Svenska Cellulosa Aktiebolaget SCA (publ) (OTCPK:SVCBF) Q4 2022 Results Conference Call January 27, 2023 4:00 AM ET
Company Participants
Anders Edholm – SVP, Communications
Andreas Ewertz – CFO
Ulf Larsson – President and CEO
Conference Call Participants
Robin Santavirta – Carnegie
Linus Larsson – SEB
Oskar Lindstrom – Danske Bank
Cole Hathorn – Jefferies
Christian Kopfer – Handelsbanken
Martin Melbye – ABG
Anders Edholm
Good morning, and welcome to this presentation of SCA’s Year-End Results for 2022.With me here today, I have President and CEO, Ulf Larsson; and CFO, Andreas Ewertz, to go through the results and take your questions. Over to you, Ulf.
Ulf Larsson
Thank you, Anders, and good morning also from my side. Warm welcome to the presentation of the results for the full year, but also for the fourth quarter 2022.When I summarized last year, I can state that we have delivered the best year ever. We reached SEK10.2 billion on EBITDA level, and by that, 49% profit margin.
We have had a strong demand and high prices for all our products in combination with good cost control. We have also benefited from a high degree of self-sufficiency in wood, energy and logistics.
And together, this has created a strong cash flow from which we have been able to finance all investments, including strategic. True major investment projects in Obbola and Ortviken have both started up during last year, approximately one quarter ahead of plan and we are now in an exciting start-up phase.
The new OCC line, which is needed to reach full capacity in Obbola is scheduled according to the original plan, and will be up and running during the first half of this year to meet the planned start-up curve. In addition, I can also mention that our reinvestment in a new grading mill at Bollsta sawmill is finalized and the trimming has started according to plan.
From first of January this year, we will start to disclose our new segment, Renewable Energy. And the reason behind this is that we already today have a leading — we are a leading producer of renewable energy, and we annually produce 12 terawatt hours of bioenergy. We have 20% of installed capacity wind power on SCA land, and we have a big ongoing investment in biofuels that will start up Q4 this year.
And as we’ve said earlier, we have the ambition to grow this segment further and we also recently announced that we have acquired our first wind farm in the northern part of Sweden. The big capacity today in Skogberget, which is the name of the wind farm is approximately 200 gigawatt hours, but after repowering, we expect the capacity to double or triple.
The price level of forest land has continued to rise. And when we follow our described model based on transaction prices in our region for setting the market price, we can state that the total value has increased from SEK84.5 billion, the 31st of December ’21 to almost SEK98 billion same date 2022.
Finally, EBITDA increased 12% in comparison with last year due to higher selling prices and the stable cost base. And sales increased during the same period by 10% due to higher prices. Turning over to some financial KPIs related to the full-year ’22. As just mentioned, our EBITDA increased by 12% in comparison with last year and reached SEK10.2 billion for ’22, and that corresponds to a 49% EBITDA margin.
Our industrial return on capital employed came out on 40% for the full-year ’22, which is seven percentage points higher than ’21. The leverage is stable at one, despite our almost finalized large ongoing investment projects in Obbola, Ortviken and Bollsta sawmill.
And we continue to finance all our investments, including strategic projects with our operating cash flow. The proposed dividend for the AGM to decide on is SEK2.50 per share, and this is in line with our aspiration to give a stable and increasing dividend. Last year, we gave SEK2.25 as an ordinary dividend and then an extra dividend of SEK1. Last but not least, earnings per share went up by 14% in comparison with ’21 to SEK9.61 per share.
This slide will give you an overview of KPIs for the fourth quarter ’22. And when we compare quarter-on-quarter, we can note that our EBITDA reached close to SEK2 billion during the fourth quarter ’22, which is 29% lower in comparison with a very strong Q4 2021. This gave us an EBITDA margin of 41%, and an industrial return on capital employed of 24%, calculated as the average for the last 12 months. And the leverage is, as already mentioned, stable at one.
So, then I will make some comments for each segment, starting with the forest. During the fourth quarter, we have had a stable supply of wood raw materials to our industries. In general, and also in our region, we can note a high demand of wood raw materials. And by that, also increasing wood prices, as you can see in the graph in the bottom left. When we compare the fourth quarter ’22 with the same quarter ’21, pulpwood prices have increased by almost 20% and corresponding figure for sawlogs is around 15%.
On the other hand, we can see that pulpwood prices in the Baltics have now started to come down from an all-time high level. When we compare quarter-on-quarter, EBITDA has decreased 15%, and that is mainly driven by lower revaluation effect of biological assets. We have also seen cost inflation in transportation and harvesting, and that is driven by fuel price — higher fuel prices. On the positive side, we can note a higher harvesting level in our own forest.
Finally, we can note a continued high interest of purchased forest land in Sweden and in the Baltics. And Andreas will come back to some data around that. Turning over to business area, wood. And in general, we have seen a lower global demand during the fourth quarter last year. Anyway, in most markets, customers have finalized destocking and started to buy again. Building activities remained on a more or less normal level, but housing starts decreased during the end of last year.
For SCA, we have maintained normal deliveries during the fourth quarter. Price levels for solid wood products, as expected, hit the bottom in several markets during the fourth quarter last year. And I did communicate a price drop of 25% between Q3 and Q4, and that was also realized. As you can see in the graph, bottom left, prices on solid wood products have come down substantially, while on the other hand, sawlog prices have gone the other way.
My best guess for the coming quarter is that we will see more or less unchanged prices. Sales and EBITDA was substantially down due to price and cost of wood raw materials when we compare quarter-on-quarter. Today’s stock level of solid wood products in Sweden and Finland is in relation to the average for the last five years, described at the top left on this slide. And we note that inventory volumes are on a somewhat high level. Anyway SCA, as mentioned, has maintained normal deliveries during the fourth quarter. And by that, we have a balanced stock at the end of the year.
As can be seen in the diagram to the bottom left, the Swedish and Finnish sawmills production has been on the low side. Most producers in Scandinavia also announced production curtailments during the fourth quarter. When looking at the diagram to the top right, we can see that the price peaked in the third quarter ’21, and that was on a historically high level.
Prices have come down substantially since then. And as I mentioned, at the same time, prices for sawlogs has increased with the major negative effect on the profitability. Then some words about pulp. And comparing quarter-on-quarter, all fundamentals like price and currency were better in the fourth quarter ’22 in comparison with the fourth quarter ’21. The result for the fourth quarter ’22 was up 36%, but it was negatively impacted by a planned but also an unplanned production stop, which reduced both the volume and the energy production during the period.
The estimated impact on EBITDA level is approximately SEK260 million when we compare quarter-on-quarter. SEK138 million out of that is related to the unplanned stop, and we will have a negative impact from this unplanned stop also in the first quarter this year, ascending to approximately another SEK140 million. And the reason for the unplanned stop is significant disturbances in the fiber line and the recovery boiler at Ostrand. And there have been difficulties with the process conditions in the boiling process, which in turn has caused instabilization and leakage in the recovery boiler, which led to this unplanned stop. Now, we are up and running again.
The CTMP alignment at Ortviken is now on the ramp-up, one quarter ahead of plan. Still we have, of course, a lot of fine-tuning left, but our goal is that the production should reach at least 150,000 tonnes during this year. Full capacity achieved in 2025 will be close to 300,000 tonnes.
We see a weakening demand in the pulp market, mainly in Europe and also in China. The European fixed price peaked in September, October last year and that was close to USD1,500 per tonne. Since then, we have seen declining prices on all markets and the price for deliveries to Europe in January is USD1,410 per tonne. But then one need to keep in mind that discounts in Europe have increased by approximately 2% to 3%, while on the other hand, discounts in US is on an unchanged level in comparison with last year.
Today, we have a better net price in the US in comparison with Europe and China. And one reason might be that we note weakening supply from competitors in Canada. We have seen announcements of curtailments, and that is mainly due to lack of fiber, but also the cash cost situation that — yes, the cash cost situation for Canadian mills. Inventories for both hardwood and softwood pulp is, as you can see in the graphs on a rather normal level.
Finally, containerboard and the new kraftliner paper machine in Obbola has started ahead of the time schedule in the last quarter last year. The successful startup was affecting the production volume and costs negatively in the fourth quarter in comparison with the fourth quarter ’21. But of course, long-term, this will create good foundation for a highly successful project.
And as mentioned before, overall, this is a unique project, also based on the fact that we have delivered a strong cash flow throughout the whole project since we started. The new recovered fiber line, which is a necessity to reach full capacity in Obbola is progressing according to plan, and that one is planned to be ready in first half of 2023. As earlier communicated, we expect to reach full capacity in Obbola in 2026.
Sales was up quarter-on-quarter due to high prices, while EBITDA was down by 13%, mainly due to the effects of an early start-up causing lower production and delivery volumes for Q4 ’22. Also, of course, higher energy costs had a negative impact on the result for containerboard.
After a long period of increasing prices for kraftliner, with the peak in Q3 last year, we have now started to see decreasing prices. One can note some reasons for that. And if we start with the demand, it has declined in the fourth quarter, mainly related to lower retail sales, which has led to lower demand of boxes. Europe is facing a double-digit inflation and that will, of course, lead to reduced purchasing power. Deliveries of kraftliner have decreased significantly, 8% in the fourth quarter ’22 compared with the fourth quarter ’21, and that is by otherwise similar to the box demand.
Secondly, natural gas prices have come down sharply from the peak in August ’22, and that will ease the cost pressure for testliner producers and at the same time, availability of OCC is good and demand lower due to reduced production of testliner. Anyway, availability of OCC will gradually decline when lower box consumption is translated into less availability of OCC.
Today’s price for OCC is around EUR65 per tonne, and that is more or less EUR120 per tonne, lower than the peak price in July ’22. The price for unbleached kraftliner has decreased by EUR90 per tonne in the fourth quarter ’22. Testliner prices have decreased somewhat more, and the price gap between kraftliner and testliner today is around EUR155 per tonne, which I think is a rather normal gap. During the same period, the price for kraftliner white top has decreased with EUR30 per tonne.
Despite the lower demand, inventories have been kept on a stable level during the fourth quarter by producers, reducing supply. And we would estimate production to be around 10% lower in the fourth quarter ’22 in comparison with the fourth quarter 2021. So, by other words, inventories of containerboard are still on a high level, no doubt about that. But they have not increased more than according to a normal seasonal effect due to the mentioned production curtailments.
So, by that, I hand over to Andreas.
Andreas Ewertz
Thank you, Ulf, and good morning, everybody. I will start off with the forest valuation. Forest prices in Northern Sweden continued to increase. In the graph, we have the development of forest prices in SCA’s region, according to Svefa and Ludvig & Company. And the prices have increased over SEK400 per cubic meter. In SCA’s forest valuation, we used a three-year average price, which has increased by 13% to SEK366 per cubic meter.
The valuation of SCA’s forest increased by over SEK13 billion to SEK98 billion in 2022. The increase was driven both by the price increase of 13%, and the increase of standing volume by 2% to 267 million cubic meters, approximately SEK1.8 billion and through the P&L.
If we move on to the income statement and focus on the full year to the right, net sales grew by 10% to SEK20.8 billion, mainly driven by higher prices. EBITDA increased a record high of SEK10.2 billion, corresponding to a margin of 49%. The EBIT margin increased to 42%, and financial items totaled minus SEK39 million.
We had an effective tax rate around 20%, bringing net profit to SEK6.8 billion, or SEK9.6 per share, which is the highest ever. If you look at the fourth quarter to the left, EBITDA declined to just below SEK2 billion, corresponding to margin of just below 41%. The decrease was mainly driven by lower prices in wood and the production stop at Ostrand, which impacted results with SEK138 million.
Net profit for the quarter totaled SEK1.2 billion, SEK1.76 per share. Looking at the dividend, we have proposed dividend of SEK2.5 per share, a SEK0.25 increase compared to the ordinary dividend last year, which is in line with our target to have a stable and increasing dividend over time.
On the next slide, we have the sales bridge for the full year. Prices increased 12%. Record high prices in pulp and containerboard, partly offset by lower prices in wood. Volumes declined 3%, mainly driven by a weaker wood market and the start-up of new paper machine in Obbola.
Currency had a positive impact of 4%, and exit publication paper had a negative impact of 3%. Moving on to the EBITDA bridge. Price/mix had a biggest impact of SEK2.3 billion, driven by higher prices in pulp and containerboard. Volumes had a negative impact of SEK340 million, driven by weaker wood market and a start-up of new paper machine in Obbola.
High cost of wood raw material and chemicals had a negative impact of SEK980 million, while high energy costs had a neutral impact, which will show us our high self-sufficiency post exit publication paper. We had a positive impact from currency and a negative impact from higher fuel prices. In total, EBITDA increased 12% to approximately SEK10.2 billion, corresponding to a margin of 49%.
On the next slide, we have the financial development by segment. Starting with the forest segment to the left, net sales increased to SEK6.7 billion and EBITDA increased to SEK2.7 billion, mainly driven by higher pulpwood and sawlog prices, which was partly offset by increased fuel costs.
In wood, we had another strong year with an EBITDA of SEK2.1 billion, corresponding to a margin of 31%. EBITDA was driven by a very strong first six months, while the market deteriorated during the second half of the year and prices go down 20% in Q3 and another 25% in Q4, as Ulf mentioned. In pulp, we had a record high year, where net sales increased to SEK7.2 billion and EBITDA increased almost SEK3 billion, corresponding to a margin of 41%.
In the fourth quarter, we had the unplanned production stop at Ostrand, which impact result with SEK138 million in lower volume and reduced energy production. And the stop will impact Q1 with a similar amount, as Ulf mentioned. In containerboard, we had a record high EBITDA of almost SEK2.9 billion, corresponding to a margin of 42%. And this is despite having lower volumes and start-up costs relating to the ongoing ramp-up of the new paper machine.
On the next slide, we have the sales bridge between Q4 last year and Q4 this year. Prices decreased 5%, where lower prices in wood was offset by higher prices in pulp and containerboard. Volumes increased 1%, where higher volumes in wood and pulp was offset by lower volumes in containerboard due to the start-up of the new paper machine. And lastly, currency had a positive impact of 7%.
Looking at the EBITDA bridge for the fourth quarter and starting to the left, price mix had a negative impact of SEK330 million, mainly driven by lower prices in wood. Higher volumes in wood and pulp was offset by lower volumes in containerboard, again, due to the start-up of the new paper machine. Higher costs for wood raw material and chemicals had a negative impact of SEK400 million and higher energy costs had a negative impact of SEK70 million, mainly relating to lower electricity production at Ostrand due to the production stop.
We had a positive impact from currency, and a negative impact from higher fuel prices and start-up costs in CTMP, where we now have the full organization in place. In total, EBITDA decreased just below SEK2 billion, corresponding to a margin of 41%. We had another year with strong operating cash flow, almost SEK5.7 billion in 2022 compared to SEK5.2 billion in 2021. This means we’re continuing to fund our strategic investments with operating cash flow.
In the quarter, we had several large strategic CapEx payments. Obbola investment of around SEK800 million, acquisition of the wind farm in Markbygden of SEK800 million, forest land in the Baltics of SEK400 million and the CTMP investment of SEK300 million.
Looking at the balance sheet. The value of the forest assets increased to SEK98 billion. Working capital increased to SEK4 billion due to higher prices. Total capital employed decreased to SEK106 billion, and net debt stood at SEK10 billion or 1time EBITDA.
Equity increased to SEK96 billion, and net debt to equity was 10%. Renewable energy will be reported as a new segment in 2023. On this slide, we have the EBITDA impact on each segment for 2022.
Starting with forest segment to the left, unprocessed biofuels and wind power leases will be reported in renewable energy. The pro forma effect for 2002 was approximately SEK90 million. In wood, pellets will be reported in renewable energy, which had an impact of approximately SEK130 million. Pulp and containerboard sell tall oil for our fossil-based price to renewable energy, which is responsible to maximize the value of the green premium.
The impact was around SEK80 million in pulp and SEK60 million in containerboard. In total, renewable energy had a pro forma EBITDA of SEK355 million. And from January, our new wind farm will also be included, and from late next year, also our investment in liquid biofuels.
Thank you. With that, I’ll hand back to you, Ulf.
Ulf Larsson
Thank you. And if I try to give you the short version, I mean, 2022 has been the best year ever. SEK10.2 billion, 49% EBITDA margin. We have been able to finance our ongoing investment projects by our operating cash flow. Our two major investment projects, they are now up and running. Of course, we still need to do some fine-tuning and so on but nevertheless, producing premium products for the market.
From this year, we will start to disclose renewable energy as a separate segment, which is interesting. And we also announced end of last year that we have taken the first investment decision in our own wind power capacity in Markbygden. And last, but not least, we see a substantial increase of the value for forest land. So, by that, I think I open up for questions, please?
Question-and-Answer Session
Operator
[Operator Instructions]. The first question comes from Robin Santavirta from Carnegie. Please go ahead.
Robin Santavirta
Thank you very much and hello to everybody. My first question is related to the wood segment and to pricing outlook there. I guess, you call for unchanged prices of sawn timber now in Q1 Q-on-Q after the declines we had last year in H2. Is this now in your view the bottom of this cycle? And when should we expect the prices to increase, and what is the best leading indicator for us to look at for the pricing for those wood segments?
Ulf Larsson
Yes. It is hard to say, really. But I mean, yes, I think we have reached the bottom. I thought that already in the third quarter, and the estimation at that time was that we should — the price should decrease by 25% from the third quarter to the fourth quarter and that came through. The best guess we have now is that we will see unchanged prices for the first quarter next year — this year. And I think that we might see an upward trend in the second quarter, but that is too early to say.
What we see is now in the market, at least in Sweden is that prices — I mean, they are still on a — if you look to the prices in a historical view, they are on a reasonable okay level, but log prices has come up substantially, I thought about 15% to 20% in one year. And I mean, 70% of the cost for sawmill is related to raw materials. I mean, that put pressure on the profitability in the sawmill. And that you can also see now when — I mean, when more companies released their results that they will be very close to zero cash flow. And I mean, that cannot continue for a longer while, of course.
So, I think we will find. We have found some kind of balance in the market now and we will remain on this level. But, of course, again, you don’t know what will happen with cost inflation, interest rates and all that kind of things. But personally, I think that we have reached the bottom.
Robin Santavirta
I understand. Thank you very much. And we could see yesterday a smaller sawmill reported numbers in the red already in Sweden. You guys are more efficient, obviously, and black figures still. But related to that, then the higher log costs. Should we expect log cost to start to decline already now in Q1 or perhaps, is it then Q2? And what is the outlook for pulpwood for this year?
Ulf Larsson
I think that is tricky to say, really. I mean, ourselves, we increased prices in the beginning of this week. And again, for us, it’s not a very big issue because I mean, 50% what we need, we take from our own forest. So, I mean, we are in a rather good position in this perspective. But again, if you don’t have a good profitability industry, then, of course, prices on raw materials will start to come down sooner or later, but it’s hard to say when it will happen. Normally, you have some kind of lagging effect of six months, but it will be just now how to say. I mean, in Sweden, we have also seen that Sveaskog, they reduced the harvesting level by 1.5 million cubic meters. We have 10 million cubic meters, which are — they are not coming from Russia, Belarus and also. So that have also an impact. So, you have a slightly different balance this year in comparison with the past.
Robin Santavirta
But the increase you made, I guess, was that for log?
Ulf Larsson
That was — yes, that was both for sawlogs and pulpwood in the northern region. And I mean, we’ve seen other companies that have done more or less the same thing.
Robin Santavirta
Yes. True. Thanks. And the final question I have, it seems like Obbola has come off very well to production. Should we expect that 500,000 tonnes produced in Obbola this year still, is that the good sort of a outlook still?
Ulf Larsson
If we can reach 500,000 tonnes in the first year, that will be a big success, of course. And as said, I mean, the bottleneck just now is the recovery line, but that one is now under construction. We have 200 entrepreneurs on site and also that part of the project is running well. So that was positive.
And as mentioned, I mean, we took some extra — as you always have to do when you ramp up, you have to take some extra costs related to — yes, when you start up, I mean you struggle somewhat, but it has been a fantastic journey so far. We have between 60,000 tonnes and 80,000 tonnes now out in the market of premium products and with a very good reaction from our customers. So far it has been a fantastic project, really.
Robin Santavirta
Thank you, very much.
Operator
The next question comes from Linus Larsson from SEB. Please go ahead.
Linus Larsson
Thank you, very much. And good morning to everyone. Couple of questions on wind. And maybe starting off with Markbygden. If you could share with us what the EBIT, and/or EBITDA was from that recently acquired operation in full-year 2022, please?
Andreas Ewertz
So, if you look at the wind acquisition, the capacity is just below 200 gigawatt hours and then, I mean, it all depends on what electricity price you assume. So, if you take the price that you assume for 2023, multiplied volume and then the margins for wind power is very high at 60%, 70% range.
Ulf Larsson
And the reason for us to acquiring just that project was that we have a good potential for repowering. I think that’s most important. I mean, of course, again depending on the prices and price development, but you have good conditions for repowering in this area. You have good capacity in the net and so on. So, in 5, 10, 15 years, you can double or triple the capacity with, I mean, no big investment means. So, I mean, that is the big potential in this project.
Andreas Ewertz
And also, will help to maintain our self-sufficiency. Now we’re ramping up CTMP and Obbola production, our electricity usage will increase. But because of the wind farm, Markbygden, will help to balance that again.
Linus Larsson
Right. But you’re not sharing — is it hedged? Are you giving any kind of indication of what to expect in the first quarter? What the contribution is from this?
Andreas Ewertz
It’s not hedged. You look at Nord Pool and look at the wind prices in SE, one area to get that feeling of the numbers.
Linus Larsson
Are you planning on more similar M&A in the coming year?
Ulf Larsson
As I said earlier, I mean, we plan to build up the capacity of, let’s say, three terawatt hours in 10 years and it might be acquisitions. But I mean, we are much more focused on organic growth. We think that we have a better margin in organic projects and we’re working hard on that one.
Linus Larsson
And what’s the timeline do you think on that when — and I understand it’s to do with permitting processes, et cetera. When will you start investing in repowering in, for instance, Markbygden?
Linus Larsson
I mean, that depends on the price development and what kind of conditions you have. But I mean, that’s always, we take it step by step. So, I think if you — you can take three terawatt hours and divide by 10, and that is more or less the target we have.
Linus Larsson
Okay. But no CapEx relating to this in the coming year, at least?
Ulf Larsson
Then you can just multiply with approximately the CapEx cost per terawatt or gigawatt or — and so then you get the feeling of it.
Linus Larsson
Right. Okay. What’s the — what’s your CapEx guidance for the group as a whole for 2023?
Andreas Ewertz
If we start with current CapEx, we had — this year, we had just about SEK1.4 billion, but we have some CapEx that went down to other — to 2023. We were expecting SEK1.5 billion. So, we guess around SEK1.6 billion in current CapEx for 2023. And if we look at our strategic CapEx, we have around SEK1 billion to SEK1.5 billion left in our ongoing decided projects in CTMP, Obbola, the biorefinery in Gothenburg and some forest acquisition. And then it depends on, if we do any other investments, but SEK1 billion to SEK1.5 billion on already decided CapEx?
Linus Larsson
For 2023, that is?
Andreas Ewertz
Yes.
Linus Larsson
Okay. Excellent. Thank you, very much.
Andreas Ewertz
Thank you.
Operator
Our next question comes from Oskar Lindstrom from Danske Bank. Please go ahead.
Oskar Lindström
Yes. Good morning gentleman. Couple of questions. First on the forest land market in Sweden. What was the developed — what did you see in the market in the second half of the year and what’s your outlook or your expectation for 2023? And then the second question is on cost inflation outlook for 2023 and especially concerning chemicals, which I believe is often quite closely tied to energy, how do you see that momentum developing? And then just a third question on the Markbygden wind farm. I mean — so you have no immediate plans for any investments there, is that correct?
Andreas Ewertz
If I start to comment on the forest prices, if you look at the compared prices for the first six months compared to the second six months, the price has increased slightly during the second half of the year. So, so far, we have — prices have continued to increase on a high level. I don’t know if you want to comment, Ulf.
Ulf Larsson
No. It’s fine.
Andreas Ewertz
And then for the second question on cost inflation, as Ulf mentioned, pulpwood and sawlog prices are continuing to increase during the beginning of this year. And that’s, of course, our biggest cost, but we get half of that back from our own forest. And then if we look at chemicals, the chemical prices are still very high and continue to increase, especially sodium hydroxide. But as you said, it will also depend on development of energy. If we look at transportation costs and oil, they’re starting to come down and also OCC prices have started to come down now at the index around EUR65 per tonne. So, it’s a mix. Some costs are still going up and some have peaked and starting to come down.
Ulf Larsson
And about the third question, we have no immediate plan for investments in Markbygden. I mean, it is rather more than wind park and now we will learn how to operate in the best way. But no investments during the coming short term, at least.
Oskar Lindström
If I may, just a final question on the sawn timber market in Europe. Are you seeing sort of some sawmills starting to take downtime or reduce production significantly? I know there were some announcements in the second — during the second half of last year, but I’m not sure to what extent they actually came about.
Ulf Larsson
I mean, it’s hard to say, but I believe maybe around 10% during the fourth quarter. And as someone mentioned, I mean, we — now we see red figures and negative cash flow. And I mean that will not continue. So then, I think we will see more closures and you have a rather — I don’t know if I have seen this before when sawlog price has continued to rise and at the same time, we have — more or less, we are in the bottom in the price for solid wood products.
So, the combination here is not sustainable, I would say. So, that’s the reason why I think that we have reached the bottom when it comes to prices for solid wood products. And then, I think also we have some kind of lagging effect when it comes to prices for sawlogs. But again, it is impacted now by — not at least by the reduced harvesting level at Sveaskog, and again, we have different situation also when it comes to the Russian flow and so on.
Oskar Lindström
Thank you.
Operator
Our next question comes from Cole Hathorn from Jefferies. Please go ahead.
Cole Hathorn
Good morning and thank you. Could you give us some views on what segments or areas you’re seeing on demand for the containerboard markets? I know you mentioned deliveries down minus 8% and production down minus 10% across the industry to kind of balanced inventory levels. But any color you can talk about on the end markets for demand on containerboard? And then linked to that, what are you seeing from imports from the US players. The import data hasn’t really picked up as much. And I’m just wondering if there is any particular reason or your thoughts on the imports from the U.S. as well? Thank you.
Ulf Larsson
I mean, it’s hard to say, really. I mean, the figure that we have got is that e-commerce went down 6% during last year, and that is also at least the estimation for the first half of this year. You saw the graph on box consumption, and that one also came down. On the other hand, not to the trend line. But I think maybe we see more. Yes, it’s hard to say what will happen there, but it is a rather balanced situation when we compare what we see in box demand with the reduction in kraftliner and as I said, some companies, they have already started to reduce capacity here.
The inventory level is on a high level, but it was positive that we had a rather stable situation over Christmas. Normally, you have a negative seasonal effect when it comes to the stock level over Christmas, but this year it was rather stable. When it comes to the import, I believe that we have more or less the same flow from US down to the southern part of Europe as we’ve had before and that is not — no major volumes. It’s rather tiny flow, I would say.
Cole Hathorn
And then maybe just an open question. But the cost curve for containerboard has effectively steepened and players that are lower down the cost curve are much better positioned at the moment. How do you see this industry reacting? Will it be kind of a two-tier market where the lower players can run to demand, keep good operating rates and the high-cost players set the price and we’ll have a lot more variable production with energy volatility and just remain under a lot of pressure, even though low-cost producer can still earn good margins? How do you see the dynamics playing out? Thank you.
Ulf Larsson
I mean, I don’t like to comment too much, but you can look into the figures that will be presented now coming weeks. And I mean, you can see that we still are on a rather good level when it comes to our containerboard business. And we disclosed it very transparent and you can see other players where — and they have become close to, yes, single-digit figures. And then, of course, when you are cash negative, then you start to take curtailments, no doubt about that.
What we see us now and that is a different situation in comparison what we had six months ago, and that is the situation for testliner. I mean, I think we peaked in — cost for energy peaked in August, September last year and now we know that natural gas prices, they are ona, let’s say, a decent level, at least. And as Andreas mentioned, I mean, the price for OCC has come down from 180, down to 60, or something like that. And I think it will not decrease much further. I think we are more or less at the bottom. But still they — I think the testliner producers today, they have a rather — they have a rather strong profitability in comparison with kraftliner produces. And then, of course, depending on what kind of sites you have and cash cost position and so on, but in general.
Andreas Ewertz
Just to quickly comment on cost position. I mean, Obbola was even, before the investment, the largest kraftliner machine in Europe. And after the ramp-up, it will be even bigger than the competition. So, we have a good cash cost position. You can also see that, as Ulf mentioned, if you compare our EBITDA margin to some other players.
Ulf Larsson
But then you have to keep in mind that during this ramp-up period, normally, you have a negative cash flow during a ramp-up period. We have delivered a substantial cash flow throughout the whole project. But, of course, we will have some kind of impact during this ramp-up phase. I mean it is so if we see something that is wrong or not perfect, then we stop and we take care of that and then we start up again. And that is what we have to do now during the ramp-up phase. And so….
Cole Hathorn
Thank you.
Operator
Our next question comes from Christian Kopfer from Handelsbanken. Please go ahead.
Christian Kopfer
Yes. Thank you. I just had one follow-up question on the opportunity you talked about, the recovering potential and you have talked about it before as well. But have you received any initial response from municipalities and so on? I mean, still you will increase — the turbine size is quite material, I guess, and the wind mills will become quite much bigger. So, have you received any response to those projects that you are planning to repower?
Ulf Larsson
Do you mean in general or do you just mean Markbygden?
Christian Kopfer
Yes, in general, you can say.
Ulf Larsson
In general, okay. I mean — I think that, again, you know that it is not so easy to get the permission to build up a new wind farm. But from my point of view, I think all, including politicians, they realize that it is much easier to get the permission to replace old unefficient turbines with new and bigger in already existing places. I think that might not be a big problem, I would say. Of course, you need some kind of permission process. And what we are fighting for just now is to reduce the number of years in order to get the new permission.
I think that should be done in six months or so. And yes, now, we don’t know what kind of time it will take. But I think in that perspective, we have a good response from politicians and we also have ongoing discussions here in this field and so on.
Christian Kopfer
And just finally then — because I guess — when you built or when the operators built the wind farms initially, they had one, I mean, they had to build the transmission according to the turbine types, I guess. So, this may also mean that you have to invest quite significantly into new transmission from the parks to powering them?
Ulf Larsson
That’s a good question. That depends. I mean, that was the reason why we went for Markbygden. And I mean, you have a higher value in a wind farm where you have a storing net and storing capacity in the net, because then you don’t need to take this kind of extra investments. But if you have a limitation in the net, then of course, then you need to do extra investments. And then you can also be dependent on other actors. So that’s the reason why we choose Markbygden and that’s also how we tried to choose other projects. So, we tried to find projects with good net capacity in order to have the flexibility.
Christian Kopfer
Thank you, very much.
Operator
[Operator Instructions] Our next question comes from Martin Melbye from ABG. Please go ahead.
Martin Melbye
Good morning. My questions have been answered now. But say, the start-up of Obbola, CTMP and the biofuel, could you indicate which quarter that will have an impact on EBIT, please?
Andreas Ewertz
So, if we start with Obbola and we are currently running at around the same volume as the old machine, slightly lower in Q4. So, I think as we mentioned — Ulf mentioned that our target is around 500,000 tones on Obbola for this year compared to 450,000 — 460,000 tonnes last year. So, we’re gradually ramping up Obbola. And when the volume comes — when the volume increases, we’d also get the EBIT contribution. If we look at biorefinery in Gothenburg, that will be finalized during the end of the year, that would be starting in Q4 where we get some volumes from the biorefinery.
And then CTMP, I mean, we are just starting to ramp up now also. We would not expect any significant contribution from CTMP during Q1 now. It will be fairly similar to what we had in Q4.
Ulf Larsson
And then, again, you have to keep in mind when you ramp up, you might see some surprises and things like that and we have to fix that. So, I think don’t be too positive to what we — what kind of impact we will have this first year. Give us this year and then I think next year we’ll see substantial impact on the result.
Martin Melbye
But there was no positive effect in Q4 from the start-up of Tier ones?
Andreas Ewertz
No. This is rather a negative effect and since we have start-up costs. And as Ulf mentioned, we run and then we find something that is relatively fine-tuned. And then we stop, fix that and then start the machine again. So, you lose some volumes, but you also — you’re not running on optimal cost when you have to start and stop and that’s a normal part of the ramp up. So, the investments have affected EBITDA negatively during Q4.
Ulf Larsson
And again, that is very positive long term because that has created a good foundation for a very successful project and that goes for both Obbola and also for the CTMP project and Bollsta and so on. So, I mean, basically, this is very positive good news. We have some extra costs earlier than we thought, but that is due to the fact that we are ahead of plan.
Operator
Thank you. There are currently no further questions in the queue.
Anders Edholm
And that concludes the presentation for the full-year results for 2022. Thank you very much for listening in. And welcome back in April when we present our first quarter results for 2023. Thank you.
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