Svenska Cellulosa SCA AB
STO:SCA B
Svenska Cellulosa SCA AB
STO:SCA B
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Sincerely, welcome to the presentation of SCA's interim report for the first quarter.My name is Björn Lyngfelt. I'm SVP, Communications. The report will be presented by our CEO and President, Ulf Larsson; and CFO Toby Lawton. And after the presentation, there will be the opportunity to ask questions both from the participants here in the room and for those participating over the telephone.Ulf, please?
So thank you for that, Björn. Good morning, everyone.I'm happy to give you some more information about the first quarter 2018, which has in general been a rather strong quarter for us. Still, we have a continued strong market out there for more or less all product areas and still also in all market regions. We had a strong sales growth, 11%, this quarter in comparison with Q1 '17. And the main reason for that is, of course, prices -- price increases. On the other hand, as you can see, we had -- negative on volume. And the reason for that is that we just now started a big stop in Östrand in order to prepare for the startup in mid-June. And we have been forced to keep volumes in order to supply customers that need our pulp also during this long stop. I will come back to that.EBITDA was up 47%, from SEK 797 million up to SEK 1,175 million. And again the reason, main reason, is prices. Of course, we have had also this year harsh winter conditions, and we've seen some negative effect on the cost side for our Forest operations. And also, when we look into sawmills, we can see some negative effect from this strong winter. The Östrand project is progressing according to plan. And we have now stopped for the final step, where we will extend the recovery boiler. And so far up till today, we have invested 80% of the total amount of SEK 7.8 billion.We've seen a stable wood supply during the first quarter and also before Christmas despite harsh winter conditions. And as you know, we are less dependent on external wood supply than maybe some of our colleagues, which have been a good thing this winter. Of course, we can see some effect in the sawmill production and also in the Forest operations, as I said. So we've allowed some extra costs here but nothing big. And our Pulp and Paper industry hasn't really felt anything from this tough winter. We can also see that we have improved our product and market mix. And of course, in a strong market, we try to, so to say, move our customers closer to the mill, which we've done in a positive way, in a successful way. Another example is that we -- this year, I think that we will not sell more than at maximum 3% standard newsprint. We have tried to find new products, and we tried to move forward in the value chain also in that perspective.If we then look into some KPIs. As I said, SEK 1,175 million, plus 47% on EBITDA level; our return on capital employed in the industry is 17% if we exclude the capital that is now invested in Östrand, as we don't have any -- and so far, we have no positive effects of this investment, but we have spent the money, of course. 17%. When it comes to the EBITDA margin, we have a positive trend, as you can see on the right-hand side, close to 27% this quarter. And our leverage is around 1.8. We've had a strong cash flow during the quarter, but the first quarter is also the quarter where we pay out dividends.I did show this slide at our AGM recently just in order to show that we do -- continued investments in a profitable growth in order to maximize the value from the Forest. We are happy to say that the production in Tunadal, the new saw line in Tunadal, is now up and running and maybe better than we even thought. It is the world's fastest sawmill -- saw line today, and it's working to 100% just now. We will start up the new mill in Östrand, the rebuilt mill, from mid-June, as we've said, according to plan. We have now also started up the pilot facility that we have started up in Obbola in order to see if we can extract black liquor from the process and from that produce biodiesel and some other [ ring ] chemicals and things like that. And now the equipment is working, and it's -- but it's still too early to judge what we can do about it. But it's working now as we also planned that it should do at this time.As you know, we have an installed capacity of wind power on SCA land of 2.6 terawatt hours. And now we have closed further agreements, so we today know that 2020, we will reach our goal, which is 5 terawatt hours installed capacity in 2020. We have also during the period announced that we will invest another SEK 200 million in our kraftliner mill in Piteå in order to increase the production of white-top kraftliner, again to move forward in the value chain. And we have also started up the environmental permit applications for a possible production increase in Obbola and also at the same time for a biorefinery at Östrand mill. So a lot of things is going on in this area.We've also announced some management changes during the period. And if we start to the left -- to the right: Jonas Mårtensson, he has become the new President of Forest since 1st of April. Jonas has a long experience in the wood industry. He is replaced by Jerry, to the left. Jerry has been in charge of Obbola kraftliner mill for the latest 3 years, and before that, he has spent many years in the Wood business as technical director. He's been heading Tunadal sawmill and also Bollsta sawmill, so it's a very experienced guy here. And last but not least, Kristina Enander, she will enter into the position of being President in Pulp from 1st of November 2018. And Kristina, she spent almost 25 years in Ortviken and had done a fantastic job at that mill. So we're happy to welcome these people into new positions.If we then walk into our segments, start with Forest.As already mentioned, we have had a stable wood supply. We have been able to run our industry to 100% even if we have had tough winter conditions in the northern part of Sweden. In some areas, we've had up till 2-meter snow, which is quite hard to deal with. And also it's been quite cold, which is not the least for the sawmill's problem really in the production. We have now started to see some slight price increases in the region and especially high prices for imported wood. We don't import too much, as we have our high degree of self-sufficiency, but still, we can feel that it is price pressure upwards here.Sales were down 1% during the quarter, and that is -- yes, it's more or less flat, so nothing to comment really. EBITDA was down 6% or about SEK 20 million. And as mentioned, we have had some extra costs in the Forest operations due to the winter.If we then turn over to Wood, here we can again say that we have a stable market with continued price increases. And if you look to the chart to the left, one can see that we have been able to, step by step, increase prices since first quarter '16 or maybe since the fourth quarter '15 even. And that is also something that we will do in the second quarter. We have set prices for the second quarter; and we will have another price increase of 3% to 4%, something like that. Low inventory levels, really low inventory levels. And sales were up during the quarter 10% due to higher prices. And EBITDA was up 19%. And prices, of course. And we've already mentioned that we've had some extra costs related to the winter but also due to increasing raw material prices.In Pulp we also have a continued strong market with increased prices. And we are happy to say that the Östrand project is running to plan, according to plan. Sales during the month were -- during the quarter was down 8%. And the reason, the main reason, for that is that we have had lower deliveries due to inventory built up for -- ahead of the Q2 stop. So we have to supply some of our customers that are more or less dependent on supply from SCA, and that's the reason why we have built up the inventory. EBITDA, nevertheless, was up 71%. Higher prices, of course. We had lower deliveries. We have also some -- as we have announced before, some direct costs affecting the project. And in this area, we've also had some negative currency effect, but prices have overcompensated that fact.And as I said, we have now stopped Östrand for the latest -- or the final phase in this rebuild of Östrand mill. As you know, that -- this project has been run as a sequential startup, and that is a very good thing to have because that will mitigate risk, of course. And I can just show you some slides here. This is from the wood-handling unit, and that one was up and running Q3 '17. And that is today the only wood-handling unit that we have. We've been running for 50% capacity up till now, but now from June, we will run it to 100%. But this is -- I mean this is already finalized, more or less. The operation plant, we started up Q4 '17. And as you can see, we struggled a little bit in December, but from January and up till March, we have more or less 100% capacity in this plant. Now of course again, we have to speed it up to serve the full capacity in Östrand, but we believe that will be nothing peculiar with that. That's an easy operation, we think. Drying and packaging, this part is now handed over to SCA from the supplier. And again, we have tried all parts of this department, and it's working well. The fiber line is still under commissioning, which is also according to plan. And so that is the work that is ongoing now during the long stop that we have just now. And finally, now we have started to extend the recovery boiler. And just today, as we speak, we are moving the big, big, wall. And that will take between 2 and 3 days and -- but so far, it is really good. The white liquor filter is also up and running now. We have now also been able to look into the old recovery boiler. I mean we have run that for 10 years now. And you don't really know what you will find there when you open up and go in, but so far, no bad surprises. So we are happy to say that we think that is working well. And it is according to plan, and we will start up mid-June.Then finally if we talk a little bit about Paper. We have a continued strong kraftliner market, again with higher prices. And if you look to the left-hand side you can see that, as mentioned before, we increased prices 3 times EUR 50 per tonne in last year. Now we have another -- announced another price increase from this year of EUR 60 per tonne. We have also seen some improvements in the publication paper market due to a better balance structurally. Consumption of publication paper is still going down, of course, but it's always a question of the balance. All in all, sales were up 16%, and that is more or less 100% related to high kraftliner prices. EBITDA was up 119% due to kraftliner prices, high kraftliner prices; also higher prices for publication paper but from a very low level, as you can see down in the left on this chart. But we've seen some price increases also here. Again, we have improved our product and market mix. And in this area, we have also had a very stable cost development because this part of the business has not been impacted negatively by the harsh winter.So by that, I leave over to Toby.
Thank you, Ulf. And good morning, everybody.So I'll just show you first the income statement here. And as Ulf has already explained, the top line increased by 11% up to, yes, SEK 4.4 billion in the quarter. EBITDA is up 47% to SEK 1,175 million, which is a margin of 26.7%. And I think you can see here because we have basically flat in terms of depreciation and financial costs, the drop-through from the EBITDA to the bottom line is very strong. And therefore, we've more or less doubled net profit for the period. And earnings per share is now SEK 1, more or less double what it was in the first quarter last year, after the first quarter.When we come on to the contribution by segment here. First, on the left, you can see the Forest. And the top line here is very stable. We have a seasonality in the Forest business which is largely driven by how much we harvest of our own forests every quarter. And the first quarter is always a bit lower quarter seasonally, but we also had some effects from the winter here in the first quarter. So I think, without the additional effects from the winter, we would have had a slightly better first quarter in the Forest division.In the Wood division also we've shown consistent growth over many years. We have a stable EBITDA margin. It's -- we have a timber supply business alongside our sawmills, which gives us a more stable development in EBITDA margin than maybe you would having a pure sawmill-type business. And here we have a -- we also have some seasonality so the first quarter is also seasonally usually a little bit softer than the fourth quarter, but again, as Ulf mentioned, we had some winter effects here as well primarily driven by slightly lower volumes. Volumes would have been stronger if we hadn't had effects from the winter.In the Pulp division, we have a very strong momentum, very good pricing environment. We had a top line slightly down, as you can see, which was driven by the fact that we're building up stock in the first quarter ahead of the stop, which has now started in the second quarter, in order to maintain deliveries to key customers now during the second quarter. And EBITDA margin has increased now on 30%. There are still -- here still costs in Östrand driven by the project, which I will come back to, so it would have been higher without those costs, but it's obviously a stronger development driven by the pulp pricing particularly.And Paper, also a strong development. Top line increased, and EBITDA also increased and now it's an EBITDA margin of 25%. And the biggest factor here again is kraftliner price development, but also publication paper has developed a bit better versus previous quarters as well.So here the bridge on net sales from the first quarter last year to first quarter this year. We have an increase of 11%. 13% is driven by price/mix. So by far, the biggest effect is driven by prices, and here it's positive in all major product areas in terms of price. We have a slightly lower volume. So volume has a minus 3% deviation. And the biggest one here is pulp, which is again building up of stock ahead of the second quarter, during the stop. We also have a slightly lower volume in kraftliner which is not production related. It's really that stocks are now much lower. So production is going well, but deliveries are a bit down on where they were first quarter last year where we had a relatively high level of deliveries.And currency is a small difference, plus 1%. And here euro is positive for us. U.S. dollar is actually negative versus the first quarter last year, but our weighting in euros is heavier than our weighting in dollars, so the net effect is slightly positive.When it comes to EBITDA, again the biggest effect, of course, is the same. It's price/mix, where we have high prices for all major segments and an improved product and market mix. Volume, slightly down, a small negative. On raw materials, we do see some cost pressure on raw materials, in particular, wood costs slightly higher for the wood [ cost ] we buy in and chemicals where we see some cost increases. Energy, largely flat. We had probably more energy costs, which I'll come back to in the direct costs, in Pulp slightly in the first quarter, offset by some other positive impacts in energy but overall largely flat. Currency, a positive; again euro positive, U.S. dollar negative. And then we have some small negative in other as well, which is really driven -- here we have the Östrand project costs and also some other costs related to the winter, which affect the other column.So overall a 47% increase in our EBITDA margin in the first quarter at 26.7%. On cash flow you can see we had, yes, a strong cash flow in the quarter, operating cash surplus after we take away the effect of the Forest valuation which ends up on SEK 922 million. We had a negative working capital in the first quarter. Although our overall level of working capital in relation to sales is stable, we do expect an increase in working capital during this year as we build up for Östrand coming online as well. Capital expenditure is pretty stable at SEK 76 million. And operating cash flow then SEK 591 million for the quarter, where we are almost then financing the strategic CapEx in Östrand which is SEK 634 million. We're almost financing that from our own operating cash flow this quarter.So now I'll just come to a few details on the Östrand project, and I think a lot of this will be repetition to many people. So here there's no new information on the guidance here we give on the Östrand project. The startup, we expect, is in June, according to the planned startup time. The ramp-up period, we expect to take 12 to 18 months. And this year in 2018, we expect the volumes to be in line with last year. So again, the volumes that we lose from the stop, the long extended stop, will be compensated by the higher volumes after the startup. And we expect 2020 then to be the first year at full capacity and 2019 somewhere in between. Overall, the project will double our NBSK capacity to 900,000 tonnes. We expect a fixed cost reduction, which will be the largest impact, of some SEK 350 per tonne. We expect an improved energy balance, where we will go from being a net consumer of around 0.1 terawatt hours before the project to a net producer after the project of 0.5 terawatt hours. And on the other side, we expect potentially there could be some higher wood costs as a result of having to source a higher volume of wood primarily from further away. So it's a higher cost to bring it to the mill. So that's again nothing new with the investment cost SEK 7.8 billion.And here are some of the impacts in 2018, and again this is largely also repeating information that we've already explained but just to make sure people understand. We have 3 different kinds of cost impact, which we've explained. We have the project-related costs which are indirect costs which have been continuing at a very similar rate during last year and continued during the first 2 to 3 quarters of this year as well. And there we expect SEK 60 million of project-related costs this year, of which SEK 10 million is depreciation. And as you see here, that's primarily during the first 9 months. Then we have the maintenance stop which is happening now in the second quarter, which is obviously a long maintenance stop which, as we show with all maintenance stops, has a cost impact. And here the impact in the second quarter is expected to be SEK 220 million. And then we expect a small stop in the fourth quarter of SEK 20 million in terms of maintenance stop as well.And then finally, we have the direct cost impact during the ramp-up, which we expect to be around -- between SEK 100 million and SEK 250 million during the whole year due to the effect of higher costs for energy, higher costs for chemicals, some extra wood consumption and a higher share of B-grade pulp during the ramp-up. So this effect is expected to be some SEK 100 million to SEK 250 million during the year, depending on how the ramp-up proceeds. We can't be any more specific than that. And we have seen some of these costs already during the first quarter a little bit; SEK 25 million, we estimate, during the first quarter from higher direct costs primarily energy related in the first quarter.So those -- I mean you can see on the right we've given the table showing those 3 main cost items. And lastly, we also expect working capital will increase during the year, particularly raw material inventory. And that's due to the higher volumes and higher sales which will come through from Östrand ramping up.A little bit, finally, on balance sheet. Our book value of our Forest is now SEK 31.6 billion, a stable level. We have a working capital just over SEK 3 billion, 17% of sales; our total capital employed now at, yes, SEK 43.5 billion, which means when -- with our net debt of SEK 7.3 billion we have a net debt-to-EBITDA now of 1.8x. And as Ulf mentioned, our operating cash flow minus strategic CapEx is more or less neutral, but we paid the dividend in the first quarter. So that's when we pay the dividend. So that resulted in a slight increase in net debt up to SEK 7.3 billion, with 1.8x EBITDA. And our net debt-to-equity is 20%.Björn?
Yes. And just to summarize: Again, we have continued strong market in all product areas, all geographies. We had a strong sales growth mainly due to price increases in the first quarter this year, in comparison with first quarter '17. EBITDA was up 47%, up till SEK 1,175 million. Östrand project progressing according to plan. We will have our startup mid-June and, yes, according to plan, according to time and according to budget, which is, of course, a positive thing for us. We have had a stable wood supply even if we had a strong and hard winter this year; and of course, due to the fact that we are -- have a high degree of self-sufficiency, which is a good thing to have in a winter like this. And we have also been working quite hard with -- yes, to improve our product and market mix. So...
Yes, with that, we will open for questions. And please wait for the microphone so everyone can hear you. And please state your name and company when you address the question.
Please.
It's Linus Larsson with SEB. I wonder if you just could clarify just a bit with the winter-related burden that you had on the first quarter if you could in any way quantify that and more importantly talk about what to expect in the second quarter. Are there any reversals of those effects to expect in the near term?
Yes. I mean we -- it's not so easy to calculate, but I think that we've had maybe SEK 20 million, SEK 30 million in extra costs. And of course, we will see maybe something in the second quarter, mainly in the distribution, but we have no big things. I mean we have a good system with our [ rail-rail ] terminals and so on, but of course, you need to -- the big thing for us has been to move harvesters from the coastline into the inland because we have had too much snow. And you have to do some replanning and things like that but, I mean, no big things really.
Great. And maybe a related question, but Toby, you showed on this graph the variable cost inflation year-on-year that we've had in the first quarter. Now as the year progresses, I think you showed SEK 65 million impact year-on-year. Do you think that number is growing as the quarters progress in the rest of the year?
It's very hard to give guidance, but I think that was obviously Q1 last year versus Q1 this year, increased some -- to some degree during last year. So I don't think we can give guidance on whether that would further increase or decrease for the remainder of the year. What we see is, based on current prices, that is how much more expensive it is now than last year. We see some increase in wood cost. And we see chemicals now are more expensive than they were a year ago, but we don't see it becoming any more dramatic right now...
And if you'd rather comment on a sequential basis talking about wood and chemicals and other variable costs, how would you describe that?
I mean I think risk of repeating, but I mean I don't want to sort of predict where they're going to go for the rest of the year. Right now that's the effect we see. We don't see impact that they're going to go down significantly. We do see pressure on the Wood side, which Ulf mentioned, but again we have a high degree of self-sufficiency there, so only a limited part of that comes through and impacts us overall. So yes, the pressure is there, we don't see it increasing dramatically from here. It increased a bit during last year. So whether you would see a higher or lower effect in the second, third, fourth quarter is very -- it's very hard to say.
Oskar Lindstrom from Danske Bank. A couple of questions. I mean, this quarter, you had very good price momentum and support for your earnings from, I presume, especially the kraftliner side. And you mentioned the EUR 60 per tonne price increase that you announced. How much of that was sort of fully in the Q1 numbers? And what kind of momentum are you seeing for Q2 and the rest of the year?
I mean if we start with what we did '17. We had 3 announcements of EUR 50 per tonne each, and they have more or less all come in. The announcement now for this year, I cannot really see that we have had not too much effect in the first quarter and -- but we hope that it will gradually be implemented during the second quarter.
But you do feel that the market is strong.
The market is strong, but you never know if you'll reach all the way. I mean that's too early. We -- the announcement is EUR 60.
All right. My second question I guess is a little bit related to the kraftliner side. This is the project that you've -- or the preproject that you announced for Obbola. What's the status of that project? When do you expect to get an environmental permit? How soon can you move ahead with expanding capacity, starting up et cetera?
I mean it is a preproject. That is what it is. And Per Strand, who was the -- who is the former mill manager there, he's gathered a big team. So I mean we will spend between SEK 50 million and SEK 60 million in this preproject to do it in a thorough way. And I guess that we will have a good view on this project in the beginning of next year, Q1, Q2 or something like that. And the reason for us starting to work with these environmental permissions is that it is a long lead time. So even if the result of this will be that we will not go, so still you have to start with this process, anyway. So that's the reason. That's the reason also why we have done it in Östrand. I mean that's more a feasibility project, but still, we have to start with the environmental permission.
So I'm -- I realize I'm getting ahead of myself or getting ahead of you perhaps, but that's sort of my nature, I presume, but the -- if you went ahead with this project, would that sort of entail a startup sometime during 2020 then or 2021 at the earliest?
Okay, but I mean, if you have the preproject running as now and if we decide to do this in, let's say, Q1, Q2 next year, then maybe we will see something in 2021, late 2021.
And my final question is, I guess, also a follow-up on that. Is the -- I mean we're seeing a number of capacity-increase projects either already ongoing both in the -- both in Sweden, Finland and also in the Baltics. And you have this potential project as well on top of the Östrand expansion. How do you see sort of the potential sort of wood supply to support all these projects?
I mean we had the opposite situation in the past. I mean we have seen a -- lots of closures. And as it is just now, at least in our region, we have a rather balanced situation. So I mean for us, when we looked into the Östrand project in 2006, then we realized that we can really fulfill this. We built a recovery boiler, but we couldn't really do the full project due to the wood supply situation that we had at that time. Today, when we have now done this project, we feel that we are -- I mean we are in a good position when it comes to the wood supply. We have, I mean, many big suppliers that really like to come in and -- to secure that they can supply to the new mill. So for us, it's a good and balanced situation as it is just now, I would say.
Yes, Mikael Jafs, Kepler Cheuvreux. A couple of questions. The first one relates to Oskar's question in a bit. I mean we see that recycled papers are coming down quite sharply as a result of Chinese new restrictions. We haven't really seen how the test liner price increase announcements are going through yet. So my question is really what's that link between the recycle-based liner market and your products if there is a link at all.
I mean obviously, you have a link between test liner and kraftliner to some extent. And so I believe, if -- at least in the past, they don't follow each other in a perfect pattern, but I mean they follow each other in one way or another, I think.
Okay, all right. And...
If I could, maybe just to add. I mean I think, on the one hand, recycled paper has a big input cost in the test liner. And test liner and kraftliner go -- there is some degree of substitutability. So there's -- there are links on that. So from a cost side, there are impacts, but from -- and from a demand side, we see very strong demand. And demand growth for kraftliner has been not met by capacity in recent years, so we still see a very strong -- on the demand side. So yes, exactly how it plays out is hard to predict.
No, no. And then final question. You mentioned that wood prices seem to be starting to go up now. Could you just sort of remind us, where are the current wood prices in relationship to your long-term DCF book valuation of the forests? Is there a sort of in-line or above or...
The -- I mean we base our valuation of the forests on a 5-year average of the wood prices so we -- if you like, we even out. I think right now, this quarter, we will be a little bit above, but it's not dramatic.
Do we have any more questions from the room? Otherwise, we will go to the participants that will ask questions over the phone. And could we first ask the telephone operator to instruct the participants to press the right buttons for getting access to us?
[Operator Instructions]
And the first participant over the phone is Christian Kopfer, Nordea...
You have partly already answered this question, but just to follow up on the market side here, primarily on the kraftliner side, as we've seen the strong markets continuing here in the beginning of 2018 with a lot of price increases. Are you -- do you have any fears that you will see backdrops in -- on the demand side for these products as prices have increased so heavily?
I mean we have a strong demand as it is just now, but I mean we don't know about the future. But as it is just now, it is a really strong and stable market. And if we could produce more, we could sell also more. That's the current situation.
Right, but -- and then I'll follow-up on that as well: You are looking into expanding your volumes on the kraftliner side, obviously. Do you think it's a risk that the market will be oversupplied of kraft if you look -- not in the short term but if you look 4 or 5 years ahead?
I mean, long term, I think that the demand of packaging material, good-quality, mainly fresh fiber-based packaging materials, the demand for that will increase due to e-commerce and things like that. So the long-term trend is, of course, positive for the packaging business and not the least for the kraftliner business, I think.
Right. And finally, for -- maybe for Toby, on -- maybe I missed this part, but to clarify if I understood it right, that you have hedged around 60% of your expected cash flows in euro, that you have hedged the euro-SEK at around SEK 10 or something like that. Or...
Yes, we've hedged, well, 70%. So in euro, we've hedged 70% for the rest of this year at SEK 9.96, I'm thinking. And we've also hedged 30% of our U.S. dollar flows for this year as well.
On -- what kind of currency on the U.S. dollar?
I think it's SEK 8.11, yes, if I remember right. I think it's all -- that's in the report as well. So you can read the figure, the exact figure, in the report, if I'm slightly wrong, but I don't...
Thank you. Then we have Alexander Berglund, Bank of America.
I have a follow-up for Mikael's question on the kraftliner and test liner spread and the risk for substitution. I mean it looks like the spread increased a bit more. Specifically, in your conversations with your customers, have you seen any indication of increased substitution to test liner? And I mean just looking at kind of consumption of linerboard generally. I mean kraftliner is already quite at a historical low, well, looking at a total consumption. Might it be that we have reached kind of a limit where there is no real scope for substitution to kind of the need of fresh fiber and also kind of application on requirements where you need to have kraftliner?
As I said, I think, if we could produce more kraftliner, it would be easy to sell it in the market as it is just now. And the demand again for high-quality packaging materials is really increasing. And again the reason for that is the e-commerce, not the least. I mean, if you should send a package over the world, you'd like to have a package that is in good condition when it arrives to the customers. So I think it is a good momentum for kraftliner and the general trends supporting fresh fiber-based material in general.
Then we have Robin Santavirta, Carnegie.
Regarding Östrand. You plan to reach full capacity in 2020, you said, so 2 years out. That seems as a quite long time to reach full capacity. Is the reason technical, or is it commercial? And is it sort of a conservative plan, or is it simply how you realistically see it?
That is the plan that we have just now. You need to have a plan. And we have been looking into other projects. And I mean out -- from that, we have [ just ] between 12 and 18 months. And I think -- if you think it's conservative, I don't think it's conservative. I think it's quite aggressive, to be honest, but I mean, as far as we know, up till now, we are positive because, as mentioned before, we have had a sequential startup. And we have -- many different parts of the mill is already up and working in a good way. And I mean we have had no bad surprises even now when we have opened up the recovery boiler that has been used for 10 years. So no reason for us to believe that we will not have a good startup, but I think it is quite ambitious to say between 12 and 18 months. But we will do our best, for sure. Can we do it faster? We will do it. I can guarantee.
But what do you think is sort of a larger limit for sort of reaching that, whether it will be sooner or later? Is it technical, or is it commercial, provided the...
Definitely it's technical in that perspective. And I mean one thing is to produce the volume, but for us, it's really important that we will serve the market with high-quality pulps. I mean we will not start up with some big race and things like that. We will fine-tune the process so we that can deliver high-quality pulp, but I mean it's a tremendous demand out there for pulp just now and not the least due to the restrictions that were mentioned in China now for recycled fiber. So it is really a strong momentum for pulp. It will be up and down, of course, but as it is just now, it's strong.
Exactly. Related to that, have you agreed on -- with customers about the new volumes? And will it be mostly in China, or any additional volumes in LatAm, in Europe as well?
I mean we are -- today, we are more or less 100% based in Europe in this business. And at an early stage, we did plan for bringing at least a couple of hundred thousand tonnes out of Europe. As it is just now, I think it would be possible to sell everything in Europe, but I think long term it should be a good balance. So some of the volumes, I believe that we will place in China but also in the U.S. And in a project like this, it's so easy just to focus on, let's say, the production part, but we have really been putting efforts in the marketing side, so we feel that we are really prepared also on the market side. It's easy to sell 1 million tonnes of pulp, but the tricky thing is to do it so you can make good money out of it. And I feel that we are very well prepared also in that area.
Good. And then finally, just a question on harvesting at the moment. So what are the conditions now after sort of a bit of a problematic winter?
It's spring also in the northern parts of Sweden. God, thanks.
But these floods -- but are -- the sort of floods or flooding, might that be...
No -- but the positive thing, we've had a lot of snow. It was rather cold in -- this winter, but I mean the snow came before we had coldness. So I think then what you call the fall time will be rather short, so -- which is of course good for us. And we have also our [ rail-rail ] terminals. And we have a good stock now, so I think in that perspective, in the wood supply perspective, we have no danger left. So now we are in a controlled situation again.
And then finally, we have Martin Melbye, ABG.
You mentioned price increases on kraftliner and wood but if you summarized each of the business units and the price increases yet to come, i.e. not already in Q1.
Yes. You -- I think Ulf mentioned the wood part when we went through the slides. Was it 3% to 4% we expect to come through? Kraftliner, we expect there's a bit of a time lag, so there will be some time lag effect coming through into the second quarter for kraftliner. Beyond that, I think we don't give sort of speculation on...
But we can say in publication papers that we reached some small price increases from the first quarter. I think it was EUR 15, EUR 20 per tonne. And I think that we have also seen announcements now on coated papers from this summer of 3% to 4% and yes. And in pulp, with -- peaks prices nowadays is $1,130. And we've seen announcements now for May on $1,170. So that's the current situation. And of course, in kraftliner, I mean we've done these announcements, and then we have to wait and see what will come through. So it's still under negotiation.
Great. And these wood prices that are moving up, can that impact your Forest EBIT in a meaningful way, or not really?
I mean what we have done ourselves is that we have announced plus SEK 20 per cubic meter in both pulp and sawlogs. And that will, of course, have a positive impact on our EBIT level in the Forest. It will have a negative impact on the industry side, but as we have a degree of self-sufficiency of about 50%, as Toby mentioned, we will have a limited effect.
Excellent. Last question: The next 10-year forest plan, when is that due?
Yes. You mean the survey. I mean I think we are in the middle just now, so I think we will have it in...
'19, '20, I think.
Yes, around '20.
'20 maybe...
2020.
2020.
Okay, thank you. That was the end of the list of questions and -- which means that we will now conclude this session. We hope to see as many of you as possible on the 22nd of May when we will have a Capital Markets Day dedicated to the Forest. And since we've had quite a few questions on Wood and Forest, that will be a good opportunity to have deeper insight into the mysteries of the Forest operations and wood supply.So thank you. And look forward to seeing you soon again.
Thank you.