Interim report January–September 2021
High growth and significantly improved earnings and cash flow
- High sales growth driven by strong demand
- Price increases more than offset cost inflation
- Significantly improved EBITDA margin
- Continued strong cash generation
- Net sales grew by 17% to SEK 6 494 million (5 561). Excluding currency effects net sales grew by 18%
- Adjusted EBITDA* increased to SEK 1 117 million (570), corresponding to an adjusted EBITDA margin of 17% (10)
- Operating profit amounted to SEK 639 million (86)
- Net profit was SEK 477 million (52)
- Earnings per share amounted to SEK 2.31 (0.25)
- Continued strong market conditions
- Good availability of pulp wood
- Higher costs for chemicals, logistics and energy
- Further price increases and mix improvement will be necessary to offset cost inflation
Comments by the CEO
Performance was strong in the third quarter driven by mix improvement and price increases across all segments, offsetting cost inflation for some categories. Currency-neutral net sales grew by an impressive 18% compared with the same period last year. The EBITDA margin improved to our target level of 17% through a combination of market tailwind and our profitability-enhancing initiatives. Demand remained strong throughout the quarter and our order pipeline is very good. Our cash flow generation was impressive also in this quarter.
At the beginning of September, production in our Gävle mill was significantly impacted due to the extreme and unprecedented rainfall and flooding that occurred in August in the Gävle area. As water quality for the mill deteriorated to record levels the mill was shut for nine days. Production resumed sporadically until the annual shut end of September. Since the restart, the mill is operating at regular capacity despite lower-than-normal water quality levels.
Our current business priorities remain health and safety, stable production, ramping up board production at Gruvön, ensuring competitive wood supply, and delivering our cost and efficiency programme. Regarding safety, in 2021 we have been focusing on improving safety procedures as well as safety training for all employees. We are making progress, but safety is still not good enough which is why we intensify our work with this.
Our production footprint allows for overlapping capabilities and makes it possible to shift some volumes and optimise production between mills. In the Board product area, the output of liquid packaging board from Gruvön has accelerated. In the Paper product area, Skärblacka has become a world leading MG (machine glazed) centre since the investment at Skärblacka a couple of years ago.
Over the last months, we have developed a strategic direction based on our leading positions in attractive segments with good growth opportunities. One of the keys to success lies in our products’ ability to replace fossil-based packaging with sustainable packaging solutions. Our financial position is robust, and the prospects are promising. I look forward to sharing more details about our strategy at the Capital Markets Day in Stockholm on 17 November.
The market outlook remains positive for the next few quarters. We expect continued good availability of pulp wood, but costs for chemicals, logistics and energy are expected to rise. Prices we pay for near-term electricity consumption are hedged to a large extent. To counteract the ongoing cost inflation, we plan to implement further selective price increases.
President and CEO
The quarter in review
SALES AND RESULTS
Net sales for the third quarter grew by 17% to SEK 6 494 million (5 561). Excluding currency effects sales increased by 18%, driven by higher sales prices, an improved sales mix and increased volumes.
Adjusted EBITDA increased to SEK 1 117 million (570), mainly due to higher sales. The comparison with the same period last year is affected by the change in the maintenance shutdown schedule.
No items affecting comparability impacted the result for the third quarter (–).
Market development AND OUTLOOK
During the third quarter of 2021, market conditions were strong in all segments, with increasing prices for some segments. The exception being liquid packaging board, where market conditions were stable.
The market outlook for the next quarters is positive. Demand is expected to be strong in all segments and the conditions for liquid packaging board is expected to be stable. Higher costs for chemicals, energy and logistics will need further price increases in the quarters to come.
events in the quarter
Annual maintenance was carried out at Karlsborg, Rockhammar and Gävle, under extensive precautionary measures due to the coronavirus pandemic. The total maintenance shutdown costs amounted to around SEK 290 million.
On 29 July, BillerudKorsnäs announced that it is in a process with the aim of divesting the mill in Beetham. The strategic importance of the Beetham mill has been reduced since the machine glazed (MG) paper business has been focused to the Skärblacka mill. The process to divest the business is ongoing and no binding agreement to divest the mill has been entered into.
As a consequence of extreme and unprecedented rainfall and flooding in the Gävle area in August, production at Gävle had to be stopped in the beginning of September due to poor water quality in the lake from which process water is sourced. The unplanned production stoppage implied a volume loss of around 20 000 tonnes of predominantly liquid packaging board, with a negative earnings impact of around SEK 75 million, whereof around two thirds affected the third quarter result and one third will impact the fourth quarter result.
The investment project for a new recovery boiler at Frövi progressed according to plan. Blasting and groundwork has taken place and during the autumn the casting of the bottom foundation will start. The assembly of the new recovery boiler is planned to begin during 2022.
BillerudKorsnäs initiated in July a marketing campaign connected to the launch of two low grammages of the flagship cartonboard product CrownBoard Prestige®. With this addition, the CrownBoard Prestige range comprises ten grammages. It is developed to meet the needs of discerning brands for packaging premium consumer goods.
For further information, please contact:
Ivar Vatne, CFO, +46 8 553 335 07
Lena Schattauer, Head of Investor Relations, +46 8 553 335 10
This information constituted inside information prior to publication. This is information that BillerudKorsnäs AB (publ) is obliged to make public pursuant to the EU Market Abuse Regulation. The information was submitted for publication, through the agency of the contact persons set out above, at 07.00 CET on 22 October 2021.