Holmen AB (publ) (HOLMB) Earnings Call Transcript & Summary

Good afternoon, ladies and gentlemen, and welcome to the interim report presentation for the Holmen Group. Here in Stockholm at the office, we are the usual suspects on this. It's me Henrik Sjölund, CFO; and Anders Jernhall, CEO and CFO, of course. And this quarter, the second quarter has been a very special quarter in relation to the years that we have had before and also the situation with COVID-19. If we go back a few months, there was a lot of uncertainty in the market. I think all of us have been affected in different ways, all societies, also our own business. Now as we have proceeded during the quarter, we have a little bit better understanding how it has affected our own business. And we can say that all over, we are doing relatively well, which is also reflected in the second quarter operating profit of SEK 542 million. But we can also say that we are struggling in our paper business, which comes from a really huge drop in demand. We are happy to say that our paperboard business is back on track or is doing a little bit better. It's a strong performance in the second quarter. And we are also happy that we were able during the second quarter to finalize negotiations to buy Martinsons, which we will come back to a bit later. And at the Board meeting today, the Directors of Holmen decided to propose to an Extra General Meeting to decide about a dividend later on during September of SEK 3.50. We are a company with a very strong financial position. We are also a company that should normally be able to give dividend also in uncertain times. But if we go back a few months, you know that we postponed or we did not have our Annual General Meeting when it was planned. And later on, we also withdraw the original proposal for dividend. Now a few months later, just as I said, we have a better understanding of our own business and how COVID-19 is really affecting the opportunities to make money and, let's say, run the business as normal. We have looked at and considered all different aspects when it comes to our own situation. And despite the fact that we have a very strong position, we have also looked at other areas such as we are a very responsible company. And when we take everything into consideration, the Board of Directors have come to the conclusions that, yes, we should give dividend, but we should not give dividend in the same, not to the same extent as the initial proposal was, but half of what was initially proposed, which means SEK 3.50. Let's move on. We'll come back to that later on, I guess, to our forest business. Forest is a fantastic asset. We know it because we have had it for a long time. In times when things are uncertain and when things change, the strength of our forest assets becomes very clear as well. We have a wood market right now where there is, I would say, it's a bit excess of pulpwood because the industry is running with slightly lower activity than normal. We have a balanced situation when it comes to the saw log market. But of course, for us, the good thing with the forest is that if the industry is not consuming as much as we are used to, then we just leave the trees for some time to grow a little bit bigger and become even more valuable. This means, for the moment, that prices are down slightly. On the other hand, we have had a period with slowly increasing prices. So Anders Jernhall, how's that transferred into our operating profit on this?

Yes. You saw a Q2 report of SEK 370 million in operating profit from the forest. That's SEK 50 million more than the previous quarter. And the difference is explained by sale of forest properties that was concluded during the quarter. Otherwise, it's roughly the same underlying result in Q2 as Q1 with unchanged prices between the quarters. Looking year-over-year, we have SEK 90 million higher profit to the largest extent, that is more of an accounting increase in earnings due to the new value of our forest assets. We benefited from the sale of forest property, but lost a bit of revenue due to, on average, 5% lower selling prices between the years. Thank you.

I said before that COVID-19 has affected our business in different ways. To be a paperboard producer for the premium segment of consumer packaging, life has been quite okay. We see stable prices in the market, even though we see also that the pulp price, softwood pulp is a bit lower or it's really low at the moment. But as you know, for us, we are more or less neutral. We are not exposed really to the pulp market. As we produce a little bit more than we need in at the Iggesund Mill, and we are buying roughly the same amount to our Workington mill. Not only prices have been stable, we have also seen a fairly good demand development. Not only in Europe, but also if you look at the deliveries from European producers to other parts of the world, the development has been, I would say, quite okay. We have grown in line with the market, and we have also been able to improve our product mix slightly. We had really high deliveries in the first quarter. But if you look at the first half of the year, still the deliveries are on the positive side, and we are roughly at the 550,000 tonnes. We have promised a couple of times, Anders. And then failed, if you go back 1 year, but now we are there, and it feels like we are on track. How does that reflect?

We saw a good result in Q2, SEK 218 million. And this quarter, we benefited from a very good product mix, but we also saw effects of investments in the pulp mill kicking in, some slightly higher pulp volumes during this year, are also seeing lower variable costs due to these investments, and we are happy to see that. Comparing year-over-year, it's not a fair comparison. First 6 months last year was affected by maintenance stop, and we also had an imbalance between production and sales, somewhat weaker market and some self-inflicted problems that we had on production side. So it's better to look at the performance during the last 6 months. That's reflecting underlying performance in today's market conditions. And then just to remind you that we have a maintenance stop this year, only one, and it will be in Q4, expected to cost some SEK 120 million.

Maximum, I hope. Moving on to paper. As I said before, everyone who is producing paper in the world right now is really struggling with lower demand. It's even worse if you are into the wood-free sector, but in the graphic sector where we are we also feel it quite a lot. The drop in consumption is something like 30%. And if you look at the prices, of course, there is a price pressure, even though it looks very dramatic on that chart. But there is a pressure in the market, which is not strange coming from overcapacity. That's the situation we have right now. Our sales, we have done -- you can't say we have done well. We have done well, given the circumstances. We are taking market shares in Europe. We have also been extremely keen on not driving up our own stocks, but keeping a very close eye on the stock levels and keeping them at the minimum. And then we are also in the time of the year when the order intake is normally really low, which means that we have, during the second quarter, taken a lot of downtime or curtailments, not only us, most of us have. And during these circumstances, Anders, it's not easy to make money, but just one more thing. What we do now is that we, of course, we speed up everything we can when it comes to product development and finding new niches, which we have been really good at before, but we need to do it even quicker now as we have lost such big volumes in the market. Anders, over to you. Yes.

When you lose these kind of sales, you're losing sales of more than SEK 300 million. Of course, it's difficult to keep up the performance in -- so operating profit, minus SEK 60 million this quarter. It's actually the first time in 5 years that we have recorded a quarterly loss for the paper business. And back 5 years ago, the reason for the loss then were that we were running in the new rebuilt PM 53. That was a very successful investment project. So have to give even further back in time to find a quarter with a negative profit. This quarter, the loss was a bit exaggerated -- burdened by maintenance stop, costing some SEK 30 million. And year-over-year, of course, we have a dramatic decline in profit, not only due to the downtime that we had to take, but also due to 5% lower selling prices compared to a year ago.

All right. Continuing with renewable energy. Here we are in a situation where the electricity prices in Sweden, they have been low because it's simply lower demand for electricity right now. And we also had a period with quite high production. So of course, it means that it's been more than enough of electricity for the ones, who can consume it. We should have consumed more if we were able to run our machines full because it's cheap, but it hasn't been possible. That means, for us, even though electricity prices have been low, we are, if you look at the first half of the year, roughly on the same level as last year if we exclude SEK 80 million, we got from selling the rights to build a wind farm on our land. And then in the second quarter, there are some seasonal effects, which is quite normal. If we continue with wood products, which is maybe the most interesting part today, it's still 900,000 cubic meters, and it should stand there at this time, but next time, I hope we have changed that. In the market, I had a feeling, not only me, that when we came into this year, it looked quite difficult. But as things have gone forward, we have seen that actually the market balance has become better. It's not only that we have seen during the COVID-19 times that people have actually consumed quite a lot of wood products. That's the case in some markets, but it's not the case everywhere. But it's also that supply has not been that high. We can see that, for example, in North America, where prices now are rising quickly, sharply. It's scarcity of wood products for the moment. I think most of you, who have had some time to maybe do some redecoration at your summer house, you've seen it's not so easy actually to get hold of wood products this summer in Sweden. So we are in a situation where the balance is better. Prices are on their way up, but we have to raise a bit of a warning finger when it comes to the situation in Continental Europe. Of course, there is more capacity that could be used, but it's currently not run. So slightly better prices. Anders, does it mean we make more money? Sorry. We have one more. I already spoken about this. But our own deliveries, they were really high in the first quarter. And also in the second quarter, they are a little bit higher than maybe we expected when it comes to what we have been able to do. In the beginning, we were quite afraid that COVID-19 will limit our production. And it did for some time. But after that, we've been running more or less full. And you can also see that -- from the chart here that moving 12, we are on the right track. And we are also about to ramp up the Braviken sawmill, where we have some 150,000 cubic meters to add on when we feel the time is right given the market situation.

But we did take some downtime during the summer month now in July, didn't impact Q3, Q2, but it will have some impact on Q3. This actually went down in production volume during the vacation period. But Q2 saw a result of SEK 19 million. It's an improvement on the previous quarter. Also here, we have a good product mix, and we saw some price increases in the market. Nevertheless, we are behind last year, and that's predominantly due to a good start. Q1 '19 had very good prices. They started to decline in Q2. So Q2 this year is more or less on par with Q2 last year on the timber business.

Thank you. Then moving on to Martinsons, which is, first of all, we are really happy that we were able to buy Martinsons. It's a well-run family business with high-quality assets and also with a good potential to expand the business in the future. It integrates well, of course, with our own forest holdings. We have had a lot of forest up north for many years now without having our own industry. This is an important and a very logic step for us to take to have our own industry where we will produce planks, mainly, but also some other things, but we have not only bought 2 sawmills, even though that's the majority, of course, of the business. 2 sawmills, 1 in Bygdsiljum, 1 further north, closer to Skellefteå in Kroksjön. But it's also extensive refinement facilities for cross-laminated timber, glulam beams, painting factory, finger jointing, et cetera -- wood treatment, et cetera. And then we have something which we have not even been close to before, which is building systems. That's a project organization, selling complete wooden frames for offices, sports centers, apartment buildings, et cetera. And what we have in our press release said is that we have acquired 100%, or we will acquire 100% of the shares of Martinsons for SEK 1 billion, and we expect to close the business in the fourth quarter. Just to give an idea what especially cross-laminated timber could look like and what it's used for, this is a picture showing couple of big houses, multi-story houses. They were normally not built out of wood, but this is the future, as you understand.

It had a benefit besides being cost-efficient in building wood.

A huge benefit comes when you look at the sustainability part of the business, of course.

You build in carbon dioxide in the building instead of emitting carbon dioxide.

You do. And Martinsons, there have been pioneers and forerunners in this business for many, many years. And they have after -- they have been fighting hard to find the right business model to go forward. And I feel this is something to build on for the future now. If we take a look at what they have been able to do, it's clearly that they have been able not only to develop the business, they have grown the business, but also with fairly healthy margins, which is not always the case in this part of the business. They are also quite locally oriented, which means that a lot of the sales from these facilities, they are sold in Scandinavia. We have a slightly different mix when it comes to what comes out of our own sawmills. And that's partly because they are more into value-added than what we are when you look at what we have before the acquisition of Martinsons.

And you can comment that they have been able to grow 50% the last 10 years, while still they have consolidated the production. And most recently, 2018, they went from 3 production units to 2, while still retaining the growth pace that they have had.

In all the business of Martinsons, the consumption of sawlogs corresponds to more or less our own harvest in our own forests, which is roughly 1 million cubic meters, which means that we have also bought our biggest customer when it comes to sawlogs. For us, Holmen, as a company, where everything we do is based on our forest holdings, and that's from that position, we develop our different business areas. This is a very good step for us when it comes to growing our sustainable business. Wood products, 10 years ago, it would have been a bit different. Today, this is part of the core of what, we believe, can be interesting to expand in the future. I should also mention that very close to Bygdsiljum, which is the bigger sawmill, we are actually investing SEK 1.3 billion in the wind farm, and we are waiting for environmental permit for another wind farm, and we'll see whether we take that decision or not, which is so close, it actually could be seen from the sawmill. So this makes sense for us. And that concludes our presentations, and we are happy to take any questions you might have.

[Operator Instructions] Our first question comes from the line of Johannes Grunselius of Kepler Cheuvreux.

It's Johannes Grunselius here. You had pretty good harvesting volumes in the forestry side. Can you elaborate how we should look at the harvesting volumes for the coming quarters? I think you said in the presentation you had in Q1 that you might be a little bit more cautious on harvesting ahead because of softer prices. Any changes there?

We are harvesting in line with our long-term plan. And we have the readiness to decrease harvesting if there is not enough demand for the wood. So far, we have had sufficient demand, but still have the preparedness to back down if -- we're rather back down than doing -- selling the logs too cheaply.

Where we harvest a little bit more than normal is in the south of Sweden, where we're not -- where we don't have that much for us. But in order to make sure that we take out as much of spruce bark beetle invested volumes as possible.

Okay. Okay. But basically, we shouldn't assume very sort of stable harvesting for the coming quarters? Is that what you're alluding at?

Yes. It looks right now, it's stable. It was a bit more unclear 3 months ago.

Okay. Good, good. Then I have a question on the paperboard division, you did excellent results. Was there any effect from holding from clients that there were some specific qualities with a good margin that were particular requested or was the sort of the demand very much reflecting the underlying demand? Were there any sort of holding effects in the second quarter?

I think for us, we've been able to run, especially the pulp mill at the Iggesund mill in a better way than before, which is also a result of investments we have made. And in this quarter, we also had a quite favorable product mix.

Yes. To the best of our knowledge, there has not been any major stock buildup at the end of our customers. But it's very difficult to see through that, but we have no reason to believe that there has been a stock buildup, no.

Okay. And then I have a final question. And if you can help me with the breakdown of your, sort of, overseas sales from the paperboard business? Because as I remember, there is quite big volumes being shipped outside Europe, Asia and the U.S. Could you talk a little bit about that? And also how the dollar is affecting this business going forward?

The split of Europe and overseas is pretty much in line with the previous year, and you can find that in the annual report, the exact split if you want to dig into that. And yes.

The dollar.

And the dollar -- yes, of course, we have a net exposure as a group against the dollar. And if we are -- continue to trade around SEK 8.70 as we do today, we will not see an effect in Q3, but net negative in Q4, maybe on a group level, SEK 30 million. If you take into account other currency movements that we have.

Okay, okay. But the dollar exposure, I mean, let's say, the overseas market for your paperboard business. Is that pricing dollar? Could it be a combination?

It's a combination of dollar and Chinese renminbis or whatever you call them.

The next question comes from the line of Christian Kopfer of Nordea.

Two questions from my side. Firstly, if I start with forest, we have heard from a certain competitor of yours that they're seeing transactions, in certain parts of Sweden, going up on forest assets. And I just wanted to touch base if you have heard something similar on -- in your neighborhoods, so to speak, that transaction prices are starting to be above the book values that you have currently?

It's too early to tell it. You have to look at this from our perspective over a bit longer period. There were a one transaction that you read about in the papers that were in the northern part of Sweden that were way above our book values. But -- and of course, it was a larger transaction, 800 hectares, but it's still -- that's one transaction, and that's...

We'll come back on that later on. We'll do our own summary.

Yes. And right. And how does your reasoning -- so if you look forward in terms of how you will evaluate. I mean in terms of what happened in the market? And how that could impact your book values?

We come back to that in the Q4, then we look at the valuation of the forest holding as a whole and do mark-to-market for the -- our forest value. And then we take into account the last 3 years forest transactions.

Okay. And then my second question is on the paper division. And I think you have previously said that over time, this is obviously a cash -- that's something that you're looking at from a cash flow perspective. Of course, maybe that's also what you're looking from on other business divisions, but maybe even more on paper. And now obviously, okay, Q2 was an extraordinary weak quarter volume-wise. But if you look at cash flows, they were clearly negative, even if you adjust for the maintenance stop. So if you look ahead, just wanted to see if you can talk a little bit about how tolerant you will be? And what kind of -- I mean how long you can wait until cash flows get positive again -- until taking decisions to considering to close down machines?

I think, first of all, nobody knows exactly what's going to happen in the market. But I think we all agree on that it will never be as it was before again. This is something we have to live with. And there will be a haircut when it comes to capacity in Europe sooner or later. That's clear. But we had a strategy where we make the best use of our fresh fibers, and we have not changed the strategy. We have a lot of initiatives going on when it comes to product development, et cetera. So we are giving that a good chance, and then we'll see what we will be able to achieve.

And just one clarification on EBITDA level for paper, we are on a positive territory, not by wide margin. That cash flow is sufficient to cover the necessary maintenance CapEx in our business. Right now, we are in the middle of an investment program for the paper business. Therefore, investment levels are higher. But this investment program will enable us to produce better products, find new niches. And so it's part of the transition.

Take the next step in product development. Yes.

Right. And to follow up that, Anders, if you could just -- you said that the sustainable CapEx is covered by EBITDA. Can you just -- approximately, what is the sustainable CapEx in the paper division?

You are -- the maintenance CapEx in the paper division, that's somewhere around SEK 100 million to SEK 150 million per year. Right now, we are in -- it's more because we do believe in the assets and there are good opportunities to find new product niches for us.

But that's also to keep them going for a long period. Just keep them for some years, of course, it's lower, but that's not our ambition.

Our next question comes from the line of Lars Kjellberg of Crédit Suisse.

A couple of questions, starting again with investment on paperboard, I should say. You did comment that you had a good product mix. Is this the product mix that you -- where you want to be? And should we consider this as normalized? Or were there any particular exceptional change in the mix that you benefited from. You also talked about the development of new products that you're accelerating. Did that cause any incremental costs and going forward, how do you -- what are you looking at? Are you finding new niches again that you've been very successful in doing in the past? That was my first two questions.

I might comment on product mix first. Normal variation, I usually say on paperboard is SEK 50 million between a good and a poor production quarter. And that is the variation between Q2 and Q1. Product mix is good, is very good, and we might be able to keep it. But remember, it's also about production costs. So this is -- the Q2 report is on the higher end of what you can perform in paperboard in today's market conditions. And the product initiatives, Henrik?

The second question, was it about paper or paperboard?

Paper, paper.

Like Anders said before, we have taken some investments in order to be able to take the next step when it comes to product development. But it's a little bit early stages to say something that you can use for calculating in the future. That's too early. But we have proven before that we can change shovel product mix quite rapidly when it's needed. We have also closed down a number of machines over the years. But where we are right now, we feel that we have a good chance to come out with something that might work because we need a lot of new order intake that's clear, like everyone else in this market.

Sure. Just two follow-ups. You mentioned, of course, the forest property sales gain. Can you actually give us the number what the impact was in the second quarter? And then also, when you have acquired Martinsons, what sort of self-sufficiency will you have in terms of -- what you can produce from your own forest and what you consume in your industrial activity on a net basis?

Yes. If you look at the forest result, the one-offs in Q1 -- Q2 are -- explains the deviation between the quarters. And we have a number of items that are a bit of a one-off, the -- but it's forest sales that are the dominant one.

Around SEK 50 million then?

Yes. When it comes to Martinsons, remember that we have bought a very well-run family business, which works in all aspects. We are also happy that we've been able to buy the forest organization. They have done also a really good job in order to buy raw material to the saw mills, et cetera. And that completes Holmen, that's a good combination with what we have. Sure, there are synergies, but that will be a question for a later stage. Now we are concentrating on making sure that we, together with Martinsons, when we take over, we do the best possible business we can.

Your question on -- Lars, was about the self-sufficiency. And before this transaction, we were, on an economic basis, 100% self-sufficient. Now we go down -- on timber, now we get down to somewhere around 60%, 65%. But on the other hand, we use our own logs from a physical perspective. And then we get hold of -- from a trading perspective, pulpwood and ships. But actually, when you do run the business, increase our sales efficiency for our -- the paper and board business. So I would say, on a whole, this strengthens our sales efficiency from a purely practical perspective.

And the possibility to source not the least pulpwood to our mill in Iggesund and also partly us.

So just to be clear then, you go from 100% to 60% to 65% on the timber side and on the pulpwood side and as a group as a whole...

Economic -- it's no -- from an economic perspective, no impact, on the pulp side, pulpwood.

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

In terms of the paper business, the average ASP in H1 seems that declined some 4%, 5%. What is the outlook in terms of pricing now when we go to H2 and 2021? Can you also sort of comment on the average time span of your price intervals in paper. So can we get an idea of when the sort of price changes are visible for you guys in the market?

Price change, it is difficult to comment on more than that. We are negotiating right now because some business have a new price from 1st of July. Some have from 1st of October. Our price length is normally somewhere between 3 months and a year. And there is a split in between.

And your first question, Robin, if I understood it correctly. When you do the math between Q2 and Q1, you see that average price -- selling prices on paperboard seems to be lower. Was that correct, Robin?

No, just in page -- if we're looking at page 1, I can see that the ASP, the average selling price is down some 4%, 5% compared to H1 last year. I was just wondering sort of what the outlook is now for H2 and next year? I understand you're negotiating now prices and something will be as of July, some new prices as of October, et cetera, what are the prices going up or down? I would assume down now with market prices, right?

I think that's a fairly good guess. But remember also, it's a quite big difference between which products we talk about. The lower you come in terms of grade quality, normally the bigger changes in price you have because they are more competing for the same business. And we are in both ends. We try to go the other way, of course, to go for more value-added in graphic paper.

I understand. Now just sort of a follow-up on a previous question. Clearly, you're operating -- and again, in paper, in a fairly nice niche, your deliveries are outperforming better almost every year now for a few years than the market. And I assume now based on what you say that you try to sort of just continue with this path with innovative products. But if that doesn't work and if the markets [indiscernible] there, any chances that you're looking at structural sort of measures to either rightsize, sort of, capacity to convert or just simply to shot? I think in your toolbox.

That's not ambition, but the history speaks for itself. You know what we have done over the years. If everything comes to the worst, of course, we are prepared to take any measures that's needed. But that's not what we're aiming at. Not at all.

I understand. In terms of Martinsons, the deal seems to make perfect logic. I was just wondering about -- if you could sort of guide a little bit about the earnings impact, looking at the numbers for Martinsons' numbers for 2019, actually, roughly in line with your profitability when it comes to EBITDA margin, EBIT margin. Now how should we sort of model this going forward, any synergies, first of all? And what is sort of the underlying performance of Martinsons now this year and the outlook for the second half and next year?

I will come back to that. But as you noticed, they generate roughly the same EBITDA as we did last year, and it's sort of -- that's where they are trading right now, but we'll come back to more guidance in the Q3 report.

Yes. All right. Fair enough. And then just finally, on this Blåbergsliden wind farm investment. Could you just provide an update on the timing and the CapEx spend sort of this year, next year, 2022? I assume the plan is still to start-up production by the end of 2021. And also, in terms of that investment, what is the production cost now when we have power prices at fairly low levels. So could you just update sort of what is the production cost for that -- that wind farm?

We are right now constructing the roads, et cetera, on the site, preparing the site, and we'll spend some SEK 200 million this year. And the remaining SEK 900 million will be spent during 2021. We will start to erect wind mills somewhere in Q3 next year, and that's when the bulk of the cash outflow will be. And the cost -- the cost for production has not changed because the prices -- electricity prices have gone down. We'll see what the profitability will be when the wind farm is up and running. It all depends on the market balance at that point in time. We have no reason to believe that selling prices, the long-term selling prices of electricity has changed fundamentally due to the COVID-19 event that we have experienced or the collapse, temporary collapse in oil prices. On the other hand, you can see that the EU is quite firm on moving into clean energy. The pricing on carbon dioxide. That is the driver of electricity price as a long term driver. It's actually up. They are higher now than they were a few months ago. So it's sort of no change to the big picture from our perspective.

Well, of course, it would be nice to make sure that there are no bottlenecks in Sweden when it comes to be able to move the electricity from where it's currently produced to where it's needed. That's why we have such a strange situation in Sweden as we have right now.

Sure. Thanks. But just to check, I would assume that even though with the current low prices, it will be a profitable project or earnings would be simply profitable with the current low prices?

It depends on what you define as current, not the July prices. But no, but if you look at the forward curve a few years out, yes, it's still a profitable project.

And our next question comes from the line of Linus Larsson of SEB.

On the paper business, in terms of volumes, you did relatively well in the quarter compared to some industry average. But as you said, yes, it's a very challenging market, 21% down year-on-year on volumes in the quarter. Could you please share with us how the third quarter has started? If you look at July, August, what rate of year-on-year change are we seeing now?

It's a bit early to say. But in the paper business, normally, you have 2 periods during the year when you kind of fill up your order books and then you live from that for a number of months. And that's in the -- before Easter, and then it's after the summer. So it's a very important period that comes now, end of August, September, October, that's normally when demand picks up. We will see, as you know, nobody knows exactly what's going to happen. It's totally dependent on what happens in Europe if people consume if they are allowed to go to the retailers, to buy things, et cetera. And also nobody knows how much we have changed our behavior forever.

Sure. I'm just thinking that you have some, sort of, visibility in the order book and how that has changed and we compare the order inflow with the typical seasonality at this time of the year?

Yes, we do follow it from week-to-week, and it doesn't look worse than the period we have behind us, but it's too early to say where it's going.

Okay. That's fine. Then I'm just curious, maybe it's still very early days. You haven't even closed the deal, but Martinsons like you have already talked about it. It provides you with forward integration. You're buying a customer well-invested sawmill, but you're also entering into the CLT business. And I'm just curious to hear your thinking, if you look a few years down the road, is this something that you would be interested to grow? Maybe at other sites of yours to organically allocate capital into this business?

We have looked into this business before, and we have made a couple of investigations to see whether we should invest ourselves a few years ago. But we came then to the conclusion that we have some more work to do in order to change our own, I'd say, our own offer to the retail business and to the -- we needed to invest in some things, especially at the Braviken Sawmill and also partly at Iggesund before that step would have made sense. Now we got a chance to acquire something where they have come a lot further in cross-laminated timber, for example. But I think we are -- we need to learn a bit more about this market before we say anything.

And to add to that, the production capacity at the CLT factory that Martinsons runs, there's still a lot of spare capacity. So we -- there is a lot of room for us to grow in this market. And since you produce such a valuable thing, you're not really dependent upon short transport distances. So we still have plenty of room to grow that business.

Great. That's helpful. And then just finally, on capital allocation. You're very clear on the dividend announcement today. How you think around that? But maybe after all what's happened, it could be interesting to get an update on capital allocation overall? I mean what's the CapEx guidance for 2020? How do you look at 2021? I understand that Blåbergsliden is increasing in terms of CapEx, but are you still open to take on more wind parks? What's your kind of view on buybacks, et cetera, now that you're basically cutting your dividend in half from the original proposal.

CapEx wise, if you look at the underlying business, we haven't changed our plans. We're still normally investing SEK 1 billion or just shy of SEK 1 billion in the ordinary business. And next year, as you pointed out, we have Blåbergsliden. We are still working on. We don't have permits for the next wind farm project. It's unlikely that there will be no decision this year. It's sort of -- there's not time for that. It will more likely towards the second half of next year, if you're talking about decision on wind farms, that's the investments that we are looking at in -- organically. And on buybacks, it's something we bought back shares in August, September last year. We feel that, that was good for the company as a whole. We bought forests, more forest per share for all the shareholders. And we have been looking at that and monitoring that market. But you have to be a bit respectful that times are still uncertain, nobody really knows what happens with COVID-19, if it will come back. And we want to have the financial strength in this company to be able to do the right decisions, irrespective of market conditions surrounding us.

If an opportunity comes, we don't know, then we will see. We are prepared at least.

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

Two questions from my side left here. I mean the first one is on the Martinsons' acquisition, which I think is super interesting. I mean you're now entering a new segment of the market. And I mean, talking about expansion opportunities. I understand you've not yet closed this transaction yet. But I mean what kind of time frame and size are we talking about when you mentioned expansion opportunities?

Mainly, what we know already now is there is a possibility to increase or should be possibility to increase production at the sawmills, especially one of the saw mills, that as far -- that's what we know right now. Then we have to go through the -- we have to own it and run it for a while to see really what the potential is. But clearly, the bigger sawmill has the potential to increase production.

We have 20% production potential, but it will take some time to deliver on that in terms of that potential in the sawmills. But we also are ramping up or will ramp up our own Braviken Sawmill, which will add some when we have finalized that, some 100,000, 150,000 cubic meters in volumes. So there are expansion that we already have invested in the timber business.

And talking about -- I mean, now you're talking about expansions in -- of volume in sawmills. As you mentioned, the Martinsons acquisition also had sort of forward integration into cross-laminated timbers and building systems either. Are these parts of the business that you look forward to expanding? Is that why you acquired it that you want to expand those parts as well? Or is it more on the sort of an integration and synergy side?

But I think building in wood as such has the future. That's no doubt about that. And what they do when it comes to cross-laminated timber and also with the group in building system that enables the production unit actually to have somewhere to ship cross-laminated timber parts that is produced. The building system parts is extremely important because that's the prolonged sales arm of the business, so to say. But we need to learn first. But the way the market looks and the interest, clearly, this is interesting for the future.

All right. My second and final question is on the paperboard market. Now in the second quarter, we didn't see any -- or there didn't seem to be any distribution chain turbulence or inventory buildup as there sometimes is when there is sort of a turbulence in end markets. Does that mean that the sort of threat of this is over? Or could there still be sort of this type of buildup and turbulence in the distribution chain coming during the second half of the year. What's your view on this?

It's not -- there has still been some issues on distribution, but they have not been significant in Q2. So there was more of an issue in Q1, but you can't rule out that it can come back. It's too early.

And the final question in the queue so far comes from the line of Markku Järvinen of Handelsbanken.

I had a few more questions. You mentioned that you achieved price increases in wood products in Q2. And I guess the question is, what kind of magnitude do you see for increases in Q3? Or the increases from Q2 at least roll fully in, in Q3? Or how does it look right now?

It's too early to give a guidance. We normally don't guide on it. But it -- as you can do the math from the report, we -- there were some 2%, 3% higher selling prices on average in Q2, but we also did have quite a good product mix in Q2. That's -- what we see is no significant shift in Q3.

Okay. Very good. Then just on Martinson. You mentioned that it doesn't really have any impact on pulpwood. I was just wondering if Martinsons sells any chips and -- to pulp producers? And were you buying those in the past? Or do you intend to buy those in the future? How does it go?

We had part of those flows in the past, but of course, we did not have all the flows in the past. So this gives us a better portfolio to trade with. And it is not insignificant when you're talking about market positioning.

It's also something you can use to trade...

Can you talk about the magnitude here?

No, I did not. We don't go into that detail.

Okay. Okay. Then just on energy. Prices are now lower. Could you just remind us what's your sort of net power purchasing position is as a group in, sort of, normal circumstances?

We -- more or less, we consumed 3 terawatt hours in our power -- paper business, and we produce 1.2 terawatt hours in our energy business. And then we have hedges on top of that for the paper, the purchases for the paper.

Once Blåbergsliden is up and running, it's roughly 0.4 terawatts coming on stream.

So 50% self-sufficient, but we don't really look at -- we look at it as 2 different positions that we manage.

Sure. Sure. Good. Then finally, I had a few questions on FX in Q2 -- sorry, in Q1, you said FX had a positive impact of SEK 70 million on the EBITDA. Do you have a number for H1 or Q2 for that?

No, it had a -- if you do -- it had slightly -- in Q2 over Q1, it's no currency effect. No, I don't have the number for year-over-year.

Okay. So similar to Q1, I guess?

Yes.

And then on just hedging. Your euro SEK is hedged at SEK 10.63. Is that for 100% of the flows for the next 2.5 years or...

Yes, 100% -- more or less 100% of our net flows. Yes.

Thank you. And as there are no further questions at this time, I'll hand back to our speakers for the closing comments.

All right. Thank you very much and for taking your time and good questions, good discussions, and see you soon again. Thank you.