Interim Report January – March 2019

Strong sales performance

KEY HIGHLIGHTS

• Good demand and strong sales performance in all divisions
• Solid result despite high fibre costs
• Ramp-up of KM7 has started and is proceeding according to plan
• Process of finding suitable investors for Bergvik Öst is ongoing

QUARTERLY DATA

• Net sales were SEK 6 504 million (5 897), an increase of 10%, mainly as a result of higher sales prices and positive currency effects.
• Adjusted EBITDA* was SEK 1 035 million (1 102), a decrease of 6%.
• Operating profit was SEK 640 million (677), a decrease of 5%.
• Net profit was SEK 451 million (498), a decrease of 9%.
• Earnings per share amounted to SEK 2.18 (2.40).

Q2 OUTLOOK

• Continued good demand for our products.
• Increased price pressure is expected – focus is on safeguarding current price levels.
• Total cost for fibre expected to flatten out at a high level
    
  

COMMENTS BY CEO

“I am very pleased to announce that the ramp-up of KM7 at Gruvön is proceeding according to plan and test-runs of the machine are now ongoing”

The first quarter was marked by continued good demand and stable prices for innovative and sustainable packaging in our selected product areas. Strong sales performance combined with positive effects from currencies and renegotiated long-term contracts increased net sales by 10% in the quarter, which is well above our financial target of 3-4%.

I am very pleased to announce that the ramp-up of KM7 at Gruvön is proceeding according to plan and test-runs of the machine are now ongoing. This 550,000 tonnes board machine is one of the most modern production facilities in the world and makes BillerudKorsnäs well positioned to meet the increasing demand for sustainable packaging solutions. We reiterate that the structural changes in connection to the ramp-up of KM7 will have a negative effect on EBITDA of approximately SEK 500 million during 2019 and SEK 200 million during 2020. Following this short-term impact, the investment will have a positive earnings contribution from 2021.

A comprehensive safety programme based on best practise has been launched and the entire company is now working to prevent accidents and eliminate risks with a zero injury vision in mind. I truly believe that a safe company is a well-run company. Therefore, our safety-first initiative, together with the production excellence programme are the main focus areas for BillerudKorsnäs. On the back of this, we see good opportunities to increase production stability and volumes in 2019 compared with last year.

To secure long-term competitive and stable wood supply we have entered into an agreement to acquire Bergvik Skog Öst. The transaction is expected to be completed during the second quarter and the process to find suitable investors for a substantial part of the forestland is ongoing.

We have announced that a joint venture will be formed with plastic packaging solutions provider ALPLA. The two companies share the ambition to drive packaging innovation in a sustainable direction. With combined resources, we will continue the development of the paper bottle with the aim of launching the product and then scaling up production.

For the second quarter, our assessment is continued good demand for our products and we foresee our order books to remain solid. However we expect price pressure to increase and are focusing on safeguarding current price levels. We expect unchanged market demand for pulpwood and the total cost of fibre to flatten out at a high level.

In the longer term, market trends offer significant opportunities for continued growth. We are well positioned with a broad offering of innovative and sustainable packaging and solutions. Demand for a comprehensive offering, in which the sustainability of materials plays a key role, is growing. Packaging is gaining an increasingly important role in many brand owners’ efforts to make their products more competitive. This continues to give us great confidence in our products and development.

Our strategy is based on achieving sustainable profitable growth by challenging conventional packaging materials and solutions. To unlock BillerudKorsnäs full potential we have an agenda that focuses on safety, securing the successful ramp-up of KM7, safeguarding wood supply, stabilising production, enhancing efficiency and accelerating innovation and solutions.

With our new organisation in place, we see positive effects in operational efficiency, customer orientation and profitability focus. We are well prepared to capture customer demand and expand in the value-chain.

Petra Einarsson, President and CEO
   

SALES AND RESULTS
Net sales for the first quarter increased by 10% to SEK 6 504 million (5 897), as a result of higher sales prices and positive currency effects. The sales volumes were largely unchanged.

All divisions delivered growth, on or above 10 %, mainly driven by higher sales prices and positive currency effects.

Adjusted EBITDA decreased by 6% to SEK 1 035 million (1 102). Higher costs for raw materials and energy as well as a negative impact from lost production volumes at Gävle and a changed product mix at Gruvön were partly offset by increased sales.

The implementation of IFRS16 affected adjusted EBITDA positively by SEK 27 million in the first quarter, see note 1. Items affecting comparability, amounting to SEK 13 million (37) and reported in Other, was mainly related to Gruvön and KM7.
  

MARKET DEVELOPMENT AND OUTLOOK
Market conditions for liquid packaging board, cartonboard and containerboard were good in the quarter. Conditions are expected to remain good with normal seasonal variations except for uncoated liner, for which the market is more unstable and price pressure is expected to increase.

The market for sack and kraft paper was good during the quarter but has weakened compared with the same period last year. The pulp market has weakened due to the slowdown in the Chinese market. The market pulp price index (PIX) has dropped from USD 1 200 at year-end 2018 to USD 1 105 at the end of March 2019.
   

For further information, please contact:
Christopher Casselblad, EVP Communication & Sustainability, +46 8 553 335 08
Lena Schattauer, 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 17 April 2019.

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