Svenska Cellulosa Aktiebolaget SCA (publ)

Good morning, and welcome to this presentation of SCA's 2026 First Quarter Report. 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 also from my side, a very good morning.

So despite the increasing costs and the continued challenging market for forest industrial products, we delivered SEK 1.1 billion on EBITDA level and by -- that's an EBITDA margin of 23% for the first quarter. Segment Renewable Energy had a record high result during the first quarter, and that was driven by electricity prices, strong deliveries and also a very good market for liquid biofuels.

Our new wind farm located in Jamtland started operations during the quarter and contributed to a high profitability within the segment. And our high degree of self-sufficiency in strategic areas continue to be an important factor to mitigate higher costs, partly offsetting higher wood raw material and energy costs.

Turning over to some financial KPIs for the first quarter. As already said, our EBITDA reached SEK 1.1 billion, and that corresponds to a 23% EBITDA margin.

Our industrial return on capital employed came out on 2% accounted for the last 12 months, and the leverage was 2, while our net debt to equity reached 11.9%. And I will now make some comments for each segment, starting with Forest.

Stable harvesting levels from our own forest have contributed to balanced supply of wood raw materials to our industries during the period. We have seen a long-term trend of increasing sawlog prices, and they continued up also in the first quarter.

However, availability of sawlogs has increased towards the end of the quarter due to the big storm, and that will also gradually reduce prices coming quarters. Regarding pulpwood prices, they have been rather flat for a couple of quarters, and now they have started to come down.

When we compare the first quarter '26 with the first quarter '25, sales were up 2%, while EBITDA was up 1%, mainly due to higher prices for wood raw materials. Over to solid wood products.

And -- in general, we still have a slow underlying market for solid wood products. We continue to note signs of improvement in the repair and remodeling segment, and we also see a decreased production in Scandinavia and Germany, generating a better supply and demand balance, especially for spruce.

Stock levels remain on the high side among producers for pine, but are on normal levels for spruce and stock levels at customers continue to be on the low side. Delivery volumes were lower in Q1 '26 in comparison with the first quarter of '25, but first quarter '25 was an exceptionally strong quarter.

SCA stock level of sawn goods is currently on a very balanced level. The price for solid wood products increased by a bit less than 4% in the first quarter of '26 in comparison with the fourth quarter of '25.

And this development is in line with what I said when we presented the report for the fourth quarter last year. Sales were 13% lower in comparison with the same quarter last year.

EBITDA margin decreased from 16% to 4% due to higher raw material costs, lower deliveries and a negative currency effect. Today's stock level of solid wood products in Sweden and Finland is described at the top left on this slide and is shown in relation to the average for the last 5 years.

As mentioned earlier, we note that the inventory level is on the high side, especially for pine, while the SCA inventory level is balanced. As can be seen in the diagram to the bottom left, the Swedish and Finnish sawmill production has been lower than average in the beginning of '26.

And in the diagram to the top right, we can note that the export price index decreased in the first quarter. SCA's prices, however, increased due to a better mix.

Going into the next quarter, I estimate that prices in the market will increase. On the other hand, increasing freight costs will have a negative effect, resulting in a slight net price increase for SCA.

Looking forward, we will probably see a stable development going into autumn with an okay balance between supply and demand. Over to pulp.

When comparing the first quarter '26 with Q1 '25, sales were down 16%, mainly due to lower prices and negative currency effects. EBITDA was down 88%, which was also driven by lower prices and negative currency effects.

During the third and fourth quarters of '25, demand for NBSK pulp was rather weak and prices were stable at low levels. Net prices on NBSK then decreased further in the first quarter of '26, very much due to the higher rebates in Europe and U.S.

At the same time, gross prices increased in Europe and U.S. despite weak demand.

In China, demand for NBSK pulp was on a normal level during the first quarter, but prices remained low. The conflict in Middle East is adding complexity in the pulp market, and it also increases the cost pressure.

Looking at CTMP, demand was very low in January and February, and prices were at the bottom. However, during March, we saw an improvement in demand and prices started to increase.

Inventories of NBSK were on a high level during the first quarter. Hardwood inventories on the contrary were below average level.

Finally, CTMP inventories have been on a rather normal level. Moving over to containerboard.

Sales were up 4% in Q1 in comparison with the same period last year, driven by higher delivery volumes, somewhat mitigated by lower prices and the negative currency effect. EBITDA was down by 56%, driven by lower prices, negative currency effect and higher energy costs.

We have noted a rather soft box demand during the start of the first quarter, but it has since then developed in a cautious positive direction. The retail business remains a positive driver, and we have also seen the manufacturing industry recovering in the beginning of the year.

European demand of containerboard has been moving sideways during the first quarter, in line with the box demand. There is no new containerboard capacity expected to start up in the first half of '26, although we can expect a ramp-up effect of new capacity started in '25 with the vast majority coming in testliner.

Kraftliner inventories remain above historical average in Q1, as you can see in the graph. During the first quarter, the availability of OCC has been in balance with supply and demand, which in its turn has led to stable prices in the first quarter.

Prices for brown kraftliner in Central Europe has during the first quarter decreased with EUR 25 per tonne and for white kraftliner with EUR 20 per tonne. Anyway, we now feel a more solid underlying demand in combination with strong cost pressure.

And due to that, we have implemented a price increase of EUR 60 per tonne for brown kraftliner and EUR 40 per tonne for white kraftliner from the 1st of April. Finally, I will say some words about renewable energy.

And in the segment, we have had a stronger quarter compared to the same period last year and maybe the strongest quarter ever. And that is, of course, mainly due to higher production and stronger margins in our -- with St1 jointly owned biorefinery in Gothenburg.

In addition, we have also had a positive impact from our new wind farm in the county of Jamtland. Electricity prices were high during the quarter, which had a positive impact in our wind business.

Our new wind farm, Fasikan, was taken over in time and on budget and has been ramping up production during the quarter. SCA's land lease business is stable at 10.6 terawatt hours according to plan.

And this is, as said before, equal to 20% of installed capacity of wind power in Sweden. The market and price for solid biofuels were strong due to cold weather during the first quarter.

Anyway, the positive effect was mainly offset by higher costs for raw materials compared to same quarter last year. For liquid biofuels, we have seen continuous high margins compared to previous quarters.

The main reasons are the implementation of RED III across European countries as well as strengthened EU control mechanism regarding imported products and feedstocks. In March, we also see additional price increases due to the situation in the Middle East.

We expect market volatility in renewable fuels to remain high as Europe ramps up the blending mandates, both in HVO and SAF. And with that, Andreas, I hand over to you.

Thank you Ulf, and good morning, everybody. I'll start off with the income statement for the first quarter.

Net sales decreased 8% to SEK 4.7 billion, driven by lower prices and negative currency effects. EBITDA decreased 33% to SEK 1.1 billion, driven by lower prices, negative currency effects and higher cost for wood raw material.

EBIT decreased to SEK 543 million and financial items totaled minus SEK 86 million with an effective tax rate of below 20%, bringing net profit to SEK 380 million or SEK 0.54 per share. On the next slide, we have the financial development by segment.

Starting with the Forest segment to the left. Net sales were in line with the previous quarter at SEK 2.5 billion.

Higher prices for sawlogs were offset by lower delivery volumes to SCA's Industries. EBITDA decreased slightly to SEK 884 million due to seasonally lower harvest from SCA's own forest compared to the previous quarter, which was offset by higher prices for sawlogs.

In Wood, prices were slightly higher compared to the previous quarter. Net sales decreased to SEK 1.3 billion due to lower delivery volumes.

EBITDA decreased to SEK 49 million, corresponding to a margin of 4%. High costs for wood raw materials and lower delivery volumes were partly offset by higher prices.

In Pulp, net sales decreased to SEK 1.6 billion compared to the previous quarter, while EBITDA increased to SEK 40 million, corresponding to a margin of 3%. Lower costs for planned maintenance stops were offset by negative currency effects and lower prices.

In the quarter, we took market-related downtime in our CTMP mill due to high electricity prices. In Containerboard, net sales were in line with the previous quarter at SEK 1.7 billion.

EBITDA decreased to SEK 104 million, corresponding to a margin of 6%. Lower prices, negative currency effects and higher energy costs were partly offset by lower costs for raw materials and higher delivery volumes.

Renewable Energy, we had a record quarter. EBITDA increased to SEK 206 million, corresponding to a margin of 31%.

The increase was driven by high electricity prices, the new Fasikan wind mill and higher results in liquid biofuels. On the next slide, we have the sales bridge between Q1 last year and Q1 this year.

Prices decreased 4% with lower prices in pulp and containerboard, partly offset by somewhat higher prices in wood. Volumes were flat with higher volumes in containerboard, but lower in wood.

And lastly, currency had a negative impact of 4%, bringing net sales to SEK 4.7 billion. Moving on to EBITDA bridge and starting to the left.

Price/mix had a negative impact of SEK 255 million. Higher costs from mainly wood raw materials had a negative impact of SEK 111 million.

We had a positive impact from energy of SEK 34 million and a negative impact from currency of SEK 203 million. In total, EBITDA decreased to SEK 1.1 billion, corresponding to a margin of 23%.

Looking at the cash flow. We had an operating cash flow of SEK 569 million in the quarter.

And as you know, other operating cash flow relates mostly to working capital currency hedges and should, therefore, be seen together with changes in working capital. Looking at the balance sheet.

The value of the forest assets totaled SEK 104 billion. Working capital decreased to SEK 5 billion.

Capital employed totaled SEK 112 billion. Net debt stood at SEK 12 billion and equity totaled SEK 100 billion, corresponding to a net debt to equity of 12%.

And we are now almost finalized our large ongoing investment projects. Thank you.

With that, I'll hand back to you Ulf.

Thank you, Andreas. And just to summarize, I mean, we have had a challenging first quarter.

I think we have controlled what we can control in a good way. We see a positive effect from the ramp-up of our big strategic investments, and we are looking forward to the time when we can move over those extra volumes to our main market in Europe and the margin that can create.

We have also started up our new wind farm outside Bracke in Jamtland and the project was done on time and in budget. So by that, I think we open up for questions.

Three questions from my side. I'll take them one at a time, if that's okay.

First, on containerboard. So you're starting from a fairly depressed EBITDA margin level in Q1.

And going into the second quarter, you should be benefiting from lower fiber costs as well as lower power costs. How about other input costs around logistics, chemicals, et cetera?

Just trying to understand the overall development into the second quarter on the cost side. And then related to that, is it fair to expect another increase in kraftliner prices in May to help restore margins?

I'll stop here for the first one.

I'll start with the market and then Andreas will give you the cost perspective. And I guess, I mean, as you realize, we did increase the price for kraftliner from 1st of -- first, we reduced the price by EUR 25 per tonne for brown kraftliner in the first quarter and EUR 20 for white top.

And then from 1st of April, we have announced that we will also come through with price increases of EUR 60 per tonne for brown and EUR 40 per tonne for white from 1st of April. And that will stepwise be implemented in the price for the first quarter.

I guess we see no price movement in May. We haven't heard anything more from testliners producers.

And I think it's fair to say that they have to start and then I believe that kraftliner can come after. So nothing is planned for May.

But if we will remain on this level when it comes to gas prices, I guess, we'll see some attempts in -- yes, later in Q2 or in the beginning of Q3. So that's my view.

Then Andreas, about the cost situation.

Yes. On the cost side, if we start with pulpwood, the pulpwood will continue to go down slightly in Q2, but very slightly.

As we talked about earlier, we have this 6 months lag effect. So the pulp wood prices will go down mainly in the second half of the year.

OCC prices are fairly stable. If we look at electricity prices, they're very high in January, February.

So depending on how the electricity prices develop, but most likely, it will be lower compared to Q1. And then in terms of transportation costs depending on the oil price development, but the oil price will, of course, affect transportation.

So that's the big moving parts.

Okay. Then the second question, can you comment about current pulpwood prices?

I know you mentioned a slight benefit in the industrial units in Q2, but just trying to understand where are we now on pulpwood prices versus the peak of 2025?

Yes. So pulpwood prices, they went down slightly in Q4, slightly in Q1, but we are talking about maybe 1% to 2% down.

It would continue to go down 1%, 2% in Q2. And then you get a larger effect in Q3 and in Q4 because of this lag effect.

Okay. And just the last one for me.

You talked about the CTMP market where demand remains low, same with prices. Could you give us an update on operating rates in Q1 here and your expectation for Q2?

And how are you feeling about this business given the depressed market backdrop? Are you willing to run the asset?

I know it's a low-cost mill, but just trying to understand how you're looking at optimizing the business here.

Well, in the first quarter, I would say that we have maybe run the CTMP mill at 50% or something like that, I mean, due to high electricity prices and also the margin cost for pulpwood. So that's the case for first quarter.

And I mean, CTMP has been a very bad business in the first part of this year. Now we see that the CTMP market is picking up.

And I guess one part of it is that short fiber pulp is picking up step by step and maybe we see some kind of substitution. I also feel that we have a better consumption by board customers, not the least.

And so I mean, just now, we are running more or less full for the moment being. Of course, we keep an eye on the electricity price.

And if it's too high, then we have to close down, but we are rather positive for the CTMP business in the second quarter.

I'll start with a follow-up on the input cost side. And if you could maybe elaborate a bit on the pulpwood cost declines that you're seeing in your wood consuming operations over the course of the next few quarters.

If you could quantify in any way what you're expecting going into the second half of 2026, please?

Yes. So as I said, now we got maybe 1% down on pulpwood cost in Q1 compared to Q4, while the sawlog prices increased with around 7% in Q1 compared to Q4.

In the second quarter, we expect both pulpwood and sawlog prices to go down slightly, but we're talking about 1%, 2%, maybe 3% on pulpwood and 1% to 2% on sawlogs. And then we'll see a bigger effect in Q3 and Q4.

But it's hard to say exactly now because it's now we're going to -- in second quarter, then we're going to get more of these storm volumes, of course, will help to get the price down. So we'll see, but we expect a bigger decrease in Q3 compared to in Q2.

Great. And then -- and I hate to ask this, but if you could maybe please help us dissect the other line, which was weaker in the first quarter?

And if you could help us understand what the normalized level might be going forward? And the reason I'm asking is that this is actually where more than the entire deviation compared to consensus occurred.

So if you could just help us understand that would be super helpful.

Yes. Firstly, we have a seasonal effect, but the biggest thing is, of course, profit in stock.

So when we sell something, for example, from the Forest business to the Wood business, then the Forest segment, of course, makes a profit. But until the Wood division sells that final product, you eliminate that profit.

And that's why you have this cyclicality between -- dotted line between different quarters. So because of the increased prices of sawlog and a bit lower delivery volumes in our Wood segment, you have a higher other costs, but that's only periodization between different quarters.

Great. That's really helpful.

And like given what you just said, Andreas, any pointers for what to expect in the second quarter?

I think if you look at the full year, of course then these prioritization effects, I mean, they get canceled out. So if you look at the full year, then you get quite a good picture of the yearly other costs.

Sorry, what do you mean -- if I look at the past couple of years, that...

Yes, yes, exactly. The past year.

Now in terms of Middle East crisis, you mentioned in the report that it increases uncertainty and of course, the oil price is also higher and you call out this as an indirect negative. But you have high energy self-sufficiency.

Do you think you have a competitive advantage to Continental European producers, especially in containerboard?

Yes. I mean, we are not dependent on Russian oil and gas or oil at all, more or less.

I mean that is, of course, a positive thing. And the other thing is that when it comes to distribution, I mean, we used to say that we have 40% -- degree of self-sufficiency due to the fact that we now produce liquid biofuels in Gothenburg and our part, I mean, account for around 40% coverage of the total cost.

So that is, of course, very positive. And as you could see also in this quarter, I think we did the strongest quarter ever for renewable energy and a big part of that was, of course, liquid biofuels.

Right. And then also related to containerboard from what I hear from not only you, but from other companies in the market, it seems demand has increased quite significantly in March and April, and it's certainly in containerboard grades in Europe and the start of the year was much slower.

What explains the pickup in demand? Is this just pre-buying before prices go up?

Or are there other dynamics in play?

It's hard to say really. I think one thing can be that you have -- I mean, I guess people, they are securing the raw material supply in different areas due to the geopolitical situations.

So that might be one thing. But we also feel that -- I mean, the retail sector has been quite good for a while.

And now we feel also that the industrial customers, they are coming back. And I mean, not at least today, I mean, we have seen some reports and also yesterday from some companies.

And I mean, they also say that the order inflow is quite strong also from the more heavy industry, which has -- that will have a good impact also on our kraftliner business. So yes, the market is definitely strong just now.

The balance is -- still we are a little bit on the high side when it comes to the inventory level. And I mean, we all know that we have a lot of testliner capacity out there, curtailed just now, I guess.

And on the other side, if we will -- if gas prices will remain on this level, there still -- I guess, many of them, they lose money. So I guess we will see -- it's a mix between supply-demand and cost pressure and so on.

But I guess we can -- we might see some further price increases coming into the autumn.

I understand. Finally, just on saw timber.

I mean, this market, of course, is tricky. But when I look at log prices in Europe and when I speak to companies there, they complain about scarcity, essentially of sawlogs -- prices of -- log prices that are much higher than you have in Northern part of Sweden.

Why wouldn't you sort of have better -- I mean, you're in black figures most of the quarters, even in this tough environment. But could it be a setup where you basically do not need the construction market to come back and still get higher prices?

Or is there something I'm missing with the mismatch of sawlog prices in Europe versus Northern part of Sweden.

I don't know if I fully took your question, but you talked about price deviation from Northern -- Southern part of Sweden...

I mean, they are paying 2x more for sawlogs...

No, no, they don't. No, no, they don't.

And I think that's a misunderstanding. No.

I mean you look at public price lists, and that is, of course, not the price in the market. So I guess, when we do some comparisons, I mean, you don't -- it doesn't really differ too much.

And also when it comes to log size, I mean, the log is much more narrow in the Northern part in comparison with the Southern part and so on. So I don't think that delta is -- yes, we are favored.

So the price is roughly the same.

Maybe not the same, but it's not -- as you say, I mean, it's not the double price. So I mean, I think it's -- and then, of course, now with -- now you have the storm effect, and we haven't seen really the result out of that.

You see a big difference between spruce logs and pine. You see also in the end market that now we have a deviation for sawn goods by SEK 300 per cubic meter more or less if you compare spruce and pine to the advantage of spruce, of course.

And I guess that's a result of the spruce beetle effect that we had in Central Europe a couple of years ago. So I mean they have a deficit of spruce logs.

So it's a more complex market than that. And you cannot really look at official price list.

That's my clear message. You have to -- because what we buy in the market is something completely different in many cases, where you have to add premiums and things like that.

It's Johannes here. I have two questions.

I would like to zoom in on your energy business and the containerboard business. So on energy, you said it already, Ulf, but you had a nice tailwind from higher biofuels.

So I was wondering if you could provide some color on what that means. I think your earnings delta were like SEK 60 million Q1 versus Q4.

How much did biofuels supported that earnings growth?

I can first start with the production. I mean, we are also in the ramp-up phase with biorefinery in Gothenburg, and that is the first thing.

We have had record production in that unit, and we are far above design capacity. So that is a very positive thing, of course.

And then in addition to that, of course, we have had a very good price development. And then Andreas, you can.

Yes. So if you look in Q4 compared to Q1, the solid biomass pellets and unrefined fuels basically had the same profitability in Q4 as in Q1.

So the increase comes from -- roughly half from the wind segment and roughly half from the biofuel business, roughly speaking.

Okay. But what you're saying, it's more of a ramp-up benefits, not sort of pricing benefits.

And could you comment on Q2, how we should think about the pricing effect here coming from higher prices?

Both. We got both, higher margin in the biofuel business compared to Q4 as well as good production.

And we'll have to see how the market develops. But for energy, I mean, if fuels continue to be high, that, of course, will benefit our fuels business.

But then, of course, Q2 is a weaker market for our Solid Biomass segment and Wind compared to Q1.

Got you. And then on containerboard, if you could elaborate a bit on basically operations and also the mix because I assume you're still in sort of a ramp-up phase in Obbola.

So do you foresee sort of tangible benefits from more efficient operations in the coming quarters and also benefits from a more commercial mix, if you can elaborate on that one, please?

I mean, step by step -- I mean, we produce more in Obbola. And by that, we also will be -- if you count per tonne, I mean, then you will be more also cost efficient.

And first, the volume and then we fine-tune the cost level. And this year, as we said before, I mean, we will probably produce around 100,000 tonnes more in '26 in comparison with '25.

And step-by-step, we will be more and more cost efficient. So that is one thing.

But as you say, I mean, all surplus volumes today, I mean, they are placed in overseas market and the margin is completely different if you have to place those volumes in Asia or U.S. or South America or wherever.

So I mean, when the market comes back in Europe, that will, of course, improve the margin quite a lot, I would say.

So I have two. The first one, they're both on the forestry side.

But the first one is related to your forestry -- your silviculture cost in the first quarter, which are usually lower. But then I would expect some of that to come back in the second quarter, right?

So overall, if you could guide us towards the level of expected profitability on a per cubic meter basis for wood harvested maybe excluding the revaluation, of course, for the remainder of the year and for the second quarter, specifically, that would be very helpful. And then a longer-term or more strategic question here would be basically on the valuation of these forests, right?

So the company now trades at a significant discount to the book value of the forest. And I just wanted to pick your brains on whether this is something that bothers you and if there are any measures to try and unlock some of that value of these forests.

Yes, I can start with the seasonality of the forest. I won't go into exact figures, but just to get some flavor.

And as you know, we harvest seasonally more from our own forest in Q2 compared to Q1. So that's a net benefit.

Then you're absolutely right that in Q2 and Q3, especially, we have our fertilization and silviculture cost because it's then we replant, we do this fertilization. And that's maybe, roughly speaking, what can it be SEK 50 million to SEK 80 million per quarter in Q2 and in Q3.

And then, of course, we will see how higher oil prices, of course, will also affect our -- the transportation and harvesting business. So on the plus side, we harvest more from our own forest, will have slightly lower prices, and we will have higher seasonal costs for silviculture and fertilization.

And then when it comes to the valuation of the forest and if you plan something to unlock the hidden value of the forest, I mean, we don't. I mean, we have had a couple of big transactions recently.

And I mean, they show that the book value is also the market value. And I mean, we trust that.

And forest and forest business is a cyclical business. So you have to like that and see opportunities when you have them.

And I guess we will -- we are looking forward to what's going to happen now when Stora Enso will split, of course, and that might have an impact on the view of the price of the forest. Otherwise, I mean, we are following continuously the market for -- I mean, the local market for -- when you buy and sell forest estates, and we can just see that we are more or less on the same level as before.

So I mean nothing has changed.

Three sets of questions from Danske Bank here. First off, I'm just very curious, are sort of higher oil prices and talk of possible aviation fuel shortages in Europe creating a greater interest from you or from others in your aviation fuel project in -- biorefinery in Ostrand?

That's my first question. .

Yes. I mean, as you say, just now, it is good profitability in the biorefinery in Gothenburg.

And by that, you can say that conditions for the Ostrand project should also be very good. And I guess they are.

But that is, of course, a much bigger bet. And as we have also said, this market will be very volatile, and it's also very capital intensive.

And I guess if -- before you start a big project like that, you need to have some security when it comes to some kind of offtake agreement or at least the price level for SAF long term. I mean you can talk about resilience and degree of self-sufficiency and things like that, both in the union, but also in Sweden.

Will that come? We don't know.

And the tricky thing, I guess, with these kind of projects is always the political risk. I mean we are used to take the technical risk, the project risk, and we can handle that.

But the challenge is really the political risk. Will something change when we have a new government in place, both in Sweden and in the union and what kind of impact will that have?

And that will, of course -- it's more challenging to raise the money needed for such a big projects.

But -- follow up on that. I mean, would you be open to doing that as a JV then?

Absolutely. I think that's the only solution really.

I mean we can provide a fantastic place close nearby Ostrand, lots of synergies. We also have from now the energy supply, which is really important.

But maybe the most important thing, I mean, we are maybe the only player in that part of Sweden that can provide with the raw materials, I mean, the feedstocks. I mean, I guess we are a perfect partner in the JV, but this project is, of course, too big for us alone.

And -- so we have to talk with some friends if this should come through.

Very interesting. My second question is, I mean, continuing on that with the Middle East conflict causing disruptions, as you mentioned.

We hear a lot about how this is having an impact on Continental European producers, perhaps especially of containerboard, who are dependent on natural gas and oil for energy. What about sort of -- is it causing other shifts sort of that you're noticing, for example, in Asia or having impacts on logistics, which is causing shifts in the market or in the cost curve that are meaningful for you.

Yes, I don't know if we see some structure -- I mean, for everyone, I mean, we see that the freight costs, I mean, they will increase, of course. And in our case, as I said before, I mean, we have maybe a degree of self-sufficiency due to the biorefinery we have in Gothenburg up to 40%, and that is different for different companies.

And as you also say, I mean, we are not depending on oil and gas prices as we have a fantastic energy supply situation in not only SCA, but Scandinavian companies. So I mean, that is, of course, in our advantage.

But input costs will increase and freight costs, oil, one thing. The other one is, of course, chemicals into the industry.

But on the other hand, I mean, that will have, I guess, a bigger impact from plastics and other competing materials. So it's really hard to say how this will turn out.

If you will see a big restriction now when it comes to aviation and things like that, that might create the same situation as we had during the pandemic that people they will stay home and build Verandas and do a lot of work in their gardens and the houses and so on that might create some kind of better market for solid wood products. I mean, it's hard to say and it's hard to speculate.

We are so focused now on trying to control what we can control. And that is also something that we are very happy in the first quarter.

I mean we have had a good production. The cost level is good, very strong energy business.

We see a positive effect of those strategic projects that we have launched. And -- but still, we are at the bottom of the business cycle just now, and let's see when it will recover.

And my third and final question is more straightforward. In the Renewable Energy division, I mean, you've obviously been able to benefit here in Q1, partly from the ramp-up, of course, which will be hopefully sustainable for the rest of the year, but also from higher prices due to the situation in the Middle East.

Are you able to lock in any of the higher prices through hedging or something like that so that we get a little bit of that benefit for the rest of the year as well?

If we start with the wind business, then we don't hedge anything. I mean, that's just our self-sufficiency, so then we're exposed to spot prices.

If we look at our solid biofuel business, here I say you have much more long-term stable contracts and they have some spot volumes, but a large share is long-term contracts and they are quite stable prices, while the spot, of course, that moves up and down with the market. And with the biofuel business, there you do some contracts in advance, but not very far.

So I would say we are exposed to spot, and that's part of our strategy to be -- have a high self-sufficiency. As I said, on oil, we are around 40% self-sufficient.

So there we want to have when the cost goes up or down, our renewable energy income goes up and down as well. So I would say we don't have that long hedge exposure on renewable energy, more spot.

I just got a couple of questions. First of all, on containerboard, you mentioned the first EUR 60 hike through in April, nothing expected in May.

The index realized EUR 30. I'm curious what you're seeing from some of your competitors where some of them hiking, but with a bit of a delay, maybe coming through in May?

Or like what explains the lower index move? And just to confirm, like are your customers in April already paying that EUR 60?

Has that been fully implemented?

Good question. And yes, I guess they -- many of them, they have announced price increases from 1st of May.

So what you see now in the index is the price hike from SCA. And I mean, as I would say, the major part of our business is also related to the index movements.

I mean, we will not get even 50% of this price increase in April, but we will get it in May. So that's the case.

Yes. Okay.

That makes sense. And just on the Wood Products business.

I think you guided last quarter to flat price development in the first quarter, and it looks like it went up about 7% on a revenue per tonne basis. So kind of curious what changed versus your initial thought process?

And can you give us some guidance on how you see prices developing in the second quarter?

Maybe you have a better memory than me. I think I said 4%, and I think we had 4% more or less.

But I'm not sure. But anyway, we had a small price increase, but the price development for sawlogs was even higher.

So that's also the main reason for the profitability coming down. In the second quarter, I mean, it was a little bit of a disappointment for me.

I thought that we should have a higher price increase in the second quarter in comparison to the first quarter. But I guess we will have around 4%, a little bit more for spruce, a little bit less for pine, a little bit more in some markets, a little bit less in other markets.

So we try also to work with the mix, of course. And now this quarter, we see that log prices will come down a bit.

But on the other hand, I guess that 50% of the price increase will be mitigated by higher freight costs. So it will be a small positive effect from increasing prices and also a positive -- small positive effect from decreasing log prices, I would say, in the second quarter.

And you're right. I mean, as Ulf said, we probably expected prices to be a bit more flat in Q1, but then get a larger effect in Q2.

Now we got a bit of that Q2 effect already in Q1. So I think the increase was about the same as we thought, but less -- more in Q1 versus Q4, but less in Q2 versus [indiscernible].

Yes, related to what we said. But my thinking was that we should have a stronger market really in the second quarter.

But that has not come through. It is much stronger for spruce than in comparison with pine.

So spruce is maybe a little bit better and pine is a little bit less good, I would say.

Yes. That's clear.

And actually, just on the freight question. You have -- I know you have some of your own vessels, I mean, obviously, that probably doesn't protect you from bunker fuel and all that sort of stuff.

But I mean, how does -- can you quantify the impact on your freight costs across the various divisions from what you're seeing now and maybe compared to what you think your peers might be paying, but without that self-sufficiency in vessels?

[indiscernible] so figures you can work with, it's that if you took both bunker oil, we took oil for burning and then also diesel for trucks and everything. I think our total exposure is around 130,000 to 140,000 tonnes.

And then we get back 50,000 tonnes is from tall oil and that's linked to the fossil price plus a green premium. So there we are self-sufficient at around 40%.

And then, of course, [indiscernible] and our pellets business will be also an indirect hedge. But if you remove those, I mean, our total exposure of 130,000 to 140,000 tonnes, minus 50,000, that's around 80,000, 90,000 tonnes of exposure.

And of course, this indirect effect from pellets and [indiscernible].

I'd just like to ask on the pulp markets for softwood pulp in particular. What do you think is ultimately needed to bring down those inventory levels and tighten this market here?

Because we've seen some kind of demand shift to the hardwood side. We've still got a lot of inventory levels in China.

Softwood futures have come lower. It just seems like quite a disconnected market, softwood versus hardwood.

So I'm just wondering what do you think needs to play out over the next few months to help balance the softwood market and ultimately support further pricing?

It's a very good question. And I mean we are a little bit surprised ourselves, I must say.

I mean, we have heard also talk about interest in implementations in China that swing capacity is now running long fiber and so on. But honestly, I don't know really.

But what we have seen is that a positive price development step-by-step for eucalyptus pulp. And just now, I mean, you have a small delta between hardwood and softwood.

So I guess that is the first sign that we will see some kind of substitution going forward. But again, when you look at the inventory level, you are still on the high side for softwood and on the low side for hardwood.

And also, we have big producers in hardwood, they have announced some curtailments. But on the other hand, we have also heard that some Scandinavian producers, they have also announced curtailments now.

But I mean, short term, it's always a question about supply-demand balance. And I guess, the price difference now between short and long fiber, that will help a bit.

We see that on CTMP already now, definitely for March, but also, I guess, coming in now in the second quarter, that will help us. I don't feel that we have any structural things that dramatically have changed the situation.

I mean, as long as something is a little bit cheaper than something else, I mean, then you try to substitute as much as you can. So I mean, long term, I don't think this is a structural thing.

It's more a question about supply-demand. And so let's see, but a little bit annoying, of course.

Well, hopefully, we see some capacity closures. But if I look at some of the softwood producers, there's some listed players that have seen their debt trade down.

It seems like a lot of the market is really under pressure. If assets do become available, how does SCA think about M&A in that context at the right price?

Or are you just comfortable staying with your business in Sweden?

Yes. I think our -- I mean, we are an integrated forest company with the industry.

And I mean, I have a great respect to move into other geographies if you don't -- can guarantee the raw material supply. So I think the integrated model we have today, I think, has been very profitable over time.

And also in relative terms, I mean, we perform well. And as it is just now, we have also done a lot of big strategic investments, and we will be very cautious now.

We will focus on, I mean, ramping up what we have started and also to consolidate the balance sheet. And so I mean, for us, no M&As, at least not short term.

So firstly, just following up on oil and appreciate all the self-sufficiency and hedges that you have highlighted. But if I just look at your transportation and distribution, it is almost 25% of your cost base, so say, roughly around SEK 4 billion and diesel is up 30%, 35%.

So how do you plan to offset that SEK 1.5 billion cost headwind that you have? And just as a follow-up to this, are you seeing the roadside pulpwood increasing on the back of diesel costs going up?

As I said before, we have around 140,000 tonnes of exposure to bunker oil and diesel and oil in our industries. And roughly that we produce 50% to get back from a tall oil.

So there is an exposure of 80,000 to 90,000 tonnes. So of course, I mean, if the prices of diesel or oil goes up, I mean, they will have a 90,000 around roughly exposure, so they can calculate the figure.

And then in [indiscernible] that's the pure oil part. And then transportation, I mean, part of our business, I mean, we have our own RORO ships.

So there is only the bunker exposure. And of course, [indiscernible], especially to U.S.

and there we freight ships. And of course, then it depends on how the market for renting those or freighting those vessels move forward.

But to bunker and diesel, our net exposure is around 80,000, 90,000 tonnes.

Okay. And then just -- how should we think about your capital allocation now going forward given the pressure on -- I mean, the market and the free cash flow generation?

Do you think maintaining dividend is possible in this market environment?

So in terms of CapEx, I would say that we will have around SEK 1.5 billion in current CapEx this year and then around another maybe SEK 400 million, SEK 450 million in strategic CapEx. And then in terms of capital allocation with dividend or with share buybacks or other strategic CapEx, I think that's something for the Board and now we're focusing just on ramping up and getting the cash flow for our investments.

And that concludes our presentation of the first quarter report, and we wish -- welcome back in July for our half year report. Thank you very much for joining us today.