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

Ladies and gentlemen, welcome to the BillerudKorsnäs Q4 Report 2021. [Operator Instructions] I will now hand over to Lena Schattauer, Director, Investor Relations. Please go ahead with your meeting.

Good morning, everyone, and welcome to this conference call following the publication of our 2021 year-end report and fourth quarter results. Our CEO, Christoph Michalski; and our CFO, Ivar Vatne, will hold the presentation. And after that, we will open up for questions. So by that short introduction, I hand over to you, Christoph. Please go ahead.

Thank you. Good morning, everyone, and welcome to our quarter 4 results announcement. Let me go and talk to you a little bit about top line first. And I think you have seen, we had a very good fourth quarter with 15% growth in net sales. It was driven by very good market demand and strong markets across all segments. Our order books remain relatively full. We have very good pipeline in quarter 4 as well going into quarter 1 this year. Therefore, I think we are on a good start and we have a very good momentum. So this good momentum was supported by very good production in quarter 4. Despite some maintenance stops in the business, we still had excellent production. And we are looking forward to continue with this level of stability. Our profitability increased significantly. And this increase came from mix improvement, prices, efficiency programs and cost efficiency programs on the manufacturing side. And all these activities all together could offset a lot of the inflation and cost increases that we have been talking about in our quarter 3 result. We also, in the quarter, announced our new strategy during the Capital Market Day. And just to remind you, the focus on paperboard, the added value in sack and kraft, the growth opportunity in North America with a very strong home market in Europe. And I think we are now on a journey which we will keep very consistent over the years and quarters to come. And I think the first expression of this execution is clearly also the deal we signed with Verso. The deal is not closed yet, but we are working hard to come to closure. And I think this will accelerate our expansion, a, in North America with that asset, but also our growth in paperboard going forward with the conversion of the Verso machines. When you move into the full year, we had a relatively slow start in Q1 and then accelerated over the quarters. And I think quarter 4 was basically a great combination of the whole year. Net sales were 12% FX neutral, and we doubled our operating profit. The strong cash flow allowed us to further solidify our balance sheet, and we're now at the level of 1. And we discussed with the Board and we basically proposed a dividend of SEK 4.30 per share, which is in line with our historic performance and which is in line with our dividend policy. This represents about 60% of net profit. If you look at the bridge, clearly, you see a lot in pricing and in volume and mix. And if I stay a little bit on the pricing front, clearly, some of that, around 25% or so, is coming from pulp. So this is not just in our paper and board categories. But all categories have basically driven this good performance and be it liquid packaging board, be it paper -- containerboard and cartonboard, but also sack and kraft. Some categories clearly stronger where we have less long-term contracts. Other a little bit slower, where we have yearly rolling yearly contracts or even longer. But I think overall, this pricing and volume and mix increases allowed us, as I said before, to bridge -- to cover some of the inflation. And maybe in order to give you even more depth into the cost component, I hand over to Ivar, who will talk a little bit about the earnings in quarter 4.

[ So one more, please. ] So thank you, Christoph, and good morning, everyone. Let's go into the profitability bridge. And in terms of the delivery, it's been another quarter with excellent progress, almost double the EBITDA versus a year ago, and margin coming in to a level now close to our target level, which is very pleasing to see. Starting from the left on this chart and some comments on the different building blocks. We have a small negative item, SEK 25 million, and that is related to the Gävle incident, that we did talk about, happening in Q3. Total scope of that is the 75 And then the reason why we have part of that hit in Q4 is linked to planned delivery for October that was impacted. Next bucket is the big one and important, have several components. And there's no doubt that we have more and more focused around cost inflation on several buckets, and we will talk about that during the call. Just to give you some indication of where this SEK 260 million is coming from: wood purchase of fiber cost, minus SEK 10 million, so pretty neutral; chemicals, minus SEK 70 million; energy, minus SEK 35 million; net pulp position, minus SEK 50 million; and logistics, minus SEK 90 million. I have a slide later on to talk a little bit more going forward. But for now I'll leave it like this. There is a very sizable green building block next to this around pricing, and pricing impact clearly has been significant in the quarter. It's broad-based from several different segments and also been building up during the year. Mix, Christoph mentioned this as part of the net sales bridge, is coming from several sources. But there's no doubt that some of the excellent work now is happening in Gruvön and KM7 [ just the ] component on that. And in general, I can say that we are all [ within moon ] with the progress that we've seen from that project over the year, and it has a big impact on our profit improvement over the last quarters. Our cost and efficiency program has had another great year, and we added a bit more than SEK 100 million now in Q4. And rounding that up with a smaller other and some timing component of our maintenance schedule, it brings our EBITDA to 1075 million and 16% of EBITDA. So if you go to the next slide and continuing a little bit on inflation. I think this is a hot topic not only for us, but for the whole industry and, in fact, for several industries. You see some of the bigger buckets here on the screen. For fiber or cost for our wood purchases is relatively stable. In general, availability has been very good across 2021. And that is also the trend that we're taking -- with those going into 2022. There is a slight increasing trend on the wake of higher fuel prices and a bit tighter situation around the sawmills, but it's, at least for now, a relatively marginal impact that we expect. Chemicals continuing up, with caustic soda prices soaring high double digit, heavily impacted by energy prices. We're expecting that inflation to be in the 10%, 15% in the near term. Latex has had a very aggressive inflation over '21. We expect that now to stay flat, but that obviously means staying flat on a high level. And other chemicals like starch, we are expecting further inflation also near term. For the energy, electricity spot rates have been very volatile during Q4, as I'm sure everyone is aware of. I've seen prices peaking 5x normal rates. The good news is that our hedging has been extremely effective during 2021. So exposure has been limited. And we have also looked into very, what at least seems to be very attractive rates for 2022. So we also expect to have a rather limited exposure for next year. Logistics cost, I mean, that is intensifying fast as one of the main headaches going into 2022. Cost-wise, this went up quite a bit versus what we saw in Q3. And in general, you can say that the big drivers of this is there is a sizable logistical congestion across several industries. Overseas transportation being one of the main challenges. And container freight rates, [indiscernible] storage is clearly on unprecedented levels. For road transport, increased fuel prices and shortage of drivers. I mean that also intensifies the picture. But in the bigger scheme of things, that's more of a smaller impact. But this is certainly one bucket that is changing quite fast. I think purchased pulp, we followed the market in general, very, very tightly. It has flattened out on high levels. We expect this to continue going into Q1. Now the next slide, I just wanted to summarize some of the points because this is something we also opened up a bit on when we had our Q3. And if I just start with the below statement there in the green box, that inflation has accelerated during the second half. It's certainly intensified a bit even during Q4. It has increased our '22 exposure. So last quarter, when we went through the different buckets, kind of said in general, big terms that SEK 400 million to SEK 500 million could be the cost exposure that we would potentially be facing. That number is now a bit higher. So the interval seems to be more in the SEK 600 million to SEK 700 million range. And that includes also exposure to some slight currency changes versus what we've seen today. Just as a kind reminder, this is not necessarily what we would call the cost of guidance or outlook, but it's literally just to give you exposure of our cost potentials if when we see the Q4 rates will continue on the flattish level for the coming year. And coupling that with heading off this slide, I mean, this is no doubt that it's one of our main priorities going into '22, but we need to be very much on our toes on several items. Price management and continue hard on our internal efficiencies plans. And the good news is that we are covered it with our current plans to mitigate cost inflation for the coming year. And the next slide, I mean, this is certainly a building block that will also help us for the internal measures for '22. But our continued effort to drive internal efficiencies has worked really well also in 2021. We have had continuous improvement of our ambition level. And 2021 was a great year as well for the cost and efficiency program. Now in Q4, we've added another SEK 105 million and landed an accumulated, since we started this program, of SEK 650 million. That is clearly ahead of the target. So we are super happy with some of the effort that has been done. We are aiming to add SEK 100 million of additional savings by the end of '22 to reach up to SEK 750 million, and we are good on track for that. So going into with some details around cash flow. It's certainly also one of the main financial achievements that we are very proud of during 2021. It's been a truly excellent year, and Q4 was no exception. We came in strong to finish the year on a high. I mean operating cash flow conversion is highly satisfactory, both for the quarter and for the full year. Net debt balance keeps declining, and we are now down to 1x EBITDA in terms of leverage, which is an excellent result. CapEx-wise, very much in line with what we had seen earlier in the year. We landed at SEK 1.5 billion, where SEK 400 million of that is related to the Frövi recovery boiler. And a couple of words about CapEx outlook for 2022. There should be no surprises. We're expecting SEK 2.5 billion. SEK 1 billion of that is linked to the effort that we're doing in Frövi around the recovery boiler project. The remaining SEK 1.5 billion sits in base CapEx. And that base CapEx number is obviously a bit higher versus what we've done over the previous years, but it's very much in line and synchronized with what we presented in our [ CMD ] back in November. So with that, I hand it back to Christoph.

All right. Thank you very much, Ivar. Before moving into the outlook, I just want to go back a little bit on the -- on our acquisition of Verso, which is really there to secure the future growth and profitability. As we said during the announcement, we bought basically the cost leader in graphic and specialty paper. It's an excellent business with good profitability today. And the transformation of that business towards cartonboard will give us the opportunity to grow over the next 10 years. It's situated in one of our key markets and growth opportunities in North America when it comes to primary fiber for containerboard and cartonboard. And it has a world-class cost base. It's one of the lowest cost producers in the U.S.A. and is in the top quintile for export to Europe and Asia. And this will allow us to basically use the Verso assets in the future in combination with our European assets to cater for worldwide markets. They have 2 state-of-the-art paper machines that can be transformed towards paperboard [ grades ], and it has an integrated pulp supply and is situated in a very good wood market. So very clearly, it will be EPS accretive immediately from closure. And we hope that, that closure will be somewhere in quarter 2 2022. It will add 400,000 tons of incremental paperboard value, which is clearly a very significant mix effect. And that will significantly expand our EBITDA margin due to a more profitable mix after the conversion. I think also, adding to that, why I'm very happy about this opportunity to acquire Verso is the fact that this transformation is done in steps with 1 machine ready by the end of 2025 and the second following after that. And I think this transformation also is for me a relatively reasonable thing to do in the sense that it only requires the transformation of the machine, but not of the industrial site, which is clearly a much simpler endeavor than previous projects done in BillerudKorsnäs. Having said that, I have 1 slide which I will not go through about the timings where we expect closure to happen. For the moment, all the signs are in green. We have submitted all the regulatory requests for the closure and the proxy and et cetera, have been submitted to the SEC. All right. Let me go into the outlook. Well, as I said before, I think what made quarter 4 a very strong quarter will also be the reason why we expect quarter 1 and, potentially, also quarter 2 to be strong quarters. We have basically very good market demand across all our business segments, and that is likely to stay over the next half year, definitely. Ivar mentioned higher cost base. But I think with the mix development we are seeing, in particular, in paperboard and liquid packaging board, using our different production sites, Gävle, Frövi and Gruvön in optimizing our production. The mix game that we still are being able to play, we should be able, without doubt, to cover for most or even all of the cost inflation in front of us. Wood availability is good, and there's no reason why this will change. Prices might fluctuate a little bit. But generally speaking, this is not a major concern. And finally, when I think about our priorities next year, it's clearly to deliver on the strategy in commercial operations and wood supply as we presented to you in the Capital Market Day and focusing on our cost and efficiency. Then we are looking forward to the closure of the Verso deal. And that entails then as well a process of integration, which we're currently planning, and then we will execute in the second half of 2022. Well, having said that, I think it's time to open up for questions. As I said before, I would be grateful if you can ask question one after one question, and maybe limit to one -- to two or something for us to be able to answer precisely. Thank you very much, and I hand over to you.

Operator, please.

[Operator Instructions] Our first question comes from the line of Robin Santavirta from Carnegie.

Well, I limit myself to 2 questions. First, in terms of sales prices, clearly, you have very good momentum and also that is visible in your numbers. But now going forward, how should we look at the pricing? We're now soon in February. Do you expect incremental increases in kraft and sack, cartonboard and containerboard prices? Or is it what we sort of have received as of now what we should expect into the winter and spring? So that's question number one. Question number 2 is related to the Pietarsaari production mill. UPM has been affected by quite large strikes in Finland. Apparently, that also impacts your production in Pietarsaari. It's not a huge mill for you. But could you just update is that mill running now or not? And what is the earning impact, if any? So those 2.

Thank you, Robin. Let me start with Pietarsaari and then I hand over your pricing question to Ivar. So you're correct, so we're affected a little bit by the price in Pietarsaari. As you know, UPM has even lengthened the strike now, I think, to the 19th of February. Our team has been incredibly active in mitigating that. So we have basically, with a local energy provider, made a deal to get some of this team. We have some workers from UPM helping us with water treatment. And actually, out of the strike period, I think more than half we have been in production in the last few weeks. We see that going forward also into -- now into February. But clearly, it is a concern. And on top of that, as you mentioned, it's a relatively small mill. It's a mill which uses external pulp, which is not integrated. And therefore, the profitability impact will be relatively marginal. I think for the moment, we're talking around maybe SEK 10 million or something like that. Would you like to take over the price?

Yes. Sure. I can do that. So on the pricing, let me just try to answer that a bit in sequence. So I think there's 2 parts. As you know, we've done quite a lot of pricing during the year. And you saw from the chart from Christoph, he did mention that 11% in general, that's Q4 over previous year. And if you just do this with a little bit rough brush, you can say that 8% of that is on materials. That's what I'm focusing on. So if you think pricing for our materials and the 8% is now pretty much where we stand in Q4. Around 4.5% of that has been the average, you can say, for 2021. So we expect a pretty sizable, you can say, carryover impact to help us in 2022. So that is in general. But I think quarter-over-quarter, which I think also you are alluding a little bit to, clearly, we're also then initiating a bit more new pricing items in the beginning of the year. Rough estimate of that will be another 2% of Q1 pricing activities. And I can say it's broad-based. So it's pretty much across the board for all of the segments, and both for the paper segment and the board segment. And I mean this is obviously going to be very careful [ monitoring ] exercise that we will continue throughout 2022. But yes, I hope that helps a bit on the visibility of both carryover positions and new items planned for the beginning of the year.

Yes, yes. Can I just clarify? So Ivar, what you sort of indicated it's roughly 2% higher ASP Q2 versus Q1?

No, I said Q1 over Q4 in terms of...

Right, right. Yes. And then maybe some initiatives still start of 2022.

Yes, exactly.

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

On variable costs, if we look at the first compared to the fourth quarter, Ivar, you said that you saw acceleration during the fourth quarter. How should we look at variable costs comparing the first average to the fourth average? Are we then seeing increasing variable costs overall? And if so, how much in the first compared to the fourth quarter, please?

So I mean I think in general, Linus, you're absolutely right that we have seen a bit of intensified situation during the second half, in particular, in Q4. In Q4, it's mainly logistics, which has been accelerating. The other ones have, well, with maybe the exception of chemicals, been on a relatively high level. I hope the guidance that I gave in general that we are potentially exposed to SEK 600 million to SEK 700 million for '22 versus '21 will give a good indication of the exposure level if the spot rates stay. But tagging along to the answer I gave to Robin on pricing, we should also have a very good plan at the moment to mitigate that.

But is it -- are you confirming that on a sequential basis, yes, we are seeing higher variable input costs Q1 and Q4?

Yes. I think the logistic is maybe the only one sticking out with chemicals. The rest should be relatively flattish if you talk about the sequence just on the quarters.

Okay. Great. That's very helpful. And then just a quick one on CapEx. You guide very precisely on 2022. What's 2023 like? Could you update us on that? I understand it's a bit of sequencing there. But could you give a figure for 2023 as well?

Yes, we can do that. So 2023, we don't expect significantly changes based on our business in BillerudKorsnäs. All the projects are very well under control, in particular, SPAjax, which is clearly the big outstanding project, which should be finished by the end of 2022, in the beginning of 2023. And I think if you think about the Verso CapEx, which might come in after closure, that clearly will be clearly defined in 2022. And as soon as we know, we will make a statement on that.

Sorry, if I can just add, so I mean, if you keep Verso aside, I can confirm that for 2023, we would be looking at [ 2.5 billion ] as a proxy. So another SEK 1 billion on Frövi and pretty much the same on base CapEx. That's the starting position right now.

Perfect. That's very clear. And then just one final question, and I don't know how much you can comment on the ongoing Verso deal. You said closing in the second quarter. Is that early in the quarter? Is it late in the quarter? I don't know if that's something you can give any more detail on? And also now with the Swedish krona weakening, how should we think about that? Is this a hedged deal? Or will effectively the acquisition cost go up if we see this dollar-krona trend in the market?

Okay. Let me start with the timing. So unfortunately, we don't know. It depends entirely on the regulators in the U.S. when the deal will be closed. It is our assumption for the moment that Verso shareholder meeting will be somewhere beginning mid or end of March. And that depends again a little bit how quickly the SEC will come back. And then we have a number of regulators which -- who need to approve the deal. And here it's a little bit of timing issue, so to say, because we don't know. It really depends. We got some indication from some of them that this would go very fast. But then us and most countries, COVID still plays a role and gives a little bit of uncertainty. So for the moment, we expect quarter 2, but we cannot say is this March or is it May or June.

And the last part of your question, Linus, so yes, we have entered into what is being referred to as a deal-contingent FX hedge. And I think all of you have some of this $825 million in your -- in the back of your head as part of the transaction. The effective rate of that deal depends a bit on when we actually push the button and in what month. But you can say in general, we would be looking somewhere between [ 9 27, 9 30 ]. I think that's pretty good interval to think of. Now looking at the spot rates right now, seems to be a pretty good deal. But who knows? But at least, we have a very good visibility now on what that transaction cost will come out on our side.

Our next question comes from the line of Mikael Doepel from UBS.

I'll limit myself to a couple of questions here. So first of all, on the Verso deal, how would you define the size of the target market that you see in North America in terms of million of tons? And also, what do you see as the key competitive advantage you will have in that market compared to the established SPS players as well as the current FBB importers?

Okay. Thank you for that. So the first of all, the market is around 6 million tons or so when you [ collectively ] take cartonboard and together, which is a mix between, I think, 90% SPS and about 10% FBB. So that is the overall size of the opportunity. The opportunity we expect to grow between 2% and 3% over the next few years. So if you add that up over a number of years, you have an additional 1 million tons of opportunity in that market until 2030. And we expect -- we have seen very strong growth in FBB, which was mainly provided by our European competitors. They have grown the market segment to around 10%. We see this trend of FBB demand continuing because of its quality advantages. And therefore, we have a market opportunity to catch, which is basically based on SBB to FBB transfer, the general market growth and then maybe also some share. What is our competitive advantage? I mean Verso today is basically the lowest-cost producers in their segment. It has very efficient factories. It sits in a very good wood basket. And on top of that, this wood basket is probably the highest quality of fiber that you can use for these type of FBB products. And that gives us a very good position to start the technical transformation of the mill and then basically go after this market. As you know, we are already exporting FBB products to the U.S. today. So it's not that we start with an empty mill and we need them to start only to look for customers. We have already existing customers. And most of our customers today in the U.S. are saying, "Hey, we would like to buy more from you." But clearly, we are a little bit concerned about the long input distance going into the U.S. and the, kind of, security aspect of that. And the second part is most American companies like Made in America. So I think Verso is a fantastic opportunity to go after these customers and providing them excellent quality product made in the U.S. based on the same products that we're importing today from Sweden. So that is the rationale and the competitive advantage that we see we will have by starting up in 2025, 2026, the first machine.

Great. Then another question coming back to the earlier commentary around the potential, let's call it, cost and FX headwinds that you see into 2022 in the tune of SEK 600 million to SEK 700 million. Now combining that with what Ivar, you said previously about the carryover on the price as well as the incremental price increases you expect into Q1, would that be a good price cost match? Or would you still need more on pricing to cover that if it is the SEK 600 million to SEK 700 million, nobody knows, but just for the sake of argument, say, that's the number.

No, I can confirm that the carryover pricing positions and the pricing initiative that I did comment on as part of Robin's question, that should be able to offset the interval I mentioned on our potential cost exposure.

Okay. That's very clear. And then just let me sneak in one final here. On KM7, could you just remind us of the targeted EBITDA contribution you expect to get from that investment? And I was just wondering, given your commentary in the presentation about this mill already giving a strong contribution in 2021, how much more, in rough terms, can we still expect in future years? If there's anything you could say about that, that would be very helpful.

Mikael, as I said before, I think we will stop to comment a little bit on particular machines. But you know the project was basically aiming at SEK 1 billion additional contribution and that will clearly happen. I think much more interesting than the single machine is actually what we see now. So we have around 380,000 tons on KM7 today. But the additional benefit we are getting by maximizing the production efficiency across Gävle, Frövi and Gruvön is clearly one of the, I would say, the magic ways of further improving our mix and efficiency across our footprint. And Verso in 2026 will also go into that frame because export costs from the U.S. to Europe and Asia, et cetera, are fundamentally [ us ] or more competitive than what we have in the Swedish production footprint. So it's not just a matter of 1 machine, but it's actually a matter of optimizing the total footprint.

Our next question comes from the line of Martin Melbye from ABG.

One more question on SEK 600 million to SEK 700 million. I think you said that included FX. Could you split out what was input cost and what was FX of that number?

Yes, I can do that. I'll run it quickly, so I hope you have your pen and paper ready here. So currency, we would be looking into roughly SEK 125 million; chemicals, SEK 125 million; electricity in general, SEK 75 million to SEK 100 million; logistics, SEK 200 million to SEK 250 million; fiber, in the area of SEK 75 million. That's a bit with a broad brush, the buckets.

Excellent. One more question. So after Verso is included, what would be the mix between your sales packaging versus fine paper for the group?

So just repeat the question, Martin.

So after you include Verso, how would the sales split be? So today, you are 100% packaging. But after the inclusion, is it like 70%? Or what is your best guess?

Give me a second. I have that. So let me find the right page on this.

Well, let me start with answering the question what happened just after closure. So today, Verso's business is basically only graphic paper and specialty paper. That business will represent about 30% of our mix. So our mix will be 70% packaging and 30% graphic paper and specialty paper. Then the first machine will be transformed by -- during 2025. And the mix then immediately will move much more into cartonboard. And now I hand over to Ivar who found the...

Yes, I found the page. So I mean, as I said, after the conversions, and we are in this stage into the 2030s when we had the ramp-up completed. We will be looking at from a category point of view, 70% paperboard; 20% sack and kraft; 10% graphical and specialty paper. I also add, I think this is of an interest as well, I mean, geographically, pretty much half or 50% of our business will then be exposed in Europe. Yes, roughly 1/4 or 25% of that should sit in U.S., 18% Asia and then the rest on other selective items.

And say, by 2029, are you then fully out of fine paper? Or is there still fine paper left?

Fine paper, we should maybe have just a little bit left in the transition phase, but it shouldn't be much left. I think when we are coming more to, yes, the full ramp-up then it's more on the Quinnesec, which is sitting with their current portfolio.

Yes. And Quinnesec, I think maybe that was a bit confusing. So Quinnesec, in principle, is also -- we can also transform Quinnesec into cartonboard machine. But I think because 10 years or so is already a pretty long time horizon. We have focused our plan on Escanaba, which is basically today the lesser-performing mill, and therefore, the transformation of Escanaba in terms of value creation will be even better. And then with a reduction of capacity of graphical paper and specialty paper, we actually believe that Quinnesec will have a very profitable future ahead of them. But if that -- if the market decline would accelerate or would be different of what we have expected, there's nothing which stops us to transform these machines after 2030 into cartonboard as well. So we have, with this acquisition, actually, a very good flexibility concerning the market circumstances at the time we take the decision for transformation. And secondly, we have flexibility on timing in order to follow market situation. So as you know, today, graphic paper in the U.S. is having a very good profitability. And this is a balance of demand and supply. And by having still graphic paper left and transforming some of our graphic paper volumes into packaging, we actually help that transition to better market balance in the U.S. as well.

So Martin, I just need to correct myself. I gave you the wrong coordinates. So on Escanaba, we will only be 100% paperboard post the conversion. So Quinnesec, the portfolio, that is 60% CFS and 40% specialty paper, and that we expect to continue.

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

I've got 3 questions. I'll take them in turn. The first one is just on white top kraftliner. We've seen brown grades continue to move up, and the gap to kind of the white top grade has narrowed quite a lot. How do you see that market developing at the moment? And is there scope for further upside on the pricing is the first question.

Do you want to take that, Ivar?

I can certainly give a try. I mean in general, I can say that all of the segments, if it's in boards or if in paper, it's very strong. It's actually the biggest challenge at the moment for us is to get the items out, and it's more of a challenge that we need to delay shipments between the quarters because of different bottlenecks on the supply chain. So we could have certainly had even a better result if everything was normal. I think in general, you can say that there is a little bit more steam on the brown side on the white. But I mean in general, we would classify on all of our cycles that even for our white top kraftliner, the demand and the fundamentals is very strong.

And then on your Verso acquisition, I mean, they've put out their statements -- their filing giving color of where you started the bid process and where you got to? And they've also given color on where their initial estimates are for EBITDA. I'm just wondering, if you were to look at those estimates today, given the strength in the graphic paper price and the further increases we're getting, can you give any color where those graphic paper prices would be or those estimates would be today? And then I was wondering if you could give any color on where you plan to be post-2026 on your EBITDA. Just color of what EBITDA we should be thinking about the Verso business once you've done the conversions? I mean should the acquisition as a whole be kind of over the $300 million EBITDA level? Just some context of what's the end goal of EBITDA for that business.

Yes. Very good question. So first of all, I think I'm very happy that actually this process made the deal making quite transparent. And as you can see, when we started this process, we started on a, I think, a very competitive price for a graphic paper business in the U.S. It was a tough negotiation, but we ended up a little bit lower what might have been the right price from our perspective. So that is very good. And we see a significant upside in the transformation. As you can imagine, the question always come why did the current owner didn't go for this. And I think it has to do with the market understanding with the expertise to transforming these machines into cartonboard, but maybe also the appetite of the current shareholders to do this kind of investment. Because clearly, it's long term and the investment of the transformation is significant. But the added value is substantial. So we know that graphic paper has some fluctuation and cyclicality, which is a little bit shorter and higher than what we used in packaging board. But I think in view of the fact that the transformation will take existing capacity out of the market, we are pretty confident that the prices of graphic paper and specialty paper will be -- the market balance will -- while not improving, will stay stable. So we start from the cyclicality from a relatively stable market balance because we will take some capacity out of the market. And then in the transformation, we see a very significant EBITDA uptick. And maybe Ivar, do you want to [indiscernible] color into that?

Thank you, Christoph. I certainly can. And Cole, I think, once the deal is completed, and it sits on our belt, I mean it's also a natural point for us to start being a bit more precise on your short to midterm, et cetera. But I think for now I think it's also right that we keep part of the big picture. But I can give you some help on the last point because I think it's an important one on the end state and potential size of the price here. We have talked about this on the EBITDA margin that will be definitely accretive to what we see the BK business today. We mentioned north of 20%. I think 20% to 25% range is not -- is a bad starting point, also depending a bit on the year. But once you come then into the 2031, '32 when you expect all of the conversions to fully be ready and the ramp-up is completed, we are looking at a higher or bigger size to price than the SEK 300 million that you were quoting. And more of the SEK 350 million, SEK 400 million is the range that we are looking at. So we're very excited also about not only the strategic fit, but also how this can be a very strong financial case and creating shareholder value.

Thank you. At this stage, we have no further questions. I will hand back to the speakers for any final remarks.

Yes. If we have no further questions, we will then conclude this conference call. Thank you all for participating, and welcome back when we report our Q1 results, which will be the 26th of April.

Thank you, everyone, and have a good day. Thank you. Bye-bye.

Thank you.

This now concludes the conference call. Thank you all for attending. You may disconnect your lines.