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

Good afternoon, and welcome to the interim report presentation for Holmen. From our side, we are the usual suspects on this. It's me myself, Henrik Sjölund; and Mr. Anders Jernhall. We will do it in the same way as we usually do. We go through the presentation. After that, we're happy to take any questions you might have. But starting off with some highlights from the third quarter. It's a very nice feeling to be able to present a very strong result and especially a strong performance across all our business areas. We can see that we have had a very high production efficiency, not only in one business area, but as I said, actually, in most of them. And we know that we have seasonally low costs, low cost, but we also see very good discipline when it comes to cost in general in our business areas. We also see that when it comes to wood products, we have a favorable market situation or a good balance. We've been able to increase prices, and we have some tailwind from that. On the other hand, we do not see a specific tailwind when it comes to lower cost for pulpwood or sawlogs. It's more that we've been able to run our facilities in a very efficient way and a good mix to some extent as well. During the quarter, we also closed the acquisition of Martinsons, which we will come back to, and we've also been able to distribute the dividend of SEK 3.50 per share. Looking at our financial situation. After the acquisition of Martinson and also after we have given dividend, we can see that it's very, very strong. And our net debt is on a low level. And if you look at the [ cake, ] Anders, wood products are now a little bit bigger, but not very much, to be honest, compared to the rest, but a very strong situation in general. If we then move to forest, we have a situation which is a bit delicate. We see that there is very strong demand for sawlogs. On the other hand, we also see that due to COVID-19, the activity in the world as such, is lower, and it has also affected the pulp mills, especially in Sweden, especially in printing paper, where we have seen coming closures, but also running at a lower utilization rate, which means that there is plenty of pulpwood and wood chips and firewood. Because on top of the situation we have, we also have the spruce bark beetles we need to take care of down in the south of Sweden, which means that more wood is coming out of the forest. In general, it means that we have to find a way to get through and also to be able to source the sawlogs we need for our saw mills. On the other hand, find simply place to store the pulpwood we don't need at the moment and also take care of what is not the best quality. So it's a bit different situation than what we are used to. On the other hand, it's a very strong position to have the forest land we have ourselves, and we have a lot of the situation in our own hands. All in all, Anders, if we summarize the financial results for the forest during the third quarter.

Maybe should talk about the new harvesting plan before.

Sorry, we should do that. Absolutely. Last year, we did -- we checked the inventory of our forest. We came to roughly the same result as last time, a bit over 120 million cubic meters standing in the forest, and based on that, we also made a new calculation how much we believe we should harvest in the coming 10 years and a bit beyond that. And what we -- the conclusion is that it's roughly as we saw the situation before, but we will be able to increase the harvest of mature forest because we grow trees to produce houses and homes, not pulpwood. And that part, the mature forest, we will be able to increase, not much, but from 2.2 million roughly to 2.3 million cubic meters per year, the period from 2016 to -- sorry, going forward from 2021 to 2030. On the other hand, in our old prediction, we thought that thinning would be on a slightly higher level than what we have been at during the last few years. And when we look forward, we see that we will stay on roughly that level, which means roughly 0.5 million cubic meters per year, which is, as I said, a little bit lower than we previously expected. If we then go beyond the next coming 10 years, we see a potential to increase the harvest with some 10% after that. We have not included any climate effect on the calculation, at least not in that time span. In total, it will not have an effect on cash flow, no net effect, slight difference between harvest and thinning, but no net effect. Off that Anders.

Now it's time for financials. It's a good result, yet another good result from the forest division, SEK 342 million. It's -- as you can see, it's lower than previous quarter. But as you might recall, we sold a forest asset in Q2 that boosted that result. We are, I would say, roughly SEK 20 million higher than the normal result in Q3. And that's due to -- despite the challenging wood market, we have been able to manage that situation well, run efficient operations and have costs under control, which have benefited us in quite a good result for the quarter.

It says lower selling prices, how much has that affected?

Year-over-year, 8% lower selling prices this year compared to last year. You might recall that prices declined in last autumn.

Exactly. All right, moving on to paperboard. It's a very stable market. We said it many times. It takes time both to increase prices and to reduce prices. We are in a situation now where we see that most prices are stable. And we can also see that demand is developing in a fairly good way. To be honest, nobody knew, not only when it came to -- comes to paperboard, but to different business areas what COVID-19 would do. We do see that it's a bit challenging when it comes to order intake, when tax-free is closed down, that's quite natural. But all in all, for us, we've been able to fill our order books with a good mix, especially in the third quarter, the mix is nice. And deliveries are on a quite high level, which is a fairly good position to be in, even though with a second wave of COVID-19, you never know for sure how things are going to develop. But so far, this is something we have been able to have in our own hands. And as I said before, production efficiency in paperboard have been quite good lately.

Yes. And the good production efficiency and the strong product/market mix have translated into nice figures, both in Q2 and Q3. We commented that the Q2 result was on a high level. And now we have increased some SEK 50 million on top of that. SEK 30 million is due to seasonally lower fixed costs when people are on vacation, and the other SEK 20 million is due to a -- we have been able to reduce production cost even further due to higher efficiency based very much on the investments we have done in the pulp mill at the Iggesund Mill. Then we maintained a very good product mix, which we also had in the Q2 report. Looking year-over-year, you see a SEK 400 million profit improvement. And of course, that's from a very low level. Last year was burdened by maintenance stops, and production was not running very well. This year, production is running well, and we have a good product mix. And yes, but you will not forget that we have a maintenance stop in Q4, which we estimate will cost some SEK 120 million, but it's quite a big range of possible outcomes of those kind of stops.

Indeed. So all right, a few words about paper. We knew already from the beginning when we saw the outbreak of COVID-19 that it will have an influence on paper, quite clear. So -- and it has had quite a big impact on, especially demand development not only in Europe but in the whole world. And we have been used to see that we have a structural decline in printing paper as such. And we have been able to invest in product development and changed our product mix more and more to, what we call, uncoated mechanical papers, where we use the benefits of the virgin fiber we have. But of course, also, we are affected in a situation like this. We've been able to do rather well, especially in Europe, but we have seen that our overseas sales has simply vanished. And also prices overseas is on ridiculously low levels. So also, we have been forced to take quite a lot of curtailments. If you look at -- to the extent, we have been able to fill our order books. We have not -- we have been running far from full. On the other hand, you can see a slight improvement in the third quarter compared to the second quarter. We do see some businesses coming back to some extent but are also quite worried about the second wave now because the first wave COVID-19 had really severe impact on especially demand for our products. But Anders, coming from minus 60 to plus 60 between the quarters, how was that possible?

Yes, it's a relevant question. Maybe if you should look at the operating -- the underlying performance of the paper business, maybe you should look at Q3 and Q2 together. We're running roughly EBIT 0 in this division. Q2 was burdened by maintenance stops and quite a big drop in European volumes. Q3, we have seen the European volumes coming back, giving some better product mix. But we have benefited also from SEK 30 million in seasonally lower fixed costs, and we have also been very good, very disciplined on maintenance cap -- maintenance costs in this quarter, which have boosted the profit a bit. We do, however, have some larger maintenance expenses next quarter. Not as big as in the paperboard division, but maybe SEK 20 million to SEK 30 million higher than we had in Q3.

Thank you. Then moving on to wood products. Now it says 1.5 million cubic meters, 1 million, we previously had, and now we have added also the 500,000 cubic meters from the acquisition of Martinsons. This market is interesting. Also here, we pulled the hand brake like most players in the market did in the beginning of the outbreak. After a while, we understood that it's not going to be that bad. And soon after that, we started to increase and ramp up production again, like most people have done. Remember, when it comes to the wood products market, it's not that demand is fantastic. It's really good in some markets, but not everywhere. It has more to do with less output, less supply than what we normally have seen in a market with fairly good balance. We see Canadians structurally taking out capacity. We also see players in, for example, Russia. And as I mentioned before, there is an imbalance when it comes to wood supply, sawlogs is sought for and sawmill is really needed, but pulpwood, we have a little bit too much. If you have a sawmill somewhere where you are not co-located with the pulp mill, you're running into problems because you can simply not get rid of or you can't sell to a decent price rest products like mainly wood chips and some sawdust. So it's a market which is not really what we normally see. But what the balance -- if you look at the balance right now, yes, we do see price increases coming through. We saw really rapid price increase in the U.S., and after that, it has come down a bit again. But still it's a positive momentum, which is largely to be explained by a bit less supply than what we could normally expect. And then we have, as I said, we have acquired Martinsons as of October 1, which we are extremely happy, I must say that it will be a terrific fit for us having the forest up North now also having the sawmills and the facilities and all the people. As we said last time, it's a couple of well invested saw mills. And it's also a part which we have not had in our company before, a lot more value added, not lease the building systems, which is something new to us. So I guess, soon, Anders, we will also see this in our financial results, but not yet.

No. It will be included for Q4. And the Q3 result, as you have noted, is very strong. It's up almost SEK 30 million from Q2, which was quite a good result. Half of this increase is -- actually there's a price boom that we saw in the U.S. for a brief moment during Q3, we were able to capture that. So half of that, this improvement of SEK 30 million comes actually from being able to sell in the U.S. at the right point in time. Looking year-to-date, we are on par with last year. But this year, we are on an upward trajectory whilst last year was on the downward spiral. Log costs are, as we speak, lower right now than they were a year ago.

But no real difference between the second and third quarter?

No, no difference there.

Okay. Then a few words about renewable energy. Here, we have a situation in a market where we have a lot of water, obviously, a lot of rain. And we have overcapacity costs also in line with COVID 19. Consumption has been a bit lower, and we have had plenty of production in Sweden, which means that we have not had a fantastic price. And we also land on exactly the same result as last quarter, but simply higher production, still low prices, and remember, last year, we also sold off the rights to build a wind farm on our land. To finish with a few priorities, you understood that we are a bit concerned about the imbalance we see between sawlogs and pulpwood in the wood market. We have a strong position as a forest owner, but still, this is something a bit new to us. And we have had a really good production efficiency at Iggesund and Workington in paperboard. And of course, we will do everything we can to maintain that. We have to continue to work hard with product development in paper. We are affected as all the other ones. We have a good chance to do something different, maybe in the future, but it comes down to product development and being able to come out with new products as well. And then we have an interesting job to do to integrate Martinsons in the best possible way to -- what do we say, make 1 plus 1 become 3. That's not what I learned at school, but may be possible. And we also have, especially, 1 wind farm in the pipeline, whereas we are, as we speak, constructing the Blåbergsliden up in the North, which is roughly half terawatt, and we have another one next door, actually also next to Martinsons, actually, which is roughly the same size. And there we wait the environmental permit. And we are working hard actually on seeing if we could also build some wind farms in south of Sweden, outside Norrköping, but that comes later. We are a company, Anders. More and more, we contribute to sustainable society, not the least after having acquired Martinsons, which is a nice feeling. And when we speak to our people I would say, more and more, I also have a good feeling about having the forest as a base and to be able, especially when it comes to building in wood, to substitute concrete and steel. And to some extent, also when it comes to board and paper to substitute plastic. And to be able to, in the long run, continue on the strategy we have and increase our energy division. All right. Thank you very much. That's it, and we are happy to take on any questions you might have.

[Operator Instructions] Our first question comes from Christian Kopfer from Nordea.

A couple of questions from my side. Firstly, on forestry, I think you mentioned that there would be a slightly lower harvesting, including thinning. But at the same time, you said that there is no cash flow effect. I just wondered how -- I mean, if you harvest a little bit less, how can't you see any cash flow effects move up?

The -- we are increasing final felling and it's final felling, where you get a lot of timber for the sawmills. That's where you earn the money. It's both cheap and you get better paid for the final felling. The thinning is more -- you're tendering to the forest to make it grow better and you have a very thin margin when thinning, so the net effect is 0 from those increase in final felling and decreasing thinning.

A follow-up on that, I understand. You also said that you had a very good cost control in the forest in the third quarter. Was it something special there on the cost control side? Or should we think that to be...

No, it's nothing special. It's -- you have these variations between quarters, and this quarter was a very good one.

Christian, when we look at the company as such, all business areas, we see a good discipline when it comes to keeping down cost.

Yes. You also said that you had a good mix in the quarter. Was that unusually positive? Or how should we look at that?

Good mix, yes, in all paperboard, paper and timber division, we had very strong mixes, product mixes.

It can vary over time. But of course, we try to improve the mix over time, but it's not that easy. And it's not -- it's a little bit more difficult to predict what kind of order intake you will have with what mix will be around the next quarter. If it wasn't for COVID-19, it would have been easier.

Right. And in paperboard, you said that prices were pretty much stable. But if I look at the sales development, it seems like sales in Swedish Kroner is -- that's coming down more than delivered. So it seems that there are some downward pressure on prices. But how could you explain that?

No. The price levels are the same. If there is a down -- there is no trend in pricing, I can say. You have the translation effect maybe for -- 40% of our sales comes from the U.K., and it might be a translation effect. But if you look on the underlying price trend, it's stable.

It could also be that we sometimes take on a filler volume, just to fill up machine, then you have a lower price than that. But in Europe, and our main customers there, we see a stable price development.

Right. And then finally, on the standing volumes on the forest side, I think you mentioned that you are slightly above 120 million cubic meters. Is that where -- also where you expect it to be by the end of this year?

We are at 123 million, if I recall correctly, and that's where -- you might recall that we last year did the stock taking of the forest that we do every tenth year. And so it has been calibrated.

Our next question comes from Lars Kjellberg from Crédit Suisse.

Clearly, your improvement in Iggesund is quite remarkable, and you're getting the efficiency that you've been aiming for. Should we now view this as a new normal? Or is this these 2 quarters? You mentioned in the prior quarter, there was an exceptional good operational quarter. I know you have the same, pretty much. So absent, of course, the disruptions from maintenance activities, have you now found that stable platform that you've been looking for for some time?

That's very hard to say. But I think if you go back 1 year, roughly, we can definitely say that we did not do a good job when it came to production efficiency. Remember, in the fourth quarter, we have this big maintenance stop that's always connected to quite a lot of unsecurity. We don't know exactly what's going to happen. But of course, we hope that this is a new level, but I cannot guarantee.

We can add to that where the problems we had 1.5 years ago, it was yes, we had production disturbances, definitely, but we also had an imbalance in the market, which forced us to take orders we didn't really want to have, and that created production inefficiencies. So you need to have 2 -- both things, right? You need to have a solid market and a good production stability in order to deliver these kind of results that we have delivered the last 2 quarters.

And the pulpwood, of course, now is in good shape. There's no issues there, which I'm sure helps as well.

Yes, you have a solid point there.

The -- you did overproduce relative to your deliveries, both in paper and in paperboard, that had a meaningful contribution to cover fixed costs, and I guess we should expect that to reverse to a degree as you bring down mills for maintenance in Q4. Is that the right way to look at it?

Paperboard is a bit of a stock buildup ahead of the stop that we have. Paper is a marginal stock increase. We had a stock reduction in Q2. So it's sort of more, yes. It's no major moments in the paper division.

In total, the stock for paper is not very high, but yes, we did build some stock now.

So on the context of what you said, you should view the 2 quarters in context that's -- i.e., essentially a varied result, and that's the way we should look at things heading into Q4. Is that the read?

That's quite a fair starting point, yes. Yes.

And the other one -- or 2 more, if I may. The wood product situation, and of course, the U.S. spike that you mentioned that was -- contributed half of the gain in wood products, where do you see that now? It sounded like -- it was almost like an arbitrage you had in a temporary moment of glory in a way. Are we back to more normal activity and pricing in the U.S. now? And the other one was on margin. So you mentioned part of Martinsons would be reflected in the forest division. Does that reflect the trading of wooden, et cetera, is that what's going to come in the wood product if -- or in the forest division and the construction and the wood products will stay in wood products, so to speak? And final question on that. I would assume trading margins would be appreciably lower than the production and wood products -- or construction and wood products business that you're going to have in wood products?

If we start by the...

Any guidance would be...

If you take the price level in U.S. to start with. If you take the current price level, and we obviously do not know where it will end up. But where we are right now, it's slightly above the level we have in Europe. We don't have any huge volumes going into the U.S. as it also depends on how we are harvesting the spruce bark beetle-infested trees down in the south of Sweden. It's mainly that part that we ship to the U.S. according to those specifications. And the rest, Anders?

Yes. You're correct, the wood trading part, the sourcing of logs that will be moved into the Forest division. And that's a very thin margin. It's mostly, I could say, almost a zero-sum game. And the construction systems, building systems and the wood products, sawn wood products will be managed in our wood products division. Did I miss any part of your question?

I think the last one.

I think not. And just a clarity on the U.S. prices, slightly above European prices. Get that one or the -- versus where they were in Q3 when you saw the benefit?

You can almost take away all that benefit, most of the benefit, we can't expect it in Q4. That's a simple answer.

But it's changing so quickly.

Yes. I got that. And what about activity in rest of world? Are you seeing any issues now with COVID in that particular activity in construction?

It's like I said before, it's a split picture. Many markets are doing fine, and especially during the third quarter. We have seen really good demand from a number of markets. But we also have seen, of course, really low demand from the markets, which have been more or less closed down or locked down. And if you take Northern Africa, Middle East, et cetera, it's not a very high activity.

Our next question comes from Linus Larsson from SEB.

Congratulation on a really strong set of results. Did I hear you right that you said that seasonality in the third quarter was 30 plus, so SEK 30 million each in paper and paperboard? Did I get that right?

Yes, you got it right. It's slightly higher than a normal level. But that's -- and we've been very disciplined on taking out vacation and et cetera, et cetera.

Right. Yes, that's indeed higher than normal. So my follow-up question is, obviously, what's the negative seasonality Q4 on Q3 then?

It will be a reversal of the SEK 60 million. We will go back to the normal state in Q4.

Yes. Got you. Okay. And then maybe just 1 or 2 more questions on Martinsons. Now that you've closed the deal, you have full visibility. We have now a fantastic third quarter or a strong third quarter behind. And so when we try to understand what Q4 is like, how has Martinsons behaved in this type of market environment? What kind of expectations should we have for the combined entity in the fourth quarter?

We don't have that slide in this presentation. But if you look back in the Q2 presentation, we showed you the historical performance of Martinsons. And you can see that it's clearly a much more stable business than our wood products business. And that's due to 75%, 80% of the sales are in Sweden, which have a much more stable pricing picture, and also a lot of value-added products, which has a more stable margin over time. So you shouldn't see -- expect to see the same uptick in financial performance from the Martinson mills, as you can see from the old Holmen mills.

Especially the [ Braviken ] mill with big volumes takes advantage of the market situation like now.

Great. And then just 1 final question. On the maintenance schedule. So this year, you have 1 big maintenance shut in an Iggesund Mill, SEK 120 million, you said in the fourth quarter. How have you set the schedule for 2021? By now, will you have both that kind of a start and the working tone stock, which you didn't have this year? Or what's the schedule looking like?

Yes. We will have a stop in Workington in Q2, which will be slightly larger than normal, actually due to overhaul of our biofuel burner, and then we have the normal stop for Iggesund, most likely a year from now.

Yes. And so the Iggesund, is the same? It's SEK 120 million right now?

Yes. We'll see.

Linus, we had a period when we went from 12 months between the stops to 18 months even looked for 24, but we have come back to 12 as we had to when we had a couple of inspections back, we were forced to -- we couldn't wait more than 12 months to have the inspection. We'll see what comes out, but most probably, it will be another 12 months and then a new inspection.

And at the Workington mill, we haven't disclosed the numbers yet. We'll have to come back to that. But it's a big stop. It's 8 years since we commissioned our turbine at that mill. And so it's a big overhaul after 8 years.

So it's something clearly bigger than the normal SEK 70 million to SEK 80 million?

We'll have to come back to exactly how much bigger the financial impact is.

Our next question comes from Robin Santavirta from Carnegie.

Just a question on Martinsons. Could you reveal what is sort of the mid- or long-term outlook for synergies or off of that company's profitability, we can see the history. I would assume you have now a pretty clear idea about the synergies and where Martinsons kind of -- profitability can end up for you guys?

That's a little bit early.

We have bought a company that has -- is very well run. It has shown ability to be profitable, yet be able to have quite a high-growth pace. And we hope to be able to continue to that journey to show good growth and stable profitability. Synergies is not really the reason why we bought Martinsons. But it didn't degrade well with our own forest holding up north.

So maybe we shouldn't expect any material synergies or any material sort of profitability improvement of that company as it's well-run already now, so to say. Is that the correct way to...

Right now, I think that's the correct way to see it, yes.

Yes. Good. Then the paper business, a significant improvement in profitability now in Q3, a bit better deliveries. What are you seeing at the moment if we forget about sort of what might come with lockdowns. What are you actually sort of seeing in order intakes in September and October? Is that in line with the average performance in Q3? Or is it weaker or better?

I think you had to see it already from the beginning of COVID-19 when everything went down a lot, and we didn't really know. And after that, after the summer, we have seen some improvement. But remember that there's also seasonality when it comes to when our customers in paper actually order. This is the time of the year when they should order a lot, not only for the fourth quarter but also for the first quarter next year, depending on what magazines, retail business, et cetera, it is about. So yes, we see an uptick when it comes to order intake, but what that means, we really don't know. It's better than at the worst point. At the same time, we have structural decline. So we see some rebound, but how far that will take us, we really don't know. For us, it's, of course, extremely important to do the best we can and also take some market shares, take advantages of the products we have and try to win new business and to wait and see a little bit what comes after COVID-19.

All right. I understand. Then in terms of forest valuation, forest transaction prices in the market in your area this year, what should we expect now when we go into Q4? Is it basically stable year-over-year? Or should we expect you to increase the fair value of the forest on the back of some higher transaction prices?

It's too early to say that. We will come back in the Q4 report when we have done the valuation exercise.

But is this something you do every quarter? Or is it once a year at the end of the year?

It's once a year at the end of the year.

I remember we're bringing also some historic data of the last 3 years.

Yes, yes, yes. Final one, how should we view -- you sort of frequently state that your balance sheet is very, very strong. Clearly, that is the case. What is more important for Holmen? Is it, at this stage now, growth? Or is it then pay back to shareholders in some way?

We like -- we don't have a problem with having a strong balance sheet. And of course, we are doing everything we can to expand our business when it makes sense. It's not that easy in all business areas. But like now when we bought Martinsons, that makes sense. When we invest in wind, we are building a wind farm right now, we think that's a logic step also for us it makes sense long term. And then we will see.

Our next question comes from Martin Melbye from ABG.

2 questions, Martinsons. You said EBIT last year was like SEK 50 million. What is that number year-to-date in 2020?

I think EBIT, we stated January to August was SEK 50 million. Last year, full year EBIT was SEK 100 million.

Okay. And then regarding -- you described the oversupply situation on pulpwood, and prices have dropped by 25%, 30% already. Are you here seeing another price decline at the start of next year? Or are prices already low enough?

I think you will see a number of different prices. Firewood, for example, will be really, really cheap. And good quality pulpwood. Well, normally, when you have oversupply, prices go down. How far it will go, it's hard to say, but we have a situation simply where we have more than we need. And the ones driving out the wood out of the forest, that's the sawmills at the moment. Exactly where it will go, we'll have to see.

And this firewood segment or quality you described, is that something you buy, so you'll get a better mix? Or how is that segment?

No, but it's something you get, especially when you take out the forest, the spruce bark beetle infested trees down in South. You have -- some trees are too dry. They are not good enough to be used by the saw mills or the pulp mills, and then they end up being burned in the -- for producing hot water. And then that's a different specification and a different price. It's nothing we want to have, but it's something that happens right now. And also, if you look at sawdust, et cetera, it's normally sold to producing energy.

Our next question comes from Oskar Lindstrom from Danske Bank.

So 3 questions from me, all regarding paperboard and a little bit of overlap maybe to some previous questions. But the first one is, you've had a couple of quarters now with good production, you say the market is rather good as well. Are you worried that there are any sort of high inventories in the value chain, which have been built up now in the first -- well, during the corona crisis that your customers have maybe bought a little bit too much just to be on the safe side, and like we might see some destocking in the quarters ahead?

Yes, we see some tendencies of that, yes.

Of destocking? Or still...

They stocked up a little bit. You have a little bit more of inventories in the -- at the customers than normal, but it's also different from segment to segment.

On top of that, you do have a sort of Brexit stocking up effect definitely in the market. But we've had that in the past. So it's nothing major, but there is an element of that.

Should be, temporarily.

Yes. All right. And do you think this destocking might come in the end of the year here? Or should we expect that more next year?

That's hard to say. We -- let's say that we see some tendencies right now.

All right. My second question here also on paperboard is you talked about a better product mix. And how stable should we expect that to be? I mean is it a consequence of active decisions on your part? Or is it just sort of you've been lucky customers have ordered your high-margin products, this could end any time? Or sort of what's the story behind the better product mix?

Now it's not only product, it's also sales mix to which markets we sell. If we could, we would sell everything into Europe or most of it, but we can't. And that varies a little bit over time. And in the third quarter, we were able to have a good mix and we didn't need to take on filler orders, if you call it that, which has a different price.

Could you -- I mean, I realize the distinction might be able to simplify. But let's say, overseas, outside of Europe orders are the ones with lower margin for you. What percentage of your volumes in paperboard have been to overseas markets in, let's say, the third quarter as opposed to a normal quarter?

If you take paper, that's a generalization you can make. But board, we have some quite nice volumes going outside Europe that have a good margin as well. So it's...

It's a mix, a huge difference.

Yes. Our ambition is to maintain this mix, but it's not completely in our hands. We need the customers to want to maintain that relationship as well.

And your earlier question about, maybe there is some destocking, then, of course, we have to change the mix a little bit until that's over.

Right. But it's not as if you have launched new products and taking out some old ones from your offering for any such actions, which is behind this mix change?

No, it's not.

No. And then my final question is, I mean, you mentioned lower pulpwood prices when you talk about the Forest division. Has this had any impact on your paperboard and, I guess, paper divisions yet? Or should we expect it to come?

Year-over-year, we have a positive effect, especially in paper, not so much actually in paperboard. We source a different mix for the paperboard division. Quarter-over-quarter, we have hardly any effect.

And would you -- should we expect there to be more effect in coming quarters given what the market looks like right now, the spot market. I realize there's some delay in your cost -- input cost.

We have had the effect year-over-year, that effect will remain quarter-over-quarter. We don't -- even if we look ahead, we don't really see any significant effect coming in.

And this should also hold true for the forest division, your sales prices there?

Yes.

So a fairly stable situation going forward?

As we trade right now, yes. But you don't know what will happen a quarter or 2 from now.

No. All right. Actually, if I may, just a fourth question here on the paper division. You described it rather well, I thought about sort of foreign demand disappearing in the second quarter and a little bit of it coming back in the third quarter, but of course, a lot of uncertainty due to research in COVID. What will you do with this division if sort of the foreign demand doesn't come back in any significant way? I mean, are you just going to -- can you run these mills at reduced levels indefinitely? Or what are your options here for adjusting your costs?

I think you partly answered the question yourself. No, nobody can run on too low utilization rate in the long run. But I think where we are right now, we have to understand where COVID will take us, and we had to try -- we also need to understand the combination of COVID-19 in structural decline. And also what our possibilities are because we work hard on product development. We do new business, but if that will be enough to run full already next year or after that, we don't really know. And if it comes to the worst, well, that's too early to say. Then we have to take out capacity, but that's not our idea.

And when you talk about new product development, would that be nonpublication paper grades? Or are we talking more conversion into improved newsprint and book paper?

Both, but we concentrate on graphic paper right now.

Our next question comes from Cole Hathorn from Jefferies.

In the forest division, you called out 8% lower selling prices year-on-year. [indiscernible] should you provide some color on how you see the pulpwood and sawlog prices potentially developing over the next 12 to 24 months given there's increased targeted harvesting for the spruce beetles and probably some faster decline in graphic paper demand. I mean, does this mean more subdued pricing near-term for longer?

That's a very difficult question to answer. I think if you had to take Sweden in some perspective, in that case, long term, I believe Sweden will be an import country, which means we will most probably consume more than what we can harvest sustainable in Sweden over time. Right now, you're right. We have had some closures. So we'll have closures of paper capacity. We've also seen lately quite a lot of investments in pulp capacity. And right now, pulp is also a product which is a bit oversupplied. So we are in a very special situation. But we really don't know where it will go, but I'm convinced if you go beyond the 24 months, you will come back to a situation where most probably Sweden will be -- need to import to fill the demands from the players here. But meanwhile, we have an oversupply, it will then be a balance between what will be taken by the pulp mills and what will be taken in terms of firewood, for example, for bioenergy, et cetera. There will be a new balance. But right now, it's not there.

That's very helpful. And then just a follow-up on that. I mean, are you doing anything different with the harvesting for spruce beetles to kind of screen that wood and where you sell it to the customers is the first point just carrying on, on that forest? And then separately on wood products, you talk about the potential to replace concrete and other items in building materials medium term? And I know the EU Green Deal is supportive of more CO2 efficiency in buildings. How do you see that theme playing out longer-term in wood products?

I'll take the last question, replacing concrete and steel with building in wood, we believe that makes sense. And that's also partly why we believe the investment in Martinsons is a very good step to take part of that development, especially when it comes to building in wood, higher buildings, multi-story buildings, et cetera. When it comes to the wood we take out right now from the forest, just to make sure that we stop the infestation of spruce bark beetles. Well, yes, we do screen it and we divide it into different qualities. As much as possible, we bring into our own pulp mills when it comes to pulpwood. And if the timber, the sawlogs are in enough good shape, well, then you can run it through the sawmills and sell it to quite normal prices, sometimes even better prices. But if it's too old or too dry, then you end up with firewood. And then, of course, it's a different value added, hardly any.

[Operator Instructions] Our next question comes from Markku Järvinen from Handelsbanken.

Yes. I had a few additional questions here. Paper pricing, these list prices moved down for H2 compared to H1. And is this now fully visible in your Q3 earnings? Or is there some sort of contractual lag here?

Sure. There is a contractual lag. We see an impact in Q3 of lower prices. That has been weighted up by better product mix as selling more to Europe rather than overseas. But clearly, they will have some impact in Q4, pricing will go down a bit in Q4 due to the lag effect.

And do you expect to see the full effect in Q4? Or does it also run into '21?

We negotiate constantly with our customers. Some are yearly contracts, some are quarterly contracts, et cetera. It's too early to say, and we are discussing right now for '21.

Okay. Very good, very good. And then still on paper, there have obviously been some closures during -- closure announcements during Q3 on the SCA and UPM and do you expect to gain volume due to those closures? And have you sort of seen increased interest already?

I think we should remember that these machines are still running. But sure, we -- it's good news that they disappear from the market. And especially when it comes to SCA, they have nothing else to replace it within their company. So that's clearly an opportunity. When it comes to UPM, most probably, they will try to find place on other machines to support the customers. But it's good news, but we need more for balance in a market.

And then finally, just on the expansion that you've done at Braviken, where does that now stand? Have you sort of taken that into full utilization? Or is that still to come next year? Or what's the situation there?

You mean the ramp-up of the sawmill?

In September, we started to ramp it up. And is -- we should, in Q4, be quite close to reaching the new level.

600.

Yes, the 600,000 level [indiscernible] the mill.

So do you think the sort of seasonal demand will be sufficient to sort of increase volumes due to the new capacity? Or how does it look?

Normally, this would not be the right season to ramp up the sawmill, but the market is -- there is a lack of wood product right now. So it -- from our perspective, it's a good timing.

And also when it comes to prices, normally, the fourth quarter is not the quarter when you increase prices, but it might happen this time.

Okay. There appears to be no further questions. So I'll hand back to the speakers for any other remarks.

Okay. Thank you very much for taking your time to listen to us and very good questions. Thank you, and have a nice day.