Stora Enso Oyj

OMXH:STERV

Earnings Call Transcript

[Hans Sohlstrom, executive]

Hello, everyone, and welcome to Stora Enso's Fourth Quarter 2024 Results Presentation. Thank you for joining us today. I'm Hans Sohlstrom, the President and CEO of Stora Enso, and I'm here with our new CFO, Niclas Rosenlew.

Today's presentation is titled Improved results in challenging markets. We will today guide you through our performance for 2024, and we will address any questions you might have towards the end.

Before we start the formal presentation, let's take a moment to look at this image of the lobby in our new headquarters in Helsinki where we moved last autumn. This remarkable mass timber building owned by the Finnish insurer, Varma, is the largest of its kind in Finland, and it's a new low-carbon marvel, capturing attention across the architectural world.

The structure is composed of over 2,000 bespoke load-bearing wooden elements produced by Stora Enso. Choosing wood over concrete for the structure resulted in a significant 35% reduction in greenhouse gases. Besides having a lower carbon footprint than concrete, wood also has the unique ability to store carbon. No other commercially available building material offers this benefit. It's more than just a building. It embodies nature at its core.

Now let's shift our focus to the key highlights of the full year 2024. In the full year 2024, we achieved a robust 75% year-on-year growth in adjusted EBIT. This success is a result of our focused actions on improved sourcing, enhanced operational efficiency and commercial excellence despite challenging market conditions and rising wood costs.

We reduced our fixed costs by EUR 110 million. And all profit improvement actions more than offset wood cost escalation.

I'm also very pleased that we reached an all-time low operating working capital, which, in the last 18 months, has decreased by more than EUR 700 million, meaning a reduction in operating working capital to sales from over 14% to 7%.

All in all, it's been a year of significant progress, and it's satisfying that our efforts and improvement actions are starting to bear fruit.

In our fourth quarter last year, we announced our plans to sell approximately 12% of our forest assets in Sweden. We are actively engaging in discussions with several potential buyers. In addition to strengthening our balance sheet, it would also underscore the economic value and resilience of our forest holdings.

A key focus in 2025 is the successful ramp-up of our new packaging board line in Oulu, Finland. In connection to that, we signed an agreement to acquire 100% of the Finnish sawmill company, Junnikkala, to secure cost-efficient wood supply to this new packaging board site in Oulu and to support Stora's Enso Wood Products division with new production assets.

Furthermore, reflecting our commitment to shareholder value, the Board will propose a dividend of EUR 0.25 per share, up from EUR 0.20 last year, with payments scheduled for Q2 and Q4 of this year.

In 2025, we need to continue to enhance efficiency, performance and reduce costs, which will be crucial for our success despite the subdued demand forecast.

Let's now take a closer look at the detailed financial results. Following a challenging year in 2023, the market began to gradually recover in 2024, although consumer confidence and spending have not yet fully rebound.

Market uncertainties and fluctuations in demand and pricing persisted throughout 2024. Full year sales declined by 4% to EUR 9 billion, primarily due to capacity closures and divestments in 2023. However, sales for continuing businesses increased by 1%, mainly driven by higher deliveries.

In 2024, as I mentioned earlier, we increased our adjusted EBIT by 75%, reaching EUR 598 million. This improvement was supported by higher deliveries across all divisions.

We reduced our fixed costs by EUR 110 million and countered the continued escalation of wood costs through efficiency improvements and reductions in other variable cost categories. Including mill closures, our fixed costs decreased by EUR 155 million.

The fourth quarter sales increased to EUR 2.3 billion, and the adjusted EBIT increased to EUR 121 million, marking a 139% increase from the same quarter of previous year, which had seen notably low levels. Although wood fiber costs increased significantly, the improvement was driven by higher sales prices and volumes as well as cost-saving actions.

Let's dwell deeper into the key factors that influenced the adjusted EBIT for the full year. Increased -- in 2024, profitability improved by EUR 256 million to reach EUR 598 million, with the adjusted EBIT margin increasing to 7% from 4% the year before. Lower sales prices, primarily in packaging, were offset by clearly higher volumes despite the political strikes in Finland in the first half of 2024.

Stora Enso made significant strides in profit improvement, working capital reduction and value creation actions. This progress was achieved through improved sourcing, operational and commercial efficiencies across all divisions. Lower variable costs contributed to increased profitability as a rise in pulp wood cost was more than offset by reductions in other variable costs, particularly in energy and chemical expenses. As mentioned earlier, fixed costs were reduced by EUR 110 million on a comparable level, thanks to cost-saving measures.

As a result of these efficiency improvements and cost-saving actions across the entire company, we were able to deliver a significantly higher adjusted EBIT. However, we are still far from our long-term financial targets, and our systematic, determined efforts to improve profitability will continue.

Next, we will explore the progress of our capital expenditures as we approach the completion of the heavy investment phase. In 2024, additions to fixed and biological assets amounted to slightly over EUR 1 billion, consistent with the level recorded in 2023. A key focus and a great part of the strategic CapEx has been the build of our new packaging board line in Oulu. The investment is scheduled, and production ramp-up is expected to commence in the coming months. Production will start with small volumes and lower grades, with full capacity anticipated during 2027.

Now that the heavy investment phase is concluding, the average range of capital expenditure expected to return to the historical average between EUR 600 million and EUR 800 million per year after -- as from this year onwards. The remaining CapEx related to the Oulu investment is approximately EUR 160 million, with total CapEx expected to be around EUR 730 million to EUR 790 million in 2025.

Having reviewed now our CapEx, let's now explore how these investments strategically position us for robust growth in fiber-based packaging sector. We are well positioned for growth in fiber-based sustainable renewable packaging. Looking at the growth numbers for fiber-based packaging, we see a trajectory of steady annual growth rate of 2% throughout 2033. With our strategic investments in Oulu in Finland and De Lier in Belgium, we will be better positioned in growing packaging segments for the future.

On the previous slide, we discussed the ramp-up of our Oulu site in Finland. During 2027, site is projected to reach full production capacity of 750,000 tonnes annually, meaning EUR 800 million in top line growth. This investment targets key segments such as food, drink and chilled goods primarily in Europe and North America. Thanks to produced transfers between our mills, the Oulu investment increases our total consumer board offering and capacity in a total of about 50 million tonnes per year market, thus representing about 1.5% of global demand when fully ramped up in 2027.

Our investment in a new state-of-the-art corrugated packaging side in De Lier in Belgium enhances our long-term competitiveness in Western Europe. The site will increase our corrugated capacity by approximately 20% and will reach full operation during 2026. Products primarily include boxes and trays for fresh products, industrial applications and e-commerce.

In October last year, we terminated the divestment process of our consumer board packaging site and forestry business in Beihai in China. Since initiating the divestment in late 2022, global increases in wood and logistic costs have improved the Beihai site's relative cost competitiveness. The potential for further development and enhancement of the site now surpasses the value of any possible transaction. The Beihai site will reinforce Stora Enso's role as a leading global supplier of premium packaging board and food, drink and 2 other segments, serving both existing and new customers in the vast Asia Pacific region and primarily in China, which is the world's largest liquid packaging board market.

We will now move on to take a look at the performance of the divisions. In 2024, the Packaging division accounted for nearly 60% of our external sales, with Biomaterials, Wood Products and Forest each contributing about 15%. With the ramp-up of the new investment in Oulu, the share of Packaging is expected to increase further.

One of the challenges during 2024 has been the ongoing volatility, market weakness and rising wood costs. To address these challenges, our targeted actions mentioned earlier have made significant progress across all divisions.

Packaging Solutions faced challenges with overcapacity and market volatility in 2024. However, Packaging Materials and Biomaterials showed significant adjusted improvement from the 2023 levels. Wood Products' adjusted EBIT improved as well but remained negative, while Forest continued and even improved its strong operational performance throughout the year, reaching record-high result levels.

Now we'll take a closer look at the details of the performance per division. Packaging Materials faced a challenging quarter due to weak market cycle and planned annual maintenance shutdowns, primarily in consumer board units, which affected profitability. Sales rose by 5% to EUR 1.1 billion, driven by higher containerboard prices and increased consumer board volumes. Consumer board price increases were successfully implemented on renewed contracts, but containerboard prices started to decline towards the end of the quarter for both recycled and virgin fiber grades following declining recycled fiber prices. And order inflow remained weak across all segments during the fourth quarter. Adjusted EBIT increased by EUR 37 million from last year but was still negative at EUR 6 million.

Now continuing with the Packaging Solutions division, where we continued to navigate through challenging market conditions. Packaging Solutions continues to face margin pressure due to market overcapacity. Sales remained stable at EUR 247 million, with higher volumes but lower prices. Adjusted EBIT fell to a negative EUR 6 million. Profitability was adversely impacted by price pressure and higher containerboard costs while the ramp-up of the new corrugated packaging site in the Netherlands continued.

Let's take a look at the Biomaterials division. Despite the generally soft market, the Biomaterials division was able to enhance both sales and profitability. Additionally, the division achieved strong deliveries, which supported its performance despite challenging market conditions. Volumes increased due to a changed sequence of planned annual maintenance shuts compared to last year. Sales prices in Europe increased year-on-year. However, sequentially, pulp prices decreased across all pulp grades and markets. Adjusted EBIT rose by EUR 32 million to EUR 67 million, driven by higher sales prices, cost-saving actions and increased emission certificate sales.

Shifting focus to the Wood Products division. It was impacted by continued low demand. The generally weak markets continued for the Wood Products division. Although demand was stronger year-on-year, it remained suppressed due to lower construction activity. Sales increased by EUR 57 million to EUR 400 million due to higher prices and volumes for sawn goods. The demand for cross-laminated timber and laminated veneer lumber remained suppressed. Adjusted EBIT improved by EUR 15 million but was still negative at EUR 12 million. The increase was driven by higher volumes and prices, which offset the increase in raw material costs. Ongoing cost-saving measures helped to improve the results.

Now let's have a look at the Forest division that continued its strong performance also this quarter. Forest division had a robust result driven by increased wood prices, strong demand and good operational performance in all areas. Demand for all wood assortments remained high in the Nordics. Sales increased by EUR 134 million to EUR 784 million due to higher volumes and prices. Prices increased year-on-year and slightly quarter-on-quarter. Adjusted EBIT increased to EUR 81 million, reflecting strong operational performance in the group's forest assets and wood supply.

Let's move on to take a look at the development of the fair valuation of our forest assets. We are pleased to report a continued steady increased forest value of EUR 8.9 billion, which translates to EUR 11.28 per share. This improvement underscores the strength, enduring value and potential of our forest assets. The year-on-year increase of EUR 163 million was mainly driven by increase in estimated wood prices and standing stock in the Swedish assets.

Now I will hand over to Niclas to go through the details of some key financials.

[Niclas Rosenlew, executive]

Thank you, Hans, and hello, everyone, and very happy to have joined this great company and actually look forward to meeting many of you in person here going forward.

As Hans commented, there was a clear improvement in profitability in 2024. This was a result of the efforts across the company to improve sourcing; increase operational efficiency, for instance, in mills; and the ongoing work within commercial activities such as pricing and portfolio. Also cost reductions, as Hans commented, was a focus area throughout 2024. And while we are still far away from our target performance levels, it's good to see that we are moving in the right direction.

Our net debt continued to increase somewhat in Q4 to EUR 3.7 billion. This was driven by the near-final stages of the Oulu investment. However, our net-debt-to-adjusted-EBITDA ratio continued to improve also in Q4 and ended at 3x. Our net-debt-to-adjusted-EBITDA target remains at 2x, and we continue to work our way towards it.

Besides performance improvements, we are preparing to sell approximately 12% of our forest assets in Sweden, as announced in the fourth quarter and as Hans commented on. And the same -- this move aims to further reduce our net debt and increase our financial flexibility.

When it comes to our operating working capital, we saw a clear improvement throughout the year. This was thanks to dedicated and focused actions. And the working capital ended at a record low EUR 544 million in the fourth quarter. This was actually a reduction of more than EUR 700 million since the peak some 1.5 years ago. The operating working capital to sales was 7% in Q4, actually a record low, down from 14% at the peak.

If we then move on to cash flow. The full year cash flow from both operations and after investment activities improved compared to last year due to the actions taken to improve profit, on the one hand, and lower working capital or reduced working capital. As previously mentioned in the presentation, we have had quite high investments in both 2023 and 2024, driven by the strategic consumer board expansion at the Oulu site.

The investments in Oulu are now getting close to completion and this means total investments in 2025 will go down from roughly EUR 1 billion in 2024 to an estimated below EUR 800 million in 2025 and thus also support an improved cash flow.

In the fourth quarter, the cash flow from operations was at a reasonably solid and stable level at EUR 325 million. And cash flow after investing activities improved to EUR 88 million due to less cash spent on CapEx.

And with that, let's switch from financials to sustainability. And back to you, Hans.

[Hans Sohlstrom, executive]

Thank you, Niclas. Our growth is driven by global megatrends and sustainability, which not only offer us strategic advantages but also sharpen our competitive edge. In line with this, we remain committed to our sustainability targets.

We are actively focusing on critical areas such as climate change, circularity and biodiversity while also supporting our customers' sustainability goals. I'm particularly pleased to share the significant progress on our path towards climate neutrality and our long-term commitment to sustainability.

By the end of 2024, we achieved a 53% reduction in Scope 1 and 2 emissions, surpassing our target of a 50% reduction by 2030 from the 2019 base year. The decrease is mainly due to efforts in both reduction measures such as fuel switches and the impact from site and production line closures.

We have reduced Scope 3 emissions by 39% from our 2019 levels, aiming for a 50% reduction by 2030. In terms of circularity, our products are now 94% recyclable, with a target of 100% by 2030.

Now moving on to the sequential market and business outlook for the first quarter. I will now cover the sequential market and business outlook for this quarter, Q1, compared to the previous quarter, Q4 2024.

Overall, we expect demand to remain subdued and volatile, mainly due to macroeconomic confidence and ongoing geopolitical uncertainty. We also anticipate that wood prices will continue to be high.

Let's begin with the Packaging Materials division. Here, demand continues to be soft, yet we expect a rise in consumer board volumes following maintenance and the typical low seasonal demand in Q4. However, it's important to note that margin pressures are still present due to the high costs of wood fiber. Price increases have been achieved in some consumer board segments, and price increases have been announced in containerboard markets this quarter. The division's average price level is expected to remain stable quarter-on-quarter.

The Packaging Solutions division still navigates through market volatility and overcapacity, which continues to impact demand. Despite these challenges, we see stability in Q1 European volumes, with gradual normalization in China, but high costs from containerboard and new site ramp-up limit margin expansion.

Looking at Biomaterials, the pulp market is nearing a cyclical low, with supply curtailments helping balance in the market. Price increases have been announced, with effects expected in Q2 of this year. However, demand continues to be uncertain, shaped by economic and geopolitical factors.

For Wood Products, the outlook for classic sawn products remains stable despite lower demand. Slight price increases are driven by escalating raw material costs, while construction activities anticipated stay subdued.

In the Forest division, wood demand is projected to remain robust. This is despite decreased consumption in pulpwood, which has been driven by cutbacks in the packaging and pulp sectors.

Given these market dynamics throughout 2025, we need to keep pushing forward with our actions to cut costs and strengthen our operational and commercial excellence. Our goal here is to improve our operational performance and competitiveness.

With this outlook, I will move to the key takes and how we are building a stronger future.

To conclude this presentation and before we open the floor for your questions, I'd like to emphasize that we are truly powering ahead. Our financial results and strategic initiatives demonstrate our strong position and commitment to growth, all made possible by the hard work and dedication of our team.

Let's take a moment to reflect on these critical achievements. In 2024, we achieved 75% growth in adjusted EBIT, driven by improved sourcing, commercial and operational efficiencies alongside a significant reduction in operating working capital by over EUR 700 million and a EUR 110 million cut in fixed costs. And all profit improvement actions more than offset wood cost escalation.

All in all, it's been a year of significant progress, and it's satisfying that our efforts on improvement actions are starting to bear fruit. We remain dedicated to further improving financial performance and cost efficiency in 2025 to ensure continued success.

And now we are ready to take your questions.

[Operator]

[Operator Instructions] Our first question is from Ephrem Ravi at Citigroup.

[Ephrem Ravi, analyst]

I'll stick to two questions. Firstly, on the CapEx slide on Page 5. The EUR 600 million to EUR 800 million of CapEx from 2026 onwards implies probably still EUR 200 million to EUR 500 million of strategic CapEx, just looking at the different parts of the bar chart. Once Oulu has kind of ramped up, can you indicate what are the main strategic CapEx items you're looking at going forward?

And secondly, on the working capital reduction to 7% of sales is pretty impressive, and a large part of it looks like reduction in receivables. Just wondering, a, do you think this is a sustainable long-term level, the 7%? And b, are there any margin implications of this reduction? Typically changes in payment terms does come with some changes in prices and discounts in my experience.

[Hans Sohlstrom, executive]

Thank you very much, Ephrem. First of all, yes, this projected CapEx levels includes also strategic investments, correct. We have a pipeline of a lot of attractive opportunities, which I will not disclose here. But of course, one strategic opportunity that we have disclosed before is the Langerbrugge newsprint mill conversion to testliner because that, actually together with the acquired De Jong facility, will form a very competitive entity.

The Langerbrugge paper mill is located close to our acquired De Jong facility. And with the ramp-up of the new corrugated box plant there in De Lier, in De Jong, this site actually will be the world's largest corrugated box facility when fully ramped up, combined then with a converted newsprint line into testliner located close by. Also that one will be the most cost-efficient unit when they've converted.

But there are no decisions about this conversion and no time line more precisely there. But this is just one example, which just happens to be public information.

And then when it comes to the working capital, 7% of sales, we are working on all levers of operating working capital, meaning receivables, inventories and also payables. And we are continuing our systematic work. This is -- we still have efforts, and we are taking actions to improve our working capital efficiency even further. So I see this absolutely as sustainable over the annual seasonality, of course.

[Operator]

Our next question comes from Lars Kjellberg at Stifel.

[Lars Kjellberg, analyst]

Coming back a bit to a couple of comments that you made. You talked about a strong focus on growth, but also the need, of course, to improve profitability. And if I look at where you stand today, you're about 40% below 10-year average. And 2024, as much as you improved costs, it's the second-lowest profitability since 2013. So of course, there's quite a lot to do.

So when it comes to real structural profit improvements, because taking out costs tends to be diluted over time through cost inflation, you're now about to start up Oulu, which, of course, should be a lower-cost milling system, but in an environment with high -- or sorry, slow demand and low operating rates. Wouldn't this be time to take some structural actions to make way for that machine to ease into the market? That's my first question.

The second one is more related to your performance in Packaging Solution, which is way below most of the peers and going in the wrong direction. The real question there is what are you doing wrong? You shouldn't be losing money in the converting business. And all those sources really related then to the significant costs around the De Lier startup. And when should we expect this business to turn?

[Hans Sohlstrom, executive]

Thank you very much, Lars. So first of all, we are working in a very systematic and determined way on improving our cost efficiency across the whole company. We have, in fact, thanks to this systematic work, where we have been going through every mill, every operation, every part of our company, we have identified 3,600 improvement actions. They relate, for instance, to improved energy efficiency, improved utilization of our raw materials, including wood, chemicals, a recipe development that changes as well as also fixed-cost reductions across the board, efficiencies in sourcing and also commercial aspects of pricing and product mix optimization.

So these 3,600 initiatives are being worked on. And we have, in total, 770 project owners in the whole company working on these actions. And in fact, last year, despite EUR 300 million increase in our fiber costs, mainly wood costs, we managed to improve our operational EBIT by 75%. So our actions, clearly, it surpassed the negative impact of wood cost increases. Then -- so we have -- and we have seen the beginning -- we have seen only the beginning of what we can do in improving the efficiency of our company.

When it comes to our Oulu 750,000 tonnes investment, the new consumer board line, as you could see also in our presentation material, the whole consumer board market globally is, in total, a 50 million tonne demand per year. And in fact, this consumer board line, even if it is focusing into folded boxboard, it actually, through product transfers, is increasing our capacity also in liquid packaging board and foodservice board, thanks to the product transfers between the mills.

So in total, we are bringing -- when fully ramped up in 2027, we are bringing 750,000 tonnes additional capacity to a 50 million tonne market, meaning 1.5% capacity addition. So less than 1 year of demand growth when you look at the trend growth figures. So of course, the ramp-up of Oulu, 750,000 tonnes will be gradual, and we hope to start soon. And then as I said, fully ramped up in 2027. And when fully ramped up, this will give us EUR 800 million of additional growth.

Naturally, we are very -- analyzing critically the cash flow and the forecasted net present values of all our assets. And if needed, we'll take actions based on that. But currently, we don't have any plans of any capacity closures to make it very clear.

When it comes to our Packaging Solutions division, first of all, I want to highlight that when you compare with key competitors such as Smurfit, Westrock, IPDS Smith, they actually don't disclose separately the profitability of their converting part. They actually report the profitability of the total value chain from containerboard, including box making, so containerboard and corrugated plants together. So therefore, of course, the comparison is not quite comparable.

However, having said that, we are absolutely unsatisfied with the performance of our Packaging Solution, and we are doing a lot of actions and taking measures to turn this business around to improve the profitability levels. We have a new divisional leader in place since November of last year, Carolyn Wagner, who comes from this industry. She has 30 years of experience in operations, sales, general management, P&L leadership in corrugated business, and she has a very clear plan in place with her team to turn this business around and to improve the profitability.

[Operator]

Our next question comes from James Perry at Citi.

[James Perry, analyst]

I'd like to ask about the forest. You obviously recognized a forest asset fair value gain due to the higher transaction prices. Some peers, though, have recognized lower forest trend pricing in Sweden. Might you be able to comment on how you see the transaction volume dynamics from here and the pricing? Should we expect any slowing? Or do you think we're past the worst?

And secondly, on wood costs. Similarly, we've heard peers talk about Nordic wood cost inflation is stabilizing. Would you say you're seeing a similar plateau emerge?

[Hans Sohlstrom, executive]

Thank you, James. So starting with the latter part of your question, wood costs outlook, the short answer is yes. I mean we see wood costs stabilizing.

And then when it comes to the fair value of our forest assets, first of all, I think it's important to recognize that the forest companies also calculate the fair value in different ways. We are basing our fair value on the, let's say, done deals during the last 3 years. So we take a longer perspective for our fair valuation of our forest assets, whereas some of our competitors are perhaps looking into other ways of valuing their forests. And we saw an increase in fair value in Q4 of last year following basically the very long trend that we have seen for many, many years in the Nordic -- in Nordic forests.

And I don't want to take any perspective on the future development there, but that's where we are today.

[Operator]

Our next question comes from Andrew Jones at UBS.

[Andrew Jones, analyst]

Hans, just a quick question on Oulu. I mean, I guess, obviously, you're flagging minus EUR 100 million this year. When do you expect it to reach EBIT breakeven?

And just on the sales plan, I mean, you talk about a 50 million tonne global market. But obviously, in Asia, we have massive overcapacity on the consumer board side. In the U.S., there's a lot of potential risk that tariffs might be imposed. I guess the U.S. was originally in the sales plan for this new mill. Where are you planning to place those volumes as the U.S. is still a major part of it?

And just as a follow-on to that, can you just remind us about your sales into the U.S. in various grades in recent times?

[Hans Sohlstrom, executive]

Yes. Thank you very much, Andrew. Yes. First of all, when it comes to our Oulu consumer board line, we are not yet guiding any EBIT breakeven. We might come back to that later during the year. Let's first start up the machine and the mill. And as we have mentioned in our report, we estimate that there will be roughly an approximately EUR 100 million negative EBIT impact primarily during the first half of the year. This comes both from the startup and start the ramp-up but also from increased depreciations, of course.

Then yes, you are absolutely right that the 50 million tonnes of consumer board also includes Asia as a major market. So that's the global market. We are primarily looking to -- the majority of the new consumer board line sales will go to Europe, but then also a significant part is planned for the U.S.A. We have been ramping up and preparing for that business development already since a long time.

Today, actually, U.S. represents less than 5% of our group sales, so we have a position in certain board grades and consumer board grades in the U.S. today, but it's not a very strong position -- or it's not significant sales today. But as said, we have now, for more than a year, been preparing to ramp up sales in the U.S. We have invested in our sales force, technical customer service and in our customer relationships for this.

[Andrew Jones, analyst]

And if tariffs were imposed, I mean, how would that change your plan? I mean, what's Plan B in that context?

[Hans Sohlstrom, executive]

Well, we don't want to speculate with the tariffs. As such, a 10% tariff would not have a significant impact. But of course, there are -- if there are more major and more important tariffs, there are both direct and indirect impacts. I want to underline that today, the U.S. market represents less than 5% of our group turnover.

And I have to also underline that there is so much uncertainty around the tariffs. And depending on what tariffs will be imposed, there can be positive impacts, but there can also be negative impacts. So I think we need to keep both in mind.

[Operator]

Our next question is from Charlie Muir-Sands at BPN (sic) [ BNP ].

[Charlie Muir-Sands, analyst]

It's Charlie Muir-Sands from BNP Paribas. Firstly, just on the Packaging Materials division. A couple of your competitors have announced attempted containerboard price hikes recently. I just wonder whether you had yourselves attempted to do that as well or whether you'd seen that. And what kind of likelihood of success you thought was realistic for that given it's only just come back down again?

And then secondly, on the cost savings, can you say how much of the fixed cost savings that were due to come through in 2025 are already reflected in the Q4 performance? And how much is left to come through in the year ahead on the fixed cost side?

And on the other work streams like procurement and operational excellence, are you now at a position where you perhaps could put some quantification around the potential scale of cost savings you might be able to deliver over the next couple of years?

[Hans Sohlstrom, executive]

Thank you very much, Charlie. Well, first of all, containerboard prices, we normally don't disclose through a press release or similar our price increases. We have informed our containerboard customers already several weeks ago. They have received price increase letters from us, as said, already several weeks ago. And we see that equal to last year, this is a relatively similar type of a situation where there is clearly cost driven -- cost push reasons for the containerboard industry to increase prices. So we are, of course, also very keen to increase our prices. That's for sure.

And then when it comes to our cost-saving measures, we decreased our fixed costs by a total of EUR 110 million last year. We announced in the beginning of last year that we are starting a new cost reduction -- fixed cost-reduction program aiming at EUR 120 million in total in -- fully -- with full impact in this year. A part of that was visible during the second half of last year, but the majority is to come during this year.

You saw also in our report that during last year, our number of FTEs decreased by more than 1,300. So we are continuing on focusing on streamlining the company and making us more cost efficient, both through variable cost and reductions and fixed cost reductions.

When it comes to your question about our work, our systematic and determined work in improving sourcing, operational efficiency and improving and reducing our variable costs. Here, I would refer to the bridge that we have in the material where you can basically see that despite EUR 300 million for the full year -- despite EUR 300 million of increased wood and fiber costs, we managed to save actually much more in variable costs than wood costs went up. So -- and that contributed to improve the adjusted EBIT for the full year of 75% in total.

[Operator]

Our next question comes from Patrick Mann at Bank of America.

[Patrick Mann, analyst]

Maybe just a follow-up from Charlie's question there on the fixed-costs savings. So if I look at bridge for 2024, you're showing EUR 110 million cost savings at fixed costs which, to me, kind of implies there's only EUR 10 million to go into 2025. But then you're also saying there's -- the majority of the benefits come in 2025 only. So maybe if we think about the bridge in '25, what would we see there? Is it only EUR 10 million? Or is there more to come?

And then my second question is, if you could just give us an idea on the progress for the forest sale and how we should think about the potential timing for that? Is there any steer you can give us on when you think you might be in a position to conclude a sale?

[Hans Sohlstrom, executive]

Thank you, Patrick. First of all, there is definitely more to come on the fixed-cost reduction. EUR 110 million of fixed-costs reduction in 2024 is on a comparable basis. In fact, when you look at the total fixed-costs reduction, we reduced fixed costs by about EUR 150 million, including capacity closures by the end 2023. But the comparable, excluding capacity closures, the reduction was EUR 110 million. Part of this was from earlier agreed fixed-costs reduction programs, and that's why I'm saying that a major part is still to come then during this year, out of the EUR 120 million, which we announced in the beginning of 2024.

When it comes to our forest sale, we are in negotiations with several potential buyers. And therefore, I don't want to comment on value or timing. It is clear that for us, a good deal and a valuable deal is the most important, more important than timing. So we will do a diligent good work also here in this process.

[Patrick Mann, analyst]

Is there any chance you can give us an indication of how much of the EUR 120 million is still to come?

[Hans Sohlstrom, executive]

No, we don't disclose. I mean we will see the full EUR 120 million impact of the program that we have that started in January. But as said, within the EUR 110 million, there is a part from this program, and there is a part from earlier-started programs.

[Operator]

Our next question is from Pallav Mittal at Barclays question.

I'm going to take the next question from Cole Hathorn at Jefferies.

[Cole Hathorn, analyst]

Hans, you've spoken a lot about the variable cost and efficiency program, but it's very difficult from the outside in to put a number on that. Is there any quantification or any numbers that you can provide to help us for the relief that you might see into 2025? I know it's a difficult question, but any help there would be useful.

And then following up on CapEx. Given there is strategic CapEx in the future years, I'm just wondering what the focus is for Stora Enso for that CapEx. Is this more cost takeout efficiency CapEx given that most of the markets that you're exposed to are in oversupply, particularly in Packaging Materials? So just wondering if that CapEx is more cost focused or there are growth projects. And if there are growth projects, how can they be justified in an oversupplied market?

[Hans Sohlstrom, executive]

Yes. Thank you very much, Cole. First around the strategic CapEx. I mean we have in the pipeline, both cost competitiveness and efficiency improvement CapEx as well as also growth investments. But I absolutely agree with you that the timing needs to be right from a market demand perspective, from a supply and demand perspective. And that's also why currently we don't have any additional strategic investments to announce or move forward with.

We are now determined to make the new consumer board line, which is a significant investment, state-of-the-art, cost-efficient and large modern consumer board line. We are now focusing on ramping that up and making it a success.

And then when it comes to our value-creation programs focusing on sourcing and operational efficiency as well as commercial excellence, we prefer to look into the results. And as you could see in the bridge from last year, clearly, we have yielded results.

So despite the EUR 300 million wood cost increase during last year, we managed to increase our adjusted EBIT significantly by 75%, so more than offsetting that significant wood cost increase.

And we will continue our determined work to improve the cost competitiveness and efficiency of Stora Enso in order to improve our profitability.

[Cole Hathorn, analyst]

And then, Hans, maybe just as a follow-up so that we understand the progress of the Oulu ramp-up this year. What is the initial focus of the ramp-up as it starts? Do you initially start with some kraftliner grades and then improve the mix through the year? So ultimately, we'll be seeing mix improvement as you ramp the volumes back half of '25 and into '26 to hopefully improve profitability on that?

[Hans Sohlstrom, executive]

Yes. Correct, Cole. So we are starting with lower grades and then gradually moving into, let's say, the prime focus grades, mainly folded box board, but it will be a gradual development throughout this year. And as said, the mill will be fully ramped up as from the beginning of 2027.

[Operator]

Our next question, we're going to go back to Pallav Mittal.

[Pallav Mittal, analyst]

Can you hear me fine now?

[Hans Sohlstrom, executive]

Yes, Pallav. We hear you fine.

[Pallav Mittal, analyst]

Apologies for the line earlier. So firstly, on 2025, I know you're not providing any guidance range, but you have done EBIT of approximately EUR 600 million in 2024. And you are highlighting EUR 120 million worth of fixed-costs savings largely in 2025. So with some recovery in the market and prices broadly improving on containerboard, you are highlighting on consumer board also, it seems that there are price increases if you look at what the peers are saying. So is it fair to assume that your EBIT in 2025 is at least EUR 100 million above what you have done in '24, just accounting for these fixed-costs savings? So that's the first one.

And secondly, if you could, for the Packaging Materials division, you are highlighting stable pricing in Q1 '25 versus the last quarter. Can you just talk about the increases or the price movements in consumer board specifically?

[Niclas Rosenlew, executive]

It's Niclas here. Just briefly on the 2025 EBIT. As we commented here earlier, of course, goes without saying, we are still at the improvement phase. We see significant upside potential here going forward. But we'll leave it with that. We will continue to work with our costs. And as commented here earlier, look forward to improved performance overall, but we don't provide an exact figure for 2025.

[Hans Sohlstrom, executive]

And when it comes to the Packaging Material price outlook, we have achieved price increases in several consumer board segments at the turn of the year. And we have made those containerboard -- we have sent our containerboard price increase letters to customers. So our intention is to also there get the containerboard price increase through. But then, of course, there is the impact of mix and so forth in this outlook statement from Q4 of last year into Q1 of this year.

[Pallav Mittal, analyst]

Sure. If I can just ask a very quick one as well. If you could just quantify your CO2 shares, the emission certificates in Q4 and for the full year '24?

[Hans Sohlstrom, executive]

So our annual report will be out here in a couple of days' time with the details about our CO2 emission rights sale. But what we can say at this point is that in 2023, our emission rights sale was about -- the magnitude of about EUR 60 million and, during last year, was roughly the same magnitude.

[Operator]

Our next question is from Joni Sandvall at Nordea.

[Joni Sandvall, analyst]

A couple of questions. Firstly, on Beihai transformation towards more liquid packaging board. Can you give any time line on this and how this is processing?

[Hans Sohlstrom, executive]

Yes. Regarding Beihai, we are -- we can significantly improve the profitability of the mill with product mix changes, more towards the higher-margin liquid packaging board, where Beihai is clearly representing a state-of-the-art, the highest-quality asset in the world's largest liquid packaging board market, which is China. And we are actively working on promoting liquid packaging board there, and that's the work we will continue with in order to improve the performance and profitability of the mill.

[Joni Sandvall, analyst]

Okay. Okay. And secondly, maybe on the depreciation levels now going forward following the write-downs now in Q4 and the upcoming Oulu ramp-up. So could you give any indications for this year and when Oulu depreciations are coming visible?

[Hans Sohlstrom, executive]

Well, what we -- in connection with our write-downs that we announced end of last year, we said that the impact will be roughly at the level of EUR 40 million decreased depreciations per year. So that's what we can say at this point.

[Niclas Rosenlew, executive]

Yes. And the Oulu depreciation obviously comes with the commercial start.

[Operator]

There are no further questions. I shall now hand back to Hans Sohlstrom and Niclas Rosenlew for closing remarks. Thank you.

[Hans Sohlstrom, executive]

Thank you very much, and thank you for joining our Q4 results review. All in all, the key takeaway is that during last year, we have made significant steps forward to improve our profitability. However, we are still far away where we want to be. We are still below our long-term financial targets, and we are determined, and we can see a significant improvement potential in the company. And we will continue our determined systematic work to improve the competitiveness and the result and profitability of Stora Enso in order to deliver shareholder value.

Thank you very much, and have a good day.