Earnings Call: Q1 2021

Apr 30, 2021

Good morning, and welcome to this presentation of SCA's First Quarter Report for 2021. With me here today, I have President and CEO, Ulf Larsson and Chief Financial Officer, Torbjorn Lautern, who will present the Q1 results followed by a Q and A session. Ulf, please, the floor is yours. Thank you, Anders. And also from my side, a good morning and a warm welcome to is a presentation of our Q1 2021. Strong market has characterized the Q1 of 2021 and we have seen high demand and gradually increasing prices within all of SA product areas and this far into the Q2, we can also note that this strong trend, I must say, is continuing. When comparing our EBITDA level for the Q1 with the outcome for the Q1 in 2020, we note an improvement of 32%, and this is mainly due to increasing prices in all areas for wood, for pulp, for kraftliner, while the currency development contracts the positive earnings development during the period. In August last year, we informed that negotiations to close the at that time remaining 3 paper machines at Doortviken would take place. The closure has progressed sequentially and according to plan during the Q1 of 2021 and the last LWC machine closed down at the end of February. This change has, together with the sale of our operations in U. K. Decreased our sales substantially during the Q1 2021 compared to the Q1 2020. On the other hand, price and volume have contributed positively in this comparison. In connection to our announcement of the decision to close down the publication paper business and also in line with our stated strategy, we will invest SEK1.45 billion in increased CPMP pulp production. This investment is located at the Otriggen site in order to obtain a capital efficient investment by using existing equipment in the new project and the investment cost will be around SEK 5,000 per Ton, which is approximately 1 third of greenfield investment. This project is running on time and budget. Last but not least, I can also mention that ongoing investment to build the world's largest kraftliner machine in Obbola is also progressing on time and budget despite challenging times. I can also say that we have had no significant impact on production or distribution from COVID-nineteen and of course, we continue to take measures to minimize the risk to our operations and people as far as possible. We have made a very strong start this year and we delivered SEK1.36 SEK1 1,000,000,000 on EBITDA level during the Q1. As already mentioned, this represents an improvement of 32% compared to the corresponding quarter 2020. Our EBITDA margin was strengthened by the closure of the publication Paper Business and the sale of the wood distribution operation toward the Building Materials sector in the UK and reached 33% during the Q1. If we take a look at our industrial return on capital employed calculated as 12 months rolling average, that one amounted to 8%, while the level for the Q1 was 16%. Thanks to a strong focus on cash flow and also a reduced net debt of over SEK 600,000,000 compared to previous quarter, our leverage arrived at SEK1.5 billion despite the ongoing investment program. So I'm proud to say that we continue to finance our strategic investments with our operating cash flow. So I now would like to make some comments for each segments starting with Forests and we have had a stable supply of raw material to our industries during this quarter, sales was slightly lower than comparing quarter on quarter mainly due to lower pulpwood prices because of lower share of imported volumes and also somewhat lower volumes also due to the closure of the publication paper business. EBITDA, however, was very much in line with last year, having optimized the raw material mix following the closure of publication paper. In wood, we have had a continued high demand in all markets during the Q1 and thereby also steeply increasing prices, again driven mainly by the U. S. When I presented the Q4 report, I estimated the price increase for the Q1 versus Q4 to be above 10% and the actual outcome for us was more like 16%. And at present, we forecast a similar price increase at least for the Q2 in comparison with the first. Sales was down 12% during the Q1 'twenty one and the reason for that was the divestment of SCA Wood Supply UK in Q4. And as you know, this business was large built on trading had a yearly turnover of approximately SEK1.4 billion and the normal EBITDA level of SEK25 1,000,000. As mentioned before, we will continue to sell solid wood products to our industrial customers in the UK also after this divestment. UK will continue to be one of our core markets for solid wood products. EBITDA was, as you can see, up as much as 226 mainly due to higher prices. Today's stock level of solid wood products in Sweden and Finland is in relation to the average the last 5 years described at the top left on this slide. And you can note that the inventory volumes are at a very low level. At the same time, the underlying consumption continues to be good. The availability of containers for overseas transports is limited and thereby causes some disturbances and also some extra costs in the freight floor. As can be seen in the diagram to the bottom left, the Swedish and Finnish Somi's production rather exceeds the last 5 years average and that production is now running at full capacity to meet the increased demand. Also the pulp market is still strong with good demand and gradually increasing prices, this time driven by China. And as you can see in the diagram to the bottom left, which shows our price development net mill in Swedish kronor, the currency effect and the effect of the time lag is apparent. When we peaked price wise at the turn of 20 in 2019, we had a fixed price in Europe of $12.30 per ton. And as you also can see, we touched to bottom during the Q1 2020 when the pigs price had dropped to US8.20 dollars per tonne. After a rather flat price development during the major part of 2020, the pulp prices started to increase sharply and today we have an official Plpk's listing of $11.20 per ton. Now we know that announcements have been firstly made for further price increase up to 12 US20 dollars per tonne and secondly for another price rise to US1300 dollars per tonne and that will be gradually implemented through the second and also third quarter. So I believe next month we are back on the same peaks level as we had Q1 2019, but then both increasing discount level and also currency have a negative effect of course. We nevertheless, we note that the net price in China is approximately US100 dollars per ton higher than in Europe even after allowing for a rise to US12.20 dollars per ton in Europe. Sales and EBITDA were up substantially in the Q1 2021 compared to the Q4 2020. This relates to higher prices, but also to lower costs. We've had good and stable production that also leads to better yield in terms of lower consumption of wood, lower consumption of chemicals, higher energy generation and so on. Our ongoing project to build a CTMP line at Tothviken's industrial site with a total capacity of 300,000 ton is progressing on time and budget and when the CTMP plant, the Tordviken is ready, the production of CTMP at Oerstand will be closed down. So the net increase in other words will be about 200,000 tons of CTP and P and we believe this site or mill line will start up in the beginning of 2023. Inventories have now come down to a normal or low level in both softwood pulp as well as in hardwood pulp. The supply situation is affected by lack of capacity in the logistics chain, especially to Asia. This lag no doubt drives pulp price, but also results in increased distribution cost on the other side. As mentioned earlier, the high net prices mainly in China, but also in U. S. Indicate continued rising pulp prices in Europe even after the prices have softened a little bit in China. When we move to our business area containerboard, I would like to start by stating, as I did also in the beginning, that our expansion project in Obbola is progressing well and on time and budget start up will be in the first half of twenty twenty three. The sales and EBITDA are up 4% and 7%, respectively, Q1 'twenty one versus Q1 'twenty 20, and this is mainly due to increase in prices, but also due to yes, mainly due to increase in prices. And even if you in the bottom left on the diagram can note the lag effect in combination with a negative currency impact when it comes to our registered net Tuss. The prices for UCC, which have more than doubled since November 2020, negatively affect the result, but at the same time, as they also support the price development for Testliner and thereby also indirectly for Kraftliner. The kraftliner deliveries from Europe globally continued to increase also in the beginning of this year and we can conclude that the demand for boxes has been very strong also during the Q1 of 2021 and is now back on a level above the trend line before the outbreak of the pandemic. This has led to inventories being on a very, very low level for Kraftliner. Since the bottom position in terms of price Q4 2020, the price for unbleached kraft has so far risen by approximately €100 per ton. As of April 1, the price for brown qualities will increase with an additional €50 per tonne for brown and with €30 per tonne for white Topkraftliner. These price increases will successively take effect during the Q2. As a view on 1st, several marketplace have already announced a new price increase of €50 per ton for both brown and white kraftliner, taking impact successively during the Q3. With this present situation, the delta between kraft and testliner prices is approximately €150 per tonne, which historically is rather normal level. So by that, I'm happy to hand over to Toby. Thank you, Ulf, and good morning, everybody. I will start with the income statement here. And you can see on the top line the net sales. You can see we had SEK 4,200,000,000 of net sales this quarter, which is a 13% reduction versus the Q1 last year. We had underlying net sales growth of 8%, but of course, there was a significant impact from both the exit of publication paper and the divestment of Wood Supply UK on the which reduced net sales. Those 2, however, had very little impact on EBITDA, of course, and we had a strong growth in EBITDA from just over SEK 1,000,000,000 to SEK 1,360,000,000 this first quarter this year and then an EBITDA margin now of nearly 33%, so a significant increase in margin, which is also due to the exit from those businesses structurally improves the EBITDA margin going forward. On the EBIT line, you see that we actually increased EBIT by more than we increased EBITDA. So it's about SEK 100,000,000 lower, of course, in depreciation. About half of that SEK 100,000,000 is due to taking away the depreciation of mainly Oortviken and publication paper. And the other half is actually we have made a reduction to the write downs we took in Q4 last year. So that's a one off items around SEK 50,000,000. And the EBIT margin then comes out at 25% with an EBIT just over SEK 1,000,000,000 for the quarter. Financial items, very much in line with last year, SEK 28,000,000 tax, SEK 216,000,000 and the average tax rate, just over 21%, very close to the normal Swedish corporation tax rate. And altogether, that means we delivered a net profit this quarter of SEK 800,000,000, SEK 802,000,000 and earnings per share SEK 1.14 if I come to the segments and just the development over recent quarters, starting with the forest on the left hand side, you can see the top line has come down a bit, and that's basically due to the exit of publication paper. So we have less wood being supplied to the industries. On the bottom line, we have a lower EBITDA than Q4, and that's really driven by the seasonal impact, which we have our seasonal pattern where we harvest less owned forest in Q1 versus Q4, so that's the biggest impact. You can see we're pretty much flat versus Q1 last year, and that's despite actually pulpwood price being a bit lower than it was last year mainly because, as Ulf mentioned as well, we optimized the sourcing mix with also taking away the volume requirement for publication paper. When it comes to wood, you can see here the sales has come down because we've exited the Wood Supply UK, which was relatively large in sales terms, but mainly a trading company. So we had SEK 1,400,000,000 sales on an annual basis, and that's what you see impacting the top line, but it's counteracted by strongly increasing prices. So that's impacting the sales and the prices, of course, are what's driving the EBITDA bottom line and the margin. So we now had SEK 310,000,000 EBITDA in the Q1 and an EBITDA margin of 25%. In pulp, we had a pretty clean quarter, good production in Q1. We have an impact of increased prices on the top line and of course, the increased prices and the good production drive better yield and cost performance and therefore, we had a 30% EBITDA margin and SEK 385,000,000 in terms of EBITDA in Pulp. And then finally, when it comes to containerboardpaper, Q1 now is just the containerboard business. So the history included publication paper, and you can see the drop in sales is because we now taken exit publication paper, so the sales dropped substantially, but of course, limited impact on EBITDA. And you can see the EBITDA from Q1 is just containerboard here as well, SEK 321,000,000 and the margin improvement is also because of the exit publication paper to 25%. We have figures which show just containerboard the 2 containerboard mills, Ovela and Monksund, on their own in the report, so if you want to see the development of Just Containerboard, you can find that also. When it comes to the net sales bridge, you can see here we had a significant increase from price increases in all areas, all product areas, so 7%. We had higher volumes and mainly also the pulp division, 4%. Currency was negative this quarter, Swedish krona stronger than it was in Q1 last year. And then we have the two effects from the divestment of Wood Supply UK, 7% and 14% from the exit publication paper. When it comes to the bridge for EBITDA, you can see the big impact from higher prices in which is really driving the EBITDA improvement. We then had a positive effect, a positive effect from the volumes as well. Raw material, pretty much neutral. Energy, a positive partly due to better energy production, also predominantly in Ostrand. And then currency again was negative and also a negative impact here from exit publication paper we actually had in the Q1 last year was before the pandemic hit. So we had a small positive result in the Q1 last year. And in the Q1 this year, of course, we we're closing down the machines and we had the impact of bearing the cost for publication paper during the final stages of the exit. When it comes to cash flow, you can see our EBITDA SEK 1.36 NOK 1,000,000,000 we take away the revaluation impact, and we had an operating cash surplus just over NOK 1,000,000,000. Working capital normally increases in the Q1 and it did this quarter as well. The increased prices had some impact on working capital, it's very much in line with the sales level, so stable in line with the sales level. We had restructuring costs now from the closure of publication paper, so SEK 123,000,000 restructuring costs, just over SEK 200,000,000 current CapEx and then an operating cash flow of NOK 475,000,000, which that means we're more or less funding our strategic capital expenditures, as Odf mentioned, from operating cash flow. We also had a strong deleveraging effect this quarter down to just over SEK 7,000,000,000 in net debt. This is due to also the strong operating cash flow in Q1, nearly SEK 500,000,000. And of course, at the same time, we're funding the significant strategic investments that are ongoing predominantly in Obbola and the CTMP in Odfjeken. So now we're down to 1.5x net debt to EBITDA, so a strong deleveraging effect. And then finally, on the balance sheet, nothing strange here, but you can see the forest assets are at just over SEK 75,000,000,000. We haven't updated the pricing the market price statistics for the forest assets in the quarter 1. We'll come back to that in quarter 2. Working capital, as I said, stable in relation to sales, 18% of working capital to sales ratio. And then total capital employed just over SEK 80,000,000,000 at the end of March. And net debt, as I mentioned before, just over SEK 7,000,000,000 debt to EBITDA, 1.5 times versus at the end of last year, where we also had a good cash flow in the last quarter, we came down to 1.7 times, but we're now 1.5 times and then equity, NOK 73,000,000,000. So with that, I can hand back to Ulf for a summary. Yeah. I mean, when we summarize the Q1, again, it is really strong quarter. We have a strong market out there. We have a positive trend, increasing prices in more or less all remaining product areas. We can also see that the Q1 has been good in the perspective of production and cost control. Our EBITDA was up 32% versus the Q1 2020. Sales was of course impacted by the decision to exit publication paper and we have now 25th February closed down the last remaining LWC Paper Machine and we also, as you know, took the decision to divest our wood supply in Unit in UK. And last but not least important are 2 big investment projects in Obbola, Kraftliner and Utrecht and CTMP is running on time and on budget. Thank you. That concludes the first part of this presentation, and we are now ready to open up for questions from the audience, so please, operator, go ahead. Thank you. We now begin the question and answer session. We are taking our first question from the line of Linus Larsson at IFP. Thank you and a good day to everyone. Starting with the Wood Division, which is doing very well, markets are very strong. And just if you could, Ulf, repeat what I think you said, but did you say that you expect the price development in the Q2 versus the Q1 to be at the same pace of the improvement that we saw in the first versus the 4th quarter and also in this context, how do you see volume development and Soar log cost developments in the Q2. Yeah. Can you just confirm what you say, Linus, I mean, we will have more or less the same positive price development in the Q2 versus the Q1 as we had when we compare the Q1 with the Q4, so that is our view as it is just now. The second question was production volume. And I mean, as you can understand, just now we try to produce as much as we can. We do so and all other producers, they do the same. And of course, it is also, let's say, a favorable time of the year. Seasonally, it's good to produce during the spring. When it comes to the cost for sawlogs, I think it differs between different areas in the region. And for us being the biggest private forest owner in Europe, I think we have rather good cost control when it comes to our log supplies. So I feel for the coming quarter it will be, I would say, reasonably flat for us. Great. Thank you. And maybe a bit of Housekeeping. But with regards to the changes at Utviken, you Repeat that. In the second quarter, on the other line, the D. A. Drag on From Oortviken will be NOK 20,000,000 to NOK 30,000,000. That's on EBITDA. How much was it In the Q1? You can So the EBITDA effect in the Q1 for Otrifikin was around minus SEK 50,000,000. And then we expect an effect going forward of around SEK 20,000,000 to SEK 30,000,000 a quarter of what we call transformation cost keeping the Odfjeken site running until we start up the CTMP. So that's on EBITDA level. Is that Yeah, great. Yeah, no, That's great. And then maybe to continue and maybe that was what you were about to say. On the depreciation side, Again, on behalf of 9. Yes. On the depreciation Please continue. Yes. So we had SEK 100,000,000 effect on depreciation, basically around half of that is the depreciation on the Oortviken side that is disappearing. And around half of that or a little bit more than half of that is the is a one time effect, which is that we've actually reduced some of the write downs we took last year because we now have good prospects to be able to sell some of the assets, so we take back a bit of that write down. So that's a one off effect that won't you won't see that in Q2 and onwards. Right. But on the other line specifically, I mean, it looks as if Depreciation on other was SEK 38,000,000 in the first quarter. What would that be in the second quarter Altogether, I mean, Oak Creek and then everything included. Yeah. I mean the depreciation will be so that is predominantly from this one time effect. So that All right. So back to a very low depreciation from Q2 onwards? Yes, it should be back to a low level from Q2 onwards. Got you. I can check that and come back to you, yes. Okay, cool. No, that's very good. And then just finally, if I may, on pulp, a very, very fast response to the strong pulp markets in your P and L. Could you just say something about your mix, maybe especially in terms of geography, how much is China, for instance, as a percentage of sales. I mean, again, our we do very small volumes for China. For a while now the prices have been slightly higher in China, but on the other hand we have our, let's say core customer base in Europe and also in U. S. So we have limited volumes to Asia. Great. That's all for me. Thank you very much. Thank you. We're taking our next question from the line of Robin Santavirta at Carnegie. Thank you very much and Good day, everybody. Now related to the pulp business, it seems as Yes. ASP is the increase is fairly low as expected. That's probably there's a quite significant lag to this Price statistics. But the costs are clearly lower, at least compared to what I expected in pulp, I think Gruff you said something about that. How should you what are the key reasons? Can you just repeat that? And how should we look at the cost going forward in pulp? Has basically Ostrand now reached a new Efficiency level or is this lower pulpwood cost? So what are the key items and how should we look Upon the next few quarters. Thanks. I mean generally one can say that when we are producing well, then of course the yield is better when it comes to wood consumption, chemical consumption and as I said also energy Generation, so in general, I mean, you have a lot of positive effects when the production is on a stable level where we are just now, to be honest. When it comes to I can just give a comment on wood cost, I mean the decision to close down Utviken also gave us a positive position in the wood market, I mean, we have more or less reduced imported volumes down to 0 for a while now. We will need some more wood again when we start up Obbola, but also when we start up the CTP production in the first half of twenty twenty three. But until then we are on a we have a lower wood consumption which has also contributed in a positive way of course. I don't know if you'd like to add something, Tobje. I could just add. I mean, the cost position is predominantly due to the good production and better yield. Then we do sell some tall oil, which has a pretty good price in the Q1 and a good energy balance as well in the Q1. So they help, of course, but it's predominantly the production in the year. I understand. Thanks. And then the second question related to the containerboard business. Could you just repeat the order of price increases that you have Launched, number 1. And number 2, you mentioned OCC. Could you just remind us Of the fiber relation of OCC in containerboard you have? Yes, I mean if we start with OCC, we have, as I said, more than doubled the price since November 2020, at that time I think we were on €70 per ton and today we see prices around €150,000,000 or €160,000,000 per ton for OCC and that of course have a negative effect because we also use some small volumes of OCC in our production there. On the other side, if I got you right, I mean, we have now announced a price increase from April 1 for brown qualities and of €50 per ton and also for white top of €30 per ton. And then another price increase is announced from 1st June, €50 per tonne for both brown and white top. And that will as you know, I mean, that will successively be implemented in the second and the third quarter. I understand. Thanks. And just finally, if you have been a quite good predictor of the sawn timber and the wood Markus, and you gave your sort of view for Q2. How should we look upon H2 now? And do you believe that these high prices we have globally and in the Americas especially, is this Simply a cyclical strength or other more sort of fundamental elements or structural elements supporting prices, which could Keep the prices higher for longer. I mean solid wood products will continue to be cyclical, no doubt about that, but I mean what we see us now is one effect of people due to the pandemic, they cannot travel as much as they did in the past for the moment being and I mean some people are moving out from urban areas and we see a lot of is in houses and both in terms of new construction, but maybe even more in repair and maintenance. And I mean the biggest driver you have in the U. S. Market, but we see the same trend also in Scandinavia and in all other regions. And in addition to that and that is my guess is that we have I mean we have supporting things from the governments all over the world now to get the economy to work again and that will also support the market for a while, I mean infrastructure projects, they need often a lot of wood. I think we will have a strong consumption now for a while, but I don't think we have reached so far is the new level. Underlying, we still have a very positive trend for solid wood products, but just now we are boosted of the, let's say this effect from the pandemic. I understand. Thank you very much. We're taking our next question from the line of Christian Kopfer at Nordea. Thanks, operator. Good morning, everyone. Just a few follow ups for Baoyi's side. Firstly, on the pulp market, I would not ask you for any Pulp price predictions, because you will not answer them anyways. I'm just wondering a little bit because we are now not very far from the price that we saw and you also commented on it, Ulf, I think, the price that we saw in 2018. So Do you think there is something fundamentally different this time around? Because after the previous Okay. They were stable for a number of months, but then we saw a dramatic price point. So the question is, do you see Any different fundamentals this time around than what we saw in 2018? Well not really, I think also pulp will continue to be a cyclical business. Again, the question of supply and demand. I mean, we know that no new additional capacity of size will be apparent before the Metzi investment will come on stream. And until then I think that I mean the market might be quite balanced. If you look at the inventory level, both for hardwood and softwood, they are now on a, let's say, a normal level. We have had some disturbances in the logistical system and that might also have had some kind of short term effect on the pulp market. But I think also when you compare it to the history, you have to remember that the rebates increased 1% or 2% year every year, so that has an impact. And the currency impact, I think Ulf mentioned earlier as well. So for many producers, the impact has been negative versus that peak in 2018. So it's important to remember. And I think that's what you could see also in the diagram that I did show a while ago. I mean, even if we have we have had quite steep price increases now for a while, but when you look at net mill prices, I mean they are definitely impacted by the currency effect, but also you have a lagging effect and that you have to take into consideration. And also, as you said, also the discount the increase in the discount levels. Right. But on the discounts, first, did you see increased discounts In the Q1, I couldn't really see them when I'm trying to calculate them backwards. And secondly, what is driving the increased discounts? Yeah. You have them in the P and L. We have increasing discounts for the Q1 definitely so. And what is driving, I mean that is more to ask the people that are buying our pulp. Maybe it's good to have a higher official price to show the market. But it's been I mean, it's been that trend for many years both in Europe and U. S. And you have an increase of 2% in rebate levels this year versus last year. So it's But again, if you like to look at the real price, it's just to look at China prices. And but just now, as I mentioned also, today we have a delta between European prices and China prices of a little bit more than US100 dollars per Ton, and I think that is some kind of sign that the pulp price will continue up for a while. Okay. And then finally for me on containerboard. Kraftliner, brown kraftliner is obviously coming up dramatically or Significantly. White top is not coming up at all that much. What do you think is the key reason behind why top Lagging, Brown, so much. Hi. It's more a question of volatility. If you look at the price over time for White Top, it's much more stable. So I mean it's that's the reason I think. Yes, I'm trying to figure out if could it be could one reason be that customers For ESG reason, for environmental reasons, would demand and beach products more because it's more healthy to the environment? I mean our kraftliner is our white top Yes, it's not coated. So but I mean, there tends to be a lagging effect also. The white top is more stable, but it over time follows but takes more time. And then there's been such demand for the brown kraftliner That I think production has been focused on the strong demand for brown kraftliner, which has really been driving the pricing dynamic. We haven't really seen a trend shift in the demand, but maybe you're better to judge that, but Okay. Thank you very much. We are taking our next question from the line of Oskar Lindstrom at Danske. Yes, good morning. I have two questions. Both of them are to you, Ulf. First one, just Do you have any picture of what's happening in the China pulp market right now in your view? I mean, how much of the most recent spike up has been inventory refilling or sort of that type of effect? That's my first question. My second question is more long term. So I mean, we're seeing a very strong cyclical price improvement in a number of markets. And you talked about Some of the factors on the demand side driving this, increased housing construction, government subsidies and things like that. Do you also see factors on the supply side contributing to this? And To what extent do you believe that those are structural, I. E, long term changes? I'm thinking about things like harvesting levels, Closure of old mills, etcetera, which has happened for a period. One of your industry peers has talked about what they see as a global fiber shortage, if I remember correctly. So those were my two questions, China pulp and supply side disruptions. If we start with the pulp side, I mean, yes, it's hard to say. I mean, we have seen, as you have done, the China price softening a little bit when it comes to the Shanghai futures and things like that, but what we feel in the market is that there is still a strong demand for pulp and we can also see when we look into reports coming up now that the underlying consumption is still on a very good level. So I think for a while China will be demanding quite a lot of pulp and as long as you have a delta between China prices and China spot prices and what we have in Europe and U. S. That will drive the price also in Europe and U. S. And that is also exactly what we see us now. How long will it last? I mean that's tough to say or predict. When it comes to trends when it comes to fiber supply, yes. I mean, long term, I think that we see some different things here. I mean, if we look into North America, we know that Pine Beetle deceased 20 years ago. I mean, that has had an effect of the fiber supply in that region. We've seen the pine beetle disease in Central Europe. Short term, that is, of course, for some place positive. Long term, that is of course negative. And I mean, I think according to Global Trends, when it comes to see the forest industry as a part of the solution to protect the climate. I think that we have an underlying positive trend for our industry and not the least for companies like SCA sitting on a big part of Forest Land and Virgin Fiber in their own hand. So that is maybe my feeling. Would you like to add something, Torbjorn? No, thank you. Good summary. All right. Thank you. We're taking our next question from the line of Martin Melby at ABG. Good morning. Could you try to simplify the quarter over quarter Price changes on pulp and containerboard for Q2. That is realistic the way you see it now? Yes. As you know, We don't give forecast. I think we have a time lag. So that and that's both for containerboard and for pulp is typically around 2 to 3 months. And then you see I think Ofer has mentioned the announced price increases in things like fixed prices For Kraftliner, so yes, going up from today's level to 12.20 Dollars per tonne and then there's now been announced $1300 per tonne. So that's the PIX or the announcements on pulp. And then for kraftliner, we see the increase is also mentioned ahead of us, but we don't yes, we don't give a specific forecast. Okay. On the sawmilling After the merchant business is out, is all the sales in that division now, Say eligible for a price increase? Or is there some business which is stable? No. We still have a supply business in Scandinavia, which is so you can't in that sense, it's not the total sales of the wood business that has a 16% price increase, that's really the underlying price increase on the wood. And then we have a portion which the supply business, which we still have in Scandinavia, which doesn't have a profit increase in the same to the same extent It's more a trading operation. But if we compare, let's say, the supply solution we have in Scandinavia in comparison with U. K. The grade of the integration is much higher in Scandinavia in comparison with what we had in U. K. And that was also the reason why we took the decision to divest U. K. But I mean in Scandinavia, we have much more than 50% in terms of integration, which is very positive. Yeah. So some 30% or so of sales, 30%, 40% is then the supply represents the supply segment. Thank you. And last question, maybe I missed this at the start, but do you have a comment regarding the last document regarding taxonomy? Yes. Only that I think it's now clear that I can Forest you can say Forest Management is, I think, clearly included in the taxonomy, which is, of course, positive. I think when it comes to the rest of our activities, we think there's a good case for it to be included even under the way things are written now. But there's a it's a very unclear situation still. So I mean, we think it's impossible to start to talk about percentage numbers given the lack of clarity as it is today and that needs to be improved going forward in order to come with any kind of reliable guidance going forward. But I think that's about all we can say as of today. Thank you. We are taking our next question from the line of Justin Jordan, Edexcel. Thank you and good morning, everyone. I just want to return to the woods division, I guess. Clearly, we've seen very strong wood demand in North America driving up, I suppose, North American prices first. And If I'm simplifying it, please correct me, but that strong demand from North America and pricing business is dragging up, shall we say, European prices. Ultimately, as you've been very clear with us, this is a cyclical industry, how quickly can the industry respond through increasing harvesting levels? Is How sustainable are these price increases that we've seen for the rest of 2021 or perhaps multiple years beyond? Could you help us understand just how ultimately it's a supply demand market and clearly supply will increase over time, but how quickly can that happen, please? Yeah, I can try to start here. I mean, when it comes to production, it's rather easy to increase the production when we have a strong market and that is also what we have seen. I cannot really say that I follow the North American market, but if I take a look at the statistics for Scandinavia and I mean you have a big volume coming from this region. There we can see that the production is slightly higher than the average for, as I said, the last 5 years, but I don't think that you have too much possibilities to increase capacity further. I think we are running at full capacity more or less just now. I think some smaller Somis, they will maybe try to speed up during the summer, which is not normally may be done from smaller players we normally produce during summer also in all markets. So I think and how long this situation will last, I mean that is impossible really to say. We know now that the Q2, as I said, I mean, that one will be stronger than the first one. And typically, you don't see too much of weakness in the Q3 if it follows the normal pattern, I would say. Okay. Thank you. Just one quick follow-up on a different topic. You called out clearly rising OCC prices earlier, but I guess ultimately that feed through to rising Tesla on our prices and that clearly pushes up Kraftliner prices, which helps you. Can you just remind us what COCC consumption is within SCA? Because I appreciate it's cost inflation, but I would have thought it's probably not Engine material and group context. I mean, overall, we do have OCC is a raw material. And I think you can find the data in our annual report on how much OCC we Sorry, I don't have the figure in my head. But yes, overall, I mean, while it's a cost increase for us, if OCC prices go up, they pushed testliner prices up and that has a positive impact on kraftliner prices. So in the long run, it's a positive to SCA with increasing OCC prices within reason. And as you said, I mean testliner prices, they will push kraftliner prices and in this market today we have a delta between testliner and kraftliner of €150 per ton approximately and that is is quite on a quite normal level. So that seems to be quite stable. Yes. It's a good time to be long containerboard. Thank you, We're now taking our next question from the line of Johannes Grund Selius at Kepler. Yes. Hello, everyone. This is Johannes here. Just a bit of a follow-up on the containerboard market and your analysis of that. Would you say the very strong Demand increase in Q1 and what we have seen over the last few quarters. I mean, is it both driven by increased e commerce use from those channels? Or is it more driven by a comeback of industrial end segments? Interesting if you can Sort of comment, the spectacular demand development here. I think the main reason is the e commerce maybe. I mean still the pandemic makes us continue to buy things, but we like to have them distributed to our homes. And I mean then you also consume more packaging materials, but I think also in the first wave of the pandemic, we saw that more industrial capacity were closed down, I would say. I think from in the second phase and now in the third phase, all companies they try to continue to run their business in I mean as good as they can. So but I think the main difference is the increasing e commerce. Yes. And I mean, what you see now, there is no signs of any slowdown for the coming months? Or I mean, is it sort of same strength here Compared to the last few months? No. I mean, as I said, we typically, we don't do we don't forecast. But I mean, as you saw on the graph that I did show you, we are now not only back on the level we were before the pandemic when it comes to box consumption, we are much over the trend line and so far we cannot I mean and again, if you look at the inventory level of Kraftliner, it's on a very, very low level. So I mean if you look at pulp, there we are more on a, let's say, normal level when it comes to kraftliner, and I would say that we are on a very low level. Yes. And I mean, Since the inventories are trending down, this suggests that operating rates are absolutely right for the containerboard industry in Europe. Is that your analysis? Everyone is producing as fast as I mean, as full as They can in this market with low inventories. And then I would just add one. I mean, I think the U. S. Market is also strong, which has impacted some of the U. S. I mean the U. S. Traditionally exports to some parts of Europe, but that level has reduced somewhat because basically they're focusing on the domestic market where they obviously, have a better profitability. So that increases demand and pressure on inventories in Europe as well. Yes. Right. Then on the year over year comparison, the building blocks you are showing on Page 16, it clearly shows that you didn't have that Or basically no cost inflation. Am I right here? And what do you foresee for the coming quarters in terms of cost inflation? Yes. You could say, I mean, we have in our business, wood is by far the biggest raw material. And aside from wood, we have a little bit OCC, which is going up, which you say we have logistics where we do see some increases, but they're counteracted in the Q1 at least by the fact that we've seen no pulpwood prices have come down a bit. But we do see that pressure, if you like, going forward on logistics and OCC. But Yes. Yes. Then the final question. Could you remind us about the CapEx For this year and possibly also 2022, maybe I missed this information before, but could you remind us about that one? Yes, we guide to SEK 1,200,000,000 to SEK 1,300,000,000 of non current CapEx in the year and we have SEK 3,000,000,000 to SEK 4,000,000,000 of strategic CapEx this year. So that's the guidance we give. Yes. Same as before then. Same as before, yes. No change. Okay. Thank you very much. We are taking our next question from the line of Cole Hathorn at Jefferies. Good morning. Thanks very much for taking my question. Just wanted to build on some of the comments you made on containerboard inventory levels. They are very low at the moment and the U. S. As well. How long do you think the industry is going to take to get those inventory levels back to kind of a normalized level, normally over the Easter period, you imagine the mills keep operating and box plant slowed down to build a bit there. But in the Q2, we've also got maintenance downtime, which I Imagine can't be postponed particularly after the shift last year. So are we going to be in a position where inventory levels are remaining lower for longer? That's the first question. And then the second question on this containerboard division. You've given good detail of your historic disclosure. And back in 2019, 2018 when pricing was higher or similar level, we were well over 30% EBITDA margins. Would you mind just giving a discussion of what type of EBITDA margin this business could be medium term? Thank you. Yeah. We'll start with the capacity. I mean, I think that oil producers, yes, now they run for full capacity, no doubt about that. And I mean as you said yourself, we cannot really postpone our maintenance stops. I mean many things are regulatory, so they need to be done. And it might DNB saw also this year that some of the maintenance stops are being moved from the spring to the autumn because we all hope and believe that the effect from the pandemic might be less serious in the autumn as people continue to take the vaccine and so on. And we've done that ourselves. I mean our big planned maintenance and investment stop we will take during the autumn it was originally planned for the spring. And I think that maybe some other place they do the same. So I mean by that I think that it's for a question just now of the consumption and if the consumption continue on the same level as we have just now, if we will continue to have, let's say lack of recycled fiber in the system, then I think that the balance will be Rather strong for a while. So it's more the general economy that can impact the market situation just now. And we will not say anything about future margins, you can look at it. Yes, I think I could just mention we have as think you mentioned, we have a slide in the appendix to this presentation where we show some data on just containerboard standard. And that's pretty much over one cycle. So yes, I think you see there the difference between peak pricing and bottom pricing in terms of profitability of our kraftliner business. Thanks very much. There are no further questions from the line. Please continue. Thank you, operator, and thank you, Ulf, and thank you, Toby, and all who are listening in. This concludes this presentation of the Q1 results, and I would like to take this opportunity to welcome you back on July 23 for the presentation of the 2nd quarter results. Thank you very much.