BillerudKorsnäs: Interim Report January - June 2019
Solid underlying result
Strong sales performance
Continued high fibre costs
Ramp-up of KM7 proceeding according to plan
Divestment of a majority share of Bergvik Skog Öst, to be
completed in the third quarter
Net sales were up by 7% to SEK 6 293 million (5 898) as a result
of positive currency effects, higher sales volumes and increased
Adjusted EBITDA* was SEK 539 million (671), impacted by higher
costs for raw materials and start-up effects for KM7.
Operating profit was SEK 194 million (-174).
Net profit was SEK 182 million (-133).
Earnings per share amounted to SEK 0.88 (-0.64).
Market conditions expected to remain good for liquid packaging
board and cartonboard.
Weaker market conditions for some segments.
Increased price pressure expected.
Total cost for fibre is expected to flatten out at the current
COMMENTS BY CEO
We deliver a solid result despite continued high fibre costs and
start-up effects for KM7
High demand for sustainable packaging solutions continued to drive
growth. Net sales in the second quarter improved by 7%, positively
affected by currency, higher sales volumes and price increases. We
deliver a solid result despite continued high fibre costs as well as
start-up effects for KM7 of approximately SEK 190 million.
Production availability has been satisfactory during the quarter and
sales volumes were up compared to same period last year. Operational
efficiency is improving, supported by our production excellence
programme and group-wide safety initiative, but lost production
volumes have affected us during the first half of the year.
The ramp-up of the new board machine KM7 at Gruvön is proceeding as
planned. During the second quarter we delivered on important
milestones and since the end of June the machine is producing liner
for customers. The next step will be to introduce coated material,
and in October we aim to have certification material sent to
customers. For the full year we estimate the negative start-up
effects for KM7 on EBITDA to total SEK 500 million.
As communicated, we will divest a majority share of Bergvik Skog Öst
to the pension company AMF and have agreed on a 15-year long
agreement regarding the supply of wood corresponding to approximately
one tenth of our total wood supply. We have thereby secured a
long-term, competitive and stable wood supply from this forestland.
The transaction is planned to be completed on 30 August and will
result in a positive cash effect of around SEK 7.9 billion. The
balance sheet will thereby be substantially strengthened, enabling
investments and acquisitions for a continued profitable growth.
BillerudKorsnäs market position and know-how offers fantastic
opportunities to grow within packaging solutions. We are investing in
innovation of new products and believe that the fastest way to market
is through collaboration. An example of our way of working is the
joint venture that we have formed with ALPLA, where we share the
joint vision to develop a fully bio-based and recyclable paper bottle
in the near future. Carlsberg and Absolut have already signed up to
take part in the commercialisation of the paper bottle.
Long-term demand for fibre-based packaging is being driven by the mega
trends of urbanisation, digitalisation, globalisation and
sustainability. Country by country, decisions are being taken to
reduce the use and litter of plastic. In Europe, our largest market,
the EU has adopted a directive on single-use plastics which
constitutes a great opportunity for us to replace plastic packaging
in many applications and contribute to a more sustainable consumer
For the third quarter we expect the market conditions for our liquid
packaging board segment, constituting around one third of our sales,
to remain good and within this segment we have secured a number of
long-term contracts. However, uncertainty in the containerboard
market has increased somewhat and we expect weaker market conditions
and increased price pressure for some of our smaller segments. To
mitigate the effects and safeguard our results we will continue to
focus on growth in areas where we are strong and to continue our
programmes for operational efficiency and cost savings. The total
cost of fibre is expected to flatten out at the current high level in
the second half of the year.
BillerudKorsnäs is well positioned to capture customer demand for
innovative and sustainable packaging. Our strategy is based on
profitable growth by challenging conventional packaging. We will
continue to focus on a successful ramp-up of KM7, safety, production
stability, efficiency improvements and innovation.
Petra Einarsson, President and CEO
SALES AND RESULTS
Net sales for the second quarter increased by 7% to SEK 6 293 million
(5 898) as a result of positive currency effects, higher sales
volumes and increased sales prices. The currency effect on net sales
amounted to SEK 148 million.
Adjusted EBITDA decreased to SEK 539 million (671), negatively
affected by higher raw material costs and start-up effects for KM7 of
approximately SEK 190 million, partly offset by increased sales and
lower scheduled maintenance shutdown costs compared with the second
quarter last year.
The implementation of IFRS16 affected adjusted EBITDA positively by
SEK 27 million in the second quarter, see note 1.
Costs affecting comparability amounted to SEK -40 million (483) and
reported in Other, were related to released provisions for staff
changes, demolition of old buildings and decontamination as well as
costs for the new board machine in Gruvön. Costs affecting
comparability for the second quarter of 2018 included provisions
totalling SEK 452 million and were related to strengthened workplace
efficiency and environment and unified accounting principles related
to spare parts and consumables.
MARKET DEVELOPMENT AND OUTLOOK
Market conditions for liquid packaging board and cartonboard remained
good during the second quarter, while the uncertainty in the global
container market increased. The market for sack and kraft paper has
For the coming quarter, market conditions are expected to remain good
for liquid packaging board and cartonboard, stable for semi-chemical
fluting and white kraftliner and challenging for sack and kraft
paper. The market pulp price index (PIX) has declined from USD 1 105
at the end of March to USD 1 000 at the end of June.
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 16 July 2019.