Billerud AB (publ) (BLRDY) Q4 2023 Earnings Call Transcript

Billerud AB (publ) (OTCPK:BLRDY) Q4 2023 Earnings Conference Call January 25, 2024 3:00 AM ET

Company Participants

Lena Schattauer – Head, Investor Relations

Ivar Vatne – Chief Executive Officer

Andrei Kres – Chief Financial Officer

Conference Call Participants

Linus Larsson – SEB

Robin Santavirta – Carnegie

Cole Hathorn – Jefferies

Christian Kopfer – Handelsbanken

Johannes Grunselius – DNB Markets

Martin Melbye – ABG

Lena Schattauer

Good morning, and welcome to this webcasted Conference Call about Billerud’s Fourth Quarter and Year-End Results. As usual, our President and CEO, Ivar Vatne; and our CFO, Andrei Kres, are here to hold the presentation. And after their presentation, there will be a Q&A session.

So, after this brief introduction, we will now get started. So, please Ivar, go ahead.

Ivar Vatne

Thank you, Lena, and good morning, everyone, and thank you for joining. So, we will go through some of the highlights and key financials for both the quarter and for 2023 in total.

I think the headline says it all for how a summary of how 2023 has turned out. And I’ll give a little bit more context. So, let’s move into the next slide, please. And there is no doubt that 2023 was an extremely difficult year and a year that, in many ways, has been a bit of a hangover from 2022 and characterized by unusual high inventories across the value chain. This has led to low sales volume and in combination with sales price pressure and higher input costs, it has wiped out most of the profitability compared to last year.

Now, in this challenging market context, it is imperative to keep strong control of items we can influence. And there are two particular items that I’m proud of and how we manage to drive a good performance. Number one, keeping a continued close eye on working capital to secure a strong cash conversion; and number two, how we rallied around our efficiency enhancement program and over delivered versus the target we set one year ago.

Another big event for the year has been our soda [ph] recovery boiler in Frovi, which is now completed on time, on spec, and on budget. And this is something we’re really proud of, given that much of that was done and completed in a COVID time period.

Now, onto a bit more details around the Q4, so next slide, please. And Q4 was another quarter facing severe market headwind, but it landed broadly in line with our expectations. Volumes were soft, mostly in North America, while we experienced some pricing pressure in both of the region. And that has led to challenged profitability and 8% adjusted EBITDA is the performance we certainly are not happy with.

Our cash flow is a clear highlight with outstanding cash conversion, and this is something I’m really pleased to see as we’re putting considerable effort to achieve that result.

We do have some items impacting comparability, minus SEK244 million, where the biggest one is the revaluation of the biological assets through a holding in value and that item is minus SEK164 million. The other item is the one-off restructuring cost related to our FTE reduction, and that is SEK80 million.

Now with that, let’s continue with some input on the market sentiment. So, next slide, please. And as I mentioned already, market conditions, they remained weak throughout Q4 pretty much as expected. Second half of December shipments, they came in a bit under what we had foreseen, which was a clear sign of customers protecting their working capital before year and most of that has been moved into January, so no real drama on that one.

Now, going forward and into Q1, we do expect to see some slight improvements, but coming from weak levels.

On the cost side, we see more and more signs that the customer destocking phase is coming towards an end or have normalized already. And that should yield a slightly better volume demand. Now on the negative side, higher interest level is starting to bite in certain categories and pull consumption down. In that regard, we are well placed with a strong relative weight towards food and drink, where consumption tend to be more stable. Hence, net-net, we remain cautiously optimistic, and our order books do point towards a better start for 2024 versus how we ended 2023.

And with that, I hand it over to Andrei.

Andrei Kres

Thank you, Ivar, and good morning, everyone. So to start off with the top line development for the quarter. Both regions were sizably down compared to the last year, and the total group sales were down 20%, with North American volumes and European pricing as the main drivers. We had also negative mix impact in both regions as we sold more pulp in quarter four this year.

Currency rates continued to have a positive impact, while the divested Managed Packaging business had a marginal negative impact. And on Managed Packaging, just as a reminder, so the business contributed with a sales of SEK420 million in 2023 and will obviously not contribute with any sales heading into 2024.

Next slide, please. Looking into the profitability development. Also here, pricing and volume are the main drivers behind the decline. For the first quarter of this year, we have year-on-year input cost relief as we start to meet higher base, but also due to the input costs coming down sequentially in quarter four, which I will get back to. The impact from our efficiency enhancement program contributed with SEK 215 million. And as Ivar mentioned, is one of the highlights for the year and also for the quarter as we saw additional good progress.

The other is roughly SEK 200 million negative where the biggest item is from inventory revaluation had a negative impact of SEK2 00 million year-over-year. And as we mentioned at the previous calls, this has been a significant effect versus previous year with the cost inflation we’ve had, but the impact is marginally full sequential development now. And then finally, the maintenance schedule for this year was slightly more intense as we had the shutdown in Escanaba mill in quarter four. So we have a negative impact from higher maintenance costs.

Next slide, please. Heading into region’s performance and starting with the European region. Sales volumes were flat versus a year ago, while net sales declined by 12%. And the decline was driven by lower pricing for all categories, except Liquid packaging board, but also, as I mentioned, negative category mix with higher pulp sales. The market conditions for the European segments remained weak in the quarter with the exception for liquid packaging board, which was on a normalized level.

For liquid packaging board business, we concluded pricing negotiations for significant volumes, which will have sizable and meaningful impact heading into 2024 now. Sequentially, the volumes for the region declined with 2%, and we saw clear year-end effect with postponement of orders into quarter one and also some logistical challenges to get out volumes. Profitability for the region was down with one-third versus a year ago. And again, the main drivers is the lower pricing and also negative mix.

Year-over-year, the region’s input costs were down, which was supported by the impact from efficiency enhancement program. And we can move on and look into input cost development for the region during the quarter.

Next slide, please. In line with our expectations, we saw a general decline in input costs, with the exception for energy costs, which increased on the back of higher spot prices for electricity. The fiber prices were down SEK140 million versus the third quarter, chemicals down SEK30 million and logistics down SEK10 million. This positive impact was then offset by higher energy costs of SEK50 million.

And on logistics cost side, the cost impact from the challenges that we experienced during the quarter to get out the volumes was limited, but we see that this will have some impact heading into the first quarter. And so heading into the first quarter, we do expect that the total input costs will increase by about SEK100 million, and that is primarily from logistics of SEK50 million. Energy costs expected to increase with SEK60 million, which will be offset by lower chemicals costs of SEK30 million.

Fiber cost is expected to increase marginally, resulting in a negative impact of about SEK20 million. So all in all, total cost increased versus quarter four of about SEK100 million.

Next slide, please. And heading then into the North American region, the markets remained weak in terms of volumes in quarter four, and we continue to operate our assets at below 60% of capacity. Net sales in the quarter were down significantly versus previous year ago, driven by 25% lower sales volumes. Also within the North American region, we had less favorable mix with higher pulp sales.

We saw some price pressure in the quarter, in particular, on specialty paper. And looking ahead into quarter one, we expect pricing on graphic and specialty paper to come down somewhat, as new contracts for 2024 start to kick in. Sequentially versus the third quarter, the volumes were down marginally, and we saw a clear order postponement into quarter one this year, where we see that order books are improving for quarter one.

EBITDA for the region was down significantly on the back of much lower volumes and unfavorable mix, while also cost relief compared to the last year, primarily on energy and logistics.

Next slide, please. And just a quick comment on the cost situation for North America, which remained stable as we also expected, and really no big callouts for any particular cost bucket. Overall costs were flat versus the third quarter and the minor changes we have within the different buckets canceled out each other. That’s also what we expect heading into quarter one with flat cost development.

Next slide, please. In quarter 4, we continued with our cash flow efforts and reduced our working capital further, which resulted in an excellent cash conversion of 99% for the full year. And I’m very pleased with the efforts that we put in to reduce our inventories during the year, which was the main building block behind releasing SEK700 million in working capital in 2023.

The cash flow focus implies also that we end up with a leverage of SEK1.6 million, well below our target of 2.5% despite the profitability-wise, challenging year. Capital expenditures for this year amounted to SEK3.2 billion, which was SEK200 million above our guidance, as we chose to proceed with some of the investments on the back of stronger cash flow.

The capital expenditures for the next year is SEK2.3 billion, unchanged from our previous guidance. Board of Directors proposes a dividend of SEK2 per share, corresponding to a payout ratio of 65% of adjusted net profit for the year, which is also in line with our policy. Subject to the AGM’s approval, the dividend will be paid out in the quarter 2 this year and result in a total dividend amount of about SEK500 million.

With that, I would like to hand it over back to Ivar.

Ivar Vatne

Thank you, Andrei. Now our efficiency enhancement program has been one of the big successes for ’23 and something I’m very pleased to see how we’ve been able to mobilize as a company and create a strong momentum. The FTE reduction program is proceeding as per plan, and we are on track. We are right now in dialogue with unions on how the plans will be executed across the company.

And as already mentioned, we booked a provision of SEK80 million now in Q4, which is the best estimate of a total one-off cost, and we do not foresee at this stage any additional cost. Now in Q4, SEK250 million additional was added to the program, and that takes our total 23 delivery just north of a revised target of SEK600 million. Many of the biggest initiatives over the year are efforts that requires more collaboration and systematic work across our functions. And that was exactly one of the main purposes behind the program. Having said that, this is not a sprint, but a program expected to run over several years, and I’m convinced to have potential to extract more going into ’24.

And with that, it might be a good bridge to the next slide, please. So for ’24, we have three main priorities, and we will keep coming back to those. Number one, first and foremost, we are proceeding with preparation for our strategic projects. And here, the US transformation is the most important one. Now we continue to evaluate alternatives of how this transformation can be executed, and that means exploring scope and phasing. And we’re obviously doing this in close collaboration with suppliers. We will continue to keep you updated on our progress during the year.

As well for BCTMP project with business in Norway, the visibility study is completed, environmental permits to the regional authorities have been submitted.

Priority number two, we will do a selective strategy upgrade for Region Europe. And I keep referring to the point that the premise for Nordic pulp and paper production has changed, and we need to brace ourselves for higher fiber costs going forward. Now inflation and input cost is not a problem per se as long as you can pass on that pricing. But this will partly be a challenge in certain categories, where we operate with global players, we don’t necessarily see the same cost situation as in Nordic and Europe. And that means, we need to be agile to stay competitive and think differently from today.

More information will follow here, but there is no doubt that we need to improve our efficiency of our mills. And not least, we need to make some bold moves to secure cost competitive fiber sourcing. And here we will talk partnerships, reducing fiber consumption and a further increase of our field fiber purchases.

Priority number three, keep delivering on our efficiency program. Andrei mentioned this, we’re off to a good start, but we need to do more. And that’s why we set the bar even higher for 2024 and had a target to deliver SEK 700 million, and we will report our progress quarterly as we’ve done throughout ’23.

So next slide, please. So to round it up, conditions for Q1, a bit more positive versus what we saw in Q4, but more of a gradual improvement. We do expect volumes to improve as the customer de-stocking phase is coming to an end. And we will see a positive sales price impact from liquid packaging board, which should more than offset some of the high price pressure in other categories. Input costs expected to increase driven by logistics energy, as Andrei already mentioned, and we will continue to drive our efficiency enhancement program with priority.

So with that, I hand it back to operator for Q&A.

Question-and-Answer Session

Operator

Thank you. [Operator Instructions] And now we’re going to take our first question — and it comes from Linus Larsson from SEB. Your line is open. Please ask your question.

Linus Larsson

Thanks, operator, and good morning, everyone. First question on your guidance for the first quarter. If you could maybe expand a bit on that. First of all, do I understand it right that you see input costs increasing sequentially by SEK 100 million? And also, do I get it right that you’re actually seeing increasing prices? And then what’s the combination of this? What’s the net balance of sequential input cost increases and sequential price improvement? Thank you.

Andrei Kres

Good morning, Linus. So let me start off with the input costs. As you pointed out, SEK 100 million in increased cost is what we expect heading into quarter one, and this is entirely coming from Region Europe. While the North American input costs are expected to remain stable or flat. In terms of pricing, I’m going to split it up between regions. So as I mentioned, we have had a sizable price increases on liquid packaging board, which will start to kick-in, in quarter one, but that will be offset with the pricing decline, primarily within paper as we also there see quarter one contracts kicking in.

So in total, we expect a price increase of about 1.5% for Region Europe in quarter one compared to quarter four. And for Billerud North America, the pricing will come down as we also see new contracts for this year kick-in. We expect the price decline on total for Region North America of 2.5%.

Linus Larsson

Perfect. That’s very helpful. Thanks a lot, Andrei. And then maybe moving to capital allocation, and maybe if you could provide some kind of update with regards to North America. What are the options on the table really? And what kind of a time line are you looking at? What are the parameters which are crucial from your point of view here?

Andrei Kres

Yes. Hey, good morning, Linus. It’s a good question. No, but I just want to continue on what I mentioned already back in October that we remain confident about the whole business opportunity and the context that the paperboard locally produced in North America can yield and provide. But it’s very clear that this is a very big move for Billerud and we want to make sure that this is right, and we take our time now to evaluate different options. And yes, it needs to land on a very strong proposition. I’ll come back to that in a second and surely create shareholder value.

I think the two pieces we look at mostly now is to explore different versions of scope and timing. And I think all of them have pros and cons, and these are typically weighted up towards, not least the CapEx it will require. But I have to say at this stage, I literally do not have much more information to offer. I know that there’s a lot of interest in this topic. So you can surely or rest assured that we will update you on the progress in 2024 and we’ll come back as soon as we have something more to say. And I don’t really yet have that, call it, estimate, but you will be updated, I think, all of our quarterly report how we’re progressing.

And it is key. I just want to say this from what are we looking for? It’s obvious the balance that this is a project that has to be clearly positive from a net present value. It also needs to give us return overall on capital employed. And surely, that should be north of what we have as a bit of a guiding star of 13%. And we look into this also in terms of what the CapEx the program will mean and how we weigh down on the balance sheet. So all of this were kind of way up towards in a big pot and try to find a good solution on this. But more to come Linus, on that later down the line.

Linus Larsson

No, that’s fair enough. May I just ask on CapEx. You guided the 2024 CapEx of 2.2 basis plus SEK100 million relating to further that’s what you’re detailing. Apart from that, what might be added? I mean, could we assume that nothing relating to Region or North America will show up in 2024, or is there anything else potentially which could make CapEx bigger in 2024?

Ivar Vatne

No. I mean both of them can, I mean, hypothetically, not something that will really have any estimates on today because, as I said, for both of the cases, we’re not in a position yet where we are ready to move ahead at all. So for the time being, this is the kind of two items we do have. That’s the base CapEx, as you mentioned in the last tail of the recovery boiler. And that’s this view at the moment, depending then on how we progress on Norway and the US. I can add something, but literally nothing I can either hint on what that might mean. That will be information we come back to potentially later in the year.

Linus Larsson

Okay. Thanks for that.

Operator

Thank you. Now we are going to cover next question, just give us a moment. And the next question comes from the line of Robin Santavirta from Carnegie. Your line is open. Please ask your question.

Robin Santavirta

Yes. Good morning, everybody. Thanks for taking my questions. First of all, regarding the efficiency program you have, what are the key items in that program? And how much of a sequential improvement in earnings should we expect already now in Q1, Q-on-Q?

Ivar Vatne

Yes, I’ll start with that — and then I’ll let Andre just comment on the potential impact you had for Q1. Now listen, I think that the main purpose of this program is not, first and foremost, the cost reduction, and that’s also why we deliberately call the efficiency enhancement program.

I think we have recognized over the years that still when we look at project across different functions that we need, even tighter collaboration, that potential has not been at a satisfactory level. So if you look at examples, I mean, it’s a pretty long and broad list, but I can surely give you some examples to give some context of what that is.

I mean TRIM [ph] is a pretty known challenge in this industry on how do you use the whole width of the paper rolls in any good manner. That’s not something that either operation or commercial can do a loan, but they have to be that in pretty good tandem. And that’s a pretty big piece. I think we’re still looking forward to look at, for instance, consumption of all of our chemicals, experiment different alternatives of chemical usage, how we can further stretch ourself of optimizing some of the recipes even further. And that is something that very often you would have both commercial operations and board supply in a good period to make that as successful.

Another example, maybe talk about our outbound logistics in particular for Europe and how that can be optimized even further with kind of less trucks and more boats and more trains. It’s an area where we’re already quite advanced, but we feel good about that, hey, this should be even more into that potential. And we already mentioned this in Q3. We’ve already added now the FTE reduction of 350 into this program. So that should give you some sense of what we’re looking for. It’s a pretty long list of a big project, but I think the key denominator is to look for more collaboration across. Maybe I’ll hand it to you, Andre, for the Q1 impact.

Andrei Kres

Yes. Thank you, Ivar. And Robin, on the sequential impact, if we look into quarter 1, 2024, we estimate that the impact will be in the region of SEK50 million to SEK60 million compared to the fourth quarter.

Q – Robin Santavirta

All right. Thank you very much. Second question I have is related to this strategy of grade work in Europe, you are probably sort of early days, but can you expand a bit on that? And also, you said efficiency need to be at a high level in mills. So is it likely that, that sort of game will be sort of something that will lead to material CapEx investments in the next few years, or is it other stuff that you’re looking at?

Ivar Vatne

Yes. No, but I’m happy to do so. And I think, as you say, we will probably come back even later with more content on this, but I did mention already quite consciously that there is two items, and let me just take them piece by piece. When we look at the efficiency of our mills, we do not right, but I think it’s fair to say that we’re not doing great, and that’s what certainly we are striving for. And that typically, if you use the benchmark of OE, set it as a proxy. And I think it’s a complicated question of what drives that. I think in particular, when we look at our board mills, we do recognize that have come quite a long way since we started off the KM7, how the board mills work as a unit. And we put the different, you can say, production segments on each of the machines that are best equipped to do that job.

Now having said that, there is just more potential out there. And I think we can also quite comfortably say that we also expect more from our paper mills, and this is on average and kind of in a general statement. First and foremost, this will be ways of working standardization and how we really take the company has on a higher degree versus we have done in the past. So I do not expect at this stage that this will come with a very big CapEx build actually to the contrary, our main ingoing assumption is that most of this effort should and will be covered from the base CapEx that Andrei already talked about.

More to follow on that. I think the other one is around the whole fibre situation in Nordic. And there is no doubt that, hey, we, as the biggest fibre buyer in Nordic, we need to be courageous and we have to take certain moves given that the situation is certainly starting to tighten up and we’ve seen that it has tightened since the war in Ukraine.

I think for us, it means we need to look at many different parameters. Partnerships is one. We already talked about our chapter in Norway with Viken Skog, which is something we’re excited about. Then you talk about fiber optimization and even a higher degree of CTMP is key for us. I would have mentioned this as part of our efficiency program, how we continuous need to challenge ourselves of what is the optimal and what is even a better recipe formula in light of now that the fibre market has tightened.

And I think the third one is we have already taken steps during the last quarters and year to increase our presence of what we call field fibre purchases and that has yield results that are good and happy with. Maybe we want to do more. So that let me give you a little bit more context of some or two items. But as you said in the beginning, this is an area we are expected to come back with more information during 2024.

Q – Robin Santavirta

I understand. Thank you very much.

Operator

Thank you. Now we’re going to take our next question. Just the moment. And the next question comes from the line of Cole Hathorn from Jefferies. Sir, line is open, please ask the question.

Cole Hathorn

Good morning. Thanks for taking the question. Maybe just like a little bit of commentary focusing on Europe. Could you give any differences in what you’re seeing, maybe not by end markets, but by categories, how are you seeing kind of containerboard? How are you seeing stack and specialty into 2024 as well as cartonboard, you’ve been quite clear on liquid packaging board?

And then on the European region and the opportunities there, it sounds like you’re focusing on kind of optimizing the product mix and footprint. I mean, are there actions you could take to focus on kind of the value over volume side, potentially consolidate some volumes from some mills or some machines to keep your lower cost assets at better operating? And would this analysis include thinking about some rationalization of capacity at all? Thank you.

Ivar Vatne

Hey, good morning. Well, actually going to start with the second question, before I go into the first. No, but I think you’re absolutely right. And this is something we need to ask ourselves continuously. And I’m very sure that the same question is being asked by all the players now in the Nordic region.

I think we need to be very clear on what mix and what profitable growth we can see going forward. That’s a very important piece on how we can be even more selective on what offering we bring out to the market. It also means that potentially the offering we used to have in the past is not necessarily, which is 2024 and onwards.

It certainly also means that how do we ensure that all of our assets, and that means mills and machines they stay competitive and not least our ability to pass on that potential cost inflation that comes our way. I know that it’s a bit of a generic answer in combination to what I mentioned already on the fiber option. But I can only say that this is now more important than ever in the Nordic region, and it’s very high on our agenda and part of the Europe strategy.

If I move into kind of your first question, I can do a little bit of a tour on comments per category. I mean starting with cartonboard, I think, the underlying theme there that is still a weak underlying demand, and we see that both in premium and power products. And destocking is getting there, but probably that is one of the few categories where we can see some signs that it’s still not completed. And in the main market, Europe, for us, macro economy, demand is kind of stable, but at a low level. So it’s not really finding the gear yet versus what we see in other categories.

And if it goes straight into containerboard, yes, I mean, underlying demand is not strong. And there are some challenges also there, but the situation is definitely more manageable for virgin than recycled. And as you know, we are, first and foremost, in the former. And inventories have certainly come down and almost to the point we can say that the destocking is kind of a past chapter on that one.

Fluting for us is a tight market, but we’re still all right. We do selective price increase and pushes for sub charge, et cetera, for the affected geographies, but underlying consumption is relatively unchanged. I mean on liner, I think, we can even get more confidence say that, hey, you know all the destocking is done. And it’s still on a relatively low level, but getting maybe a little bit better and we see some small signs that order books are picking up. I think the North America containerboard is still very weak, but for us, this is not a big market at all at the moment.

If you move on to sack, I mean, Europe is still weak and driven by low activity in construction. Emerging market is slightly better, and we do see a bit of a pickup on order books there, in particular, for the brown sack. We’ve even announced now we will have a price increase of brown sack 8% from March 1. No plans for anything on that on the white sack, which is still a bit weaker and first and foremost, finding its home in Europe. But I can confirm that the volume for sack is expected to increase, in particular when we go into Q1 versus Q4.

And if you go to kraft paper, I mean, underlying demand is still tough. And I think it’s a little bit different if you go brown versus white. I mean, brown kraft paper for us towards e-com is certainly still pretty depressed. And the white which goes more towards full service is better. And there we can also confidently say that we see very clear signs that the destocking is completed. And hence, we do expect also there the volumes to start coming up, but not much is happening on the price. So hopefully, that gives you some flavor of where we stand on the categories.

Cole Hathorn

Thanks very much for that color. I mean maybe just going back to the first question, you alluded to it that kind of optimizing the product mix, thinking about how you produce — that will benefit your fiber costs. I have one more, which is on your maintenance guidance for 2024. I know the maintenance costs seem a bit lower than they did last year. Is that just because where we are in kind of the cycle? And I noticed that Quinnesec, which you — in the past, you’ve talked about, kind of, a big maintenance spend every, kind of, two or three years. It just seems a little bit lower. So I’m just wondering if there’s anything in the maintenance schedule that we should be aware of?

Ivar Vatne

Hi, Cole, I can take this one. So to start with the Quinnesec mill, the last upgrade we had there, which was in 2022, that was a major upgrade, so that was significantly higher, where we also increased the pulp capacity for that mill. Now when we — and the maintenance shutdown at this mill, as you might know, is every second year right now. So heading into 2024, we will have a maintenance shutdown but with a lower impact. Then if we look at the total guidance for the shutdowns, we have revised our guidance, as we mentioned, and this is really due to revised calculation of the impact, which is basically looking at what volumes are we losing in terms of stopping the machines during the maintenance shutdown period. So it’s a minor revision downwards and just adjustment of the calculation.

Cole Hathorn

Thank you.

Operator

Thank you. Now we’re going to take our next question. Just give us a moment. And the next question comes from the line of Christian Kopfer from Handelsbanken. Your line is open. Please ask your question.

Christian Kopfer

Great. Thank you very much. Good morning, everyone. Just one short follow-up from my side. Sorry, if I missed it. Maybe Andrei, you mentioned it, but either way on the volume side, you have mentioned that you have gone through a pretty rough destocking in period — in 2023. How do you see the restocking taking? What, kind of, impact do you see for Europe versus North America in Q1 in terms of more specific numbers?

Ivar Vatne

Yeah. I’ll let Andrei come to the specific numbers. I think the two effects, I think we just have to keep in mind going into 2024 is that; a, we do expect volume uplift just on the wake of the destocking is majorly completed on most categories. But at the same time, and this is a little bit of the unknown that, hey, there are certain categories that are starting to buy the higher interest level and it is holding down the underlying consumption. But net-net, we are still what we call cautiously optimistic that we should see an improved volume number for 2024 versus 2023 as a whole.

But Andrei, maybe some quick comment on the quarter.

Andrei Kres

Yeah, I can follow-up on that. And if we look at quarter one, I mean, as I mentioned during the presentation, we have had some year-end effects. So we saw a clear sign of reduced orders at the end of the year with our customers managing their inventories.

Looking into quarter one, we would expect some spillover from that, but also as Ivar went through the category, some better outlook within a couple of segments. So all-in-all, we would look at improved volumes in the region of 20,000 to 40,000 tonnes in quarter one versus quarter four.

Christian Kopfer

All right. Perfect. Thank you very much.

Operator

Thank you. [Operator Instructions] Now I’m going to take our next question. And the question comes line of Johannes Grunselius from DNB Markets. Your line is open. Please ask your question.

Johannes Grunselius

Yes. Hello, everyone. Most of my questions have been answered now, but I have one question and one follow-up. But on the cash flow side, you did very well in the fourth quarter, as you said, releasing plenty of net working capital. Will there be any, sort of, swing — were there any temporal effects there, basically? Would you expect some of that release to come back in Q1 and other quarters, or were there structural changes behind that decline in net working capital? That’s my first question.

Ivar Vatne

Yes. And I can take that, Johannes, good morning. So in terms of the working capital, I mean, we have worked in a structured manner throughout the year to reduce the working capital and release cash. With that said, there are always some year-end effects. We don’t expect any major comeback in terms of tying up more capital in quarter one, but it would be marginal effect in quarter one.

Johannes Grunselius

Okay. Okay. Good to know. Good to know. Then a bit of a follow-up on the previous question regarding the volume side, you were very specific there, giving us a range on your very helpful. What’s your comment on how we should look at volumes for North America for Q1 and quarters beyond that?

Ivar Vatne

Yeah. I can start on that piece. I think we were probably quite reluctant to give a volume for the whole year.

Johannes Grunselius

Sure.

Ivar Vatne

But if you just kind of think about this logically, that the, the biggest route operation right now that you expect for next year is coming from North America. And that is quite clear when we look at what operating rates we’ve had other mills there for the last quarters. I think Andrei mentioned again that we had another quarter in and around 60%, which is, to be honest, extremely low.

We’ve hold much better in Europe, over the year. And I think, call it, an 85% operating fill rate for Europe is not a bad estimate for 2023. That means that there should be still opportunities also in Europe. But I think it’s fair to say that given our broader portfolio, it’s a little bit easier to find some alternatives and fill the machines with profitable volume in Europe versus the US.

So for that number that as Andrei mentioned, I think we would expect US to have the bigger piece. And looking into 2024 versus 2023, I will be very surprised if not the bigger volume recoveries is coming from US.

Johannes Grunselius

Okay. For Q1, sorry, I might have misunderstood it, the 20 to 40 tonnes in uplift quarter-over-quarter. Is that for the whole group then for both divisions?

Ivar Vatne

Yes, that’s correct.

Johannes Grunselius

Okay. Okay. Got you. Okay. Thank you for answering the questions. Great.

Operator

Thank you. Now we’re going to take our next question. Just give us a moment. And the next question comes from the line of Martin Melbye from ABG. Your line is open. Please ask the question.

Martin Melbye

Good morning. Could you just confirm how large these liquid packaging board price increases have been? And second question, you said something about a kraft paper price changes from March, which I missed you do repeat that, please?

Andrei Kres

Yeah. Good morning. Martin. So in terms of liquid packaging board, I mean, we don’t comment individual contracts, but the price increases that we have achieved are sizable. And if we look at the total segment as a whole, it would add roughly SEK 800 million in 2024 compared to 2023 in pricing. And in — within the sack paper, the figure Ivar mentioned is that we intend to increase the prices for brown sack with 8% starting from March this year.

Martin Melbye

Excellent. Thank you.

Operator

Thank you. Now we’re going to take our next question. And the next question comes from the line of Cole Hathorn from Jefferies. Your line is open. Please ask a question.

Cole Hathorn

Thanks for taking my follow-up. Just one comment on how you see fiber costs in the Nordic region developing. And I know you’ve given for the comment for the 1Q, but I’m just wondering how your thoughts are changing through the full year of 2024. And I want you to link that to have fiber costs being higher for longer, have they changed how you’re thinking about setting prices for your product categories going forward? Thank you.

Ivar Vatne

No. Listen, it’s a very good question, Cole. So thanks for coming on that topic. I mean, if you start on the wood cost. I mean, we have seen some price movements upwards in Sweden last week, but that has to be said, that’s first and foremost on sawtimber. But it is no doubt, if you just play with the scenario that the whole Europe now and in particular, Nordic have had a production level in 2023, which has been on a much lower than normalized level. It’s not unreasonable to think that the trend for wood prices will then continue upwards in 2024 if we will start to see increased production level as a whole.

We don’t have an estimate of what that might mean, but that’s a bit our read of the trend. But I can confirm that what has already been announced last week, that will not hit our P&L before Q2. And the value of that for the time being, it’s very limited. It’s more in the SEK 5 million, SEK 6 million range, and that’s annualized. So, so far, that’s not something at all that we have much on the radar.

And I think the second point is very interesting, and it’s a good one. because there is no doubt that if you consider that input cost increases are certainly not expected to ease and actually to the country might start to go up. We have a very clear expectation that sales prices should also start to move. And certainly, indeed we will take the responsibility to be early on capturing an opportunity that might arise. And then just as an example of this is just what myself and Andrei comment on is the 8% price increase now that we have announced recently on Bronze.

Cole Hathorn

Thank you. Very clear.

Operator

Thank you. There are no further questions. I would now like to hand the conference over to your speakers for any closing remarks.

Lena Schattauer

Yeah. We will thereby conclude this conference. So thank you all for participating, and welcome back next time when we report the Q1 report. And please note the date for that, the 24th of April. Thank you, and goodbye.