Stora Enso Oyj

Thank you, Roberto. I'm Ulla Paajanen, Head of Investor Relations here at Stora Enso and welcome to our Q1 2021 results announcement call.

And with me here today is our CEO, Annica Bresky; and our CFO, Seppo Parvi that will give us first a presentation about the results before the Q&A session. So, Annica please go ahead.

Thank you, Ulla and thanks for joining us this Friday afternoon. If I start by summarizing this quarter, I would say that we are back on track on many of our financial targets.

And this is due to improved performance in our company, but also recovering market conditions. We have seen a good growth of our core businesses 14% and we can also see an improvement in our operational EBIT by 82%.

And the backdrop is that all our growth businesses are moving in the right direction and we have had a good cost management within the company. As you are aware this week we also announced the closure of two paper mills, and of course, this is very difficult news to deliver to all our mill personnel.

If we look at how this impacts our paper business, this would of course improve significantly the profitability of our paper business and our long-term competitiveness and at the same time, our footprint within paper business will be reduced. So, after completed negotiations, 90% of our group sales would come from our core businesses and this is of course, the direction we are going in the execution of our strategy.

Oulu Mill which was one of the significant steps of transformation we took last year that we started ramping up in the beginning of this year is performing very well. We are delivering our products to the customers.

We have reached many of the quality demands. And I'm very happy to announce that we are reaching our operational EBITDA breakeven earlier than planned already in quarter three this year.

And last but not least we reaffirm our outlook for this year where we say that we expect our operational EBIT to be higher than last year. So, all in all I would say that Stora Enso is back on track and that we see traction in our growth in core businesses.

So, if we move now over to some of the high-level financials, our sales increased by 3% in quarter one and excluding paper as I said by 14%. Our operational EBIT increased to €328 million and excluding paper to €362 million.

And of course, we need to remember here that we have the impact of our forest sales in Sweden on €74 million. All in all despite this divestment in forest sales, we still have a very strong underlying result.

Our operational EBIT margin increased to 14.4% and excluding paper to 19.4% which is a very good level showing the strength of our businesses in the growth segments and also our core businesses. Cash flow from operations landed at €185 million and after investments at minus €9 million.

Our net debt to operational EBITDA is at 2.3 on the same level as a quarter ago. And operational return on capital employed excluding our forest division increased to 12%, which is quite close now to our financial -- long-term financial target of 13%.

If we now move to the bridge showing what impacted our results, you can see here that it was mainly driven by performance in our growth businesses and also good cost management on top of course the forest land sale. And the impact of paper has been quite significant as you can see here, the market is still very demanding and sales prices are low in the paper business, but we have through the other businesses being able to increase our sales, increase our volumes, despite challenging supply chain situation around the world and also deliver on our reduction in variable and fixed cost and our profit protection program.

So all in all, we are moving in the right direction. I'll say a few words now about the market conditions for our businesses.

And we have seen robust performance in packaging materials. That was the case also last year.

This year, we see that we are fully sold out. There is a high demand and our capacity for the division is very allocated right now.

Market situation in China is continuing to improve, which is also driving our results in that division. For Packaging Solutions, there is a solid demand for e-commerce.

And this supports of course our corrugated packaging. The prices here are yet to catch up, because they have been quite steep with the raw material price increases in containerboard, but this will adjust itself, as we go along.

Classic sawn as well as CLT and LVL has been extremely strong in Wood Products results. We have seen a very good performance there with all-time high levels of EBIT margin -- operational EBIT margin.

This is a very strong testimony of the direction of our Wood Products in terms of building with wood. We have a continued healthy performance for our Forest division.

The harvesting conditions have been excellent. So, our Forest division has been able to supply this increased demand from all our other businesses.

Of course, we have also seen the improvement in biomaterials. And as you are all aware, the pulp prices have moved in the right direction since already last quarter.

And now, they are shown in our books, which is good to see. Demand is expected to stay strong for this year.

Last, but not least as we have said many times, the paper demand is still very much challenged and will continue to be so. But we have taken significant steps now in our company to adjust our capacity to meet this new reality.

So all in all, we stay firm in our strategy execution and the actions are intensifying, as we are moving further. Our paper restructuring plans have been announced.

We also decided to shut down our US-based Virdia operations in Q1, since they were not in line with our areas of growth. Our TreeToTextile joint venture, where Stora Enso holds 25% share is in demonstration plant phase for developing a new technology for sustainable textile fiber in Nymölla.

So this is an area where we put effort, because we believe that textiles need to be much more sustainably produced in the future. So here we have a leadership position together with our joint venture partners.

In our strategic review, we made the decision to seize dissolving pulp production at Enocell Mill during 2021 and instead increase the production of other pulp grades. And as you are aware, the ramp-up of the converted kraftliner in Oulu is proceeding very well and ahead of plan.

And as I mentioned, we've reached EBITDA breakeven already in quarter three 2021. We estimated before that it would be quarter one 2022.

In Ždírec Mill, we have decided on an investment in cross-laminated timber production. And here we are in the construction phase and this project is also proceeding as planned.

And this would be a very good add-on seeing now the demand of the many projects that we are running in our Wood Products division. Our feasibility study is ongoing at Skoghall Mill and the decision on that investment is to be taken at the end of this year.

And last, we have signed an agreement with OX2 to lease land in Sweden for the construction 170 megawatt wind power park. And this is also how we support renewable energy production through our forest holdings and collaborating with partners in that.

I'll just say a few words now about the plans to permanently close down the pulp and paper production at Kvarnsveden and Veitsiluoto mills. And a lot of this, of course, you have already read in the media.

And it's important to remember that this decision is still subject to completed co-determination negotiations that we will do the coming months now. But what we aim for is to reduce our capacity in SC magazine paper and improved news and also in woodfree uncoated office paper and coated magazine paper.

And as you are all aware, there is significant overcapacity in many paper grades especially on the European market. So for us, we reduce our own capacity by 35% by this step.

And make sure that the rest of the sites that we have are competitive and our paper business becomes profitable. Of course this is very, very sad news for our people.

It has a potential impact of maximum 1,110 persons. And the financial impact of this would be €35 million in operational EBITDA that would be improved for the paper division.

And as I said, it would take out 35% of our paper capacity or 1.3 million tonnes per year. Our annual sales would decrease by approximately €600 million on the back of this decision.

And then we allocate €127 million of noncash impairment costs in quarter one and €104 million as items affecting comparability in quarter two results, out of which €96 million is a cash impact due to restructuring and layoff costs. And now with that, I turn over to you Seppo to give a little bit more details on the financials.

Thank you Annica. And I start with the key figures from the report that we have published today.

First of all, sales line for the first quarter, this year sales reached €2.276 billion, which is 3.1% increase year-on-year. Operational EBITDA margin at €21.4 million significantly up compared to a year ago when we were by 15.2%.

And operational EBIT €328 million that is 82.4% increase versus a year ago and operating EBIT margin at 14.4%. Earnings per share basic at €0.18 for the quarter and operational return on capital employed excluding Forest as Annica already mentioned at 12%, a bit below 13% long-term target, and cash flow from operations at €185 million.

And net debt to last 12 months of operational EBITDA stable at 2.3, despite the fact that we have paid the dividend at the end of the quarter. Then moving forward and looking at our €400 million profit protection program where we are moving ahead with good speed and we will be able to reach the targeted savings already ahead of the plan during the current quarter Q2.

We are very proud and happy about the achievement and organization has been working hard to reach the target. We are trying to close also the reporting of the program end of the coming quarter.

But, obviously, we will continue to track the savings and close the tails towards end of the year. Then moving to divisions and I start by looking at the Packaging Materials division.

Their strong performance continues. And we are very, very proud about the Oulu Mill ramp up that is proceeding also ahead of the plan.

Sales increased by 13% and reached €862 million. This is thanks to higher deliveries and price.

Operational EBIT was up €31 million at €127 million level despite all ramp-up costs. Ramp-up cost for the Oulu Mill €23 million during the quarter.

This also inflection of lower variable and fixed costs. And good to remember that last year first quarter was negatively impacted by strike in Finland.

Operational return on capital improved 16.7% compared to 13.5% a year ago. Unlike Annica already mentioned, Oulu Mill operational EBITDA breakeven is expected to be reached already in Q3 this year.

That is two quarters ahead of the original expectations when we thought that we'll be there by Q1 next year. Then looking at Packaging Solutions.

Where we can see solid growth, but operational EBIT is challenged by higher raw material costs. Sales increased by 7%.

This is thanks to higher sales in China packaging as well as European corrugated deliveries. Operational EBIT decreased by €4 million and was at €4 million level.

This is because of higher raw material prices and negative FX foreign exchange impact that is not yet fully compensated by higher selling prices. There is about one quarter delay.

New efficiencies impacted operational EBIT also negatively. This is the work we are doing an investment when it comes to biocomposite business formed fiber and Box Inc.

And these have been partly offset by higher volumes. And operational return on capital at 7.5%.

Then looking at Biomaterials. The excellent market conditions and solid performance improved profitability.

Sales increased by 24% and was at €355 million level. This is thanks to higher pulp prices as well as higher delivery, partly due to finish strike in the comparison period Q1 2020 effect in figures.

So it's good to notice that market is quite strong. And currently global inventories are two days below five year average.

Operational EBIT increased by €68 million and was €65 million and this is thanks to higher sales and lower variable costs. Operational return on capital increased 11.2%.

Next looking at our Wood Products. There we have record high quarterly operational EBIT margin.

Sales also increased by 13% to €382 million, thanks to strong demand, especially classic sawn market has continued to be strong. Operational EBIT increased by €34 million and was €52 million.

It is second highest Q1 ever. Higher sales prices and volumes partly offset by higher raw material costs.

And like mentioned also earlier in addition to record high quarter operational EBIT margin this was also highest ever operational return on capital 36.9%. In effect increased 11.3% compared to a year ago.

Then our Forest division where solid operational performance continues and has disciplined the results on top of the gain from the land divestment. Sales increased by 7% to €582 million.

This is thanks to higher wood deliveries in Finland and Baltics. Operational EBIT increased by €82 million, the record high third quarter level of €123 million.

This is including €74 million impact from forest land sales in Sweden as well as solid wood supply performance. Also to -- it's worth to mention that harvesting conditions this interval have excellent and quite optimal for the time.

This is of course good news for the relativity of the wood. Operational return on capital clearly above long-term target and was at 9.9% level.

Then our paper division. Here we expect that plant closures would improve profitability and long-term competitiveness of the division.

Sales decreased by 28% to €428 million. This is due to lower deliveries because of accelerated structural demand it will decline.

Oulu Mill conversion also decreased sales significantly in the paper division. Operational EBIT decreased by €55 million to negative €34 million.

We issue the global paper market challenges higher variable costs were partially offset by lower fixed costs. And comparison period last year was negatively impacted by the strike in Finland.

Other cash flow after investing activities was at negative side 4.6%. Then, taking a look at our long-term financial targets and the development there.

It starts to be now more on green and yellow compared to couple of previous quarters. Dividends and growth on green.

Growth 14.3% in our core growth businesses. Net debt to operational EBITDA 2.3% and net debt to equity at 37%.

Operational return on capital employed at 12% as mentioned earlier slightly below 13% target level. Then look at the divisions.

So looking at the Packaging Material slightly below the targeted 20% level at 16.7%. Also Packaging Solutions at 7.5%.

Biomaterials moving up at 11.2% now. And wood products like said at record level 36.9% clearly higher and above the targeted 20% level.

And ForEx at 9.9% also above the 3.5% level that we’ve set as long-term target. And paper EBITDA that was 7% was now negative at 4.6%.

With that I hand back to you Annica, please.

Thank you, Seppo. And coming back to our outlook, we stay firm in our expectation that this year operational EBIT is expected to be higher than in 2020.

And as you're all aware, this is driven by the recovery in global economy from the pandemic. It's specifically strong in China and in US, but also Europe is catching up.

The demand for our product is healthy except for graphic paper. So this is the backdrop upon which we see that this year will continue to be better than last year.

In Packaging Materials, our Oulu Mill is performing better than we expected. So as we said, the EBITDA breakeven happens already in Q3 before it was Q1 2022.

And as Seppo also mentioned before €10 million to €15 million negative impact of ramp-up costs are expected in quarter 2. And approximately €40 million to €50 million total negative impact of the ramp-up for operational EBIT in 2021.

We will reach design capacity by the end of quarter 2. This is progressing very well.

What we are focusing now is establishing the final steps in the quality that we have. And already now we have had very good feedback from our customers.

So commercialization of the product portfolio will be reached by end of 2021. And as Seppo mentioned before, our €400 million profit protection program is proceeding very, very well and we will conclude this ahead of our plan already by Q2 this year delivering on our target.

Our estimation for our total maintenance impact is €112 million for quarter 2. And in pulp business, we have no significant maintenance shuts during quarter 2.

So to summarize once again, we are getting back on track on delivering on our new financial targets that we set a year ago on our Capital Markets Day. And I'm very proud of the work that we have done.

It's been a combination of our own actions and then a very strong demand for renewable materials in our core businesses. Moving forward now, we will continue our focus on our strategy execution to deliver growth and this is something that the whole organization is focusing on.

So with that I open up for your questions. Yes.

And before we go to the Q&A session, I want to remind all of our audience that please limit your question to two per person. So Roberto, please give the instructions for the Q&A now.

Yes. Thank you very much.

It's Robin Santavirta from Carnegie. Now, the first question I have is related to the consumer Board business of yours.

You have launched price increases in Europe and in Asia I assume. Could you just describe, first of all, the background for those price increases I think you have been quite cautious related to the consumer board the folding boxboard market in Europe before.

Has that -- what has changed? And then related to the Chinese business we have seen ivory board prices increasing quite significantly.

Could you describe what kind of pricing agreements you have in China when it comes to length? So are those mostly still monthly price agreements, or do you have mostly long agreements in China.

So more information on that? Thanks.

Yes. If I start with Europe and Consumer Board as you are all aware we have a mix of different type of contracts from loan contracts are up to five years then we have three years, one year and then shorter contracts.

And how we can increase prices is dependent on when the contracts are kind of reaching their time for renegotiation. So this is always depending on that when we can push prices.

But, of course, whenever we have the possibility and we see that there is a strong demand we pushed price increases. If we look at China the market is different.

It's more shorter-term contracts, especially, in the folding boxboard business and the market is more volatile. On our liquid business that we have in China it's more or less the same setup that we have in Europe where it's more longer contracts.

Thank you. And can I ask what is the relation of the longer contracts and shorter contracts in China?

Is it 50-50 or?

We do not comment on the contractual setup unfortunately. I'm sorry for that.

All right. And then just on the situation in Europe.

Has something changed now when you are launching price increases and before you I guess quite consistently we're talking about lower prices or price pressure in Europe?

I do not recognize the comment that we have seen price pressure in Europe. We have pushed price increases when we have had a strong demand and when the contracts have been up for renegotiation.

And typically then prices in annual cycle they are renegotiated along New Year both sides of the New Year. So -- and that is certainly critical on the timing.

All right. I understand.

The second question I have is related to the pulp business and your dissolving business. What is the background for you now moving out of that business and when will you stop selling or producing dissolving pulp?

As many of you might be aware we have done a strategic review. We did that already last year.

And within that we decided which areas we had the opportunity to be market leaders in and take significant market share where we would see our best opportunities for good margin business. And when we looked at it dissolving pulp or viscose production was not an area where we would be able to have a significant share of the market nor have an upside from a profitability perspective.

Enocell Mill is a swing mill. And the dissolving business is a minor part of our total business in Stora Enso.

And if you look at having a site such as Enocell you want to have less complexity and reduce complexity. And if there is no clear margin upside then this complexity just adds on production costs.

So this is the backdrop of the decision to move out. If we then look at the timing we have customers globally not only in China.

So this is of course something that we gradually will do and hope that by beginning next year we would have moved out most of our business.

I understand. Thank you very much.

Thank you.

Thank you, and good afternoon everyone. And well done clearly on the nice cyclical recovery in Q1.

I've got two separate questions. Firstly, on Wood Products, where you described the demand in Q1 versus Q4 are significantly stronger.

And clearly, you're seeing that the positive motion relation benefits of that in terms of increased record EBITDA. Can you share with us your view on the outlook for demand as it were?

Do you believe it will remain significantly stronger year-over-year throughout calendar 2021? And secondly on a completely different topic.

I appreciate you've had a very busy week. But on Wednesday this week the EU gave us some final determinations on taxonomy and clearly Stora Enso is a major forest manager in Sweden and Finland.

What is your initial take on what taxonomy might mean for Stora Enso in terms of proportion of revenue that might be for example taxonomy aligned? Thank you.

Thank you. If we start with Wood Products we see a healthy demand continuing here.

There are no signals or indications that something would change. There is a restriction in supply.

And there are a lot of projects requiring, for instance, CLT and LVL products that we have. So I expect the demand to continue staying on this level.

And if we then move to taxonomy -- and sorry before moving there it is mainly driven by of course a demand in US and also very strong demand in EU. We are seeing it picking up also in Asia.

And of course, here, we constantly make sure that we choose the projects where we can also deliver and support to our customers. You're all aware of the challenges in the supply chain side, and we have managed really well to be able to both deliver Wood Products to our customers and make sure that we choose the right projects.

And then if we move to taxonomy, our initial take is that we will be able to live up to the expectations in the draft that -- or what we have seen so far. It will mostly impact kind of smaller forest owners by having to declare environment and climate impact assessments and so on.

But this is something that we are already working on -- as a big forest owner. So for us this impact is not going to be substantial.

And of course, as forestry now is classified as green investment it is, of course, positive for us. So we will continue improving our operations in this and to be in line with the requirements.

A deeper analysis of course we will come back to. We've only had the text for a couple of days now.

Thank you, Annica.

Thank you for taking my question. Just going to get back to Consumer Board.

It's been pretty good evidence that, of course, corrugated or containerboard has seen very strong demand from e-commerce. But I suppose you would have in your consumer-board business potentially greater scope for plastic to paper wins.

Are you seeing any of that? And have you seen a sort of greater acceleration of growth in that business that relative to containerboard has been comparatively slow?

That's my first question.

What we can say is that we see that we have a very strong demand from our customers in liquid board and in Consumer Boards. And as I said our capacity is fully sold out.

So, our Skoghall investment is the step that we would like to take if everything is found to be on a good level in the feasibility study to increase our ability to deliver on this -- on the Consumer Board market as well. And then, of course, innovating in the types of barriers and so on is the work that we are doing to support the transition from other materials into Consumer Boards.

But I would say, yes, the trend - the sustainability trends in society are increasing and more and more people are questioning their choices in terms of packaging, what type of packaging can be recycled. So designed for circularity and also designed for lower carbon footprint is going on.

And here our products have superiorly lower carbon footprint than many of the other alternatives out there. So, yes, I believe that we are seeing some of these trends materializing.

Have you in any shape or form started to track any gains of new business from plastics to paper?

That is very difficult to track. It is very, very hard to do that.

But we get increasing kind of questions from customers where they want to move out of many of the most difficult plastic, for instance, the packaging and going into paper for the reasons that I have said. But it's generally, on a high level, it's very difficult to track.

And, of course, if we can have availability of more material to give and have these solutions, that will drive our growth.

Just a follow-up question, what you said on liquid paperboard and being sold out on many things. Of course, one of your customers think they're about to close their own Whakatane Mill in June.

Does this present opportunity for you to speed up the mix improvement in China?

I do not comment on China specifically. But, of course, we are growing together with our customer needs, both in Asia and in Europe and SIG is one of our customers.

Got it. Thank you.

Thank you. A couple of questions.

First on the sawmill market. Now, given the very strong demand and pricing that we see there, have you seen any signs of capacity buildup in that market?

You mean inventory or --

No, I mean --

Capacity exchange, so --

Starting up of new sawmills and building your sawmills to kind of match the higher demand?

Okay. No, I cannot say that this is -- there is always excess capacity in assortment.

You can always add more shifts and so on. This is the type of business where -- when the business is low, you take out shifts and then you increase the shift.

So it's not so much about building new sawmills. It's actually about running the sawmills that are already there to their full capacity, so --

As you know, there are some projects by our competitors, but it's not so significant addition to the market capacity that would disturb the market as such.

No.

Okay. And then, my second question would be on costs, basically on kind of underlying cost, trends that you see now heading into Q2 and the second half of this year.

I guess there are some inflationary pressures in some areas. Some are more stable.

But just wondering what kind of trends do you see now, heading -- going forward in the year? And also related to costs, I think you had a temporary cost saving last year, a quite significant one.

I was just wondering, if you see that coming back now this year, or is it staying away, so to say?

You take it, Seppo.

Thank you. So looking at the cost pressures, they are relatively low still at the moment.

There are some increases when it comes to fiber costs. For instance, recycled fibers or recycled paper prices are going up.

But we have managed to compensate quite where it comes to process containerboard business with the price increases. So that is not hurting the business.

Logistics cost, we all know that there is a challenge with the availability of the containers, which is increasing the cost. But that also is a very small portion of the total cost pool and we have been able to compensate pretty well.

When it comes to Packaging Solutions business, like Annica commented earlier, the cycle is a bit longer, so it takes about a quarter to get a chance to compensate for the higher input costs, but they also be on the right track to be compensated. So I would say that it's relatively well under control at the moment.

When it comes to last year, sort of, temporary savings that we took because of COVID-19, those were more temporary by nature. But like I said, our permanent cost savings and improvements to the protection program are moving ahead well ahead of the plan and that partly compensates for that part from last year.

Okay. Okay.

Right. And then just a follow-up on the underlying cost side.

Is there – what do you see in terms of wood costs pulp wood or sawlog? What are the trends you're seeing there?

There especially in the case of log cost we see that the trend has been going up and the costs are increasing. Pulp wood has been more stable and balancing it somewhat.

Okay. That's clear.

Thank you very much.

Yes. Hi, everyone.

Can you hear me?

Yes.

Perfect. Perfect.

Okay. Hello, there.

So I have a question first. My first question is on Oulu and I appreciate you giving us the detail of where you foresee the EBITDA breakeven.

But could you say something on where you see profits for the Oulu conversion given where prices are today for example?

Well, we cannot comment on that its future outlook. So at the moment, we comment on EBITDA.

Yeah. I remember historically you are mentioning, what kind of sort of indicative EBITDA you would achieve and so on.

But I then look at it – yeah, I do that work myself. I just wanted to see, if you could help me there.

Then I was wondering about the closures that you announced this week Sweden and Finland. I think in that press release, you mentioned that the impact would be €35 million positive from the closure.

Is that based on historical EBITDA for those mills, or how did you come to that number? Is it more an indication, or can you elaborate on that please?

Seppo, will you take that? Are you there?

Can you repeat the question?

Yeah, sure. I'm after sort of the earnings impact from the decision of closing the two paper mills in Sweden and Finland.

And I think you said in the press release that you're indicating an impact of €35 million positive. How did you come to that number?

Was it based on sort of the isolated effect from those two mills, or did you consider sort of indirect effects, or how do you arrive with that number?

It's the inflection of the profitability of those mills at the moment. Like we said, they were loss-making last year they continue to be loss-making also this year.

And in many ways, we are exiting those businesses and volumes and we – it becomes a closer decision after the construction process.

Sure. Because I was thinking that, when this happens the operating rate should be quite healthy in Stora Enso's paper business.

So, my feeling is that the earnings impact will be a lot higher than €35 million. Do you agree on that?

Like I said, this is based on the current performance of those mills. And in some of the grades, if you look at for instance that, at the vehicle order where we are producing mechanical – uncoated mechanical magazine, if we are exiting the market totally and that is not of course tempering any traditions.

And we produce office paper elsewhere, but also there, I think that it depends so much on how the huge development is on the demand and the price development. So that's difficult to comment.

I would rather say that, how much this will impact has to do with how the market develops going forward and what type of capacities that are still on the market. So it is about making sure that, now we have to be on profitable mills, but it is also about the ability to push prices then on the grades.

And yes as we all know, it's tough there.

Yeah. Sure.

But I mean, I think it's a given that your operating rates now will be quite healthy even if demand stays, where it is on these low levels, right?

Yes, that is the point that Nymölla is producing office paper for instance. So, of course, we will try to transfer as much of our customer base as possible and offer them grades within our portfolio.

And Nymölla is producing improved news, and then we have SC paper that's produced in Langerbrugge and Maxau Mill that can be offered to our customers.

Okay. Thank you.

That’s helpful comments. Thank you.

Thank you.

Good afternoon. Thanks for taking my question.

Would you mind just providing a little bit more color on the demand trends you're seeing in pulp? Firstly, what are you seeing from your kind of tissue customers and the graphic paper demand by region that would be helpful.

And then, also on containerboard, what are you seeing there from the demand in markets? And also, would you mind commenting on where inventory levels are in the containerboard market at the moment?

Thank you.

If we look at the pulp side, as I said, we see a healthy demand increase for this year, 3% to 4%. It's mainly driven by China.

Long-term, it's 2%. From the end-use perspective, of course, the graphical side, there it is about the paying capabilities of paper customers that kind of impact that and the paper mills ability to drive through price increases and stay running despite the increased pulp prices.

If we look at the hygiene and other end uses, there I think the ability to pass on is quite good. So, for us, we have about in our mix a much smaller part in the graphical side approximately -- or just about 10% of our sales are to graphic uses and the rest is through other end users, which are developing quite good.

Then remind me of the second part of your question, you're saying containerboards or?

And then, on containerboard, I'm just wondering if you can give some perspective on where you're seeing the demand either by region or end markets industrial consumer? And also, where inventory levels are in containerboard?

If we look at the containerboard business in terms of industrial, we see the industrial business is picking up and that has been going on in China for quite some time. Europe is coming now.

So, the end-use for containerboards there is picking up. And also, e-commerce and so on, has been strong throughout the pandemic and that will continue also afterwards to change behaviors.

So, we see a healthy demand going forward both in Europe and in Asia. Yes.

And then inventory levels, I'll have to check there with you Ulla, if you can support. I can't remember right now how the inventory levels are for containerboard.

Well, I don't think there is anything sort of meaningful to say on that, because there is a good demand healthy demand at the moment and we are more or less sold out except for Oulu. So, apparently the inventories are not too high, because the demand seems to be going so strongly at the moment.

In the case of containerboard, there are no statistics available like for pulp in the case of inventory levels globally.

Thank you.

Yes. Good afternoon.

Thanks for taking the questions. Obviously, it would be interesting to hear your take.

What is your -- what are the drivers for this de-deprecation in pulp and what you are seeing? You refer to the suppliers' inventories that they are a little bit below the kind of average.

But is there anything you could sort of -- how you could comment on the buyer's inventories in the sort of papermaking side? And what sort of signals you are seeing in the pulp market?

Also, maybe related to that, there's been some comments that maybe the European demand for pulp is not as such so strong, but the prices have been more -- being driven up by the premium in the Chinese market. But what is your take on the kind of European demand for pulp these days?

Yes. It is the Chinese market that is driving the pulp market and that has been the case for many years.

So, in Europe, there is a relative strong demand. But as I said the paying capability of the graphical side is deciding kind of on an overall global level, how the demand develops.

And as you are all aware the prices are kind of getting close to the higher levels that they were what was it roughly a year ago or something like that. And that means that, what we see ahead of us is that the continued growth in global economy that is what's fueling the growth in pulp side.

So as I said, I expect between 3% to 4% demand increase globally mainly driven by China. So that is what we can say at this point.

Yes. Fair enough.

And my second question will be regarding the -- are you going to -- when do you potentially calibrate your guidance because obviously it sounds a little bit undemanding to say the least. But I mean is there some sort of -- do you envisage that you would be calibrating it as the year goes?

This is the guidance we gave on kind of we do not go into more specific objectives on the guidance.

Yep, okay. Thank you.

Thank you very much. First off, on the inflation that we're seeing on paper for recycling both ONP and OCC.

I just wanted to get your view if you think that this is solely kind of a transitory effect from the lockdowns or perhaps if it could also be a structural trend here on collection issues as getting more and more packaging going by the e-commerce channel. And just wondered if you have any kind of data on kind of how collection or recycling rates have changed in Europe?

And then how you see your responsibility -- and overall responsibility in the industry to make sure that circularity is still very high within paper products? That was my first question.

And then I have a technical follow-up.

Yes. I'll start with the last question that you asked, we see our responsibility first of all as a company and also as an industry of being very strong in supporting the buildup of good collection systems for all fiber materials.

We see the trend for circularity is increasing. And of course having a renewable material that is also circular and collected is something that we are working very hard with each country in Europe to make sure that that becomes realized.

And we have had a lot of discussions with EU on the needs of standardization of the collection systems in order to ensure that as much of the material that is out there is actually being collected and recycled. And I can just mention one of the collaboration projects that we have with one of our customers with our mill in Ostroleka and also our trials that we have done in Langerbrugge, where we take back packaging and put it back into our operations from the liquid side and from the foodservice side where the collection rates have historically been quite low.

So I think yes this is going to have to develop and stabilization of the collection systems long-term is going to take place in Europe and we are having a lot of discussions on that with EU. And then if we look short-term one of the, things that's, happening has been as you mentioned they're lockdowns that has impacted people's kind of ability to return their packaging in the degree that we have had before.

And also the trade flows between countries of material has been impacted. That is a short-term situation.

And I expect as lockdowns are eased, and that the collection rates will increase once again. Long-term I do see that more and more products are going in the direction that there needs to be a part of the product coming from recycled.

And that will drive of course the competition for PFR, but not to a degree that it cannot be handled by the fresh fiber kind of intake in the system.

Thank you. Yes, another question is just on, kind of your improved guidance on Oulu now pulling forward the EBITDA breakeven.

I just noticed if I got this right the EBIT increase that you're guiding for is only €5 million. And that it's not really clear to me, why the positive effect would not be larger.

So, I guess if you can help me a bit on the math there?

If you look at the guidance, we mentioned that, the approximate €10 million to €50 million negative impact would be there on operational EBIT for Q2 and approximately €40 million to €50 million for full year. The depreciation is roughly €30 million for Oulu Mill this year.

So that might help you bit on that. But of course, it is not a line here when it comes to ramp up and operations.

And I think the main thing is that, we are now confident and like we communicated that we are reaching or expect to reach breakeven on EBITDA already in Q3, instead of Q1 next year. So it is moving ahead, with good speed and also supported by the market.

Thank you.

Thank you.

Okay. Thank you, Roberto.

And thank you everyone for listening in for our Q1, 2021 results. And I will now hand it over to Annica, for final words of our call today.

Yes. Thanks everyone.

We have delivered a solid result on the backdrop of a good performance, good cost control and strong demand and market recovery. And we have seen solid growth in our growth businesses, which also is a testimony that our strategy is moving in the right direction.

And our focus is now executing on the plans that we have announced and come back to you in the coming quarters. I wish you all a nice weekend.

Thank you.