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

Good morning, and welcome to this presentation of SCA's year-end results for 2023. With me here today, I have President and CEO, Ulf Larsson; and CFO, Andreas Ewertz to go through the results and take your questions. Over to you, Ulf.

Thank you for that, Anders, and good morning. Also from my side, a warm welcome to the presentation of our results for the full-year and fourth quarter 2023. And I start with this slide to summarize 2023. During last year, SCA showed that we can deliver good profitability even in a challenging world. Despite higher wood raw material costs and despite that the weakened market has led to substantially lower prices, SCA reached SEK 6.8 billion on EBITDA level and by that, also an EBITDA margin of 38% for the year. During the year, we have had ongoing efforts to start up and gradually increase production in sites where strategic investments recently have been carried out. This has resulted in higher delivery volumes in comparison to last year due to the new paper machine in Obbola and due to the new CTMP line at Ortviken. These investments will successively contribute to increased productivity and also increased cash generation during coming years. The sales growth in Renewable Energy, which became a separate segment during 2023, continued, and the result doubled in comparison to 2022. Continued increase in harvesting level from our own forest and high degree of self-sufficiency in wood raw materials. Energy and logistics have also contributed to strong results. The book value of SCA forest assets increased by SEK 9.6 billion during the year and was SEK 107.5 billion at the end of 2023. And as you already know, SCA basis the valuation of the forest on complete transactions in the region where SCA owns land. So, turning over to some financial KPIs related to the full year 2023. As already said, our EBITDA reached SEK 6.8 billion for last year, which corresponds to a 38% EBITDA margin. Our industrial return on capital employed came out of 7% for the full year, which, of course, was lower than our record year 2022. The leverage is at 1.6, and we have now finalized our big strategic investments in Obbola, Ortviken and Gothenburg, which will all contribute positively coming years. The proposed dividend for the AGM to decide on is SEK 2.75 per share and this is in line with our aspiration to provide a long-term stable and increasing dividend to our shareholders. Last year, we gave SEK 2.50 per share. And finally, earnings per share was SEK 5.23. This slide will give you an overview of KPIs for the fourth quarter '23. Our EBITDA reached SEK 1.64 billion during the fourth quarter, which gave us an EBITDA margin of 37% for the quarter. Our equity continues to increase. And despite the fulfillment of several large strategic projects, net debt-to-equity remains on a solid level of 10%. Then, I will give you some comments for each segment, starting with the Forest. In general, we can note the continued high demand for wood raw materials. Even so, we have had a stable supply of wood raw materials to our industries during the fourth quarter. As can be seen in the graph in the bottom left, prices for both pulpwood and sawlogs have steadily increased over a long period. In the Baltics, prices have been stable during the fourth quarter. When we compare Q4 '23 with Q4 '22, sales were up 13% and EBITDA was up 56%, mainly due to higher prices and a positive effect of revaluation of biological assets. Turning over to business area, Wood. In general, we have had a continued slow underlying market for solid wood products in addition to a seasonally slower fourth quarter. Despite the general low demand, we can see an, uplift in housing starts in the U.S. and also good demand in North African countries. Last quarter, I estimated a stable price in the fourth quarter in comparison with the third. Including currency effects, we saw a minor price decrease of 3% in the fourth quarter. Sales and EBITDA were down with 11% and 8%, respectively, in the fourth quarter '23 in comparison with the same period last year, and that was mainly due to lower prices, higher wood raw material costs and also somewhat lower volumes. Today's stock level of solid wood products in Sweden and Finland is in relation to the average for the last 5 years, described at top left on this slide. As you can see, the stock level is on a record low level and also in a decreasing trend. SCA has maintained stable deliveries during the fourth quarter and due to some planned production curtailments over Christmas, SCA's stock level is on a very low level today, and that might have a small negative effect on deliveries for the first quarter this year. As can be seen in the diagram to the bottom left, the Swedish and Finnish sawmills production has been substantially below normal level. Outside the Nordic countries, we have also seen continued production curtailments, mainly in Canada and Germany. If you look to the top right in the diagram there, we can see the price development. And due to low production in many regions, we estimate stock levels to stay low for a while. Based on that fact, we also forecast the price to increase with mid-single-digits during the first quarter this year. And if inflation continues down and the interest rates level out, or even decrease, we might see an increased activity in the repair and remodeling sector, giving support for further price increases in the second quarter. So, over to Pulp. First, I'm happy to see that our CTMP expansion has been well received in the market and production ramp-up continue according to plan. Sales and EBITDA were down 11% and 89%, respectively, when comparing the fourth quarter this year with the same period last year. We can note lower prices and higher wood raw material costs on the negative side, while currency and volume have had a positive impact in this comparison. The yearly maintenance stop at Ostrand took a bit longer time than planned, which had an additional negative impact of SEK 10 million to SEK 15 million during the fourth quarter. The strong demand of pulp in China continued in the fourth quarter and the imported pulp was on a record high level. This offset the somewhat weaker demand we still saw in Europe and U.S. and consequently produced inventories of pulp are on a good level, as you can see here. In Europe, we saw increase in prices on all grades of pulp, with NBSK increasing from USD 1,150 per tonne in September to USD 1,250 in December. The price then continued up in January to USD 1,300 per tonne. And SCA is now informing customers about the new base price for NBSK pulp of [ USD 1,350 ] per tonne valid from February. CTMP is following the same pattern with increasing prices in Europe. And U.S. prices were still on the bottom in October and November before starting to increase in December. Prices in Europe were partly offset by increase in rebates from 1st of January this year. So over to Containerboard. The ramp-up of the new kraftliner paper machine in Obbola is running according to plan. The new recovered fiber line, which is a necessity to reach full capacity, is also progressing according to plan. And as we have communicated earlier, we expect to reach full capacity in Obbola in 2026. Sales was down by 10% in the fourth quarter in comparison with the same period last year due to lower prices, while EBITDA was down 48%, mainly due to lower prices and also higher raw material costs. On the positive side, we saw higher volumes and positive currency effect. Books demand has stabilized during Q3 and Q4, while retail spending and manufacturing remain weak due to the economic situation in Europe. European demand of kraftliner has also been stable to slightly positive in the fourth quarter this year, which indicates stability and also stopped to decline in demand. We believe that market will gradually improve during '24, driven by stabilization and lower inflation and interest rates, which will impact the consumer spending in a positive way. On the other hand, there is additional supply in testliner ramping up in the coming quarters, which will put some additional pressure on the supply-demand balance. Prices for brown and white kraftliner have remained stable from May and including fourth quarter 2023. Testliner prices have declined with EUR 20 per tonne in the fourth quarter. Despite lower demand for the full year, inventories have been stable with a normal seasonal increase in December. And the current stock level will support a rather sharp volume and price recovery when end user demand picks up again. The availability of OCC is still good because of lower current demand of testliner. Prices of OCC have remained stable in Q4. And today's PPI index is around EUR 75 per tonne, which is EUR 110 per tonne lower than the peak in July 2022. Since we see the amount to be stable to somewhat positive, moving into 2024, we can assume that OCC prices will start to increase again based on limited supply. Then, over to business area, Renewable Energy, and we have continued with another quarter of strong profitable growth in this area. We have high prices in comparison with the same period last year. Due to increasing prices and high demand, the sales were up 17% and EBITDA level by 48% when we compare Q4 last year with the same period 2022. The market for solid biofuels is stable and the demand is high. Continued high volumes are expected in the coming quarter, not the least due to positive seasonal effect. SCA continues to grow in leasing out land for wind power and has reached 9 terawatt hours of wind power on SCA land by the end of Q4, and that is equal to 20% of installed capacity of wind power in Sweden. Finally, the biorefinery in Gothenburg is under commissioning and is currently ramping up. And I'm happy to say that first product to tank was produced during January. So by that, I hand over to you, Andreas.

Thank you, and good morning, everybody. I'll start off with the forest valuation. And forest prices in Northern Sweden decreased in 2023. In the graph, we have the forest prices development in SCA's region according to average of Ludvig & Co. and Svefa. And the prices decreased 5% to SEK 398 per cubic meter. In SCA's forest valuation, we used the 3-year average, which increased by 8% to SEK 395 per cubic meter. The valuation of forest assets increased by almost SEK 10 billion to SEK 107 billion in 2023. The increase was driven by both the price increase of 8% and the increase in standing volume of 1.5% to 271 million cubic meters. Approximately SEK 2.2 billion of the increase went through the P&L. If we move on to the income statement and focus on the full year to the right, net sales decreased 13% to SEK 18.1 billion, driven by lower prices, which was offset by higher volumes from the new paper machine in Obbola and the new CTMP mill at Ortviken. EBITA reached SEK 6.8 billion despite a weak market, driven by almost double results in renewable energy and higher results in our forest division. The EBITDA margin was 38%. Depreciation increased to SEK 1.95 billion due to the activation of strategic investments. The EBIT margin declined to 27% and financial items totaled SEK 414 million. Then effective tax rate of just below 20%, bringing net profit to SEK 3.6 billion or around SEK 5.23 per share. If we look at the fourth quarter to left, EBITDA declined to SEK 1.6 billion, driven by mainly lower prices. Net profit for the quarter totaled SEK 833 million or SEK 1.22 per share. Looking at the dividend. We have a proposed dividend of SEK 2.75 per share, our SEK 0.25 increase compared to the dividend last year, which is in line with our target to have a long-term stable and increasing dividend over time. On the next slide, we have the sales bridge for the full year. Prices declined 23% with lower prices in wood, containerboard and pulp. Volumes increased 4%, driven by the new paper machine in Obbola and the new CTMP mill at Ortviken. And lastly, currency had a positive impact of 6%, bringing net sales to just above SEK 18 billion. Moving on to the EBITDA bridge. Price/mix had a negative impact of SEK 4.7 billion and higher volumes had a positive impact of SEK 186 million. High cost for mainly wood raw materials had a negative impact of SEK 410 million, while Energy had a positive impact of SEK 71 million, which shows our high sales efficiency in both energy and wood raw material. We had a positive impact from currency and a positive impact from higher revaluation of biological assets and lower distribution costs. In total, EBITDA decreased to approximately SEK 6.8 billion, corresponding to a margin of 38%. On the next slide, we have the financial development by segment, and starting with Forest to the left. Net sales increased to SEK 7.7 billion and EBITDA increased to SEK 3.5 billion, driven by higher pulpwood and sawlog prices as well as higher revaluation of biological assets. In wood, prices declined with over 20% in 2023 compared to 2022. Our prices for wood raw materials increased. Net sales decreased to SEK 5.2 billion and EBITDA declined to SEK 550 million, corresponding to a margin of 11%. In Pulp, prices have bottomed out after several quarters of declining prices and increased somewhat in the fourth quarter. For the full year, net sales declined to SEK 6.9 billion, where lower prices were partly offset by higher volumes. EBITDA declined to SEK 1.2 billion, corresponding to a margin of 18%. And as Ulf mentioned, the fourth quarter, we had a planned maintenance stops with impacted results with SEK 147 million. In Containerboard, kraftliner prices declined significantly in the end of 2022 and the beginning of 2023, but have now been stable since May. For the full year, net sales declined to SEK 5.9 billion, driven by lower prices, which were partly offset by higher volumes from Obbola. EBITDA declined to SEK 1.2 billion, corresponding to a margin of 21%. In Renewable Energy, we almost doubled EBITDA from the previous year to almost SEK 700 million, corresponding to a margin of 37%. On the next slide, we have the sales bridge between Q4 last year and Q4 this year. Prices declined 25%, with lower prices in wood, containerboard and pulp. Volumes increased 10%, driven by the new paper machine in Obbola and the new CTMP mill at Ortviken. And lastly, currency had a positive impact of 5%, bringing net sales to SEK 4.4 billion. Moving on to EBITDA bridge, and again, starting to the left. Price/mix had a negative impact of SEK 1.2 billion and higher volumes had a positive impact of SEK 202 million. Higher costs for mainly wood raw materials had a negative impact of SEK 66 million, while Energy had a positive impact of SEK 86 million, which shows our high sales efficiency in wood raw material and energy. We had a positive impact from currency. And the quarter was also positively impacted by one-off items of approximately SEK 270 million, SEK 340 million from high revaluation, which offset by SEK 70 million in one-off costs. In total, EBITDA decreased approximately SEK 1.6 billion, corresponding to a margin of 37%. And another year with strong operating cash flow, almost SEK 3 billion for the full year despite the weak market. For the quarter, we had an operating cash flow of minus SEK 55 million, mainly relating to the timing effect of working capital between Q3 and Q4. In Q3, we released SEK 700 million in working capital, which will go back in Q4. And as you know, other operating cash flow of SEK 398 million relates mostly to working capital currency hedges and should definitely be seen together with changes in working capital. Looking at the balance sheet. Again, the value of the forest assets increased to SEK 107 billion. Working capital increased to SEK 4.3 billion. And total capital employed increased to SEK 115 billion. Net debt stood at SEK 10.8 billion. And we have now almost finalized our large ongoing investment projects in both Obbola, Ortviken, Bollsta and Gothenburg. Equity increased to SEK 104 billion and net debt-to-equity was 10%. Thank you. With that, I'll hand back to you, Ulf.

So, thank you for that, Andreas. Well, we are aware of 2 reports that were released yesterday and I'd like to clarify some facts here. We have not digged into details. We will, of course, do so coming week and then we will disclose something. But if we say some words about what we disclosed regarding standing volume on SCA land, I can just state that this is 100% in line with statistics from Swedish National Forest Inventory, what we in Swedish call [Foreign Language]. So that is by other words, the official statistics from Sweden. The second item was the forest valuation. And I think we have a very clear, transparent model that is used from many companies within Sweden. And I think that the main part you already know, how we work with this. But we base the price on official price statistics in the areas where we have our forest holdings. The third thing was about the harvesting rate. And I can guarantee that SCA harvests less than 70% of available annual growth. And -- but on the other hand, we can say that -- we are happy to say that we had a record level when it comes to harvesting on our own forest last year, close to 5 million cubic meters, and that will continue to increase coming years up to 5.4 million cubic meters. The policy in SCA is, by the way, also to manage our forests in the way that we should never have to reduce the annual harvesting level, and that has been a successful policy since 1929, I would say. When it comes to net debt, I'd like to state that utilized commercial papers are reported in the net debt as current financial liabilities. Utilized credit facilities are reported in net debt as noncurrent financial liabilities. So that is by other words, just to take a look in our financial statements. So -- and then I'd like to summarize the quarter. And again, I must say that we have had a rather challenging time during 2023. We are happy to deliver a solid result of SEK 6.8 billion on EBITDA level and EBITDA margin of 38%. We have seen already now an effect of our strategic investments. And we delivered higher volumes than we've done before in pulp and also containerboard. We are also happy to say that our segment, Renewable Energy, which was to close first time, 1st of January 2023, has delivered a very good result and we reached almost SEK 700 million on EBITDA level during this year. And as already mentioned, we had a record high harvesting volumes from our own forest during the past year. The EBITDA level is down, and that is, of course, due to tougher conditions in the market. And it is related to lower prices and also higher wood raw material costs. So by that, I think that we can open up for some questions, please.

[Operator Instructions] We'll take now our first question from Charlie Muir-Sands from BNP Paribas.

I'll stick to 3, please. Firstly, on the containerboard segment, you were commentating about stability in the price of containerboard. I think according to, at least some sources such as RISI, there has been a material slip in the kraftliner price in Europe in January. I just wonder whether you would agree with that? I appreciate it's kind of developed on a polling basis. The second question relates to the revaluation. Just in terms of the biological component, which you passed through the P&L, that was obviously a bigger number in the fourth quarter than we have seen so far in the earlier quarters of this year or last year. Were there any changes in assumption in particular that drove that larger biological revaluation gain in Q4? And last year -- could you give some guidance on the amount of total CapEx you expect for the business in 2024?

I think we can start with revaluation, Andreas?

Yes, as far as revaluation, so going forward, we expect around SEK 1.8 billion to -- [ SEK 1 billion ]. We had, as you know, a quite large price increase in this year also driven by higher raw material prices, both on sawlogs and on pulpwood, which goes into DCF model for the biological assets. On the CapEx side, this year, we had current CapEx of around SEK 1.6 billion, and we expect something similar next year with some inflation. And if we talk about strategic CapEx, then we have almost finalized our ongoing project. We have around SEK 200 million left in payments on Obbola and CTMP. We have around SEK 450 million, SEK 500 million payments of our [ FSC ] and windmill next year. And we have just below SEK 100 million in our yellow sawmill, and then we have some minor projects. And of course, if -- it depends on if we do any forest acquisitions in the Baltics.

And I didn't catch your first question about -- I heard it was something about the containerboard market, but if you can please repeat that question?

Yes. You were commentating that you had seen a stable pricing in the kraftliner market in Europe. It appears from RISI pricing that there has been a slip there in January. Do you recognize that decline as we enter the first quarter of 2024?

Yes. And I mean, we have seen it in testliner and that was minus EUR 20 per tonne. And now we -- I mean, one can expect maybe a small price decrease also for kraftliner. Typically, they follow each other. And -- so that might be the case for the first quarter. And -- but all in all, I mean, we saw that demand picked up in the end of last year. And again, I say that we are in the bottom. You might see some small volatility for a while. But we have a reasonably positive view on containerboard market going forward anyway. But it might be so that we see minus EUR 20 in the beginning of this year.

And we mainly -- our [ lignin ] prices are mainly linked to [ EUWID ]. And I think that index will come shortly, in -- probably next week.

We'll take our next question from Robin Santavirta from Carnegie.

3 questions. First of all, in terms of the pulp segment, what kind of order intake activity -- if you sell mainly into Europe and a bit into North America, what is the order intake activity now in January versus what you saw in December and at the end of Q4? Is there any improvement? Or is it still at the low level? Related to pulp, can you share the increase in the discount on the list prices? Is it a couple of percent or is it more?

Well, first, I think it's a rather stable market. As I said, we had record -- not SCA, but all in all, it was a record volume to China in the fourth quarter. Then, we have the Chinese New Year now. So it has come down a little bit. On the other hand, we see increasing activities in Europe and also in U.S. So -- and as you saw in the graph, I mean, the inventory level is on a very normal level, I would say. So we are rather optimistic there. When it comes to discount rates, I can say that in the U.S., there were no further discounts for this year. In Europe, you had something. And again, it differs a little bit between different customers and so on. But some extra discount will come in from January in Europe.

Related to cash for second question, your working capital seems to sort of -- probably you did not have a decline in the working capital release. And we could see, for example, one of your peers yesterday reporting quite a significant release. And we also see sales prices coming down during last year. What is the reason for sort of working capital of the -- remaining at a bit of an elevated level? And what should we expect going into 2024?

Yes. So we talk about working capital, I think its several effects. First effect is that you have higher wood raw material costs, which, of course, increases the value of the inventories. The second one is the biggest one and that's, that we are ramping up both, our CTMP mill, our Obbola mill, our Bollsta mill. And now, we're also starting a ramp-up of our biorefinery, which, of course, has the impact of working capital. I think those are the 2 biggest reasons.

And the final question I have is related to Forest segment. If we deduct the revaluation gains, you have a quite massive increase in the cash EBITDA, 70% in 2023, probably reflects the increases in pulpwood and log prices. So what you sell at the forest has surged. First of all, how do you expect log and pulpwood prices to develop your areas in 2024? And how do you expect the cash EBITDA in the forest? Will it remain at this -- much higher levels than you have seen in history? Or are there elements caused increasing that might take it down?

Yes, what we can answer on is the price development. And as it is just now, and that is a little bit of an unusual situation, but I mean, what we have seen in the market is that both prices for sawlogs and pulpwood has continued to increase. And recently, we saw in the very northern part of Sweden and also in the very southern part of Sweden an additional increase both for sawlogs and pulpwood. And that is -- probably it's an effect of what we've talked about before, reduced flow from Russia over to Finland. And also, it is announced that the state on forest in Sweden, Sveaskog, they will reduce the harvesting level. And I mean, that might have an impact, of course, in the market. So yes -- now, yes, raw material prices, they have continued to increase. And we see nothing else going forward. They will, at least, I think, remain on this level for a while. And -- so that is the situation. In that perspective, it's good for us. I mean, we are a big forest owner and by that, we can handle our supply. But it puts an extra pressure in the market, for sure. And we don't give forecasts. I mean, you know what we had to -- this year in the forest. And I think you can expect what we will have coming year also based on that.

We'll take now our next question from Johannes Grunselius from DNB Markets.

I have a question on how we should think about your strategic investments, Obbola, the CTMP mill, et cetera. Is it possible to quantify the positive impact in the fourth quarter from these? And how should we be thinking about the coming quarters? We get a benefit just from the fact that you will absorb more fixed cost? That's my first question.

I think we can take that one first. And I would say, in fourth quarter, I don't believe that you saw too much. I mean, we had an increase in volume that you could see. But on the other hand, when you ramp up these big mills, you have lots of extra costs. But of course, step by step, it will improve. And what we have said about Obbola is that we would reach full capacity in 2026. And I guess that will be more or less the same case for the CTMP line.

Would it be fair to assume that the benefit will be sort of coming half through in 2024? Or is it more back-end loaded, the positive step-up in earnings?

I think it's more back-end loaded, to be honest. I mean, it is the biggest kraftliner machine in the world. And I mean, we have different challenges. And for me, it's more important to do it the right way than to be in a very hurry. So I think it's so important now that we find the right quality. And I mean, if we find some problems now, then we just stop and we rebuild or we repair or we do things, and then we start up again. But we -- I think it's good timing also to get it right just now when the market is a little bit slow. So we are not in a hurry in that perspective.

Then, my second question is on your Renewable Energy business, which is showing good momentum. Is it fair to assume that this sort of growth will continue in the foreseeable future? And will it be a big change when the biorefinery in Gothenburg is fully ramped up?

No, I think we will continue to grow this segment. But then again, we always work with market prices. I mean, when the sawmills, when they are selling the sawdust to renewable energy, renewable, and they have to pay a market price. And we see also that the price for sawdust will come up quite substantially in this year. But I mean, that is internally. But for me, it's so important that we keep a solid market price between different segments. So -- but I mean, the growth will continue. And we are very happy now that we see that the biorefinery in Gothenburg has -- it is under commissioning now and it looks very promising.

Final question is on the line you have in the accounts called intra group, which was unusually negative, [ SEK 150 million ]. It's sort of typical, it's below [ SEK 100 million ] negative. Was there anything unusual in the fourth quarter? And yes, if you can comment what we should bake in, in our modeling going forward?

You mean in the segment Other?

Yes, segment Other, correct.

Yes, we are a bit one-off cost around SEK 70 million in the fourth quarter, which we don't expect in Q1.

We'll take now our next question from Linus Larsson from SEB.

Returning to capital allocation. It's been quite a few busy years. You've been very active -- actively investing in your assets. It seems to me -- maybe correct me if I misheard you, the line wasn't perfect. But I think you said current CapEx, SEK 1.6 billion and then some additional SEK 800 million of strategic CapEx in 2024, correct me if I misheard that. But is it fair to think that CapEx is coming down somewhat here? And also generally, you're thinking is that -- different given the changed interest rate environment? Or doesn't that really impact your capital allocation decisions?

I can just start -- Generally, I mean, just now, we are 100% focused on -- well, ramp up, what we have already built. We have the kraftliner machine in Obbola. We have the CTMP line in Ortviken. We have also done a rather big investment in Obbola sawmill, the biggest pine sawmill in Sweden. And that ramp-up is also progressing according to plan. And we have this biorefinery. And we are just now also building a new wind park. So I mean, we have a lot of ongoing projects. So I think it's fair to say that now we will be very focused on these projects and secure what we have promised when we have got the money for these investments. So that will be the main focus.

Yes. On the CapEx side, I mean, you are right, Linus. But that SEK 800 million is excluding any potential forest acquisitions in the Baltics.

And then just on St1, Gothenburg, could you just -- what's the status? And maybe more importantly, how does it enter into your P&L accounting wise? And is there kind of any start-up costs that we should be aware of? That would be helpful.

We can start with the start-up. I mean, it's under commissioning now. We have had the first product to tank. Typically, the start-up curve would be much steeper than in comparison with a sawmill or pulp mill or paper mill. So I mean, I think we will have a rather sharp start-up curve now.

And accounting-wise, it's a joint venture. So we will get the net profit from the JV in our books or our share of the net profit in our books.

So no depreciation or anything like that?

No, just the net profit.

And then, maybe just one final question on forest valuation. Could you please remind us when you last did your forest survey and when the next one is coming up?

I mean, typically, I think we had the last one between 2016 and '18. I mean, it takes a while. And then we did some extra survey back in 2019, I think. And that was also when we calibrated what we -- our own survey to [indiscernible]. So that's why I'm very sure that the standing volume that we have today, it's not overestimated at least. It's not overestimated. And typically, we do it every 10th year. But as you know, we have seen that the growth is just now a little bit faster than we thought in the past, and that might be due to the climate change. We have had a little bit of warmer climate for a while. And in order to find the right timing also for thinning operations and things like that, we have done it a little bit more -- with a little bit higher frequency. So -- but typically so.

And when do you think the next one is due?

Yes, I think -- I'm not 100% sure. I have to come back on that one. But if we said '16 to '18, I suppose it will be 2026 -- around 2026 or something like that. Sorry. Just to add to that, Linus. I mean -- also, I mean, we do the check all the time when we harvest. I mean, then we compare what we had in a certain stand with what we had in the register. So I mean, that's also sending to check every time when we do a harvesting operation, then we compare with what we had in the register.

And then, just -- now that you say that, what's your conclusion from that -- those [ intra ] surveys? What conclusions can you draw when you make those benchmarks?

We underestimate the standing volume that we have. Continuously we underestimate, which I think is the case…

In a significant way or…?

No. But I mean, we underestimate the standing volume. But maybe we have also step-by-step a little bit more of nature conservations. I think that is plus and minus. So it's more or less zero effect.

We'll take now our next question from Andy Jones from UBS.

I've got a few here. Firstly, just on the forest valuation aspects and some of the aspects of this report. I mean, they were referencing a much higher forest density compared to peers. I'm just wondering what your view is on what's driving that? And then, also, just on the harvest. I mean, you've been very clear that you grow more than you harvest, the 70% sort of rate sounds pretty reasonable. But they obviously highlight that a proportion of the harvest being done by yourselves compared to the proportion of your land is higher, implying that like others are harvesting relatively less. And given the high price of sawlogs and pulpwood, how do you explain why some of the peers are not harvesting at the same rates as yourselves? Could you try to explain those 2 discrepancies between yourselves and peers that is referenced in that report?

I'll start with the second one. I mean, I cannot really talk for my colleagues. But I think when we have read through the report, we can see a lot of things that are not correct. So, I mean -- but we have to answer for ourselves. And as I said, we know pretty exactly what we have in our forest, both the standing volume, what we harvest and what we will have in the future. We have done this since 1929. And we have step-by-step been underestimating the standing volume, but also the harvesting potential. And I'm 100% sure that, that is the case also going forward here. So what -- I mean our peers, they have to answer for themselves. But as I said, we haven't really bothered to get into details yet. But we will do that and we will release something in next week or the week after.

Okay. And just on another topic, the Red Sea shipping issues and increased freight rates. As far as your business is concerned, how do you see them -- what are the biggest impacts there? Are you having a major impact in terms of shipping pulp to China? Or is it impacting your sales channels for some of the kraftliner? Can you just talk about some of the potential impacts you're seeing from that issue?

For us, it's, I would say, only pulp -- mainly pulp that is impacted here. And I mean, of course, if you have to go around Africa, that will cost you an extra $40 per tonne or something like that. But again, then it's always a discussion who should pay for that. And I don't think SCA will pay for that. But on the other hand, you have some disturbances in the supply chain just now, of course, short term -- that is a problem long-term that will create some kind of lack of volumes, of course. And that might have a price impact in one way or another. So -- but just now -- and we are not doing big volumes to Asia. We do it in pulp. We do some in solid wood products. And there, of course, we have some disturbances. That's for sure.

And just on wood and the timber market. I mean, in terms of the outlook for 2024, I mean, we've seen rates starting to come down at least on the 10-year. Maybe we should get some follow-ups from Central Bank and so forth later on in the year. I mean, how optimistic are you about recovery in the containerboard and the timber market over the next few months or in 2024? Or is it likely to stay at relatively depressed levels for longer than -- maybe it's more the 2025 to what was your best crystal ball guess on when we see a recovery?

Was it solid wood products? Was that -- is that…?

Yes.

Okay. Yes. But as I said, I mean, we see that we will have a solid price increase in the first quarter now in -- at least for SCA, but also in Sweden and Finland. According to statistics, we are on record low levels when it comes to inventory level. Maybe we were a little bit lower in 2020 when we had a pandemic. So that will create some kind of price increase in the first quarter. And again, it's not an increase in consumption. That is the reason for that. It is the supply-demand balance and the supply has really went down. And I mean -- so it is -- I think in some areas for some products, it is a problem now to get access to wood. That's one case. And by that, I also think that this will remain over the second quarter. So I'm positive for the second quarter in solid wood products. But again, you cannot really -- it is a very special geopolitical situation just now. So if you have something that will happen in that area, I mean, that -- we cannot really forecast that, of course. But otherwise, I believe that we will see a rather positive development in solid wood products. On the other hand, as we said, we have also seen that log prices has -- they have went up now, and they continued up in the beginning of this year. So I mean -- and the raw material is 70% of the cost for sawmills. I mean, that will have an impact on the profitability for sawmillers. But for us, again, as being -- having 50% of what we need in our own forest, we will, of course, not be too badly impacted by that.

But timber margins net-net should improve in the first quarter with…

It depends on your log supplies. I mean, that differs between different players. But for us, it will, yes.

We'll take now our next question from Oskar Lindstrom from Danske Bank.

So 3 questions from my side. Starting off with the forest and forest valuation. You gave us the average price here for Northern Sweden, or your areas in Northern Sweden based on Svefa and Ludvig & Co. data, minus 5% year-on-year. What were the number of transactions included in that sample? And a couple of questions. Are you still seeing interest from corporate buyers? Or are these mainly private buyers? And are your own transactions included in that sample? That's my first question.

Yes, if we start with the number of transactions, we usually have, on average around 200 -- just below 200 transactions, both for Ludvig & Co. and then also for Svefa, so just below 200. And then, on corporate activity?

I don't think we have had too many -- I mean, again, we are limited by the legislation. So we don't have too many corporate transactions.

And the third question, we do some selling. We try to sell off less non-productive land far away from our industries and buy closer to our industries. So we do some transactions in Sweden just to sell far away and buy closer, but most of our transactions are in the Baltics.

Sorry, just to follow up on that last one. In the case where you do sort of land swaps, as I understand that you do with other forest owners, are -- the prices quoted in or decided on in those land swaps, are they part of the sample when you do your forest valuation?

We don't do the land swaps. Usually, we sell to one, buy -- and then we buy from someone else. What we do swap is wood volumes to reduce the transaction -- the transportation cost. But in terms of land, we usually sell, buy somewhere else. But yes, in some regions, we are a big player. So some -- we will have some transactions in those…

But they are included. They are included.

They are included, all right. And just a final question on capital allocation, if I may. I mean, you have a strong balance sheet. As you say, you have no big CapEx projects decided ahead of you. And the share is now trading at -- quite a bit below where the -- just the book value of the forest lands is per share. Would you consider share buybacks at this point?

No.

No.

We'll take now our last question from Christian Kopfer from Handelsbanken.

Just some quick follow-ups here. Just trying to get a little grip on the cost base going forward for containerboard and for pulp. I mean, I guess, you have taken on a lot of new fixed cost with the new factories and so on. Just trying to understand a little bit more, how much the cost will increase when you are fully up and running, if you could just give some picture?

Yes, the indirect cost per tonne will decrease as we ramp up since we have -- I mean, we have the same number of people to run the mill regardless if we are ramping up or at full capacities rather than, when you're full capacity, the mill runs smoother and then you usually have -- now we have start-up costs. So the cost per tonne will decrease as we reach ramped up mill.

Just trying to get a little bit more understanding on the absolute cost level, how much that will increase?

Yes, the absolute cost level will -- I mean, you'll have some inflation, but we don't need any more personnel as we ramp up. And we don't need any more -- I mean you have an annual maintenance stop as before. So I think we have most of the cost base in now, but then we will start to ramp up volumes. So the cost per tonne will go down.

We're not taking any more questions. So I will hand you back to the host to conclude today's conference. Thank you.

And that concludes our year-end report presentation, and welcome back on April 26 for the first quarter report. Thank you for watching and listening in. Thank you.

Thank you.

Thank you.