Svenska Cellulosa Ab Sca Class A · OMXSTO:SCA_A
Svenska Cellulosa Ab Sca Class A — SCA — Investor Day (November 2022)
70 slides from Svenska Cellulosa Ab Sca Class A's investor day presentation, Nov 25, 2022
Slide 1: Capital Markets Day November 25, 2022
Capital Markets Day November 25, 2022
Slide 2: Introduction
Introduction Ulf Larsson WSCA
Slide 3: Strategy communicated in 2017
Strategy communicated in 2017 Invest in integrated value chain: Increased • Grow Pulp value from • Grow Kraftliner each tree • Develop Renewable energy • Reduce exposure to Publication Paper Growing Increase forest holdings: renewable • Increase growth and harvesting level forest asset • Acquire
Slide 4: Project portfolio delivered
Project portfolio delivered Value 60% completed Östrand – further capacity increase Acquisition of Restructuring Sundsvall forest land Biofuel → 2021 → 2023 Exit publication paper Further increase NBSK pulp → 2023 CTMP expansion Additional ~40k capacity at Östrand → 2023 Kraftl
Slide 5: Transformation has increased competitiveness
Transformation has increased competitiveness EBITDA margin 60% 50% 40% 30% 20% 10% 0% 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 Jan-Sep 2022 SCA Nordic Peer 1 Nordic Peer 2 Nordic Peer 3 Nordic Peer 4 Nordic Peer 5 Nordic Peer 6 5
Slide 6: ..and contributed to a fossil free society
..and contributed to a Replaces 2 Higher growth enables more substitution – 5.8 fossil free society Mt CO2 renewable alternatives replace fossil based products SCA’s renewable Non-renewable Binds 1 products products net Growing forests bind CO 2 – 5.4 active forest management Bioenergy Fossil Mt CO2
Slide 7: SCAs updated strategy for profitable growth
SCAs updated strategy for profitable growth Increased value Invest in integrated value chain: from each tree • Grow pulp, containerboard and wood • Realize business opportunities within renewable energy Growing Increase forest holding: renewable forest • Increased growth and harvesting level ass
Slide 8: Project focus upcoming years
Project focus upcoming years Value 2 Decided and ongoing projects 3 Organic growth Grow ing forest assets Renew able fuels Grow Wood Further potential Pulp & Containerboard Ow n w ind pow er Increased forest ownership in Baltics Biofuel Bio refinery and Nordic Countries Acquire P
Slide 9: Continued transformation with remained balance between forest and industry
Continued transformation with remained balance between forest and industry Pre split Post split Next step Industrial company with forest Forest company with Forest company with industry renewable energy and industry Decided projects Today and continued Illustrative value development organic growth
Slide 10: Financial summary
Financial summary Andreas Ewertz WSCA
Slide 11: Integrated value chain with high self sufficiency offset cost increases
Integrated value chain with high self sufficiency offset cost increases ~50% ~95% >100% ~40% ~45% Wood sourcing Electricity usage Solid biofuels SCA Logistics 1) Transportation fuel 11 M m3 1.7 TWh 12 TWh 2.4 SEKbn 100 kt External exposure District heating External suppliers Sold externally Wind lea
Slide 12: Price increase drops through to EBITDA
Price increase drops through to EBITDA Higher costs for wood Higher prices in all raw material and product areas chemicals 10,000 9,000 +2,518 -292 SEK -556 +348 -167 +59 8,213m 8,000 7,000 SEK 6,303m Lower energy 6,000 costs 5,000 4,000 3,000 EBITDA margin EBITDA margin + 30% 2,000 44.8% 51.6% 1,00
Slide 13: Decided projects contribute to significantly increased EBITDA
Decided projects, financed with operating cash flow, contributes to significantly increased EBITDA Illustrative EBITDA potential 1 2 Decided projects Decided projects decided projects (SEKbn) with trend prices with 2022 prices 3 14 11 Restructuring Forest acquisitions Biofuel Additional effect from
Slide 14: Capital allocation to secure long term profitable growth
Capital allocation to secure long term profitable growth 1 2 3 Profitable growth strategy Stable and increasing dividend Investment grade credit rating EBITDA (SEKbn) and EBITDA margin Dividend (SEK/share) Net debt (SEKbn) and leverage (ND/EBITDA) 3.50 1.00 3.00 +0.25 11.0 +0.25 8.6 2.50 8.3 2.25 7.
Slide 15: Forest
Forest Jonas Martensson @®ScA
Slide 16: Increase in both standing volume and harvesting level
Increase in both standing volume and harvesting level Harvesting from own forest (m m3sub) Standing timber volume (m m3fo) +200% 350 +100% 6 300 5 250 4 200 3 150 2 100 Increasing cash flow Growing asset base 1 50 0 0 1950 1960 1970 1980 1990 2000 2010 2020 2030 2040 2050 1950 1960 1970 1980 1990 20
Slide 17: Forest acquisitions part of SCA's DNA
Forest acquisitions part of SCA’s DNA Continued acquisitions of forest land in Nordics and Baltics Productive forest land has increased 60% since 1950, million hectares productive land 2.5 +60% Graninge/Scaninge +275k ha Baltics Svanö Wifstavarvs +120k ha 2.0 +275k ha Kungsgården Marieberg +90k ha 1
Slide 18: Forest land acquisitions in the Baltics
Forest land acquisitions in the Baltics – strengthen the fiber base for future projects 1 2 3 Strengthen our High growth SCA’s competence integrated value chain and resources • Strengthen the raw material supply • High growth – 2.5x northern Sweden • Harvesting volume and standing and maintain self-
Slide 19: The Baltics offer high forest growth potential
The Baltics offer high forest growth potential Price (EUR/ha forest land) Growth potential (m 3fo/ha/year) 14,000 12 ~2.5x 12,000 10 10,000 8 8,000 6 6,000 1.3x 4 4,000 2,000 2 0 0 Southern Mid Northern Baltic Southern Mid Northern Baltic Sweden Sweden Sweden states Sweden Sweden Sweden states Sourc
Slide 20: SCA's forest holdings in the Baltics
SCA’s forest holdings in the Baltics Land in the Baltics Value of forest land 1 Location (ha) (mEUR) SCA’s forest +40-50% >60% 100,000 completed 63,000 Current Target Purchase Price Market Value 1 Estimated market value 2021-12-31 based on transactions in the Baltic countries. 20
Slide 21: SCA Capital Markets Day
SCA Capital Markets Day Niklas Lundberg 25th of November 2022
Slide 22: Outline
Outline Svefa 1. Basis of data 2. Description Market development private investors Legal entities Property size 3. Value affecting factors 22
Slide 23: Basis of Data
Basis of Data Svefa’s Sales comparison database Svefa’s Forest market report Svensk Fastighetsmarknad Fokus Skog is available at Svefa.se 23
Slide 24: Market development for forest properties, Northern Sweden
Market development for forest properties - privately owned, Northern Sweden Privately owned, Northern Sweden (SEK/m3fo) 1. Positive market trend 1,400 2. Price floor 1,200 3. High value amplitude 1,000 4. Year seasonal pattern SEK/m³fo 800 600 Expon. (Kr/m³fo privately owned) 400 200 0 jan-16 jan-17
Slide 25: Market development for forest properties, Southern Sweden
Market development for forest properties - privately owned, Southern Sweden Privately owned, Southern Sweden (SEK/m3fo) 1. Positive market trend 1,600 2. Price floor 1,400 3. High value amplitude 1,200 1,000 4. No seasonal pattern SEK/m³fo 800 Expon. (Kr/m³fo privately owned) 600 400 200 0 jan-16 ja
Slide 26: Forest properties: private owners and legal entities, Southern Sweden
Market development for forest properties - privately owned, and legal entities Southern Sweden Privately owned and legal entities, Southern Sweden (SEK/m3fo) 2,600 2,400 2,200 2,000 1,800 Kr/m³fo privately owned 1,600 Kr/m³fo, price kr/m³fo 1,400 legal entities 1,200 Linear Linear (Kr/m³fo 1,000 pri
Slide 27: Forest properties: private owners and legal entities, Northern Sweden
Market development for forest properties - privately owned, and legal entities Northern Sweden Privately owned and legal entities, Northern Sweden (SEK/m3fo) 1,400 1,200 Kr/m³fo 1,000 privately owned Kr/m³fo, price kr/m³fo 800 legal entities Linear Linear (Kr/m³fo 600 privately owned) Linear Linear
Slide 28: Market premium
Market premium - Legal entities and size Historical transactions with visual size premium (% of private transaction value) 200% 180% 160% 17% 1% 8% 140% 4% 13% 120% 35% 45% 30% 55% 55% 100% 80% 60% 40% 20% 100% 100% 100% 100% 100% 0% Östmark Östmark Norra Stora Stora Ånge Siksjö 95 mkr SEK 95m 1 800
Slide 29: Value affecting factors
Value affecting factors More categories of investors Less risk Sustainability Future beliefs 29
Slide 30: Thank you!
Thank you! Niklas Lundberg Niklas.Lundberg@svefa.se
Slide 31: Book value of SCA's forest assets based on historical 3-year average
Book value of SCA´s forest assets based on historical 3-year average Forest land values – average in areas where SCA owns forest land (SEK/m 3) 450 400 350 300 Ludvig & CO 3-year weighted average – 250 Svefa used for valuation of forest assets 200 150 Price (SEK/m3fo) 2019 2020 2021 H1 2022 3-year w
Slide 32: Potential premiums can have a significant effect
Potential premiums can have a significant effect Market price on forest land in SCAs region (SEK) +40-55% 30-40% premium on 5-15% size premium legal entities SEK ~480-570 3-year average market price applied on SCA’s forest assets 90 SEK 342 Book value SCA's Legal entity premium Size premium Total fo
Slide 33: Forest generates long term value
Forest generates long term value CAGR of 10% since 1956 Forest – Total Return Index Sweden (1956-2021) CAGR 1 Increasing forest land value 50,000 10% • Land value (SEK/m3) has increased 45,000 CAGR 2004-2021 − Land value (SEK/m3): ~6% CAGR 8% 40,000 2 Increasing cash flow • Harvesting generates cash
Slide 34: Biodiversity
Biodiversity Hans Djurberg WSCA
Slide 35: Monitoring pre-conditions for biodiversity
Monitoring pre-conditions for biodiversity Average size cutting area, ha Volume hard dead wood, Mm3 25 5-year average, data from 2021 120 20 100 15 80 Corporates/Other 10 60 40 5 Private owners 20 0 0 1975 1980 1985 1990 1995 2000 2005 2010 2015 2020 1955 1965 1975 1985 1995 2005 2015 Old forest1 on
Slide 36: Why is biodiversity a concern and how do we address it?
Why is a biodiversity a concern and how do we address it? Nature conservation strategy since 1987 SCA introduced a new approach in 2019 • To increase precision and quality in nature conservation measures Measuring biodiversity using the IUCN Red List : • IUCN: International Union for Conservation of
Slide 37: Our species commitment
Our species commitment Species reviewed in red list Redlisted species Species negative affected by harvesting 22k 4.7k 1.7k 203 4.7k 1.7k Red listed Species found on Negatively affected SCA’s land and by harvesting affected by forest management 37 Source: SLU, artdatabanken.
Slide 38: Biodiversity in the forest landscape – managed locally
Biodiversity in the forest landscape – managed locally Connecting activities on the ground to large-scale processes - at the landscape level Creating habitat linked to species commitment The forest is dynamic – disturbance is natural Fire is essential in boreal forests Actively managing for importan
Slide 39: Responsible forestry in SCA
Responsible forestry in SCA Voluntary set-asides Combined targets 7% 3% SCA’s forests should be at least as rich in biodiversity, nature experiences and Adapted retention raw material in the Basic retention future as today 3% 87% 39 x% Share of productive forest land
Slide 40: Renewable energy
Renewable energy Mikael Kallgren WSCA
Slide 41: Net Zero policy will shape demand for renewables
Net Zero policy will shape demand for renewables SCA has competitive Global CO2 emissions pathways to Net Zero Global energy supply towards Net Zero advantages in… <2.0° 1 Wind Net zero by 2060 scenario 1.5° Net zero by 2050 scenario 2 Biofuels Predictions in line with IPCC 2021 special report on gl
Slide 42: Renewable demand is growing significantly
Renewable demand is growing significantly 1 2 3 Renewable hydrogen and E-fuels Global consumption, Mt , Wind CAGR (+11%) E-fuels Total CAGR (+8%) Drivers of growth Drivers of growth Drivers of growth LV transportation, Aviation, maritime & Industrial feedstock, maritime, industry processe & heating
Slide 43: SCA uniquely positioned to capitalize on transformation towards renewables
SCA uniquely positioned to capitalize on transformation towards renewables Wind power Biofuels E-fuels Ownership of land with Access to sustainable Access to low-cost good wind conditions biomass feedstock renewable energy SCA Current land lease agreements Existing infrastructure Access to biogenic
Slide 44: Participating in the development phases of a project ensures highest returns
Participating in the development phases of a project ensures highest returns Early entry in value chain drives higher returns but The identified growth opportunities for SCA vary entails more risk in return profile Competitive Time advantage Profitability Project Route to Asset mgmt./ Financing EPC
Slide 45: Factors in line for SCA to transition from land lessor to developer
Factors in line for SCA to transition from land lessor to developer 0.1 Global levilized cost of electricity from onshore wind (2020 USD/KWh) Post 2021 trend Cost of 0.05 production Favourable conditions to transition from 0 20 10 20 11 20 12 20 13 20 14 20 15 20 16 20 17 20 18 20 19 20 20 20 21 les
Slide 46: Shortage of wind power projects 2022-2028 presents opportunity for SCA
Shortage of wind power projects 2022-2028 presents opportunity for SCA Yearly commissioned onshore wind capacity , Organic development focus , A lack of appetite for new project planning in mid 2010s cause of , diminished commissioning today Wide span between predictions could reflect beliefs about
Slide 47: 65 TWh full potential is restricted by legislations
65 TWh full potential is restricted by legislations Changes in policies will increase SCA’s potential revenues and profitability substantially Installed wind power (TWh) Theoretical power production / INDICATIVE FIGURES from grid connected sites on SCA land is 60-65 TWh in 2045 -75% 70 265 60-65 60
Slide 48: Repowering of existing wind farms on SCA land represents a major opportunity
Repowering of existing wind farms on SCA land represents a major opportunity In 2030, older turbines benefit from repowering under all Repowering offers an attractive business case price scenarios Turbine size can be increased from 2MW to 7-10MW, Net present value, 2010 project, 2 MV turbines / EXAM
Slide 49: The market for renewable fuels is expected to grow
The market for renewable fuels is expected to grow EU potential ramp-up of sustainable aviation fuel 2020-2050 1 Greenhouse gas reduction quotas will Mt/year increase as Europe redirects 60 ~10% total EU jet fuel demand ~75% total EU jet fuel demand 50 2 Available biomass will not be sufficient 40 3
Slide 50: SCA and St1 creating two companies – from forest to fuel station
SCA and St1 creating two companies – from forest to fuel station Ownership structure maximizes value creation Leading Nordic supplier Access to market, Biorefinery Gothenburg biorefinery of liquid biofuel biorefinery and customers Tall oil, Europe’s largest Access to feed stock and biomass priva
Slide 51: Gothenburg Biorefinery
Gothenburg Biorefinery St1 is constructing a biorefinery in Gothenburg • Expected start up in Q4 2023 • Yearly capacity of 200 kt (SCA share 50 kt) • Flexible design allowing the use of a wide range of feedstocks • Capable of meeting current and future specifications of renewable fuels • Includes HV
Slide 52: Östrand Biorefinery
Östrand Biorefinery Development company • Next to Östrand pulp mill • Land reclamation started • Sustainable feed stocks and energy available • Environmental permit received to build a biorefinery at the Östrand pulp mill • 300 kt tonnes capacity • Finalizing design phase 52
Slide 53: Summary
Summary Invest in wind power: • Development of portfolio in all maturity phases through M&A, Wind Power development and repowering • >3 TWh own wind power in ten years Liquid Grow liquid biofuel: biofuel • Start up of biorefinery in Gothenburg – IRR >20% • Gothenburg 200kt of which SCA 50kt, Östrand
Slide 54: Wood
\Nlood Jerry Larsson WSCA
Slide 55: Almost 50% of SCA's total value dependent on competitive saw mills
Almost 50 % of SCA’s total value dependent of competitive saw mills SCA’s SOTP (SEKbn) Illustrative break down of SCA’s value Net debt ~50% of value from Wood Industry Wood industry and MCAP Pulp and Wood Forest sawlogs ~30% Containerboard Industry Pulp and Containerboard Forest Forest – Forest – ot
Slide 56: Long term demand larger than supply – Forest a strategic resource
Long term demand larger than supply – Forest a strategic resource for the future Estimated change in harvesting potential 2020-2030 (softwood sawlogs) Long term demand of wood products growing faster than supply CAGR 2020-2030 Region in balance Region moves into deficit Region increases its deficit
Slide 57: Investment in increased efficiency in Bollsta Sawmill
Investment in increased efficiency in Bollsta Sawmill Increased yield Increased revenue from each log 52.0% • Increased raw material yield • Optimize product value from each saw log Accumulated Target 51.5% Best available technology enables further growth 51.0% • The world’s most efficient gradi
Slide 58: Pulp
Pulp Kristina Enander @®ScA
Slide 59: Global pulp market 70 Mt of which 20 Mt addressable for SCA
Global pulp market 70 Mt of which 20 Mt adressable for SCA Global demand Virgin pulp Market pulp Adressable market SCA NBSK 415Mt 200Mt 68Mt 15Mt Other Softwood Europe 5 Mt China SBSK NA 2,5 Mt Core NBSK 15 Mt markets Integrated Market pulp Recycled Virgin pulp CTMP BHK CTMP 4.1Mt TMP Unbleached Oth
Slide 60: Softwood grows with 1.0-2.0% per year, limited new capacity
Softwood grows with 1.0-2.0% per year, limited new capacity New pulp capacity (k tonnes) 3,000 2022 2023 2024-2028 Softwood 2,500 Uncertain softwood Hardwood 2,000 Uncertain hardwood High-Yield (CTMP) 1,500 Uncertain High-Yield Dissolving 1,000 Unbleached +200 kt at 500 Ortviken 0 -500 Source: Brian
Slide 61: CTMP expansion drives profitable growth
CTMP expansion drives profitable growth Scale up profitable business Cost curve SW CTMP producers • ~15% lower cash cost per tonne • Top quartile in cost position Low investment per tonne • Utilize existing modern TMP asset CTMP improves customer product properties at lower cost CTMP today CTM
Slide 62: Project status and ramp up
Project status and ramp up Production CTMP, kt Robust market plan +200kt • Mainly existing customers 300 • Main market Europe • Product development in collaboration with customers Prior to time plan • Operating trials ongoing • Start up end of 2022 CTMP at Östrand closing when Ortviken up and runnin
Slide 63: Containerboard
Containerboard Mats Nordlander WSCA
Slide 64: Containerboard demand short-term effects but long-term trend resilient
Discontinuities in economy effects containerboard demand short-term but long-term trend resilient Global containerboard demand (Mt) CAGR ~3% +90 Mt 200 Resilient demand during Today corona pandemic 180 160 Financial crisis 140 120 100 80 2003 2005 2007 2009 2011 2013 2015 2017 2019 2021 2023e 2025e
Slide 65: Need for additional 900,000 tonnes supply in Europe until 2028
There is a need for additional 900,000 tonnes supply in Europe from investment-decision until 2028 Kraftliner Europe, kt CAGR 2.4% CAGR 1.8% 6,000 5,000 +900kt 4,000 3,000 2,000 1,000 0 2013 2014 2015 2016 2017 2018 2028e Source: SCA & Numera. 65
Slide 66: Investment in increased kraftliner production
Investment in increased kraftliner production Design speed vs. trim width 1,600 Weighted average STRONG Strengthened market leading position trim w idth • Europe’s largest independent producer of kraftliner 1,400 • Increased market share 725 Obbola PM2 1,200 Design speed, m/min Munksund 1,000 Im
Slide 67: Project status and ramp up
Project status and ramp up Production kraftliner in Obbola, kt Ahead of time plan • Paper machine running 24/7, producing good quality +275kt sellable products. 725 Old corrugated case production unit expected to be completed mid year 2023 • Necessary for ramp up 450 Ramp-up period of ~3 years • 202
Slide 68: Summary
Summary Ulf Larsson WSCA
Slide 69: Q&A
Slide 70: are subject to certain risks and uncertainties that could negatively affect our business. Please
This presentation may contain forward-looking statements. Such statements are based on our current expectations and are subject to certain risks and uncertainties that could negatively affect our business. Please read SCA’s most recent annual report for a better understanding of these risks and unce