With us today, we have the CEO, Michał Jarczyński and CFO, Göran Eklund. My name is Kristofer Berggren and I work for Finwire Media. After the presentation, there will be a Q&A session. If you have any questions, please visit finwire.tv and click on this Q3 webcast, where you can write your questions. We will start with the Q3 presentation from Göran, and then Michał will have a strategy presentation regarding the updated strategy. After that, there will be a Q&A session. With that said, welcome gentlemen, and I will hand over the word to Göran. Please go ahead, Göran.
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Great. Thank you Göran for that presentation. With that said, Michał, can you please share your screen or your presentation and I will hand over the word to you. Great. Okay, Michał, please take us through the updated strategy.
Good morning. Good morning. I have the pleasure to present the updated strategy because we prepared the company during this year and create a long-term strategy for the next period, which means 2022 up to 2030. First, a short comment about Arctic was already mentioned by Göran about our current results. Today, for the last years, we were so focused regarding the pulp and paper production. Today in 2021, 67% of revenues come from the paper production side and 30% from the pulp. These new segments, packaging and power, are quite small, quite young in our portfolio. They only represent 1% and 2%. It's also quite important to express that Arctic is a stable producer of high-quality paper. Even there is a declining trend regarding graphic paper consumption in Europe, our result, our production is very stable. It's roughly 600,000 tons per year.
During the good years, during the bad years, it was even a very good output in size during the COVID in 2020. It's also important to mention that we have experience regarding energy. Both sectors means pulp production, paper production is quite energy intensive business. Due to the fact we have an on-site energy production and today 50% of our energy is produced from the renewable sources, which is quite important for the future. What are the trends which are driving us to prepare annual strategy? We see what's going on regarding the graphic sector. We see the demand for the newsprint magazine paper is diminishing, but for high quality premium book paper and paper for digital printing is quite stable. That we are so strong player in this market. We also see the trend regarding transfer from plastic packaging into the fiber-based packaging.
We as a company which are running on biomass materials for decades, we see the competence to join the train and to be active player regarding the packaging. This green energy, Green Deal is also important trend for the future. We as our company is mostly based on the green energy. We would like to develop the trend and develop the energy production on site and to be a quite important seller of energy in Sweden and in Poland. Our strategy is just first of all, to analyze the whole strong position, and we're seeing that our two existing pillars, existing fundamentals, means pulp production, paper production is very strong. Based on the existing synergies, we will develop the new sector, means packaging and energy.
As a part of the bioeconomy, we see that there is a natural trend to use the forests to produce the fiber, to produce the pulp. Then the pulp is used to produce a different quality of the paper. Part of the paper could be used for the packaging production to produce green packaging. All three elements need a stable energy supply. The trend, what we've already prepared as the 4P strategy, four pillars, means pulp, paper, packaging and power, which should deliver the result up to 2030, means that we will increase our revenues by 25%, but our EBITDA will be increased by close to 70%. Due to more focus on the new segments, packaging and energy, and both segments are more profitable compared to the existing ones.
We have an ambitious plan to invest in the new production facilities in Sweden and Poland. The plan is to divide the CapEx, which is close to SEK 3 billion for the next three years period into the three segments. For the first period, 2022-2024, then 2025-2027, and the final stage for between 2028 and 2030. First we will focus regarding packaging project because to start investment and start to execute the project in energy sector, we need much more time to prepare all necessary documentation, permits and so on. It normally takes between 3-4 years to obtain all permits needed to build a wind farm.
Regarding the packaging business, normally it's enough to plan such a project between one maximum two years. Energy is important not only for European society, but as well for us, and we as a part of green economy, circular economy, we also focus on to produce energy from renewable sources. From our perspective, hydropower, solar, wind and biomass, they are the four key elements to increase our energy production. Today we produce on an annual basis close to 3 TWh, and our goal is to achieve close to 4 TWh by 2030. We have a plan to install up to 40 MW in the solar farms in Poland and in Sweden, up to 60 MW in the wind farms as well in Poland and in Sweden.
Then we have a plan to increase, maybe in a small scale our existing hydro turbines. As well we see some positive trends regarding the biomass using on the Polish and the Swedish side. It seems that will be roughly 7% of our revenues. Packaging. We'll focus the packaging which consists of two key elements. The boxes, the packagings should promote and to protect the goods. Our experience as a graphic paper producer is quite important because we know how important is from the customer perspective, the visualization and the graphics. Our aim is to focus on the packaging would be quite important element about visualization and the quality of the graphics on this.
We already started to be active player in the packaging sector three years ago, as it was already mentioned by Göran, that we started to produce packaging paper in Sweden 2018. During the last three years, we achieved already 20,000- ton annual capacity and annual sales of the packaging grades, mainly Munken Kraft. This year we start with G-Flex produced by Bergshamra mill. Our aim is to increase our production by additional 100,000 tons of packaging. It will be kraft paper, but as well different paper with different barriers. For example, barriers are needed for the food contacts, waterproof, grease proof and stable for the temperature paper. We are the biggest European producer of the high quality book paper. Arctic represents roughly 55%-58% of this market.
We see our benefits as a strong producer. Our experience regarding the paper is over 100 years. Today 67% of the volume is created by the paper. In the future, even by increasing capacity on the paper mills, part of the paper capacity will be dedicated for the packaging grades, close to 120,000 tons per year, and 580,000 tons will be stable volume of the high quality paper dedicated for books and catalogs, as was mentioned by Göran regarding all markets. Pulp is a very stable business. Based off this green economy and the circular economy, we will see increased demand for the fiber for different application, but definitely it will be mainly driven by the packaging.
The trend to replace plastic by packaging product produced from the natural fiber is obvious, and it will create a lot of opportunities from the market perspective. We have already prepared some plans that, as I mentioned, we will focus first of all regarding the packaging products. A few weeks ago, we signed a letter of intent with Rottneros to prepare a study to build a full-scale production facility in Poland to produce molded pulp trays as a replacement for the plastic trays. It will be mainly dedicated for packaging for the food industry. In coming steps, we have already started to make some preparation and designing phase of the project regarding the solar farms and wind farms. We expect to execute the project between 2023 and 2025.
We also care about environment. Our plan is to be carbon neutral by 2030 in two sectors and the whole company by 2035. Today we are using green energy from Sweden. We already started to produce small amount of electric energy from the solar in Poland, and our Polish mill is running based of the high efficiency combining CHP plant based of the local gas. It will be replaced by the bio boilers and by the wind and solar energy by end of 2027. Our aim is to create a very stable company, which consists of four pillars, the Pulp, Paper, Packaging, and Power. These all four pillars fit each together very good.
There is a lot of synergies between these four elements, and we strongly believe that combining these four different sectors, we'll be able to create a very stable company, resilient, regardless of different market circumstances. We are convinced that it will be stable result and stable dividend policy for the shareholders. Thank you.
Okay. Excellent. Great. Thanks for the presentation from both of you. We will start the Q&A section in just a moment. Just a reminder, if you have any questions, please visit finwire.tv and click on this webcast, and there you can write your questions. Now we have both of you on the screen as well, so please stay happy. The first question from the audience is there anything special that you would like to highlight from the last quarter? Anything particular that you would like to highlight?
Maybe it's quite important to emphasize that we published our strategy one month ago, and already during one month, we already presented our execution. This packaging project, which will be a cooperation with Rottneros, its full scale production facility will be located in Poland in maximum three years perspective. We have a plan, sorry, to produce close to 70-80 million pieces per year.
We strongly believe that combining the experience of Rottneros Packaging, who is working on the natural fiber-based packaging products since several years, and combining the excellent location in Kostrzyn that we are very close to our biggest market, Germany, it will create a very stable position and give us a lot of advantages to be a very profitable and very interesting partner for the big food industry in Germany. Another sector is that we were very successful, even there is some turbulences regarding the logistic issues, regarding the energy prices. We were able to have a very good balance between maximizing the mills capacity and maximizing the profit.
I'm very proud that this is another quarter that Arctic is able to present that combination of this resilient policy, some financial hedge between the pulp segment and paper segment, deliver another stable quarter, another stable result to the shareholders.
Okay. Great. Thank you for the answer. Next question then. Are you planning to close any mills?
No. Looking for the figures which was already presented by Göran that during Q3, our capacity utilization was 95%, one of the best in our history. We have no plans if currently the demand for our product is so high that we are fully booked till the end of the year, and also we are expecting quite optimistic forecast for Q1.
Okay. Thank you. Next question then. What enables you to maintain your competitiveness when major businesses are deciding to close down, so to speak? What's your edge in that?
Arctic is a medium-sized company. We are big enough to be efficient and small enough to be flexible. As I presented, even despite the COVID time, despite the financial crisis, we were able to find the optimal balance between maximizing capacity. Year by year, our mills are producing more paper, and we are selling more paper. We are quite stable regarding the results. That was already mentioned, presented by Göran, that just looking for the last nine years of the financial results, Arctic has delivered stable EBITDA. It was between PLN 250 million-PLN 280 million. Regardless of fluctuation, even during the COVID time, when the whole European economy and the global economy was affected, from our perspective, 2020 was one of the best from the financial perspective.
Okay. Thank you. If we look at the requirements of investments in coming year in the paper segment, can you please elaborate a bit on that?
The investment dedicated for the paper segment is, first of all, to maintain our equipment. Secondly, to increase the production of different grades which are dedicated for another graphic application, like packaging grades, like technical paper, like paper with different barriers. The third leg is just to increase our efficiency, to reduce material consumption and to reduce energy consumption. By this combination, I'm quite happy that I think that we'll be able to offset the inflation without any problem, and it will be stable result for the next years.
Okay. Thank you. If we look at the new updated strategy in the report, you said that it will lead to investments of around PLN 1.5 billion up to 2030. How will you finance that investment?
This investment, this big amount is split between 9 years in fact, and it is only 20%-25% more compared to today's CapEx. It's quite reasonable. This investment will be financed in 40% by equity and in 60% as a total amount, and in 60% as a debt. We would like to maintain very stable position, and we would like to avoid too big debt in the company. Maybe Göran, you could co-comment this as well from your perspective in Swedish.
No, I think you summed it up quite nicely there. We of course want to stay at the leverage level, which is quite low, meaning that we will of course invest back some funds from the earnings we have. On top of that, also increase the debt. We will increase the debt at the same time as increasing the EBITDA. If you remember Michał's slide on the potential development where we see an EBITDA increase of 68%, and of course that will be part of the financing of this.
Okay. Thank you. You mentioned the increase of prices, but due to the increase in prices of transport, energy, materials, et cetera, you have increased prices for your clients. Has that had any negative effects on your business? And are clients in general okay with the price increases?
Göran, could you comment on it?
Yeah, I can comment on that. I mean, I think the order book we have shows that the clients are. Well, maybe they are not happy about the price increases, but they are certainly accepting them. If we look at the market in general, it's not just us who have been forced to increase prices, it's our competitors as well, s o the customers have had to accept these price increases. Of course, they can also understand that with the significant increase in pulp and the other raw materials that's happened throughout the year, we've had to increase the prices to stay healthy.
Okay, great. Thank you for the answer. You mentioned that you have a strong financial position, and your net debt/EBITDA ratio is around 0.66 at the moment. Is that a ratio you're comfortable with, or do you see potential in increasing that ratio going forward?
We are very comfortable with the current level, of course, but, depending on the speed and the happenings in the strategy, then of course, we may see from time to time an increase in the leverage. Like I said earlier, the increase in EBITDA will of course balance that out in the end. Temporarily, there may be higher leverage numbers. I would say that, as long as we stay around 1x, then we're very happy. We could from time to time go higher than that as well.
Okay. Thank you. Next question then. Will you create a separate company for the energy creation plans, a spin-off?
Yes. In fact, due to the project finance structure, definitely the energy project, like for example the wind farm or big solar farm, should be created as a separate legal entity. Of course, fully controlled by us, but as a separate legal entity. It's also important to find a good partners, not regarding the preparation, but as well our experience as to build a wind farm is quite limited. We have experience regarding the energy generation from the wood pulp. We have experience from the energy generation from the gas. We have an experience on the energy generation from the biomass, b ut regarding the wind mills, we were looking for someone who will help us to prepare and to run the project.
Definitely it will be the separate company, and the energy will be sold to the market. We just look for the recent development of energy prices in Europe. We see that this is probably the most profitable business for the next decade.
Okay. Thank you. Next question, it's regarding the new strategy we just talked about. The question is, according to your new strategy, you will invest PLN 1.5 million in order to increase the EBITDA with 70%. It sounds like a ROI of only 10%-12%. How do you justify that investment?
We see that, regarding the packaging grades, packaging business and energy business, the expected profitability is significantly higher compared to the paper or pulp. Based off our calculation, we are quite convinced that this would be a good business. As I mentioned a few seconds ago, the current energy prices, if you just calculate it, the CapEx for the wind farm is roughly EUR 1.1 million or maybe EUR 1.2 million, regardless of location. If you install the wind farm in Sweden, if you install the wind farm in Poland or in Germany, the CapEx is near the same. Expected trend regarding the energy price, especially in Poland, is quite interesting that the Polish energy spinoffs in our portfolio will be the very profitable business.
Okay, great. Thank you. It's time for the last question here if we won't receive any other questions by email. This is a viewer who is interested in, like, the main focus of the company. If you look ahead, like two, three, maybe four quarters, is there anything special that you will focus on in the business, so to speak?
Our focus for the next two, three quarters is just to be very active. The business environment around us is very dynamic. No one was expecting such a significant problems regarding logistics half year ago. No one expected such a huge fluctuation regarding energy market in Europe even one quarter ago. Our aim is just to make a stable business, to have a healthy balance between maximizing the mills and the pulp mills and paper mills, product output, capacity utilization, and the prices. We always see that there is a trend if the market is able to accept higher prices or capacity utilization is higher. Definitely, I think that even next year will be quite optimistic.
Looking for the current development of the competitors, some big players already decided to close some mills in Sweden and in Finland. We are stable supplier of the paper, and definitely, as I mentioned, we already defined some years ago quite interesting and quite stable sub-segment in the graphic sector. We are not interested regarding the newsprint, we are not interested regarding the tissue, we are not interested regarding magazine paper, but we are very focused on the premium products like paper for digital printing, like advertising materials, and like premium book paper.
Okay, thank you. We received another question, so this will be the final question for this webcast. Big investments coming up. What's your view on dividend going forward?
Our plan is to make a stable dividend policy and to distribute among shareholders up to 30% of annual profit for the business cycle. Because in some years will be, let's say, less, and some years will be even higher. Generally, calculating the financial model for Arctic Paper for the next year, we see the space to pay a stable dividend around 30% of the annual profit.
Okay, great. Thank you for the answer.
Welcome.
A big thank you to both of you for your presentations, and a big thank you to all the viewers for all of your questions. I hope to see you again on the next Q presentation with Arctic Paper. With that said, I wish you all a pleasant day.
Thank you.
Thank you.