Billerud Aktie

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.

Good day, and thank you for standing by. Welcome to the Billerud Q2 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.

Thank you. Good morning, and very welcome to this presentation in connection to the Q2 report that we have published this morning. With me is our President and CEO, Ivar Vatne, along with our CFO, Andrei Kres. They will hold the presentation and afterwards take questions from the telephone conference. So with that, we will get started. Please go ahead, Ivar.

Thank you, Lena, and good morning, everyone, and thanks for listening in this sunny Friday, at least here in Stockholm. It's a tale of 2 stories for our quarterly report. And I think it's summarized quite well in the heading here on the slide. Another excellent quarter for Region North America, while we are navigating through more challenging conditions for Region Europe. But let's get into the details. So next slide, please. And if we start from the top, we record flat net sales growth when adjusting for currency, growth in North America and decline in Europe.

Our region, North America, continues to impress and record yet another excellent quarter and 22% EBITDA margin is a level we are clearly happy with. In fact, the 22% is the highest profitability level we've had in North America since end of 2022. The situation for Region Europe has been more challenging and market conditions have gradually turned more and more unfavorable during the quarter. And in essence, we are navigating in a market where we face weak demand and supply overcapacity. Now despite this and with our continued strong focus on working capital discipline, we have been able to produce an excellent cash generation coming in with cash flow from operating activities of 75% versus a year ago. The progress on our evolution journey in U.S. continues, and we've taken new important steps during the quarter. And I want to share some more details on that part.

So let's get into the next slide, please. Now evolving our product portfolio in North America towards packaging material is one of the top priorities for the company. And I'm both proud and excited to see the progress we're doing. We reached another important milestone during the quarter with 1,000 tons sold of our bleached liner Tribute and low-grammage cartonboard Voyager. And overall, we see strong interest amongst both the new and existing customers to carry out trials for the new products.

And overall, the feedback on the product quality and performance has been highly encouraging. It confirms again that local U.S. production within our industry is a good place to be where we can offer quality, speed, reliability and predictability. Also in terms of the capital project to enable even further acceleration in our evolution journey, we are progressing as per plan. And I'm looking forward to provide you with more updates on this exciting journey as we move along in 2025.

Next slide, please, and over to some market comments. And it is challenging to give a proper market read these days. And uncertainty, in particular, in the wake of geopolitical decisions seems to be the new normal and can change industry parameters literally overnight. But there is no doubt that some of the ingoing optimism for demand recovery in Region Europe for 2025 is a memory far away.

The trading conditions for most of our categories in Europe weakened during the quarter, and there are 3 main reasons for that. So number one, consumer demand is still muted and is yet to recover the growth rates we are expecting long term for this industry and most of the categories we have exposure to. Number two, we are seeing the impact of more production capacity coming online in the region, first and foremost, within board; and three, the tariff impact is real. And we see now evidence of how the trade flows have started to change.

Not only with volume historically being exported into U.S., but now due to import tariffs have lost some competitiveness and is partly relocated back into Europe. We also see some Asian volumes struggling to find its way into U.S. and put more pressure into markets in the Middle East. And overall, we do not expect the situation to improve going into Q3. Now the notable exceptions where we operate under more normalized conditions are liquid packaging board here in Europe and our graphic and specialty paper in North America. For both these cases, we are expecting to continue their solid performance we've continuously seen over the past quarters. So with that, I'd like to hand it over to Andrei.

Thank you, Ivar, and good morning, everyone. Let's start by looking at our sales, which declined by 5%, and that was entirely driven by the FX headwind meaning our currency-neutral sales were flat versus a year ago. Now the strengthening of Swedish krona we've experienced, first and foremost, by the end of the first quarter is now fully impacting both our sales and also results. The positive pricing of 2% is mainly coming from our Europe region, while North America was quite flat versus a year ago.

Volume-wise, the negative impact is entirely from Region Europe, while North American region had a solid volume growth of 8%. Next slide, please. EBITDA margin in the second quarter was in line with the last year at 9% and also here, a tale of 2 stories. North America improving margin with 4 percentage points, while Europe seeing corresponding decline. And despite significant change in FX rates versus last year, the impact on our results was relatively limited due to our hedging program in place. The year-over-year cost inflation, mainly from Nordic pulpwood cost was more than compensated with improved pricing.

However, the volume growth in North America was also offset with decline in Europe and volume was weighing negatively year-over-year. Despite significant inflationary pressure on our fixed costs, not least through the salary increases, we are maintaining strong cost discipline, and we were able to limit the cost inflation year-over-year. The negative amount in other is almost entirely related to negative year-over-year effect from inventory revaluation. We had no major impact now in quarter 2, but we had sizable positive impact last year.

Now our quarter 2 was maintenance heavy with 3 mills in Europe having a maintenance shutdown, and those were executed as planned and also on budget. Excluding the heavy maintenance costs, our performance for the group in terms of EBITDA margin was in line with quarter 1 despite lower volumes. And now let's move over to the regions. Next slide, please. Performance in Region Europe weakened during the quarter, and we did end up with sequentially lower sales volumes for the region across most categories.

The earlier announced price increases for containerboard and sack and kraft paper were partly implemented with clearly better implementation rate within sack and kraft, while containerboard has been more challenging. Into the third quarter, we will have somewhat lighter maintenance schedule with cost impact of around SEK 280 million. And now let's move over to Region North America. Next slide, please.

The reported sales for the region declined by 5%, but clearly heavily impacted by weakening of U.S. dollar. Currency-neutral sales were actually up by 5%. The EBITDA margin, as I said, improved with 4 percentage points versus a year ago and was also up percentage points sequentially versus the first quarter. And it's now been a sixth consecutive quarter with positive margin trend, which has been driven by volume recovery and continued stable cost and pricing situation in the region. The sequential improvement from the first quarter was primarily driven by price increases for our graphic paper.

Operating rates for the region continued to increase to 76% in the second quarter, and we are now actually coming to the levels we haven't seen since beginning of '23, which is very encouraging. Now heading into the third quarter, we will carry out maintenance shutdown at Escanaba mill, and we will have additional maintenance partly in preparation for the Evolution Program. So we expect sequentially higher maintenance costs of SEK 160 million for the region. Next slide, please.

And I would like to spend a couple of minutes on the input costs. Now in terms of the input costs for the regions, we are now in a much more stable situation also in Europe. The cost development during the second quarter was fully in line with our expectations, and we had a net cost relief of approximately SEK 40 million, primarily from electricity prices in Europe.

Heading into the third quarter, we expect continued stable cost situation for both of our regions. And on the Nordic pulpwood, we now see a trend shift. The pulpwood prices are coming down. We decreased our price list during the quarter and have seen further downward adjustments by other wood purchases. We see good availability that will continue into the third quarter and expect also that the downward pressure on the pulpwood prices will intensify. With that said, the cost impact for Billerud in the third quarter will be limited, and that is due to our sourcing mix during the summer, where many of the sawmills are closed, but we certainly expect the cost to come down further into the year.

Next slide, please. Now with the newly introduced financial targets, we are emphasizing cash generation as one of our key priorities. And I'm particularly pleased with the cash conversion of 131% for the second quarter. Our cash flow from operating activities more than doubled compared to the first half of last year. And we are making a good progress on reaching the cash conversion of above 80% for the full year.

The strong cash generation is certainly supporting our strong balance sheet. And even after dividend payout during the quarter, we maintain our leverage in line with the first quarter at around 1x EBITDA. In terms of the CapEx for the rest of the year, we now estimate a total CapEx of SEK 3.1 billion for '25, which is SEK 400 million lower versus our previous outlook, and that is primarily driven by slower investment pace for our evolution program in North America. And we now expect that, that amount will be pushed into 2026. With that, I would like to hand it back to you, Ivar.

Thank you, Andrei. Now an essential part of our strategic framework, the way forward is to focus on items we can control and avoid being distracted from mix factors that we literally can do nothing about. And challenging conditions mean we truly need to be at our best to further improve our competitiveness and outperform our peer group. We have successfully been disciplined on fixed cost spending and need to be even more aggressive and creative on finding new additional saving opportunities throughout our cost base.

As you just heard from Andrei, protecting our cash flow is of utmost importance, and we certainly aim to continue the strong start of the year and land the year with 80% plus conversion. Another priority is to carefully drive our most profitable and most structurally attractive mix opportunity with focus. And lastly, improving our mill efficiency across and secure supply chain reliability and predictability towards a large and diverse customer base.

These points have been our priorities for some time, and they will continue to be so. So next slide, please. So to round it up and going into Q3, we do expect continued solving conditions for Region North America. In Region Europe, there are some variations across channels and categories, but overall, we would expect the market to stay weak and input costs should stay quite flat across the regions. So with that, I hand it back to operator for Q&A.

[Operator Instructions] And your first question comes from the line of James Perry from Citi.

Just a couple. I'd first like to ask about the wood costs. You mentioned that you've seen the first price reduction in the Nordic wood prices. Are you able to share what kind of magnitude of price decreases you're seeing and whether you think this is temporary relief or negative momentum from here? And secondly, on North America, you said about the positive sales volumes and higher interest in domestically produced products. I know it's difficult to determine, but do you have any sense as to whether customers are looking for a temporary workaround -- or have they been interested in long-term contracts?

James, I will start by commenting on the wood cost. So as I mentioned, we have seen a good availability in the beginning of '25, and that situation has continued also in the second quarter and will continue into the third. We have seen prices in Baltics and also in Norway coming down. We decreased our price list with 5% to 10% from the list prices and seen additional price reductions since then. As I mentioned, the quarter 3, we have a bit different sourcing mix. But if we would look at the impact beyond that at this point and with the price changes we have seen, we would estimate a positive cost impact of SEK 40 million to SEK 50 million, but again, not much of that in quarter 3.

So James, I can take the second question about the North America. I think it's difficult to get customers to sign in blood that this is long term. But I can say that, that process of going through the qualification and changing in supply is, to a certain extent, a bit painful. There are some efforts being required on both sides. And you can certainly say that once you come to the step that you have been finding a way in, that is expectation it will remain and it stays, so hence, a much more long term. So we are clearly very much under the view that once we start opening the doors and can illustrate a good performance, that is the start of the journey. And we expect just this now to snowball further into bigger figures going into 2026.

Your next question comes from the line of Lars Kjellberg from Stifel.

Just a follow-up on the pulpwood one. You mentioned Baltics and Norway prices have declined. And then you talked to list prices, which I suppose refer to Sweden. That's not the same as prices are coming down just because you call list prices down. So the question is, are you having any success in lowering those list prices, i.e., wood flowing in at lower prices also in Sweden? And then I just wanted to get some color on Asia. You mentioned liquid paperboard markets being particularly challenging and competitive. And we can kind of see from your liquid paperboard sales that they're down quite a bit.

Are you seeing then local competition in particularly in those Asian markets in liquid paperboard, which used to be sort of a broadly speaking, oligopoly between 3 producers? And of those, if that is indeed the case, are they breaking into other markets? You mentioned some volumes generally, I suppose, from China coming into the U.S., but it would be interesting to hear some color on that specific market. And then finally, in North America, you speak to a solid performance. But then again, if we actually take away the benefit of the maintenance activity, the schedule change, you're actually down in North America. So what explains that sort of, call it, SEK 50 million drop year-on-year in underlying performance adjusted for maintenance? That's my questions.

Lars, I will start by providing additional comments on the pulpwood. So when we look at the price list in the Nordics, in Sweden, again, those are underpinned by good availability and the moves we see on the price list. And we certainly expect that we will be able to purchase wood going forward on the newly announced price list.

Yes. Lars, I'll jump into the second. I think it's a fair question. And let me just try to give some color on what we see on the liquid packaging these days because it is a bit of a mixed picture. We are seeing that the market is more or less flat, and that is more on the kind of global basis, around 0% to 1%. But there are some pretty hefty regional differences. China now is in decline, while we see more growth in India, other items in Southeast Asia, North America and Europe is also quite flat. And our business then in terms of the supplies into Europe are performing well and more under stable conditions.

So it is so that much more challenging Chinese market and consumption being much more muted, that hits us as well as that is a big market for us to deliver into. And hence, that Asia is not growing and in decline, that is certainly an [indiscernible]. It is also so that some of our customer base in some of the key markets in Asia are losing share. And that also, of course, impacts us based on our exposure to a certain customer base. But I can confirm to your question that, yes, we are meeting some competition from local players in China, in particular, and they've been able to gain some meaningful share over the last time [indiscernible] if you take it out, Andrei.

Lars, going back to the performance in North America. They have, of course, been heavily impacted or the results in the Swedish krona has been heavily impacted by the change in FX. So that's shaving off approximately 1 percentage point in EBITDA year-over-year.

Got you. If I can just have a follow-up or another question. Kraft paper seems to be comparatively stable and reasonable in Europe. Can you share any color on how that market has progressed? You called out better pricing realization in the market, which would suggest less of an issue with, I guess, excess supply and less demand weakness, but some incremental color on that would be helpful.

Yes. I can take that one. Yes, I mean, there is no doubt that the excess supply is certainly most notable within board, particularly within paperboard. I think from what we see on our side is, yes, a bit more balanced market, but the underlying consumption is still weak and it worsened a bit during the quarter. Yes, customers holding a bit back on some orders. And it has just been a sentiment that we just felt more on the demand side. But yes, it is in a relatively better shape versus what we see on the Board side.

Your next question comes from the line of Robin Santavirta from DNB Carnegie.

First question is related to the demand in Europe. Looking at your delivery volumes down 6% year-on-year, and I think you provided 3 reasons for that. But I was also wondering whether there's potentially some destocking among your clients given this uncertainty that we have after Liberation Day? Or is this underlying demand is minus 6%?

No, I think it's always difficult to pin it down exactly what drives what. But yes, I think there is a part of that maybe towards the end of the quarter, where, in particular, a lot of our customer base as well look to protect their cash generation since market is tough. And yes, I mean, I think if you also look at some -- the historical behavior will meet when pulp pricing tend to fall as it has during the quarter, I'm sure also there are certain customer behavior that would expect material packaging pricing to [indiscernible] and again, hold a little bit back. So there's a part of it for sure, especially towards the end of the quarter, difficult to pinpoint exactly how big that impact is.

Second question I have is related to the pulpwood pricing. Could you just provide a bit more detail about like per cube where we stand at the moment? Is it so that you have cut the price by SEK 30 per cube and then there's some SEK 50 sort of per cube cuts out there right now? And if that would be the case, wouldn't the impact be a bit bigger than SEK 40 to SEK 50 once that would bump through the P&L fully?

Yes. I can continue, Robin. So we have decreased our price list with SEK 30 per cubic meter on the softwood and SEK 50 actually on the hardwood. And these are also the changes we have seen happen since then. In terms of the impact for remainder of the year, it depends on which price list you purchase on in which regions to which mills. But currently, our assessment is that will be in that region.

And can I just ask what is the P&L lag from sort of you buying this wood at lower price? Is it 3 months or...

It's 2 to 3 months approximately.

A final question, just a quick one on capital allocation. The balance sheet is still quite strong. I understand it's tough out there, particularly Europe. What about potential share buybacks? Is that something that now the stock is close to, what is it, a 5-year low? Is that something that you could take a look at this autumn?

Yes. No, it's a fair question. I can just say that there's no discussions happening with the Board on this, but it's obviously not yes, a normal discussion that will surface during second half of the year. And of course, we will come back if there are any news or any intervention, we would decide or the Board will decide. But for now, there is nothing. It's full focus on our side to continuous improvement of the items that we can control.

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

A couple of questions on Europe, if I may, starting with volumes. Shipments in the second quarter were on the lowest levels that we've seen for many years actually. And I think they were even somewhat lower than you had expected yourself. So is your message now that you're expecting the same level of shipments from Region Europe in the third quarter? And also in relation to that, how are you looking at this in terms of potential restructuring when you look at your current footprint, are there certain measures that you are evaluating?

So in terms of volumes, I'm getting a bit back to what Ivar talked about. There are 2 things. First of all, the underlying demand is not where we would expect it to be long term. And we also have the oversupply partly due to capacity increases in the region, but also change to the trade flows. With those 2 things out there, we do expect the situation for quarter 3 to remain weak.

But it is also with very high uncertainty around what things are going to change in quarter 3. And hence, at this point, it is just difficult to predict volumes for the third quarter. Our order books are weaker now versus where they have been when we went out for the first quarter, but difficult to predict and provide any more specifics on volumes for the third quarter at this point.

Linus, I'm just jumping into your second point, which -- yes, I mean, we do have a profitability target of 15% EBITDA with clear region. Just in terms of the pricing also looking forward, I mean, we are meeting a weaker market. Our starting point is to defend our pricing positions also on the back of stability in our input costs. But we need to acknowledge the weakness, and we certainly expect some pricing pressure to come through during the third quarter.

First and foremost, I think, within containerboard and cartonboard. But we will, of course, defend our positions. If we look at development in Europe year-over-year, there has also been a hefty currency impact. And if we look at currency-neutral sales for Region Europe, they were down 4% versus last year, and the majority of it was actually driven by mix due to the weaker volumes we had this quarter.

Great. That's also very helpful. May I just add one final question. [You wrote] about this negative inventory revaluation. Could you just please clarify that? Did you have -- did you -- and if so, how much was the negative inventory revaluation in the second quarter? What was it in the first quarter? And if you at all have any anticipation for the third quarter, that would be of interest as well.

Yes. For the second quarter, we had a negative revaluation impact of approximately SEK 15 million. So really no drama and where we would expect it normally to fluctuate. But looking at the second quarter last year, we had quite sizable positive impact of approximately SEK 80 million. So hence, year-over-year quite significant deviation. Heading forward now, we don't expect any major movements there, again, based on the stability in the input costs.

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

I'd just like to follow-up firstly on Europe. I mean when I go back to the Q1 report, you talked about decent order books, and I know the market changed, but I'm just wondering, was the deterioration really in June that you saw the impact and kind of pullback in volumes?

And was the volume pullback compounded by the operating deleverage that you saw. I mean, is this really an operating deleverage across your asset base effect rather than anything else? And how can you improve the operating rates of your mills in Europe? Does it mean that you take some longer economic downtime and ways to save costs? Or does it require more of a permanent solution to remove capacity?

I can take that one. No, again, I can confirm that the situation got gradually worsened during the quarter. And yes, it is so that when we started the quarter, our order books at that time looked a bit more decent. And as also Andrei said, now they are weaker than we now are in the beginning of July. I think it's, again, difficult to exactly pinpoint what is, what impact carrying its weight.

But there's just no doubt that consumer demand has been delayed in terms of getting to recovery, and that is spreading gradually also to the customer base being worried about what underlying strength is and protecting their own cash generation and certainly, the tariffs and the relocation of some of the volume back to Europe has just not helped. But it was a gradual impact that intensified towards the end of the quarter, no doubt.

Yes, I think the -- I mean, in terms of operating rates, yes, there is a little doubt that we need to manage this almost on a weekly basis. It's one of the core questions that the region wrestle with -- and we have some leeway to either take downtime some days or slow steam. But surely now, we run quite a bit lower than our normal capacity is and certainly also quite a bit lower than we [would] full out. So yes, it's the same for the whole sector. We're doing what we can, and we've been quite successful so far of maneuvering this and protecting our cash flow, as you saw earlier in the deck.

And then maybe if I just follow up on North America, which is a more positive story. But when I think about that North America division into the second part of the year, can you give any commentary on how you're benefiting from kind of the import tariffs supporting specialty and graphic paper. Are you comfortable that you're going to continue to be at a decent operating level there? And then secondly, I know pulp prices are lower, but given potential tariffs on Brazil, how would your business perform? Would you be a net beneficiary from pulp sales domestically in the U.S.?

Yes. Why don't I start and Andrei, you can jump in if you have anything. But yes, I want to say in the second half, I mean, comfortable and comfortable. I think we are in a very good place, and I think we've proven this now continuously over years that we are well placed, and we have a very strong starting point where we can be the local player offer speed and reliability and predictability. That has worked super, and we expect that still to continue.

I mean, as an example, our order books are much stronger as a relative comparison in the North America when we go into Q3. Sure, there are topics. And let's say that the phone is ringing quite more frequently now in the light of the uncertainty we are facing on tariffs. We are certainly also calling a lot of our potential new customers to remind them of where we stand and we are ready to deliver. And surely, that has helped us, but it's not been a tsunami, but it's been a good testament of the growth we've seen.

If though some of these tariffs will become permanent at a high level, I mean, that's surely going to be a benefit. But it's speculation, as you know, at this time since this situation with the trade agreement can change extremely fast. But overall, we are in a very good place and super impressed of what the North American team are able to produce quarter after quarter.

Yes, on pulp, it's interesting. As you mentioned, I mean, we are a bit long on pulp in North America on the hardwood maple pulp, about 200,000 or 200,000-ish. We'll see. I mean, there's no doubt that a big chunk of the tissue production capacity in North America is supplied from Brazil. With that tariff now on the table will remain or stay, I mean, clearly, that will benefit the remaining players of locally produced North American pulp where we are one of them. But again, it's too early to say anything. It can be an agreement or that is removed tomorrow or next week as we've seen. But surely, if it stays on long term, this should help us for sure.

And then maybe just a clarification. You called out the particular oversupply in paperboard, but were you referring more to kind of the folding carton, the boxboard side rather than the containerboard or just a little bit of specifics around which was relatively weaker and more impacted by the oversupply.

Yes. I think we talk about cartonboard and liner, first and foremost. I think fluting for us, at least our Nordic fluting is a bit more protected. As you know, it runs on separate machines. So yes, liner, in particular, quarter-on-quarter, and carton is the bigger one referred to.

[Operator Instructions] And your next question comes from the line of Martin Melbye from ABG Sundal Collier.

You had a couple of comments there on price quarter-over-quarter for Q3. Are you basically saying flat or down with pulp?

Yes. I can repeat that, Martin. So again, given the situation where we are, we do expect weaker market conditions to persist for the European side into the third quarter. Again, our starting point is that we will defend our pricing positions, but we do expect some pricing pressure. So any other guidance than that, I wouldn't be able to provide at this point. For North America, we expect stable prices for our paper grades. Now the pulp prices have come down. We expect roughly 5% lower pulp prices for the North American region, which is 0.5 percentage point for the whole region then.

And on the maintenance costs, you have some different numbers in the presentation compared to the report. So if I get this right, you say SEK 440 million in the presentation, but like SEK 380 million in the report. And what is the difference?

Yes. So the difference is that when we call out in our report is the planned maintenance shutdowns where we close essentially our recovery boilers and stop all of the productions. But in the preparation for the evolution program in North America, we will take some additional maintenance that is not CapEx, but it is maintenance, and that will add some additional costs into the third quarter for North America.

I see. And last question on the financial items, is minus SEK 111 million clean? Or is that FX loss including...

No, that is impacted by the changes in the FX rate. So that includes revaluation of our cash balances in foreign currencies. The underlying interest costs are around SEK 60 million. So the remainder is FX primarily.

Your next question comes from the line of Oskar Lindstrom from Danske Bank.

Three questions from my side. First 2 on volume curtailments. How are you distributing the production curtailments between mills? Are certain of your mills in Europe more severely impacted by production curtailments? Are there perhaps even entire machines which are being taken offline? Yes, that's the first question.

You just give all of the 3, and then we'll start from the top.

Okay. Yes. So the first question is how you're distributing these production curtailments between mills and if there's entire machines which are being taken offline or if it's really just sort of day by day. The second question is, are other producers in Europe in your different niches also taking production curtailments? What's your impression here? And then the third question, you mentioned that there was a delay in CapEx in North America for the reason for taking down your full year CapEx guidance. What's the reason for the delay? Is it by choice? Or is the -- is there another reason?

So Oskar, I can start with the first 2, and I'm sure Andrei will jump in the third. I think when we have the situation where we start to see softer demand and we need to, I call it, wrestle through it. It's one of the key points we have in our sales and operational planning. And it's a bit of a chessboard that moves quite a lot. There are no machines that are fully down that I can say.

And we've had slow steam or you can call it some downtime or curtailment more on the board side during Q2 versus what we saw on the paper side. I mean the paper in general have performed a bit stronger through the quarter. And I mean merging that into your question number two, I can with quite high likelihood confirm that I think this curtailment on production is the theme of Q2 for pretty much everyone in the industry. And yes, I expect a lot of the same companies in the sector to report how they've been able and needed to take downtime and slow steaming to maneuver to what we currently see.

Yes. And I can take the question on the CapEx, Oskar. So the SEK 400 million that we pushed into 2026 from '25, that is primarily the Evolution project in North America, and it is just more detailed planning of when we will carry out the investments. As you know, we don't have any maintenance shutdown in Quinnesec mill. So we want to time that into the maintenance shutdown, but also make more investments during the next maintenance shutdown in Escanaba. So that's a deliberate choice to adapt it better to the planned production there.

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

Okay. So with no further questions, we have come to an end of this conference. Welcome back when we report our third quarter that is on the 23rd of October. Thank you for participating, and bye-bye.

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