Borregaard ASA

OSE:BRG

Earnings Call Analysis

Borregaard Reports Mixed 2023 Results and Positive Outlook

In 2023's final quarter, Borregaard saw EBITDA fall to NOK 327 million, down NOK 37 million year-over-year, with operational issues impacting profits by about NOK 80 million. Despite this, full-year EBITDA rose to an all-time high of NOK 1.781 billion, 8.4% higher than the previous year's NOK 1.643 billion, driven by higher product pricing and decreased energy costs but was tempered by higher wood expenses and cost inflation. The company experienced lower sales volumes in biovanillin and anticipates continual challenges with high supply from China. Investments in bio-based startups suggest strategic growth, with sales volumes in BioMaterials set to exceed production, emphasizing specialized products. As for market conditions, particularly biofuels, remain favorable in Europe. However, wood costs are expected to rise 10% in the first half of 2024. The board proposed a 15% higher dividend of NOK 3.75 per share, which is 43% of net earnings.

Introduction to Borregaard's Q4 2023 Earnings

In the final quarter of 2023, Borregaard reported an EBITDA of NOK 327 million, a decrease from the NOK 364 million in the same quarter of the previous year. The company faced operational challenges during its annual maintenance stop, which, coupled with lower volumes in the biovanillin market, contributed to the dip. However, there were compensatory factors including a reduction in energy, chemical and freight costs, and positive net currency effects. Notable is Borregaard's strong cash flow performance during this period.

Full-Year Standout Performance Despite Challenges

Despite the obstacles faced in the last quarter, Borregaard achieved an all-time high annual EBITDA of NOK 1,781 million, surpassing its previous high in 2022 at NOK 1,643 million. This success was attributed to increased product pricing, reduced costs for most raw materials and energy, alongside beneficial foreign exchange impacts. Challenges persisted with increasing wood costs and general cost inflation. The company also reported a decline in sales volume within certain applications but capitalized on strategic investments to reduce emissions and enhance specialization.

Confidence in Dividend and Shareholder Returns

Adhering to its dividend policy of regular and increasing dividends, the company has proposed a dividend of NOK 3.75 per share, marking a 15% increase from the prior year. This proposed dividend represents 43% of the net earnings and indicates a yield of 2.2% based on the year-end share price, totaling a payout of approximately NOK 373 million.

Business Segment Dynamics and Market Adaptation

In its BioSolutions segment, despite a 2% drop in the average price and a 9% decrease in sales volume compared to the previous year’s quarter, the diversity in market strategy offset the lower biovanillin sales. BioMaterials saw a 9% reduction in price and a 10% drop in sales volume, primarily affected by the operational difficulties. The Fine Chemicals market had mixed results, with project investment in bio-based startups providing a glimpse into future growth opportunities.

Optimistic Yet Cautious Outlook for 2024

Looking forward, the company anticipates a slight increase in the sales volume for BioSolutions, expecting to surpass 330,000 tonnes, while BioMaterials is projected to sell more than its production output, particularly specializing in higher grade products. Fine Chemicals look promising with anticipated growth in sales volume for intermediates and ongoing favorable conditions for advanced biofuels in Europe. However, economic uncertainties and an anticipated 10% rise in wood costs pose as potential headwinds to be navigated.

Earnings Call Transcript 2023-Q4

[Per A Sorlie, executive]

Good morning, and welcome to this fourth quarter 2023 presentation for Borregaard. My name is Per Sørlie, I'm the CEO of the company, and I will be joined this morning by our Chief Financial Officer, Per Bjarne Lyngstad, and we will take you through the following agenda. We'll talk about the highlights for the quarter and for the year, the proposed dividend, talk about the market situation for the business segments and also touch upon some investments that we have made during the last quarter and then the outlook for next year. And then Per Bjarne will take over and go through the financial performance.

I should remind you that you can submit questions throughout this presentation online, and we will come back and try to answer at the end of the presentation.

So the highlights for the fourth quarter. The EBITDA came in at NOK 327 million, down from NOK 364 million in the same quarter last year. We sent out a profit warning during the quarter regarding some operational issues that was related to the annual maintenance stop in October of last year. Also in combination with the operational issues, we also had some lower volume volumes in the biovanillin business relative to the market situation. Altogether, we saw our volumes in certain applications, not only the biovanillin application.

But in total, we can report that the issues related to the profit warning came in at approximately NOK 80 million in total effect compared to the NOK 80 million to NOK 100 million that we reported in the -- or estimated in the profit warning.

We -- on the positive side, we saw a significantly reduced costs for energy and also certain basic chemicals and freight, and we had positive net currency effects also in this quarter. Very positive to report that this cash flow was very strong in the quarter. And as I mentioned, we made 3 investments, smaller investments in bio-based start-ups during the quarter.

If we take a look at the full year 2023, we can report an all-time high EBITDA of NOK 1,781 million, compared to the previous all-time high, which was the year before in 2022 at NOK 1,643 million. We saw higher pricing for several key products, and we saw reduced costs for energy and several raw materials. But on the negative side, we saw higher wood costs and cost inflation, in general, particularly in the fixed costs.

We had also lower sales volume within certain applications. And during the, I would say, the first 3 quarters of 2023, we had lower contribution from traded vanillin products. The positive -- the FX impact was positive throughout the year, and we also had a very strong cash flow for the full year.

On the investment side, some of the CapEx went into targeted projects to reduce emissions of CO2 and to increase the specialization and also the already mentioned bio-based start-ups. The return on capital employed came in at 18.3%, well above the long-term target to be above 15% and on a similar level as we saw the previous year.

Then on to the dividend proposal. Just to remind you, the dividend policy is to pay regular and increasing dividends over time, reflecting the long-term earnings and the cash flows of the company. The target for the dividend is to be between 30% and 50% of net profit. The Board has proposed a dividend of NOK 3.75 to the Annual General Meeting, and this is an increase of NOK 0.50 or the equivalent of 15%. This represents 43% of net earnings, and a yield of 2.2% of the share price at the end of the year. And this will mean a payout of approximately NOK 373 million.

Then I'll turn to the market situation for the different business areas and to start out with BioSolutions. BioSolutions saw an average price in sales currency that came down 2% compared to the same quarter last year. However, on the lignin-based biopolymers, we had slightly higher prices in the quarter. So the reduction was due to the product mix, and this was driven by the lower sales volume in biovanillin that we reported on earlier in the profit warning.

Altogether, sales volume came down 9% in the quarter compared to the same quarter last year. And this was driven by lower deliveries, particularly to construction, but also to some other industrial and specialty applications. Positive FX effect in this business area as well.

If we look at the full year, the average price in sales currency increased 3%, and there were several price increases for lignin-based biopolymers but this was partly offset by changes in the product mix, but the net effect was 3% increase. The sales volume came down 8% versus 2022. Demand for most lignin-based biopolymers was good. However, where we saw reductions, this was, to some extent, compensated by increased sales into industrial applications.

We also had a reduced contribution from these traded vanillin products that we have had that for 6 quarters or something. And 3 of those quarters were the first 3 quarters in 2023. Towards the end of the year, this also started to impact somewhat the biovanillin volume as we have reported on earlier. In BioMaterials, the average price in sales currency came down 9% below the fourth quarter in 2022.

I should remind you that the operational issues that we had in the fourth quarter following the annual maintenance stop, primarily affected the BioMaterials business. So one of the impacts was that the price came down 9%, and this was particularly driven then by the weaker product mix, because of the reduced production and the -- also the lower quality on some of that production.

The sales volume then also came in 10% lower versus the same quarter, and this volume again was a result of the operational issues. We lost production, and we also were not able to deliver all the high level -- high-quality grades that had been ordered. Positive FX impact in this business area as well.

If we take a look at the full year for this business area, the price came in 4% above 2022. The weaker product mix that we saw because we had lower demand from the construction market was compensated by sales into other applications. The volume came in at 144,000. It was a little bit lower than it would have been without the operational issues. Positive net currency effects in the business.

Then the fine chemicals market, finally, combining both the fourth quarter and the full year. We had some lower prices for Fine Chemical Intermediates, but this is related to also lower raw material costs. So the margins were -- should be intact. Higher sales prices were offset by lower deliveries in bioethanol. This was also partly due to the operational issues as no really FX impact in this quarter for this business area.

If we look at the full year, this business area had a very strong year. Higher sales prices for bioethanol was the main reason for the revenue growth, and we saw strong demand for advanced bioethanol from several European countries. And we have special certifications on our bioethanol for delivery to those countries, stable volumes and product mix in fine chemical, intermediate and a positive FX impact also in this business area for the full year.

Then I should just give a quick brief on the bio-based start-ups that we have invested in. Alginor, we invested in back in 2021. But in April of last year, April '23, we completed our investment, the last option that we had to increase our ownership. So we now have 35% ownership on a fully diluted basis in this marine biotech company. Very similar business model to Borregaard, but based on macro or kelp as the starting material, pharmaceutical and nutraceutical applications.

Then in the fourth quarter, we made another 3 investments. First, the most significant was in a Danish company called Kaffe Bueno. Again, a similar business model to Borregaard, using this, in this case, spent coffee grounds from coffee manufacturers sidestream. And the products here will go into personal care, human nutrition and agriculture.

We have taken a 12% ownership share in this business, again, co-investing with the European Union. But we have an option that expires in January '26, where we can increase our ownership to 34%. Then we have made 2 other smaller investments, one in Austria in a company called Lignovations, which is very close to our biopolymer business, but with a slightly different and new technology. We have a 12% ownership in this business. And we also have invested in a company called Oceanium. Oceanium which is a Scottish company that is basing their production on farmed kelp instead of wild kelp we see in Alginor, but also with a slightly different approach to the product portfolio.

But these are smaller investments, the ones the 2 last ones. So Alginor and Kaffe Bueno, very similar business models to Borregaard, and we have similar ownership positions in those 2 companies.

Then I'll complete my presentation with the outlook for next year. In BioSolutions, we expect -- we saw last year that even though we had lower volumes, the diversified market strategy compensated for this, and we had a fairly good result in the business area. And we still expect that this will continue, that the diversified market strategy will mitigate the effects of a slowdown if there are slowdowns in certain end markets.

The sales volume is forecast to be higher, slightly higher than we saw this year, back up to 330,000 tonnes. However, depending on the global economic development. It's too early to tell exactly how this will play out. However, we expect the sales volume in the first quarter to be in the range of 75,000 tonnes to 80,000 tonnes, which is a bit higher than the same quarter last year, which came in at 74,000 tonnes. The demand for biovanillin, as we reported for the fourth quarter, we expect the same development to continue into the new year that there will be somewhat lower demand because of the high supply of synthetic vanillin products from -- particularly China.

Then in BioMaterials, here, we expect the sales volume in 2024 to be higher than the production output. Production output is usually 150,000 plus. We sold 144,000 last year. This year, we expect to sell more than we produce. And we also expect to sell more of the highly specialized grades.

In the first quarter, the average price in sales currency will be largely in line with the same quarter -- or the fourth quarter last year. The development here in the construction market for cellulose ethers remains the main uncertainty. However, other applications will -- are expected to compensate for a shortfall -- any shortfall that we see in this particular segment.

The Fine Chemicals, the sales volume for Fine Chemical Intermediates is expected to increase in 2024 versus the 2023. And more importantly, I think the market condition for advanced biofuels continue to be favorable in several countries in Europe and the sales prices are expected to be largely in line with the strong pricing that we saw in 2023.

Then finally, the cost development and the impact from investments. The wood costs will increase again, and they are up 10% in the first half of 2024 compared to the second half of 2023. Energy and other raw material costs are expected to be largely in line with the second half of '23, which show them come down from previous levels. The energy spot prices continue to represent the largest uncertainty on the energy cost side.

And just to remind you, energy spot prices reflect or represent roughly 20% of our total energy consumption. Benefits from the investment to reduce CO2 emissions. We have -- we are electrifying our spray dryers in biopolymers at refinery. And these investments will be completed gradually through the first half of 2024, and this will give us more flexibility and improve the energy efficiency at the Sarpsborg refinery when it's put in operation.

Finally, the wars and conflicts as well as the uncertainty in the global economy may impact our markets, but we will follow that closely and take action as we find necessary. So that completes the outlook and my presentation, and then I will hand over to Per Bjarne for the financial performance.

[Per Bjarne Lyngstad, executive]

Thank you, Per, and good morning, everyone. Borregaard's operating revenues were 9% lower compared with the fourth quarter of 2022, mainly as a result of lower sales volumes. EBITDA was NOK 327 million, NOK 37 million below the fourth quarter of 2022. BioSolutions has improved -- has an improved result, while Biomaterials and Fine Chemicals had lower results.

Reduced costs for energy, certain basic chemicals and freight were more than offset by operational issues at the Sarpsborg site and lower sales volumes within certain applications. In total, the negative impact from operational issues at the Sarpsborg site and the reduced demand for biovanillin was as Per said, approximately NOK 80 million.

The operational issues at the Sarpsborg site represented more than half of this amount and affected BioMaterials the most. Net currency effects were approximately NOK 20 million positive compared with the fourth quarter of 2022. The EBITDA margin ended at 20.4% in the fourth quarter, close to the margin in the corresponding quarter in 2022.

Earnings per share was NOK 1.20 compared with NOK 1.85 in the fourth quarter of 2022. Earnings per share were negatively impacted by higher financial costs, mainly due to higher interest rates and losses on foreign exchange. For the full year, Borregaard's operating revenues increased by 4% to NOK 7.1 billion. Price increases and currency effects were partly offset by lower sales volume.

EBITDA reached an all-time high of close to NOK 1.8 billion, NOK 138 million higher compared with the -- with 2022. BioMaterials and Fine Chemicals, both improved our results significantly, while BioSolutions had a decrease. The all-time high result for the group was driven by higher sales prices for key products, reduced cost for energy and most raw materials and a positive net currency impact.

On the other hand, wood cost, cost inflation in general and lower sales volume within certain applications partly offset the positive effects. The net currency impact was positive by NOK 215 million for the full year. The EBITDA margin ended at 25%, a 1.1 percentage points improvement from 2022.

Return on capital employed ended at 18.3%, and was well above our targeted level of minimum 15% pretax and a slight improvement from 2022. Earnings per share ended at NOK 8.74 compared with NOK 8.96 in 2022. Earnings per share were also for the full year, negatively affected by higher interest expenses and an increase in other financial costs. In addition, a larger share of profit was allocated to noncontrolling interests due to an improved result in LignoTech Florida.

In BioSolutions, operating revenues were 9% below the fourth quarter of 2022 and 3% below the full year of 2022 mainly due to lower sales volumes. EBITDA increased to NOK 172 million in the fourth quarter, NOK 13 million above the fourth quarter of 2022. Again, reduced energy costs higher sales prices for lignin-based biopolymers and a positive currency impact were the main reasons for the improvement.

Lower sales volume, including lower demand for biovanillin and cost inflation in general, partly offset the positive effects. For the full year, EBITDA was NOK 915 million compared with NOK 986 million in 2022. For the full year, higher sales prices, reduced energy costs and positive currency effects were more than offset by reduced contribution from traded vanillin products, lower sales volume changes in product mix and the impact from the general cost inflation.

The fourth quarter EBITDA margin was 19%, 3 percentage points higher than in the corresponding quarter in 2022. For the full year, the EBITDA margin was 23.2% compared with 24.3% in 2022. Operating revenues in BioMaterials were 15% below the fourth quarter of 2022, mainly due to slower sales volume.

For the full year, operating revenues increased by 8% due to higher sales prices and positive currency effects. EBITDA in the fourth quarter was NOK 103 million compared with NOK 138 million in the corresponding quarter in 2022. The operational issues at the Sarpsborg site led to lower volume and sales prices and a weaker product mix for BioMaterials in the quarter.

In addition, higher wood costs had a negative impact on the result. These effects were partly offset by reduced energy and freight costs, reduced prices for certain basic chemicals and positive currency effects.

For the full year, EBITDA increased by NOK 107 million to NOK 534 million. Higher sales prices and positive currency effects were the main reasons for the EBITDA improvement. A weaker product mix, lower sales volume, higher wood costs and the general cost inflation were partly offset by reduced energy costs.

The EBITDA margin in this area ended at 19.6% in the fourth quarter, 2.7 percentage points below the same quarter in 2022. For the full year, the EBITDA margin reached 21.9%, close to 3 percentage points above 2022. Higher sales prices for bioethanol and higher sales volume for Fine Chemical Intermediates were the main reasons for a 6% increase in operating revenues for Fine Chemicals in the fourth quarter.

For the full year, operating revenues increased by as much as 24% mainly due to increased prices for bioethanol. EBITDA was NOK 52 million in the fourth quarter compared with NOK 67 million in the fourth quarter of 2022. The result for Fine Chemical Intermediates was negatively impacted by operational issues resulting in a lower production volume and lower sales prices, partly offset by lower raw material costs.

For bioethanol, higher sales prices were offset by lower deliveries compared with the fourth quarter of 2022. For the full year, EBITDA reached NOK 332 million, an increase of as much as 44% compared with 2022. The significant improvement was mainly due to higher sales prices for bioethanol.

Fine Chemical Intermediates had a result in line with 2022. The net currency impact was positive for this business area as well. The EBITDA margin was 29% in the fourth quarter, close to 40% -- compared with close to 40% in the same quarter of 2022.

For the full year, the EBITDA margin reached 42%, close to 6 percentage points higher than in 2022. The net currency impact on EBITDA was positive, as I said, by about NOK 20 million compared with the corresponding quarter in 2022. The positive impact came from a weaker Norwegian kroner, which weakened by approximately 8% using Borregaard's currency basket. The impact from a weaker Norwegian kroner was partly offset by increased hedging losses.

Hedging losses were NOK 93 million in the fourth quarter compared to NOK 34 million in the same quarter in 2022. For the full year, the net currency impact on EBITDA was positive by approximately NOK 215 million. Hedging losses were NOK 268 million, compared with a loss of NOK 50 million in 2022.

Using currency rates as of yesterday, the net currency impact for the full year of 2024 is estimated to be negative by approximately NOK 55 million compared with 2023. The corresponding impact for the first quarter is estimated to be 0.

We had us -- a cash flow from operating activities of NOK 515 million in the fourth quarter. The strong cash flow was mainly due to significant -- a significant decrease in net working capital. For the full year, the cash flow from operating activities was close to NOK 1.6 billion compared with NOK 735 million in 2022. The significant improvement was mainly due to a more favorable development in net working capital.

Investments were NOK 340 million in the fourth quarter and NOK 838 million for the full year. For the full year, the largest replacement investments was to reduce CO2 emissions and increase energy flexibility at the Sarpsborg site. The largest expansion investments were in increased ownership in Alginor and specialization projects within BioSolutions.

Net interest-bearing debt decreased by NOK 88 million in the fourth quarter. And for the full year, the net interest-bearing debt decreased by NOK 45 million. At the end of 2023, Borregaard is well capitalized with an equity ratio of 54% and a leverage ratio, which is net interest-bearing debt over EBITDA of 1.01.

And that concludes today's presentation. Per Sørlie and I will now be ready to answer any questions from those who follow the webcast. Our Director, Investor Relations, Knut-Harald Bakke, will moderate webcast questions.

[Knut-Harald Bakke, executive]

First questions from Mr. Zino Engdalen Ricciuti of Handelsbanken. Three questions. I will read them one at a time. What scenario for the construction market do you expect in your guidance for 2024 compared with 2023?

[Per A Sorlie, executive]

We Are still uncertain about the development in the construction market. We -- I think I'll take one step back and explain how this works. We are quite far back in the value chain. And the big question for this year is all the inventory adjustments that have taken place. When inventory adjustments have come to an end, which we think they must have done now ahead of us in the value chain, then you will see what the real demand in the industry has been throughout the year.

And this may happen to be a higher ongoing demand because our customers have been building down inventories, and this will now surface as we go forward. But we don't expect a big difference, a big upswing in construction going into 2024. However, we could have a positive effect from these inventory adjustments that will now stop.

[Knut-Harald Bakke, executive]

Second question then from Mr. Ricciuti. For BioMaterials, what drives the expectations for volumes to be higher than production in 2024?

[Per A Sorlie, executive]

There are several -- Borregaard is a very diversified in specialty cellulose. And as we have pointed out in the outlook as well, the construction that I already commented on also is relevant for Specialty Cellulose. However, the probably permanent, but at least the temporary closure of the Georgia Pacific cellulos mill -- a specialty cellulose mill has a positive impact on demand. So we are seeing increasing demand across several segments and partly driven by this closure at GP. So apart from construction, we are seeing quite strong demand across all sectors.

[Knut-Harald Bakke, executive]

And you partly answered that already. But the third question then is, can you comment on and give some more flavor on what we have seen regarding the effects of the closure -- announced closure of the Georgia Pacific plant?

[Per A Sorlie, executive]

The GP -- I mean we cannot speak on behalf of GP. We think that the jury is still out on what will actually happen to that site. Our understanding is that there are people looking at the site. But in the meantime, the plant is not running, and this, of course, has a positive impact on the market short and medium term.

[Knut-Harald Bakke, executive]

Then we have a question from a private investor, Mr. [ Hakon Lund ] regarding BioSolutions. Regarding the volume guiding within BioSolutions, are we seeing a slight comeback in this segment? I am thinking of the lower sales volume development you have had in the last year or so, but now we are seeing a guiding above the last first quarter 2023. I would love to hear some thoughts about this and what the reasons are for the positive guiding?

[Per A Sorlie, executive]

Well, it's partly the same answer I gave earlier that this business has 600 products. It's extremely diversified. So it goes into -- it sort of represents GDP worldwide in all the sectors that we are involved in. And we see the same thing here. We expect that inventory reductions have come to an end, and then we will see what the real end markets demand is. So we think that will give an increased demand by itself. And we are positioned well to deliver any upswing that may come in the demand. But like I said during my presentation, it's too early to tell for sure exactly what will happen, but the estimate is based on the fact that, to some extent, we don't expect the inventory adjustments to continue.

[Knut-Harald Bakke, executive]

Then we have a twofold question from Elaine [indiscernible] of Covea Finance. It's twofold, and I will read both of them. Could you give us some colors on biovanillin activity in terms of sales and profitability, EBITDA margin and the figures for 2022? Second part regarding end markets, could you give us the exposure of your group on construction market in percent of revenues?

[Per A Sorlie, executive]

I can -- I'll do the last one first. It's -- as we presented this year, we roughly sold 100,000 tonnes into construction last year in biopolymers. And for that business segment BioSolutions, the important exposure here, I think, is in the concrete admixture exposure and the concrete market.

And our exposure there is now getting down to roughly 10% of revenues. All the volume that is classified as construction does not go into concrete, a fair share, which also goes into more advanced applications like ceramic tiles and some other applications that are more specialized. So the real exposure to construction, I think, is related to concrete and that is now down to roughly 10% of revenues in that business.

We also have an exposure to construction in Specialty Cellulose. However, that exposure is quite different because it goes into, I would say, more like interior decorating. It goes into tile adhesives, it goes into spray concrete on interior decorating walls and so forth. So it's a slightly different kind of exposure. And as we have seen last year and continue to see this year, we have lots of options if there are reduced demand from that market segment.

Secondly, then the biovanillin. We don't give specific numbers on biovanillin, but the biovanillin business consists of a couple of things. One is the biovanillin that we produce ourselves from the same starting material that we use for the lignin-based biopolymers. And secondly, it's a toll manufactured trading business where we Borregaard used to produce synthetic vanillin, ether vanillin. Now we toll manufacture that, and we trade it under our brand name.

And what happened in 2022 and the first 3 quarters of 2023 is that we had after a windfall profit on this traded business -- trading business in -- during COVID, we had a setback during second half of 2022 and the first 3 quarters of 2023. So that business actually lost money as we have reported during that period.

Now going forward, we expect that to be sort of a marginal business. A trading business doesn't really give neither a huge profit nor a huge loss, but there was a windfall profit during COVID, and there was a loss following COVID.

The biovanillin business is in a different segment in a way. The pricing of biovanillin is significantly higher than the pricing of synthetic vanillin. However, in today's situation with depressed demand in some markets and with extremely low pricing on synthetic vanillin, especially out of China, it's tempting for some customers that have the opportunity to switch between these 2 qualities.

And we have seen in recent months that some customers are taking opportunity of this huge price difference that we see right now. How long that will remain and how that will impact results going forward remains to be seen. But as we saw in the fourth quarter, the biopolymers part of the business performed quite well, and the business delivered well above expectations.

[Knut-Harald Bakke, executive]

Question from Mr. Niclas Gehin of DNB Markets regarding BioMaterials. You guide for "sales volume in 2024 to be higher than the production output and highly specialized grades expected to be higher versus 2023". Can you say something about how large this effect may be in relation to the higher wood costs you expect?

[Per A Sorlie, executive]

No, I think that -- we don't guide exactly on what the volume effect will be, but they will -- it's exactly correct what Niclas is pointing to that there is a cost increase on the wood cost, and there is a positive volume deviation. As we guided for in the first quarter, the pricing will be fairly flat from the fourth quarter last year into the first quarter this year.

So the positive contribution will come from a positive deviation on the volume side, primarily and hopefully, also on the mix. So there will be positive effects on the mix and the volume side. But I cannot quantify that exactly. And the reason why that is, is that typically, the practice in this industry is that you have a contract with the customer.

And when the customer doesn't require all the indicated volumes, he will usually take down the volume requirement equally between the different -- proportionally between the different suppliers. So that's why it's -- because the point is that there is no point in forcing the customer to take the indicated volume because that will backfire the next year. So usually, we float with what the customer actually requires, but our estimate of this year's -- going into this year is that we feel quite comfortable that confident that the volume will be higher this year than last year, but I cannot specify exactly how much.

[Knut-Harald Bakke, executive]

Unless there are any questions from the physical audience here in Oslo, I think that concludes the Q&A session for the fourth quarter of 2023.

[Per A Sorlie, executive]

Thank you.

[Per Bjarne Lyngstad, executive]

Thank you.