Svenska Cellulosa Aktiebolaget SCA (publ) (OTCPK:SVCBF) Q2 2024 Results Conference Call July 26, 2024 4:00 AM ET
Company Participants
Anders Edholm - Senior Vice President of Sustainability & Communications
Ulf Larsson - President and Chief Executive Officer
Andreas Ewertz - Chief Financial Officer
Conference Call Participants
Charlie Muir-Sands - BNP Paribas
Lars Kjellberg - Stifel
Cole Hathorn - Jefferies
Oskar Lindstrom - Danske Bank
Gaurav Jain - Barclays
Johannes Grunselius - DNB Markets
James Perry - Citi
Andrew Jones - UBS
Anders Edholm
Good morning, and welcome to this presentation of the SCA Half Yearly Report for 2024. With me here today, I have President and CEO, Ulf Larsson, and CFO, Andreas Ewertz.
And with that, over to you, Ulf.
Ulf Larsson
Thank you, Anders. Good morning also from my side, a warm welcome to the presentation of the results for the second quarter 2024 and when I summarize the second quarter, I can state that the markets for all fiber-based products in all areas are sequentially stronger with higher prices in Q2 in comparison with Q1.
We can also note that we have a delay effect in pricing for containerboard and pulp with one to two months. In renewable energy, we have seen a negative market development in Europe for liquid biofuels, also affecting tall oil prices. So when we compare Q2 '24 with the same period last year, this is, of course, not the least due to reduced mandate for biofuels in Sweden since first of January this year.
And due to a seasonal effect, we also see 40% lower deliveries of wood pellets in the second quarter versus the first one this year. Also this quarter, we noted a high demand on wood raw materials and by that continued increase in prices. We have in SCA also increased volumes from our own forest which, in comparison with the second quarter '23 has strengthened the result in business area Forest.
Sales increased with 15% and EBITDA with 11% Q2 '24 versus the second quarter '23, higher prices, increased volume and a positive currency effect explains the improvement. This slide will give you an overview of KPIs for the second quarter '24. Our EBITDA reach, as you can see SEK1.9 billion during the second quarter, which corresponds to an EBITDA margin of 36%. Our industrial return on capital employed came out of 4% for the second quarter accounted for the last 12 months.
The leverage is at 1.8% and net debt to equity was 11%. And we have now finalized our big strategic investments in Obbola, Ortviken and Gothenburg. And just now, they are under ramp up, but coming years, they will, of course, contribute in a positive way. Then I will make some comments for each segment, starting with the Forest.
High harvesting level from our own forest has contributed to stable supply of wood raw materials to our industries during this period. In general, we see a remaining high demand of wood raw materials in the market during the second quarter and by that, also continued increase in prices for both pulpwood and sawlogs as can be seen in the graph in the bottom left.
When we compare the second quarter '24 with Q2 '23, sales was up 15%, and EBITDA was up 8%, mainly due to higher prices and higher harvesting level in our own forest. Regarding forest valuation, the market has since the beginning of the year, been slow and we've had very few transactions in the area where SCA owns forestland for that reason, forest valuation remains unchanged.
Then I turn over to business area Wood. And in general, we still have a continued slow underlying market for solid wood products. Despite the generally low demand, we see some early signs of improvement in the repair and remodeling segment, which is good for SCA as that segment is where we are mainly present in. Stock levels are on normal levels at producers and mainly at the low side at customers. I estimate that price in the second quarter should increase with 10%, which also happened. Deliveries and prices increased due to a seasonally higher demand in the second quarter, but the cost for sawlogs also increased during the same period.
Sales was up 11%. EBITDA was up 46% in the second quarter in comparison with the same period last year. The reasons behind this were mainly higher prices and higher volumes and the EBITDA margin consequently increased to close to 20%. 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. As mentioned earlier, we note that the inventory is on a normal level. As can be seen in the diagram to the bottom left, the Swedish and Finnish sawmills production has been slightly below normal levels accumulated so far 2024.
In the diagram to the top right, we can see that prices started to increase during the first quarter '24 and has also continued to increase going into the second quarter. Coming into the third quarter, I estimate close to unchanged prices due to balanced stock levels and also due to high and further increasing raw material costs. In the Construction sector, we can conclude that the starts of new building are low. On the other side, the Repair and Remodeling sector, as mentioned before, is performing better, and that will also respond positively to coming lower interest rates.
Over to Pulp. The ramp-up of our new CTMP mill is running according to plan. Production optimization work continues. Our CTMP products have been very well received in the market. Consequently, CTMP products represents now an increasing share of our pulp sales. Sales and EBITDA were up 22% and 34%, respectively, when comparing the second quarter this year with the second quarter 2023. We can note higher prices and volumes on the positive side, while higher raw material costs have had a negative impact in this comparison.
During the second quarter, we have had an unplanned production stop at Ostrand pulp mill due to leakage in the recovery boiler. The total negative impact was approximately SEK60 million in second quarter and a similar amount will be recorded also in the third quarter. The pulp mill is now back in stable production again. After a rather weak 2023, demand for pulp improved in Europe and U.S. during the first half of this year. export volumes to China normalized during the first half of '24, after, as you remember, very high volumes in the fourth quarter of 2023.
The Finnish strike in March substantially reduced supply of NBSK in the beginning of the second quarter. In Europe, prices and ore grades of pulp continued up in the second quarter with NBSK index pricing increasing from $1,400 per tonne in March over to over $1,600 per tonne in June. In the U.S., NBSK prices have had a similar development as in Europe, but with a small delay.
Looking at the CTMP prices, they have been increasing in Europe, but at a slower pace, and we have seen more of a flat price development for CTMP in Asia. In July, we see prices stabilizing in general, but with some regional differences. Inventories of both softwood pulp and hardwood pulp are on average level, as you can see in the graphs. As mentioned before, pulp wood prices continue upwards, supported by limited supply.
So moving over to Containerboard. The ramp-up of the new kraftliner machine in Obbola is progressing. During the quarter, we have taken extra stops to adjust the machine line. We also continued to see high operational cost, which is absolutely expected in this phase of the ramp up and as we have earlier communicated, we plan to reach full capacity in Obbola by 2026. Sales and EBITDA was up by 11% and 6%, respectively, in the second quarter in comparison with the same period last year, and we can note higher prices and volumes on the positive side, while higher raw material and other costs had a negative impact in this comparison.
We see a healthy growth in box demand in comparison to last year, and we are now back to historical growth trend levels, as you can see top right, as inflation and the interest rates goes down, we foresee retail spending to strengthening leading to continued growth in box demand. European demand of kraftliner has improved in the second quarter compared to last year, following, of course, the box demand. We expect positive demand development of containerboard in coming quarters, supply and demand balance will be impacted by additional supply coming on stream with the vast majority coming in testliner.
European prices for brown kraftliner have increased in the second quarter with €100 per tonne, and white kraftliner has increased by €80 per tonne, both price increases divided into two steps. We, SCA, we have recently announced another price increase from first of August by €60 per tonne for both brown and white top kraftliner. Containerboard inventories have been kept on an average level in Q2, driven by improvement demand. Several kraftliner producers are now planning for annual maintenance shutdowns in the autumn, which will put some pressure also on the supply side during the autumn.
The supply of OCC will probably become limited in the autumn driven by the low historical supplier boxes. And consequently, we have also seen OCC prices increasing during the second quarter with €70 to €80 per tonne. So finally, over to Renewable Energy and in business area, Renewable Energy, we have had a weaker quarter with lower market prices for tall oil and liquid biofuels in comparison with the same period last year, bio premiums and prices have decreased to substantially lower levels compared to last year.
And the main reason is, of course, blending mandates in Sweden and increased imports also from China, creating an imbalance in supply/demand in the renewable fuels market. Ramping up Gothenburg biorefinery together with SD-WAN in this market environment, put a short-term pressure on the segment. We expect market volatility in renewable fuels to remain relatively high as Europe ramps up the blending mandates both in HVO and SAF.
Long term, our outlook is positive. But in the short term, we expect continued lower refining margins and bio premiums. The EBITDA level decreased by 53%, mainly due to lower market prices for tall oil and bio premiums in liquid biofuels. The market for solid biofuel remains stable. SCA continues to grow in leasing out land for wind power and has now reached 9.7 terawatt of wind power on SCA land by the end of the second quarter, and that is equal to 20% of installed capacity of wind power in Sweden.
Finally, I can also mention that the execution of our windmill project, Fasikan, is progressing according to plan. And by that, I hand over to Andreas.
Andreas Ewertz
Thank you, Ulf, and good morning, everybody. I'll start off with the income statement for the second quarter. And net sales increased 15% to just below SEK5.3 billion, driven by both higher prices and higher volumes. EBITDA increased 11% to just below SEK1.9 billion, driven by higher prices, which was partly offset by higher cost for wood raw materials. The EBITDA margin was 36%. EBIT margin was 26% and financial items totaled minus SEK144 million, with an effective tax rate around 20%, bringing net profit to SEK960 million or SEK1.37 per share.
On the next slide, we have the financial development by segment. And starting with the Forest segment to the left, net sales increased to SEK2.2 billion, driven by higher prices for wood raw materials. Adjusting for the capital gain of SEK128 million in the previous quarter, EBITDA increased slightly to SEK883 million, a seasonal high harvest from SCA's own forest was partly offset by seasonally higher costs for forest management and fertilization.
In Wood, prices increased by 10% compared to previous quarter, while the cost for sawlogs continued to increase. Net sales increased to SEK1.5 billion, driven by both higher volumes and higher prices. EBITDA increased to SEK294 million, corresponding to a margin of 20%. In Pulp, prices continued to increase throughout the quarter. Net sales increased to SEK2.1 billion and EBITDA increased to SEK509 million, corresponding to a margin of 24%.
In the quarter, we had a negative impact from our planned maintenance stop of SEK29 million. We also had a leakage in the recovery boiler, which had a negative impact of approximately SEK60 million in Q2 and will impact Q3 with a similar amount. In Containerboard, kraftliner prices increased during the quarter. Net sales decreased to SEK1.6 billion compared to the previous quarter driven by lower volumes. EBITDA increased to SEK231 million, corresponding to a margin of 15%. Higher prices were partly offset by higher cost for wood raw materials and higher OCC prices and ramp-up costs were in line with the previous quarter at around SEK65 million to SEK70 million.
In Renewable Energy, EBITDA decreased to SEK85 million, driven by seasonally lower deliveries of solid biofuels, lower prices for liquid biofuels and tall oils, ramp-up costs as well as higher costs for sawdust. And the higher cost for sawdust, we get back as a positive in our Wood segment due to our integrated value chain. On the next slide, we have the sales bridge between Q2 last year and Q2 this year. Prices increased 7% with higher prices in primarily pulp and wood, volumes increased 5% driven by the new paper machine in Obbola and the new CTMP mill at Ortviken as well as higher volumes in wood. And lastly, currency had a positive impact of 3% and bringing net sales to just below SEK5.3 billion.
Moving on to EBITDA bridge and starting to the left, price mix had a positive impact of SEK287 million, and higher volumes had a positive impact of SEK15 million. Higher costs from mainly wood raw materials had a negative impact of SEK76 million, were the negative impact of energy of SEK99 million and a positive impact from currency of SEK130 million.
In total, EBITDA increased to just below SEK1.9 billion corresponding to a margin of 36%. Look at the cash flow with an operating cash flow of SEK526 million in the quarter and SEK1.2 billion for the first half year, which means that we're continuing to fund our strategic investments with operating cash flow.
Looking at the balance sheet. The value of the forest assets was SEK108 billion. The beginning of the year was a slow market with very few transactions, and we therefore, left a 3-year average price used in the forest valuation unchanged. Working capital increased to SEK5 billion, driven by higher prices, higher volumes and higher cost for wood raw material. Capital employed totaled SEK116 billion and net debt increased to SEK11.8 billion due to the dividend. And we have now almost finalized our large ongoing investment projects in Obbola, Ortviken, Bollsta and Gothenburg. Equity totaled SEK104 billion and net debt to equity was 11%.
Thank you. With that, I'll hand back to you, Ulf.
Ulf Larsson
Thank you, Andreas. And yes, again, when I summarize, I think we can now see a stronger market for more or less all fiber-based products. We have a tough market for liquid biofuels, increasing wood raw material costs. By that, we are in the relative game benefited from the big share that we can take from our own forest and sequentially, this is a better result than first quarter and also when we compare this quarter with the second quarter last year.
So with that, I think that we can open up for questions.
Question-and-Answer Session
Operator
[Operator Instructions] We will take our first question from Charlie Muir-Sands, BNP Paribas.
Charlie Muir-Sands
I've got three, if I may. First one, on the forest valuations, I understand very much like the half year last year, you weren't in a position you felt to revalue given the limited number of transactions that you did give a chart at the half year last year, at least showing where the half year pricing was coming out.
I just wondered if there was enough data for you to at least share where prices have moved for forest land over the last six months. Secondly, on the pulp segment. I note that there's been some amount quite cut now by some of the radiator pine producers, not yet northern pine, but I just wondered if you're starting to see any kind of pushback from customers on the kind of recent rally in prices there? And then lastly, on renewable energy, I wondered if you could break out at all quarter-on-quarter, how much of the decline in profit is due to the fall in the price of tall oil and biofuels versus some of the seasonal and other effects?
Ulf Larsson
So we try to take them one by one. We can start with the pulp question. I mean, as you know, we have had a strong development in the pulp market during this year. We -- first -- fourth quarter 2023, I mean, we had record deliveries to China. Then the Chinese market started to slow down a little bit or normalize in the beginning of this year.
And -- but at the same time, we felt a stronger market in Europe and U.S. Recently, we have seen that spot prices in China has come down and now we have a delta of $100, $150 per tonne. And as I said, I think earlier, I mean, that might create some kind of stabilization in the market. I mean, Chinese prices must come up a little bit or European U.S. prices might come down a little bit.
So that might be the case. We are -- on price-wise, we are on the peak or top level at least. And -- but at the same time, when we compare margins with 2022, I mean raw material cost has increased quite substantially. So that's the reason why the margin is a little bit lower. But still, we have a rather good demand out there, not least in U.S. and in Europe. And as I think Andreas said, I mean we have also a delay in price effect with one to two months. So that was the second one. The third one was renewable energy, Andreas maybe you should...
Andreas Ewertz
I can take that. So we start with the seasonal impact between Q1 and Q2. We had approximately 40%, 45% lower pellet volumes in Q2 compared to Q1. And we also have higher sawdust prices compared to Q1 with about 25%. And that, of course, impacts renewable energy negatively, but impacts wood positively. So I would say that the seasonal effect and the higher sawdust, I mean that lowered the profit in solid biofuels with just above 50% compared to the first quarter. And then in terms of the liquid biofuels, the prices for liquid biofuels and tall oil has gone down and that also has an impact of around 50% compared to the first quarter.
Ulf Larsson
And then finally, price on forest land. And I mean, in fact, we haven't seen any official statistics yet, neither from [indiscernible] or from [indiscernible]. We know that it has been a slow market for a while. And I think the reason for that is, of course, that for a while, we saw increasing interest rates and also normal, I mean, when the ground is covered by snow, you don't do too many of transactions.
Last year was maybe an exception. So it is a slower market today. I believe that the market has stabilized. I mean we do -- on our own, we do some transactions every year, and we feel that the market prices may be a little bit lower than last year, but it's hard to compare because it depends where in the geography you are? And I mean, what kind of state is -- now we know that we will see decreasing interest rates for a while. I think that will have an impact on the market. We also know that raw material prices has increased substantially. And as we feel it just now, they will continue to increase. But that is what we can say. Just now, do you like to add something, Andreas?
Andreas Ewertz
No, you usually have a very, very slow market in the beginning of the year as in Northern Sweden. You don't do any forest transactions when it's covered in snow, and then it picks up during the summer and autumn. So we love to wait and see how the prices develop now when the seasonal activity picks up.
Charlie Muir-Sands
I'm sorry, just to clarify what you said about renewable energy. You said a 50% solid and 50% in liquid. Are you talking about half of the quarter-on-quarter decline in profit? Is it [indiscernible] to each? Or are you saying that those subdivisions saw their own profits of 50% quarter-on-quarter?
Andreas Ewertz
Subdivisions, for the subdivision of solid biofuel, for example, they saw the profit in Q2 compared to Q1 drop with just above 50% and similar amount for liquid biofuels. On the solid biofuels, it's more of a seasonal effect and higher sawdust prices, while on the liquid biofuels, that's market-related development.
Operator
We will take our next question from Lars Kjellberg, Stifel.
Lars Kjellberg
I have three questions. Starting with the bigger picture of capital allocation, as you've now exited your big CapEx programs, how should we think about the priorities over the next two to three years? Second is on CTMP with the new pulp mills...
Ulf Larsson
Excuse me, I think we take one by one. It's easier. So if we start with CapEx, sorry to interrupt you, but I mean, just now, we are so focused on ramping up all big projects that we have started up a couple of years ago. I mentioned Obbola and also Ortviken and the Gothenburg biorefinery. In addition, we also have that process with the grading mill in Bollsta and the CT scanner [indiscernible]. I mean, we have performed quite a lot of big projects. And for the moment being, we are 100% focused on ramping up what we have, and we will be very cautious with new investments now for a while.
Lars Kjellberg
Yes, I understand that. I was just more thinking about generally capital allocation priorities as the cash starts coming in, would that be primarily debt reduction at the first stage and then at some other stage other consideration in terms of capital returns and/or potential new projects?
Andreas Ewertz
Yes. So as Ulf said, now we will focus on finalizing our big projects, both in Obbola, Ortviken and in Gothenburg. And then we're committed to having a stable and increasing dividend over time. And then long term, we also have some interesting potential projects going forward. So I think it's -- we will focus now on ramping up, and we want to have a stable increasing dividend. We want to keep an investment grade credit rating.
Lars Kjellberg
So on the CTMP side, I just wanted to understand what markets you serve and what the uptake has been of the new pulp?
Ulf Larsson
Yes, that's a good question. I mean we have had good development in Europe, and that is our main market, and that is our main target. And you know that in the old mill at Östrand, we produced around 80,000 tonnes of CTMP and that was more or less all allocated for the European market. Now we have more or less doubled the capacity, we are in a ramping up curve. But our main focus is still Europe. And we like to place as much volume as we can in Europe, and we have been successful in that perspective.
It's also a question of price. I mean the price development in Europe for CTMP has been progressing while the market in Asia more or less have been standing still. So I mean it's also a stronger price development. Not as strong or good as in NBSK, but still, it has been a positive price development in Europe for CTMP. So for us just now, it's more important to, I mean, work with yield when it comes to chemicals, wood consumption, energy and so on. than try to push the volume. We already have the volume. We have the capacity. We know that, but just now, it's more profitable for us to look into other details.
Lars Kjellberg
And from an end-use perspective, is this predominantly hygiene-oriented or hygiene and packaging. Can you just share the mix?
Ulf Larsson
Hygiene and packaging.
Lars Kjellberg
And then final question for me. Containerboard, obviously, it's sequentially somewhat better demand in the market, yet your deliveries are down. Is that due to any disruption internally or any other considerations?
Ulf Larsson
I mean, market is up in Containerboard as you could see in the graph, and I mean the box demand is back on the trend level. And I mean by that, the demand of kraftliner will follow. We also feel that -- I mean, it is just now a lack of OCC in the market, so that will push testliner prices upwards. And that will, of course, also help kraftliner prices upwards. We increased prices by €100 per tonne in the second quarter.
We haven't seen any effect of the second step there. And we have also announced another step from first of August by another €60 per tonne, and that is not yet accepted in the market, but we know the testliner producers, they have come through with price increases in the first.
Lars Kjellberg
Your own volume on a sequential basis, you stepped down from 250,000 tonnes and [indiscernible] in Q2. Any reason for that downtick?
Ulf Larsson
I mean, as I said, we still -- we are in the ramp-up phase. I mean, it's -- we take two steps forward, and one back and we stop and we justify the line and we do what we need in order to ramp up this mill in the best way. So I mean that is what is happening in the ramp-up phase.
Operator
We will take our next question from Cole Hathorn, Jefferies.
Cole Hathorn
I just like to get some more color on what you're seeing on repair and remodel just some insights in what the customer inventory levels are like and what green shoots you're seeing in the repair and remodel?
And then the longer-term question on softwood pulp through the cycle. The supply-demand dynamics for softwood pulp is tighter than hardwood. And I know there's new supply coming on premium hardwood, but do you expect the premium of softwood pulp to kind of extend through the cycle and the volatility to be lower in softwood pulp than on the hardwood side. I'd just like to hear your thoughts on how you see that price to premium through the cycle?
Ulf Larsson
If we start with solid wood products, I mean, as you say, I mean, we have seen some improvements in the repair and remodeling sector while new housing starts, I mean, are on a very low level. And that is also what you can expect. At the same time, as you could see on the graph, I mean, the stock level is normal, at producers, and we believe in many cases, among customers, the stock level is on the low side. And I mean, I think normally, the first step is to improve the repair and remodeling sector and then the second step will be new house construction. And I think that will come. And I mean that will also be dependent on what kind of development will we see now when it comes to interest rates and things like that.
But it's not easy to -- when you have stopped that market as you did for a while, I mean, then it takes some time before you can start up again. But I believe, I'm not sure, but at least more than 50% of the total volume is going to the repair and remodeling sector.
And as I said, we feel normal market in that market. And again, I said also earlier that I believe that we will see more or less flat prices going into the third quarter. But at the same time, I mean, we also see that raw material costs will continue to increase. So by that, the margin might be a little bit squeezed depending on where you are and what kind of region you have your operations within.
Then the second one was supply/demand and in pulp and premium softwood pulp and so on, it's so to say. I mean, we know that we have no new -- after [indiscernible] now, we have no new capacity on stream, no capacity announced. We have seen lots of closures in the softball pulp market and I feel that we have a very strong balance in softwood pulp going forward now.
And at the same time, I mean, some kind of impact you have from the short fiber market in pulp. But I guess my guess should be that we will see at least the premium that we have today for NBSK at least. Because in some areas, you need softwood pulp, you need -- when you need the strength, when you need a long fiber, I mean then you need softwood.
Operator
We will take our next question from Oskar Lindstrom, Danske Bank.
Oskar Lindstrom
Yes, three sets of questions from my side as well. First one is just on sawn timber. Did you provide any guidance now for Q3 pricing quarter-on-quarter? That's my first question.
Ulf Larsson
Yes. And as I said, I believe that the price will be more or less flat comparing the third quarter with the second quarter. But the margin might, in some areas, be squeezed as raw material prices will continue to increase.
Oskar Lindstrom
Right. And on pulp, I mean quite good volumes despite this leakage in the recovery boiler. I'm not sure if that impacted the volumes. Will that impact volumes in Q3? Or how should we sort of expect the impact of that other than on earnings?
Ulf Larsson
Yes, of course. I mean, we have -- as I said, I mean, we had a negative impact of SEK60 million in the second quarter. We have said that we will have more or less the same negative impact in the third quarter. And I mean, we have lost a couple of days in the pulp mill, and they are gone.
So by that, we will be forced to reduce the volume. And then, of course, in the autumn, we will see a regulatory maintenance stop. So that will also impact the volume. And I think that's not only in SCA that will come in other mills than our mills. So I think it will be -- I mean, you can speculate what will happen in the pulp market, but I think you will see again a rather tight market for pulp after the summer.
Oskar Lindstrom
Yes. Also on pulp, sorry, just to follow up on that. How much was your CTMP volume in the quarter? I mean I know you're ramping up from 80,000, 90,000 to 200,000. But what was the actual CTMP sales in the quarter?
Andreas Ewertz
No, we have not provided that -- we have not provided that detail, but we are ramping up towards our 300,000 tonnes in annual capacity. We're not there yet, but we have seen good increase in volumes from the CTMP mill.
Oskar Lindstrom
Okay. And just a final question, perhaps following up on capital allocation. You've now invested quite a bit into your industrial assets. And as you said, you've more or less completed those investments and are now ramping up these new or rebuilt facilities.
Thinking about forest land because that's something that you've set out as one of your aims to buy more forest land. I mean, this would seem to be a good time for somebody like you to actually buy more forest land because as you said, probably the market is still fairly subdued compared to where it was a couple of years ago. What are your opportunities for buying more forest land than -- would that be in Sweden? Or do you really prefer the Baltics? I know there was a forest for sale or forest lands for sale there earlier this year, which I believe you did not end up buying. What's your thinking here on the Forest land acquisitions?
Ulf Larsson
Okay. Yes. I mean if we can buy forest land in Sweden, we will do that. But you know that we have a legislation in Sweden that says that we are -- we have a limitation. So -- but if we see some possibilities if we can -- yes, if a legal entity is for sale, I mean, then we would be interested, of course.
Otherwise, we are a little bit cautious now. Now we like to focus on ramping up what we have started. We are also I mean, we try to take care of the balance sheet. And by that, we'll be a little bit cautious when it comes to acquisitions of forest land in other areas than in Sweden. So that's the case just now.
Operator
We will take our next question from Gaurav Jain, Barclays.
Gaurav Jain
Three questions from me as well. So first is that there was a comment made earlier that the forest valuation, it seems it has -- it is down on a Y-o-Y basis from the few transactions you have seen. Could you indicate how much is it down? Is it like down 2% or 5% or higher than that?
Ulf Larsson
I'm not sure if I heard you right. But you were asking about the price development when it comes to forest land, I suppose. And I mean, we see some percentage down. I mean, as I said, we are always present in the market. And normally, we sell some land in the western part, far away from the industry. And then we try to buy back closer to the industry.
I mean, again, that is due to the legislation that we have that we cannot really buy forest land from a private forest owner without selling the same amount to another one. So I mean we create some space and we try to move the forest so to say a little bit further closer to the industry.
And typically, the value of the land closer to the industry is a little bit higher than it is in the West. But as I said, I mean, we see -- it's hard to compare because it depends on where you are and how dense forest you have and what kind of forest you have, age distribution and things like that.
But the market is -- first of all, it's a little bit slower now. You have few transactions and the price is a little bit lower. And I don't know if I like to estimate, but say 5% or something like that in the transactions that we have done. But as again, as I said, we have seen no official statistics. And I suppose that will come from [indiscernible]. And then I think that figure will be more representative.
Gaurav Jain
That's very helpful. And second is we have had the discussion that wood cost in Nordics are now structurally higher, and you have commented also again that they should continue to go up. But like -- is there a limit to how high they go in your view because clearly it makes the downstream industries uncompetitive. So where do you think they level out?
Andreas Ewertz
Yes, we see -- I mean, if you look at our margins, I think we still have very good margins in our Wood division, also on Pulp and Containerboard. So we feel that there is room for the wood prices to continue a bit further. And that's what we see going into the next quarter, we see that cost for wood raw materials will continue to increase a bit and long term, it's hard to say, but we believe that Forest will be a strategic resource going forward and that the demand globally will be higher than the supply. So I think we like the forest as we think that to be -- will be a scarce resource in the future.
Ulf Larsson
I mean -- we clearly now see the effect of the Russian invasion of Ukraine and I mean, 10 million cubic meters is not coming over from Russia to Finland, Sweden and so on. We also see the effect of reduced harvesting level in the northern part of Sweden from the state on forest [indiscernible]. We have some big investments also in the northern part that will put an extra pressure in the raw material market.
And I think we definitely will have a scarce situation also going forward. And by that, I suppose that the price level will remain or it will be -- it might be also even -- the prices might be even higher, which in the long run, of course, we support the value of the forest land in combination with lower interest rates. So I think that is the long perspective.
Andreas Ewertz
And also global in Canada, you've seen that the harvesting level has gradually decreased. [indiscernible] as a scarce resource.
Ulf Larsson
In the West.
Gaurav Jain
Okay. And my third question is on the Pulp segment. So there is this sort of view that pulp prices probably are lower in 2H versus 1H and we can debate whether that's correct or not. But assuming that pulp prices are lower, and the wood costs are higher and then the planned maintenance stops are also much higher in 2H than 1H. But is it fair to say that Q2 pulp EBITDA was a high point of EBITDA for this year? And sequentially, the pulp EBITDA will go down.
Andreas Ewertz
We don't give any guidance, but the cost for pulpwood will increase slightly in Q3 compared to Q2. But as Ulf mentioned before, you also have a lag in the price development say one to two months lag in both pulp and containerboard. So you'll have some lag effect, but you also have some higher costs and then we'll see how the prices develop into Q3.
Operator
We will take our next question from Johannes Grunselius, DNB Markets.
Johannes Grunselius
I have one question and that's regarding Obbola and the ramp-up [indiscernible] I think it's what you said before, fully up and running, 2026. I mean, could you get us a feeling for profit contribution? Well, in Q2 from Obbola and how we should think about it over the next few quarters? Will it be sort of very back-end loaded in 2025? Or when do you think most of the profits will be seen?
Andreas Ewertz
I can start to mention on -- I mean, we have a -- still start-up costs in the ramp-up in the last quarter, they were around -- in Q1, they were around SEK70 million and in second quarter we estimate around SEK65 million to SEK70 million, and we expect a similar ramp-up costs going into the third quarter.
Johannes Grunselius
Okay. So basically, you have a loss -- I mean it's an isolated cost of Obbola because of ramp-up position, yes, of SEK65 million, SEK70 million now.
Andreas Ewertz
Yes. And that's of course, I mean, you ramp up and then you need to fix some things so you reduced the speed or shut it down and you ramp up again. and then you have higher chemical consumptions, you also have lower volume and things like that.
Ulf Larsson
I think it's very normal. I mean, when we look back to Ostrand, I mean, I think we had three years of extra costs, and it takes some time to fine-tune the operations. So I think that is what you can expect when you ramp up a brand-new mill.
Johannes Grunselius
When do you think you can sort of reach breakeven in the currently, given sort of current market prices?
Andreas Ewertz
We're still profitable. I mean EBITDA, we still get the contribution from Obbola.
Ulf Larsson
We have never been negative. No.
Johannes Grunselius
No, no. Okay. Okay. But could you sort of indicate what kind of more commercial volumes you will have '25 versus '24 or something like that?
Andreas Ewertz
That's too early to say.
Johannes Grunselius
Okay, okay, fair enough. Yes. Maybe I can also ask you another question, and that's about -- I mean, we talked a lot about wood costs being up as opposed to a few percent quarter-over-quarter in the third quarter. What about other costs, do you see any sort of meaningful deltas there?
Andreas Ewertz
No, I think wood cost will increase slightly, as I said, for chemicals, I think they will be fairly stable. Distribution cost, I think, will be slightly lower -- yes slightly lower. We also had our three big rower ships were on the yard for maintenance this quarter. So I expect the main distribution cost to be slightly lower. OCC has increased a lot, and of course, could increase further. But the main cost of an increase is wood cost slightly up in Q3 compared to Q2, and the rest are fairly stable.
Operator
We will take our next question from James Perry, Citi.
James Perry
I think most of the questions have been asked, but just one quick one on CapEx. Would you be able to update us on the strategic CapEx remaining for the current projects and the certain level of CapEx you expect for '24 and even '25, if you can?
Andreas Ewertz
Very rough. I mean if we start with the strategic CapEx, we expect just below SEK1 billion plus some forest acquisitions, with some forest acquisition in Baltics just above SEK1 billion for 2025, then we'll have just below SEK1 billion left on our Fasikan investment. And then in terms of current CapEx for this year, we expect around SEK1.3 billion.
James Perry
Any comments on '25 or too early to say?
Andreas Ewertz
On the current CapEx, strategic I said we have Fasikan left is around SEK1 billion. On current CapEx in 2025, it's a bit early to say. But I mean now this year we'll be at around SEK1.3 billion, but then we sold [indiscernible] for around SEK200 million. So if I adjust for that, we'll be around SEK1.6 billion in current CapEx next year.
Operator
We will take our next question from Andrew Jones, UBS.
Andrew Jones
I've got a few remaining questions and clean some follow-ups. Just on the sawn wood side. I was encouraged by the fact that you were going to sort of flat price quarter-on-quarter when seasonally it's usually weaker. Will we see that negative seasonality through lower volumes? And can you give us any expectations around that? And I'll wait for an answer to that before asking the next one.
Ulf Larsson
Yes, I'm not sure if I heard you right. But yes, we believe in a flat price development, of course, seasonally, we'll see a somewhat lower volumes in the third quarter in comparison with the second but not too much maybe. And -- but then it's always a question about margin. And again, I mean, more than 70% of the cost is related to raw material in the sawmills. I mean, if raw material prices, prices for sawlogs, if they continue up, then, of course, we might see a squeezed margin in the third quarter. But otherwise, we feel that the market is -- it is quite okay. And I mean we had 20% profit margin in the second quarter, which I think historically is a rather good level.
Andrew Jones
And do you think we've seen the lows in that market? I mean, could we see further price declines in the fourth quarter? Or do you think that underlying demand improvement is enough to support prices at these levels or higher?
Ulf Larsson
Sorry, if we can see a 1/3. What did you say?
Andrew Jones
So just saying that do you think we've seen the worst of the pricing on the wood side? Do you think like the fourth quarter prices could fall again? Or do you think that underlying demand is improving enough that basically [indiscernible] sort of low?
Ulf Larsson
It's hard to say. I mean, if you look at the price now and compare it with the history, we are on a high level. But at the same time, when you look into raw material prices, log prices, they are also on a historically high level. So again, it's always a question about the margin.
So if we will see a continued pressure in the raw material market, then I guess that prices will remain on a rather high level and it might be sort of we have big differences now in -- not the least in Sweden. I mean we can see big differences when it comes to result for solid wood products producers nowadays. And that must, in one way or another, also be related to the raw material market, I guess.
Andrew Jones
Yes. And just on renewable energy, you talked through a lot of moving parts in 2Q, what are the moving parts going into 3Q? I mean when you -- what are your expectations there? Do you expect any improvement or something fairly comparable? What are the moving parts to sort of bring that number in 3Q?
Andreas Ewertz
Yes, if you look at solid biofuels, Q3 is also a seasonally slow market since you have July and August, you start much heat. And then in terms of liquid biofuels we don't see any improvements going into deferred quarter.
Ulf Larsson
I think that will come in maybe in 2025 when you have an increased mandate for both HVO and SAF in the European market. And -- but I think when we came into this market, I mean you had a reduced mandate in Sweden that -- and Sweden was a big part of the HVO consumption in Europe.
So that had a big impact. And many players, they had rather big inventories. And when the mandate came down, then of course, they just stopped, they didn't buy anything for a while. So now we feel that it has started to move again. And -- but again, as you say, Andreas, I totally agree, I mean, we will not see anything before 2025, and we will see the effect of the new mandates.
Andrew Jones
Understood. And then I just -- one on working capital. You had a big build in the first half of the year. Do you expect that to reverse in the second?
Andreas Ewertz
I think that buildup relates. I mean we see higher volumes from a ramp-up of our both Obbola, [indiscernible] and Bollsta and then also we see some higher prices and higher costs for wood raw material. I think that's what has driven working capital.
Andrew Jones
And do you expect it to reverse in any way or fairly stable in the second half?
Andreas Ewertz
No, I would think if prices continue to and volumes continue to increase, of course, that would drive working capital. So we don't expect a release in the second half of the year.
Andrew Jones
Okay. And just finally, the lack of forest transactions. There's obviously some scrutiny about your methodology, the value of the forest earlier in the year from some investors. Is the fact that the market is so thin that it's hard to actually appraise it. Does that make you question that approach or think about alternative ways in which you can actually value the forest land?
Andreas Ewertz
We think the best approach is to look at the transactions in the market. And that's why we use a 3-year average to get a good amount of transactions. And then we have the seasonal effect, as I mentioned in Northern Sweden that you don't do any forest transactions when it's covered in snow. And the first snow quite late into the spring. So the market really picks off in the summer and autumn. So we'll have to wait and see how the prices develop when the market picks up.
Andrew Jones
Yes. Okay. And that 5% lower, are you talking year-on-year? Or are you talking since the end of 2024 in terms of the transactions that you've seen?
Andreas Ewertz
And that's compared to 2023.
Andrew Jones
Compared to the average of the whole year?
Ulf Larsson
Yes. I also think you have some uncertainty related to the development of interest rates. Now I think people -- they are I mean you had lots of transactions for a while, and it was a boom in the market for a while and I mean, I guess that it is related to the business cycle we have in all other areas that will also be in the market for forest land. So I also think that people now they sit down and they wait and see what will happen with the interest rate and how many times will it shrink this year and next year and so on. So that will also have an impact.
Anders Edholm
And that concludes the presentation of the half year report. We'll come back on October 25 for the third quarter report. Thank you.