EBITDA (Full Year 2024): SEK7.1 billion, with an EBITDA margin of 35%. EBITDA (Q4 2024): SEK1.65 billion, with an EBITDA margin of 32%. Net Sales (Full Year 2024): SEK20 billion, a 12% increase. Net Profit (Full Year 2024): SEK3.6 billion, or SEK5.18 per share. Net Profit (Q4 2024): SEK820 million, or SEK1.17 per share. Proposed Dividend: SEK3 per share, up from SEK2.75 last year. Forest Assets Valuation: SEK107.3 billion, in line with last year. Industrial Return on Capital Employed: 7% for the full year 2024. Leverage: 1.5 times. Net Debt-to-Equity: 11%. Harvesting Volumes: Record high at over 5.2 million cubic meters in 2024. Sales Increase (Q4 2024 vs Q4 2023): Forest segment up 16%, Wood segment up 12%, Pulp segment up 27%, Containerboard segment up 11%. EBITDA Increase (Q4 2024 vs Q4 2023): Wood segment up 260%, Pulp segment up more than 300%. Planned Maintenance Costs (Q4 2024): SEK338 million. Operating Cash Flow (Full Year 2024): Just below SEK3.2 billion.

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Release Date: January 31, 2025

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

Svenska Cellulosa AB (SVCBF) achieved an EBITDA of SEK7.1 billion for 2024, with a strong EBITDA margin of 35%, despite higher wood raw material costs. Strategic investments in Obbola and Ortviken have led to increased production capacity and higher delivery volumes, contributing to future productivity and cash flow. Record high harvesting volumes of over 5.2 million cubic meters were achieved in 2024, supporting a stable supply of wood raw materials. The company proposed a dividend increase to SEK3 per share, reflecting a commitment to providing a stable and increasing return to shareholders. Svenska Cellulosa AB (SVCBF) has successfully ramped up its wind power capacity, reaching around 10 terawatt hours, which is 20% of Sweden's installed wind power capacity.

Negative Points

Higher costs for wood raw materials negatively impacted profitability, despite efforts to offset these with increased harvesting and strategic investments. The Renewable Energy segment faced challenges due to lower green premiums for tall oil and liquid biofuels, influenced by lower blending mandates and increased imports from China. Electricity prices were low during the quarter, negatively affecting the Wind business. The Containerboard segment experienced a 17% decline in EBITDA due to planned maintenance stops and higher raw material costs. The market for solid wood products remains slow, with only slight improvements seen in the repair and remodeling sector.

Story Continues

Q & A Highlights

Q: Can you provide guidance on the expected volume increase from Obbola in 2025 compared to 2024, and discuss the cost improvements as production stabilizes? A: We anticipate a 15-20% increase in output from Obbola in 2025 compared to 2024. We are still in the ramp-up phase, which involves occasional stops for adjustments. Regarding cost improvements, we had ramp-up costs of around SEK60-70 million this quarter, which will decrease over time. Once fully ramped up, Obbola is expected to contribute SEK800 million to SEK1 billion in total EBITDA, assuming trend prices. - Ulf Larsson, CEO, and Andreas Ewertz, CFO.

Q: You mentioned that the market cycle has bottomed out. Are there any risks of setbacks, particularly in the Pulp segment where price hikes are planned? A: While market risks always exist, we currently see stable demand in the Pulp segment, with stock levels decreasing. The net price is similar across China, Europe, and slightly higher in the US, which is a good foundation for further price increases. We also anticipate a seasonal price increase in solid wood products due to higher wood raw material costs. In Containerboard, despite a recent price reduction, we feel the market is balanced, and we have announced a price increase effective March 1. - Ulf Larsson, CEO.

Q: Regarding the announced EUR90 price increase for kraftliner, is this driven by cost inflation or demand factors? A: The price increase is primarily driven by cost pressures, including higher pulp and pulpwood prices. While kraftliner inventories are slightly high, we see strong demand in the retail sector and some improvement in the manufacturing industry. The cost pressure is the main reason for the price increase. - Ulf Larsson, CEO.

Q: Can you discuss the ramp-up costs for Obbola and the CTMP mill throughout 2024 and expectations for 2025? A: For Obbola, ramp-up costs were around SEK60-70 million per quarter in Q1 and Q2, similar to Q4. These costs will gradually decrease as production stabilizes. The CTMP mill's ramp-up costs are less significant, and we are at a good level now. We expect some ramp-up costs to continue in 2025 but anticipate a gradual reduction. - Andreas Ewertz, CFO.

Q: Are you interested in acquiring more forest land, particularly in the Baltics, given the current market opportunities? A: We are generally interested in acquiring forest land, as it aligns with our strategy. However, the current focus is on consolidating our balance sheet and ramping up recent investments. We are not involved in the current sale in Sweden due to limitations, but the Baltics remain of interest, depending on timing and affordability. - Ulf Larsson, CEO.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

This article first appeared on GuruFocus.

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