Billerud Stock

Good day, and thank you for standing by. Welcome to the Billerud Q2 Report 2026 Webcast and Conference Call. [Operator Instructions] Please be advised that today's conference is being recorded.

I would now like to hand the conference over to your first speaker today, Lena Schattauer, Head of Investor Relations. Please go ahead.

Hello, and welcome to this presentation of Billerud's Second Quarter Report. Great to have you this morning -- to have you with us this morning. I'm joined by our CEO, Ivar Vatne; and our CFO, Andrei Kres, and they will take us through the highlights and developments of the quarter. After that, we will, as usual, open up the call for questions.

With that, we are ready to start. Ivar, the floor is yours.

Thank you, Lena, and good morning, everyone, and thank you all for listening into our presentation this Friday morning. In many aspects, it's been a quarter we have seen progress across several areas, and it's certainly been a good step in the right direction for us.

But let's get into it. So next slide, please. And as expected, our Q2 result was a clear improvement versus the first quarter. North America had a very strong sales quarter with FX-neutral net sales up 11% versus a year ago, which is another testament to our attractive U.S. position, offering local supply. For Region Europe, the main focus over the last months have been on improving profitability, and that is exactly what we managed to do now in Q2. And our performance is stronger and improved, both when we compare to last year and versus Q1.

I'm naturally pleased to see this as we mobilized the organization early in the year to move us forward and decisive actions on pricing, reducing both fixed and variable costs and driving a more profitable mix are now yielding results. Focus on working capital is another clear priority for us, and a 97% cash conversion during the Q2 is another good performance.

So next slide, please. And we have a clear philosophy to focus on the items we can control and drive continuous improvement. And in that regard, our fixed cost saving program is proceeding well and according to plan. We recorded SEK 150 million savings now during the quarter, and that is SEK 50 million incremental from Q1. All staff reductions are now completed. And in Q2, we did have the first quarter with a leaner organizational model and somewhat simplified ways of working.

And I do like to take the opportunity to thank the whole Billerud organization for showing agility and determination to deliver on the standards we expect. It certainly has been an important building block to improve both our productivity and competitiveness. In this program, we expect the benefit for '26 to land in the area of SEK 550 million with further SEK 250 million to be delivered in '27.

So next slide, please. And another very important company priority is to evolve our portfolio gradually towards packaging materials in North America. We are picking up sales momentum after a long period of trials and qualification, and it is in particular true for our liner proposition Tribute. The interest in our coated liner has so far exceeded our expectations, and we are now expanding our offering also to include uncoated liner.

We will do some selective CapEx investments now during Q3 to further strengthen our production capabilities within the area. And there is no doubt that we also expect further sales acceleration into the second half of the year.

Now, over to some words about the market sentiment. So next slide, please. And if I start with North America, the market conditions, they remain favorable and stable. Now the overall consumer sentiment in the U.S., it did take a hit, post the crisis in the Middle East. But so far, within our categories, Q2 was another quarter with good demand. Our order books are strong, and we are expecting to see operating rates above 90% going into Q3. If we change over to Europe, the market sentiment is a bit different. I mean, overall, it has been muted, but we are starting to meet different conditions between our sales channels.

Within Food and Beverages, conditions have improved and are starting to normalize. Luxury is still weak, while the industrial channel also has improved during the quarter and in some sense, is starting to normalize.

And lastly, some words about Asia and Rest of the World. The situation has also improved slightly during the quarter. And Food and Beverages, and that means for us, mostly [ liquiding ] packaging board that has performed surprisingly well during the first 6 months of '26 and has reached normal conditions. And also within the industrial channel, where our exposure is mostly found within the sacks, the sentiment has strengthened a bit during the quarter.

So with that, I will hand it over to Andrei.

Thank you, Ivar, and good morning, everyone. So starting with our net sales, which were down 2% versus a year ago, and this was driven by the pricing development in Europe. Sales volume for the group were in line with the last year, with North America up 7%, while the European volumes were down close to 3%. Currency continues to have an impact on both our top line and profitability as we have stronger Swedish krona compared to Q2 last year.

Next slide, please. The profit decline versus last year was driven first and foremost by price pressure in Europe and loss of emission rights. Now most of the impact was offset by our decisive actions to reduce costs, our volume growth in North America and pulpwood cost relief in the Nordics. Our EBITDA margin of 7% was a clear improvement sequentially, given we also had heavier maintenance schedule now in Q2. Excluding the impact from maintenance shutdown, adjusted EBITDA increased with 4 percentage points versus quarter 1.

Next slide, please. Moving over to regions. And first of all, I'm very pleased to see that our actions to improve profitability in Region Europe are yielding results as we see improved profitability both sequentially and versus a year ago. We did see sequentially lower volumes across most categories, but clearly, that impact was more than offset by our pricing and mix actions together with cost reductions. Pricing was up with close to 1% versus quarter 1, and we expect additional pricing carryover into the third quarter of 1% to 2%.

In terms of input costs, as expected, we had significant pulpwood cost relief compared to previous quarter. partly offset by cost inflation due to the Middle East crisis. And looking into the third quarter, we have solid order books, which are partly supported by the seasonal impact from temporary capacity adjustments in the Nordics. And as Ivar mentioned, the underlying demand remains somewhat muted.

Now moving over to Region North America. North America continues to enjoy favorable market conditions and had the highest sales volume since late '22 with more than 250,000 tons sold in the quarter. Sales grew both within graphical and label paper, while pulp sales were slightly down compared to last year due to Quinnesec maintenance shutdown. The positive volume development means that we now operate at considerably higher operating rates, which were above 90%, and we expect that level to also continue into Q3.

The biannual maintenance shutdown at Quinnesec was slightly more expensive and had approximately SEK 50 million higher cost impact, which was related to some start-up challenges, but the mill performance has progressed throughout the quarter, and we are now back to strong operational performance. And for the third quarter, we expect the favorable market conditions to continue. And similarly to Europe, we have strong order books. The price increases that were announced earlier in the year will now fully materialize in quarter 3, and we expect a positive pricing impact of 2% to 3% for the region compared to the second quarter.

Next slide, please. Turning over to some comments on the cost development. And first of all, in the second quarter, as we expected for Europe, we saw continued pulpwood cost decline and also seasonally lower electricity costs, which contributed positively. That impact was partly offset by cost inflation on most and foremost logistics due to higher oil prices. All in all, we had a sequential cost relief of approximately SEK 150 million for the region, in line with the expectations.

For North America, we saw likewise cost inflation related to higher oil prices, which impacted fiber, chemical and logistics costs. Energy costs were somewhat lower due to seasonality. And overall, the input costs were down approximately $20 million compared to the first quarter.

Next slide, please. Now looking forward, for the third quarter, we expect overall flat input cost situation. But clearly, due to the events in the Middle East and volatile oil price, it is somewhat unpredictable environment. For Europe, we still expect further pulpwood cost relief, although the decline is now flattening out.

At this point, we expect both lower pulpwood costs and seasonally lower electricity prices to offset the cost increase we will experience on chemicals. And we would look at the total sequential cost relief of around SEK 40 million for the region. For North America, we expect input costs to increase somewhat into quarter 3. But here, we are talking about quite small increases with a total negative impact of around SEK 20 million.

And with that, I will hand it back to you, Ivar.

Thank you, Andrei. So some comments on cash flow and balance sheet. And as already mentioned, the cash conversion now in Q2 was another solid performance with close to 100% conversion. Our balance sheet remains healthy and leverage ended at 2.2x after the dividend payout was executed during the quarter. Our CapEx guidance remains unchanged for '26, and we are planning to invest SEK 2.6 billion. Most of the strategic CapEx is related to project evolution in North America, and we do expect that program should be close to completion by the end of the year. And we will get back with the CapEx guidance for '27 in conjunction with our coming Q3 report.

Now so to round it up and next slide, please, and closing remarks on the near-term outlook. And for Q3, we would expect continued favorable conditions in North America. The situation for Region Europe is a bit more uncertain and unpredictable, but we are seeing some positive momentum at least within selected channels. And for both regions, we will see positive pricing impact now in Q3.

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

[Operator Instructions]

And your first question today comes from the line of Johannes Grunselius from SB1 Markets.

It's Johannes here. I have a question, Ivar and team, on your comments on positive pricing. Did you say on the call what kind of price magnitude we are talking about? Or does that remain to be seen? It will be very helpful if you could, sort of, give us some indication on the magnitude there, please.

Johannes, so as you know, we announced price increases broadly during the first quarter, and they are now materializing. We did see some pricing impact in Q2. Heading into the third quarter, we expect for Region Europe additional pricing impact of 1% to 2% compared to the second quarter. And for Region North America, a pricing impact of 2% to 3% compared to the second quarter.

Okay. Very helpful. Then on your comment about strong order backlog, how should we interpret that? First of all, if you can expand a bit what you mean with this in terms of periods of order backlog and so on? And do you think this will materialize in sort of better mix quarter-over-quarter and also higher volumes quarter-over-quarter?

Johannes, I can start and maybe Andrei chip in at the end here. The way we would look at this is that North America had a pretty solid quarter in terms of sales volume. We would expect that to continue also into Q3. We are operating now in the 90%-ish operating rates in North America and that we expect to continue now in Q3. We had some maintenance shut in Q2 in Quinnesec, and we will have Escanaba now in Q3. So in that sense, still going strong.

The mix question there in North America is we had a bit lower pulp sales in Quinn. That we would expect to pick up now, since Quinn is back to full blaze, and that typically has a bit of a subdued margin. So there might be some small negative impact on the mix in North America.

For Region Europe, it's a bit of a mixed bag. But in general, order books are very strong, and we do expect to run a pretty solid production pace now going forward. We probably would expect some pickup in terms of the volume. But you might see some offset since in this quarter here now, we would expect to sell a bit more than we produce and part of that volume uplift could be offset by some fixed cost absorption. But in general, good order books and good production pace is also the case for Europe in Q3.

And the next question today comes from the line of Linus Larsson from SEB.

You talked about somewhat improved market conditions in Europe. I wonder if you could shed some more light on that possibly. Which segments are we talking about? And how do you interpret that? Is this part of an inventory cycle? Or is it your view that we are seeing some real demand improvement, some more constructive customer behavior out there?

Yes, I can start with this. It's a good question, first and foremost. And I think the honest answer here is that I think we continue to ask ourselves that question. And I'm the first to admit, we probably need a bit more evidence and months under our belt to really feel that this is a longer trend. But I can just confirm that right now, we are seeing better demand in food and beverages. As you know, that's our biggest channel in Region Europe. And liquid packaging has been strong from pretty much the beginning of the year, and we are pretty confident that will keep up at least into Q3.

For containerboard, I think also we see a pretty okay situation. Fluting pretty much is fully sold out in terms of our machines going forward. And there's a nice pull from our strong position in Latin America given our product performance on this Billerud Flute. Liner is a bit weaker, but still it's holding up better than maybe we thought 3 months ago. So luxury and for us, that means a lot of the exposure to cartonboard is still the weakest part. That has been weak for some time, and I think we don't expect much change on that.

Certainly also, this is an area that has a lot of overcapacity. We're doing better than others on brown. But on white carton and FBB, it's still a pretty muted and weak situation. And I think for paper, sacks now is kicking in quite nicely into gear, and we have more pull now on brown sacks than probably we had for many quarters. And we certainly also sold out on that piece.

And maybe somehow a bit of a surprise we see that industrial channel has picked up, and that's not only in Europe, but a lot of the regional exposure we have on brown sack is found in Middle East, North Africa and also into Asia. That has been better, yes, than what we've seen for some time. White sack is a bit muted, but still better than maybe it was. Kraft paper in this case, MG and MF is still a little bit softer than we see on sack, but also a bit of an uptick versus what we saw for the last 2 quarters.

So I think if you sum it up, it's still not fully back to maybe the old, let's say, sentiment that we have 2% to 3% category growth consistently. But it's certainly now a step in the right direction, and we are seeing for some time on better pull on many of the channels we have exposure to.

Interesting. Because that improvement is not visible in your Europe shipments numbers for the second quarter. So I guess what you're alluding to here is that we will see a pickup in Europe shipments volumes in the third quarter. Are we back to year-on-year growth in terms of European shipments in the third quarter?

No, I don't want to comment necessarily that. We also had some maintenance shuts in the quarter that impacted, if you think quarter-over-quarter. But I can confirm we are expecting a volume uplift now in Q3 versus Q2, although that impact, as I mentioned also on the previous question, would be a bit more reduced given the impact that we expect a bit bigger impact on the fixed cost absorptions as we would expect to sell a bit more in the quarter versus production. But in general, the underlying sentiment still remains that we should have a better sales volume quarter in Q3 than Q2 for Europe.

Great. And then just finally, also on the market situation, but in North America, you've had a fantastic recovery in terms of operating rates over the past several quarters by now. And with regards to trade barriers, et cetera, could you -- and your very special market position, could you give us the snapshot here and now with this kind of operating rates what's the trajectory of profitability, pricing, et cetera, from here do you see? How is this tariff dynamic working out in your market segments in the U.S.?

Yes. I think the situation has been favorable in North America for some quarters and certainly has been a phenomenal performance over years now that we got used to from our colleagues in Michigan. And we expect that going forward. I think so far in '26, graphic paper has been outstanding and surprised us also a bit that it is a category in secular decline, as you know. I think so far, this has hold much better, and it might actually be right now on a more flat category development. That is not something we would expect as the new normal. There's clearly been some big events now with both the World Cup and also the midterm election that is, in some sense, pumping some extra energy into the category.

But we have a great position. We are one of the few remaining locally produced suppliers. And I think our value proposition of predictability and reliability and a near-term partner is really paying off. So graphic is still going to be the cornerstone of that for some time. We do know, and I'm repeating myself, it is in secular decline. We have other legs to stand on. Our label paper is also one of that. And there, we see more favorable conditions and growth of 1% to 2%. And there we have a leading position for some time, and we expect to have that.

And then we do come back to the point around our journey to gradually go into packaging materials. Yes, there's numbers are still in, call it, a scale-up or start-up mode, but we are getting now to the point where more and more of our qualification trials are turning into successful and tangible results and that momentum should go forward.

So I think we would expect strong performance for the, call it, foreseeable future in North America. Input cost situation is much more stable than in Europe. I think we come now with pricing in Q3 that will also take a good step into the gross margin and operating rates should be on the higher side for at least some time going forward. That's our best estimate right now.

Your next question today comes from the line of Cole Hathorn from Jefferies.

I'd just like to follow up on the comments that you made in the -- in your statement about evaluating all opportunities to play an active role in addressing the industry challenges. I know the market is very difficult and that comment leaves the scope open for footprint rationalization and M&A. And I'd like to ask on the M&A side, do you also take the view that with a bigger footprint, it's easier to reallocate volumes and it's easier to close capacity when you have scale. I'm just wondering if M&A is on the table and how you think about it within the industry.

Cole, I can try to add some comments on this. I think what we're trying to say with this statement is that although now we are seeing a bit improved sentiment, at least also in Europe, it doesn't take away the fact that it's still a pretty unbalanced situation, and we are not very optimistic on the long-term view of the competitiveness of the region unless we see some structural change. I think I would have a pretty broad-based support, I think, from my sector colleagues on that statement. And you can do many things to try to make some interventions here. You can do it alone. You can also do it in a bigger context.

And I think what you mentioned on M&A, I think everything is on the table. And as far as I can go today says that we are allocating quite a bit of time on that, both within the management, but also in terms of our dialogue with the Board to see what really is going to be positioned going forward. And that's pretty much, I guess, as long as I would like to go on that statement.

Sure. And then maybe just following up on the volume commentary. I mean, the deliveries of 610,000, it's -- it is quite low compared to history. And I get it that the market is challenged, but you've got really good operating rates in North America, whereas the operating rates in Europe are more challenged.

Do you think that this is an element of you need to rightsize your asset base to kind of address the volume gap? I mean if we look at 2025 volumes of 2.5 million tons versus going back to 2020, 2021, 2019, there's a 200,000 to 300,000 ton gap, which is an entire paper machine. And I'm just wondering, is the asset base still fit for purpose? Or are you going to need to take some actions there?

No. I mean I think it goes straight into the first point where, yes, us and the whole sector is running below where they would need to run. It is a very capital-intensive sector where you are almost, in some sense, dependent on having a very high utilization to make solid financials. Yes, we share the view that it is too much capacity versus now what the market looks like and with some of the X factors we met over the last years, and that applies to us and it applies to pretty much the whole sector.

So yes, I can only say that although we see a bit of a step up into the right direction, the fundamental challenge that we see now in the sector is not going away anytime soon.

And then just a follow-up to end it on more of a positive one, which is the kind of the order books better into Europe into Q3. Has it -- do you think there's been any kind of increase in or restocking or supply chain pull forward? My channel checks indicated there was some in containerboard, but I hadn't really seen anything in sack or specialty kraft or folding carton. So I'm just wondering if there is any restock or kind of customers wanting a little bit more inventory for safety. Anything to explain the better order books from your side or restocking would be helpful.

Yes. So that's another question that we try to stay very close to our customers to get the best intelligence out there. I would have had some of the same fear during second quarter, in particular when the -- going back to COVID, what happened and when the Middle East crisis happened. And of course, the natural reaction is that we now see something similar.

I think what we've seen though is in Europe, there hasn't been much, you can call it disruption at all. And I certainly don't expect that to have been in any way impacted with some extra safety stock. Intuitively, you can say that everything that goes to Asia might have had some impact given supply chain in that passing by the region is a bit sketchy.

But what we have seen is that not much is coming our way of a need to do safety stock. Another piece that tends to be a good indication is we're coming with pricing that is starting to hit from the 1st of July that can lead in some cases to customers stocking a bit up before. But our order books are strong. They're very solid also going into Q3. So that's also not what we're saying. So at least to best knowledge, the stocking impact that we should have seen over the last months should have been very limited.

[Operator Instructions]

And the next question comes from the line of one moment, Martin Melbye from ABG Sundal Collier.

A question on pulpwood. At the start of the year, you gave a number of SEK 900 million in cost benefit for you from a price decline. How much have wood costs dropped since then? And how much are you expecting now?

Yes. So I think if we look for the full year and the SEK 900 million was really based around our view or expectation that price per cubic meter would be roughly SEK 100 per cubic meter lower in the year. This is still our expectation for the full year, and this is on that trajectory that we have been now for the first half of the year. So first half of the year, we have had roughly half of it in terms of profit uplift.

And that is still what you see. There's no further decline from the SEK 100.

No, not at this point.

Okay. And then the second question, you have announced 6% to 8% on sack kraft and coated fine. Have they gone through? And does that mean that there's more price increases for Q4? Or has that happened in Q2?

Yes. So in terms of the price increase, I mean, the announced price increases were communicated both during quarter 1 and quarter 2. They have gone through. So they are being implemented. As you know, there is a variation between how much we get through within the different regions and areas. But those are now fully in the guidance that we provided in terms of price increases of 1% to 2% for the region into Q3.

Okay. Good. And last question on volumes. You gave this comment that volumes will be better, that the fixed cost absorption will be lower. Does that mean that you produce more in this quarter?

Yes, we did.

We will now take the next question. And the question comes from the line of Oskar Lindstrom from Danske Bank.

Two questions left from my side. One is on the chemicals cost, which you're now saying is going up. And obviously, that's related to the higher energy prices. My question is, how quick is that energy impact into chemicals? And if we see energy prices come down sort of now, let's say, in the coming months, would that quickly translate into lower chemicals prices as well for, let's say, Q4 and into next year? So that's the first question.

And then the second question is, I mean, you're describing an overall market situation, which seems to have fairly quickly improved with good order books also in Europe and fairly good seems demand in export markets. Do you believe there's further room for price increases even without any structural actions in the industry? So those were my 2 questions.

Oskar, I will start with the question on chemicals. So in terms of the inventory turnaround to just start with, it is somewhat faster than we have for our fiber inventory. So it goes quite quickly. So it's mostly really dependent on the contract structure and how often we renegotiate the contracts for the chemicals. But I would say that as a guidance, it would probably be a quarter ahead that we would see the price impact on chemicals to come through the P&L.

Oskar, I can take the second. Yes, it's a good question. It is tough to give a very good answer on this, but I'll give it a shot. I mean we need to come at this from slightly different angles. But one angle is if you think about at least within Europe, what is driving a lot of the pricing push on the virgin fiber, and they tend to be within the recycle who's starting this, you can call it circle. And there is also, in some sense, a bit of an unhealthy balance on recycled. There is a bit too much capacity that we also see there that tend to be a bit more strained on ability to price up.

But much more for the recycled players than what we see here up in Nordics with integrated pulp mills is that they're very depending on the energy costs, especially on the gas prices. And clearly, they spiked to what we saw in the Middle East.

The million-dollar question is what's going to happen with that going forward? Clearly, it's lower now over the summer, but when you go into the fall, if they will stay and we will see oil prices and gas pricing being elevated and maybe even going a bit further, I think the likelihood is that we will see another wave is high, not something necessarily that we are counting on. And clearly, we will obviously seize any opportunity we have. But that could very easily happen. It can also happen the other way if we start to see that there is more stability and those are coming into more historical levels, you might very fast expect to see some mechanism that goes the other way. It's probably the best answer I have for you right now.

Your next question is from Cole Hathorn from Jefferies.

I'd just like to ask on the European Commission putting in some protectionist measures from the likes of Shein and some of the Chinese products that are coming across cheaply on the Internet -- on the e-commerce platforms. And I'm just wondering, do you have a view -- do you think this will be supportive to the European packaging industry? And is this supportive to Billerud ultimately? Does this mean that we're going to have a little bit more goods and supply chains using the European packaging papers?

So I can take that one. I mean, as a starting point, I think we are in very favor of, call it, free trade or a pretty open trade relations. And that's what we've seen for a lot of decades, and that's been good for us. I guess what we're seeing now when we're starting to see a trend which is starting to be more regionalized in North America with what they've done over the last, let's call it, quarters and years, it's starting to be a big issue since a lot of the installed capacity in Europe and Nordics was calibrated for that.

And when we also then play on the other premise that Asian players are ramping up and they have ramped up a lot of the capacity, and we will start to meet more intense competition also in Europe. I think we just want to make sure that we are meeting that on fair terms and conditions and don't see Europe as an antidumping scene as we've seen in other categories. But we don't necessarily have a strong position that we don't like Asian export into Europe.

I think that's a natural evolution also what the sector has done in Asia. I mean, for example, we have a pretty sizable export into Asia from our Nordic mills. And clearly, we expect that to continue. And then you also have to accept that there is a window coming the other way around. But as long as it does on call it terms, which is fair and comparable and not necessarily subsidies and the support underlying that makes Europe an antidumping scene, we are okay with this. And I trust now that the EU starts to wake up to the reality and notice that, hey, the world has changed, and we also need to look after our region and make sure that we get access to the same competitive fair terms. And that will be our position that we will pursue and support.

Maybe just following up there, just to understand how Billerud might benefit. I mean, if we take the view that the e-commerce platforms set up, let's say, European-based fulfillment or repackaging hubs, that should ultimately help drive a little bit more demand for European boxes or even mailer bags, et cetera. I'm just wondering which segments of Billerud might benefit from using more a shift to EU retailers, manufacturers and kind of fulfillment and repackaging hubs. Would it be your kind of containerboard business and sack and specialty, which segments would be the beneficiaries?

Yes, natural would be containerboard, and it would be within our kraft paper, in particular, on the MF side. where we have a pretty good leg to stand already today on e-commerce. I mean that's been growing. And I think the MF in particular will be where I would point to that should be something that would get an uplift.

And our next question is also a follow-up from the line of Linus Larsson from SEB.

Coming back to wood costs, you're guiding in Europe for net cost tailwind of SEK 40 million in the third compared to the second quarter. How much is wood cost tailwind? And also, sometimes we talked about the inventory impact from revaluation in this context, is any such revaluation included in guidance? Or is that on top? And if so, how much?

Linus, so pulpwood stands for most of that sequential cost decline of SEK 40 million that we expect there is. We will have some minor increases on chemicals, as I talked about, but they will be offset by the lower electricity prices. So most of it is actually pulpwood. And I think in terms of inventory revaluation, obviously, we are coming in a stage where quarter-on-quarter, the impact becomes less evident and smaller due to flattening of decline. So it is included in the guidance, and it should be pretty more -- pretty much flat heading into Q3.

There are currently no further questions. I will hand the call back to Lena.

Thank you. That concludes our presentation of the second quarter report, and we wish you welcome back in October for our third quarter report. Thanks for joining us today, and goodbye.

Thank you. This concludes today's conference call. Thank you for participating. You may now disconnect.

Good day, and thank you for standing by. Welcome to the Billerud's Q1 Report 2026 Webcast and Conference Call. [Operator Instructions] Please be advised that today's conference is being recorded.

I would now like to hand the conference over to your first speaker today, Lena Schattauer, Head of Investor Relations. Please go ahead.

Good morning, and welcome to this presentation following the publication of our interim report for the first quarter 2026. Billerud's President and CEO, Ivar Vatne; and our CFO, Andrei Kres, will present. And after that, we will open up for questions.

By that, I would like to hand over to Ivar.

Thank you, Lena, and good morning, everyone, and thank you all for listening in to our comments this Tuesday morning. It's been another quarter with twists and turns and yet again, some unexpected events to navigate through. The heading on the slide is our summary of the quarter, but as you would expect, some nuances between our regions.

So let's get into it, and next slide, please. As expected, it's been a tough start of 2026, fighting a challenging market, but we continue to see different realities between our 2 regions. And there are also some clear positives to comment on.

In North America, we recorded another strong quarter, and we continue to be well positioned with a local U.S. production to serve a broad customer base from our Midwest manufacturing footprint. 16% EBITDA margin is solid, but we were hit by some unusually heavy snowfalls and freezing temperatures that forced us to take a couple of days unplanned production stop and it drove our energy and logistic costs higher than expected.

For Region Europe, it was a quarter of incremental price pressure, currency headwind and loss of emission rights that pushed down the profitability to a level below expectations. And having said that, we have plans in place, and we are taking further action to strengthen the situation going forward. And we are certainly more optimistic about our Q2, and we do expect a profit recovery, but more on that later.

One clear positive for our Q1 was the shipment. We managed to grow volume 9% versus Q4, and that growth came from both regions and broad-based across several categories and is a number we are happy with. Our cash conversion for the quarter was solid, and we're delivering well on our cost-saving program, and we are ahead of our plan.

Some additional comments on the market sentiment. So next slide, please. So if I start with North America, we continue to meet more stable and solid conditions. Consumption seems to be okay across our core categories and our order books are solid for the foreseeable future. We produce now at approximately 80% operating rate.

Another highlight, I guess, is our strategic priority to grow our position within packaging materials. The start of 2026 was encouraging, and we continue to take new positions with both existing and new customers. And Q1 was, as expected, our best sales quarter in that regard.

In Europe, the market continues to be difficult, but with some rays of light, we shipped better than expected, and it was a clear uplift from Q4, in particular on liquid packaging board. Now we are a bit cautious as our sense of the strong start is partly linked to 3 buckets. A, customers building up some inventory after a slow end of '25; B, supply chain uncertainty in the wake of the Middle East conflict; and C, some customers ordering a bit extra ahead of announced price adjustments from Q2 and onwards.

For the Asia and the Rest of the World, we see a mixed picture. It's mostly weak, but we do see some encouraging sign on the liquid packaging board, where we are picking up some signals that, in particular, demand in China is better than expected. Also in the Industrial, in the Rest of the World has strengthened a bit during the quarter, in particular on sacks.

So with that, I hand it over to Andrei.

Thank you, Ivar, and good morning, everyone. So our currency-neutral sales are down 5% versus a year ago, and that was primarily driven by the price decline in Region Europe. In North America, the pricing was flat versus a year ago. And clearly, the strengthening of Swedish krona since last year has had a significant impact on our sales and also profit, which I will get back to. Volume-wise, they were marginally down with 1% in both regions.

Next slide, please. The profit for the group declined significantly versus last year, primarily driven by Region Europe. Foreign exchange and pricing have been the 2 big drivers for the decline. In addition, loss of emission rights and also more extensive maintenance shutdown schedule in Q1 this year were other 2 major building blocks.

Since we have decline in input costs in the quarter, we are also having a negative inventory revaluation impact; while last year, that impact was positive and year-over-year, it's a significant item in our bridge. Now on the positive side, our cost saving program is delivering ahead of plan, and we have significant decline in fixed costs versus a year ago.

Now let's move over to the regions. Next slide, please. Despite the strong sequential volume uplift versus the fourth quarter, the profit for Region Europe declined. Lower pricing, together with loss of emission rights and also stronger Swedish krona were the main drivers behind the profit decline compared to Q4.

We did see pulpwood costs to come down, although it was slightly slower than expected due to slower inventory turnover of the pulpwood. And we do expect the decline on pulpwood costs to continue also into the second quarter, and that will, of course, be a major cost relief for the region.

Now to restore the profitability, we have announced price increases on second kraft grades and also on containerboard. And we expect the positive pricing impact to start materializing in quarter 2. For other categories, we have implemented surcharges for increased logistical costs due to the situation in the Middle East.

Moving over to Region North America. Next slide, please. Profitability for Region Europe declined also versus quarter 4, but that was entirely driven by higher input costs. As Ivar mentioned, we did experience some challenging weather conditions with both extreme cold and also heavy snowstorm, which impacted our energy and logistics costs. And we had to take 2 days of production downtime during the quarter.

We certainly do not expect the same extreme weather conditions in quarter 2, and the region should be back to strong underlying profitability. On the back of solid demand and, to some extent, cost inflation in the region, we have announced broad-based price increases for our paper grades. The impact for quarter 2 will be quite limited, but we should see full impact materializing in quarter 3.

And finally, our North American team is continuing to ramp up sales of paperboard grades, and we have also now started to provide turnover figure for cartonboard and containerboard sales in our quarterly report.

Next slide, please. Now, in terms of the input costs, both regions had somewhat higher input costs versus our ingoing expectations for the first quarter. For North America, again, the weather conditions resulted in approximately SEK 40 million higher input costs compared to quarter 4. For Europe, we did see cost to come down on pulpwood, but that was partly offset by higher electricity costs.

And all in all, the costs were down around SEK 60 million compared to quarter 4 for Region Europe. The earlier announced price list changes on pulpwood are materializing. And just recently, there was a wave of price list decreases, which were particular to the storm areas in mid-Sweden.

Next slide, please. Now in terms of cost development for the second quarter, we do expect overall costs to come down, but there are quite a lot of moving pieces from where we stand.

For Region Europe, we should see cost to continue to come down, both from declining pulpwood prices and also seasonally lower energy costs. We do, however, expect cost inflation to start materialize on chemicals and logistics due to the situation in the Middle East. At this point, all in all, we expect a sequential cost relief of around SEK 150 million for Europe compared to quarter 1.

For North America, the overall input cost should remain quite flat with somewhat higher fiber and chemical costs expected to be offset by seasonally lower energy costs. And our U.S. operations are mostly exposed to natural gas prices, and they have been relatively stable in U.S. despite the situation in Middle East.

Next slide, please. And continuing on the topic of the Middle East conflict. It didn't have any material impact on our Q1 results. We have managed the sales deliveries to our customers well, and we do not have any significant exposure through sales to the region.

With that said, indirectly, we do see input costs to start coming up, and that is primarily on chemicals and logistics through higher oil and gas prices, and we do expect that to be a factor in 2026. Our plan is to mitigate the cost inflation through pricing. And we have already announced broad-based price increases in both of our regions and plan to do further increases to compensate for the higher costs.

And with that, I hand it back to you, Ivar.

Thank you, Andrei. As I already mentioned, we are doing good progress on our cost-saving program, and we are ahead of our plan, enabling us to raise the ambition for 2026 impact. All of the planned staff reductions are now completed, and we record SEK 100 million saving in the first quarter, and I'm pleased to see how we come together as a company to execute the program. We will see sequential impact of SEK 50 million in Q2, and it takes the plan for 2026 up to SEK 550 million. The remaining SEK 250 million to reach the full program ambition of SEK 800 million can be expected in 2027.

Next slide, please. So in terms of cash flow and cash conversion, we managed a cash conversion of 55% for the quarter, which has improved versus what we did last year. And with our continued focus on working capital, we remain focused and committed to deliver 80% plus cash conversion for the year. Our net debt is pretty stable around SEK 6 billion, and leverage remains well below target. And lastly, our CapEx for 2026 remain unchanged. Base CapEx for both regions at SEK 2 billion, while SEK 600 million is for the strategic CapEx, which is, first and foremost, earmarked to the Evolution program in North America.

Next slide, please. So to round it up, for Q2, we would expect an improved performance and profit recovery, especially through benefits from pulpwood prices in Nordic and more help from our cost-saving program. Market sentiment is still challenging in Europe, while solid in North America. The situation is highly volatile and changes almost by the week, but we will likely see additional cost inflation for chemicals and logistics coming out of the Middle East crisis, but our plan is to more than mitigate through both announced and new price announcements. And lastly, in line with our annual shut schedule, somewhat higher sequential maintenance cost.

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

[Operator Instructions] And your first question today comes from the line of Robin Santavirta from DNB Carnegie.

First question I have is related to the demand outlook going into Q2. You mentioned there's a lot of uncertainty going on related to the Middle East crisis and other things as well. So in Europe and in North America, how does your order book look like right now? And what is the rate of order intake over the past few weeks?

So, in terms of volume and the demand outlook, I think it's better to, of course, break it up into the regions. And for North America, we have solid order books and we should, at this point, expect pretty much stable volumes heading into the second quarter, maybe slightly up. For Europe, the situation is a bit different, and it is a bit more uncertain with everything going on. I think if we look at the sequential volume uplift we had from Q4, as Ivar mentioned, we had a couple of factors playing in there. And I think there was some preordering ahead of the announced price increases. Of course, this puts a bigger question mark around Q2 volumes. At this point, we would probably look to slightly lower volumes for the second quarter.

All right. The second question I have is related to pricing. Can you shed some light about the earnings impact from price increases going into Q2? And if you have any more on Q3 as well?

Yes. I'll start with Q2, Robin. And we look -- actually looking at both regions, we expect prices to increase with around 1% to 2%. Now that's a combination of announced price increases, but also our ability to improve mix based on slightly better order books that we have seen. So, at this point, we would expect for both of our region, price and mix effect to be positive between 1% and 2%. I think Q3, of course, the price announcements that we have made during the quarter, they will be impacting also the third quarter. But I think it's quite a lot of uncertainty at this point. So we will need to wait a bit and see traction on the price announcements before we can provide some more color on quarter 3.

I understand. The final question I have is maybe for you, Ivar. You mentioned in the report persistent overcapacity in a lot of your segments, and you speak about potential consolidation, the need for consolidation. When it comes to mill operating rates and potential closures, potential consolidation, is this something you are involved in as well? Could you comment a little bit about the industry and also your perspective -- your own actions with regards to this?

Robin, let me just start by saying a couple of more things before specifically trying to answer on the Billerud side. It has been quite a long period of time now that we see for our European sector that margins are underwhelming. If you look at some of the return on capital employed, they are almost consistently low single digit and in the lower end of that. And quite frankly, that is unsustainable in the long future and specifically given the capital intensity of our sector.

So we do see this reality starting to take place and regionalization is a word I use from time to time where, yes, each region now and the local production in the region is going to start to have a more prominent pace. It means just straight to the point that we in Europe, there is too much installed capacity versus what the defined market now seems to be.

I mean we're still operating at a pretty decent operating rate now in Q1, and that number is close to 90%, but very, very squeezed pricing situation and margins being certainly compressed. And yes, in many ways, something has to be done. So we would expect that is just the law or the nature of law here now that something has to yield and something has to come out to restore a more healthy long-term supply and demand balance.

I expect most players now in the sector to take at least very deep conversation about this topic that includes ourselves. And there are plenty of items, of course, you can do in this field. There's nothing else I can share at this moment and nothing that is, you can say, advanced enough that we would share. But clearly, this is a topic I expect the whole sector now to wrestle with in a more intense manner than some quarters and years ago.

Your next question today comes from the line of Martin Melbye from ABG Sundal Collier.

Many of the puzzles or many of the pieces of the puzzle for Q2 have been answered now. But on pulpwood costs and the inventory revaluation, is that something to keep an eye for Q2? Or is that flattish? And you mentioned further price reductions being made. What is remaining of EBIT effect for, say, Q3, Q4 on wood costs?

Martin, so I can start with the pulpwood and inventory revaluation. So I would like to separate them just because it's easier to talk around them. I mean the inventory revaluation impact we had on a group level was negative SEK 50 million in the first quarter, and we do expect that to be roughly the same, negative SEK 50 million also for the second quarter just on the back of continued input cost decline on the pulpwood.

In terms of the pulpwood costs for the second quarter, we do expect a reduction of roughly SEK 110 million for our region, Europe. And as I mentioned, the SEK 150 million in total for Europe that also includes some reduction in the energy prices.

Looking now for the third and fourth quarter, again, there's quite a lot going on. But at this point, we would still look at, on average, price per cubic meter to be roughly SEK 100 lower in 2026 compared to 2025. That's still our ingoing assumption and outlook.

Okay. But what does that mean in SEK per cubic meter for Q3, Q4 versus Q2?

Well, it's difficult to point out the exact impact in quarter 3 and quarter 4. But after the second quarter now, we should have the majority of the declines behind us and probably some marginal effect in quarter 3 and quarter 4.

Your next question today comes from the line of Linus Larsson from SEB.

Just on the topic of costs, if you could maybe come back to how you look at freight costs in the second compared to the first quarter and if that's part of the guidance that you've been giving here, quantifying or if that comes on top? And if so, what that impact might be?

No, the logistics cost is included in our guidance. So, when we talk again SEK 150 million input cost relief for Region Europe. That also includes a slight increase on the logistics cost that we expect due to the situation in the Middle East.

Excellent. That's great. And then, just coming back to your low profitability in Europe. Now you've been EBIT negative for the past couple of quarters. You're still EBITDA positive in the first quarter, but only slightly. So, I wonder if you could share maybe some view on how it differs across your various assets and if there are huge differences in terms of profitability when you compare the various production units within Europe?

Linus, I can take that. I'm not going to comment on any profit situation or specific cost competitive per mill. Clearly, there are, in some sense, a variation depending on everything from size of machines, energy situation, pulp integration, et cetera. But I can say the following that, you pointed out that the margin is squeezed and profitability is certainly under pressure in Europe. I think that is obvious for everyone. It's a sector, I think, that is seeing the same pattern. And for us now, I mean, we are keeping a very tight control on the items we can influence and cost program is still going to be an important piece as a building block for us, '26 versus '25.

Andrei mentioned already that we certainly expect more help going forward also on this pulpwood price decreases. That should help us, and that should also enable us to have a certain profit recovery going into Q2 and onwards. But the situation is, as I said, is strained and it's a reflection of the unhealthy balance we currently have.

So you can say that these steps we're taking now, they are intermediate or there are needed items, but the bigger picture still hangs over the sector as a supply-demand imbalance.

And as you may understand, the reason that I'm curious is because I wonder whether there are opportunities to address certain paper machines or certain mills to make a significant improvement on overall profitability. And when you talk about restructuring, do you see that you have very much in your own hands? Or do you see the bigger opportunities in combination with other potential partners?

I think it's all of the above, if I'm honest, I think everybody should be on the menu. And -- I mean, in general, I have to say our commercial portfolio is one of the stronger points of Billerud, and we do have exposure into mostly categories that are growing and have had a high degree of resilience in the past. But yes, right now, I mean, there's just too much board capacity in particular that just makes it challenging in pricing in general. But I think we will look at everything we can internally in terms of mix optimization and yes, you can call it mill optimization, either alone or in combination. I think everything now is on the table.

We will now take the next question. And the question comes from the line of Oskar Lindstrom from Danske Bank.

Three sets of questions from me. The first one is, do you expect any further quarter-on-quarter impact from loss of emission rights in Q2? That's my first question.

Yes. Oskar, no, we do not expect any effect into the second quarter.

Excellent. The second question, I mean you talked a little bit about signs of improving demand. You mentioned the liquid packaging board in Asia. I think you mentioned also sack kraft paper. Do you believe this is sort of inventory building or underlying demand or something else? And how -- can you be certain about any of that?

Oskar, I think it's a good question. And I don't think I need to remind everyone that what happened 12 months ago, where Q1 was pretty strong for the sector, and then we ran into a very different situation from Q2 and onwards. And honestly, now everything happening almost at the same time and Middle East coming in as another black swan. It is difficult to really pinpoint. And clearly, we're having the discussion with a broad range of customers to get a feel for this. We are pretty certain that a piece of the volume uplift we saw in Q1 is around inventory adjustments, either preordering ahead of announced pricing partly also nervousness around supply chain uncertainty given the Middle East crisis.

Our view is that, that is not a significant part, but there are some volume, call it, a minor or a somewhat of a volume uplift. I think we don't see broad-based good sign or credible sign that the market is strength. But there are pockets of it. I mentioned already one that you referenced, liquid packaging in Asia, in particular China has started better, which is encouraging after we had quite a few years with some negative market growth in China.

We shouldn't also forget this, and that tends to be overlooked as a topic that given now that everything from oil price and some resin-based derivatives have increased, it also makes fiber-based packaging more competitive versus some of the substrate of plastic. And we have signs of that as well, especially for instance on the sack that our products are more competitive and customers are adjusting their behavior quite fast.

Will that last? Is that now more of a longer trend? Who knows, depending a bit on also what's going to happen, how long down in Middle East. But certainly, some signs are a little bit more encouraging in few of our segments than 3 months ago.

All right. My third and final question is also, I guess, a little bit more of a general one. I mean we're seeing increasing use of hardwood pulp in several paper segments and -- do you see this sort of impacting liquid packaging board and your other segments? Is it a step change? Or is it more of a continuation of a gradual trend that's been going on for a long time?

Yes, that's another good question. I think if you go through our portfolio and look at what we can offer to our customers, I mean, softwood will be, I can tell you, for the foreseeable future, the dominant component, and that is partly everything from stiffness, from flexibility to strength to some of the items of bulk that characterizes a heavy softwood content.

So in that sense, we are not super worried about it. I think we have these niches where we talk about high-performance packaging material, which has always been the core and the DNA of Billerud. I think cartonboard is maybe one area that stands out. There is more carton coming our way. And I think we see some signs of higher hardwood content on that, in particular in Asia.

You could probably even put in some liner in that as well, with the Eukaliner being a product that is getting a bit of traction. So you can say that it's starting to eat its way into some of the segments. For us, given where we stand in our portfolio today, nothing dramatic that I would expect to change anytime soon.

All right. So, it's more of a gradual development than something that's new that's happening in 2026.

Yes, at least for our side, the answer is yes.

[Operator Instructions] And our next question today comes from the line of Cole Hathorn from Jefferies.

I'd just like to follow up on the wood cost. You mentioned kind of SEK 100 [ cube ] lower '26 versus '25. So, sticking with the kind of SEK 1 billion cost relief. Now into the third and fourth quarter, I was still expecting a little bit more kind of pulpwood cost relief. Are you guiding that because there's kind of diesel costs increasing that the cost of the mill gate, you're kind of sticking to that SEK 1 billion? Or are there some moving parts in that kind of wood cost relief is what I'm asking? Is kind of stumpage still coming down, but cost of the mill gate is going up a little bit just considering diesel?

Yes, I think -- I mean, obviously, we have some parts of the price increases for the energy and diesel in particular, that's specific to the harvesting, which is carried by the forest owners. When it comes for the logistics to bringing the wood from the forest or roadside to our mills, we do expect some increase on the cost side. We have activities in place to mitigate those effects.

I think also the additional price reduction for the storm area now, that's obviously something that is partly offsetting that increased cost -- and that's why we also, at this point, at least stick to the same outlook for '26, i.e., SEK 100 per cubic meter lower output costs. That's our best guess at this point.

And then you talked about the -- Ivar, you talked about pricing announced as well as potential need for further ones, further costs. Can I just understand how you're thinking about that? Because liquid packaging board, I imagine just for the logistics, you're going to need to try and push through some surcharges there. But the rest of the portfolio would -- is this kind of surcharging for logistics? Or is it -- do you think you need to go out to the market for underlying price increases where possible?

Cole, I think it is both or the latter that you pointed to. So, I think it will be a combination category by category. I think it also depends quite a bit on what we see on the recycle side. And there has been movements, I guess, broad-based in that field, as you know. And I'm pretty certain that we would see more just on the basis of some of the cost situation and how it will be hitting harder the nonintegrated and the more energy depending players, specifically in Continental Europe. And clearly, that's something that we also take with us.

So we've seen, can many ways say round 1 and certainly there will be around 2, and we are certainly also gearing up for that. It will be a combination then on what position we have on that to what we also see on the recycled side. But it's a pretty fast-moving situation, and I would certainly expect more movements to happen now during the second quarter.

And then the last one, it's a difficult one, and it might be a bit of an unfair question, but you've been very open on the need for capacity closures and industry consolidation to improve the supply/demand balance and everyone is looking at it. But we still haven't seen as much action as we probably should. The industry has been talking about this for the last year, and we just haven't seen the closures that the industry needs. How do you think about it going forward from here? Do you think that price increases are ultimately delaying the inevitable here? And are we going to be in a position where we actually need the closures rather than the price hikes? Just like your thoughts on the general industry. I know you ...

Yes, it's a good question. I don't think it's unfair at all. Yes, it could very well be so that what we see right now might be short-term, I don't know, give a little bit more optimism back or push the margin in the right direction. I still think that the underlying challenge that we are wrestling with, and we've seen this in Europe for years now, it's not only a quarter or 2. It's how we compress margin and returns are just unsatisfactory. And we see a completely different ball game in the U.S., where I think also it has been a much tighter race in terms of managing capacity.

And yes, I do expect, everything else equal, unless that we see something now that there is some input tariffs have been reversed or you would see something -- other X factor of hopeful from Russia coming back in and all of this seems now unlikely, I think we are facing, as a sector, the inevitability that some capacity has to come out.

And then just because we don't get much visibility on the sack and specialty kraft side, would you just mind providing a little bit more color on what are you seeing in those end markets by customers, would just be very helpful.

Yes. No, I can do that. I think if I start with our sack and maybe going to brown first, situation is stable on a quite low level. There are some demand increases in some niche areas. I mean Africa and Asia are an important sector for us. We do think that lot of that so far of the more order intake is linked to uncertainty around the Middle East.

And as I mentioned earlier here in the call, price on resin derivatives have gone through the roof, and it is enabling us to be more competitive on some of our products. I mean, particularly this woven poly bag is a product we now have a much better value proposition on our sack to compete with. White, quite similar, quite decent order books going into Q2, but I think we are, at this stage, careful to say anything about the underlying strength. But probably we can confirm that some customers are now trying to secure positions.

I think on kraft paper, starting with MG, quite stable on, again, low level, not as good order books as we see on sack. Now uncertainty on the supply chain is also making some customers, especially overseas, booking a bit more than they normally do. But yes, maybe 1 notch down then in terms of where we are in the market versus the sack.

And lastly, I think on MF, we do have a good product on the E-commerce, and that part is performing quite well. It fits well to our portfolio and also talking back to my point about how we can have a product that has high performance. Strength of market is okay for the time being, nothing more, but very decent order books also on the MF going into second quarter.

[Operator Instructions] There are currently no further questions. I will hand the call back to Lena.

Thank you, and that concludes this conference. So thank you for participating, and welcome back to the 17th of July when we report the second quarter results.

Thank you. This concludes today's conference call. Thank you for participating. You may now disconnect.

Good day, and thank you for standing by. Welcome to the Billerud Q4 Report 2025 Webcast and Conference Call. [Operator Instructions] Please be advised that today's conference is being recorded.

I would now like to hand the conference over to your first speaker today, Lena Schattauer, Head of Investor Relations. Please go ahead.

Good morning, and welcome to the presentation of the Billerud's 2025 Year-end Report. I'm joined by our President and CEO, Ivar Vatne; and our CFO, Andrei Kres. They will present the results and afterwards, open up for questions from the telephone conference. With that, let's get started. Over to you, Ivar.

Thank you, Lena, and good morning, everyone, and thank you all for listening in this Friday morning. 2025 has come to an end and also for this year. It has been another eventful year with several twists and turns in our packaging universe. And as usual, in Q4, we will do a bit of an evaluation of the full year before zooming into the quarterly results. So let's get into it. Next slide, please.

So for 2025, you have heard me repeatedly talking about 2 stories or different realities in our regions. And that's really the essence of what 2025 has been for Billerud. Continuing a very good run in North America, while navigating through highly challenging market conditions in Europe. And North America has really had another outstanding year. And on a currency-neutral basis, net sales grew by 5%, although the market for coated graphic paper is in secular decline. Now that's a true testament to a very strong value proposition as the local partner in U.S. and coming in at 20% EBITDA is certainly satisfactory.

In some contrast, our Region Europe has had a challenging year after a promising start. And the themes throughout the year have circled around uncertainty, continued slow demand and oversupply within the sector. This has pulled down both top and bottom line versus a year ago. We have remained focused on the items we can control, and our relentless discipline on working capital has paid off, meaning we have succeeded with a strong cash conversion.

And to further strengthen the competitiveness in Europe, we launched a cost reduction program during the second half of the year, which is progressing as per plan. Our balance sheet is healthy, and the Board of Directors proposes a dividend of SEK 2 per share.

Now over to some comments for Q4. So next slide, please. Now in general, our Q4 was a challenging quarter. Net sales currency adjusted down 14% versus year ago. And continuing on the same period, as I mentioned, for the full year, our Region North America recorded yet another excellent quarter with 20% EBITDA. For Region Europe, both net sales and profitability is down both sequentially and versus year ago. And it's first and foremost, lower sales within our board categories that is driving the development. And it also continues as a whole sector fights difficult market conditions. Another clear theme during the quarter has been the acceleration of falling pulpwood prices in Nordic and that will certainly be a big topic for us into 2026, but more on that later.

But first, some additional comments on the market sentiment. So next slide, please. Now market conditions during the fourth quarter continued to be polarized. And in the U.S., again, the overall economic sentiment is better versus other regions, and we continue to see solid conditions. Graphic paper is in secular decline, but we managed to gain share throughout the year. And we would expect the secular market decline to continue into '26.

Now back in Region Europe, liquid packaging board is relatively flat on a global basis with big regional differences. And in essence, we see 3 trends: a, the plastic is gaining some category share at the expense of packaging materials; and b, competition of packaging material suppliers has intensified first and foremost in Asia; and c, some of our converters are losing market share to local competition.

Now for cartonboard, it is a challenging market, with slow demand, a lot of available supply. We are keeping our focus on brown cartonboard, which actually growing quite nicely, but we are not expecting any improved situation in short term. The containerboard situation is weak, but situation is stabilizing. And also recently announced price increase on recycled could potentially help us and improve the competitiveness on new fiber products.

For our paper grades, situation has been tough in Q4 with additional pricing pressure, but different versus board, the situation for paper is more related to muted demand and not that much oversupply as the case is on board. For sack, brown is in a bit tougher situation versus a white tack, but in general, we have a good position to stand on in our regions, Europe, Asia and Africa.

Next slide, please. Now on the more positive side, and this is slightly a well-known fact by now. We do see pulpwood prices in Nordic are falling significantly, and we see a similar situation for both soft and hardwood. A clear driver for the decline is less demand from the pulp and paper industry recently, but also still low or slow activity on the sawmill side and on the bioenergy sector. We expect this trend to continue its decline into '26. And for Billerud, as the biggest pulpwood purchaser in Nordic, this will provide a needed and significant cost relief. We are seeing some impact on the declines already now. But given the 2, 3 months inventory turnover, the impact will start to accelerate from Q2 and onwards, but more on that in a few minutes.

Next slide, please. Another highlight of '25 has been a progress on the evolution program in North America. And as a reminder, this program aims to shift gradually our portfolio towards packaging material with local U.S. production. We have engaged with numerous trials and qualifications across both existing and new customers over the past year, and we aim to reach a more meaningful sales now during '26. We will start reporting packaging material as a separate line item in North America from Q1 and onwards.

We are investing in the U.S. to enable the packaging material journey with a SEK 1.4 billion investment program as previously communicated. And the first batch of that has successfully been completed with the upgrade of the Escanaba woodyard and success in this context means on time, on budget and safely executed. We will continue to update you on our journey throughout '26.

So with that, I hand it over to Andrei.

Thank you, Ivar, and good morning, everyone. I would likewise like to start by summarizing the development for the year. And our top line decline of 7% was down to 2 parts. The strong volume growth we had in North America of 6% was offset by declines in our European business. Foreign exchange has also been a factor in the past year with significant strengthening of Swedish krona throughout the year, which has impacted both our European business and also translation of our U.S. operations.

Next slide, please. Profitability for the full year was down with pretty big movements across several drivers. Our pricing efforts during the year did offset the input cost inflation, primarily coming from Nordic pulpwood, but facing additional FX headwinds and also the reduced volume in Europe and Asia were the main drivers for the profit decline. Now 10% EBITDA margin is, as you know, below our targeted level. And we have also, during the year, taken decisive measures to improve our profitability heading into 2026, which we'll get back to.

Next slide, please. Zooming into the Q4 performance, the main drivers for the top line decline were similarly volume and also foreign exchange. The weak demand we were facing in Q4 in Europe and Asia did also have an impact on pricing with more spot volumes at lower pricing points. The volumes in North America did slowdown in December, which was also in line with the ordering pattern we saw last year. And we did face some logistical hurdles to get out all the orders due to weather conditions at the end of the year. Nothing dramatic, and this, we expect, will spill over into the first quarter of this year.

Next slide, please. Profit decline versus last year was mostly due to lower volumes in Europe and Asia, FX headwinds and also negative price development primarily for the market pulp. Year-over-year, the input costs were largely unchanged with marginally lower pulpwood costs, offset by higher energy costs in both of our regions.

And now moving over to regions, starting by Region Europe. Next slide, please. In Europe, Q4 was by far the toughest quarter for this year. And as we expected, the order books remained weak in the quarter and also ample supply resulted in pricing pressure across most categories. As Ivar already mentioned, the pulpwood prices are coming down and having a positive impact sequentially, and we do expect the trend to accelerate going forward.

Heading into the first quarter, we do not expect the situation to change significantly in terms of market conditions. Order books in general look a notch better, but with ample supply, we expect continued pricing pressure. For the biggest category in the region, liquid packaging board, we have contracted volumes in line with the volumes for 2025.

And now moving over to Region North America, next slide, please, which continues with solid performance and excellent profitability. Now despite slightly lower volumes, the profitability for the region improved compared to last year, driven by both lower costs and less pulp sales. The operating rates continue to increase and are now at 79%, clearly above the 68% where we were a year ago. And we expect these favorable conditions to also continue into the first quarter with both stable demand and pricing for graphic and label paper. And we also expect a slight increase in pulp prices in the first quarter. And of course, the focus on qualification of packaging grades remains a top priority for the region. And our efforts in the past year have built a solid foundation to continue this volume ramp-up heading into 2026.

Next slide, please. A few words on the input costs and our outlook forward. Sequentially versus the third quarter, we had a marginal input cost tailwind of SEK 20 million, and that was primarily related to Nordic pulpwood costs. Now the decline in pulpwood costs was offset by higher energy costs in both of our regions. And for the first quarter, we expect cost level to come down with Nordic pulpwood cost again as a main driver, and we expect total cost relief of approximately SEK 130 million, most and foremost in Region Europe from both pulpwood and successful renegotiation of chemical contracts. The pulpwood cost decline is expected to accelerate into Q2 with the full impact of the price list changes at the end of the year here. And input costs in North America are expected to remain stable into the first quarter.

Next slide, please. Now as we've communicated in September, we are continuing to take decisive measures to strengthen our competitiveness. And our cost saving program is on track. We have made a steady progress in our union negotiations and have now completed or are in final stages in our negotiations at all of our sites. This means that we're also on track to deliver the targeted savings of SEK 500 million for 2026, and we will have SEK 40 million impact sequentially into the first quarter and expect that to accelerate to SEK 150 million in the second quarter.

Next slide, please. As we've mentioned throughout the year, cash flow and also our working capital efficiency has been a focus area. And I'm very pleased with the significantly improved cash generation compared to last year. The absolute level of operating cash flow we've generated in '25 was in line with the previous year despite SEK 1 billion lower profit. And this will remain also our priority heading into 2026.

And on the back of the strong cash flow, also our balance sheet remains strong with leverage that is well below target, and we enter 2026 with balanced loan portfolio. Now we are also taking actions to protect cash flow by limiting our investments. We have maintained prudent investment level for '25 and reduced our CapEx below ingoing targeted level. We are now also making tough prioritizations on '26 investments and reduced the CapEx guidance to SEK 2.6 billion. Finally, Ivar already mentioned the dividend proposal, the payout of SEK 2 per share would imply a payout of approximately SEK 500 million, and that would be made in Q2 following the AGM.

And with that, I hand it back to you, Ivar.

Thank you, Andrei. We have decided to exit our joint venture with Viken Skog regarding the BCTMP production at the Follum site, north of Oslo. And simply put, this is due to both changed market conditions since we started looking into this project some years ago as well as a very lengthy political process around the environmental permit. We will have a SEK 50 million noncash write-off in Q1, which will be classified as an item impacting comparability.

I want to express my appreciation and thanks to Viken Skog, whom we've gotten to know quite well over the past years and enjoyed a highly collaborative relationship. And we certainly aim to keep that relationship warm going forward and continue to explore business opportunities together.

Next slide, please. So to round it up, going into Q1 and '26, we don't expect significantly changed market conditions. North America is still going strong, and we look forward towards a continued solid performance. For Region Europe, we are still in weak conditions and we are seeing further pricing pressure across many of the categories. But having said that, pulpwood prices in Nordic are in clear decline, and we will expect that trend to accelerate going forward. And as a reminder that Q4 '25 was the last quarter of free emission rights, while we'll have a slightly higher planned maintenance cost scheduled for Q1.

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

[Operator Instructions] And your first question today comes from the line of Robin Santavirta from DNB Carnegie.

First question I have is related to the volume performance you have in Europe. Looking at delivery volumes, they're down, what is it, 16% Q4 year-on-year and full year essentially roughly 10%. What is your market share performance? Surely, this cannot be underlying consumption of packaging and products that you sell. So does this reflect some market share changes? And if so, in what segments?

Yes. Robin, I can try to take that. I think to answer that question, you will probably need to go a bit through different categories. I think also you know that in our sector, it's difficult to get fully credible estimate on market shares, but certainly, you can get some estimates and some triangular calculation. And if you start from board, it is no doubt that we have lost some market share to Asian competition. And I think in Europe, we're holding up really well, but it certainly saw that a portion of our historically export to Asia has been reduced coming in now from -- yes, locally in Asia.

We are pretty confident now that, that is now bottoming out in Q4. And actually from onwards, it's going to be quite a bit of growth instead on that category. For containerboard, it's a bit different. Fluting, we are holding up well. We have a pretty niche in our very strong performance on our fluting proposition. And there, we're holding up share. On liner, it's a bit of a mix. But on coated liner, we probably dropped some share since that was some export going into U.S. which is now a bit more challenged through the exports, but on coated liner, we are holding up share well.

On cartonboard, it's a bit mixed, but we are holding the share pretty flattish from our view. A bit of a mix between the brown and white, but in general, holding up. But as you know, we don't have a very significant share on cartonboard on our side. Sack and kraft, our view is that we're holding share pretty well. Market is a bit down, in line with muted demand. So yes, that will be my quick summary through the categories.

And can you share some thoughts about the order intake now early or in January? It seems you have some negative pricing going into the year. Sometimes what customers do, they -- when pricing is changing, they reduce orders and then they sort of order more when the new price list is out. So any sort of color on the order intake now in January in Europe?

Yes, I can take that. And just providing some background entering Q4, we experienced weak order books, which also materialized in lower sales. Now as we enter the first quarter, the order books look a notch better. I think it is across most of the categories that we see in our European business. With that said, we do have still high uncertainty in terms of the underlying demand, but for now, the order books look a bit better compared to Q4.

And final one before letting others in. North America market environment seems to be much better. Could you share some color on the pricing outlook now for start of the year?

I can just start with a bit of market and then Andrei might jump into the pricing. But I think we have mentioned this before, and it continues to be a region that has quite a bit more confidence, if I can use that word, of continued growth into '26 and certainly also confirmed by myself meeting a lot of customers early Jan in terms of the outlook. But let's not forget, I think graphic paper is still in secular decline, and that will continue to be. But we have a very strong position there. So we feel good about the categories that we have exposure into and fueling the momentum we had built up over the last couple of years.

But Andrei, if you want to comment on the pricing specifically?

Yes. And I can just, Robin, add on the pricing side. I mean, we did, as you know, increase the prices for coated freesheet at the end of 2025. So we don't expect any additional pricing impact from our paper grades, either the label or coated freesheet, but we do expect a slight uptick in pulp prices due to index picking up. So all in all, we expect the region pricing to increase with 1% heading into the first quarter.

And can you share your expectation on European pricing similarly?

Yes. For Europe, we are right now looking at price decrease sequentially with 2% to 3% into the first quarter, and that is mainly coming from liquid packaging board.

We will now go to the next question. And the next question comes from the line of Oskar Lindstrom from Danske Bank.

Yes. So my first question was on LPB pricing, but I guess you sort of answered that. So I'm not going to use time for that. My other 2 questions, the first one is on capital allocation. I mean given the already low share price, your relatively strong balance sheet still and lack of major capital investment plans ongoing, do you see any opportunity for returning cash to shareholders sort of throughout the year through, for example, share buybacks?

It's natural that we have these discussions with the regular interval with the Board. As I'm sure you know this is the Board in the end who will need to go for that. It hasn't been on the table yet, and it's certainly not something that we come today, but it will be continuously evaluated. I mean, focus for now is to strengthen the performance. And as you say, we have, I think, relatively well in the sector, a strong balance sheet. But yes, for now, at least all of the focus that we put in priority from the management side is strengthening the underlying performance and cash delivery.

All right. My second question is on supply reduction in Europe, which you mentioned in the report as being something that is needed. Given that you're losing money in Europe, do you see any need for possibility to close any of your less efficient machines or even mills in Europe?

Yes, I can also take that one. I think it'd be very strange if not everyone now in the sector are evaluating this from time to time. I think you also know that it's probably premature to look at this in a quarter. So you need to look at it in essence and maybe more relevant looking at this in a forward-looking projection with a combination of future investment needs, what kind of earnings forecast do you have and how do you look at just in general, the competitive strength.

But I stand by that what I also wrote in the report, board now in Europe, in the region Europe is a bit the sick man in the packaging universe. And it's a significant overcapacity. It will take quite a bit of time with demand growth, you're kind of canceling this out. And after now what's happened in the U.S., regionalization is a bigger theme. So before we get some significant volume out, we will continue to be in a tough spot. The focus we have for the time being is on our 3 big board mills. Every focus is to strengthen that competitiveness further and build on the portfolio positions we have.

Yes. And then finally, if I may, a third question. I mean, you've talked a little bit about Asia and sort of increasing competition from Asia. But if we talk about the European market, to what extent have imports from Asia contributed to the oversupply? And do you see anything that could change that, for example, import tariff initiatives? We've seen it in segments like steel, for example.

Yes, I would say that I think the import into Europe from Asia is very insignificant for the time being. I would even call it nonmaterial. That doesn't mean that it cannot increase in intensity going forward, and potential tariffs, if it will be at all can be, but it's, of course, not on the table yet. So for now, our view is that it's not disturbing the picture too much. But we are, of course, meeting more volume in regions outside of that as Middle East, et cetera, maybe into Turkey. Those are markets for us that has some size, but not significant. But in Europe, this is not a factor for now at least.

We will now take the next question, and the question comes from the line of Linus Larsson from SEB.

Maybe continuing a bit on the variable cost side. Did I hear you right saying that the European variable costs will ease SEK 130 million Q1 on Q4? And if so, is that including everything, inventory adjustments, et cetera? And secondly, what kind of tailwind are you talking about additionally in the second compared to the first quarter when you were talking about an accelerated wood price trend downwards, please?

Yes. We do expect approximately SEK 130 million in input cost relief heading into the first quarter, and that is primarily from the pulpwood, but we do have some renegotiated chemicals contracts. Also that is part of it, but the absolute majority is pulpwood costs. And of course, as Ivar also mentioned during the presentation, it takes some time before the new price list changes for the pulpwood are fully visible in our P&L.

So the final impact from the recently announced price list changes will come or materialize in the second quarter. So we will see additional decline in the pulpwood costs in the second quarter, but we'll need to get back to exact guidance.

Yes, because that's what I was a bit curious about if you had some sort of magnitude, is that a bigger number than the SEK 130 million that you're guiding for Q1 on Q4? Is that how we should understand this accelerated trend that you're talking about?

Yes. No, but that's correct. We would expect a bigger magnitude on the pulpwood cost decrease heading into the second quarter at this stage.

And do you see some sort of continuation in the third compared to the second quarter? I mean, is this a trend for the rest of the year?

Well, I think -- I mean now we have the new price list for Europe -- for Sweden, which is our biggest catchment area. And the impacts that we are talking about now are based on the recent price list changes. And then, of course, the price list changes might occur going forward. And right now, with the situation we have in the market, everything is pointing to accelerating reduction of the prices, but we will need to see how the price list move going forward.

Cool. That's fair enough. And then maybe just if I can squeeze in one last question. And considering the weak volumes in the fourth quarter, how do you see the full year 2026, if you look on, say, European-wide volume development full year 2026 compared to 2025?

Yes, I can take that. I think I'm the first one to admit that it's tough to say at the moment since the sentiment changed during '25. And now we're starting the year on a bit of a lower note versus when we go back a year ago. But there is no doubt that we are expecting growth if you look at now what we have delivered in Q4. And we are certainly expecting to come back at least into the volume for the full year of '25. And clearly, that means we would need to see some sequential increase over the coming quarters.

But yes, that's the best I can say. I mean, if you look at the run rate now in Q4, it's certainly lower, and that's not where we either expect to be. And also tagging on to what Andrei said, order books look a bit better. But I will refrain from giving any more specific number for full year, but that's at least the view we have right now.

We will now take the next question, and the question comes from the line of Cole Hathorn from Jefferies.

I'd just like a little bit of color on how the cost savings plan, the SEK 0.5 billion is going to phase through 2026. Just if you could give context of how much do you expect into Q1 and Q2, just the timing of that? And then just following up on the pulpwood questions. I'm just trying to understand the quantum moving into the second quarter. Just considering there is a 3- to 6-month lag before it impacts your P&L. How material could it be into the second quarter? I mean are you already saying that we'll see a further SEK 100 million, SEK 200 million sequential cost relief into Q2 and further into Q3? Just some context of that would be helpful on the cost.

Yes. In terms of our cost saving program, I mentioned, so SEK 500 million is the savings ambition for us for full year 2026 compared to the previous year. And the first piece is coming now in quarter 1, which will be SEK 40 million. And then we expect that increase to SEK 150 million in the second quarter, and we expect slight uptick from those SEK 150 million for the remaining of the year at this point. So that would be our estimate for the timing of those savings.

In terms of the pulpwood cost for the second quarter, as I said before, we expect those to accelerate. And at this point, we would expect costs for '26 to be significantly below '25. I mean we are now looking at price lists that are around SEK 100 per cubic meter lower on the pulpwood. And with our purchase volumes, that is a significant amount of SEK 900 million.

And then maybe just to understand the key moving parts into 2026, am I right in understanding that the price pressure that we're seeing now, this is -- you talk about mostly liquid packaging board, but we've still got kind of the carryover effect of kind of some containerboard prices that fell through the fourth quarter. We still got some kind of stack and specialty kraft that kind of drifted down impacting Q1. But do you feel that this is effectively the pricing trough? Are we at the point where the market is just under too much pressure on the cost side that, that's the bottom on most of those categories? Just trying to understand if Q1 is ultimately going to be the pricing trough.

Yes. I can comment on that, Cole. So this is what we expect now heading into the first quarter, the 2% to 3% in total for the region. Again, majority of it is liquid packaging board, and we had, as we commented, pricing pressure in the fourth quarter, but we feel that the pricing pressure will be pretty limited on most of the categories, but of course, liquid packaging board is heading into with new contracts.

We will now take the next question. And your next question today comes from the line of James Twyman from Prescient.

Thank you for your presentation. I've got 2 questions, if I may. The first one is the decline in demand you're seeing in Europe seems very much out of kilter with what you would expect underlying demand to be, especially in things like construction and food, where I think the decline in underlying demand is quite small. So are you seeing destocking in any of these areas? Because that's often the cause of these large gyrations in volume.

And then secondly, in the U.S. market, you talk around moving sales from coated paper into packaging. Could you give us some idea of in 2026, what sort of scale you're expecting this move to be and exactly what product lines you're going into?

I can at least try to start, and Andrei might jump in if there's anything else. I think -- in Europe, I think you need to look at this, as I said, per channel. And if you go through our exposure, we have a very sizable chunk into food and drink. And I mentioned this a bit earlier, but full -- liquid packaging, for instance, is relatively flat on a global basis, but with quite big regional differences. I mean as an example for us, we know that China is down in the market. And China is a very big export market for us, while other regions like U.S. and LatAm is more up, and that's not really where we are too present.

So you will find some regional differences there. But it is so that food and drink tend to be more resilient. And yes, you can say stable. We have seen the trend, and that's also confirmed when we talk to some customers that given that disposable income for many households has been under pressure. They are tearing down, moving from branded to more private label, moving more from supermarkets, hypermarkets to discounters, et cetera, where the more predominant packaging space is on either fossil-based package on a more simple or lower level of packaging materials.

So it's a bit of a mix impact there as well. We don't see, I think, any signs that '26 will be worse on this. And it feels like we're coming through the bottom of the curve on this. Hard to say, but I think this is at least our view. Construction, we don't see much kind of uptick at the moment. It's still pretty soft and it's been soft, certainly in Europe, but we have pretty good activity on the brown sack in Asia and also in Africa still. So that's that.

Luxury and your cartonboard is just very tough, and it has been tough for some time being. And yes, we don't see any signs so far that this is coming up. And clearly, the market there is quite a bit down as a whole for the last couple of years. Yes, and I think for U.S., I already mentioned to it, but it's more of a secular decline, and we've held up really well through market share in our local proposition. So again, mixed bag, but I think it's, in many ways, comforting that we have a good position in food and drink, but we have also seen some movements there, at least for the last couple of years, which again should be stabilizing.

I think the U.S. journey we are undertaking or we are certainly into it, in many ways, you start from scratch and that's been some of the last 18 months of trying to get some of the technical qualifications ready and moving those into customer dialogues and test and trials and qualification. Our target is exceeding 50,000 tonnes of packaging materials now in '26 with a more longer target of 300,000 tonnes when we come towards 2030. And that's certainly what we're aiming for. And again, we will continue to update you on that journey and start reporting this from Q1 and onwards.

There's, first and foremost, 2 items that we are into, its coated liner that we are naming or well, selling that under the Tribute proposition we have, and then it's low grammage cartonboard on the Voyager. So those are the 2 things we're focusing for now.

We'll now take the next question. And the question comes from the line of Martin Melbye from ABG Sundal Collier.

A couple of follow-up questions. First on liquid packaging board, could you indicate what is the price decline? And is that equal across all the key customers or one specific contract? Second question, you previously talked about inventory changes on pulpwood. Is that a factor to think about for Q1? And also what about energy costs for Q1, please?

I can take the first and maybe Andrei can take the second. No, I mean, I'm just repeating what had already been stated. It is the 2% to 3% pricing quarter-over-quarter, where most of that comes into liquid packaging. And I will refrain from commenting further on any specific customer. And I hope you have understanding for that. But it is slightly different mechanic now than it used to be. It's shorter kind of discussions a year typically, so they tend to come all at the same time. And yes, it's always a bit of a mixed bag in terms of the priorities and the dialogues. But in general, I can confirm that the 2% to 3% is first and forecast on liquid packaging.

Yes. I can continue with your two second questions. So in terms of the pulpwood, of course, our production costs are heading now -- heading down in the first quarter, and this will imply some negative inventory revaluation. We don't expect the magnitude to be significant. We are talking normal variation, and we would expect somewhere around SEK 20 million negative. And for the energy costs, we do expect pretty stable situation into the first quarter compared to the fourth.

We'll now take the next question. And your next question today comes from the line of Alexander Vilval from Pareto Securities.

It's actually a follow-up on this discussion on liquid packaging board. If you could elaborate a little bit on this sort of average contract length regarding price and how big a share of your liquid packaging board volumes are actually repriced as of the beginning of this year compared to Q4?

No, I can confirm it's 100%. So all of the volume now pretty much sits on a 1-year, you can call it the term. So everything is being discussed or has been, yes, over discussions during the last months.

Right. And those new contracts are also valid for the entirety of 2026?

Correct.

Great. And just a quick follow-up on that. Are there any -- have you seen any sort of mix changes with regard to geographies regarding your LPG -- or LPB sales during Q4?

Yes, we certainly have. And if you do it simple, we have -- the 2 big regions for us is Europe and Asia. And Europe is the biggest by far. And there, the situation is much more stable, if you may, or our deliveries are, in many ways, not as impacted from the decline you've seen. There is a chunk for sure, and I already commented on this, which we have felt through a more intensified competition in Asia.

So that's, first and foremost, where the decline has been related to during the year. But having said that, when we look now at Q4, in particular, we will be looking for growth from that one and onwards, and that should be also what we see for the coming quarters.

Your next question today comes from the line of Johannes Grunselius from SB1 Markets.

It's Johannes. I have 2 questions. My first one is on what's happening regarding the free emission rights. You have been provided those for free, obviously, for years. They will be gone now from 2026. Is this in line with your own expectations? And what about the rest of the industry? Are all other players having the same sort of outcome in this?

Yes. I can start. So we -- as we've communicated before, we will lose all the allowances for free emission rights that we have received in the past, and this is due to our mill sites being more than 95% fossil-free. There are facilities within this industry, not within Billerud that still are below that and that most likely will continue to receive. But for Billerud's part, we do not expect to receive any emission allowances going forward.

Okay. That's helpful. And maybe I missed this information, but could you sort of remind us about the CapEx plans for this year and potentially also if you can indicate what level you see '27, '28 as well, please?

Yes, Johannes. So for 2026, we expect a total CapEx of SEK 2.6 billion. That is slightly below what we previously planned for. And it is divided into maintenance CapEx that is around SEK 2 billion and then strategic CapEx targeting our evolution program that Ivar talked about in North America and most of the remaining SEK 600 million there.

Now after '26, the evolution program and the CapEx program we have there is coming to an end. We might have a small add-on in '27, but that should be minor. And right now, it is really around the maintenance CapEx that is planned, and there it is between SEK 2 billion and SEK 2.2 billion.

[Operator Instructions] We will now go to the next question. And your next question comes from the line of Cole Hathorn from Jefferies.

You mentioned in the release because Europe is facing a challenging situation that you expect an acceleration in kind of capacity rationalization. And we've seen a number of kind of listed bonds. We've seen debt investors get more aggressive on companies, let's say. I mean, from Billerud perspective, you have taken action on headcount, which is commendable. But when I think about your volumes, volumes are quite low. If those volumes come back, you should get really good operating leverage performance. But how can you change your asset base? Or how can you kind of maximize that operating leverage on the upside? How can you kind of maximize your footprint to kind of reduce the fixed cost effect on your footprint? Do you need to take any action on your production volumes?

Yes, I can try to take that. It's a good question, I think. And I guess the answer is that, I mean, in many ways, there's no shortcuts or easy ones you can do. But certainly, there are some. We have to go even harder after, again, fixed cost as we are doing and also be even more aggressive on variable costs, and that includes no holy cows. You look at formulation and you look at setup where you can just be smarter where you can try to trim out some inefficiencies. And that's ongoing, but I think there's been an amplified focus also on our side now going forward.

You always have leverage to try to expand the flexibility on the machine to do more, call it, grades on the one asset you have. That, of course, frees up more flexibility also to try to find niches that we don't necessarily have been playing with. That's not easy, but that's also certainly possible. But we are still on a, you can call it, capacity utilization, which sits north of 80%, and that should be possible to make money on that, but you need to then have a very strong competitiveness and cost control and certainly, we are doubling down on this.

But it is -- I mean it is tough, as I think we have conveyed, it's tough for everyone. But I think we have a relatively good starting point on our side, but we have to really accelerate both the flexibility on our assets and also to get costs down, and that goes across the board, both fixed and variable.

And then maybe just a final clarification point. Historically, I always thought the 4Q was slightly weaker from a kind of a volume perspective just from seasonality. And this year, we also got a number of players in liquid packaging board on the converting side, kind of not taking their volumes to hit their volume rebates. Should we still expect a sequential improvement in volumes in Q1 versus Q4 just because of some seasonality effect and just starting the orders for the year? Or is that not the case? Should we think about volume similar level on Q4 versus Q1?

Yes. Cole, I think what we see right now, again, is somewhat better order books heading into the first quarter. I think the typical pattern we also see in the fourth quarter is customers, of course, managing their working capital and inventory levels. It is always difficult to quantify the exact magnitude of it. But at this point, we do expect some uptick in volumes heading into the first quarter.

There are currently no further phone questions. I will hand the call back to Lena.

Okay. So that was all questions. This conference has come to an end. Thank you for participating and welcome back when we publish the interim report for the first quarter, and that will be the 28th of April. Thanks, and goodbye.

Thank you. This concludes today's conference call. Thank you for participating. You may now disconnect.

Good day, and thank you for standing by. Welcome to the Billerud Q3 Report 2025. [Operator Instructions] Please be advised today's conference is being recorded. I would now like to hand the conference over to your first speaker today, Lena Schattauer, Head of IR. Please go ahead.

Good morning, and welcome to Billerud's Q3 2025 Earnings Call. As usual, our President and CEO, Ivar Vatne; and our CFO, Andrei Kres, will give you an overview of the results and the highlights in the third quarter. The presentation will be followed by a Q&A session.

So with that, I hand over to Ivar to begin.

Thank you, Lena, and good morning, everyone, and thanks for listening in this early Thursday morning. Yet again, it's a tale of 2 stories for our quarterly report, summarized quite well in the heading here on the slide.

It's been a quarter that landed quite close to our expectations with another strong quarter for our Region North America, while weak market conditions are weighing down on Region Europe.

Let's get into the details. So next slide, please. And if we start from the top, net sales is down 8% versus a year ago, where half of that decline is currency related and most of the remaining decline is due to lower sales volume in Europe.

Our Region North America continued its impressive trend and recorded another strong quarter. Currency-neutral net sales growth of 4%. And despite some maintenance costs during the quarter, the region delivered strong profitability coming in at 16% EBITDA.

And for total Billerud, EBITDA landed at 11%, which is down versus a year ago, but up sequentially by 2 percentage points. We maintain our working capital discipline also for Q3 and record a very strong cash conversion and cash delivery.

And so far in 2025, we're way ahead in terms of cash generation versus same period last year. Last but not least, we did announce mid-September a new cost-saving program, targeting annual savings of SEK 800 million and more details about that program a bit later.

Some more comments on the market sentiment. So next slide, please. And as I mentioned during my introduction, we are continuing to meet very different market sentiment between our 2 regions. In the U.S., where we have our biggest exposure towards graphic paper, the favorable conditions are continuing, and we are in a great position with local supply and close proximity to a large customer base in the Midwest.

Post implementation of the U.S. import tariffs in August, we've seen accelerated customer interest in the wake of our strong value proposition. And we do expect the favorable conditions in the U.S. to maintain also now in Q4. Now in a bit of contrast, we are facing and continue to face weak market condition for our Region Europe, across the board, and we expect the condition to stay weak also now in Q4.

And this is an industry and sector challenge where we're doing our utmost to navigate through it. And on the Billerud side, we are impacted more within our Board categories while our paper grades are holding up better.

Now you'll meet some of the usual suspects when trying to identify the key drivers behind the development. So next slide, please. And although these drivers are probably not equal in a way, there are 4 main reasons that continue to impact our Region Europe.

Yes, we are still seeing high prices on Nordic pulpwood. And yes, we do face currency headwind. But the bigger challenge right now is related to weak consumption and muted consumer spending. And we see that across most of our key categories and channels at the moment.

Growth is stagnant and much below the long-term growth expectation. Short term, we don't see any evidence for recovery, certainly not in Q4, but at least in our discussions now with several customers regarding their 2026 forecast and volume projections, it indicate a more positive view.

Secondly, production overcapacity, first and foremost, within Board products, too much supply is available right now linked to new capacity coming online in combination with reversal of some of the trade flows that historically went from Europe to the U.S.

Now on our side in Billerud, we do remain focused on excelling within the areas we can control, and that has been the mantra for some time, and that is what we intend to keep doing. So next slide, please. And hence, we've taken another proactive step during Q3 to further strengthen our competitiveness and reduce our cost base.

And this will be our second cost and efficiency program in 2 years. We target annualized savings of SEK 800 million, which we expect to reach the full run rate towards the end of '26. We estimate SEK 500 million impact in 2026 with an exponential impact from Q1 and onwards.

It will impact up to 650 positions throughout the company, first and foremost, in the Region Europe and corporate functions. And right now, we are in dialogue with the unions regarding scope and impact, and we'll have a clear picture of the planned elements towards the end of the year. Linked to the program, we did record a nonrecurring cost item of SEK 350 million now in Q3.

Next slide, please. Now on the other side of the Atlantic, the strategic direction remain very clear: Stay committed to a graphic and label paper while evolving our product portfolio towards packaging materials. And the progress is starting to click into gear and yield results.

And we have several trials and tests ongoing to offer locally U.S.-made container and cartonboard. Order flow is strengthening, and we move towards 2026 with significant momentum, both for our Tribute liner product and the cartonboard Voyager proposition.

And I'm both proud and excited to see the progress we've been doing and have made in '25. And for '26, we obviously have a much higher ambition of what number we aim to achieve. So with that, I'd like to hand it over to Andrei.

Thank you, Ivar, and good morning, everyone. So starting with our top line, which declined with 8%. That was largely driven by strengthening of Swedish krona, primarily versus U.S. dollar, but also versus euro, and that hit our both regions. The volume decline of 3% is a combination of strong volume growth we experienced in North America with 4%, while the European volumes declined with 6%.

And pricing is slightly down versus a year ago, positive development in Board primarily, but pulp pricing taking it down to minus 1% on a total level. Next slide, please. Our profitability is down versus a year ago, driven by really 3 key items. The biggest impact is from raw material cost inflation comprising of energy and pulpwood costs in Europe.

Looking at other elements, the raw material situation has been stable year-over-year. We already talked about FX headwind. The profit impact here is both from transactional exposure in Europe and translational exposure for our North American operations. And then the third major item is pulp pricing foremost in our U.S. business, while Europe is neutral on pulp exposure.

Now our quarter 3 results were impacted heavily by planned maintenance shutdowns at our 3 mills with a total cost impact of SEK 360 million or almost 4 percentage points on our margin. And as we now move into quarter 4, we will be less maintenance heavy.

Moving on to regions and starting with Region Europe. As Ivar already mentioned, we are continuing to fight weak markets in Europe. We have sales decline across all categories, except pulp and also lower sales volumes, together with maintenance shutdowns weighing on profitability in quarter 3.

Now heading into quarter 4, we will have, as I mentioned, lower maintenance activity, and we also expect positive impact from lower pulpwood costs to start impacting the results. This cost shift will lead to negative inventory revaluation impact of approximately SEK 70 million in quarter 4 versus quarter 3.

Our order books for quarter 4 are soft for Board categories. And at this point, we expect somewhat lower volumes within Board segment. The paper business is holding up better. And we already went through the cost saving program that will primarily impact Region Europe and start contributing in 2026.

Now moving over to Region North America. The North American business continues to deliver strong results. Comparison versus last year is impacted by significantly weaker U.S. dollar and also somewhat higher raw material usage during the annual maintenance shutdown in September.

Excluding the maintenance shutdown, the EBITDA margin was at solid 19% for the region. In quarter 3, we saw volume growth in both graphic and label paper and see continued strong order books within both segments also moving forward. The announced price increases on graphic paper will start contributing now in quarter 4.

During the quarter, we maintained operating rates at 75% of capacity and are, of course, looking to increase these rates with continued ramp-up of packaging volumes, as Ivar talked about. Next slide, please. A couple of comments on cost development.

And as expected, the cost situation remained stable in the third quarter in both regions. We had only minor movements across raw material categories with an overall positive sequential impact of SEK 20 million. And in the fourth quarter, we do expect continued stable cost situation in our North American operations. For Europe, the pulpwood prices are coming down, but we also expect seasonally higher energy costs to offset that impact now in the fourth quarter.

Next slide, please. Now we've mentioned it a couple of times, and it is quite significant declines in pulpwood prices that we've seen since the peak levels over the past years. And it has been broad-based declines across both Nordics and also the Baltics.

Looking at our sourcing mix, approximately 2/3 of our pulpwood is sourced based on Swedish price list, while remaining is impacted by prices in Baltics, Finland and Norway. And moving forward, we continue to see good availability of pulpwood and better supply-demand balance, which also supports potentially even further price decreases as we move on.

Next slide, please. One of the key highlights already mentioned for this quarter was our excellent cash performance with OCF conversion once again well over 100%, and that is largely driven by our strong working capital discipline across both of our regions. The strong cash generation is supporting our strong balance sheet with leverage of around 1 in relation to EBITDA and well below our target.

In terms of capital expenditures, we are further reducing our CapEx spend for 2025 now to SEK 2.9 billion due to phasing of our strategic investments. The strategic investments in North America are proceeding according to plan, but some pieces of that CapEx will now fall into '26 instead of '25. And at this point, we expect 2026 capital expenditures to be in line with this year at SEK 2.9 billion with the same proportion of base and strategic CapEx. And the strategic CapEx is primarily targeting our revolution journey in North America.

And on that note, I hand it back to you, Ivar.

Thank you, Andrei. And to round it up, going into Q4, we do expect the strong sentiment in North America to continue and deliver another solid quarter. And in Region Europe, challenging and weak conditions, Board products are more impacted while we expect to hold better in our paper categories. And on the input cost side, we are starting to see the impact of lower pulpwood cost in Europe.

So with that, I do hand it back to the operator for Q&A.

[Operator Instructions] We'll now take our first question. This is from Christian Kopfer from Handelsbanken.

Just a few questions from my side. Firstly, on the pulpwood cost, you mentioned that you see them coming down in the region of 10% for the regions and despite -- or except for the Baltics then. But if I do the calculation, I think you have 7 million cubic meters a year you're buying for the Nordic operations and these prices are coming down with, let's say, GBP 100 or so. So those -- that should be a meaningful impact for you going into next year, right?

Yes. That's correct. I think in terms of the consumption, it is around 9 million to 10 million cubic meters per year in our European business. And the 10% decrease in pulpwood costs would imply somewhere in the region of SEK 900 million on a year-on-year basis, yes.

Is that -- is it fair to say that 70%, 80% of that tailwind is coming for next year? Or will it be more for Q4?

No, I think if we look at the price development during 2025, I mean we peaked during 2025. So in the beginning of the year, we had somewhat lower pulpwood costs compared to midyear. So it will have a significant impact, and we'll look to benefit of that in 2026.

And Andrei, I think you mentioned that you expect prices to come up in North America on the products, but down on pulp and in Europe, slightly down, as I understand it. Can you provide us with some figures on it for these 2 regions for Q4?

If looking at the region of North America, we announced, as I mentioned, price increases on the graphical paper, which will come through in quarter 4. Pulp prices are expected to come down. In total for the region, we estimate around 1% in positive pricing impact for quarter 4 sequentially.

For our European business, I mean, we mentioned a couple of times that the weak market environment we are experiencing. And we do expect pricing pressure during the fourth quarter. Now our position is to, of course, defend and fight for our pricing, but we need to admit that we are in a market where we need to address the weak situation and pricing pressure, primarily containerboard and cartonboard.

All right. So slightly down on prices in the European system seems. And then finally for me, maybe for Ivar, you mentioned that you see some light in the end of the tunnel, if that wording is correct. Just interested to hear what you see from your customers? Is it a better underlying demand? Or is it seasonally better into Q1? Or what do you see here?

Christian, it's a good question. And as I said, I think there are some indications. They are quite loose. I have to admit that. So we have to admit that there's a portion of hope and some data points that's starting to at least draw a picture. But again, some of the customer dialogue we have now around their 2026 expectations and their own, you can say, preliminary forecast, they do indicate a bit more of a normalized year.

Clearly, that is some expectation also on their side coming from their customers to have a bit of a pickup. Nobody is in our dialogue talking about a kind of a sharp recovery and a quick, -- yes, steep increase into beginning of the year, but some indications given some of the macro pictures are starting to be a bit better.

I mean we do see in the euro area, you can say the consumer confidence starting to be a little less negative, if we can say it like this. And of course, in Germany, which is a massive market for us, we've had some GFK data that is also starting to show a little bit better trajectory.

But it's still coming from low levels. And I want to stress the point that there's nothing in Q4 that we see that support this. But again, some at least early signals that we might at least see something better when we come into 2026.

We'll take our next question. And this is from Johannes Grunselius from SB1 Markets.

Johannes Grunselius, SB1 here. I have a couple of questions. But if I start with the cost-cutting program, needless to say, it's very ambitious. It's a lot of people. I think it's like 15%, 16% of your old staff in Europe. Can you talk about the risks that things can be adverse impact like do you see any risk that, for example, that operational risks are coming up and so forth? I'm sure you have thought about this, but if you can give some color on it.

Johannes, I can start with that one. Yes, I think as you say, it's a significant program. The numbers are big. It's going to challenge us as a company in many areas that we haven't seen before. I think there's a couple of things I just wanted to convey. We earmark or you can say that we focus this program, first and foremost, in Europe and overhead or staff functions.

Operation in U.S. is, to a very large extent, exempt for this as we are doing top speed at the moment in North America and have a very strong momentum, and that's what I want to continue with. But we are going after a quite significant cut on, as I said, overhead.

We are also going for pretty aggressive cut on some white collar share of our European mills, try to protect at least to a higher extent the blue-collar population, which is the biggest. Yes, I think that there will be a couple of things. We need to work even harder with simplification, automation.

We will accept that we will reduce some of our own, you can call it, capacity to carry out a lot of projects. We need to stay more focused and say no to more things. I mean that starts from the top and needs to flow downwards. I think we have the whole management team behind us that this is important to drive our competitiveness to make us stronger when also the recovery in the market will come and it will come, we will have a stronger Billerud on the other side of that tunnel.

Okay. That's helpful. I was also wondering if you sort of can indicate where you believe operating rates are in the industry for Europe at the moment and your operating rates? And also, I'm very surprised to see how much your volumes are down and not just you or the whole industry, given that you are sort of exposed to relatively stable consumer end segments.

I'm sure like groceries are not down 10%, 12% in Europe. So it has to be some kind of inventory adjustment in the system or reverse trade flows. If you can share some thoughts on that, that would be helpful.

Yes, I can start with that and then maybe Andrei jump into the back half of the question. I -- again, it's a good question. It's a complicated question. I'm not disagreeing with you that if you go through some of the retail figures, it's not down as much.

But I think we see right now a couple of trades, especially when consumer spending is more strained that there's a bit of a downgrade on the consumer side to cheaper products and private labels, et cetera, that tend to have a more dominant share of their packaging in cheapest possible and fossil-based packaging.

I mean that's certainly one. I think also on other channels outside of retail, if you think about nonfood and more electronics and more consumer durables, consumption is certainly down, and they are down in the areas. I mean it's difficult to answer for the whole industry in terms of what the rates, but I think it's fair to say that right now, we are seeing lower operating rates in Europe than we've seen for many, many decades. And maybe, Andrei, if you jump in, can maybe give some light in terms of what we're seeing on our side.

Yes. I think looking at the operating rates, I mean, they have decreased during the year. So obviously, quarter 3 is not comparable to where we started the year. Looking at quarter 3, we were operating at low 80% in our European business. As I mentioned, 75% in our North American business. On the back of everything we went through with the demand situation at year-end, we expect to operate at lower rates in quarter 4 as well.

We'll now take the next question. This is from Linus Larsson from SEB.

First, a question on your evolution program in North America. Could you please give us the guidance as to what kind of shipments you're expecting for this year and maybe for 2026? And maybe for 2027 as well, I don't know.

Linus, I can start. I think the chart we showed was, in some sense, also a forecast or an estimate for Q4. So I think we would be expecting to around 12,000, 13,000 tonnes for '25 on our packaging materials journey and obviously picking up momentum as we go.

Ambition or you can say a target that we would have at that stage for '26 is in the area of 50,000 tonnes. I'm not sure '27 per se, but I think I can say that when we go into 2030, and that's also a bit back to what we presented on the Capital Market Day almost a year ago, we are targeting the area of 200,000 tonnes with a pretty meaningful share within both the liner and to the carton.

And I have to say everything that we've seen so far and getting some tailwind now with, again, locally U.S. production, I feel comfortable about where we're going. But we will certainly provide updates on how that journey is progressing also when we go into '26.

Great. And just to be clear, to reach the 200,000 tonnes by 2030, would that require any additional CapEx?

I think what we have said for the time being is this $125 million that also Andrei mentioned, we are obviously underway on that. That is the only CapEx component that we have pinpointed to enable this 200,000 target in 2030.

Okay. And then just on the cost guidance for the fourth quarter, just to be perfectly clear, are you guiding for flat costs on the variable side altogether? And then the additional SEK 70 million inventory impact, is that right?

Yes, Linus, that's correct.

And then I guess on the fixed cost side, you have some tailwind. Sorry, some headwind -- sorry, some headwind in the fourth compared to the third quarter.

Yes, that's from the vacation accruals that will come back. And that's roughly impact of SEK 130 million, the positive we had in quarter 3 that will now come back in quarter 4.

We'll now take our next question. This is from Cole Hathorn from Jefferies.

I just like to ask on the sack kraft market and your MG and FF. Any color you can give on demand. You're talking about them holding up relatively better. I'd just like some comments around what you're seeing in sack in particular and the pricing dynamics there as well as your -- and then you talked about consumer board and containerboard being a bit weaker. You've taken a lot of head count, but when is it better to start thinking about some capacity rationalization to improve operating rates about that or weighing up the pros and cons of higher operating rates versus lower medium-term demand?

Yes. Cole, we hear you a bit poorly, but I think I got the question, so I'll start at least. Yes, on the sack and kraft, if you go through that, it is, as we mentioned earlier, a bit better, you can say, balance between supply and demand, at least we are not as hit as the overcapacity on Board.

But underlying demand, you can say, or the market sentiment is still very muted. But if you go a bit into some of the details, I think we see that our brown sack is doing pretty well. And to a large extent, we are fully booked. We have a good customer base in Africa and Latin America.

Asia, clearly more soft. It's a bit of a contrast. White sack is certainly more troublesome and doing worse, you can say. We pick up also that there are quite some inventory levels that are on the higher side that need to be flushed out, especially on our Southern Europe side of our business.

Then if you move more into the MG side, we have so many different applications and channels, so you need to give a bit more color on different kind. Interleaving medical and some of our grease-resistant papers, they are performing better and actually quite well while we have a more challenging situation on some of our MF products, and it's certainly more softer than MG.

We have historically pretty good positions within [indiscernible], but there is just a lot of supply out there and quite muted demand. So in that sense, you can say we go into Q4 on kind of total paper for us that order books are quite solid.

White sack is an exception. And again, also MF is a bit more muted, but that's somehow a smaller segment for us. I think on the other question, it's a good question, and I understand why it's coming. In terms of rationalization, in terms of capacity closures, I think I would expect most companies to take that decision also on what are they thinking long term.

How are they looking at, again, a bit more than what we see right now. It is a fact that we've had the situation for some time, and it's also still that we are waiting for consumption to start picking up. I think we are in a situation where I would expect most companies to seriously reconsider their supply footprint in terms of what can be feasible.

I think also cost curves in this aspect is extremely important on where literally you have the more competitive assets. I guess from our side, we are still running full speed forward and doing everything we can to be more competitive, still stay a very relevant partner to our large customer base and come out more competitive when we would see and expect to see a better, call it, market tailwind at some point of time.

And then just following up on folding boxboard. It's less of a part of your business, but I'm just wondering, you mentioned [Technical Difficulty]...

Yes. No doubt that the cartonboard is in a tough spot. It really is certainly one of the weaker categories that we see in the packaging universe. And as you rightly point out, it's not our biggest category, but it's a category that we have quite interest in and certainly also some growth aspiration.

It is a significant oversupply at the moment, especially on the white carton side. It is a bit better on the brown carton, and that's also where we launched 2 new innovations during the quarter that is getting actually a lot of customer interest.

So that's our light and carry proposition. And on those, we expect more momentum into '26. But we will find out. Customer feedback has been outstanding. But I do confirm that cartonboard is under a lot of pressure. There will be price pressure expected also in that area. But we are doing everything we can in our niches in our proposition to find pockets where we can have a relevant customer offer.

[Operator Instructions] There are no further questions coming through. So I would hand the conference back to Lena Schattauer.

Okay. As there are no further questions, we will conclude this conference. Thanks for participating, and welcome back when we report our Q4 results on the 30th of January. Thank you, and goodbye.

Thank you. This concludes today's conference call. Thank you for participating, and you may now disconnect. Speakers, please stand by.