Good morning, and welcome to the presentation of Billerud's third quarter results. Our CEO, Ivar Vatne, and our CFO, Andrei Krés, will give you an overview of the results and the highlights of the quarter.

After their presentation, conference participants will have the opportunity to ask questions. By that, I hand over to you, Ivar.

Thank you, Lena, and good morning, everyone. Thank you all for listening in to our Billerud update this Thursday morning.

There are several highlights to talk about, but it's first and foremost been a quarter where we see progress on the profitability recovery, and we continue the positive trend since the beginning of the year. Let's get into it.

Next slide, please. Overall, our Q3 result is coming in quite close to our expectations, and we do see progress on several fronts.

We returned to positive net sales growth, plus 3% versus a year ago, and plus 2% currency-neutral. Net sales is also up versus previous quarter.

Our sales growth is coming from increased volumes in both regions, and we have positive pricing momentum for most of our categories. I want to in particular call out our region Europe for strong profitability improvement.

We have been through some tough years in Europe, but EBITDA margin for Europe now in Q3 is the highest since beginning of 2025. Our saving measures on both variable and fixed costs are working, and we have succeeded to increase our competitiveness.

Now, for North America, it's been a big quarter in taking the next step in our program evolution. We have installed some new equipment at our Escanaba mill, which will enable further acceleration towards packaging materials, but more about that later.

Focusing on converting a high share of our profit into cash remains a clear priority, and we had another excellent quarter in terms of cash conversion, coming in at 127%, which makes our year-to-date position very strong. Next slide, please.

Our strategic direction to evolve gradually towards packaging materials in North America is of high priority for us. We reached another milestone now during the third quarter, and in combination with the annual shut in Escanaba, we upgraded some of the assets.

Specifically, we did changes on roll handling, roll wrap, winders, and sheet dewatering elements. This has been needed to enable further capabilities to produce heavy basis weights versus what we historically have focused on.

With that, complement our customer offering with dimensions that are more in the sweet spot within the packaging material space. Commercially, we are continuing to pick up speed and record another record sales quarter during Q3, and we would expect that we exceed that number also for Q4.

Now, over to some comments around market sentiment, next slide, please. If I start with North America, the market conditions remain favorable, quite stable.

Inflation has been a big topic, particularly fuel prices, but besides that, the consumer sentiment is still quite good. Our order books are solid for Q4.

In Europe, the market sentiment improved a bit during Q3. Now, it's mostly supply-driven and fueled by energy price hikes on Continental Europe, and that triggers positive pricing momentum across the sector.

Consumer demand is still relatively muted, but a bit improved versus how we started the year. There are big differences between categories and channels.

Food and beverages and industrial are starting to normalize with pretty good demand, while luxury is still weak. For Asia and the rest of the world, the situation has also improved a bit.

Food and beverage continue strong performance during '26, also within industrial channel, where our exposure is mostly within sack, the sentiment has strengthened during the quarter and is solid. With that, I hand it over to Andrei.

Thank you, Ivar, and good morning, everyone. As Ivar mentioned, we are back to top-line growth, which is driven by positive volume development in both regions.

Europe was standing for the majority of the increase, with 5% volume growth, while North America recorded 2% volume increase. The total pricing remains negative, but is a quite mixed bag here, with all categories in North America up versus a year ago, while Europe is still behind.

Next slide, please. EBITDA was more or less flat versus a year ago as most of the headwinds were offset by our cost-saving initiatives and volume recovery.

Raw material cost development is positive versus last year, largely driven by Nordic pulpwood costs, while we do see higher costs for logistics compared to same period last year. That's, of course, driven by higher fuel prices that we see now.

Margin of 10% is another solid improvement versus weak start we had in 2026. Sequentially, EBITDA is up more than 50%, and right now it's our region Europe that is driving this sequential improvement.

Our successful cost-saving program is, of course, an important building block and is continuing on track to deliver 550 million in cost savings this year, and further activities and impact also into 2027. Next slide, please.

Some more words on region Europe. Continued positive momentum on pricing and our cost-saving program were the main drivers to recover profitability in the quarter.

Volumes were up 7% sequentially, and the improvement was particularly strong in containerboard and sack categories. Pulpwood costs continued to decline sequentially, and we now expect current level to persist into the fourth quarter.

Quarter three was quite maintenance-heavy, with annual shuts at three mills, and for the fourth quarter, we will only finish off the Frövi shutdown, which will be the last one for this year. Maintenance-related costs will come down in Q4, but we will have, as usual, seasonally higher fixed costs compared to the third quarter.

Heading into the fourth quarter, we see continued pricing opportunities within some categories, where we see a bit better demand, and we also expect to selectively implement price increases during the quarter. Now, moving over to region North America, next slide, please.

North America had a solid quarter, with a 15% EBITDA margin. Now, we did encounter some operational challenges in connection with the Escanaba shutdown and also ramp-up of our packaging materials.

Despite that, we managed to maintain stable deliveries to our customers sequentially. Order books remain strong across all paper grades, and this clearly also supports our operating rates, which have now been above 90% for a second quarter in a row.

Cost inflation is a clear theme for the region, primarily through higher fuel prices, and we are offsetting that with both price increases and surcharges to our customers. For the fourth quarter, we expect the market conditions to remain solid, and also in North America, we are now out of the maintenance shutdown period.

Next slide, please. Some words on cost development in the third quarter.

In Europe, we had a sequential cost relief of about 20 million, that was driven by lower pulpwood and logistics costs, which were offset by higher chemical prices. In North America, we saw some headwinds from energy, chemicals, and logistics, with an overall negative impact of around 20 million.

All in all, for the group, flat input cost development in Q3 compared to Q2. Next slide, please.

For the fourth quarter, we expect input cost headwinds of approximately 60 million, and that is primarily driven by seasonally higher energy costs, i.e., electricity in the Nordics and natural gas in US. Elevated fuel prices will also be a factor, in particular in region North America, where we see impact on both fiber, through higher harvesting costs, and also logistics.

Now, as I mentioned earlier, Nordic pulpwood costs have come down, as we have expected, and from here we see quite flat developments into the fourth quarter. Now, finally, energy prices are dominating a lot of the headlines these days, and I would just like to remind that we are well-positioned with integrated assets in both of our regions, and thus high self-sufficiency, and we also hedge majority of our energy price exposure quite far out in time.

With that, I hand it back to you, Ivar.

Thank you, Andrei. Some comments on cash flow and balance sheet.

As mentioned earlier, our cash conversion in Q3 was excellent, and 127% is certainly a number of strength. It all puts our year-to-date cash conversion in a good place.

Our balance sheet remains healthy, and leverage drops to 2 now at quarter-end. Our capex estimate for 2026 is a bit reduced versus early guidance, with some project costs in the US rolled over into 2027.

This is first and foremost a timing effect. It means that our current capex guidance for '27 is 2.6 billion SEK, base capex 2.1, and half a billion related to the last section of Broröd evolution, North America.

Right now, we don't have any further significant strategic capex project planned. To round it up, and next slide, please, in closing remarks on outlook for Q4, we do expect relatively stable and unchanged market conditions for both of our regions.

We have pricing actions in both our regions, and we would expect this impact to offset cost inflation. After a period of heavy maintenance activity, we will have now less annual shuts in Q4.

With that, I hand it back to operator for Q&A.

Good morning, everyone. Thanks for taking my question.

I just wanted to ask about the profitability in Europe region. How much of the margin improvement in this quarter is sustainable going into 2027?

What would be the margin level achievable given today's demand environment? Thank you.

Good morning, Ashish. I think if you look at the improvement we have seen in Europe, it's obviously, as I mentioned, it's our cost-out initiatives, which is sticky, if I can express it like that.

That's underlying profitability improvement we have in Europe. Then it's, of course, the price increases that we have implemented throughout the year.

Looking at the development into the fourth quarter, I mentioned we probably will see a gradual price increases, and for 2027, based on the positive momentum on pricing we have today, we would probably see additional impact also going into 2027.

If I can just maybe add one point from my side, just keep in mind that Q3 in Europe is always impacted by some vacation accruals and a bit lower activities. That amount is estimated to 150 million, which will come back in Q4.

I just wanted to add that on top of the comments of Andrei.

Thank you. Thank you so much.

Good morning, gents. Hello, everyone.

On sequential basis, did I hear you right, guiding for input cost headwinds of 60 million Q4 on Q3 on a sequential basis? Just want to clarify whether I got that right.

Also on the compensation front, what are you guiding for in terms of price improvement Q4 on Q3?

Good morning, Linus. Yes, at this point, we look at headwinds of around 60 million on costs.

It's roughly 50-50 split between the two regions. On pricing, at this point, we look at approximately 1% positive pricing development in both regions sequentially.

Now, of course, if you look at what's happening on the market, and also with the energy prices, a lot of the price increases that have been announced and that are now impacting were announced before the worsened situation we are in now within energy. We expect also that momentum will continue into 2027 and first half.

That we will need to come back to when we have some more quarter four under us, to speak.

Great. Super.

Then you took over operational challenges in your North American operations, anyway you could quantify that for the third quarter? Has that been resolved or does that have any sort of impact in the fourth quarter as well?

Good morning, Linus, I can take that one. We don't guide really specifically on those items.

I can say, if you look at some of the historical performance in North America, and look now at Q3, and taking out maintenance, it's a little bit lower than you would normally see. We had two dents, you can call it, that caused this quarter, and we had a little bit more downtime on the Escanaba mill after our annual shut.

That by default should be a one-off. We had a little bit lower runnability, or, if you can call it, mill efficiency.

It's part of the ramping up also now the packaging materials. That will be worked.

It's not fully resolved, but we see progress going already into the first weeks of [unclear] in October. I would expect us to take another step now in Q4 towards what we historically have seen as good performance in North America.

Cool. Then just finally for me, on the volume side of things in Europe, you did pretty well in the third quarter.

Any color on that? What drove that improvement, and is there any reason why Q4 is not going to look as good if you look on a year-on-year comparison, for instance?

Yes, Linus. I think if we look at the development in quarter three, I called out during my earlier comments, in particular strong deliveries within containerboard and sack.

I think if we look towards the fourth quarter, we feel that customers are managing or are careful about their inventories. We also see that orders are coming in quite late, because there is volume out there.

Standing here now in October, we would expect that, as we have seen previous years, that the inventories will be brought down in quarter four to manage the working capital position at our customers. Hence, at this point, our best outlook is that we will see somewhat lower volumes.

Sure. Now, I was more asking, wondering on a year-on-year basis, but I don't know if you can add anything.

No, I can take it. I don't think there's any specific per se.

It's been pretty good momentum going into Q3. We had nice runnability.

There's nothing specific per se that stands out. It's a little bit up versus Q2.

As Andrei said, we have strong order books also into Q4, but everything else equal, maybe slightly down just because of customer trying to manage carefully their year-end position. There's nothing else really out to be noted Q3 year-over-year.

Cool. Great.

Thanks.

Thank you. Sorry, just a couple of follow-up questions on costs.

Firstly, on the logistics side, of the 60 million sequential cost increases that you are talking about, would it be fair to say that most of it is logistics, given as if I heard you correctly, most of your energy is hedged? Could you give us a sense of your total kind of absolute logistics cost base, if you can, on a full-year basis?

Secondly, on the qualitative guidance around the different markets in the different regions, obviously Europe is normalizing. How far or how much below normal would you say Europe is?

Is it 10 or 20%, or is it two quarters out, in your assessment? Thank you.

Yes, good morning, Ephrem. I can start.

In terms of the cost headwinds into the fourth quarter, yes, that is primarily logistics. I would say of the 60 million in headwind, roughly 2/3 is logistics, but we will see seasonally higher energy costs as well.

As we're not 100% hedged, the spot share there will impact also quarter four. If you look at the total logistics costs for the group, it's roughly 3.5 billion for both regions per year.

Good morning, I can take the second one. It's a bit of a tough one to answer.

I think the sentiment in Europe has taken some steps from low levels, from the beginning of the year. The consumer sentiment has been muted for quite a bit of time.

You have to probably also go into a bit more specific on channels and categories to give it balance, but for us, food and beverages is the biggest channel for us in Europe, and that's performing pretty well, with some slight growth in the category, and obviously we've been benefiting of that. Industrial also has been pretty solid in the sense of Eastern Europe and what we could export out to Africa and Asia.

That has been, in some sense, good, and we foresee that will hold, certainly into the end of the year. Luxury is still very weak.

Cartonboard in particular is the category which still, I think, is a bit the sick man in Europe in the sense of our packaging space. There's just a lot of capacity out there, and that's where clearly we see that the demand is struggling the most.

Thank you.

Good morning. When you refer to higher prices going to be announced during the quarter, which segments, which products are we talking about then?

Hi, good morning, Martin. I think it's not very clear as an answer.

I think we can say that on sack, we know there will be price increase coming in from the beginning of '27. I think if I just spin out on what also Andrei talked about, we know that some of the pricing announcement that has hit us in Q3, they were done at energy levels, and especially gas prices in Europe, which was lower than we currently see now.

Looking now that if this continues, even speculating if there's a cold winter coming, then I think there's every reason to believe that this will continue. I think it's reasonable to say that both containerboard and also cartonboard will be benefiting that on top of our paper grades.

Nothing is really announced right now, but it's just when we look at where the market is trending, we see also some of the drivers that has been helping us so far in Q3. This is our best view.

Okay. Say on energy costs heading into 2027, do you care to give some guidance there?

Hi, Martin, I can provide some guidance. If we look at our positions now in terms of hedging, we have roughly 2/3 of our exposure hedged for 2027, and I think as we mentioned, we start to hedge quite early, three years before we enter the year, which means that it's not on the levels we are at now that we are hedging the most of it.

It should actually be pretty stable development year-over-year. We expect to have 80% hedged when we enter the year, and then 20% will be exposed to spot.

If you were to mark to market the entire portfolio, was that stable, or was that for the hedged part?

Sorry, Martin, can you repeat?

I think you said stable year-over-year in 2027 despite higher energy cost, or was that just a comment on the hedged part of the portfolio?

Yes, and then, of course, the spot exposure that we will have in 2027, yeah, will depend on what energy prices we will have. I'm unable to provide a guidance on that then.

I see. Excellent.

Thank you.

Morning. Thanks for taking my question.

I'd just like to follow up on the positive volume development in 3Q, and how that goes into 4Q for Europe. Am I right in assuming that majority of the positive volumes is containerboard and the kraft paper side, or was there some liquid packaging board volumes?

Then when you think into fourth quarter, which is the segments you think that the customers are managing the working capital? Is it more on the liquid packaging board side is the first one, and then I've got a follow-up.

I can start, and then maybe Andrei has some comments then. I think we have seen broad-based, pretty strong growth within the region Europe.

Most segments have had a pretty good run. When we look at, and this is not necessarily an answer that fits everyone, but there is, specifically for the European customers, pretty much across any category, it's a pretty hard discipline around year-end position.

It's a bit more leeway for the volume that goes overseas. There's a little bit longer delivery times at the moment, and trying to source the volume is of higher priority.

Everything else equal, we had a good run in Q3, our order books are pretty good, we would still expect a good volume performance in Q4, but pretty a little bit lower, just based on typically what we see on customers managing their year-end positions.

Then, you called out the CO2 loss of allowances into 2026 and quantified that. You made a comment in about 2027 losing something more.

Is there any kind of color you can give on loss allowances into 2027, if there's a quantified amount into 2027?

Good morning, Cole. I can take that.

If we look at 2026 to start with, we lost, as we've communicated, free allowance of emission rights, and that has historically been approximately half a billion of EBITDA impact since we've sold them. Now, instead, in 2026, we are now subject to carbon tax, and that's a headwind of approximately 100 million for us 2026.

Looking into 2027, there is still legislation and decisions to be made by the legislators, but our best guess right now is that we will not be subject to carbon tax, and we will instead be required to deliver the emission rights. Year-over-year into 2027, the impact should be pretty neutral, because they're more or less the same.

Thank you. Then you've done well on the capex side to make sure that you don't spend too much on capex, and you've given your 2027 capex guidance.

Could you just remind us, firstly on North America, what are the kind of the medium-term targets for those kind of packaging volumes between kind of boxboard and containerboard, just what you're trying to achieve out to 2030, just so we've got that as a reminder. You talk about no major strategic capex needs.

I remember a while ago, there was questions around recovery boiler replacements out in kind of 2030, anything that we need to think about there on the recovery boiler, or is that still quite far out for you that you don't need to make any investment decisions near term?

Hi, yeah, I can take that one, Cole. If I just start with Europe, yeah, I mentioned this already, there are no big items planned.

We do have a boiler in Gävle that at some point will need to be taken care of. Right now, we're not looking at any decision before 2030.

That's the latest data point we have there, and that we'll continue to monitor. I think in North America, what we said going into '26 is that we were targeting around 50,000 ton.

We probably come a bit lower than that when we close the books, and that's also partly because we had some tight supply situation around the summer, and partly had to prioritize some other categories. We do have a long-term target of reaching 300,000 ton when we come up towards 2030.

For that equation to hold, we will still targeting a pretty aggressive growth also going into '27 and onwards. This momentum continues.

We're getting more customer attention and trials and qualification, but momentum is solid. We can probably come back to that a bit more in detail when we come with our Q4 report for '27 expectations.

That's helpful. Thank you.

Sorry, I'll take the liberty to ask another one. Ivar, I never asked you this quarter on the views of sack and speciality kraft, considering the market's quite small, just some color on how it developed on the speciality kraft side, order books and demand, and then the similar for the white sacks and the brown sack grades.

Thank you.

I can do that, Cole, no problem. I think if I start with sack, it's pretty good positive momentum on both white and brown.

There is positive pricing impact from Q4 onwards on both grades. As earlier mentioned, we are targeting another pricing when we come into the beginning of '27.

Situation in Europe is a bit wait-and-see. There's a lot of last-minute orders.

Construction, where we have our cement bags, is down, while food and bulk, that's up with a couple of percentage, and that's mainly the white sack. Situation Europe's stable to slow, and it goes into the same camp earlier mentioned that customers are afraid to sit on high inventory by year-end.

Overseas, it's better. It's quite long lead times, and customers are in a pretty more positive spirit.

Strong in Northern and East Africa, LatAm and Asia on brown sack, and construction sector is actually performing a bit better than we thought some quarters ago. We also have some very good products into there, we have this QuickFill Plus XL, and that has been a recent innovation that has been performing extremely well so far, and we are really happy.

Then more on the speciality paper, yeah, there's been pricing coming in from the beginning of the quarter that has held. We are pretty fully booked on all of our MG machines, and that's something that we're going to Q4.

Having said that, it is starting to slow down towards the end of the quarter, and we also expect here customers to kind of die it down towards the end to avoid sitting on too much inventory. It's also here in Europe, orders coming in on short notice.

Interleaving paper in Asia is also dropping now quite heavily towards the end, but pretty okay. We also expect some pick-up on medical papers, due to our latest innovation on SteriKraft and PharmaKraft, but honestly that will also maybe come more credibly when we're into '27.

Yes, just one last follow-up on pulpwood is you called out stable into Q4. How should we think about that now is should we be thinking about wood cost effectively stable from here, because even though index prices may be lower, it's offset by costs to the mill gate with diesel?

Just some guidance Q4 and into 2027 how you see wood costs developing.

Looking at 2026, Cole, I think our expectation of pulpwood costs coming down has materialized. That has of course been supported by the storm volumes that we have seen in Mid Sweden, to some extent, as you say, offset by higher diesel prices.

For Q4, we're pretty sure where we will stand. Looking into 2027, this is probably where we will start seeing impact of the storm volumes being taken care of.

I think for 2027, our best estimate right now will be flat cost compared to 2026, which means that we are actually expecting that when storm volumes are out, we will have slight increase on prices. On average, '27 versus '26 should be stable at this point.

Thank you.

That concludes this conference. Thank you all for your interest and for participating, and welcome back the 2nd of February, when we report our Q4 and year-end results.

Thanks, and goodbye.