000 cubic meters. During this period we have also seen lower pulpwood prices. On the other hand, EBITDA is up 33% due to higher degree of harvesting from our own forest land, but also we have a higher earnings from revaluation of biological assets. In business area wood, we have seen a rather stable market and as I said earlier, this is the business area where we haven't really been negatively impacted by the COVID or corona pandemic. We feel that we have a high demand in the market and we have this quarter had 1% higher prices including currency in comparison with Q2 2020. And we forecast also for the Q4 another price increase. So I believe that prices will be up 3% Q4 in comparison with the Q3, which is of course positive. And the driver behind this is mainly the We have really strong market in Scandinavia, but in general total Northern Europe is very strong and also U. S. While we see a little bit slower market at least price wise in China and Japan. EBITDA was up 7% quarter on quarter. In pulp, as I said, we were negatively impacted by the unplanned production stop in July. But on the other hand, since we were up and running, we have had a really strong production after the restart. Sales anyway was down 13% due to prices, but also due to lower volumes related to this unplanned production stop. EBITDA was down 49% due to the stop, but also due to lower prices, lower energy prices. And we have also started up now a planned maintenance stop and we had a negative impact in Q3 of SEK 20,000,000. We will have another SEK125 1,000,000 impact in the Q4, but we started in the end of September with this planned stop. Sorry, there we have. We have also rather interesting pulp market for the moment being. As you can see on the left hand side, deliveries has come down to more normal level. We had, as we mentioned in Q2, a buffering effect in the beginning of the pandemic, but now we are back on a normal level. Prices has been for a while quite flat here. When we look into hardwood pulp inventories they are on an average level. If we look at softwood pulp inventories they are a little bit high. On the other side we know that maintenance stops has been moved from the spring to the autumn and normally 50% of the stops will be performed in the spring, 50% in the autumn and majority of producers have 5 to 30 days stops. So we think that the inventory will just due to that fact come down between 5 10 days here. We feel positive price signals in the market. China has improved and spot prices there are close to $600 per ton for the moment being. We and also other producers have now announced a $40 per ton price increase from 1st October and I'm quite positive that that will come through. In paper, we are still hit by a lower publication paper demand. Structurally we have had a declining market for many, many years, 5%, 10% per year, but during the pandemic we saw that consumption went down 30% to 40% depending on what kind of degree grade we are talking about. And that is still the situation and that was also maybe the reason why we took the decision to leave publication paper just now. As I said, due to that decision we have had an even lower capacity utilization and sales was down 24%. But as you can see on the left hand side prices for Kraftliner has also step by step went down from the top from the peak in Q3 2018. And in publication paper prices as they have been quite flat here. But EBITDA nevertheless down 58% when we compare quarter on quarter. We have a really strong containerboard market. If you look to the left hand side we can see that deliveries now are very strong and prices have been flat for a while. When we then look at the right hand side, we can see that European box demand has come back to the level before the pandemic and we have a very strong and positive trend here. Kraftliner inventories are more or less done on average level and still we could expect more or less the same effect as we had in pulp that maintenance stops. They will be performed during the autumn and that will have a positive impact when it comes to kraftliner inventories. We had a small price decrease in the kraftliner during 3rd quarter €20 per ton and now we have announced the price increase from 1st November €50 per ton and we know that testliner producers they have already come through with €30 per ton for October. So all in all a rather strong market for containerboard as we see it. Yeah, we've been talking about the transformation of Utvik and as you can see on the right hand side we said already back in 2017 that we should continue to grow our pulp business and that is exactly what we are doing now. And at the same time, we should reduce our exposure to publication paper. And we have in 8 years gone from more or less 2,000,000 tons in this segment down to next year close to 0. So we have followed the strategy here. We have finalized the negotiations with the union. So that means that we will sequentially close our paper machines during the Q1 next year. At the same time, as I also said, we will invest SEK 1,450,000,000 to increase our CTMP pulp production at Toutviken site. And we can use the equipment that we have at Toutviken, not the least rather new TMP equipment. So CapEx will be SEK5,000 per ton in comparison with the greenfield that should cost around SEK15,000 to SEK20,000 per ton. So investment CapEx cost will be very cost efficient and we also feel that we will be really cost efficient when it comes to the cash cost for the production going forward. We have already started up the project and the start up is estimated to the Q1 of 2023. At the same time, we have also found an agreement with Renewcell to establish textile recycling site at Utvieken and we will let out the space and also supply utilities. So that is good in that perspective, but also it's good because we can in this way also offer 100 to 150 people possibility to a new job in the region. So we're very happy for this cooperation with Renewcell. Last but not least, we have set a new group target when it comes to our contribution to fossil free society. Today, we contribute with 10,000,000 tons of carbon dioxide per year and that will increase to 15,000,000 tons per year by 2,030. And we have 3 components in this calculation. The first one on the left hand side is the forest. We continue to invest a lot in our forests and that give a higher growth and the higher growth will also bind up more carbon dioxide. At the same time, we will also continue with the program for buying more forest land, not the least in Latvia. That will also have a positive effect of course. By 2,030 we have also increased our production quite a bit and by that also possibilities to subsidization and we will replace in a higher degree plastics with paper, fossil based fuels with biofuels and concrete and steel with solid wood constructions. And now last but not least, when we invest, we always look for the best available technology and we will during this period continue to reduce our emissions. So by that I hand over to Toby. Thank you, Ulf. Good morning, everybody. I will start here with a slide showing the impact from the exit of publication paper, which was decided in quarter 3 here. And this impact offers presented the underlying results, but the one off impacts of the exit of publication paper is the biggest effect on in the result this year. So I set out the effects here for you to see. You can see, firstly, on the left hand side, we have an impact on EBITDA of SEK1.12 billion and this is 2 components. The first component is the provision for restructuring, which is working capital SEK250,000,000 as well with no cash flow impact but impacting EBITDA. And then further to that, we're also writing down fixed assets of SEK671,000,000 which has an impact then on EBIT. And then finally, we have a positive impact in terms of deferred tax from these effects of SEK 359,000,000. So those are the onetime effects from the exit of publication paper. We have taken the effect now all in Q3. There may be some fine tuning as we go through Q4 as we're confirming some of the amounts, but we don't expect any significant changes. This is the onetime effect from that decision that we've taken now in quarter 3. And then finally, you can see at the bottom on the left hand side also giving some information now that the publication paper EBIT loss, which has been there since the start of this COVID crisis, has been SEK40 1,000,000 to SEK50 1,000,000 of EBIT loss in basically in both quarter 2 and quarter 3. So that's the loss rate we have in publication paper, which will continue until we close the operation as Olf said successively in Q1 next year. So then you can see the impact of all these figures on the right hand side. And if I focus on year to date on January to September, you can see on the right hand side And on the EBITDA line, you can see our underlying EBITDA for the 1st 9 months is SEK3.06 3,000,000,000. But then when we take the impact of the EBITDA one off items, we have SEK1.9 billion. Then on the EBIT level, our underlying EBIT is SEK 1,850,000,000 and then there's a bigger impact on EBIT with the write offs of fixed assets. So that comes down to SEK 61 1,000,000, no impact on financial items, then a positive impact on the tax line due to the deferred tax impact. And then basically on the down on the net profit for the also for the year to date, we have an underlying net profit SEK 1,400,000,000 for the 1st 9 months with an earnings per share than underlying of NOK 2 just over NOK 2 per share. And with the one off impacts, then we have a small negative minus SEK16 1,000,000 on the net profit line. So that's the impact of these one off items just to set that out for you. Then here you have basically the income statement underlying. So without these onetime effects and as Ofer has presented here, you can see the EBITDA we have of SEK1032 million. So we have an EBITDA margin of 23.8% in Q3 and that's a 24% drop versus Q3 last year, which is primarily the effect of pricing. Then on EBIT, we're at SEK 624,000,000 for the quarter. Financial items very similar to last year, very stable of SEK 28,000,000 tax charge of SEK 121,000,000 which is an effective tax rate of 20%. And so net profit for the period SEK475,000,000 underlying, which is then an earnings per share of SEK0.68 per share. Okay. If I just then give a bit of guidance per segment and focus most on this the trend versus the previous quarter. And here starting on the top left on the forest business, you can see here, you can see the effect from the lower publication paper volumes, which have an impact. But we've also this quarter, we have flat versus the last quarter. We've also had an impact from the unplanned production stop in Ostrand. So that's kept the internal net sales from the Forest division a bit lower than they would otherwise have been. And then in the terms of bottom line, we're also slightly, slightly up versus Q2. We have had less harvesting of own forest this quarter, which means lower profit contribution from the harvesting of own forest, but we have compensated by higher revaluation effect in Q3. When we move across to the wood sector, we have lower top line, lower sales in Q3, which is a seasonal impact. We produced less in Q3 and we've had some less production over the summer period in Q3 this year with an impact on then net sales. The bottom line, we have a higher profit margin this quarter, which is really the impact, as Ulf mentioned, of the higher prices coming through in Q3 and the stronger demand, particularly in the building material supply sector, which has been strong this quarter. Then when it comes to pulp, of course, the unplanned production stop was the main effect when it comes to the top line. We had lower volumes due to the unplanned production stop that we had in Q3. And then on the bottom line, you can see we had we're lower than we were in Q2, which is basically the unplanned production stop had an impact of around $100,000,000 So it was less than we previously thought, but an impact around there. And then we compensated with a good level of production during basically during August September after we started up after the unplanned production stop in July. So that compensated back around NOK 50,000,000 of the NOK 100,000,000. So we ended up, yes, just under NOK 50,000,000 lower in the quarter versus previous quarter. And then when it comes to paper, here also see the impact of the lower publication paper volumes and that's probably particularly between Q1 and Q2, that was the main impact this quarter. We have slightly lower prices in Q3, slightly worse FX. So that's a slightly lower top line versus Q2. The bottom line is slightly up, which we have the lower as I say, slightly lower prices, which are offset by a slightly lower cost for maintenance during Q3 than we had in Q2. And here just to then give you the bridge for sales first and then EBITDA on sales. Basically, we have a total decline of 13%. The price impact is 4%, which is basically across all segments even though you saw wood pricing is now increased versus previous quarter, but versus this is versus last year. We are slightly lower in all segments in terms of pricing quarter versus quarter last year, same quarter last year. And then in terms of volumes, we have a 10% impact and this is primarily paper volumes and primarily publication paper effect driving that. And then a small positive currency and then yes, 0 on acquisitions divestments. And then when it comes to EBITDA, you can see the same effect on price mix on the left hand side having an impact on EBITDA of some SEK 291,000,000. Then we have the impact of the volume, which again is paper volumes or mainly publication paper volumes. We have a good positive contribution coming through from the lower external raw material costs from the lower wood prices that we now have, which compensates for a part of that price and volume impact. Then we have a negative energy variance of SEK 84,000,000, which is primarily the energy sales from Ostrand has an impact as well with lower electricity prices. We don't get the same income on electricity this quarter where prices have been particularly low for electricity in our particularly in our area of Sweden. And then currency is a small is a positive this quarter. And then in other, we have an impact. We have to remember in Q3 last year, we sold the Rotterdam terminal and that had a positive impact of over SEK 70,000,000 in the result. And then we also had the unplanned production stop in Ostrand, which I mentioned before. All right. Then as well also mentioned, we had a strong operating cash flow this quarter. Q3 is seasonally is usually a good cash flow quarter, but it was particularly strong this year. We had SEK 1,100,000,000 of operating cash flow this quarter as you can see and the biggest contribution here is really the change in working capital where we had plus SEK 821,000,000 and that's there's basically the it's a seasonal effect partly, but we also have some effect from the lower volumes feed through to a positive effect in terms of working capital, but we've also had a very tight control in terms of working capital this year with the particularly with the underlying environment being so uncertain to keep a tight control on the working capital, which has led to a stronger cash flow here as well. So year to date, we've delivered $1,700,000,000 of operating cash flow and also then that funds the strategic capital expenditure well within our operating cash flow. So we have and we've had $1,150,000,000 of strategic capital expenditure this year so far, which is predominantly the Obbola investment. And here, because of the strong cash flow, we've had a good deleveraging effect this quarter. We've reduced net debt by over SEK 1,000,000,000 during the quarter. So from quarter 2, which you see on the left hand side here, we've had the SEK 1,100,000,000 of operating cash flow, which have reduced net debt. Then we've had strategic CapEx in the quarter of some SEK 300,000,000. And then we have basically a small effect from tax charge and then also a positive effect from revaluation of pension assets. But overall, then it's the one over $1,000,000,000 improvement in net debt, which has driven the deleveraging in the quarter and also an improvement in the net debt to EBITDA ratio where we were at 2.1x 3 months ago and now we're down to 2 times debt to EBITDA. And finally then just to show the balance sheet, our forest assets you can see on the top line are valued now at the end of September at SEK 71,500,000,000 valued according of course to the new method market valuation of forest assets. Our working capital, you can see SEK 1,000,000,000 less than it was at the end of last year, which is the strong effect I talked about in working capital, but a strong focus on working capital. And then total capital employed then is SEK 77,000,000,000. Our net debt versus the end of last year, our net debt is down some SEK200 1,000,000 at nearly SEK8.3 billion and 2 net debt to EBITDA at 2x. We were lower at the end of last year, which is primarily the run rate on EBITDA because the net debt has come down a bit, but also our run rate on EBITDA has come down. So the ratio is affected by that. Net equity, SEK68.9 billion or SEK69 billion. And then the market price for forest assets, I remind you here, it's the same figure we had in the half year report. We haven't done any update of the market price of forest assets. We still have the latest number of SEK 281 per cubic meter, which was the latest statistic we had at the end of June and we will update that again at the end of the year when we get the latest market price of forest assets. But it was it's slightly up at the end of June versus the end of December last year in terms of price per cubic meter. All right. I think with that I hand over to Ulf for a summary. Well, when we summarize the quarter then we can say that we are fundamentally reshaping the company. We have now finally taken the decision to leave publication paper and at the same time we have also taken the decision to further improve our pulp capacity. EBITDA was down during this quarter. We are clearly impacted by the decision to leave publication paper. Long term, it's the right step to take. Short term, it will have somewhat negative impact. We had this unplanned production stop in Neustrand as we have earlier talked about. Start up was very good, so we are happy about that. We have had during this quarter in comparison with last year lower selling prices in all areas except from solid wood products. We continue our program for buying forest land in the Baltics. We have done 20,000 hectares during this period and by that we have reached 50% of the total 100,000 hectares that we have announced in one and a half year. And we have also set the new climate target for the group 2,030 reaching 15,000,000 tons of carbon dioxide per year. So by that I think that we open up for questions and maybe start here. Nothing in the room, I think. Nothing in the room. Then operator we can open up the line if we have some questions from the audience. We do. Thank And your first question comes from Johannes Grunzelius from Kepler. It's Johannes Grunzelius here. A few questions. May I start on kraftliner, that side. You're pretty positive here, Ulf, on the pricing prospects. Have you can you confirm that you have these price hikes you're pushing through? Have they been accepted? Because we can't see this, at least, in the statistics so far, but I know the statistics is lagging. And also if you could sort of highlight, is this very much demand driven or what's behind it? I think you saw that pretty well on the slide that I did show. But I mean, the announcement has been down from 1st November, so you cannot see it in the statistics yet. What you can see in the statistics is that testliner prices has already went up with €30 per ton And the announcement from our side has been €50 per tonne and that has also been done by other producers, some from 1st November, some from 15th November and so on. So I mean it's a negotiation ongoing here. But as you could see on the slide we have just now a very strong we have strong deliveries and we also have a rather strong box demand. We are more or less back on the trend level as we were before the pandemic. So I feel that we have for the moment being a very strong market for containerboard. So we should basically pencil in higher prices for the Q4 already? Still we are negotiating with our customers, but I mean our view is that the balance is strong. Then of course we know that we will have additional capacity coming on stream from the Q1 next year. And I mean it's hard for me to judge what kind of impact that will have, But the balance is good just now and prices is I mean they are increasing now for test liner which normally is a strong sign also for kraftliner. Yes. I can also see that you had at least compared to my expectation pretty favorable of expect on in the pulp business. Is it a lot of lower input cost that is coming through there? Or what's behind the low cost? And then also, how should we think about cost for the pulp division for the coming quarters? I can take that. I mean I think we saw obviously we had the significant impact from the unplanned stop, which came in July. And then but then we had good production in August September and that feeds through to then also a good I mean, a good production feeds through to a good cost position. So we had we've seen that effect come through in August September. Okay. That's useful. Then a final question. If I look at the Forrester division, I take EBITDA, I strip out the revaluation effects. The EBITDA per hectarecubicmeters is relatively low in the Q3 compared to previous quarter. Is this mainly affect our price? And can you help us in understanding the price decline year over year or quarter over quarter and how we should be thinking about the next few quarters? I could say that you also have to factor in always the amount of own forest harvest in that calculation as well. We have a when we harvest more of our own forest, we have a significant profit effect from that and because that's where the profit is delivered from basically and vice versa. When we have a low harvest of own forest that has a negative effect. So that's one thing you need to factor in. And then of course, the pulpwood prices and the timber sawlog prices have come down as you saw in the graph that we showed as well. So those so over a longer period, that has an impact as well. Yes. How should we think about timber prices, load prices Q4, Q1 here with Q3 as a base? Do you still see a pressure on prices or is it more flattening in and out now? I would say that we have a rather stable market out there. I mean if we look more into details it is a little bit over we are a little bit oversupply. We have a little bit of oversupply in pulpwood for the moment being. And as we have a very strong market for solid wood products, I mean in some areas I think some companies they might have a lack of sawlogs. For us as a big forest owner, I mean we can adjust a little bit on how we harvest. So we are in a rather balanced situation. But all in all I think in the northern part of Sweden we have stable situation. We have as it is just now no impact from the spruce beetle disease and so on. So I mean stable in our area, I would say. Okay. Thank you very much for taking my question. Thank you. Thank you. Your next question comes from Martin Malbi from ABG. Please go ahead. Your line is open. Yes, good morning. So the prospects are good on full plant containerboard. Not to go overboard in Q4, what kind of price change do you see on kraftliner for Q4 realized given that prices dropped in the previous quarter? And then also same question on pulp, if you will realize price ish for Q4? We don't give forecasts as you know. So I mean it is exactly as I say in containerboard we have announced a price increase of €50 per ton from 1st November. Then we have different agreements. I mean, some of them are related to index movements and some of them are direct agreements by us and customers. What we know just now we are negotiating and what we know is that in testliner they have come through with €30 per ton and then you have to do your own judgments of the possibility for us here. In pulp, we can also just follow what we know. I mean in China now prices as they have went up $30 per ton and have reached around $600 per ton as it is just now that is the spot price. We know that many suppliers or producers in Europe they have announced increasing prices from 1st October and we're just now negotiating prices for October. So I mean, we don't know really the outcome of that, but we can look at the statistics and you can do the same and see that we have a rather balanced situation. I think when you look at the inventory days just now in MBSK, you have to take into consideration that more or less all maintenance stops they are moved from the spring to the autumn as I said and that will have a rather big impact on the inventory level going forward from now on. And I would add Martin and I think Johannes had the same kind of question, but there's always a time lag when the prices come through to the bottom line. Of course, it's a time lag for it to come through to index. So those that takes a bit of time. So it always comes through a bit later in the result both up and down than it does in directly in the market, so to say. Okay. But to rephrase, it's likely that the lower kraftliner price, Did you capture everything here in Q3? Or is there more to come from that in Q4? No, it was pretty much all captured in Q3. Great. Thank you. And the last question on the potentially higher forest asset values. How much is that price increase you're looking at for the first half compared to what you had in your numbers? You mean, I mean, we have the price per cubic meter 2.81, is that? Yes. And then you said you had seen higher transactions than that. I said, no, the 2.81 is where the market is prices were at the end of June. So that's up versus where it was at the end of December is what I what I said. So we so you can see then there's a SEK5 per cubic meter increase there. And we've what we do so far is we estimate SEK281 for the end of the year, so until we see updated statistics. But we have no a lot of the transactions do come through in Q3, Q4. So there's a lot more statistics coming through now. And we see no indication that it is on the negative side, but we have to wait for the statistics to come in and see where it ends up. Okay. Thank you. Thank you. Your next question comes from Linus Larsen from SEB. Thank you very much and good morning to everyone. Thanks for providing the guidance on the Utviken EBIT drag that we've seen in the past couple of quarters. Could you also say what the depreciation has been, I. E, what has the EBITDA drag been in Q2 and Q3? And also just to understand this correctly, is all of the depreciation going away now as from the first of first of October in relation to Utrechten? Basically the depreciation we have given the EBIT then of NOK40,000,000 to NOK50 1,000,000 EBIT loss in Q2 and Q3. There's a small depreciation in around a little bit over $10,000,000 per quarter. So that's then you can add that back to find the EBITDA impact. But basically, that depreciation will continue up until pretty much up until the machines are closed. So there won't be a big impact from in Q4, Q1. Great. That's very helpful. Thank you. Then also regarding the Utrecht and site, I mean, you've already announced that you're making a significant investment into CTMP production. You have this cooperation with Renucel. Are you also looking at other potential options for the site? Is in your own business or as a landlord? Well, I think I mean we have a lot of big projects going on just now. So we are very mainly regarding our personnel that can be very helpful I think for Renewcell when they are starting up the new line. And so we are very happy for that. Otherwise we are not in a hurry. So I mean we will start up now the big the project with CTMP and we are in a very good position here. We can utilize the old TMP equipment that was integrated back in 2007 And by that we will have a very low investment cost. And also I didn't mention that, but the fact that we now can close down 2023 the CTP production at Ostrand that give us an opportunity for further capacity increase in Ostrand. So that is also part of the picture really. And also part of the over the strategic picture where we say that we shall continue to grow our pulp business and also as I said also leave the publication paper business. But as it is just now, now we are focused on delivering on the projects that we have announced. We have a fantastic site there and we will continue to have activities on Utrecht site. And for the moment being, we are not planning anything else for the moment being. But I mean long term, it's a fantastic infrastructure that will be used for something. And just to be perfectly clear, does that mean that also on the next leg of the Ostrand expansion, that's not something that is imminent. You will now focus on what's going on, on the Otrigan site and the previous project at Ostrand and Obbola and the next potential expansion of Ostrand is not in focus for the time being? I mean we have done a lot of pre studies and feasibility studies when it comes to Ostrand and we know that we can and we'll continue the journey at Ostrand and we shall do that of course as we have already today the biggest line in the world at site. And but again, it's a question of market, it's a question of cash flow and we don't know really what kind of impact the second wave of the COVID pandemic will have and so on. So I mean for the moment being we are focused on what we are what we have announced. Yes, that's clear. And then just short term also on pulp shipments I guess were negatively affected by the Ostrand boiler breakdown in the Q3. Our inventories on the low side now that you're going into the Q4? You have a bit of maintenance. And in other words, does that mean that shipments to capacity will remain somewhat suboptimal in the Q4 as well? I mean we will be impacted by the planned maintenance. So we did start in September. And as I said, we had in September and we know that we will have another negative impact of 125,000,000 in the 4th quarter. So and by that production will be lower for a while. We feel that we have a strong market as it is just now. So I mean we have no limitation in the market for the moment being. But still we have to do this planned stock. Right. And then just one final question on the there are a lot of structural changes going on in the company, Obolab, CTMP, the closure of Utviken, the acquisition of Forestland in the Baltics. Once all of this has been completed and the dust has settled, what would self sufficiency will we be looking at? Yes. I mean depending on I mean Obbola, CTMP and so on you will remain on around 50%, I would say. And the good thing with the CTMP project is that 50%, I mean that 300,000 tonnes of CTMP is around 600,000 cubic meter of wood, but more or less 50% out of that will be birch, which is good. I mean we are oversupplied when it comes to birch. So in birch it will be more than 100% coming from we will be fully supplied from our own forest. So you also have a little bit different mix going forward. Thank you. Your next question comes from Cole Hathorn from Jefferies. Please go ahead. Your line is open. Thanks for taking my question. Just a follow-up on the kraftliner market. We've seen the U. S. Market calling out good demand and box demand and then pulling back on some of the exports to Europe. Firstly, can I get a little bit of your comments on what you're seeing from the U? S. Players on the exports? And they also commented around stronger produce demand. And I know that's not really where much of your volumes go, but hoping you can give a little bit of commentary on that. And then following up on Wood Products, you talked about better construction demand and some exports to the U. S. Are you still seeing that strong pull in the export markets for Wood Products? Thank you. I mean if we start with the import of kraft line to Europe, normally it's rather stable. It is a couple of 100,000 tons going to Spain and Italy and down there and I feel it's on a rather stable level here and will continue to be. You mentioned produce as well-being strong, but Kraftliner is a lot of Kraftliner goes to the produce market. So it's an important segment also for Kraftliner. So that's we see that effect as well. When it comes to the U. S. Market, I'm maybe not the right person to ask. I mean we do 70,000 cubic meters per year and have done so for 25 years to few customers there and we feel that there is a strong demand. We are I'm personally a little bit surprised of the strong demand that we still have in Scandinavia and Northern Europe and so on. And but I mean that is what we have just now and as I said before see another price increase in the Q4 and we also see that we will have a strong market in the beginning of next year. So and U. S. Has been a strong driver for that because big volumes from Europe has went over to U. S. As prices has went up. SCA is maybe more stable with our customer base. So we haven't really acted on that. We have are quite stable in the mix. I didn't catch the second half of the year. So we are quite stable in the mix. I didn't catch the second question. What was that? Well, I suppose something just following up on the kraftliner side would be, do you have any more color what's driving this acceleration in demand? Is it industrial coming back that you're seeing in your customers? I mean, again, first, I can I believe that we have also during the pandemic seen a good demand from the e commerce business that has been strong? And what has been negatively impacted is the industry and we feel that it is a much stronger demand and you also saw more or less higher level than it was before the pandemic, which might be a little bit surprising but that's the case just now. Inventories are also low and the deliveries are super strong in Kraftliner. And I think very much is now depending on the 2nd wave, what kind of impact will that have on the industrial production. 1st wave that production of cars in Germany not the least went down and spare parts and things like that and a lot of our kraftliner is used for that kind of industry. So but as it is just now for the moment being it is a strong demand and let's hope that that will continue. But I think that will be pretty much dependent on the development now of the pandemic. Thank you. Your next question comes from Justin Jordan from Exane. Thank you and good morning, Ivan. I've got 2 completely different questions. Firstly, on the $40 tonnes of the fill price hike that you're targeting. I'm conscious of the fact that some of your Nordic peers have been cautious on this in what they've said in their Q3 results in recent days. And secondly, clearly, there is a very elevated difference between software pulp prices in excess of the hardware pulp prices globally. Does that make it a quite challenging environment to get this sulfur pulprica hike through unless you see hardwood pulp prices moving up also? And then my second question is just buried away in your results release, you're having a Capital Markets Day on December 3. What should we expect from that, please? Yes. No, I mean, on the I think Ofer said that really on the software price hike, I don't think we can comment anything on what others comments, but we feel a strong market with these maintenance stops also shifting to the Q4. So I think I don't think there's really much more we can add to that. That's our I think the feeling we have is how offers presented that. So I don't know what more I can add to help you there, Justin. But I think that's our take on the market situation and the prospects for on the NBSK side. And then the second question, I think, yes, we gave a little bit of a flavor in the yes, we'll give a bit more flavor going forward for the Capital Markets Day, but we expect to show basically the strategy going forward and the vision for SCA over the next 5 years is basically the theme of that Capital Markets Day. And we've taken a number of big decisions here and we want to show how that transforms SCA and then potential route after that as well. Okay. Just one quick follow-up on your new 15,000,000 tonnes of CO2 target as it were for 2,030. Do you envisage at some point in the future that you can monetize this carbon capture through, I don't know, some sort of EU regulatory system or something? Because clearly, you've been doing this, I don't want to say for centuries, but clearly, you're naturally doing this to some degree because you're a fantastic horse owner. But clearly, you don't get frankly any revenue or profit from it directly. But is there any sort of vision of the future where this might become a potential revenue profit stream for you? Maybe I can start, but I think it's still extremely early or hard to answer that question. I mean, I think it's becoming more talked about in terms of the benefit that forest has in terms of carbon dioxide. But there are no real kind of concrete proposals that we see for monetizing that. There's a few ideas, but it's still very I would say very preliminary and how those kind of ideas might work or might yes, might pan out in the future. I don't think anyone it's such it's too uncertain to draw any kind of conclusions or any kind of viewpoint at this stage, I would say, Hadrien. Your next question comes from Michael Dupele from UBS. Just a question on the publication paper business. I appreciate the additional details you've given on Q2 and Q3. But these are quite extreme quarters, I would say, from a historical perspective. And I'm wondering if you would mind giving some indication on the longer term EBITDA that business has generated before the pandemic? Maybe just a ballpark figure would be great. We don't give separate figures for publication paper, but I think what we've always said is basically is that the day when publication paper stops contributing, then we will take action and that's what we've done here. So publication paper during Q2 and Q3 has been a loss making business and has been then a negative effect on SCA and on the group. And then we've taken the decision to exit publication paper. Before that, publication paper is you have to go back a long time before you get basically a strong bottom line from publication paper. But it's been before that, it wasn't a negative impact. It was a neutral or a small positive impact, you could say. But I don't we I think that's about all I can say, Michael, but I would say it's been extremely volatile because it's also dependent on the currency and so on. So I mean and the B industry has been I think quite good at the closing down capacity, but as always a little bit too less and a little bit too late. And I think that again, I think we have reached a new normal and I don't think it's enough now with what's done. I mean a lot of capacity closures has now been announced, but we will see more. Yes, yes, for sure. For sure. And then a question on still on the pulp markets. I appreciate you're not wanting to give too much comments on the pricing. But if you think about the European and Chinese pulp markets right now, if you compare the 2, what would you say are the key differences right now in terms of demand trends and in terms of inventories and so on? Anything you could comment on that? I mean, yes, now we see that China was I mean they had a pandemic effect a little bit earlier and there was a little bit earlier recovered from the pandemic and some in the consumption in China as I see been quite good. We don't do too much to China and we are more focused on Europe and secondly on U. S. But still as we have seen that prices now has come up already in China and I think that Europe will come after and I don't know, comment so much more about that. I mean, we have most of our customers are in Europe. So that's the market that the vast majority of our sales and so that's our main market. Yes. And how would you characterize the demand in Europe? I guess the tissue demand hasn't been that strong and graphic paper has remained quite big. How have you seen the I mean, just looking at the statistics, but how have you seen the demand of pulp in Europe in Europe? I mean, you saw it on the slide more or less. It I mean first you had a buffering effect in the beginning of the pandemic. It was a really strong market out there and strong demand. Then it has come down to what you can more see like a normal level I would say and that's where we are just now. In the tissue business when you also look at tissue companies, I mean presenting the results they have a rather stable demand in tissue. So I think the big impact of course also in the pulp business has been I mean the effect of the publication paper business decline. Okay, okay. Sure. Good. And then just finally on the working capital, maybe, Toby, if you can give a comment on that. I mean, we saw quite a significant release, as you pointed out, in Q3. What do you expect to be going into the last quarter of the year? Do you expect to see some further release? Or how should we think about that? I think we don't give forecast either on working capital. I think Q3, as I said, was seasonally is a strong quarter and was particularly strong this year because of the tight control and also the lower volumes in Q3 have an impact on working capital. I don't think we'll see that effect twice if I put it that way, but I wouldn't at this stage give a forecast of what we expect in Q4. Okay. All right. Good. Thank you very much. Thank you. Your next question good morning. I had a few more clarifications, I suppose. So to start with the containerboard business. Testliner, you said there is a €30 price increase that has passed. Could you just remind us what was the increase that was solved when that passed? Sorry, what was the last part? What was the increase that was? What kind of ink? I think they also went for €50 per ton in most cases. Yes, sorry. Okay. Very good. Very good. And then Kraftliner, where do you now stand in pricing in October compared to the Q3 average? So kraftliner pricing in October For you. Yes, again, that's forecast information, but we don't give out. But basically, there's not a big difference. I would say basically we haven't seen the increase coming through. And as I mentioned earlier in the call, basically the time lag effect has come through now during Q3 of the previous drop in kraftliner prices. So that's now fully in. The drop was €20 per ton in Q3. Okay. Very good. Very good. And then this price increase, you announced for this sorry, November, does that impact the P and L primarily from December? How should we think about it? Yes, it has this time lag effect. So I think it will be a small impact before December. Yes, so it will be December 1st that we see any we see the impact of that on bottom line, yes. And then it will be more than in Q1. Good. And then looking into next year, there's quite a bit of capacity increases in testliner and then in the kraftliner. We know that Stora Enso is converting the Oulu plant and that will come online sort of early next year. How does the supply balance in that market look to you? It's really hard to say. I mean first of, I mean, Oulu will not go from 0% to 100% in 1 quarter. It will be a ramp up period of course. And again we don't I think the biggest question mark will be the demand. And as it is just now and as I did show you on the slide, I mean the box demand is back. It's on a higher level today than it was before the pandemic. Deliveries are on a really high level for the moment being. Inventories are on the low level. So I mean fundamentally you have a really strong balance in the market just now. But of course, I mean the big question mark for all of us just now is what kind of impact the second wave of the corona pandemic will have on the business. I think we in some areas might have learned something from the 1st wave and as it is just now we don't see too many signs of companies closing down the production. But I mean if things get worse then no one can really answer. Sure. Sure. And industrial demand in containerboard or kraft miner, has that now fully recovered from the pandemic impact of weather this time? Yes. I mean, it seems so. Or if I mean the e commerce and e business is super strong and maybe the industry part has not fully recovered yet. So that is yet to come if we when if and when we come over this. Okay. Very good. And then pulp, I still had a few questions on that as well. So given our oil price increases from 1st October and that those negotiations are ongoing, I suppose SEDRA followed that increase. We haven't seen an increase from Met. Have you seen increases from other players for the European market? We don't talk with other players. We talk with our customers and we feel that they understand that prices will come up a bit. And but I mean, we just talk to our customers. And the increase is from 1st October, but I suppose that would then impact November or how does it go? Go? Again, we have some customers that are related to the fixed price development and other customers they have I mean, they will have direct agreements. So I mean it differs. But again, it will you will have a lagging effect also in pulp. Okay. Okay. Good. And China was talked about quite a bit. Where does the sort of net price spread stand at the moment in NBSK between China and Europe after discounts? I mean, again, if you have China net price now on $600 more or less and I mean, official fixed price just now is $8.40 And then if you take 70% out of that, then you can do the calculation. Okay. Very good. And I suppose you mentioned this at mid part of the call, but where do you see sawtimber pricing going to Q4? How much was it up in Q3 now? And what's the sort of move to Q4? Yes, I mean for SCA, that's our own figures. I mean you have no statistics, but for SCA, we had a 1% price increase the Q3 in comparison with the Q2 including currency. And then in the Q4, I believe that prices will increase another 3% in comparison to the level that we have had now in the Q3. And we feel also that we have a surprisingly strong market when we also come into 2021. So the demand is still there. Of course, somewhat slower activities in the business merchant sector, but still a good demand and a stable demand. And we will now take our next question coming from the line of Oskar Lindstrom from Danske Bank. Please go ahead. Your line is open. All right. Good morning, gentlemen. And I have a couple of questions on the pulp side, which I thought was a very strong result here in the quarter. It seems you had very strong pulp production in August September, and you say that you lost some 50,000 tonnes in July because of the boiler problems. Now if I add back the 50,000 tons, that would to what you actually delivered in the Q3, that would indicate that it's a record level for the pulp division now in Q3. Does this reflect in any way sort of a new normal new higher production level for Ostrand? Or were you more sort of you had a very good 2 months and that's the way we should see it? I certainly hope that we have reached a new normal so to say. And as you said, we have a good production in August September and one of these months was also record month. But again it's it is now I feel on a stable level. We have now just performed planned stop and we have done also some work with some bottlenecks and so on. So I mean step by step it's getting better and better. But still it is a tough job to ramp up a mill like that. And but just now we are we are confident with what we have and we have reached some kind of a new level there now. All right. Very interesting. And a follow-up. I mean, you talked a little bit about the CTMP project that you have in Utrecht. And how are you progressing on the project of expanding the chemical pulp capacity in Ostrand, which you previously mentioned would be made possible by moving the CTMP line to Utviken. What's the progress on that project? Yes. Again, I mean, just now we have taken the decision to invest SEK 1,450,000,000 to build up CTMP in Tordviken site and that will be of course a big project. But I mean we have to do we have to close down the CTP production at Ostrand in order to be able to continue to develop the Ostrand site. And we will do that. I mean, definitely we will do that. We will utilize the infrastructure that we have now created around Ostrand. So that will happen. But again, now it's more a question of, I mean, cash, of course, and what kind of impact will the pandemic have on the future market for a while and so I mean timing is important just now. We have a couple of big projects going on now. We have Obbola perfectly on time and budget will be up and running in the Q1 of 2023. We have the big project in Bolstad slightly less than SEK1 1,000,000,000 but still a lot of money. We invest now in the closure publication paper also in cash slightly below $1,000,000,000 and we put in SEK 1,450,000,000 into the CTP production. And in addition, we have also taken another step in the Baltics. I mean, we have a lot of cash out for a while just now. We have done a lot of work in Ostrand just to understand the most clever way to take the next step. There's some I mean we are pretty sure on how to do it. So just now it's more a question about timing, I would say. Thank you. I mean, I appreciate that you a lot of things going on at the moment, including some rather expensive ones. Just on that expansion in Ostrand, and again, I realized you're it's some time away. Would expanding that capacity necessarily cost a lot of what would be the CapEx associated with that? Or is it something you would be able to do with a rather small debottlenecking investment? I don't like to speculate in that. But I think that will be I mean, if C10B the C10P project that will be a very cost effective one because then we can use the C10P line already. So I mean that will be 1 third of a greenfield. But in Ostrand, I mean I believe we will be more in line with what a normal cost for expanding a pulp mill. So And it does I mean, it does depend on what kind of technology. There are a few options still. So it's not that we know exactly which option is the I mean, still the problem for us in the the recovery boiler. We need to find a way to release that bottleneck and you can do that in different ways. And it's also related to what you can do with the lignin. You can always do energy but can you do something else and how can you do it? So I mean, we have some options and we also have some time now I think to figure out what will be the best for us and the safest way to do it. Thank you. Just finally on this topic, when do you think you will be able to tell us about what that next step in Erstad will look like? Maybe when we know about the pandemic and things like that. So let's see. We will come back on it, Olska. Yes. Thank you. Yes. And then just a question on the CTMP project in Utveegan. I know you had a separate press conference on this, but something that's I've thought about since then. To what extent will you be having selling this increased CTMP volume to existing customers? Or to what extent will you need to find new customers? I mean, it's quite a niche product in a relatively small market. I was just wondering about that. Yes. It's a good question. I mean, we have CTMP is not you have different grades of CTMP and we are rather specialized in the CTMP that we produce today from Ostrand and we feel that we have a strong customer base already today and many of these customers they like us to increase the volume and that is of course the first option. But we also see an increasing demand not the least from China and so on, mainly due to the chemical pulp production. But the challenge will might be in the market for a while. But again, that's also why we haven't really calculated on a fast ramp up. We will take it step by step and we will also try to continue with the balanced market of course. All right, wonderful. Thank you. Those were the questions I had. Thank you. Thank you. Thank you. We have no further questions at this time. I will now hand back to the speakers for closing remarks. Thank you for the interest you have shown in this press conference and in our quarterly report. We hope to see and hear from you and then at the year end report on the 29th of and then at the year end report on the 29th January next year. Thank you.