The following is excerpted from the question-and-answer section of the transcript.
(Questions from industry analysts are provided in full, but answers are omitted - download the transcript to see the full question-and-answer session)
Question: Linus Larsson - SEB, Research Division - Analyst
: You disclosed pretty well your variable cost development in the fourth compared to the third quarter. I wonder on the first compared to the fourth
quarter on a group level and maybe on a unit cost level would be easier given the strike. But how do you see variable cost development in the first
compared to the fourth quarter? Is it still rising? Is it even accelerating or something completely different?
Question: Linus Larsson - SEB, Research Division - Analyst
: Okay. But you're not expecting a further increase then Q1 and Q4, if I understand you right.
Question: Linus Larsson - SEB, Research Division - Analyst
: Sure. No, that's clear. And then maybe, which is partially related, I guess, if you could give us an update on your energy hedge situation because
there are some changes. So one question would be, to what extent, if any, have you hedged your share of Olkiluoto 3? And also, to what extent --
sorry, to what extent have you hedged your electricity consumption now that you're presumably consuming a lot less electricity with the ongoing
strike? So maybe for the first quarter and I guess for the remainder of the year, if you could just give us a brief update as to what degree you are
hedged on energy, please?
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Question: Justin Joseph Jordan - BNP Paribas Exane, Research Division - Analyst
: I've got 2 very separate questions. Firstly, I guess, on spearheads for growth. I fully approve that we're in a major global pandemic with huge inflation
that we haven't seen for many decades. But I just wanted to double check just on the existing 2 major spearheads clearly in Uruguay and Germany.
The Board's hurdle rate of 14% return on category, that still is clearly applicable despite the delays and the costs implications that, that has led to.
And then I suppose just thinking about the Board's decision perhaps at the end of 2022 on the biofuel refinery. I'm assuming that I sympathize
with any Board trying to make a major investment decision in the current climate. But I'm assuming that returns discipline that UPM has had for
many years still applies to any future investment decision that the Board will be taking until '22, 2023.
And then separately, a separate question completely on, shall we call it, Raflatac and shall we call it the European Specialty Paper business, so the
non-Asian portion. Clearly, those businesses have been a star within UPM in 2020, 2021 enjoying stellar margins. But I'm just noting that EBIT
margins or comparable EBIT margins in both Specialty Paper and Raflatac have been easing successively in recent quarters. Are those businesses,
do you believe they're now sort of past their peak in margins? Or if you think about something like Raflatac where pre-2020, you were talking about
high single-digit comparable EBIT margins, you had 13% plus EBIT margins in 2020 and 2021 but easing to 10% in Q4 2021. Was 2021 one sort of
exceptional period for those businesses? Or really what I'm asking, I suppose, is what are their pricing power against what is clearly an inflationary
cost environment as we think about 2022, 2023 for both Raflatac and Specialty Paper? So I'm sorry, 2 very separate questions, but I appreciate your
answers.
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