Billerud AB (publ) (BILL) Earnings Call Transcript & Summary

Good morning, and welcome to this webcasted conference call following the publication of the BillerudKorsnäs fourth quarter and 2020 year-end results. Our President and CEO, Christoph Michalski; and our CFO, Ivar Vatne, will hold the presentation. And after that, we will open up for questions. So by that, I would like to hand over to you, Christoph.

Thank you. Good morning, ladies and gentlemen. This is Christoph Michalski, and I will take you together with Ivar through our announcement presentation. On the first slide, you have our key highlights from quarter 4. And as you can see, our net sales were flat. If you exclude the currency effect, the growth was 2%. Sales volume increased by 5%, and adjusted EBITDA was 10%. We have seen an encouraging market evolution, and we continued positive operational efficiency across all sites. And as you always have seen in the past, we had -- our structural saving program has performed very well with an additional structural savings of SEK 10 million (sic) [ SEK 100 million ]. For the year, it basically means we have grown -- we have declined in overall sales by 2%, but our sales growth has been neutral if you take the exchange rate effect away. Sales growth was 4%, supported by a good ramp-up at Gruvön. Adjusted EBITDA margin is 11%. And cost and effective (sic) [ efficiency ] program delivered above target. So overall, the whole year on that front has been very successful. And this resulted in strong cash flow delivery, which you have seen in our report. During the year, we have also, again, took the leading position in the Dow Jones Sustainability Index. And our Board will propose SEK 4.30 per dividend share to the AGM. Let me move to Page #3, which is business status and market outlook. I think here, you can see our perspective on the markets. If I start with the food and drinks sector in quarter 4, it has been stable. And I think if I take the whole year into account, the stability of food and drinks has been quite remarkable as well as medical and hygiene. We've only really seen over the time some effects on the consumer luxury and the industrial segment mainly driven by the corona pandemic and the consequent economic decline in key markets. But if you look at quarter 4, I think we've seen much more stability across all things, except maybe industrial, where the picture is a little bit more mixed. But I think going forward, the market outlook seems to be a bit more positive. Food and drinks, I think, is a key one. Medical and hygiene is relatively stable. Consumer and luxury is stable. And I think this is driven by the fact that the travel industry is very much down still, and it will take some time to recover over 2021. And industrial, I think, overall, we are a little bit more positive. If I move to the next slide. We announced also yesterday evening our investment in the Frövi mill. The total investment is estimated at SEK 2.6 billion. This will increase efficiency and further integration of the mill. And it will also improve our environmental performance. This is a long-term project. We expect everything to be in operation by the end of 2023. And currently, we are planning to finance the whole amount by cash flow from operating activity. And in 2021, it basically means about SEK 700 million will be taken on. The existing recovery boiler will continue until the new operation is starting up, and that will result in some minor depreciation now over the next 3 years. If we go to the next slide, about KM7 and our quarter 4 and 2021 perspective. I think in quarter 4, we saw some excellent continuation of progress on this new machine. Overall, the negative EBITDA effect is reduced to SEK 50 million in the quarter, and we -- and the accumulated effect for 2020 was SEK 450 million. We have produced 350,000 tons, mainly uncoated material. And during the ramp-up, we still see some wastage and second quality, in particular, in the first half of the year. And this has improved steadily over the third and fourth quarter. Key focus for 2021 is improve the mix towards higher-value segments. We have seen run of high-quality product which had a very good acceptance in the market. Also, as we go along, the speed will increase. And in 2021, we will see a continuous qualification for the liquid packaging boards. Currently, we are qualifying with all our key customers, and we expect this to be finalized latest by the end of 2021, assuming everything goes as planned. We will reach breakeven during the year with that machine. And I think from then on, we will not speak in particular about KM7 anymore. I know it has been a big focus during the last years. But I think we will bring the machine now to continuous improvement. Like in all other mills, as you know, we have a big, big focus on that everywhere. If you move to the next slide. On net sales, you have the waterfall with the basically flattish performance. You can see that there was clearly a pricing decline of 2.5%. We had some currency effect but very good performance when it comes to volume and to some minor mix, which basically recovered us to 0 growth for the year despite currencies and pricing. I think on the next slide, on EBITDA impacted by maintenance, we just cleaned that up. And if you then do the comparison, you see the effect of pricing and currency, but then good help by raw materials, the volume effect, the cost efficiency and then a minor portion of others, which result in an EBITDA of 500 -- around SEK 570 million. I don't know, Ivar, do you want to add maybe one thing on this one in particular?

No. No further comments.

Okay. Good. I will, anyway, hand over to Ivar now to talk a little bit about the -- more details of the financials, and we'll take over later in the presentation. Ivar, please.

Yes. Thank you, Christoph, and good morning, everyone. So we start just a small update on raw material and input costs. In general, it's a very positive picture for us, and most of the trends are certainly going down. We had a significant help in Q4. As you saw from the bridge, it's down SEK 150 million versus a year ago. The vast majority of that comes from lower fiber prices and also on pulp. And only the smaller help comes from the chemicals. In terms of the outlook and what we expect going into 2021, we expect the fiber cost to start flattening out. And we don't actually foresee any material change in Q1 versus how we ended and how we reported in Q4. Chemicals, still going down, a bit of volatility there. We actually expect more help from the caustic soda than maybe on the latex piece. But net-net, we still expect small help from the chemicals. For the energy, we do not expect any material differences in Q1 versus our Q4 status. So if we move into the next slide and around our cost and efficiency. Christoph already mentioned a couple of sentences on this. It's been a very solid success story for us during the 2020. We have exceeded the target now, and we brought the target up, as you might remember during our Q3, so SEK 335 million delivered with then the contribution of SEK 100 million in Q4. And that performance has been split pretty much in quite sizable buckets between FTE-related savings, operational activities, and purchasing activities. So that is also -- mean that we have savings both in terms of our variable costs and also on the fixed cost piece. If we then look forward and what we expect now for 2021 and the remainder of this program, the upgraded program delivery of SEK 650 million remains mean that we expect to have a run rate of additional SEK 315 million by the end of 2021. And to avoid misunderstanding and maybe clarifying a little bit extra, that means that we have all activities in place by the end of the year, with probably some carryover effect going into first half of 2022 will be expected. So we move in to the next slide and a couple of comments around our different product areas and starting this product area Board. In general, you can say that we had a very strong top line quarter for product area Board: Net sales, up 2%; excluding currency, this is a plus 5%; sales volume, up 6%. And as you can see, most of this growth came from cartonboard and containerboard, which both had a very, very strong quarter. And this is also very encouraging news because a strong KM7 output has been instrumental in delivering this result and a clear proof that the ramp-up is going into the right direction. And in particular, those 2 segments, cartonboard and containerboard, we also have strong growth plans going into 2021 and, in particular, on the cartonboard as we have been under capacity constraints for some time. And we can now start to really accelerate some of our expansion plans. Liquid packaging board came in slightly negative, but it's actually more related to a very strong base performance last year in Q4 '19 versus anything particularly now for the Q4 '20 performance. And on the profitability part, there are several impacts playing in at the same time with some of the more prominent ones, negative pricing and currency, dragging the number down, while it's been partly positively offset by higher volume, lower input cost and some savings. And if you move into the next one and talk a couple of seconds around product area Paper. The market continues to be a little bit more challenging, as also Christoph mentioned in the beginning, although there are clear signs now that the situation is improving going into 2021. For Q4, our net sales were down 6%; and adjusting for currency, they're minus 2%; sales volume of plus 1%. And if you look at different segments, sack is now back to growth. It's been some time since we saw positive growth figures for sack and, in particular, were helped by a very strong performance on the brown sack. The situation is more challenging for kraft paper, where, in particular, the white MG is still in a pretty tough spot driven by market dynamic. So EBITDA, impacted by the maintenance timing. There's also a negative pricing impact and currency, as we've seen for some quarters, and that's partly offset then by lower input cost and savings. So if we move into the next slide on cash flow and a bit of our financial position. We had a very strong delivery of our operating cash flow in Q4. And that also helped us to deliver in total for the 2020 a very strong performance on the cash flow. As you would expect, there are several impacts happening, but the main and one of the bigger ones in Q4 is related to the working capital result, and it's the removal of our obligation for the energy hedging collateral. Some of you might remember that had a pretty bad impact in our Q1 '20 results. And hence, with this move now in Q4, we pretty much neutralized this impact for 2020 in total. Investment for the year, pretty much as expected and clearly lower versus previous year. And this has also been the plan from the beginning of the year. In terms of the outlook for the year, dividend proposal of SEK 4.30 per share. It was pretty much exactly SEK 890 million. Frövi, as already been mentioned by Christoph, we plan to finance this, at least to a very large extent, through our future operating cash flow. And also a comment on the future depreciation rate. We expect now going into 2021 a quarterly depreciation rate of 4.75%, which takes into account a bit accelerated depreciation of the current Frövi boiler value. And that means if you start adding up the new news on Frövi versus then what we tend to have as a base CapEx estimate, we would expect to land around SEK 2 billion in total for the CapEx for 2021. So with those words, I hand it back to Christoph for some closing words and also a bit of an outlook.

All right. Thank you. Thank you, Ivar, for this business presentation. As you know, I just joined the company in November 2020. And since I was able to make myself a picture of where we stand, I think we are very well set up for a good reasonable year in 2021. The focus will be on the basics. It will be on the performance of our mills. It will be on making sure that we get our savings. It will be on operational discipline and also to investigate opportunities for future growth in the mid-20s once we achieve our full operational efficiency and KM7 is running full speed. I think what will help is market condition looks better today than they looked during the pandemic year of 2020. But clearly, it's not over yet. So some segments will be affected by the pandemic still going forward. And I mentioned already luxury and cosmetics, which probably will not take off before the mid or latter part of 2021. And -- however, we see also some positive price movement, which clearly will have a positive effect on our margins even if fiber costs, as Ivar already mentioned, will probably be relatively stable. And I think all these things together, with a focus on the current operation, will allow us to have a reasonable 2021. As you know, for those who know me, I generally don't comment on quarters because I think we manage the business over a rolling 12 months, and we try to basically drive long-term performance. And therefore, I don't think in the current uncertain times, it does make a lot of sense to talk quarter-by-quarter. But I think if you take 2021 year overall, I see some positive signs, and now it's up to us to deliver the year. All right. With that, I think we stop here, and we will open up for questions. So please, operator, if you could take over.

[Operator Instructions] Our first question comes from the line of Martin Melbye from ABG.

Yes. Could you remind us of the next renewal of the liquid packaging board contracts?

Ivar, do you want to take that?

Yes. No, I can. So the -- if I get your question right, Martin, you're talking about some of the contract expirations and where we stand. Is that correct?

Correct.

Yes. So I mean, as you know, we never comment on any specific customers, but there's not a big secret that there's 3 main customer for us. Contract lengths tend to be between 2 to 3 years, meaning that pretty much every year, we would have a discussion with 1 of the 3 big ones. And 2021 is no exception on that. That's pretty much as far as I would go on that question.

Okay. And you didn't want to comment about the quarters, but given that you see some price increases, will these be effective for Q1 or more Q2?

Yes. So I can also take that one. And I think as Christoph alluded to, there are now movements into certain of our segments that we clearly tag along to. I think containerboard is one thing that we already have seen for some time, and there, we would expect to see an impact in Q1. Not probably from the Jan 1, but during Q1, we would certainly expect to see an impact on both liner and on fluting. We also see now, and I think it's been circling also in the media over the last couple of days, that there is heating-up now also a bit on the brown sack. And that's also something we clearly also expect to tag along to. There is a good pull, as I mentioned some minutes ago, in the brown sack. That pricing is probably a little bit further away, so that's more of a kind of end Q1, early Q2 topic, so not a lot of impact for Q1. But during the first half, we would expect to see pricing impact of both segments.

Our next question comes from the line of Johannes Grunselius from Kepler Cheuvreux.

It's Johannes Grunselius here. Yes, if I may start with a question on KM7. Christoph, you said you don't want to comment this so specifically perhaps, but it's kind of difficult to do an assessment of Billerud without talking about KM7. But I mean previously, you have talked about what kind of premium grades you have in KM7, just an indication and bulk rates and the waste ratio. Could you mention anything about this, where we were in the fourth quarter and where do you see this machine in a few quarters from here?

Yes, let me give you a wider perspective first. And maybe, Ivar, you can have a look at some of the detailed question. Look, I think -- I was very surprised when I joined BillerudKorsnäs that every analyst knew our KM7, and very few had questions about the markets and our customers and all these type of things. And I think when I look at our current operation, I see clearly, yes, KM7 is a big contributor of future growth. The machine is in the ramp-up phase. And despite being delayed in its overall project timetable, I think we are through the worst, and we have a very good ramp-up as we speak now. But as you know, these things takes time. Sometimes, for example, the liquid packaging board qualification takes a year or 1.5 years, and this is due to the process of our customers and some complexity of these materials. And in the meanwhile, we will do premium products, and we will start to fill the machine and bring the operational waste and running rate up and waste down and things like that. But I think when I look at the overall BillerudKorsnäs, I see also many opportunities in all our other mills because our operating performance, I think if you benchmark us to the rest of the industry, can still improve. And therefore, I think from now on, as KM7 is operating and starts to operate in a good way, now it's really about the output of KM7, where we sell, what are the premium products we can do, and it's probably less -- it will be a continuous ramp-up in operational efficiency. I don't know, Ivar, do you want to comment a little bit on the details?

I can just probably add a little bit of context because, I mean, obviously, I agree with what you say Christoph. I also know that this is a very hot topic for a lot of our external stakeholders. And I think if you just look into what happened during the 2020 in terms of the KM7 performance and what are some of the numbers we talked about, the trend is very clear. I mean we had a minus SEK 200 million impact, Q1; minus SEK 120 million, Q2; minus SEK 80 million, Q3; minus SEK 50 million, Q4. So the trend is very clear and going into the right direction quarter-by-quarter. And I think we talked about this over some quarters that the key of that projection and also a continued projection into the positive territory is not only it's clearly linked to what volume output we get, but it's certainly also linked to the mix. And in the beginning of the year, we struggled a lot with a pretty high waste and also a lot of secondary-quality products. We've gradually been able to minimize that and now coming on a very good shape on this and gradually moving from the pretty unsophisticated, uncoated products to having a percentage of total higher coated material. And that is a very clear, you can say, projections and linear expectation of going into 2021. Yes, we expect some higher volume, but I think more importantly, we certainly expect the positive mix development to continue. That means, in particular, yes, cartonboard is a segment that I mentioned we've had very good ambition plans for. And we expect that to have a key growth component also for 2021. We have also some more coated liner. You can say that we're planning to put it into that mix. Nothing for the time being on liquid packaging plans for 2021. The certification, as Christoph said, they are on the way. But yes, it takes time, so the commercial value of that is not really before we get into 2022. But certainly, we can come back to part of those questions. So I hope that at least helps, Johannes, on some of the thoughts you had behind the question.

Okay. Yes, it does. I mean what you're saying, Ivar, is basically that there is a linear improvement from -- I mean if I look at the third quarter, the fourth quarter, that sort of, is that a realistic view, I mean, to think about the improvement sequentially?

It's not unrealistic, at least. And you can say that probably more than 1 quarter we should have in mind. But there's no doubt that we're taking big steps. We continue to take big steps. Yes, we expect to come to that breakeven at some point during 2021. But I mean you see for yourself where we are in Q4. We are not far off from coming to this.

Sure. Sure. Sure. Then I have another question on the announcement of this recovery boiler. Did you look at various opportunities or alternatives to it, I mean, building 2, for example, recovery boilers? And most importantly on my question here, I mean what kind of -- do you foresee any kind of benefit from an economical point of view? Or is it more -- or is it -- or this economical benefit, is that coming through operational stability? Or how should we see the economical impact from that investment?

Yes. So I think there are 3 parts to this question. The first one is, yes, we have looked at many different options what we could do in Frövi in order to rebuild this boiler. We have thought about rebuilding. We thought about new. We thought about different ways how we could do that. I think you need to understand there's 2 aspects to this: a, one is the age of the boiler; second is the environmental permits which comes with it. And at the end, we took the decision to go through the -- basically, the better environmental solution to go for the more efficient solution of rebuilding the boiler. And in the past, the old boiler has a risk of breakdowns, and that's clearly a big risk we have, and we want to avoid that. And on top of that, the new boiler capacity will further help with the integration of the mill. And potentially, it is -- it would allow us to increase slightly the capacity if we take other steps in debottlenecking some of the systems. This is not part of the investment. This is a long-term view on the site. But -- so there is a mixture of further efficiencies with the boiler; secondly, further -- how do we call that, less of stoppages because of the new boiler. And the more long term, there is further ways of how we can increase capacity and -- or further integration in Frövi. So it's very good news. I'm -- when we looked at the investment, it was one of the faster decisions because it's an obvious thing that we need to do. And the other positive thing is we also looked at the rest of our industrial footprint. And from my perspective, we will have, over the years to come, our running rate of normal maintenance of SEK 1.3 billion. But there are no very significant emergency CapEx that are needed as far as we can see today.

Our next question comes from the line of Linus Larsson from SEB.

Maybe I can continue just there on the Frövi recovery boiler. Like you said, Christoph, you've looked at various alternative solutions. And if we look at the Frövi recovery boiler investment in just somewhat bigger context, how do you see the Gävle pulp supply situation? You have 2 old recovery boilers there as well. You say there's no urgent CapEx needs. I appreciate that. But what is the long-term plan there? And at what stage do you see a reinvestment of that pulp mill as well?

Thanks for your question, Linus. Look, if I go through what we do -- I have a bit of noise over the line. Could you just put on mute, wherever it's coming from. Thank you. Maybe it's you, Linus, yes, in the background. I think when I -- basically, what we have started and Lennart Holm started that already some months ago, we have now started to look at all our footprint and look at the basically CapEx needs over time. And this is a bit about the longer-term projects, driven by what is the market needs, what are the immediate investment we need to do. And clearly, that also covers Gävle and et cetera. We do not see an immediate need to invest in Gävle at this time, so we are talking on a time horizon. So nothing is planned for the next 5 to 7 years from a major investment perspective. So what we need to do in order to get our operational efficiency right is basically ensuring that we do preemptive maintenance, ensuring that we work through the bottlenecks we have here and then our different plants, ensuring that we also get clearly in line with our health and safety records and a good trend. And I think that will deliver that. So from a big CapEx, like doing another recovery boiler in Gävle, that is, at this stage, not on the agenda at all.

Great. And then just one more question, if I may. You've been with the company not that many weeks or months as of yet, but I'm sure you've created a good idea what's going on. And today, if you look at 2020 performance, this is a company with a 3% EBIT margin. I mean not long ago, EBIT margins were double digit. So my question is really now that you look at the company, do you see that all elements for improvement to get back to double-digit EBIT margins are in place? Or do you see some obvious things which are still not there and that you really want to drive in terms of change in the company?

Look, you're totally right, and I put the caveat of 3 months in the company on my statement. But what I found arriving is, basically, I found a good team. I found a reasonable manufacturing footprint. I found some variable markets in which we are operating, which kind of some going up and down and then, on top of that, over that was the corona pandemic. I don't think there's anything structural in our way to improve our profitabilities over the years to come. It's just about hard work, getting organized, getting focused. And I think the initial approach to refocus a little bit the management team and to basically now put the steps in place that we deliver on clear programs, on cost savings, on operation, on safety, on whatever you have and also then being a little bit more focused on our market, portfolio management, customer and product management -- portfolio management. I think there is nothing which should stop us to deliver a very good performance over the years to come. It will come slowly because these things doesn't happen overnight, it's hard work, but I think there is nothing which stops us. Where I think we need to do some more work, which is a little bit unclear for me, we have, I think, a very good growth agenda for the 3, 4 years to come. And the question for us will always be then what happens in the future. And as you know, in our industry, things takes time, they're CapEx intensive, and we need to decide where do we put the next steps or the next poles in the ground for future growth from '25 to '30, '35. And what are the -- is it M&A, is it CapEx, is it greenfield and which geographies, considering all the different factors that play in this question. So in summary, I think it's just up to us to make it work in the current market context. It's -- I think it should be feasible. And when it comes to the longer term, yes, there is more work to be needed to really have a perspective of the long-term growth path of BillerudKorsnäs.

Great. That's very helpful. And best of luck in doing that.

Thank you, Linus.

Our next question comes from the line of Oskar Lindstrom from Danske Bank.

I have 3 questions, and maybe I'll ask them one at a time. The first one is, I mean, you had a rather good result in your business areas, but you seem to have had a sort of larger-than-normal negative item in your other line if we exclude the positive effects of the revaluation of the associated company. Could you tell us a bit more about what's behind the negative number in the Other line?

Yes. I will hand that over to Ivar because this is -- it's basically an exchange rate issue I think you're referring to. But Ivar, why don't you go and explain?

Yes. No, thank you, Christoph. I mean you also probably remember that we changed now a bit the -- a different reporting structure this time and keep that just in mind when you compare to, I mean, previous reports. But I think Christoph is absolutely right that if you look at the performance in now what we call solution and Other, I think the Managed Packaging is probably not too much to comment on because that is anyway continuing the trend from what we've seen earlier in 2020 with a pretty tough brand owner situation for our, yes, big customers in the Managed Packaging. And if you look at the kind of the balance of that, what you can probably then say is Other, a lot of this is related to the currency situation. So clearly, it's changed quite a bit from what we saw in Q3 going into Q4. And particularly for the last 10 days of December, I think all of you have seen that the Swedish krona strengthened quite significantly. And clearly, that impacted our hedging result. It impacted our revaluation of receivables. And that tends to be a big significant driver if you look at the kind of the events of the quarter in the group Other.

All right. So yes, I mean is this something we should expect to be repeated in coming quarters? Or were those big negative sort of -- I mean assuming that exchange rates remain where they are at the moment?

Yes, I mean the -- let's just say that if the spot rates stay where it ended on the 31st of December, you would not expect to see a revaluation effect, so that should be neutral. And then clearly, that -- the next question then will go to hedging. And that certainly will hit us. And then I think you know it depends also versus then the hedging rates that we have on. And clearly, around SEK 10 per euro is a pretty strong currency. So you can say that, yes, you would expect to see a hedging impact, but with flat spot rates versus where we ended the year, you wouldn't expect to see any revaluation effect.

All right. Great. My second question here, maybe that's to you, Christoph. I mean when you talked about the recovery boiler investment in Frövi, I heard the words debottlenecking and increased capacity in your comment there. And what are we talking about in terms of possible magnitude of capacity increase at Frövi? I mean, usually, you build a new recovery boiler with a larger capacity than the old one. So what sort of headroom are you building in here?

We built a lot of -- I mean there is some headroom but it's, at this investment perspective, not significant. So basically, today, we have about 20,000 tons of pulp, I believe, in Frövi, which we take into the mill. And we just made sure that the new boiler is able to cover for that going forward. But the investment, if you look at it now, is really focused on basically the operational lifetime of the old boiler coming to an end, and we need a new boiler in order to safeguard the production in Frövi and to renew our environmental permits. And then clearly, we sized it in a way that there is some marginal upside in production. And that we will implement once we are going. The most -- I think one of the things we have learned and the company has learned in KM7 is that we said we need to focus on the project management, we need to be incredibly disciplined. And my wording to the troops was a little bit in the line let's make sure we build a boiler which has a future, but it's a project, first and foremost, focused of being operational by 2023 in time, in specs, in order to then close the old boiler down and puts a new boiler instead. And then we can look at further growth opportunities in the mill. So that is not part of any CapEx, but there is a bit of upside.

All right. My final question is on the brown sack paper market, where we've had some market reports about price increases already now in January happening, I mean, even though we're in the winter and then talk about more increases here in the spring. I mean could -- you'd say you also see this sort of improvement in market conditions. Could you tell us a little bit about why you believe conditions have improved already now in the usual -- usually quite sort of slow winter season? And how sustainable do you believe the sort of improvement in these market conditions are? And then finally, could you please just remind us how much the brown sack paper prices dropped to where they are -- where they were last year, I suppose, and what kind of sort of long-term upside do you see?

Yes. No, look, I think if I look at brown sack paper, Oskar, I think the first one, let's put it in the economic and pandemic perspective first. I think what you have seen in 2020 was actually driven by pandemic and economic development, which really hammered that particular subject. So that was a little bit before my time, before I joined, so I will hand over to Ivar in a second. But I think what we are seeing, I think everyone is sitting a little bit on the edge of their chair and saying, okay, the vaccine is underway. Probably coronavirus by the summer, early, early autumn, will further improve, and we will slowly go back to normal economic development and especially in the catch-up phase as well. And therefore, I believe that the timber pricing, which are going up again, will be -- will probably be sustainable for some time. And then it really depends what's happening in the world economy as we go forward. But maybe, Ivar, there was a specific question between going up and going down -- sorry, going down and now coming up again. Do you want to comment on that? Are you on mute? We don't hear you, Ivar?

No, you're absolutely right. I think, Oskar, to the question, I probably don't want to sit in "specific" how much it went down. But I can say, if you look at the average for 2020 versus 2019, I mean it's significantly down. I mean we're talking pretty high double-digit decrease in net sales per ton. I think also, if you look at those prices then for brown sack during 2020 in a historical perspective, you are quite low on the curve. And I think from my side, I mean it's pure speculation, but I think also there tends to be now also from the buying side a bit of a sense that the only way now is up. And inventory has come down quite a bit over the last, I would even say, 18 months. So surely, there are some interest to start to stock up on what perceived to be good and lower prices before it will go up. But no doubt that I think we see the same trend as, I guess, the industry is starting to report that there is a good pull. And yes, there is a clear expectation of pricing is moving, and we will do that, as I said, during the first half.

All right. Super. Let's -- I'll certainly follow that.

[Operator Instructions] We have a question from the line of Mikael Doepel from UBS.

I just have one question and basically continuing on the last one and about the sack kraft market. So it seems to be a bit mixed overall. I mean you have the brown sack clearly improving, but then some other segments are not really. And so I was wondering if you could talk a bit about the markets overall about the different segments. What are the dynamics at play here? What is pulling the brown sack market right now? What are the positives underneath the surface? What about the other grades, white sack, MF, MG and so on? So a bit around that, the current dynamics in the market across the different segments, but then maybe also looking a bit further out over the next couple of years across these segments, what do you expect in terms of demand, supply and pricing?

Maybe I hand it over to you, Ivar, if you want to give a little tour around.

Yes, I'll do my best. It's a big question and a question that had many parts, but I'll do my best to give some help and then answer on this. I think the overall trend I think you can say is that the on-bleach or the brown qualities are in pretty good pull, probably more than on the white segments at the moment. That's partly trends related. I think also, if you talk brown sack in particular and if you think about where does most of our brown sack go or how -- where do they end up, it tend to be in industry. We export a lot of that to Asia. And you can say that, yes, there are certain signs that things are better and took a bit of a hit when the pandemic put in. I would probably argue that the fundamental demand on this probably haven't changed dramatically. They tend to go a bit cyclical, as you know, but I will probably -- from my own point of view, probably answer that some of the pull that we see now is more of a kind of an inventory, first and foremost, adjustment up again on what is perceived to be pricing at a historically good level and indication things are going up. I still think that the industry, for us, tend to be a good destination. We have ample room still to grow. But yes, it tends to be pretty cyclical and have been so historically and expect it to do so going forward. I think on the white sack, I mean, clearly, the destination categories and the channels is a little bit different. We're talking more into food and drinks, for example. And I think in general, we've been keeping up, at least from our side, the pricing very well. And we haven't really moved that much as some of the brown sack has seen over the last 12, 18 months. It still tends to be a good segment for us, and we have very competitive products that we have excellent feedback on. It's probably not a secret that also more supply has been added into that category. And that clearly also does something with a bit of the balance and the pricing dynamic per se. But in general, yes, some short-term hiccup; but I think long term, it tends to be an attractive segment. We also expect to grow very much on the tailwind of the -- we call the sustainability trends and a more antiplastic focus with a lot of our customers and channels. I think on the MF, it's a little bit similar. As you might know, this is a smaller part of our business. But I think brown tends to do better very much on the wake of some of the sustainability items I mentioned. And the white MF usually is not a very big segment for us, tend to be quite linked to some of the arguments I used for the white MG. So that's pretty much the small storyline I have, Mikael. I don't know if there's any add-on, so you feel that was somehow answering what you were looking for.

No, that's super helpful.

Our next question comes from the line of Cole Hathorn from Jefferies.

Just 2 questions from my side, and I'll take them in turn. Just first on the operating performance, and you're talking about kind of getting the operating performance of the entire business a bit better. You talked about debottlenecking, preemptive maintenance, getting health and safety right. And I just wanted to get more color on what you're thinking about the business mix going forward. When you look at certain grades and kind of specialty kraft paper or other areas of your business, are you looking at your machines and your product mix medium term and you're saying are there any changes you need to make there within the business? If you could just give a little bit of color on that.

Okay. I think that when I look at the business today, I think that we had in the past enormous amount of focus on our plans and what we could produce and et cetera. And I think I'm driving now the team a little bit more into the direction and say what does the market actually tell us and what we should produce rather than what we can produce. And I think when we look at our footprint and the history of BillerudKorsnäs, it was an organization which was very much driven by the mill and what's the mill individually could decide as a product portfolio and these type of things. And what we missed a little bit was to take a holistic approach in the business and say what can we actually give our customers and then how can we optimize the production across mills and et cetera. And I think it's a bit like KM7, what you see is when you have a new opportunity, like a new production unit, is that you will then put on that production unit what makes sense. And then you can reshuffle in the rest of the operation to run longer runs, to run products which are well run in this particular unit versus other units and things like that. And I think this is a process which takes time. And the same as what we have done, I think, which the team started to do during the corona crisis is also to look, okay, suddenly, the -- how would I say, the thoughts we had about the business was very stable, and then corona came, and so life changed. And that allowed also to rethink of saying, hey, how should we optimize our product portfolio towards the market? And where are the margins now? And this clearly -- I mean Ivar mentioned the brown sack going up and down, and then you focus a little bit lesser on brown sack, and now prices are coming back. So we need to have a certain level of flexibility. So that's a market component. And then I think there's no secret, in the past, we did some benchmarking against the whole industry in terms of paper production and pulp mill efficiencies and things like that. And we came to the conclusion that we're not the best in town. And that is the other aspect. So once we have decided to optimize what is the type of market portfolio, how can we now optimize the runnability and the productivity and efficiency of our machines everywhere. And I think we have seen initial mills, some mills already really, really going down the track doing really, really well. And others can still catch up. And that gives us a certain amount of extra capacity which we have, by design, but which we are not fully exploiting by the way how we run it. So that's basically the background to this comment that we have enormous amount of scope over the next 3, 4 years to actually improve our business without significant CapEx investment for capacity.

That was helpful. Ivar, then just a question on -- well, a follow-up question on FX. You've given some helpful color on the hedging impact, but I'm just trying to frame what the potential FX headwind will be next year versus the offset from the hedging. Am I right in assuming the round-number FX headwind is about SEK 400 million, and then you've got roughly SEK 200 million positive from hedging impact? Is there any color you can give on FX?

Yes. No, I can. And I think the person who knows this for sure will get rich. That's all I tend to say on currency because that's all that we know. But what we think today is not going to be the case. But at least -- and I think you're onto a topic that is not far off from how we see this. We obviously have, I think most of us know, been through a lot of years with the Swedish krona weakening move versus some of our core currencies. 2021 was a little bit of a, you can say, constraint on that one. And now with the spot rates at least we've seen from end December, beginning of the year, it certainly looks that the Swedish strong currency effect would just, non-hedged, be a pretty sizable impact. I think the number you mentioned there is not far off. I think then from the hedging, I mean we even published this on our report, as you know. We don't hedge all of it, so clearly, something will go through. But you can see that, yes, a little bit maybe more than maybe what you mentioned there. It's typically the recuperated hedging position we're looking at now. You're not far off, but I probably would add a little bit more to the estimate you gave.

Great. And if you'd just allow me one more on containerboard, you called out the fluting really strong. You called out kraftliner improving. You are referring to kind of your white top kraftliner and the coated liner when you talk about the pricing for that segment, correct?

Yes. And probably more on the white kraftliner than the coated at the moment.

Our next question comes from the line of Robin Santavirta from Carnegie.

Just a quick question related to input costs and especially wood costs. Now we have seen list prices in Sweden declining in H2, also, I guess, in Q4 as well. So I was a bit surprised that you called a flat wood cost Q1 versus Q4, so just any color on that. And then what is the sort of view for the full year 2021 wood cost and other input costs compared to 2020? I guess it's difficult to say, but your view is probably better than ours.

Okay. Thanks, Robin. Let me take the first part, and maybe Ivar take the second part of your question. I think the reason why I'm a little bit careful on wood cost now going forward is because we had -- we saw a decline in H2, as you said. But if you look at the later part of Q4, I think we are in a very low area right now. And we do not see very significantly further decreases, so a bit more stability as we go. And that is -- that basically drove this comment we see stability. Yes, it will fluctuate a little bit, but we don't see the same type of significant decline as we've seen in H2. Maybe, Ivar, you want to make a comment on the full year?

I can. And then maybe just add to what you mentioned, Christoph, and to your question, Robin, that there hasn't been any list price decreases during Q4. And as you know, we tend to take the 3 months for us to see the impact. So again, we don't, at this stage, expect to see any at least sizable impact, Q1 versus Q4. I think to the second point, you're absolutely right that when you look at how did we end now the year in terms of our fiber cost and assuming that stays now and how would that look into the average for 2020, I probably don't want to sit here and talk about a number per se. But I mean, clearly, if you look at some of our quarterly bridges and look at the trend of that, I mean we are in the triple-digit millions SEK range. So we are in the hundreds of millions of help, assuming now everything else stays flat, I think. So that's kind of on the fiber, and clearly, that's the biggest input part we have. I think for the time being, I will be much more neutral about both the chemical part in particular. And I think also on the energy from our side, 2020 was a very strange year because the spot rate, as you know, went very low. We had also done some hedging position that was on a pretty different level, so it kind of came out a bit flat overall on the year, although the spot certainly went down. Now you might have seen that the spot rates have spiked quite hard, end of December and the beginning of the year. So that kind of reversed the situation a lot. But you can say that we expect a small help on energy as it currently stands, net-net with hedging, 2021 versus 2020.

There are no further questions at this time. Please go ahead, speakers.

Okay. As there are no further questions, then we will conclude this conference call. Thank you all for participating, and welcome back next time when we publish our first quarter results, and that will be the 27th of April.

Thank you.