Stora Enso Oyj

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00:39 Thank you [Indiscernible]. And good afternoon to everyone.

As you said, this is Stora Enso Q3 twenty twenty one earnings conference call. It will be presented by our CEO Annica Bresky and our CFO Seppo Parvi, after that we will have a Q&A session.

So, Annica, please go ahead.

01:00 Thank you Ulla and good afternoon to everyone. I'm very pleased to be here today and present yet another quarter with robust growth and profitability.

Our strategic transformation program is progressing really well, and we have a powerful foundation for growth going forward. We have seen that we have been delivering solid results and many divisions have had record high deliveries and results this quarter and our top line growth in our key focused areas, Packaging Materials, Wood Product and Biomaterials have been very strong.

Also our forest assets are yielding very well. 01:45 We also today announced an investment and expansion of the attractive end user segments of packaging to accelerate our growth for sustainable packaging underpinned by a very healthy demand in that sector.

And we are in a strong position to end this year on a high level and I'm very happy for the strong performance that we have shown this quarter considering the market conditions. 02:16 So moving over now to operational EBIT and our results, a few highlights, our profits are trending up so we more than doubled our results compared than last year.

And our sales have increased by twenty four percent year-on-year excluding paper almost thirty three percent. Our operational return on capital employed excluding Forest is above our long-term target of thirteen percent, reaching twenty percent level.

So all in all, we are trending in the right direction. 02:58 Moving on now to the impact of some of the input cost that we have had in logistics energy fixed costs and other variable costs as well as fiber.

You can see here that we have been able to offset that impact very well through the quarter through our increased sales prices and improved product mix. So that is all in all, building up our results for this quarter.

03:26 On our strategy execution, we are taking decisive action to grow our packaging position following a very strong demand in sustainable packaging. The long trend here is very favourable.

Our pilot production of Lignode is progressing according to plan. We are here evaluating the different options of partners that we have to be able to scale up are and the industrialize this opportunity.

03:56 With the restructurings that we have done the latest quarter, we will move towards an impact of totally ten percent of total sales after the closing of Veitsiluoto and Kvarnsveden sites is terminated and we did that at the end of this quarter. We also divested our Sachsen Paper Mill last quarter.

So all in all, paper business will have a very small impact on our overall sales and results going forward. 04:30 I'm also happy to say that our remaining business in paper has an improved position on the market.

It is competitive and we can see a turning around. We also see that due to the actions that we have taken, we and other players on the market, the balance in supply demand is more favourable for paper.

And we're also implementing a decentralized operating model which will I’ll come back to in a few minutes. 05:03 Looking now at one of our key areas of growth sustainable packaging.

We today announced that we want to invest close to hundred million euro at our Skoghall mill in Western Sweden to enable and accelerate growth in high margin business. This is supporting the ambitions that our customers have and Skoghall site in Sweden is a key strategic asset for us with a very competitive position at a global quality leader.

And the segments that we are aiming for is liquid packaging and other consumer board grades, which see a long-term strong trend in sustainability that we want to capture. 05:47 The debottlenecking of the existing production line will be completed by second half twenty twenty three and it would yield about one hundred thousand tonnes of additional board grades to the market.

If you remember, we initially communicated a total investment level of eight hundred million to eight fifty million euro based on us also doing a pulp investment, but we have decided not to proceed with that at this stage. 06:19 Since our ramp up in Oulu mill in Finland has been very successful, we delivered EBITDA breakeven three quarters ahead of the plan and we've already reached the quality demands on the market.

We want to capture the strong growth in those – in the packaging board grades and therefore, we have decided to proceed with a review of the second idle line that we have in Oulu. And this is to capture the opportunities we see on the market and drive market share in packaging board grades.

06:56 Coming back now to our decentralized operating model, We want to strengthen the execution of the strategy and achieve customer intimacy. Our different businesses have different roles some our growth, some our value creating and to empower them and get a more agile and a quick decision making closer to the market.

We are driving an organization where we have focused functions, focusing on scale areas across the company, and then we drive performance culture through our business specific processes and closer to customer decision-making. 07:44 We have also communicated today that we have set ambitious targets for two thirty and the goal that by two fifty we want to be one hundred regenerative.

As you know, EU Commission has a very ambitious climate agenda and we fully support that, this is an opportunity to transition to a low carbon society and we as long-term owners of sustainably managed for us and having renewable circular products. We are part of the solution to reach these ambitious target.

By developing products that not only reduce harm, but also are positive from biodiversity circular economy and CO2 footprint. We are taking the lead in this area.

08:37 And if we look at what that actually means in concrete steps up to two thirty, it means that we align our CO2 footprint through Science-Based Targets with the one point five degree scenario. We do that by reducing the CO2 emissions, not only in our own operations, but also with our partners and suppliers.

We look at our products and design them for circularity and we want to have circular design guidelines by twenty twenty five and one hundred percent of our products should be recyclable by two thirty. 09:18 And in the biodiversity area, we have an detailed action plan towards twenty thirty to achieve restoration in biodiversity and we do that by having fifteen indicators on ecosystem, landscape and species level, we will transparently communicate our indication to show – indicators to show progress in these different areas and have an outside in perspective and a science based approach to this.

And through these three major steps we want to take the lead and be leading in the sustainability area also going forward. 10:02 And before I hand over now to Seppo to give you the details of the financials, I guess you're all aware that the European Commission has conducted an unannounced inspection at several member states and premises of several companies acted in the wood pulp sector.

Stora Enso was one of these companies and we had an inspection at our headquarters in Kanavaranta in Finland last week. 10:31 We are fully cooperating with the authorities and sharing all information, enabling this inspection and every possible way.

EU commission carry out such inspection, but that does not mean that the companies are guilty of anticompetitive behavior or that this is a prejudgment of outcome in anyway. We are under strict confidentiality, so we can unfortunately not share any more details on the proceedings of this investigation.

And I just want to stress that as a company, we have zero tolerance to antitrust and anticompetitive behavior. Having processes in our company and making sure that our employees understand what this means through constant education.

11:22 And with that, I would like to hand over to Seppo to take you through the financials. Seppo, over to you.

11:28. Thank you, Annica.

And I start with financial key figures from the report that we have published today. Sales for the quarter grew up twenty four percent year-on-year and reached two billion five hundred seventy seven million euros.

Operational EBIT more than doubled and was four hundred and ten million euros and earnings per share thirty eight euros. Return on capital input excluding forest was clearly about targeted thirteen percent level reaching twenty percent.

We continue to generate good strong cash flow from operations and we had in Q3 this year four hundred eighty five million euros operated cash flow. This is thanks to good profitability and good working capital management.

Also our debt has been coming down as well as our EBITDA going up and thanks to that our net debt operational EBITDA is down to one point for at end of Q3 this year. 12:32 Then moving to divisions and I started with packaging materials where we had excellent quarter.

Sales were up twenty eight percent year-on-year, reaching all time five. This was driven by implied higher deliveries, many thanks to ramp up of production at Oulu and higher prices as communicated earlier Oulu ramp-up is moving ahead in good order, very well and ahead of the plan as announced earlier.

13:02 Operational EBIT was up thirty seven percent year-on-year and this is also all-time high hundred fifty three million euros. This is thanks to very strong containerboard performance as well as good performance at the Oulu kraftliner mill.

Higher sales partly offset by higher variable costs. Operational return on capital was at nineteen point five percent and this is close to long-term target.

Here I want to remind that they even though that Oulu is ramping up there and performing financially better than expected. It is still at the ramp-up phase and the full effect is obviously in the balance sheet.

So going forward, data improvement should be visible here when it comes to return on capital. 13:50 Then moving to packaging solutions and there we can see that strong growth continues.

Sales were up twenty four percent year-on-year reaching one hundred eighty million euros. Sales were driven by prices as well as increased sales in innovation and services.

And these are following steep increases in containerboard raw material prices earlier during the year and those are still going up. 14:17 Operational EBIT was at the same level year-on-year, but we are catching up with the price increases to close the gap between higher containerboard prices and our overall selling prices.

I think it's visible as improved margins in corrugated business. This was somewhat offset by increased investment in the new businesses that we are developing and higher fixed costs relating to that.

Operational return on capital was at twelve point six percent but this is still below the long-term target. 14:50 In Biomaterials, we have record the quarter despite some global logistics challenges that we are also facing in here.

Sales were up forty percent year-on-year, this was record high third quarter. We can see clearly higher prices currently and European markets has been holding quite well.

15:13 Partly good sales were offset by slightly lower deliveries due to global logistics disturbances and we saw some volumes moving from third quarter to Q4. Operational EBIT was a hundred eleven as it was up hundred eleven million euros at hundred and eighteen million euros and that is second highest third quarter.

These were partly – positive sales prices partly offset by higher maintenance costs due to change maintenance schedule. And operational return on capital was at nineteen point six percent clearly at above long-term target.

15:55 In wood products, we also all-time high results. Sales go up forty eight percent, reaching five hundred and three million euros and prices will record high level.

This was slightly lower classic sawn deliveries during the quarter. Operational EBIT was significantly up year-on-year two hundred and twenty eight percent, this also all-time high at hundred twenty three million euros.

16:24 We had extraordinary high profitability due to record high prices in the business. This was partly offset by higher raw material and production costs.

And return on capital was at seventy six point five percent, which is significantly over the long-term target that we set for this business. 16:44 Then moving to Forest division where good and stable financial performance continues.

Sales were up nineteen percent year-on-year was at record high level for the quarter and this was driven part higher deliveries especially in Sweden and Finland as well as increased wood prices. Operational EBIT was up twenty one percent year-on-year also at the record high third quarter level.

This is thanks to higher margins in all forest assets and forest operations. 17:17 Group's forest assets remained at seven point four billion euro level, so no major change there this quarter.

But here I want to highlight that in Q2 and Q4 is when we make, the evaluation of the assets so that is coming in the next quarter. Operational return on capital was three point nine percent, that this is also above the long-term target.

17:43 Then paper division, the result still impacted by restructuring and high input posts, but we can now see that remaining business is turning around. Sales were down six percent year-on-year at four hundred forty one million euros and this is mainly due to structural changes in the business portfolio relating mainly to Oulu and Veitsiluoto paper mills.

18:07 Positive is that sales from remaining business increased by eighty five million euros mainly due to higher deliveries. Operating EBIT was down and was at thirty one million euros.

This is driven quite clearly higher input costs, the energy, fiber and logistics as well as lower prices. We also had some additional operational costs relating to closed paper mills, that's mainly Veitsiluoto and Kvarnsveden [Indiscernible].

Cash flow to sales after investments was negative standpoint at seven percent. 18:44 Then, let's take look at the long-term to financial targets and their development.

First, if you look at that group long-term financial targets, as you can see across the traffic lights, they all are on green when it comes especially our debt metrics, net debt to operational EBITDA and net debt to equity, we are clearly within the maximum limits sip and operational return on capital excluding forest was at twenty percent, so clearly also above thirteen percent targeted level and clearly up from seven point eight percent a year ago. 19:17 Look at the divisions, there are Biomaterials, Wood Products and Forests, reaching the target have been above the target level and packaging materials, only a bit short of the twenty percent targeted level and here I want to remind that Oulu is still in the ramp-up phase.

19:36 And paper at negative seven point seven versus compared to the targeted seven percent level. And Packaging Solutions, where we have target of twenty five percent, they are still working on price increases to close the capital higher containerboard prices and our selling prices and that's why we are still at twelve point six percent level when it comes to return on capital.

20:01 With this over to you, Annica.

20:03 Thank you, Seppo. And taking now I look at the outlook.

We reiterate our outlook we see that we will end the note, and the year on a high note global economic activity is continuing to be on a healthy level and favoring our products. We have a strong demand for our key focused areas and our businesses, and we have a full order book for Q4.

We continue to work with what we can impact to mitigate input costs and make sure that we can continue to deliver to our customers despite the logistics challenges around the world. And I think we have proven that with the strong quarter three that we are able to do that.

So all in all, I see that the end of the year is finishing on a high note. 20:58 So to close up, I'm very pleased with this quarter.

It is actually the best quarter we have had since two thousand and one. We are proceeding with high pace in our strategic transformation program.

We continue to see strong underlying demand and good growth for our key focused areas. We are proceeding with investments in high margin areas to accelerate our growth.

And I think that we see the end of the year with a strong order book and a healthy demand to end on a high note. 21:36 So with that, I hand back to you Ulla and for the Q&A session.

21:40 Thank you, Annica. Yes, we are starting the Q&A session now and I would like to remind you that please limit your questions to two.

We have usually a lot of interest and therefore, we want to give a chance to as many people as possible to ask the questions. So, [Indiscernible] please give the instructions for the Q&A session.

22:24 Thank you and good afternoon everyone. I've got two questions, if I may.

Firstly on, I suppose, topic of energy costs. I know from the very detailed investor kit that Ulla updates every quarter that energy was approximately six percent of costs in twenty twenty.

Clearly, we are in inflationary world, can you give us some help as to how we should think about energy costs going forward not just in Q4 but twenty twenty two hedging that maybe in place. And I'm thinking particularly in both Packaging Material and Paper Divisions.

Clearly, it is probably less than of an issue in Biomaterials. 23:00 And then the second question is on wood prices.

Clearly, in your bridge, you have one hundred and fifty five million euros of extra fiber cost year-over-year and now we're all familiar with rising OCC costs. But looking at your Forest revenues, it would appear like wood prices were up something like nine percent to ten percent year-over-year.

Is that what you actually – is that the actual fact as it were? Because that would seem to be slightly higher than the previous inflation that you've seen in wood prices in recent quarters?

Thank you.

23:32 Okay. If I start with the energy costs.

So I think, first of all, I want to remind that our energy self-sufficiency rate is relatively high. If you look at the total Group, it is something like sixty seven percent and in Finland alone it is ninety percent, thanks to our ownership in PVO, where we get the energy at cost.

When it comes to our hedging policy, we hedge about eighty percent of a current calendar year and seventy percent of the following. And in the coming years, fifty percent and thirty percent.

So in that sense, we are in a relatively good position at Group level. But obviously, that can be a bit different for divisions as we are then internally rising electricity at the market price obviously then we are moving it [Indiscernible].

24:19 The energy cost development with the rest of the year, we do not expect any serious increases any more during the Q4. And obviously next year, we come back later and we give further guidance for the coming year, but that we are not doing today.

But for the rest of the year, that is not very much higher than what we are seeing so far. On the wood costs side, they are, in Q3, higher compared to a year ago.

And we expect costs to increase also in the coming quarter compared to previous quarter. Saw log costs have been clearly higher year-on-year.

That has been the case since the beginning of the year, while pulpwood costs are expected and have been more stable and that has been balancing the total costs.

25:08 Great. Thank you, Seppi.

25:26 Thank you very much. And a good day to everyone.

My first question is on capital allocation and your decision not to go ahead with a big investment in Skoghall and rather focus on Oulu and my question is well, if you could talk a bit about the background for that, was that is the market, strength that has caused back that altered focus away from pulp and increasingly to paperboard? And secondly, given that you have done work in the previous feasibility study on the older site.

Could you talk us through the timeline and how soon would we potentially be in CapEx phase and start up with that second machine at Oulu and maybe also in connection to that, if you could share some thoughts what that would imply in terms of CapEx for twenty twenty two potentially?

26:32 Okay? I can start with the market side and say that we have for a long time seen the sustainability trend in packaging really picking up and this is the chosen growth areas that we have that we have communicated also earlier that will drive significant growth for the company.

So the decision to prioritize to accelerate packaging growth, both in Oulu and Skoghall, in sense that in Skoghall through the big revision we made, we saw that we wanted to debottleneck one line and grow with our customers within liquid and food packaging. And in Oulu, we decided to do the pre-feasibility study earlier than we had expected.

If you remember, we have two machine lines in Oulu, we chose to start up one and convert one first that conversion and the ramp up has gone better than we expected, both in terms of quality and reaching design capacity of the Oulu line. So that gave us the confidence to proceed quicker than expected with that and reprioritize our our CapEx allocation from the pulp mill to getting board on the market quicker.

27:52 And in terms of pulp, we are long in pulp already as a company. So this reprioritization made sense from that perspective.

If we look then at how quickly we get the board to the market, it is for Skoghall the second half of twenty twenty three and for Oulu provided that the pre-feasibility studies ending beginning of first quarter. Next year, we will come back with more details on what type of product mix we will be running and also how quickly it can be converted in the beginning of next year.

28:34 Yeah. Then about the capital expenditure figures.

So, I think first of all, in the case of Oulu, like Annica said, we have to remember that this is pre-feasibility study that we are starting now, and we expect to be ready with that early next year and after that phase, we are able to comment more on phasing off the CapEx as well as total CapEx figures and that obviously still depend on end product and once we also more clear on potential infrastructure related needs, etcetera. So that's something we have to come back to.

29:06 Then with Skoghall investment is at ninety seven million euros we announced today typically first year when you start the projects, the capital expenditure is not so high. You make the down payments at etcetera us year after second year is that when the major part of the CapEx takes place and typically that we have the last payments then from the project after the testing and an acceptance of the machinery doing that has been down.

29:34 So, no major effect seen for the twenty two CapEx from that. Typically as you know, our CapEx has been say around six hundred million euros excluding any major development projects and this year, we are guiding say, say around seven hundred as you might remember.

So that's something we come back to obviously when we are coming in Q4 with both the new annual guidance on CapEx, but currently we don’t have any sort of major things in the pipeline on top of what we have announced already now, but that's sounds we have to come back. But no major that much Skoghall products.

30:14 But I mean, even in a fast – in the fast-paced process. It's hard to see that there would be much CapEx at Oulu in twenty twenty two and not much [Indiscernible] either.

So is it fair to say that twenty twenty two will have clearly less CapEx than twenty twenty one where you have a midpoint of guidance of seven hundred million euros?

30:39 I said that maybe you come back with more clear guidance in Q4 reporting. So that's when even commented.

But like I said, we don't have any major project with pipeline the coming year as such where we would have cash outflow.

30:54 Okay. Thanks.

And then maybe just to check you didn't mention much on the Lignode project in your report. Could you just give us a quick update if there is anything to say and what's the sequence of events, what's the potential news flow in the next months and quarters, please?

31:25 Yes, I can comment on that. So what we are doing now is that we are – we have verified the technical parameters of the product in Sunila Mill.

So that project is proceeding very well. We are looking for the partners and having those discussions signing up our collaboration partners and will come back when we have more transparency on that.

And then it is about the setup of the legal structure that we are considering to enable a quick ramp up as possible to industrialize this. So, in the coming quarters, we will be able to disclose more information as we proceed with those two key focused areas.

32:14 Great. Thank you very much.

32:27 Yes. Hello, everyone.

This is Johannes. Can you hear me.

32:29 Yes.

32:31 Perfect, perfect. Yes.

So, if you could help us a little bit understand the big moving parts in the fourth quarter because it's such a moving part market or volatile and so forth market. You were successful in mitigating the higher input cost in the third quarter.

I mean, the picture on page five in the presentation in case is very useful. I mean, how should we see this in the fourth quarter?

Should we expect less cost inflation quarter-over-quarter? Would you say then in the third quarter?

And what you're feeling about mitigating or even get more compensate – compensation on the sales price. Could you talk about that?

Thanks.

33:14 So, if I start with the market, of course, we constantly review the contracts we have with our customers and depending where we are in the cycle of contract negotiations, we are also able, of course to mitigate input costs as the contracts are being renewed. Different businesses have different cycles that we are quicker instance containerboard in compensating, more stable in consumer boards where we have a longer contract period and you have seen even though that is the case, consumer board has delivered really well in quarter three and has a stable outlook also for the coming quarters.

If we look at Wood Products, we have a split between the sawn area where prices typically move up and down and quicker but having building solutions as part of our business, we have more stability and long-term contracts with customers. So, if we look at pulp, here it's about how efficient we can run our production units and supplier customers in the logistics.

34:26 So, all in all, I see that I think Q3 is a good testimony that we are able to mitigate a cost and work with what we can impact. If you remember, we had our profit protection program and that we finished some year ago, making sure that we have a sound cost structure as a fixed cost structure as well, so…

34:53 Yes.

34:54 Then maybe just adding on cost inflation so if look at the key cost drivers or input cost, like energy, wood cost, chemicals. In Q4 additional cost coming from close inflation day, it's been in the case of each item, we are talking about some single millions effect for the remaining year.

It may be good to remind also that, as I mentioned, so we have some plans audience for Q3 to Q4 and that obviously is also positive for the coming quarter and that was logistics issues that many other company are based. So that helps also going forward.

35:41 Yes.

35:42 And suppliers, of course, for input materials like chemicals and so on, we also have a kind of long contract that somehow help us in the situation when they are quick moves.

35:55 Yes, okay, very helpful comments. Thank for that.

Can I just follow-up on wood. I mean it's kind of difficult to know for us sitting on the outside to understand how how the pricing will develop short term, maybe even more complicated for twenty twenty two.

But what you're feeling here, what you hearing that discussion in terms of price pressure on these extremely favorable pricing?

36:19 I think one of the things to remember is that through our ownership of Tornator and our own forests, we are able to balance also by using our own forest to drive wood to our operations. So this is one of the areas where we can impact of course, how much we source from other forest owners and how much we choose in our own forest.

36:45 Yes. And during this year, harvesting conditions have been quite good.

So we are not had any issues with that. Now obviously, when autumn and winter is coming and now it's getting wet.

So then the key is that how fast the ground gets frozen so that we can continue to harvest also during the winter time and that will be, I think critical for the coming months how the wood price will develop.

37:10 Okay. That's helpful.

But I was actually thinking about the pricing for wood products and sawn goods for the do-it-yourself markets and the construction and builders etcetera what you see there in terms of pricing at the moment?

37:25 What we have seen in the current quarter is that the prices of U. S.

Market has gone down, but that markets of Europe, Australia and overseas, Japan have had a very healthy demand and quite stable situation so far and as I tried to explain, we have chosen a mix of customers that gives us more stability in the long run. This is favorable when there are big moves of the prices up and down in the sawn goods.

And our building solutions part of the business is giving that stability long run. We have six hundred projects ongoing in the building solutions part.

So, staying with the customers that we have and not being opportunistic when the prices move on the markets and having a good market mix that I think is key to deliver good results in Wood Products.

38:28 Okay, Thanks.

38:43 Thank you. Couple tidy up questions.

When you looking at Skoghall and Oulu, two investments, Skoghall of course you provided the pulp project. I'm just thinking about the two mills, will you have sufficient integrated pulp at both sides, post these sort of expansionary or potentially at Oulu expansionary investment.

And I appreciate you didn’t call us specifics in terms of the grades you plan to produce at all on the second machine. But would that be back to where you, I guess the first pre-feasibility study, which was some sort of CUK grade.

Is that what you are contemplating? That was my first question if you can address that first, please?

39:29 Yes. What we see is that both sides are highly competitive.

So from that perspective, we will be able to have a very competitive production even though Skoghall is not fully integrated or Oulu is not fully integrated. So, we have taken that of course into account that we have internal pulp in our business as you are aware since we are long in pulp.

So that helps us. Both of the sites are positioned in areas where we have good wood availability and the closure of Veitsiluoto in Northern Finland, enables us to direct the region that would support project.

Then the second question, it’s fine.

40:15 Which grade.

40:18 Oh, which grade. Yes.

Of course we want to have machine that is flexible, but the exact product mix we would need to come back to and this is what we are contemplating now looking at kind of the full product portfolio that we have in consumer board and containerboard, what makes most sense. So bear with us one quarter more we will come back and beginning of next year with a more precise plan.

40:44 Okay. And my second question comes back to what you talked about sustainable packaging you're seeing strong demand.

Could you help us understand what that means in your portfolio? And how that contributes to your growth and in what areas?

41:03 So if we look at the strategy, packaging as a whole, both Packaging Solutions and Packaging Materials is what going to drive the significant growth agenda that we have. So twenty five percent of our growth is expected to come from that area.

So this is just the steps that we are taking now in a very structured way to make sure that can grow with our customers liquid is growing well. Containerboard board is growing well, driven by e-commerce for instance and long-term sustainability drivers where a lot of products in plastics are being replaced by paper packaging.

So, we are taking advantage of that.

41:51 All right. Thank you very much.

42:04 Okay. Thanks for taking my question.

The first one following up on the capital allocation point that was asked earlier I mean, if I look into next year with not doing Skoghall, your CapEx is likely going to be lower. If I look at where consensus is and that the implication for your net debt EBITDA next year, if consensus is right then you'll be approaching one times net debt EBITDA.

So it brings up the question. What are you going to do with the higher free cash flow?

How are you thinking about that? Is that going to be your dividend policy?

Is it going to be potentially some M&A or other capital returns to shareholders if you just talk about how you think about that before you go into further CapEx into twenty three, twenty four, twenty five if you approve Oulu and your Lignode projects is the first question? 42:58 And the second question is around demand, Annica, you made the comment that your order books into the fourth quarter are good.

Are you referring to the packaging materials or the Wood Products, just a little bit more color around kind of the near-term order book and demand environment? Thank you.

43:15 Yes I can start with the market side. We are fully booked actually on all our products.

So it's a very good situation that we see on the market. And as I said also, the paper business has a much better balance.

So also there the competitive remaining mills that we have left are. So, I think that it's a healthy market environment for us generally.

And then if we look at the Capex allocation, of course, the ramp up of Lignode is something that we are doing the coming years, and we are looking for partners to share that investment with us. But it is part of our growth agenda.

In packaging, we have these two steps that we are looking at today and we have announced today and then of course, as you very correctly said, we have taken down our net debt. This opens up opportunities for acquisitions in wood products and in packaging solutions.

There are targets that we are looking at a long-term. And this is part now of our transformation as we have communicated before that we are moving from a phase of restructuring into a growth base and of course, M&A is a part of that.

If there are attractive opportunities out there, we will be in a position to utilize that opportunity.

44:43 Would buybacks fall under the capital allocation agenda or not so much at this stage if there were no attractive M&A opportunities that you execute on next year?

44:54 Seppo here. It's true like you said at our balance sheet is getting stronger and our net debt to EBITDA ratio has clearly improved and we believe that we are getting continue to improve going forward.

Thanks to good cash flow and improved profitability. Where it comes to, I think you referred to potentially higher dividends or share buyback programs etcetera.

But I think those are things out to the border and shareholders to decide and not something that we, as management comment.

45:26 Okay. Thank you.

45:42 I remember when you talked about it first, I think there was one motive was that will be kind of renewing the pulp lines and that there was a little bit of maintenance nature in that way, but do you see that that will come relevant at some stage now in any case if you notice not to sort of address the pulp line? That is my first question, please.

46:07 Yes. Of course, pulp mills are maintained every year.

The annual shuts that we have is to maintain the pulp mill. So from that perspective, it is not something that we see in the immediate future.

We take care of our pulp mills to make sure that they are in good shape. What we do want to do now is because of the quicker ramp-up of Oulu, we could push forward a conversion that was further ahead in our plan, and we would not have done the second line of Oulu until much later.

So this is – we take advantage of that opportunity now.

46:49 Okay. So there is no urgent need or near-term need for modernisation there at Skoghall, that is how I should understand it.

That is great. Well, if I have another question left, let us see which one I choose.

Maybe on the packaging board, deliveries were just a little bit down in the quarter compared to Q2, practically unchanged. But then you wrote that demand was weaker in, I think, recycled fibre-based grades.

But what was behind that comment? There was the genuine weakness or was seasonality or how would you sort of characterise that comment in the report?

47:35 In the recycled side, we see a strong demand. So I do not recognise that there was a weak demand.

And if we look at the consumer board, if you compare quarter-on-quarter, you have to remember that Q3 is a maintenance quarter. So therefore, the deliveries cannot be directly compared with Q2.

And also Q4 is generally a maintenance quarter for many of our pulp mills and seasonally, a weaker quarter.

48:09 We refer to strong containerboard performance actually in the report, but I will check.

48:16 Yes. So [Multiple Speakers] we see a very strong demand for both kraftliner and testliner on all our markets.

48:28 Exactly. I just wanted to double confirm.

I was just looking at this sort of result from my demand Q3 versus Q2. That's why you said that the result is fiber based about containerboard demand was a bit weaker, but that should be purely understood as seasonal factors.

48:45 seasonality effect.

48:48 Yes, okay. Okay.

Very good. Thank you.

49:06 Logistic challenges and some of the volumes [Technical Difficulty].

49:16 No, you are braking up Lars. We cannot hear you.

49:27 Hi, Good afternoon. I have two questions from my side.

The first one and both of them are on the outlook for your business. The first one is on sawn timber operations.

And you mentioned weaker pricing and demand in North America, but pretty good in sort of Europe and Asia. And I was wondering if you could comment also on sort of some of the key export markets such as the UK and North Africa.

What are you seeing in terms of momentum for prices there? That was my first question.

And my second question is on market pulp. We've had some news of paper and tissue producers reducing our closing production due to high energy prices or lack of electricity in in some regions, are you seeing any impact of this on demand for your pulp?

So two questions.

50:29 Yes, if I can start with the pulp. In China, there have been operations that have been curtailed.

Our own operations have not been curtailed anywhere, neither in pulp nor in other products in China. And if we look at our own portfolio, we have transformed ourselves out of the graphic paper end usages in pulp.

So we are in the areas of packaging and the hygiene and specialties. So there we see a strong demand.

And as I said, we are fully booked for the coming quarter. And if we then come back to sawn timber, North Africa is not a big market for us.

We are focusing on Asian markets, Australia, and Japan, because that is where we see building solutions, for instance, driving a lot of projects. I can mention Singapore, for instance, wanting to be the world's most sustainable city and building their whole university area with CLT wood, for instance.

51:42 We also see in Europe, that EU is taking very decisive action in promoting building with wood as part of the solution for the construction industries. Construction is today forty percent on CO2 footprint globally and here, replacing other products or other materials with wood to the extent that it is something that is favoured in the EU strategies that are being promoted.

So from that perspective, Europe has stayed strong. We also know that globally there is a backlog of renovation and infrastructure projects that needs to be done and building on wood is such a small part of the total construction market.

It is only about ten percent totally of the construction market. So therefore, even though the construction market might move, we are still able to capture market share.

52:53 Okay. So, you're not seeing any signs of price weakness outside of North America?

53:01 Well, I think we have seen peak prices that as we said, it's been an exceptional quarter this quarter three. And probably, there are going to be spill-over effect.

But as said, our pipeline is strong and we think we will and the rest of the year on high note also on wood products and then we would need to come back with guidance for next year at next quarterly before.

53:28 I mean, it is important to emphasise that we have a significant share coming from building solutions and that is obviously balancing our portfolio compared to some other participants in the market.

53:40 Sorry. What share is that that roughly in terms of the operating profit?

53:47 In our comment share of different business of operating profit. Based roughly one third of the total sales.

53:57 Thank you. Understood.

Thank you. Those are all of my questions.

54:10 Thank you. Hopefully, you can hear me now.

54:13 Yes.

54:14 Yes.

54:14 Good. Very good.

Thank you. Now, just my question was about the logistical challenges that you called out in the, I guess in the pulp business.

Is that the are you are seeing this? Or is it's widest spread I was thinking more on the board side where you do have some material export side soon.

But also if you can call out the quantity we're talking about in volumes that may been pushed into Q4?

54:40 I can comment on logistics in general, and I think we are all aware that this year has been a difficult year for many perspectives globally for the supply chains. And we have proven that we can deliver as Q3 shows, even though there are challenges there.

And if we look at the outlook, the expectation is that the bottlenecks that we see in logistics will continue also next year. But we have proven that we can supply our customers.

54:57 In the pulp side for instance, we see that inventories have gone up. And one of the reasons for that is that there is a lot in transit.

So the lead times might be a little bit longer. The materials are on the boat before they can be offloaded.

Many harbours have been congested or closed. So there are a lot of queues.

And that was what happened actually for one boat that missed the quarterly day and ended up in Q4 for Biomaterials this time. So it will impact positively the results in Q4.

But we have shown that we are able to handle this situation and we will continue handling it.

55:57 What about, what are you hearing from your customers about their capabilities to move product and such, which could impact your business indirectly?

56:07 Yeah. In packaging for instance, we are used working with inventory management.

I think contingency and robustness having several sites being able to supply materials such as we have interchangeability and having this active dialogue with our customers. We have proven that we can deliver and have high results in packaging for instance despite these challenges in the supply chain.

So I don't see that being a problem going forward. We sorted out.

56:40 Very good. Thank you.

56:52 Yes. Thank you very much.

So if I look at your Q3 and listen to you now in this call. Obviously, your performance seems to be quite good and you're also calling out quite a good outlook.

Now still, if I read the outlook statement that you have changed that since Q3 that in all that you the resilient demand. I think you said very healthy demand in the last quarter.

Where can you see sort of change or a weak demand or now compared to last quarter.

57:39 Well, we see a continued healthy demand for next quarter. And we have annual guidance and I understand that we are performing better than last year and trying through going through the businesses like we're doing now to comment and give more flavor to this.

But as I said, our order books are for the demand looks healthy for our products. And managing that is about choosing the right market, the right products, the right customers and making sure that you have a very active dialogue.

That is what is bringing the results at this point for us.

58:20 All right. Thank you.

And then related to China, seems to be a bit of a tricky situation ongoing there. What are you seeing when it comes to paperboard sales and your pricing in that market, what is the competitive environment when it comes to production inventories etcetera in paperboards and also related to pulp, what your customers are saying at the moment in China?

59:00 Well, we know that there have been paper board and paper producers that have been curtailed due to the energy situation. We have not curtailed our production.

Our board mill in Beihai has been producing. We know that China, of course, has a big impact on macroeconomic levels.

So a slowdown of China means impacts in the rest of the economy. 59:25 For pulp side, of course, if board machines or paper machines are closed down in China, that means that pulp consumption is lower.

But as said, quarter four is also tight from the perspective that many of the pulp producers have their annual maintenance shuts during both Q3 and Q4. And as the logistics make predictability of when you are going to get your material more difficult, that means also that customers are managing their inventory better and making sure that they have inventory enough to be able to produce when they want to produce.

So it is a tricky situation. I agree to that.

60:14 Thank you. And then a final one, looking at paper you have done a great job driving down capacity and increasing capacity utilization in that business and as you say, it seems to be turning around now with likely higher prices and lower fixed costs for you guys.

Are you considering strategic options now when it seems to sort of profitability outlook is improving what could those strategic options be if you to consider any of those?

60:52 We have our three strategic options. And it is becoming now a very small part of our total business.

So when we are finished with the restructuring totally, it is going to be close to 10% of our sales. So it does not become significant anymore, but our options are still that if we have attractive opportunities to convert, we will do that.

Oulu is an example of that, Varkaus is an example of that, and there might be others. 61:17 The business that is remaining, we make sure that it is competitive and has good products for the customers in paper.

If there is a better owner for some of the sites, we will divest, like we did with Sachsen, and that is considered an option also going forward. And of course, with improved profitability, those opportunities become better for those choices.

And if we cannot find a better owner or we cannot convert, then we will take action if the market balance is not in our favour, like we have been doing. So I think we are moving to a much better position for paper going forward.

61:57 Thank you.

62:13 Thank you. And I just want to thank everyone for my past almost twenty years and twelve years head of Investor Relations at Stora Enso, it has been a great journey.

I have been enjoyed it thoroughly. This is a great company and I hope all the best to its and its owners.

So some of you I might see in the future, but otherwise, I'd say goodbye and thanks for all these years. And now we conclude the phone conversation.

62:53 Thank you.

62:54 Thank you.