INTERIM REPORT for Bergs Timber AB (publ) 1 January 2019 – 30 June 2019

Second quarter (1 April – 30 June)

• Net sales for the second quarter 2019 amounted to SEK 913 (711) million. The increase relates to the acquisition of the Norvik operations in the Baltic States and the UK that was completed in May 2018.

• Operating profit amounted to SEK 38 (55) million, representing an operating margin of 4.2 (7.7) percent. Adjusted for income from negative excess value and transaction costs related to the acquisition of Fågelfors Hyvleri, the operating profit was SEK 27 million.

• Profit after tax was SEK 28 (42) million. Earnings per share, before and after dilution, was SEK 0.08 (0.16).

• Cash flow from operations amounted to SEK 28 (63) million and capital expenditures amounted to SEK 21 (96) million.

• Fågelfors Hyvleri was acquired on 27 June.
  
  
• Refinancing of the Group was completed
  
  

Interim period (1 January – 30 June)

• Net sales for the interim period amounted to SEK 1,798 (1,078) million. The increase relates to the acquisition of the Norvik operations in the Baltic States and the UK that was completed in May 2018.

• Operating profit amounted to SEK 98 (87) million, representing an operating margin of 5.5 (8.1) percent. Adjusted for income from negative excess value and transaction costs related to the acquisition of Fågelfors Hyvleri, the operating profit was SEK 87 million.

• Profit after tax was SEK 80 (68) million. Earnings per share, before and after dilution, was SEK 0.23 (0.32).

• Cash flow from operations amounted to SEK -6 (101) million and capital expenditures amounted to SEK 56 (106) million. The cash flow was negatively affected by increased working capital due to seasonality.
  

Note: The acquired companies are consolidated from 15 May 2018, which affects the comparability with previous periods.

CEO Comments

Price reductions in the market
Consumption of sawn timber remains unchanged and at a high level. Despite this, there has been further price reductions during the second quarter, mainly related to the increased production from spruce beetle damaged forest in central Europe. The fact that no one knows how big volumes of damaged logs to expect, creates uncertainties in the market. Beetle damaged logs result mainly in lower quality sawn goods, for which major price reductions have taken place. Prices for high quality spruce and pine are more stable although there have been significant price reductions, in particular in countries like the UK and USA, both important markets for Bergs Timber. During the last months, Canadian sawmills have announced curtailed production volumes which has to some extent mitigated the price reductions in the US market.

Bergs Timber’s development
Margins for our sawmills were considerably reduced during the second quarter, whereas margins for further processing remains stable and have even increased from the first quarter. Our stock of sawn timber has reduced and is normal for this time of the year.

Market development for sawn spruce timber remains uncertain for the second half of this year. We expect a less vulnerable market situation for sawn pine timber than for spruce timber and this is true also of our by-products. Raw material prices have been reduced by 3-10 percent for the second half of the year and will gradually and partially compensate for lower sales prices. The market for further processing is expected to remain good.

We are working hard to increase production of our more profitable further processed products. During second half of this year, the new house building production line at Byko-Lat in Latvia will start. This will also enable us to increase production of doors and windows. Our market for garden products remains good. It is satisfying to see that the profitability for the further processed business is good and contributing to more stable margins for Bergs Timber.

Production at our Swedish sawmill in Broakulla stopped during July. At the same time our Estonian sawmill Savi went to one shift and will stop completely in December. These changes will have a positive effect on the results for the second half of this year.

We are strengthening our Swedish sales organisation and building a completely new organisation for our UK distribution company. We expect positive results from these changes during 2020.

Acquisition
The acquisition of Fågelfors Hyvleri is now completed and it became part of Bergs Timber from 27 June. This will give us an annual capacity of about 100,000 tons pellets and heating logs, as well as planing capacity of 35,000 m3. With an increased demand for renewable energy, the pellet market is developing strongly in Europe. This acquisition is part of our plan to increase further processing and diversify our company.

Long term development
During the second quarter of 2019, results for sawmills have declined significantly. This does not change our medium to long term positive outlook. Demand for timber, as a renewable and effective building material, is increasing. This is giving new opportunities for companies in our industry to grow and create new and profitable business models.

We also believe that today’s sawmill situation, together with an increased interest in our industry, will result in further consolidation and the creation of larger timber companies.

At Bergs Timber, we continue to evaluate our sawmill production and look at different options for increased productivity. We are at the same time working hard to expand further processing in order to build a more diversified timber company.

 
Peter Nilsson
Chief Executive Officer 

 
Further information regarding the interim report can be provided by the CEO, Peter Nilsson, on telephone number +46 70 315 09 27 or CFO, Anders Marklund, on +46 70 284 47 96.

The information in this interim report is such that Bergs Timber AB (publ) is obliged to disclose pursuant to the EU's Market Abuse Regulation and the Swedish Securities Market Act. The information was released for publication 31 July 2019 at 13:00. The interim report is available on the company's website, www.bergstimber.se 

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