Stora Enso Oyj

Thank you, Ella. Good afternoon, everyone, also on my behalf, and welcome to Stora Enso Full Year 2020 and Q4 Conference Call.

We are running this call now for an hour, and I will hand it over for our CEO, Annica Bresky. Annica, please go ahead.

Thank you very much, and a lot of welcome to our call today. I'm very satisfied with the quarter that we have behind us.

We delivered a steady performance as a result of our own actions. And as you know, we have an unprecedented year behind us.

I'm happy that we have been able to protect our people's health, run our operations without major disturbances and serve our customers through a year that has been quite exceptional for all of us. If we look at our results, our sales and operational EBIT decreased by 11% compared to a year ago.

But if we exclude Paper, we had a 3% decline. And sequentially, I'm happy to see that our sales actually increased by 4% compared to quarter 3.

This shows that our main businesses are performing well, and I can see signs of improvement going on. Our operational EBIT was €118 million, down largely in line with 2019.

We have to remember, this is a maintenance-heavy quarter where we also had the conversion of Oulu, which we finalized. So from that perspective, coming back to pre-corona levels is a stellar performance.

We can see a clear improvement to our base businesses, excluding Paper, from €80 million to €122 million, which is more than 50% improvement. Our operational EBIT decreased to 5.5%, and excluding Paper, to 7.3%.

So there are signs of recovery in our results. Our cash flow from operations landed at €436 million and after investment at €223 million.

Here, we have to remember that we had a positive effect from an extraordinary dividend and capital repayment from Bergvik Skog amounting at €223 million last year. Net debt to operational EBITDA landed at 2.3, slightly above our target of 2x, but we have managed to reduce our debt by €300 million.

Our operational return on capital employed, excluding our Forest division, landed at 4.6%, and our Board is proposing a dividend of €0.3 per share for AGM decisions. This is in line with the dividend payout of 2019.

So all in all, I can say that we see signs of recovery of our businesses, and this has been a steady performance coming back to pre-corona levels. Moving on now, if we look at what are the main drivers for our result, we can see, of course, a decline in sales prices and volumes, which are the biggest effect during the quarter.

But through our own actions, cost savings and good management in our company, we have been able to mitigate that decline. As you also know, we have, through the year, worked with the revaluation of our forest asset.

And now we have moved over to market transaction-based fair valuation applied to our Swedish forest assets. With that, we end up at a fair value of €7.3 billion, which is slightly above the higher area of the interval that we communicated earlier this year.

This shows the fair value of the assets that we have, and from now on, we will continue with this transparent communication towards all of you. Our other forest assets are based on discounting cash flow methodology still.

So Tornator, Montes del Plata, Veracel and Guangxi in total had a fair value of €1.7 billion. Our Swedish forest assets fair value is €5.6 billion, which is both biological assets and land assets.

So with that, we can conclude that we are one of the largest global forest owners, and this is a very good position to have innovation and new products all start from our renewable materials. And here, you can see a comparison of us with other peer companies in the Nordics.

We also enable a stable dividend. Our proposal is €0.30 per share.

The dividend proposal is unchanged compared to 2019. And our policy, as we communicated in the last Capital Markets Day, is to pay stable dividends linked to the long-term performance and to have a 50% EPS, excluding fair valuation, over the cycle.

And it is important to have a perspective of over the cycle when we distribute dividends. So this is the proposal from the Board.

And as I said, we see positive signs of market recovery. Our performance in Packaging Materials continues to be strong.

Stable demand for consumer board, and we see improving market conditions for containerboard. We had a very good result for our Packaging Materials division.

Strong e-commerce demand supports corrugated packaging, and we also had the best -- the second best quarter 4 for our Wood Products division. So very strong performance there and high demand for Wood Products solutions, both building solutions and traditional saw logs.

And here, we can see that it is mainly the U.S. market and the European market that have been driving that development.

Continued strong and stable performance for Forest. We have good harvesting conditions and a stable supply of saw logs.

And we can also see improving market conditions for Biomaterials. As you know, this -- the last year was a challenging year from a pricing perspective.

We started with very high inventories for market pulp globally. But at the end of the year, we have a much more balanced supply and demand.

The inventories have come down to normal levels globally, and we see that the Chinese recovery is proceeding. So demand is expected to increase going forward.

And these are positive signs for our Biomaterials division going forward. And last but not least, as you are all aware, Paper is in a structural decline and has been already before the pandemic.

We can see that the demand decline continues, and the structural overcapacity is there in all the paper grades. So this market continues to be challenging.

And here, I come to our own actions and the importance of those. Paper has delivered a strong cash flow coming back to the levels that we were before the pandemic.

And that comes down to very good cost management, making sure that the mills stay competitive and also having a very good working capital management. We have a high intensity in our strategy execution, Oulu Mill conversion to kraftliner is finalized, and we are in the start-up phase.

Our pulp mill is producing pulp, and we are starting up the board machine. So this is a very good step in our transformation forward into growth areas of Packaging Materials.

We are conducting the feasibility study at Skoghall, as you are aware, which will be finished in Q4 this year and up for decision by the Board. We decided on an €80 million investment in our Imatra Mills to strengthen the wood handling and the competitive position of our integrating Imatra.

That will be finalized by Q3 2022. We also chose to accelerate the innovation performance of lignin and our platform in Sunila by investing €14 million to enable better operations and granulations in the packaging plant of lignin.

We made a decision in CLT, in production in Ždírec and that is progressing according to plan. Contracts for construction are ongoing, and the start-up is planned in Q3 2022.

During Q4, we also divested noncore forest assets in the southern parts of Sweden for €90 million. And we also decided on the closure of our U.S.-based Virdia operations.

This is a small pilot plan that we have had over the years where we see it's no longer part of our core innovation platform. So unfortunately, we had to make the decision to close that during this year.

We are collaborating with our customers in order to enable circular economy and a circular bioeconomy. So we are conducting with Tetra Pak, a study on expanding the availability -- or the possibility to used beverage cartons in recycling in Ostroleka Mill.

And this is a true testimony that we really want to be the leaders in this area in enabling the circular bioeconomy. And last but not least, we are continuing our ramp-up of formed fiber foodservice bowls to replace plastic and commercialized together with our wholesaler, Tingstad.

So that is clearly available on the market and has had rendered a lot of interest. So with that, I hand over to you, Seppo, to go through the financials in more detail.

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

First of all, top line sales, like Annica already mentioned, was down 11% year-on-year. Sequentially compared to Q3, sales were up 3.6%.

Operating EBITDA margin was 12.7%, and EBIT margin 5.5%. Earnings per share basic for the quarter at €0.30.

We kept the EPS, excluding fair valuation, so the base for the dividend policy and on a full year figure, we were at €0.45. Operational return on capital employed, excluding Forest, was 4.6%.

And cash flow from operations at -- sorry, €436 million. Compared to last year, you should notice I remember that there was the significant €223 million extraordinary dividend from Bergvik Skog related to the ownership restructuring done earlier.

So in that sense, I think it's fair to say that our cash flow was strong for the quarter, and it was supported by working capital reduction. Working capital is actually at record low levels.

And that is, I think, a very, very encouraging news. We have been working 1.5 years to reduce the working capital, now we start to be at the targeted levels.

And net debt to last 12 months operational EBITDA, 2.3. Then shortly, I'll comment on our profit protection program, where we are coming to final year.

Like I said earlier, we are now expecting to close the program during 2021. In Q4, we achieved €30 million continuous savings, and on top of that, €5 million onetime savings.

We expect additional savings of €80 million during this year that has started now. Then starting with the divisions.

And first, looking at Packaging Materials where strong performance continues. And also in containerboard, business market conditions are improving.

Sales decreased slightly to €759 million. That is due to clearly lower containerboard prices during the quarter compared to year before and close of the small packaging paper machine at Imatra Mills in Finland had also an effect.

That was partly mitigated by higher pulp sales and containerboard demand. Operational EBIT increased by €10 million.

This is, I think, a good achievement, keeping in mind that the result includes conversion costs of Oulu at €27 million. Results was supported by clearly lower variable costs, especially pulp, chemicals and energy and lower containerboard prices and lower consumer board volumes had an effect.

Also, you see that market situation in China has continued to improve. And operational return on capital improved to 9.2% during the quarter.

Then moving to Packaging Solutions division, where solid result was visible and it was supported by strong e-commerce demand spike also earlier during the year. Sales decreased by 6%.

There was visibly lower corrugated box prices in Europe, mainly due to decreased raw material prices and also negative sales FX effect. We have slightly higher European corrugated deliveries.

Operational EBIT, that remained flat at €10 million, reflects our lower sales, but also lower containerboard and fixed costs. It's good to remember that in Packaging Solution division that we have the new businesses included that is biocomposites, formed fiber and Box, and that has a negative impact on operational EBIT as they are in the start-up and development phase.

Operational return on capital remained stable at 16.2%. In Biomaterials, market conditions are improving.

But the result in Q4 was burdened by plant maintenance events. Sales decreased by 8% and was €314 million due to lower pulp deliveries, mainly due to all-time high deliveries a year ago in the comparison period and negative sales FX.

Operational EBIT was flat at negative €12 million, and the result was negatively impacted from total volumes affected by maintenance at slightly lower prices. But we have also clearly lower variable costs, especially for wood, chemicals and energy supporting the result.

Operational return on capital at the low level for the quarter, actually negative 2.1%. Then Wood Products division, where we had exceptionally strong Q4, sales decreased by 4%, and that was a result of structural changes at Pfarrkirchen, Uimaharju and Kitee sawmills, and that was partly offset by slightly better prices and mix for classic sawn, LVL and U.S.

market. Operational EBIT increased by €19 million to €33 million, and that was second highest Q4 ever so far.

But thanks to higher sales prices and especially good cost control, improving profitability. Operational return on capital increased and was clearly above the long-term target of 20%.

That was 23.5% for the quarter. Then moving to Forest division.

There, the strong and stable performance continued. Sales decreased by 5% due to lower wood prices, and that was partly offset by increased wood deliveries, especially in Sweden.

Operational EBIT increased by €10 million to record high Q4 level of €41 million. There we had also a positive effect from Tornator wind power project that together with the increased efficiency in Finnish wood sourcing unit improved profitability significantly.

Operational return on capital employed, remained above long-term target at 3.8%. Then Paper, the challenging market conditions continue, but we are very happy about the strong cash flow generation during the Q4.

Sales decreased by 31% due to continued accelerated structural demand -- decline and global overcapacity situation. That is placing additional pressure on prices in all paper grades.

Also, Oulu Mill conversion, discontinuation of paper production there decreased sales by €50 million. And operational EBIT decreased by €49 million to negative €5 million.

There, we saw clearly lower prices and total impact of the volumes. Partly offset by lower costs and activities related to discontinuation of paper products at Oulu Mill had, had €5 million negative impact, as indicated already earlier.

And like as I said, very strong good cash flow. Cash flow after investing activities to sales ratio was at 10.3% which is clearly above the long-term target.

And that is thanks to very good working capital management by the division. Then looking at the development of the long-term financial targets.

And there, I will concentrate on full year figures, as I have been already commenting quarterly figures in the case of divisions. Dividend, like Annica already mentioned, proposal is €0.30 per share.

And look at total figures, growth for the year, that was negative 8.7% due to the effects of the COVID-19 spreading around, having difficulty to cope in economy. Net debt to operational EBITDA at 2.3, moving in the right direction from the peak during the year but still above the targeted maximum 2.0.

Net debt to equity at 33% and operational return on capital employed, excluding ForEx, for the full year at 7%. Looking at the divisions, both packaging divisions, both Packaging Materials and Packaging Solutions at about 14% level that is below the targeted 20% and 25% levels.

But quite strong, taking into account the business environment. Biomaterials roughly at 0, 0.4%, and Wood Products for full year at 19.1%.

So we're not far away from the targeted 20% level. And Forest division at 3.9%, above the target of 3.5%.

And like I said, Paper cash flow for the quarter of Q4 was 10.3%, but due to the challenges of the previous quarters, full year cash flow was 1.6%. With that, I hand back over to you, Annica.

Thank you, Seppo. And we are resuming our outlook with an annual approach.

And what we see, as I said, is signs of improvement, and we do expect an operational EBIT in 2021 to be higher than in 2020. So we can see expectations of economic recovery, provided that the COVID vaccination progresses successfully and we are managing the uncertainties in our surrounding environment.

We do see that the demand of our products remained mixed. We have strong demand in our Packaging and Wood Products.

And we see improvement in Biomaterials, a stable outlook for our Forest division, but our Paper division is challenged. The Oulu ramp-up is going according to plan.

We estimate approximately €20 million negative impact on operational EBIT in Q1 and approximately between €45 million to €50 million total negative impact on operational EBIT for Packaging Materials for the full year. Design capacity is predicted to be reached by end of Q2 and full final commercialization of the full product portfolio by end of 2021.

We estimate to reach operational EBITDA breakeven in Q1 2022. Our profit protection program will be concluded during this year, and we estimate approximately €80 million of cost savings for this year, and we continue to focus on cash flow generation.

Also, we are giving an outlook and a comparison on the full maintenance impact quarter-by-quarter, and as you can see, our estimation for quarter 1 this year is €105 million of total impact. That includes both volumes and costs in comparison to Q1 2020 that was €98 million.

So all in all, if we conclude, we are back in line with where we were in 2019 before the corona happened in Q4. We have a steady performance, and this is largely a result of our own actions.

We see signs of recovery. Our sales has increased sequentially quarter-on-quarter and market conditions are improving for our containerboard products.

They are staying stable in demand for our Consumer Board and for Biomaterials. We have cost reductions, and they are visible.

They are seen in our P&L. And our Oulu Mill conversion is finalized and is in the start-up phase.

We have divested noncore forest land in Sweden for €90 million, and this highlights also the value that our forests have. The total forest asset fair value is €7.3 billion, and our dividend proposal is €0.30 per share to be decided at the upcoming AGM.

And with that, we open up for your questions.

Related to your Paper business, when I look at the capacity, the machine park you have and the current deliveries and perhaps the outlook for this year, it seems as the operating rate with this machine park will remain low, below 80% reach. What is the sort of plan in this division for you guys?

Is it to continue with this machine park to do something substantial in terms of cutting, simply closing capacity or any potential for divestment or consolidation in the paper industry? So that's the first question.

Thank you for the question, and I think we're all aware that there is an overcapacity in Europe, 6.5 million tonnes, approximately 10% overcapacity. So this means that structural changes will need to happen on the paper market.

We believe that there is a new baseline established now after the pandemic. So if we look at our own assets, our strategy has been the same over all time.

We make sure that we have the most competitive assets, and we drive cash flow, which we proved also now in Q4. And we evaluate constantly if we can convert a mill, such as we did in Varkaus and Oulu into other grades.

If we don't see any good opportunities that fit our own business portfolio, then we divest and we have done several of those. And as a last option, if there are no good opportunities, then unfortunately, we have to close down capacity, such as we did in Hylte decision that we took last year, where we closed down 1 machine and a deinking plant.

So this is our strategy all along, and that is what we are working on.

All right. Then related to the containerboard business, where you had the start-up cost of ramping up Oulu in Q4.

I think you guided for €30 million to €40 million cost in the containerboard segment and then €5 million to €10 million costs in the Paper business. Where did you land?

I was just looking at the containerboard EBITDA, which seems quite strong and in relation to that €30 million to €40 million cost booked in that -- provided for that division. So where did you land on those costs?

And maybe what's sort of behind the strength of the containerboard profitability?

Seppo here, maybe I can take this one. Like I mentioned in my presentation, effect on Packaging Materials' operational EBIT from Oulu conversion was €27 million.

So slightly below the low end of the range we gave. We said €30 million to €40 million.

On Paper, the effect was €5 million. So they're also at the low end of the range.

We're, of course, positive. And I think it shows the good work done in both divisions on these projects.

And it's challenging to give guidance and exact figures, as you can imagine, especially under the uncertainties with COVID-19 when it comes to conversion. So I think we are very happy and proud of the work done by both teams.

And I think that's a reflection of the result there.

And if we look at the containerboard market, we can see positive signs. We saw that already in Q4.

The inventory levels, they came down, and we could see push for price increases. So e-commerce and the use of boxes within e-commerce has clearly been one of the main drivers here, and we have, of course, benefited on that.

Yes. And then just finally on China, seems as after this summer, the activity levels there have been quite strong based on statistics, especially cartonboard packaging demand and pricing has improved and is improving.

Is this something that is supporting your operations there? And particularly in terms of Beihai, I can see ivory board or folding boxboard prices surging there, is that positive for Beihai?

Or how does the pricing dynamics for what Beihai sales were in China?

Yes, there is a good development in China. It is recovering.

It's affecting not only our Packaging business, but also our Biomaterials business going forward with improved demand levels there and the balancing of the inventories. And for Beihai specifically, yes, the consolidation of the folding boxboard market by the big players and the push up of prices there is impacting positively our mill there.

Any comments on Beihai profitability at this stage? Close to targeted level or far below still?

Or how you...

I'm sorry, but we are not able to comment on individual mills performance.

Three questions from my side. I mean just the first one is a bit specifically on price, if I may.

Starting with graphic paper, one of your peers talked about the mid-single-digit decline into the first half on their graphic paper portfolio. Is there anything you can comment there on what you have seen, potentially on price declines in graphic paper?

And then similarly, on consumer board, we talked a little bit about Beihai now, but do you see any potential to increase consumer board prices into 2021? And then finally also, wood products, you mentioned it was strong.

FCA talked about a 10% increase in the first quarter on their wood product. I know it's not the same thing.

But just if it's possible to give any color on pricing on these 3 grades and then I have some follow-ups on Forest and cost inflation.

Yes. As you know, we don't comment on prices in moving forward.

But what I can say is that I do agree that there is a high price pressure for paper also for quarter 1. So it continues to be kind of the area where we need to constantly evaluate the competitiveness of our assets and also take cost reductions to be able to mitigate.

But it is -- if we look long term and structural, the price decline has been between 5% and 6% annually. And the new levels now that are on the market, they can only be corrected if structural changes are happening on the market.

So if the overcapacity is reduced. Otherwise, I think we will need to live with these levels for quite some time on the prices for paper.

Regarding consumer board prices, here, as you know, a big part of the portfolio is fixed contracts, long-term contracts. So I would say that for a big part of that portfolio, it's stable.

And then we have annual contracts in the folding boxboard area, where we are negotiating. And of course, I cannot comment on future price increases in that area.

But we take into account, of course, the development in pulp prices when we do our negotiations. And then regarding wood products, the price increases we have seen during quarter 4 have been in all regions and especially strong in U.S., but also in Europe.

And the imbalance in demand, the strong demand, especially in U.S., we expect to continue. So we have a positive outlook for the quarter, but I cannot go into specifics regarding the prices.

Okay. Moving on to costs.

And I'm thinking about cost inflation, is there anything you can comment on what you're seeing on wood pulp, chemicals? Is there any kind of [indiscernible] on logistics?

And also, if you can remind us on your recycled fiber exposure, so how much you're buying of ONP and OCC on an annual basis because it seems like those prices are going up.

So if we look at the -- if you remind me of the first question that you asked, you said the -- oh, the supply chain and variable cost. We do not see any kind of major impact there.

In supply chain, during 2020, since there has been a lot of kind of changes of kind of supplies due to COVID, we have had increased cost in logistics that we have mitigated by other actions through our profit protection program, but we don't have any major challenges there as we see it moving forward. And the last question...

And on your recycled fiber purchases, if you can you just remind us how many times?

Yes. So we have 2.2 million tonnes of recycled paper.

So -- and OCC 700,000 tonnes, so altogether, 2 million tonnes.

Thank you very much. Final question.

I'll try to keep it short here. Forest, you came out in a bit more than your guided range.

Any comments on that? And then also, for us, to help us with our modeling here, how often are you going to revalue?

Is there any specific statistics that you will be looking at that we perhaps could follow? And also, are you looking -- are you doing a 3-year average like some of your peers?

Or are you just using the latest annual data on ForEx prices and transaction prices?

Yes. Thank you.

First of all, if you look at the final fair valuation, €0.3 billion, compared to the range that we gave €6.5 billion to €7 billion, the main driver was Swedish krona foreign exchange rate development, as it is a big asset. So a change in the FX played quite a significant role there.

Obviously, there was a fine-tuning data based on the [indiscernible]. But its main reason was the foreign exchange rates.

We plan to do the revaluation twice a year and some checking of obviously, quarterly, but main valuations twice a year, so Q2 and Q4. And we use 3-year averages as seems to be the market practice also looking at our competitors and others following the same method.

A couple of questions. First on the graphic paper market, have you seen any improvement in the demand trends now going into 2021?

I mean we did see a sequential improvement in the trends in the back half of last year into Q4, still fairly weak, but still improving trends. Have you seen that trend continuing into January this year?

And also, I think you previously said that you do expect some sort of a bounce back in volumes this year. Is this still your assumption?

Or has it changed in any way?

What we can see moving forward is that there are no real bounce backs in demand. I don't remember saying that we will see a bounce back.

I -- what I -- what we have communicated before is that we see that this is a step change, that we see the shift into new ways of communication through digitalization. People are reading fewer magazines.

They are not buying newspapers as much. In offices, we do not print on corporate paper as much.

So I believe that there has been an establishment of a new baseline and the structural decline that we have had historically will probably continue from this baseline. So since the overcapacity is so big, I have not seen and/or we have not seen any major kind of demand improvements moving forward.

Okay. So you assume that this year as well, demand will continue to decline.

That is what we see so far.

Okay. Good.

Then in terms of the cartonboard business, and I was just looking at the volumes trends in that specific segment. And I was wondering if you can help me understand the trends we saw there in 2019 and '20, I think you had declining volumes, more or less, in each quarter there despite the fact that, I guess, folding boxboard and liquid packaging board markets were either growing or stable in both years.

So I was wondering if you could explain a bit what's happening there.

There are -- within the segments, there are many different end uses. So the end uses that have been strong have been, for instance, pharmaceutical, food packaging for homes, like our liquid board and so on.

But there are also end uses that have gone weaker, like cosmetics, like foodservice board. So everything used for on-the-go food and in restaurants naturally impacted by the pandemic.

So we believe that this is a temporary decline in those end uses, and as the societies come back to a more normal ways of operation, that business is going to bounce back. And we see positive signs of that as societies are opening up.

But of course, this is the explanation behind that some end uses have been stronger and some end uses a little bit weaker, even in packaging materials.

Okay. Good.

And then just finally on the cost side of things. I think you mentioned that you had a temporary cost savings in 2020.

Was it €85 million? Correct me if I'm wrong, but something along those lines.

Will that come back in 2021, do you believe, or do you have some further measures in place to keep that away? And if you think about the overall variable cost or input cost going into this year, what would be your guess of how that's going to pan out?

I mean are we going to see inflationary or deflationary trends for the year?

Yes. Thank you.

I can comment on a large scale, Seppo, then you can go into detail if you want.

Yes. Go ahead, yes.

So if we look at kind of the distribution between variable and fixed costs, approximately 40% is fixed cost and 60% is variable costs. So of course, variable costs are dependent on what is happening on the market.

So that is something that might change if there is a very strong market recovery and depending on how we negotiate our contracts. But the fixed cost savings has been kind of something that is not dependent on the market as such, but under our control.

So we expect to keep that. We have reduced by 2,000 people in Stora Enso over last year.

So this is something that we are constantly working with becoming more efficient.

Yes. And then when it comes to these onetime savings, it is, of course, something that we expect to come back.

And that's why we are separating the savings reporting as well, those onetime savings away from continuous savings, in order not to mislead the market. Obviously, there will be some additional smaller amount of onetime savings this year.

As I mentioned in Q1, we expect some 5 million -- sorry, it was €5 million in Q4. But on top of that, there will be -- on top of this €80 million, some relatively small onetime savings still.

So it's something that is coming back. But obviously, we mitigate those with continuous improvement actions outside the profit protection program.

And full year profit protection program, for this year, we expect some €80 million continuous savings on top of what has been already implemented.

Okay. And in terms of the variable costs, I mean, in chemicals, logistics, energy, would -- what do you see overall trends in going into this year?

I would say, in general, that cost pressures are not very high. There are, of course, some differences with the different type of costs, like Annica mentioned, logistics where there has been challenges to get some containers occasionally.

And it [indiscernible].

I just want to come back a bit to the outlook. Annica, you, of course, mentioned that you expect an improvement in 2021.

Can you give us any color on the respective segments? Of course, you mentioned some positive trends in the beginning of the year.

But when you evaluate the whole year, what are you seeing? And equally so, if you can give us any short-term views on the first quarter considering that we're still sort of fighting the pandemic, in big scale, are you seeing any a meaningful impacts of that in the first quarter?

And then also if I could just ask on the biomaterials, it was quite a bit weaker than I had expected. Did you have an unusually difficult maintenance cycle that caused those costs to be really elevated?

And on the maintenance costs, you've highlighted, of course, now in your presentation pretty high numbers for every quarter. I think last year, you mentioned you had no maintenance, and I can tell from your report today that you're not having any mills taken off for maintenance.

So I just wanted to understand what the €105 million represents that you're saying for the first quarter because I can't see any mills going down. So if you can allude, if you must.

I'll address the maintenance question first, Annica. So you have to remember, we have smaller maintenance contingency.

So when we refer that there is no -- it's major maintenance and shutdowns. There are sort of smaller maintenance works going on also during Q1, but no major ones.

And the figure, it might look high, but you have to remember, earlier, we have been only communicating the difference sequentially or year-on-year. But it is matching basically, if you look at the differences, this is just that we wanted to give the full figures that has been sometimes asked by you or your colleagues.

So just to give you more -- informative.

And to be clear, that does not include any Oulu related costs?

No. No, that is an investment.

So adding on what Seppo is saying on maintenance, the annual maintenance shuts of the pulp mills, those are the ones that we have in Q3 and Q4 normally. And those are the ones that are the biggest ones.

But as Seppo said, there is continuous maintenance done all year round for our 60 sites. So by doing in this way, we show you more transparently, the effect.

So it makes it easier for you to see. So remind me of your first question.

Yes, on the biomaterials.

Yes. I remember now, sorry.

We do not have any pulp mill shutdowns during Q1, and those are normally the challenging ones, if I have to say so. So shutting down a pulp mill and especially as it has been in Q4 minus 20 or 30 degrees, and with COVID with all the precautions that we have to take, is of course a huge exercise.

So Biomaterials has been impacted by tougher conditions for performing maintenance shuts during this year compared to a normal year. So this is one of the reasons for Biomaterials' results.

And then I just wanted to see if we can get any more color on the outlook and anything on Q1 specifically?

Well, if we look at Q1, we continue -- we will continue to have a difficult situation on Paper, that goes without saying for Packaging. We have stable conditions for Consumer Board.

We see improvement in our -- we see stronger demand for folding boxboard, especially in China. What we see in pulp side is that there is support for improved prices, if we look at the demand that we see.

And then for wood products, the market continues to be strong in construction despite the pandemic. So here, we think that it is a continuous strong performance for Wood Products.

And Forest stays stable in the returns. There are good harvesting conditions for Forest.

Two more questions, just quick ones. The CapEx levels continue to look relatively elevated.

So if you can allude to if there's any particularly large projects that we should think of. I would have assumed that numbers to go down too in the 500s, but you're well above that.

And also, if you just -- maybe Annica could -- I think, how you think about the recent flurry of investments in pulp mills in China, considering that you abstained from doing the same in Beihai?

Yes. If I start with the CapEx, there's nothing extra or on top of what we have told earlier.

There's, of course, some leftovers from Oulu investments still, and then you have to remember that in 2020, due to COVID-19 hitting during Q1, we started to limit CapEx last year. That meant that some projects were delayed from 2020 to '21 in order to save the cash flow.

And that is probably why you see a bit higher figure this year than you would have seen otherwise. Other than that, nothing extraordinary as such.

And regarding pulp mills in China, I do not comment on that. What I can say is that it is -- there is not a lot of wood availability in China.

Having plantations and managing them is something that is not evident in China, so how the profitability of the pulp mills in China is that is not something that I have any insight on.

I've got 3 completely separate questions. So firstly, on pulp, I appreciate you don't comment on pricing, I wouldn't expect you to.

But clearly, Stora Enso is a major global supplier of market pulp. I'm just trying to understand the delivery times between, let's say, dissolving pulp customers supplied from Finland to Europe somewhere will be very different to, I don't know, a Chinese tissue maker supplied from Veracel.

So can you just think about across the entire portfolio of Stora Enso market pulp sales, what's the typical time delays that were between agreeing a price for pulp or contracting, for example, today on January 29 or something to actual delivery? And the reason for asking that question is, clearly, if we think about rising pulp prices in '21, when do they start feeding through to rising biomaterial EBIT as it were?

That's my first question.

Well, from the point that you start seeing price increases, it usually takes about a quarter before you see it in your results.

And then secondly, one for Seppo on FX. And clearly, you've been doing some hedging for many years.

But on Page 33 and 34, you've got some big flows of hedging for 2021. And I'm thinking particularly about movements recently in U.S.

dollar versus euro, where -- how does that hedge actually work in practice? Have you hedged the same percentage for every quarter in 2021 or does that roll down through the quarters in 2021?

Yes. Of course, we -- on average, our policy is to hedge about 50% of the coming 12 months cash flow.

But obviously, the hedging ratio is higher for the shorter-term periods than longer term because of the uncertainty with the longer-term cash flows. So there is some difference between the period -- or inside the 12-month period.

And also, depending a bit on the market situation and our UV, we are not, of course, fixed exactly at 50%. We can vary at, say, plus/minus 10%, roughly around that point.

Sometimes even more. But 50% is quite fair for your modeling purposes, if you want to do that.

Okay. And then I guess one final question for Annica.

On the announcement we heard this morning with Tetra Pak, can you give us some more color as to potentially what sort of volumes you could be talking about reusing here within the Ostroleka Mill? And I suppose what proportion of the furnace could be coming from liquid packaging board as opposed to potentially OCC for that mill?

Well, we are in a starting phase. This is a feasibility study.

So we have done trials in both our store like with used beverage carton and then, of course, also in Langerbrugge with taking back cup stock. So our ambition is really to be part of the solution of enabling a bioeconomy based on recycled materials.

So we are still in early stages of this feasibility study. So we will have to come back on how big amount that we can actually do in Ostroleka.

So it's too early to say. We have to talk and develop that.

But our ambition is to be as present in the Central European market that we would be able to take back significant volumes of these used beverage carton in Europe in Ostroleka. But we have to come back on exactly the levels when we have done our study.

Great. And just a follow-up, sorry.

What's the technical difficulty? Is this separating the various materials that are used in liquid packaging board?

Would it be separating out the polymer and the aluminum from the actual paperboard? Or what is the sort of technical challenges that the feasibility study is examining?

Actually, the technology already exists. We used to have a mill in Barcelona many times ago where you did this separation.

And it is exactly, it is about separating the different materials and making sure that the different product streams can be used and be up-cycled. The fiber will be used in the Ostroleka Mill and the other fractions of the materials like the fully aluminum will be finding other end uses.

So this is the collaboration that we are doing to develop that business model together with Tetra Pak. But technically, it is not challenging to do.

The technology exists. It is more about how you optimize it in the individual mill setting so that it works.

And that's why I cannot tell you exactly how much of the total furnace because we have to trial that, and that is the work we're doing this year.

And now we take the final question from Harri Taittonen, Nordea.

I'll only make one question in that case to keep it short. I noticed in the Q4 statement, you mentioned that in the Forest division, the division benefits from the -- apart from the efficiency, but also the wind power project.

I was just wondering, was that related to sort of divestment then or is it something that kind of continues? So what was behind that?

And in general, are you looking into that kind of activity in Finland or in the Swedish forest to kind of develop that sort of business in the future?

Yes. It's ready to turn out, first of all, in Finland.

They have been participating in various wind power projects. As an example, it's one way to create more value from the forest plant that we have and that when you participate, you realize this kind of onetime -- for the project, onetime, but it's sort of continuous work.

So there might be other projects in the pipeline later and then you book the benefit from tax once you make the deals and arrangements. So it's important part of the forest development and economy and management.

But that's one parameter as well in the Forest valuation.

Yes. And complementing on Seppo here, of course, which projects within wind power are profitable or not are dependent on the prices, of electrical prices and so on.

So as big landowners, we always have discussions with wind power owners and wanting them to kind of collaborate with us on this if they see opportunities for our land.

And then, of course, the incremental income from these projects going forward.

Okay. Thank you for everyone for good questions and good discussions.

And I'm very sorry that we have to now end the call, and we still had some questions on line, but I will take them over the phone then later. But Annica, to you for final words.

Yes. Thank you so much and a lot of good questions as always.

So all in all, we have a steady performance in Q4. We see signs of improvement.

We can say that our main businesses, Packaging divisions, the Wood Products, our Forest, they are delivering good results and have a positive outlook. We have a positive outlook for our pulp business.

And for Paper, we continue to generate strong cash flow and take actions needed as the market adapts to a new level of demand. So with that, I thank you very much.

Thank you.

Thank you.