Svenska Cellulosa SCA AB
STO:SCA B
Svenska Cellulosa SCA AB
STO:SCA B
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Earnings Call Transcript
Earnings Call Recording
Other Earnings Calls
Good morning, and welcome to this presentation of SCA's full year results for 2021. With me here today, I have President and CEO, Ulf Larsson; and CFO, Toby Lawton, to go through the results and take your questions. Over to you, Ulf and Toby.
Thank you, Anders, and also from my side, good morning, and a warm welcome to this presentation. I will begin by summarizing 2021, where we delivered the best ever result for SCA. We had an EBITDA of SEK 9.1 billion and by that, an EBITDA margin of 48%. And we're comparing our EBITDA level for the full year '21 with the outcome for '20, we can see an improvement of more than 100%, as well as a strong market with increasing prices in all business areas. We also delivered a good productivity level and also focused cost control, both of which contributed positively, of course.We can also see that the strong profit development was helped by a well-timed decision to exit publication paper. Our turnover during '21 increased by 2% compared with the previous year despite the closures of the publication paper business in the first quarter '21 and also despite the divestment of our wood distribution operations in U.K. fourth quarter 2020. And the reason for that is, as already mentioned, increase in prices, better mix and also a very good production level. During the year, we have also seen a continued good trend in the market values for forest land and prices in our core area has increased by over 10%. During the year, we have had a net growth in our forests of more than 4 million cubic meters, and we have also purchased, a net of about 10,000 hectares of forest land, mainly in the Baltics. In total, the value of our forest assets have increased by almost SEK 10 billion from SEK 75 billion up to SEK 84 billion. And finally, last but not least important, I'd like to conclude the summary of the full year '21 by stating that our 2 major investment projects in Obbola and Ortviken are progressing on time and budget. So turning over to some financial KPIs. And as already said, we had a very strong year, delivering SEK 9.1 billion on EBITDA level, as also already said, best year ever. Our EBITDA margin reached 48% for the full year, which is substantially higher than previous year when we did 24%. Our industrial return on capital employed came out of 33% for the full year, while our leverage decreased further down to 0.9%, and that is despite a large ongoing investment program. And I'm happy to say again that we continue to finance all our investments, including strategic projects with our operating cash flow. The Board proposes an ordinary dividend of SEK 2.25 per share, an increase of SEK 0.25 or a little bit more than 12% compared to last year. And on top of that, onetime extra dividend of SEK 1 per share due to the exceptional result in 2021. And finally, our earnings per share increased by almost 3x in comparison with last year and reached SEK 8.69 per share. From now on, I will focus on the fourth quarter 2021. And as you can see here, our EBITDA level for the fourth quarter was SEK 2.8 billion, which is again more than double as much as the fourth quarter 2020. And that gave us historically strong EBITDA margin of 59% for the quarter, which you also can see in the graph on the right-hand side. Our industrial return on capital employed reached 40% during the quarter, and the leverage is, as already mentioned, SEK 0.9 million. So I will now make some comments for each segment, starting with Forest. And we had another quarter of stable supply of wood to our industries. Sales was down due to lower delivery volumes, and we have also closed down our publication paper business, and we also had a long maintenance stop that has impact in the fourth quarter '21. EBITDA increased by 24% when comparing quarter-on-quarter, and the main reason for that is continued increasing prices for forest land and by that, a high revaluation of effect of biological assets. As you can see in the graph on the bottom left, prices for sawlogs have also increased. When we compare pulpwood prices quarter-on-quarter, we can note that they are on a rather stable level, and this is mainly due to our exit from publication paper, and by that, reduced share of imported wood. Then we turn over to Wood and the price levels for some wood products peaked in Q3 '21. They peaked at a historically high level, which you also can see in the graph on the bottom left. Average prices have dropped by just under 15% between Q3 and Q4. The seasonal low demand during the winter period means that prices are expected to drop further by another 15% during the first quarter. But then I think that they will turn upwards again in the second quarter 2022, and I'll come back to that. In general, we can see a lower level of supply during the autumn, mainly from Canada and Central Europe. Demand is still good, and we can see that in most markets, inventory levels is going down also for customers now. As for SCA, we had a good production during the fourth quarter and good delivery levels for the season, and that led to relatively low stock levels for us. As you can see from the graph, sales increased by 25% when we compare with the same quarter last year, and this is mainly due to increased prices, which also offset the effect of the sale of Wood Supply U.K. during the fourth quarter 2020. The profit level is still very good in SA Wood. EBITDA was up as much as 274% when we compare Q4 '21 with the same quarter 2020. And we can also just mention that, say, wood made nearly SEK 3 billion on EBITDA level during 2021 with a really strong EBITDA margin of 42% for the full year. Then some words about wood market development. And today's stock level of solid wood products in Sweden and Finland is in relation to the average for the last 5 years described at the top left on this slide. And we note that the inventory volumes are more or less back on a normal level. At the same time, the underlying consumption continues to be good. As I said, especially in the new residential building segment. As can be seen in the diagram to the bottom left, the Swedish and Finnish saw mills production is also now on a normal level. Production in Scandinavia is now running at full capacity to meet stable and good demand. But as mentioned, production in Canada and Central Europe is somewhat limited, and that creates also maybe a rather stable balance in this market. So when looking at the diagram to the top right, we can see that the price peaked in the third quarter 2021, but the prices still are on a historically high level. And as I said, they are expected to rise again in the second quarter. Then we walk over to Pulp, and I will come back to Q4, but I'd like to start by mentioning that pulp business delivered its best result ever June '21. The EBITDA for the year was over SEK 2 billion, and that gave us an EBITDA margin for the year of 37%. And this increase in EBITDA is, of course, driven by higher prices, but also by lower costs. Sales during the quarter were up by 17% compared to the same quarter last year, and that is mainly due to significantly higher prices and despite also a long maintenance stop, which was also slightly longer than originally planned. EBITDA increased by over 300% compared with the previous year. And finally, I can mention here that our ongoing project to build the CTMP line twice industrial side, the one with a total capacity of 300,000 tonnes is progressing on time and budget. The pulp market is stable, particularly in Europe with a good demand and prices that have bottomed out on a relatively high level for the time being. And we peak price-wise at the beginning of the fourth quarter '21. The official fixed price at that time was USD 3,040 per tonne. Since that point, prices have come down to USD 1,260 per tonne in Europe, but SCA has now announced a price increase up to USD 1,300 per tonne. And we should remember also that we have to face a slightly higher discount rate from 1st of January 2021 compared with 2020 -- sorry, from 1st of January 2022 compared to 2021. So the demand in China and U.S. has picked up again, and we can now after a substantial dip in prices mainly in Asia, see more or less equalized prices between Asia, Europe and also U.S. On the negative side, we have seen sharply increase in transport costs, not least for deliveries between continents. And we can definitely say that the supply is heavily impacted by global logistical challenges. Inventories for the hardwood pulp are on a normal level, while the level for softwood pulp is still a little bit in the higher end. And as you can see -- that you can also see in these 2 graphs here, but mainly relates to increased inventories in transit because of the logistical challenges. So then we move over to business area Containerboard, and I'd like to start by stating that our expansion project in Obbola is progressing well on time and budget. Sales and EBITDA for the containerboard business are up 27% and 142%, respectively, in the fourth quarter '21 when comparing with the same period last year. And this is, again, mainly due to increase in prices, where we now reached all-time high prices and that you can also see in the graph in the bottom left. And just to comment something about those prices, they have almost tripled now since the bottom in November 2020. And that affects the result negatively to some extent, but it also supports the price development for testliner and thereby also indirectly, of course, for kraftliner. The Global kraftliner deliveries from Europe continued to increase also in the fourth quarter this year, and we can see a stable long-term growth of European deliveries. And we can also conclude that the demand for boxes has continued to be strong also during the fourth quarter. When it comes to inventories for kraftliner, they are on an average level. We can see a seasonal increase in December, but that was expected. Since the prices bottom out in the fourth quarter 2020, the price for unbleached kraftliner has so far risen by approximately EUR 350 per tonne, while white top kraftliner has increased by EUR 185 per tonne during the same period, and that includes also the December increase. And the latest price increase came in December, and that one resulted in a further increase of EUR 50 per tonne for unbleached and EUR 35 per tonne for white top and this price increases will, as usual, successively take effect during the first quarter. I can also finally mention that with this present price levels, the delta between Kraft and testliner prices is approximately EUR 150 per tonne, and that is historically a rather normal level. So I think by that, Toby, I hand over to you.
Thank you, Ulf, good morning, everybody. I will start by talking about the Forest assets. And here, on this slide, you can see the higher transaction prices we have for forest assets in our area. And if I start with the graphs on the right-hand side, you can see from the first graph that the Forest -- the market price of forest land in our region has increased from SEK 291 million last year to SEK 324 million this year, and that's an increase of SEK 33 million per cubic meter, so more than 10% increase in transaction prices measured in Northern Sweden. When we also add on the effect of the standing volume where we have a net growth in our forest of 4 million cubic meters this year, some 1.6% net growth in the forest land, net after harvesting. Then we have an increase in the total forest asset of just under SEK 10 billion from 74.9 billion to SEK 84.5 billion. And then of that increase of just under -- just under SEK 10 billion, SEK 9.6 billion, as you see on the left-hand side, we then report SEK 1.8 billion, just under SEK 1.8 billion in the P&L as a biological asset change valuation change. And the remainder is mainly the change in land assets, which does not impact the P&L. So a significant increase in the value of the forest this year. If I take to the income statement and a lot of figures here, but if I focus on the right-hand side, the full year numbers and the column for 2021. As I've mentioned, you can see the increase in net sales of 2% this year despite the divestment of Wood Supply U.K. and the restructuring of publication paper, exited publication paper which impacted by more than SEK 4 billion in net sales. We then have an EBITDA of SEK 9.1 billion with a margin for the full year of over 48%. And that means when we go down to operating profit or EBIT, we have SEK 7.6 billion of EBIT or 40.6% EBIT margin. Then financial items, pretty stable. Net debt is also pretty stable. So it's a stable level, just over SEK 100 million in financial items, which we manage well. And then tax here, we have SEK 1.4 billion of tax charge, which is an effective tax rate of just under 20%. I'm giving a net profit for the full year of SEK 6.1 billion. And then in the -- just to mention in the fourth quarter then just under SEK 2 billion of net profit just in the fourth quarter. So earnings per share then SEK 8.69, also as Ulf has previously mentioned, but the best ever earnings per share. And then when it comes to the proposed dividend, just a short recap, but we have a proposed ordinary dividend of EUR 2.25 billion, which is a 25% increase from last year. And then on top of that, an extra dividend this year of SEK 1, and you can put that in relation to the earnings per share, as I mentioned, of SEK 8.69 for the full year. I'll then show some bridge of the full year result in terms of net sales first. You can see the impact -- significant impact of improved price and mix in all segments of 28%, a small volume increase overall. And then a negative currency impact. So we were impacted negatively by the currency for the full year. And then we have the impacts of both divesting Wood Supply UK at the end of 2020, and then exiting publication paper, which we ended exited publication paper at the beginning of this year in the end. When it comes to EBITDA bridge, you also see the significant impact of the higher prices, which add some SEK 5.4 billion in terms of full year result effect, a small effect from volume. We have a -- you can see a positive effect on raw material despite, I think, a quite inflationary environment in other areas, in other segments, other sectors. And that's partly also driven by better productivity and better raw material sourcing through the productivity improvement, a positive on energy because we are balanced or a net seller -- slight net seller in electricity. And then as I mentioned, a negative currency effect -- and then a negative effect in other partly here, you see the inflationary effect or mainly for us, it's seen in logistics costs where we have an increased logistics cost this year and also some temporary costs related to the transition from publication paper and towards then growing in -- particularly here in pulp in Ortviken. And then when it comes to contribution by segment, I'll start on the left-hand side here, the full year as well. You can see the Forest division. The result has improved versus the previous year. A significant effect we have to remember here is driven by the revaluation of the biological assets, which comes in the forest division. The turnover, you can see has come down a bit versus last year, and that's the effect of exiting publication paper and lower wood supply through publication paper. In the Wood Division, we have grown the top line a bit despite selling Wood Supply U.K., and you can see a fantastic result in the Wood division of just under SEK 3 billion in EBITDA or 42% EBITDA margin. So a very good result. And then in pulp, you can see the top line has grown with improved pricing and volumes. And then also a strong result on the bottom line, just over SEK 2 billion or a 37% EBITDA margin, which is a good EBITDA margin level in the Pulp division. And then containerboard paper, you see on the top line, the effect of the exit from publication paper that the net sales has come down to SEK 5.4 billion. And then on the bottom line, we have an improved result versus last year showing the improved pricing in containerboard up to 32% EBITDA margin and just under SEK 1.8 billion EBITDA. And then if I just switch to briefly to the fourth quarter and just show the same bridge, it's a pretty similar picture. Actually, that we had improved prices in the fourth quarter versus the fourth quarter last year of some 37%, again in all product areas, and then smaller effects from a bit lower volume, mainly due to timing of maintenance stops here. Currency, again, negative and then the effects of the divestment of Wood Supply U.K. and exit of publication paper. When it comes to EBITDA, it's also a similar picture here and with a strong price increase versus quarter 4 last year. And then the small effects from the volume, raw material and energy, similar to -- for the full year, negative currency again and a small impact from other as well and logistics cost is the main item to mention here as well. And then just to do the same with the quarterly picture. And I'll focus here on the bottom graph in the picture. And for the Forest division, you can see an EBITDA of just over EUR 900 million in the quarter. Again, remember here, we have the revaluation of the forest assets, and we had -- in the fourth quarter, we -- we had a one-off higher item in the -- from the revaluation because we increased the annual revaluation in the fourth quarter. So otherwise, we would have been more or less in line with the peaks in Q4 '20 and Q2 '21. Wood Division, the EBITDA of SEK 850 million come down a little bit versus the high point in Q3, which is due to, as Ulf mentioned, the price impact coming down. A little bit, but still a fantastic result and 46% EBITDA margin. In the pulp sector, we had a maintenance stop in the fourth quarter. So that's really what impacted both the top line coming down a bit and the bottom line, but 33% EBITDA margin in the fourth quarter. And then in containerboard, we had -- the maintenance stop here was -- had a main effect in quarter 3. So then you can see the significant uplift in the quarter 4 also with an impact of the improving pricing in containerboard in quarter 4 versus quarter 3 as well with 44% EBITDA margin. A little bit on cash flow, and I'll just hear our focus as well on the full year. First, we had an EBITDA of SEK 9.1 billion, as we've previously talked about. And we take away the effect mainly of the revaluation of biological assets and some other smaller noncash items. We have an operating cash surplus of SEK 7.2 billion. Then we have a small negative effect from change in working capital, but still, I think, very tightly managed working capital given the high -- the increasing price environment, which would normally drive an increase in working capital bigger than you see here. So some SEK 300 million out there in working capital, restructuring costs related to the exit from publication paper of just under SEK 400 million entirely according to plan, according to the provision taken last year. And then current CapEx of just over SEK 1.2 billion, meaning we've delivered an operating cash flow for the full year of SEK 5.2 billion. And given our strategic capital expenditures that we're investing in the growth of SCA in primarily Obbola and CTMP and Ortviken of SEK 3.7 billion. We are financing all of those growth expenditures through operating cash flow again this year. And finally, just on the balance sheet to show you the balance sheet of SCA at the end of 2021. You can see the top line here is the forest assets where -- the value has increased, as I said, by just under SEK 10 billion, and we now have a value of nearly SEK 85 billion in the forest assets of SCA. Working capital has SEK 2.8 billion slight increase versus last year, but less as a proportion of sales, which reflects the tight management, as I mentioned. And then when we include the deferred tax and the other capital employed, mainly related to the industrial businesses, then we come to a total capital employed of nearly SEK 91 billion. Net debt has been stable versus previous year, a small increase, but SEK 7.752 billion in net debt and leading to a net debt to EBITDA at a very good level at 0.9x, and then equity then of SEK 83 billion. All right. And with that, I will hand back to Ulf for some more comments.
So thank you, Toby. And I like finally to say some words about the future. SCA has delivered a substantial part of the strategic project portfolio that we communicated following this split back in 2017. And this transformation has gone faster than at least I thought -- and following the exit of publication paper, we are now 100% focused on growing markets. Our continued focus will still be on organic growth in our existing value chain and within our existing geography. We used to summarize our strategy for profitable growth into components, as you can see here, and the first component is to grow our renewable forest assets. And we do this through significant investments in forest management in our existing forest land. And by that, successively increased the growth in our forest and thereby, of course, to create conditions to successfully increase the availability of wood for harvest. In parallel, we also continue to acquire forest land where possible in the Nordics and Baltics. The second component for profitable growth is to increase the value of each tree that is growing on SCA land, and we do this by investing in our integrated value chain, and the coming focus will be on pulp, containerboard and wood. And in addition to this, we will also increase the focus on realizing the business opportunities that we have in -- within renewable energy. On the next slide, I will take the opportunity to show you and update the project portfolio. Just to show you how we will deliver our strategy. And I'd like to start with the base. We will continue to reinvest in order to secure our superior asset quality. If -- we do not focus on maintaining assets then over time, it costs a lot in terms of reduced availability, increased cost levels and lower quality. And we don't like to see that. As you can see on the left of the slide, we have a number of ongoing strategic projects, and we are, of course, 100% focused in completing them in the very best way. Here we are talking about completing the big Obbola project that is mentioned several times already, the construction of our new CTMP line in Ortviken, finalizing the program to acquire 100,000 hectares of forest land in the Baltics and finally to deliver on a point refinery with -- to produce 200,000 cubic meters of biofuels. The right-hand side shows the areas where we will deliver organic growth. And from now, we have the ambition to actively invest our own money in wind power, and that is a change if we compare with the past. There are a number of ways to grow in this area, and we believe that the most interesting are the case of repowering. I mean, where we can replace smaller turbines in existing wind parks, a bit larger and more productive turbines. Over time, we will invest where opportunities success to remove bottlenecks in existing production sites and in particular, for the manufacturer of pulp and containerboard. And at the same time, we will step by screw our production capacity in wood business area, while, of course, maintaining the balance to the raw material ability. We have seen a number of exciting development projects for renewable energy. And last but not least, we will continue to acquire forest land in the Nordics and the Baltics. And Toby, with that, I think I round off and open up for questions -- so please.
[Operator Instructions] Our first question comes from the line of Martin Melbye from ABG.
Could you indicate, say, the new level of EBITDA from the Forest segment after this last -- the forest value write-up, including the revaluation gains to land on the EBITDA for the segment?
Yes, maybe I can take that. Obviously, as I've mentioned, the revaluation of biological assets is it's -- I think you're referring to in the forest, which is reported in the Forest segment, and we reported just under SEK 1.8 billion of -- from the revaluation of biological assets in the Forest segment. And going forward, we would expect that level to be relatively stable. What we've done this year is when we look at the total value of forest assets, which I think is by far the most important, we've seen obviously a good year of increase with increasing prices in forestland in Northern Sweden. We value the biological assets according to another model, a DCF model. And -- but we've seen the effect of the higher asset prices means that we've judged and we've seen evidence also that return requirements from, from investors in forest land have come down a bit, and that's -- and we've reflected that in a higher rate of increase also in biological assets. So I think going forward, you should expect this SEK 1.8 billion, roughly SEK 1.8 billion level to be relatively stable going forward.
But this is -- that is including 1 quarter. That is included in Q4. So if you -- and you've been -- the value increase ever. So what does that mean on the EBITDA in the normal quarter?
Yes. So I think -- obviously, in Q4, we took in the effect of this increased valuation of the assets. So in Q4, you have the level increase due to that. So -- and that's probably around SEK 250 million in Q4 of that increase, which is from the onetime increase up to the full year level of SEK 1.8 billion. But going forward, you should expect around SEK 1.8 billion divided by 4 every quarter.
And the next question comes from the line of Justin Jordan from Exane.
I want to do something unusual and just firstly say, genuinely well done to everyone at SCA for a remarkable operational performance in a very challenging 2021. But moving forward, I've got 2 quick questions, if I could. Firstly, your reward for being visionary in terms of talking of coming together of pulp prices 3 months ago at the Q3 results, you reward for that is clearly, I'm going to ask you again to what your thinking is regarding outlook for prices globally going forward in 2022? We've clearly seen, as you expected or outlined 3 months ago some recovery in Chinese book prices and moderating in European pulp prices. And secondly, just speaking about containerboard, we've seen clearly some easing in OCC in recent weeks and months in Europe and North America, potentially does that negatively impact testliner prices and, therefore, impact kraftliner prices, but also counterbalancing that, clearly, we've seen U.S. peers recently announced spring 2022 U.S. kraftliner price hikes. So I'm just curious about your outlook for kraftliner prices for SCA in 2022? And then if I could be greedy and have one third question. Can I just ask Toby just some initial guidance on strategic and current CapEx for 2022, please?
Okay. Thank you we had a little bit of a bad, but I try starting with pulp. And I mean it's really hard to say here. What we can see now is that we have more or less equalized prices in all continents. I mean, we have more or less the same net price now in Europe, Asia and U.S. And I mean, one reason for that is, of course, that we see big logistical challenges, I think. On the other hand, we see some reports coming in now with a rather stable demand, not the least from the [indiscernible] side. And I mean I don't like really to give you a forecast. We -- as I said, I mean, we see a rather fairly stable market for the moment being now in Europe, and we think the price will now, for the time being, level out on this level. I don't know if you like to say something more Toby.
I mean I think as you said, we've seen the prices more equalized between the different world regions. And yes, prices have come up from where they were in China. So it seems to be, as you mentioned before, it's bottomed out and stabilized.
And when it comes to container -- I'm not sure if I did catch your question. But I mean the containerboard market is really strong. And as I said, I mean, from the bottom, we have now increased prices by EUR 350 per tonne for unbleached kraft. And the last or latest pricing increase was announced in December, and that will successively be implemented now in the first quarter. And I mean, we still feel it's a very strong market for containerboard. It's a good balance out there and something we are quite confident for at least for the coming quarters maybe.
And I think you've seen -- I mean, we see a strong demand for the end markets in containerboard. And obviously, OCC prices have an impact on test liner, which has an impact on kraftliner and energy prices is the same. But I think you've also seen that there's a relatively stable gap between testliner and kraftliner, which we expect to see going forward as well?
And then some words about the investment.
Yes, sorry, yes. The CapEx level is, Justin, yes. I can say I think this 2021 has been the heaviest year in the Obbola project. So we expect the strategic CapEx in the Obbola project to be lower next year and overall strategic CapEx to be a bit lower next year. So probably we're guiding around SEK 3 billion in terms of strategic CapEx. So we'll have a bit lower CapEx in Obbola. We'll have a bit more coming from the CTMP project strategic CapEx there in growing CTMP and Ortviken, we are continuing our investment program in forest land in the Baltics as well. So depending on what happens there, we might see some further investment there. So total around SEK 3 billion is, I think, what I can say now. And then for current CapEx, yes, we do expect current CapEx to be a bit higher going forward than it's been in the past around the SEK 1.2 billion. I don't know if you mentioned the figure of -- but yes, increasing somewhat over the SEK 1.2 billion level around -- yes, and depending what happens, but SEK 100 million or SEK 200 million higher than the SEK 1.2 billion level we would expect.
And the next question comes from the line of Cole Hathorn from Jefferies.
I'd just like to focus in on the Wood division. Normally, you give a little bit of guidance on where you see kind of construction pricing for the wood market going quarter-on-quarter? And then looking into the second quarter, I know you mentioned that there might be some uptick there. What's driving that view of kind of a recovery in pricing you would imagine that the DIY market will probably soften a little bit in Europe as we're going to return to offices and the U.S. lumber futures, while at a very high level is coming down? So I'd just love to hear your thoughts on what's driving the view on the second quarter uptick? And then the second question on containerboard. Are you seeing any increase in imports at all from the U.S. players or not yet at this stage?
Yes. If we take the first one then, I mean, we feel that I think it's a rather balanced situation out there. And as I said, I mean, we continue to produce in Finland, Scandinavia mainly on a good level, and I don't think that we can increase much more, due to lack of capacity. And that's been the case also for -- I mean, for a number of quarters now. What we've seen is a slightly lower production in Canada and also in Central Europe. We have also seen that the log prices has went up rather substantially in these areas, and that might be the reason. But the balance in the market is quite good. And as I said, I mean, we feel that, especially in New residential building segment, we have a really stable demand here. And yes, that's the case. Seasonally, we always feel a slightly lower demand in the end of the fourth quarter and in the beginning of the first one. I mean what we see now is more an adjustment still. We have to remember that steel prices are on a very historically high level. When it comes to containerboard, no, we don't see the answer is no. We don't see volumes coming in from U.S. I mean, typically, we have a couple of hundred thousand tonnes over, but we haven't seen it for a while now, and we don't see it for the moment being either.
And then just a wider question on the EU kind of taxonomy environment. We've seen further updates and comments around voluntary carbon credit markets. Is there any update you can give on potential CO2 credits or even voluntary credits that SCA might have access to for your forest assets?
I mean not really -- as you know, I mean, we have -- it is a discussion around [indiscernible] and what kind of harvesting level that will be possible going forward and so on. But I mean, for me, it's obvious, I mean, it is actively managed for us that can have a net -- can tie up carbon in a positive way and -- I mean so that we have to continue with. And I mean, from the fiber that you get from the forest you can also have a positive substitution effect where you replace. As I mentioned before, where you can replace plastic with paper, steel concrete with solid wood construction and fossil fuels biofuels. And I believe that we will see continued positive development for the forest and for the forest industry. I mean we are maybe the most important part of the solution in this area. And at the same time, of course, we have to take care of the biodiversity and do what we have to do there, and we can do more, and we are working also on that part. You would like to add something Toby?
No. I think -- well, only to add, I think, as you know, Cole, there's a lot of discussion on carbon credits and interest in that topic. But as of today, there's no real viable scheme that is relevant for our business. But of course, we will continue to monitor it.
And the next question comes from the line of Oskar Lindstrom from Danske Bank.
Three questions from me. The first 1 is on strategic projects. Toby, there, you mentioned the strategic CapEx coming down in '22 -- and although you still have a number of projects going on, they are nearing the sort of completion at the end of this year or beginning of next year. So my question is, I mean, you're making good money at the moment. Your strategic expansion projects are coming to an end. What other attractive growth opportunities do you see for you that could be or any more substantial size. I mean are you looking at expanding existing volume or capacities in existing assets, byproducts, energy, buying things abroad. What are the main sort of avenues of growth do you see?
If we start with that one, I mean, I think yes, I tried to explain some of that in my last page. I mean we will -- again, we will be focused on organic growth and -- and I mean, I said that we -- from now, we will start to invest money into wind, and we can do that in different ways and also you have a slightly different time perspective in this area. I mean how much and when and so on. I mean it depends a little bit on the opportunities that we can find in the market. But we will be much more offensive in this area. As we've always been, we will be interested in buying more forest land, and the big program that is ongoing in the Baltics, and we have done approximately 60% of that, and we will continue to finalize that one. If we find other opportunities in yes, in other Nordic countries, Sweden, Finland and so on, then we will be interested, of course. Then of course, we will always look into possibilities to debottleneck. And I mean but definition that will be in Pulp, containerboard, but also in wood. So I mean, I think that, again, we have really to focus now on finalizing our big ongoing investment projects in the best way. And it is -- even if we are now in the later part of these projects, but I mean we have to be 100% focused now it's more important than ever to fulfill these projects in best way. But then again, we have opened up for some things in the energy sector and so on.
All right. How far away is the biorefinery project? I mean you mentioned in the report that it's on the design level. Does that mean that it's at least 5 years out before you can make a decision or?
I mean, again, it's very hard to say because as I said, we have the environmental permission in place, so that is done, in order to expand close to Ostrand we need to build some land, and that is a project over a couple of years. And that is a good project anyway because we always need land. So that we will take, I think, rather soon. Then as I also said before, I mean, commercially, no 1 really has the right technique, but we are working on that, and we have big part of the resources in our research department on campus with Sweden University working on that. And -- but it's too early to say. I mean -- it's much better that we get this right and we get it fast. I mean that is a long-term work. But we know that around Ostrand, we have created a fantastic infrastructure. And of course, we -- we will do the best out of these possibilities.
I could just add, you should also remember our ongoing investment together with St1 in the agreement -- an investment in the refinery, they have in Gothenburg to produce biofuels based on tall oil and from -- yes, based on tall oil from our operations. So that's an ongoing investment, which we -- yes expect to start producing at some point during 2023. So that's sooner in time.
My second question is on saw and timber. And Ulf mentioned that there was weaker production in Canada and Central Europe. To what extent do you believe that weaker production is due to more sort of structural changes in terms of wood supply in those markets? And is that going to get worse? Or what's the situation there?
I mean, it's hard to say what we saw in Canada was that prices increased quite substantially. And we also heard that some companies, they started to take curtailments because they, I mean they didn't believe that they could make good money out of the business if they have to pay so much for the logs. I mean, that was maybe the main reason. And I think that was also the main reason, of course, in Central Europe. And Behind that, of course, in Canada, you still see negative effects from the pine wilt disease they had decades ago. And in Central Europe, I suppose, I mean, you see some negative effects from the spruce beetles disease, they had 1, 1.5 year ago. So I mean that is, I think, the main reason. How long will it last? Hard to say, but again, as it is also fundamentally in the business for wood. I mean, the demand is increasing step by step. And I think that the bottleneck will be the supply of logs. And that will be -- we will have faced a little bit different situation in different regions. But in that perspective, we are in a quite favorable part of the world in northern part of Sweden, I would say.
My final question is on forest land valuation. I think it was -- Toby, that mentioned that -- I mean 1 of the main reason why you're increasing the valuation of the forest lands here is because of higher transaction prices, which you use as a benchmark does that primarily reflect the -- still reflect the private forest land market? And if so, what do you believe is the premium for larger corporate forest lands?
Our forest land valuation is based on the market values which we see from market statistics based on transactions that take place. And -- I mean, you're right, the majority of transactions are private transactions, but they also include other transactions, corporate transactions and so on. But I think -- I mean, you're right, it's dominated by private transactions. I don't think we can speculate on corporate transactions and what premium you would see. But I think we do agree that generally you see a premium based on the fact that the -- often our tax advantages, they often are companies can be interested in as a purchaser and also that the average quality of the land is usually better for corporate transactions than private transactions. But I think that's -- there's no statistics or speculation really what kind of premium you could.
But personally, I think you have at least 40% premium, if you like my opinion.
The next question comes from the line of Mikael Doepel from UBS. .
I have a couple of questions. But before that, if you could Toby just repeat what you said about the current CapEx moving up by SEK 100 million to SEK 200 million per year. What was the reason for that? Sorry, I didn't catch that one?
Yes. I think you can say -- I'll show the slide earlier as well, where he talked about the need to really maintain the superior asset quality that we have in our operations. And therefore, we see that going forward, we've maintained the 1.2% level for a number of years now, but we see that we need to increase that slightly to really make sure we maintain the underlying asset quality, which keeps our superior position and allows us to continue making productivity improvements going forward in our existing business. So that's really the reason.
I think it's really well spent money into this area. And I think it's underestimated the effect and the return you can get from this money. I mean it's not just to keep the status. It's also to ensure that you have a strong productivity development, which we can also measure from year-to-year. So -- so I think this 1 is really both -- I think it's really underestimated to take care of what you already have.
No, that makes sense. And I have 2 questions myself. So firstly, on the containerboard market. So you mentioned that there has been a very good demand there. Demand continues to be good, and the market seems to be quite tight. Do you see room for further price increase into Q1 of this year?
I mean, we have just announced the price increase in December and that pump will, as I said, successively take effect during the first quarter. So I mean, that is first step now. We feel that it is a strong market. We feel that you have -- I mean, the delta between, as I said, between kraftliner and testliner today is EUR 150 per tonne, which is on a normal level. We have seen that the OCC prices as more -- not more, but they have almost tripled during a little bit more than a year now. So I think price development from now on might be, at least to some extent, related to the cost development for OCC. That's, I think, an important part of it.
Okay. And then just finally on the Pulp. You mentioned that the discounts have widened a bit in this year. Could you clarify that? How big of a change you see there? And what's the average discount to see in Europe right now?
I think, no, we see on average discounts have increased if we take 2022 versus 2021, by maybe 2% to 3% on average. So that's the level. But we -- and I think if you want to judge the discount level, basically, you can look at the comparison between generally spot prices and which you can see, particularly for Asia and Turkey and other markets. And the sort of official prices for Europe, which gives you a pretty good indication.
Toby to, am I right when I say I think we have more 3% in Europe and maybe 1% in U.S. this year. So the average.
And the next question comes from the line of Linus Larsson from SEB.
And great congratulations to an extraordinary strong 2021. And I'd Ulf to come back to your slide with project portfolio, and you highlight on wind power. And it seems to me that you are slightly changing your strategy from historically having mainly collected the lease revenues and having external owners and operators on your land. Is that right that you are taking a more active role in the energy markets in the north of Sweden, which are indeed very dynamic and exciting. And if so, if you take whatever a 5-year perspective or something how much wind power do you expect to own and operate?
The first answer on the first question is yes, we will take a more active role in this business. We don't -- I mean, we can do it in different ways. And I said that -- what we can see now the most boarding leg here is maybe the repowering leg, and that will maybe be actual 5 years from now. I mean, when we start to see wind parks that -- I mean, they still -- they are built up on 2-megawatt turbines, and we know that the technique in 5 years will probably give us an opportunity for 10-megawatt turbines, and that will give the wind park owner a substantial positive effect. And I mean, for that, you need another permission, but we hope and believe that it must be much easier to get a new permission on an area where you're already today have a permission for running wind mills. So I mean we will take part of that. And as you know, we have said that as today, we have 5 terawatt or installed capacity on SCA land. 2023, we will have close to 10 terawatt hours. And in all these areas, we sooner or later, we'll have opportunities in repowering. We will continue to try to develop new projects. And maybe in some cases, instead of selling these, we will try to develop them ourselves. And I mean, we will do this in different ways. But I cannot really give you a clear plan as it is just now. But it is a change. From now, we are willing to put in our own money into this business.
I would just add Linus, we're not new to the electricity markets and the power markets in Northern Sweden. Obviously, we have our -- we're active in wind power, even though we haven't put our own money in wind power so far. We're very active in windpower, and we produced some 1% of Sweden's electricity in our operations today, and we sell around half of that on the market. So yes, we're not new to this area.
And we have created good possibilities for the future as we have 20% of installed capacity on SCA land. So I think that is not the least important. But I think the time is right now to be more active in this field.
And are you looking to take over existing wind mills, wind parks today operated by external parties apart from the development of new projects, which is more -- well, it's a slow process can be at least?
I mean it's -- as you know, it's much lower return on these kind of investments. But I mean, let us look into this now and to see what kind of opportunities we have, let us spread them out over the time and see what's good for us short and long term. But I mean, just to buy and operate windmill farm, that's maybe not the best choice for us.
And then maybe just 1 final question on the Pulp market. You've yourselves be out pushing for the price hike that you mentioned. What's the update on that? How -- how has that been received in the market?
The 1 from 1,260 up to 1,300, I think is -- I mean, no 1 likes price increases, but I think that 1 is accepted in the market. If that was the question, was it?
Exactly. So that is sticking, you would say.
I would say so.
And we have 1 more question from the line of Harri Taittonen from Nordea.
One more question. The sort of pulpwood prices have continued to be surprisingly stable sort of for a long time, but could you see any events that could possibly change the stability? I'm just thinking, for example, the potential rational export restrictions. I mean if that could be something that could drive the Nordic balance to somewhere or any other sort of events that could sort of shake the or change the outlook for the pulpwood pricing?
For us, I mean, as I said, the most important thing for us when it comes to stabilize the pulpwood prices is to -- was the decision to close down [indiscernible] and our publication paper business. That was really good from many perspectives. But not the least from this perspective. And that means that we haven't really -- we have imported some pulpwood during this year because -- we have now a critical mass in the Baltics. And by that, we can also buy pulpwood in -- I mean, in a cost-efficient way. So I think that is 1 reason why we have this channel open. As it is just now, I think that this year will be very stable when it comes to pulpwood development. As you saw on the graph, we have had some smaller price increase in sawlogs -- and I think that level will remain during the coming year as we feel that the market can be quite good also next year. In pulpwood, we feel that it will be a rather stable development during at least short and midterm.
And as there are no further questions, I'll hand it back to the speakers.
Thank you. And that concludes the presentation of the full year results. And we welcome you all back on April 29 for the first quarter results presentation. Thank you.