Year-end report for Bergs Timber AB (publ) 1 January 2019 – 31 December 2019

Key Highlights

• Disappointing Q4 but a more balanced market seems to surface
• Plan for consolidation of our sawmill production in 2020 for improved competetiveness
• Good order book for further processed products
• Launched ”Woodworks by Bergs” for sales of doors, windows, houses, garden products and protected wood

Fourth quarter (1 October – 31 December)

• Net sales for the fourth quarter 2019 amounted to SEK 687 (772) million. The decrease is due to lower sales volumes and prices for sawn timber. 
• Operating profit amounted to SEK -22 (49) million. Adjusted for restructuring costs in Estonia, the operating profit was SEK -19 million.
• Profit after tax was SEK -32 (48) million. Earnings per share, before and after dilution, was SEK -0.09 (0.14). 
• Cash flow from operations amounted to SEK 2 (44) million and capital expenditures amounted to SEK 35 (27) million.

Full year (1 January – 31 December)

• Net sales for the financial year 2019 amounted to SEK 3,206 (2,655) million. The increase relates to the acquisition of the Norvik operations in the Baltics and the UK and Fågelfors Hyvleri. 
• Operating profit amounted to SEK 78 (202) million, representing an operating margin of 2.4 (7.6) percent. Adjusted for one-off items, the operating profit was SEK 60 million.
• Profit after tax was SEK 45 (174) million. Earnings per share, before and after dilution, was SEK 0.13 (0.66). 
• Cash flow from operations amounted to SEK 147 (232) million and capital expenditures amounted to SEK 131 (157) million.
• The board proposes a dividend of SEK 0.04 (0.10) per share, corresponding to SEK 14 million.

     
 
Note: The acquired companies from Norvik are consolidated from 15 May 2018 and Fågelfors Hyvleri is consolidated from 27 June 2019, which affects the comparability with previous periods.

CEO Comments

Disappointing Q4 but a more balanced market seems to surface
The market for sawn and planed timber has been very challenging during the fourth quarter and prices have continued to decrease. The outbreak of the spruce bark beetle in Central Europe and South Sweden and the ensuing oversupply of low cost logs have continued to negatively affect the timber market.  The spruce bark beetle situation in Central Europe is still not resolved and harvesting of damaged logs continues. The situation in South Sweden has improved and at the moment there are only small volumes of damaged logs available in the market. The Baltic region is not affected by the spruce bark beetle problems.

Consumption of timber products remains stable. The market in the US continues to improve and a gradually better market conditions could be expected in the UK after the Brexit decision.  The market balance has improved during December as production volumes have been slightly reduced in Europe and more substantially in Canada. Finnish production was reduced by 28 % in December, compared to the same period the previous year, due to a labour dispute which is still ongoing in several sawmills. Stock levels are not increasing and seems to be levelling out, which is a good sign at this time of the year.

Prices for sawn timber has continued to fall during 2019 and has for the fourth quarter reached unprofitable levels for most sawmills. However, as a consequence of the improved market balance some price increases have been recorded for deliveries during the beginning of 2020.

The market for doors, windows and garden products remains stable.

Bergs Timber’s development
The fourth quarter has been very challenging for our Swedish sawmills. Reduced production volumes and lowering sales prices have led to negative margins. Reduced production volumes during the Christmas break have helped to improve our stock situation and should in combination with cost reductions and stabilized prices gradually improve the result.

Margins at Vika Wood, our Latvian sawmill, have been hit by lower sales prices.  However, log prices have been reduced and the profitability during the fourth quarter has been satisfactory. Due to further reductions in log prices, we expect better margins at Vika Wood for the first quarter 2020.

We have made changes in the management for our Estonian sawmill company Laesti during the fourth quarter. The investment in the new log infeed will start during February. Raw material cost has come down for 2020 and we expect improved results. 

Byko-Lat, our Latvian processing company, has increased the capacity for doors and windows as well as for house production. Our order books are at good levels for the first quarter 2020.

Our UK port and distribution company has been through a reconstruction period. In combination with challenging market conditions, the financial performance has been unsatisfactory. Infrastructure investments, organisation and operational improvements are now in place. We expect volumes and results to improve during 2020. Our own vessel was sold in February 2020 and an agreement for a time charter arrangement has been signed.

Focus areas
The margins for Bergs Timber have decreased during 2019 and the result for the fourth quarter is unsatisfying. Margins for further processing remains at reasonable levels whilst our Swedish and Estonian sawmills are loss making.

During the first quarter 2020, we will finalise a plan to improve competitiveness at or Swedish and Estonian sawmills.

During December we launched a sales and distribution company, “Woodworks by Bergs”, which will handle sales of doors, windows, houses, garden products and related products on the Swedish market. Recruitments have started and we expect deliveries to start during spring this year. This investment is together with our development of the UK operations exciting and gives us a platform for increased sales of more processed timber products.

Our new sustainability plan will be launched together with our annual report for 2019.

Bergs Timber concentrates its efforts to consolidate the existing sawmill production and to strengthen the sales and distribution organisations. Our medium to long term goal is to further raise the productivity in our sawmill sector while at the same time promote the development of Bergs Timber as a timber processing and distribution company.

 
Peter Nilsson
Chief Executive Office

 
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 year-end 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 5 February 2020 at 13:15. The year-end report is available on the company's website, www.bergstimber.se

Tags: