Svenska Cellulosa Aktiebolaget SCA (publ) (SCAB) Earnings Call Transcript & Summary

Good morning. My name is Björn Lyngfelt. Welcome to this press conference where our Chief Executive Officer, Ulf Larsson; and Chief Financial Officer, Toby Lawton, will present our year-end report. And after the presentation, there will be an opportunity to get answers to questions. So Ulf, please, the floor is yours.

Thank you, Björn, and also from my side, good morning, and a warm welcome to this year-end presentation of SCA's results of 2020. The year of 2020 can be summarized this year of transformation and change. And SCA has, for a long period, aimed to reduce and also finally close the exposure to publication paper. And in August last year, we informed that negotiations to close the remaining 3 paper machines at Ortviken would take place. This closure will now take place during the first quarter this year. At the same time, we did announce that in line with our stated strategy, we'll invest SEK 1.45 billion to increase our pulp production. And this investment will be located at Ortviken industrial site just in order to obtain capital-efficient investment by using existing equipment in the new project. And the investment cost in this project will be around SEK 5,000 per tonne. And if we compare that with the greenfield project, it would have been up to SEK 20,000 per tonne. We have our ongoing investment to build the world's largest kraftliner machine in Obbola. And that one is progressing according to time and budget despite challenging times. And last but not least, we also announced last year that the growth in our Forest is higher than earlier estimated, and we will gradually increase the harvesting level in our own forest by slightly more than 1 million cubic meters annually during the coming 5 years. And this will give us a step-up increase in cash flow from our own forest of about SEK 300 million to SEK 400 million per year from 2025. The ongoing pandemic influenced sales and earnings negatively last year and especially in publication paper. Otherwise, production and also distribution were, in principle, unaffected. And the sales declined 6% compared to 2019, and that was mainly due to price and product mix. And during the same period, EBITDA declined 17%. When it comes to cost, we have successfully managed our cost position during 2020. After a strong fourth quarter, EBITDA for the full year 2020 reached SEK 4.44 billion, and our EBITDA margin during the fourth quarter reached 30% and thus reached an average of 24% EBITDA margin for 2020. If we take a look at our industrial return on capital employed, calculated as a 12-month rolling average, that one amounted to 5% because of a lower EBITDA level for the industry. But at the same time, it can be noted that the EBITDA level for SCA Forest was at record high during the same period. Thanks to a strong focus on cash flow and reduced net debt of SEK 600 million compared to the previous quarter, our leverage arrived at 1.7% despite the pandemic and despite the ongoing investment program, we're happy about that. Today, we are more confident with the conditions for dealing with the ongoing pandemic and will, therefore, propose a dividend of SEK 2 per share. This is -- this also corresponds with our policy of a stable and increasing dividend level. When I reflect on the outcome of the fourth quarter, I can state again that we see an increased stability despite the fact that the pandemic and its effects are far from over. The sales during the fourth quarter 2020 has compared to the corresponding quarter 2019, increased by 7%. This is entirely the result of an increase in volume, prices, currencies, and our divestment of SCA Wood Supply UK have gone in the other direction. Our EBITDA has increased by just over 30% in the fourth quarter, as mentioned. This is due to a lower cost, mainly lower raw material costs, lower maintenance stop cost, but also, last but not least, lower other costs, they have also decreased considerably. On top of this, we have the positive effect of the forest revaluation. During the fourth quarter, we also completed acquisition of 20,000 hectares of land in Latvia, and our total holdings today amount to just under 50,000 hectares. And as you know, we have a long-term target to reach 100,000 hectares in 5 years. And we have, in a rather short time, reached almost 50% out of that. In the Wood business, we also divested Wood Supply UK at the end of last year. We delivered SEK 1.31 billion on EBITDA level during the fourth quarter 2020, and the improvement versus the corresponding period 2019 was, as earlier mentioned, lower cost. And a positive effect of the forest revaluation. And at the same time, we've had a negative effect on the result from unfavorable currency development. Our EBITDA margin of 30% in the fourth quarter means that we are back on the level we could see at the end of 2018 and at the beginning of 2019. So then I'd like to make some comments for each segment, starting with Forest. And we've had a stable supply of wood to our industries. Sales was slightly lower when comparing quarter-on-quarter, mainly due to lower pulpwood prices and also somewhat lower volumes. EBITDA was up 23% due to a high level of harvesting from our own forest this quarter and also higher earnings from revaluation of biological assets. On the other hand, we could see substantially lower pulpwood prices during this period and that you can also see in the bottom left in the graph. In Wood, we have had a continued high demand in all markets during Q4, maybe with an exception for China. Nevertheless, the Chinese market has also recovered and is back on track again. And when I presented the Q3 report, I estimate the price increase for Q4 versus Q3 to be between 3% and 4%. And we can see now that the outcome for SCA was 3.5%. So with today's strong market situation for Wood, I estimate we will see a further price increase of more than 10% during the first quarter 2021, compared with the fourth quarter in 2020. During the fourth quarter 2020, we divested SCA Wood Supply UK. This business, which largely builds on trading, has a turnover of approximately SEK 1.4 billion and the normal EBITDA level of about SEK 25 million. We will continue to sell solid wood products to our industrial customers in the U.K. also after the divestment and U.K. will continue to be one of our core markets for solid wood products. Otherwise, sales was rather flat when we compare quarter-on-quarter, but EBITDA was up as much as 82%, mainly though then thanks to price and volume. We turn over to Pulp. A planned maintenance stop was carried out during October, and this gave a negative impact on the result of approximately SEK 130 million for the fourth quarter. After the maintenance stop, the production has been stable on a very high level, which we are happy for, of course. Sales and EBITDA were up substantially in the fourth quarter 2020, compared to the fourth quarter 2019, and this relates entirely to higher volumes and also lower costs as prices, including the effects of currency changes and increase in discounts remained essentially unchanged quarter-on-quarter. Another positive effect is that as the production stabilizes on a high level, the yield when it comes to wood consumption, when it comes to chemical consumption, energy generation and so on, improved in all areas, resulting in a lower cost per tonne. The pulp deliveries went down during the autumn of 2020. And this was mainly due to limited supply. And I mentioned last quarter that many producers had to move the planned maintenance stops from the spring to the autumn the same year just due to the pandemic. And this has led to both softwood pulp as well as hardwood pulp inventories now are down to normal levels. And what you can see in this slide is the level for November. And I expect that we see even lower inventory levels in December and also in January. The price increase from autumn 2020 from USD 840 per tonne to USD 910 per tonne has been contracted by a weakened U.S. dollar and from January also from increasing discounts. The price announcement of USD 960 for January will take effect from 1st of February, and we now see additional announcements of increases up to USD 1,030 per tonne from 1st of March. At the same time, we see a price rally going on in China. And the spot prices today is in the field of USD 800 to USD 850 per tonne. And that corresponds to more than USD 1,200 per tonne European peaks. We saw also that prices in China went up approximately USD 120 per tonne in 1 month. And I can't remember really that I've seen that before. So a strong pulp market for the moment being. If we then turn over to Paper. As you know, we have decided to leave publication paper in September 2020. And this announcement has partly squeezed our prices in relation to our competitors during the second half of 2020. Since the start of the pandemic in Q2, we have also seen 30% lower demand for publication paper generally. However, in Q4, we have produced some volumes against advanced payment for delivery during the first half of 2021. And this has increased our capacity utilization and thus benefited our result for Q4 2020. When we compare sales quarter-on-quarter, we can note that due to lower prices and lower publication paper volumes, sales has declined 6% during the fourth quarter 2020, compared to the fourth quarter 2019. And EBITDA has declined 10% due to lower prices and despite lower wood costs and increased volumes within kraftliner. The kraftliner deliveries from Europe globally during the year have increased by 6%, if we include increased exports. The prices for unbleached kraftliner have stabilized and increased by EUR 30 per tonne during the fourth quarter. The effect of which we should see first in Q1 2021 due to the time lag. We have also seen another price announcement of EUR 50 per tonne. That one has been made, and that one will be effective from 1st of February. We can also conclude that the demand for boxes has been very strong during the fourth quarter 2020. And the demand is back on the level above the trend line before the outbreak of the pandemic, and this has led to stocks being on a low level for kraftliner. And again, this slide show the situation in -- for November here. So by that, I think I hand over to Toby.

Thank you, Ulf. Good morning, everybody. I will start with this slide just showing that we've updated our forest valuation at the end of 2020 with the latest market prices and the transaction prices in our region have increased. And here, you can see on the left-hand bars that our price is now SEK 291 per cubic meter, which is the average weighted price that we use in the region where we have our forest, and based on an average over 3 years as well. So the market prices have increased, and we've applied the new market price level to our forest. We've also had a net growth. In the middle there, we've had 5 -- we have 5 million cubic meters more forest now. So there's a net growth of some 3 million cubic meters, and then we've acquired some forest in the Baltics. So we have 5 million more cubic meters. And those 2 factors together mean now that our -- the value of our forest has increased by SEK 5 billion and is now valued totally in our balance sheet to SEK 75 billion. We then -- we've had the significant impact during 2020 from the decision to exit publication paper. And I just show here the impact of those effects. We took a restructuring provision and have written down fixed assets related to the exit. And the total effect on EBITDA is just over SEK 1 billion for the full year. And SEK 1.7 billion on EBIT, including then the write-down of fixed assets. We reduced the levels slightly in quarter 4. So this has a slight positive impact of some EUR 70 million on EBITDA in Q4. And that's because we basically finalized the provisions and finalized the negotiations that we need in place to exit publication paper. So you can see the impact on EBITDA on the right-hand side for the full year. We had an underlying EBITDA of SEK 4.4 billion, with the total EBITDA including the onetime effects then is SEK 3.39 billion. But all the figures we then present and go through in the report are excluding this one-off item in the other slides. And here, you see the income statement, again, yes, excluding the one-off item. And you can see, firstly, for the full year, on the right-hand side, we ended with net sales of SEK 18.4 billion. So, as Ulf mentioned, some 6% down on 2019, primarily due to lower average prices. And then on -- in the quarter, we then had a net sales of SEK 4.59 billion, which is a significant growth versus the fourth quarter of 2019, and that's primarily due to that we had strong volumes in the fourth quarter. You should also note that in 2019, we had a significant positive impact on EBITDA from the revaluation that we've also excluded, and that was a one-off item in 2019. But that's also excluded from the figures we present here, the underlying figures. We had an EBITDA margin for the full year of 24% and in the fourth quarter, strong EBITDA margin at 30%. When you look further down, financial items, we ended the year with the financial items of SEK 117 million, slightly lower than last year and a tax of SEK 483 million, lower than last year due to the lower profit before tax also. So earnings per share ended the year on SEK 3.19 underlying versus SEK 4.05 in 2019. If I go to the next slide to show the bridge on net sales for the full year. We ended up with a 6% decline in net sales for the full year, and this was really driven by lower prices in all segments, when averaged across the year. Volume was slightly positive. And this -- we had a significant negative effect on publication paper, of course, from the lower demand in publication paper, some 15% lower volumes in publication paper, but that was more than offset with increased volumes from the other segments and particularly, pulp, where we had a 13% increase in volume. Currency, a small positive for the full year, and then we had the effect of the divestment that was negative, minus 1%. If I take the same bridge for EBITDA, you can see here the significant effect of price on the left-hand side, had nearly SEK 1.8 billion impact, below average prices. We had a small positive benefit from the net volume growth. And then you can see on raw material, we had a significant benefit offsetting a significant part of the price impact of SEK 1.1 billion. And here, we had basically lower cost for externally sourced wood raw material. We had more wood sourced from our own forest due to a higher harvesting level from our own forest. And we also had an effect from an increased revaluation, which comes in this line as well. We had a higher energy cost due to higher energy prices. We had a positive benefit on currency in EBITDA. And then on the other, you can see the impact of SEK 300 million here, which is 2 things. It's the impact from the lower capacity utilization in publication paper, but also we had 2 divestments in France and Rotterdam in 2019, which had a positive impact of some 100 -- around SEK 150 million for the full year. So if you then here show the trend over a number of years, and you can see by segment. And if I start off on the left-hand side in forest, you can see the top line has grown since the last couple of years mainly due to the ramp-up of Östrand. This year down versus 2019, slightly, which is really the effect mainly of price and a bit lower volume in publication paper. And then on the bottom line, we have the impact of EBITDA in the Forest division, which has increased significantly. Here we have the positive benefit from a higher revaluation effect, but we have a negative impact from the lower average prices, which is offset also by the fact that we are harvesting more of our own forest this year due to the increased net growth in the forest. Then the Wood, the top line, pretty stable. The bottom line, we're now at 10% EBITDA margin for the full year, down a bit versus 2019, which is really the effect of lower average prices. In the Pulp segment, the same, you can see sales is flat despite the significant volume increase of some 13% volume increase, but lower average prices, again, which also then impacts the bottom line, and that's why the margin declined in Pulp between 2019 and 2020. And then into Paper, where we have the significant effect of publication paper, but we also have also lower average prices in both publication paper and kraftliner this year versus 2019. But the significant impact from the lower volumes and the low capacity utilization in publication paper during the year. If I then turn to the quarter, so the fourth quarter. And here, we had sales growth. We still had a negative impact on price versus the fourth quarter last year. And particularly -- yes, kraftliner and publication paper prices were lower than they were in the fourth quarter last year. Even though, as Ulf mentioned, there's a more positive trend going to the first quarter, but we're still lower than we were in the fourth quarter last year. We have higher pulp and kraftliner volumes, particularly so strong deliveries this quarter. And that's really what's driving the growth in net sales. Currency is now negative. So we have seen a strengthening Swedish crown, which is impacting, of course, negatively. And then we had a small effect from the divestment of Wood Supply UK, which only came in December. So there's only 1 month effect from that divestment in quarter 4. Then when it comes to EBITDA, here, we had a 30% growth in EBITDA versus the fourth quarter. We had a negative impact from the lower prices, which I presented, then the volume growth has impacted positively, and we have a significant positive impact also from the raw material cost, which again is lower externally sourced -- lower cost for externally sourced wood raw material, but also especially now in quarter 4, we have a strong level of harvesting from our own forest, which is really the -- a seasonal effect that we usually have in the fourth quarter of the year. Then we have a small effect on energy. Currency is now negative, as I said, and yes, a positive impact on other, which is the cost performance that Ulf mentioned in the fourth quarter. And then just showing the trend by quarter as well here, you can see on the left, you can see the strong result in the forest, which is really driven versus previous quarters this year by the higher level of harvesting own forest in the fourth quarter. And you can -- you can see also the fourth quarter last year was stronger, and it's the same seasonal effect, but particularly strong this year. In Wood, you can see that the margin is increasing versus quarter 3. And here, it's the impact of wood prices increasing, which is coming through to the bottom line. Top line slightly down, which is mainly seasonal. So -- but you should remember here, we have the impact of the sale of Wood supply UK going forward, which, on an annual basis, has a turnover of around SEK 1.4 billion. Then in Pulp, we -- you can see the volumes have increased, and that's why the sales have increased. The bottom line is impacted a lot by the maintenance stop, which cost some SEK 130 million in the quarter. So if you adjust for that, then it is better than it was in the third quarter, not driven by price because even though the headline prices have increased, we have a weaker currency situation or a stronger Swedish crown. But the higher volumes, if you adjust for the maintenance stop would have led to increased margin versus the third quarter. And then in Paper, here, you can actually see -- you can see the top line has increased versus quarter 2 and quarter 3. We did have strong volumes in kraftliner in quarter 4, but we also had a better capacity utilization in publication paper. And that's what's really driven in the bottom line. You can see we ended up some SEK 100 million better than quarter 3. And here, the impact of the fact that we brought forward orders on advanced payment before the closure of the machines has meant that we've had the better capacity utilization in publication paper, and we've really cut the cost to an absolute minimum before the closure. So rather than previous quarters where we had a loss of around SEK 40 million to SEK 50 million in publication paper, this quarter, we've actually had a positive SEK 40 million to SEK 50 million. So that's a swing that impacts the Paper division that we won't have going forward. So that's, if you like, a onetime effect, driven by the closure. Then a few words on cash flow. You can see here on the operating cash flow on the left-hand side in the quarter. At the bottom, you can see SEK 957 million of operating cash flow come in this quarter, and that's on top of SEK 1 billion in the third quarter. So a very strong cash flow performance in the second half year, which is really driving deleveraging, which Ulf also mentioned. And you can see then for the full year, on the right-hand side, we generated SEK 2.7 billion of operating cash flow, which means that we're more than funding our strategic capital expenditures from own cash flow. And this is driven really by a strong control of working capital. We've had an extra focus during the -- particularly during the uncertain environment to keep a tight control on working capital. And here, just a bridge to show the impact on net debt versus the quarter before. We had SEK 8.3 billion of net debt at the end of quarter 3. We've had a strong operating cash flow. And then we funded our strategic CapEx in the quarter and the acquisition of the forest land in the Baltics from -- within operating cash flow. We also have a positive impact from basically net pension position, which is the other column here on the right-hand side, of SEK 271 million, which benefits, so we've actually reduced then down to SEK 7.7 billion in net debt at the end of the year or 1.7x EBITDA, which is, yes, 0.3x less than we had at the end of the third quarter. So a positive deleveraging effect. And then finally, on the balance sheet, where we ended up at the end of 2020, we had forest assets of SEK 75 billion in the balance sheet, valued at the market price, SEK 291 per cubic meter. Working capital, you can see -- here you can see the strong effect of the focus on working capital and cash flow with a SEK 1 billion reduction in working capital at the end of 2020, which really helps the cash flow and then total capital employed if further down is now just short of SEK 80 billion and net debt versus -- then here versus the end of last year is now SEK 7.7 billion. We had SEK 8.6 billion at the end of last year. So we're nearly SEK 1 billion lower now and 1.7x EBITDA. And then finally, our net equity then is now SEK 72.2 billion. Yes. So with that, I hand back to Ulf.

Yes. Thank you, yes. Just to summarize, it's been a special year for us, a year of transformation and change. We have decided now to finally leave publication paper and -- which I think is absolutely the right thing to do. We will be focused on growth areas and our growth projects in right segments. So we are happy for that. We have -- I mean we are on time, on budget in the big project in Obbola. And even we have had some challenges with the pandemic, but so far, so good. We will gradually increase the harvesting level in our own forest by slightly more than 1 million cubic meters annually during the coming 5 years with a positive cash effect of SEK 300 million to SEK 400 million annually from 2025. We have also been successful when it comes to manage our cost position during this year and also when it comes to focus on our cash flow. And we also delivered a strong Q4 with an EBITDA margin a little bit more than 30%. So by that, I think that we can open up for questions.

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

Yes. It's Robin from Carnegie. Now I was wondering related to the Pulp division. Now obviously, the pulp market dynamics have improved quite clearly, and prices are soaring in China and moving up in Europe as well. A couple of questions related to that. What is it -- what you are seeing now among your customers? I mean the price increases in China are quite spectacular. You operate in this market. Is this some kind of bubble? Or is it based on fundamentals? As you say, it seems as producer inventories are now below normal levels in January, is that the driving force? Is it demand? What are you seeing among your customers? Then secondly, just a sales split, I guess you sell most of your pulp in Europe. Is that still the case? Do you have flexibility to change the location, for example, to China or Americas in the pulp? And finally, just on pulp, the capacity utilization for 2021, what should we expect for you guys now after a couple of years with basically subnormal capacity utilization in Östrand? Also there -- these are my questions.

Yes. Okay. We'll start with China. I mean if it's a bubble or not, what you -- what we can see is that we really need this price increase to start with. I mean we have had a currency effect with a strong Swedish krona. We've had, I mean, as always, increasing discounts from 1st of January. So that has had a negative impact on the net price. But I mean we feel -- fundamentally, we feel that we have a strong market just now. Then we don't look too much at China because you have maybe more speculation when it comes to futures and things like that in the Chinese market. I mean it is a super strong market there. And as I said, if we translate spot prices in China today from -- when we are on the level of USD 800 to USD 850 per tonne, that is corresponding to USD 1,200 in European peaks. And I mean, we see now that prices will increase quite fast in Europe. USD 1,030 is announced now. And yes, I expect that will continue for a while. It's a stable consumption out there. I mean -- and then when it comes to flexibility, of course, I mean, we -- Europe is our main market, our first market. U.S. maybe is our second biggest market. And then we, of course, do sales to Asia. And we have the flexibility. I mean we have our own distribution company and so on. But still, we have strong customer base in Europe, and we will, of course, stay loyal with that customer base. On the other hand, we have seen an increase in volume, and that volume has to be placed somewhere. And I mean Asia is one of several options for us. So that is good. And capacity-wise, I mean, you should expect that we are -- I mean, as always, you can have a bad week or you can have some trouble in the production. But now we are on the level of very close to full capacity in Östrand. So now we have started more or less to -- I mean we always work with production and production creep and things like that. So you always have bottlenecks and other things. So -- but I mean it's more or less business as usual now in Östrand. And as I said, we are very happy with what we've seen in December. I think it was more or less on a record level. I think we had the same situation in January. So it's a stable production now.

All right. And then just 2 short ones, if I may. First of all, pulpwood prices in Sweden have declined to quite low levels now at the end of last year. What is the outlook for 2021? If you look historically, actually, pulpwood cost or prices move along with pulp prices with a lag. Should we expect that to happen now in 2021 as well? And then secondly, for Toby, any chance you could give some kind of indication about the FX impact on earnings, net of hedges with the current rates we have now for 2021, roughly, what would that be? So those 2 ones.

If we then start with the pulpwood, I mean, you know the market as good as we do. As it is just now, I would say, in the -- at least in the northern part of Sweden, we have quite a lot of pulpwood, and we have it ourselves, and we also see that our colleagues in the surroundings, they also have good access to pulpwood for the moment being. But I mean, again, if we have a strong market, and if that continues, that will probably have an effect on pulpwood prices sometime in the future. So -- but just now, it's a rather balanced situation, at least for us in SCA.

Yes. And then -- I mean when it comes to currency, we do give some information in -- basically in our annual report on the exposure and in the quarterly report. Then as you see, we have some 60% of the currency hedged for the first half year, and then we ramped down for the last 2 quarters of the year. So we've offset some of the impact, and you can see it well. You can see the rates in the -- we expect it to be negative. We will also have a slightly lower currency exposure due to the closure of publication paper. So that will take away some 20% to 30% of the currency exposure and that's more of a euro exposure. But -- yes. So I think you can look at the average rates in 2020 and where you think 2021 will be, Robin, and make some calculations based on that.

Our next question comes from the line of Alexander Berglund from Bank of America.

If I can ask a specific question on some other kind of cost inputs, given that we seem to be in some kind of inflationary environment here. So I was just going to ask specifically if you have seen any kind of cost inflation or expect to see anything on the chemical side. I noted Kemira is trying to raise prices. And then also if there has been anything that you've seen on freight or other logistic costs that have been going up or if you expect that to be going up?

I think nothing significant at this stage. I think -- I mean we have seen also in 2020 with -- as the Swedish crown weakened, the chemicals that are priced in other currencies. Of course, we've had a sort of currency inflationary effect, which is now the flip side when the Swedish crown strengthens, which offsets then some of that. But yes, we do -- I mean yes, we do see a sort of inflationary trend, but nothing significant, yes, at the moment or in the fourth quarter.

Okay. Just a bit of another question, different topic, more about kind of what's happening in the EU and the EU taxonomy, and it seems like there is a bit of a different -- different approach how they are thinking about the sustainable forest management and how you are doing. If you could just kind of give an update on how those kind of conversations are going? And how you are trying to inform the European Union on the benefits of sustainable forest management?

I mean, first of all, you have an ongoing process just now. And I think they have close to 50,000 notes on what they -- what's for -- before Christmas here. So I mean, and forest is one big thing. And the Swedish government has made 1 note. And I mean, we -- from the industry, we're talking directly to people in Brussels, but also through our Swedish Forest Industry Association, but also through the European organization, CEPI and so on. So I mean, a lot of work is going on. And it's too early yet, but it is a much more balanced discussion now than I felt at least before Christmas. So I'm quite positive for the moment being.

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

Yes. You gave us the price change from [ sold goods ] for Q1. What could be the realized price change on containerboard and pulp to think about for Q1?

I think, normally, I do some forecast for solid wood products because that's not so easy to find. But as I said, when it comes to containerboard, I mean, we had a price increase in the fourth quarter, and that will be valid from -- you will see it in the result from the first quarter 2021, I would say. And then we will have another price increase -- at least another price increase is announced, and I think that will come through from 1st of February. But then you have the time lags, you will see the effect from that one in March maybe. In Pulp, as I said, I mean, we've gone from USD 840 in the middle of last summer up to USD 910, but that has been eaten up by the strong Swedish krona and also by increased discount from 1st of January. But the next step that will come now, USD 960, that we will see in the results with -- again, with the time lag and also the announcement of USD 1,030, I'm convinced that, that one will also come through. So I mean you will see, gradually prices will increase. And gradually, you will have a positive impact in the result. But as always, you have a time lag.

Sure. And then regarding the Forest, very high EBITDA in the quarter, both very high harvesting and a bit higher revaluation than normal. How should we bridge that into Q1, which is usually seasonally down?

Yes. I think we expect the -- basically the full year revaluation effect to be relatively flat, stable at this level. So we had just over SEK 1.2 billion in 2020, and we expect more or less the same in 2021 and then that to be evenly spread through the year. So that shouldn't be a significant effect, but we then have the effect in Q4 that we had from -- basically from harvesting own forest, which has a significant positive impact. So Forest is not normally as strong in Q1 as it is in Q4. And I think you'll see that effect again.

Okay. And say the last remaining effect from closing the paper mill, does that have a number we could think about for Q1?

Yes. I can give a bit of guidance there. That we -- I mean, like I said before, we lost -- we had a loss in publication paper in Q2 and Q3 of some SEK 40 million to SEK 50 million per quarter. Then that's turned to a positive profit this quarter because we've taken orders in advance of some SEK 40 million to SEK 50 million. We expect that to be back to the negative SEK 40 million to SEK 50 million in Q1. So there will be a negative swing until in Q1. And then we've closed publication paper at the end of Q1. So that effect will stop. But we -- I should inform that we have -- we're keeping the Ortviken site running until we have the CTMP project up and running. And there, we will have a cost for maintaining the site and keeping the site active, which will be around SEK 20 million to SEK 30 million per quarter, which we will take then until we start up CTMP at the beginning of 2023. So you have to factor that in.

Okay. So that should be like SEK 90 million negative then in Q1 on paper?

No, this SEK 20 to SEK 30 million I mentioned will not start in Q1. That will start in Q2. So that...

[ Alex ], just referring to -- you said you had plus SEK 40 million in Q4?

Yes. Yes, I understood what you mean. Yes. You have a negative effect -- a negative swing from Q4 to Q1, of, yes, around SEK 90 million. We expect. I mean it's still -- we don't know precisely yet, but that's what we expect.

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

Just a couple of follow-ups. On the Forest, which had very strong EBITDA, like discussed in the quarter, when it comes to the harvesting levels, I think it was up -- well, it was up quite dramatically year-on-year in own forest. Do you have a number for that for the full year, how much of harvesting we should expect for the full year 2021, compared to 2020?

Yes. We -- so we have -- as Ulf mentioned, we're increasing the harvesting from the previous level was around 4.3 million cubic meters per year up to 5.3 million cubic meters. And that will be successively up to 2025. Then in 1 given year, we do vary depending on planning. And so it can be a bit more 1 year, a bit less 1 year than the planned development. So we expect to -- over the 5 years up until 2025 to be on that track from 4.3 up to 5.3. So in 2020, we actually did have a strong level of harvesting own forest, some of it due to planning and so on, which we had 4.8 million cubic meters. So we don't actually plan an increase in own forest harvesting because we were above plan in 2020. So we don't see a significant increase in -- just in 2021.

That's very helpful. And so your best guess at this stage is the same harvesting level 2021, compared to 2020?

I think we don't give a forecast at this stage, but I think it's unlikely to be higher than we had in 2020. So I put it like that. And we do want to keep this over the 5-year period, then we follow the plan, but individual years can be higher or lower.

That's very helpful. And then just one more question. On CapEx, what's your guidance for 2021 CapEx, including Obbola and Ortviken?

We have -- yes, the current CapEx, basically, I can start there. We have our level of, say, SEK 1.2 to SEK 1.3 billion, which we expect to the current CapEx -- the current CapEx level. And then we have -- on top of that, the strategic project, which is mainly Obbola, but also then CTMP as the 2 main ones. And then we expect a significant CapEx outlay in 2021. So we expect some -- yes, some SEK 3 billion to SEK 4 billion of CapEx on Obbola and CTMP in 2021.

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

Two questions really from my side. The first one is on the forest values. And you increased now your book value based on the higher average transaction prices over the past 3 years. And on this topic, I mean, what -- can you say anything about how prices developed specifically during last year. I know that we saw some big transactions in the market at very high prices. Would you generally say that prices have been tilting upwards, so to speak, in the past 3 years? And then a follow-up also on that. I mean does the transaction data that you base your forest revaluation on, does that include the full 12 months for last year? I think previously, you've commented that on -- that you've not gotten the last 1 or 2 months in there. Is that still the case? And if so, does it have any material impact? And then finally, on the Forest side, I mean, I believe you've earlier talked about large tracks of sort of company-owned forest land being priced at a premium by buyers compared to smaller privately held lands. How large do you believe this premium is? And if it is material, is that in any way sort of reflected in your book valuation of your forest land? So that was my first question, which is actually 3 questions on forest land. Sorry.

That's fine. It's usually 3 questions also. But we -- basically, the market prices have increased just in 2020, if you see the statistics. And I mean, 2 main suppliers, you have [indiscernible] and Ludvig & Company who publish the statistics, so you can follow them fairly easily for yourself anyway. But -- so you do see a significant increase in 2020 versus 2019. And as you know, we take an average over 3 years. So that's how we come with our -- the value we apply in our balance sheet and our valuation of the forest. Then I think you also asked -- we basically include all data up until November, end of November 2020. So we -- because we have to close the books, the data for December doesn't come out in time. So that's -- so we get nearly everything for the year, but we're still missing the last month, if you like. So you'll see then a slight difference maybe when the full year data come out. But essentially, we're getting nearly all the transactions for the year. But then you -- the second part, I think the data we use is from these public sources. And they such as Ludvig & Company and [indiscernible], and they largely include private transactions and the transactions that are not public, where the price is not public, they normally cannot include. So it's -- they are definitely missing some of the -- and we believe they're missing some of these larger legal entity transactions, which you referred to, which have happened recently. And so they are not fully reflected in the statistics, we believe. But that's -- that's for the [indiscernible] and Ludvig & Company to talk about how they put together the statistics.

What I mean is if you look into these transactions, I believe that what we've seen now is a premium of about 50%. That's my best guess for legal entities of the size that we've seen now. If that is the market price or not, I don't know really, but that's the case just now.

Would you say that that's the premium that these transactions have been happening in -- at sort of during 2020 or?

Yes, that's my best guess.

Yes. I just have a second but shorter question on soft timber, which has been very strong, quite surprisingly, I would say, given the pandemic and everything. And it seems to be strong right now as well, even though we're in the middle of winter. What's your sort of outlook for how this market will be when the season opens up in the spring? And do you see it as just a sort of a cyclical recovery? Or is there a structural component to this with increasing building in wood? Or is there something else that's happening in this market other than just sort of a cyclical recovery?

I mean fundamentally, I think you don't have enough raw material for the need in the markets. I mean, long term, I think that you have a positive momentum for solid wood products. Then it will still be a cyclical market, definitely so. And just now for the moment being, I mean, U.S. is the biggest driver in the system just now. And I mean, also the money that is just now put into the system in U.S. in order to, yes, mitigate a little bit of the negative effects from the pandemic, that helps, of course. I mean if we talk about USD 190 billion, that will have a positive impact on the demand of wood and when you have the situation you have just now in U.S. that, of course, will give space also in other markets. We are -- ourselves, we are not -- I mean maybe we do 50,000 to 100,000 cubic meters per year to U.S., but we will have better space in Europe, we will have it in Asia and in all other markets, and that is what we see just now. So for the moment being, it is a very strong situation in all geographical areas. Inventories are on the low level. But still, it's a cyclical business. And how long will this last? I mean it's hard to say. It will definitely last the first part of next year that we already know.

And do you have any expansion projects going on or in the pipeline in this segment that we should -- could know about?

Nothing at least that you should know about. So I mean what we are doing just now is we are investing close to SEK 1 billion in Bollsta, which is one of the, if not the biggest, one of the biggest sawmills in Sweden, producing close to 500,000 cubic meters of pine, redwood. But you have to keep in -- I mean long term, we like to have a balance between what we have in our own forest and in the region where we act and the sawmill capacity. I think that is wise because 70%, 75% of the cost is related to the raw material in the sawmill business. So if you don't control the log supply, then you might have a much more cyclical business than if you control it. I mean we are doing a lot of good things in our 5 sawmills that we have today. And I mean the status technically and so on is very good in our mills. So that is the focus for the moment being.

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

Just a follow-up on kraftliner. Could you give a little bit of color of which areas you're seeing strong demand in kraftliner? And then also with read across to the U.S. players, obviously, export prices from the U.S. globally are rising. I know WestRock has had some IT problems as well with the malware attack. What are you seeing on kind of the export markets to help support pushing through the kraftliner price increase, is the first question?

Yes. I mean we are not in the end segment of kraftliner. We deliver our kraftliner to box producers. And I mean, there, we can see -- and you saw it on the slide that the consumption is not only back. It's above the trend line before the pandemic. And I mean, it's hard to speculate in the reason why it's so. But I mean I think we see a lot more of e-commerce and things like that. And that might structurally help the business long term. It's also maybe a question of substitution where we replace plastics and things like that with paper, and that might also help, of course. The balance is just now it's really good, but then we have to keep in mind in kraftliner, we will see a new mill onstream from, I believe, maybe in the first quarter this year. And that will, of course, for a short while, at least, have an impact on the balance in the market. But export markets, I mean, just now we see small volumes coming in from U.S., smaller than normal. And we saw that quite a big volume went out from Europe to other markets during 2020. And I believe that, that will continue, and the export market has been quite good for many players during last year, and I think that will remain also this year.

And then on pulp, if you think about the wider market and inventory levels in softwood pulp, do you think the kind of the average inventory days number needs to move a little bit higher because there's going to be more shipments from Europe to China versus North America to China and the chain is longer as well as shipping disruptions. Do you think there's a kind of a demand for higher average shipping days, is the market statistics? The first part, and the second part is you mentioned a higher discount to -- or rebate versus the European index price. Could you just give a little bit of color why -- the reason for the higher rebate or discount price in 2021?

Yes. We start with rebate. I mean that's more to ask our customers. I -- it's been the trend for many, many years. And I mean, if you're in U.S., you -- the discount rate is much over 40%. And in Europe, it's much over 30% today. And -- but I mean, that will, of course, have an impact on the peaks price. So I mean the most important thing is the net price, and then you have another factor, which is the currency developments. I mean -- and you have to bring all these 3 together. So -- but I mean, the trend is -- and what we see now in the European market is maybe 1% to 2% higher discount for 2021 in comparison with 2020, so that you have to take into consideration. Yes. And the other question, yes, I think you're right. The normal level should be a little bit higher than we thought was normal in the past. And that is due to -- you mentioned Asia, yes. And also, I mean, you have a step-by-step increase in demand, and that will also, of course, have an impact. So I think what was normal a couple of years ago, that is on a low level today. Definitely so.

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

Just one question left from my side. And sorry, and you touched upon this already a bit earlier. But I was wondering about the overall cost outlook for 2021 as you see. I think you mentioned chemicals maybe moving in some direction. But of course, then we have the whole wood cost part and other cost items there as well. So I was wondering if you could give some color on that, what you expect overall for your wood cost and variable costs into 2021? What kind of a trend should we expect, in total is it going to be a deflationary or inflationary trends?

Maybe I can. I mean, in general, I think you will have a small inflation, nothing special. We discussed freights. And I mean, freight prices for 2021 is quite stable. You see an increase for containers over to Asia, of course, as it is just now, that will have an impact for a while. Wood prices, raw material. I mean if the strong market that we see is coming in just now if that will continue, I might expect that we will see some higher raw material prices in -- maybe in the spring and in the autumn and so on. But for us, nothing big. I mean we -- when it comes to raw material and wood, I mean, we have around 50% in our own forest. I mean, in that perspective, we have a strong position, I would say.

I mean I would just add -- we also have a relatively long time delay, especially with raw material prices coming through to our result, as you know, with the structure we have with our own forest and our sourcing. So I mean, we see now, you saw in the bridges, the lower raw material costs we have now, whereas in the market, raw material cost has been flat for 6 months pretty much. But we're now getting the effects after the time lag from reductions earlier last year. So now going forward, basically, we -- yes, we don't see any more of those reductions coming through at least. And then as also as it depends what happens in the market going forward, but...

And our last question comes from the line of Alexander Berglund from Bank of America.

I'm just thinking a bit on your Slide 12 on the containerboard market and looking at kind of the box demand, which definitely seems like it's booming, but if I think about it from your customer perspective, and if I'm a box maker, who is not integrated into containerboard, so I buy kraftliner from SCA, for example, I must be quite happy about the volume situation, but how am I thinking about the margins? And really, the question for you, I guess, is have you felt any kind of pressure from your customers saying, okay, take it a little bit easy with these hikes, let us get our box prices up before we can accept this? And is that something that you have seen kind of historically in up cycles that you need to sometimes wait for your nonintegrated customers to push that on to their end customer through higher box prices?

I mean that discussion we always have, I have to say. I mean we always negotiate and very seldom, we have the same view on price. So that is one thing. But I mean, many of our customers, they are integrated players. I mean they are both producing testliner and in many times, also kraftliner and then they also do boxes. So for that kind of customers, maybe it doesn't matter too much where they take out the profit. But I mean, if you're an unintegrated player just doing boxes, then, of course, you have -- then it might be tough. But if you look at kraftliner or containerboard prices in the long perspective, I think we are not on a very high level where we are just now. I mean it's always -- it depends on where -- what you compare with. But I mean, I think we are on a rather low level as it is just now.

And you can see that on the slide, Alex, on the top left graph on the slide you're referring to Slide 12.

If you compare with 18, for example, I mean, that...

So the kraftliner price today is not -- is below trend level and below where it needs to be. So I think.

Yes. Fair. And I guess, also on that slide, even if I look at the up cycle there in 2017, it was quite rapid, and still, you were still able to get kind of that up cycle if the demand dynamics were there, so.

Thank you for the interest you have shown in our year-end report. We will come back and present the first quarter on the 30th of April. And before then, you can learn some more about SCA as we publish our annual report in March. But until we hear from you again, take care and have a good winter. Thank you.

Ladies and gentlemen, that does conclude your conference for today. Thank you for participating. You may now disconnect. Thank you.