Release Date: July 26, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Svenska Cellulosa AB (SVCBF, Financial) reported a 15% increase in net sales, driven by higher prices and volumes.
- The company's EBITDA increased by 11% to SEK1.9 billion, with an EBITDA margin of 36%.
- The ramp-up of the new CTMP mill is progressing well, contributing to a 22% increase in sales and a 34% increase in EBITDA for the pulp segment.
- The company has completed significant strategic investments in Obbola, Ortviken, and Gothenburg, which are expected to contribute positively in the coming years.
- Svenska Cellulosa AB (SVCBF) continues to grow in leasing out land for wind power, reaching 9.7 terawatt of wind power on its land, equal to 20% of installed capacity in Sweden.
Negative Points
- The renewable energy segment experienced a weaker quarter with a 53% decrease in EBITDA due to lower market prices for tall oil and biofuels.
- There was an unplanned production stop at the Ostrand pulp mill, resulting in a negative impact of approximately SEK60 million in Q2, with a similar impact expected in Q3.
- The market for liquid biofuels in Europe has been negatively affected by reduced blending mandates in Sweden and increased imports from China.
- Higher raw material costs, particularly for wood, have negatively impacted several segments, including pulp and containerboard.
- The company faces continued high operational costs during the ramp-up phase of the new kraftliner machine in Obbola, with full capacity not expected until 2026.
Q & A Highlights
Q: Can you provide insights on the forest valuations given the limited transactions?
A: We haven't seen official statistics yet, but the market has been slow. Prices may be slightly lower than last year, but it's hard to compare due to geographic differences. We expect interest rates to impact the market positively in the future. - Ulf Larsson, CEO
Q: Are you seeing any pushback from customers on the recent pulp price increases?
A: The pulp market has been strong, with higher prices in Europe and the US. However, spot prices in China have decreased, creating a potential stabilization. Margins are slightly lower due to increased raw material costs. - Ulf Larsson, CEO
Q: Can you break down the decline in renewable energy profits?
A: The decline is due to a 50% drop in profits for both solid and liquid biofuels. Solid biofuels were affected by seasonal factors and higher sawdust prices, while liquid biofuels were impacted by market developments. - Andreas Ewertz, CFO
Q: What are your capital allocation priorities now that major CapEx projects are completed?
A: We are focused on ramping up existing projects and maintaining a stable, increasing dividend. We aim to keep an investment-grade credit rating and will be cautious with new investments for a while. - Andreas Ewertz, CFO
Q: How is the CTMP market performing, and what are your main markets?
A: Our main market is Europe, where we've seen good development. We've doubled our capacity and are focusing on optimizing production rather than pushing volume. The price development in Europe has been positive. - Ulf Larsson, CEO
Q: Why are containerboard deliveries down despite better market demand?
A: We are in the ramp-up phase for our new kraftliner machine, which involves adjustments and stops. This is expected during the ramp-up phase, and we plan to reach full capacity by 2026. - Ulf Larsson, CEO
Q: What are your expectations for the renewable energy segment in the coming quarters?
A: We expect continued market volatility and lower refining margins in the short term. However, we anticipate positive developments in 2025 with increased blending mandates in Europe. - Ulf Larsson, CEO
Q: How do you view the supply-demand dynamics for softwood pulp through the cycle?
A: We expect a strong balance in the softwood pulp market, with no new capacity announced and several closures. The premium for softwood pulp is likely to remain stable due to its necessity in certain applications. - Ulf Larsson, CEO
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
