Interim report January–June 2021

Continued profitable growth and strong cash generation

KEY HIGHLIGHTS

• High sales growth driven by strong demand
• Profit improvement
• Strong cash generation
• First deliveries of liquid packaging board from Gruvön

QUARTERLY DATA

• Net sales grew by 6% to SEK 6 504 million (6 156) Excluding currency effects net sales grew by 9%
• Adjusted EBITDA* increased by 14% to SEK 883 million (774)
• Operating profit amounted to SEK 404 million (245)
• Net profit was SEK 311 million (202)
• Earnings per share amounted to SEK 1.50 (0.98)

OUTLOOK

• Continued strong market conditions
• Good availability of pulp wood
• Higher input costs compensated by price increases
    

Comments by the CEO

Strong sales growth continued throughout the second quarter, driven by volume growth, product mix and higher prices. Sales volumes increased compared to the same period last year despite different timing in the maintenance schedule. Profitability continued to strengthen with excellent cash flow delivery in the second quarter.

Halfway into 2021, we experienced strong demand and a good sales momentum for all our product segments. The positive market outlook is expected to remain throughout the year. We are implementing additional price increases in several of our segments to counterbalance cost increases in chemicals, energy, market pulp and logistics. Pulp wood supply in our regions remains good and at relatively stable price levels.

In April, we had a­ production incident at our Gävle mill. Fortunately, no one was injured, but our board production was disrupted for a few weeks and I would like to take this opportunity to apologize to all our customers affected. I assure you that we will do our outmost to ensure stable deliveries going forward.

Our new board machine at Gruvön, KM7, produced its first commercial output of liquid packaging board in May, ahead of schedule. The ramp-up and certification work will continue, and we expect gradually increasing deliveries of both liquid packaging board and carton board from Gruvön. This will allow further mix improvements by reallocating production across mills as well as the acceleration of KM7 over the next few years.

Pandemic restrictions are easing. We remain cautiously optimistic of a return to normality but will continue to keep safeguards in place for our planned maintenance shutdowns in the autumn. Office restrictions will be lifted in stages over the coming months pandemic restrictions permitting.

BillerudKorsnäs is dedicated to help limit climate change. 97% of our production is fossil free and we have developed a strong step by step plan to achieve our science-based targets by 2030. We remain committed to active and responsible forestry practice that increases the absorption of CO2 from the atmosphere. Our bio-based products can replace fossil-based materials and by developing new, climate smart applications, we can further enhance the beneficial effect for the climate. For example, online packaging made from our strong Xpression e-com paper reduces CO2 emissions over the packaging’s life cycle compared to a plastic-based alternative, according to the Swedish research institute RISE.

Our current business priorities remain the same: health and safety, stable production, the ramp up of Gruvön, a competitive wood supply as well as delivering our cost and efficiency programme. Good performance in these areas will bring profitable growth over the next few years.

At the same time, we are reviewing the company’s longer-term strategic direction. The markets in which we operate, particularly primary fibre carton and container board, are indicating strong growth opportunities for the foreseeable future. We are starting to investigate additional supply capacity post 2024 assuming full capacity utilisation by then.
 

Christoph Michalski
President and CEO
 

The quarter in review

SALES AND RESULTS
Net sales for the second quarter grew by 6% to SEK 6 504 million (6 156). Excluding currency effects sales increased by 9%, driven by higher sales prices, an improved sales mix and increased volumes.

Adjusted EBITDA increased to SEK 883 million (774), mainly due to the positive sales mix and volume development. The comparison with the same period last year is affected by the change in the maintenance schedule. No items affecting comparability impacted the results for the second quarter (-39).

MARKET DEVELOPMENT AND OUTLOOK
During the second quarter of 2021, market conditions for most segments improved with high demand and increasing price levels. The exception being liquid packaging board, where market conditions were stable.

The market outlook for 2021 is positive. Demand is expected to remain strong in all segments and the conditions for liquid packaging board is expected to be stable. Higher input costs in some categories are expected to be compensated by price increases.  

EVENTS IN THE QUARTER
Annual maintenance was carried out at Gruvön in April, under extensive precautionary measures due to the coronavirus pandemic. The total maintenance shutdown costs amounted to approximately SEK 200 million.

An incident at the Gävle mill in April damaged equipment connected to the digester in the bleached pulp mill. Repair work was carried out and production ran at a slower pace during a couple of weeks, implying a volume loss of 22 000 tonnes. The financial impact of the incident will partly be covered by insurance compensation and the net effect amounted to approximately SEK 75 million in the second quarter.

BillerudKorsnäs’ board machine at Gruvön, KM7, started to deliver its first grades of liquid packaging board to customers in May, ahead of time schedule. The qualification of board grades for one litre and portion sized aseptic liquid packaging for one filling system was completed faster than planned, thanks to excellent customer collaboration.  

On 15 April, Matthew Hirst was appointed new EVP, Commercial. He will take office on 16 August and has previously held various senior sales and commercial development roles in Essity’s professional hygiene business unit. Helene Biström, previous EVP Commercial, left at the end of April to pursue opportunities outside BillerudKorsnäs.

BillerudKorsnäs awarded Andritz the contract for a new recovery boiler at the Frövi mill, to be assembled during 2022. The groundwork has been initiated and the new recovery boiler is planned to be in operation by the end of 2023. BillerudKorsnäs introduced Pure DecorX™ – a new generation of coated white top kraft liner with a 3-ply construction, light-weighting opportunities, high runnability in converting machines and enhanced packaging performance. Pure DecorX™ yields excellent print results which makes it very competitive in applications such as shelf ready packaging, displays and packaging of food, beverage, and premium consumer goods.

EVENTS AFTER THE QUARTER
In July, BillerudKorsnäs initiated 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 20 July 2021.

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