Interim report January–September 2022

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Another quarter with excellent growth, profitability and cash flow delivery

Key highlights Q3

  • Strong organic* and currency neutral sales growth of 20%
  • Record underlying EBITDA performance
  • Price and mix management more than offset cost inflation
  • Excellent cash delivery and all-time low leverage

Quarterly data Q3

  • Net sales increased by 82% to SEK 11,814 million (6,494), whereof Billerud North America accounted for SEK 3,718 million
  • Adjusted EBITDA** increased to SEK 2,196 million (1,117), whereof Billerud North America accounted for SEK 515 million
  • The adjusted EBITDA margin was 19% (17%)
  • Operating profit was SEK 1,536 million (639)
  • Net profit was SEK 1,347 million (477)
  • Earnings per share amounted to SEK 5.42 (2.31)

Outlook for Q4

  • Still solid demand for our products, but sentiment is changing towards being less favourable in Europe; stability in North America
  • Accelerated cost inflation in Europe with higher costs for wood and chemicals. Flat costs in North America
  • Continued focus on price and mix management to mitigate cost inflation


Comments by the CEO

2022 has been an excellent year so far for Billerud, and our third quarter performance was no exception. We delivered strong results for all our key performance indicators. Organic and currency neutral sales grew by 20% compared to last year, with broad-based growth across categories. Reported net sales grew by 82% compared to last year with the inclusion of the acquired North American business and currency tailwind.
Considering that the third quarter was unusually heavy on maintenance, the underlying EBITDA was all time high. We were able to more than offset higher costs in all input categories through continued focus on price management, driving profitable mix and continued delivery of our cost and efficiency program. Despite maintenance and upgrade shutdowns at four mills in the quarter, we delivered an EBITDA margin of 19%. The cash flow generation was outstanding, and our leverage has been reduced to an all-time low net debt to EBITDA ratio of 0.7. 
Our North American business is contributing significantly to both earnings and cash flow. A more balanced cost exposure following the acquisition of Verso makes us well positioned to meet more challenging market conditions. With continued North American contribution at current level, the acquisition payback period will be shorter than originally expected.
Our order book remains healthy and prices for deliveries in the end of the year are holding up. We start to see signs of a more gradual change towards normalized market conditions. There are signs of softening demand for some of our kraft and sack papers and some containerboard products, which is a natural effect of the lower consumer confidence in Europe. The demand for most of our products will however be robust even during recessionary conditions, with a proven resilience especially for liquid packaging board. For our graphic and speciality paper, prices are expected to be supported by capacity reductions in the industry.
Inflation phases and cost trends differ between Europe and North America. In Europe, pulpwood prices have increased significantly, mainly driven by lower availability of hardwood since the import stop from Russia. The volatile and high energy prices in Europe drive higher costs for chemicals, while logistics costs are expected to flatten out or decline. In North America, the cost inflation for pulpwood and other inputs is moderate and mainly driven by fuel and general price increases.
For the fourth quarter, we expect continued good demand for our products. In Europe, an accelerated cost inflation is expected with higher costs for wood and chemicals. In North America, the cost development is expected to be flat.
As geopolitical and macro-economic uncertainties are beyond our control, we will focus on what is in our hands to maintain a good performance. We continue to manage pricing to balance our need for cost coverage and the interest of our customers. We are developing new channels for wood sourcing, and we hedge our future energy consumption, which provides predictability. We are also planning an efficiency improvement programme as a continuation of our existing cost and efficiency programme, which will close in the fourth quarter.
We are currently running two significant pre-feasibility studies: The transformation from graphic paper to cartonboard in the USA and the construction of a bleached chemi-thermomechanical pulp mill together with our joint venture partner Viken Skog in Norway. Both projects are running on track with potential investment decision in 2023. These projects will both support our ambitions to grow in paperboard and have scopes that will provide considerable sustainability benefits.
On 12 October we changed the company name to Billerud. I would like to take this opportunity thank all our employees, customers, and all other stakeholders for the continuous trust in our company.
The name change was a natural step in our strategic journey to simplify and to integrate all our international businesses under One Billerud. Our mission remains the same: to challenge conventional packaging for a sustainable future.
Christoph Michalski
President and CEO

Third quarter

Sales and results

Net sales for the third quarter grew by 82% to SEK 11,814 million (6,494). Net sales excluding currency effects increased by 75%, mainly due to the acquisition of Verso, which was completed on 31 March 2022. Billerud North America (former Verso) had net sales of SEK 3,718 million and sales volumes of 254 ktonnes in the third quarter. Total sales volumes for the Group were 945 ktonnes (695). The organic* and currency neutral net sales growth for the Group was 20%.
Adjusted EBITDA increased to SEK 2,196 million (1,117). The higher result was mainly a result of the acquisition of Verso, higher prices across categories and positive currency effects. Billerud North America contributed an EBITDA of SEK 515 million. The third quarter result was positively affected by an insurance compensation of SEK 75 million for damages that occurred in the Gävle mill in 2019. The result was negatively affected by maintenance stops with a total estimated earnings impact of around SEK 890 million as well as by higher costs for fibres, chemicals, energy and logistics.
The comparison with the third quarter 2021 is affected by the acquisition of Verso 2022, the divestment of Beetham 2021, the changed maintenance schedule and an unplanned production stop at Gävle in 2021.
No items classified as items affecting comparability impacted the result for the third quarter (–).


Market development and outlook

During the third quarter of 2022, the market conditions were solid for all product segments. New price increases had effect mainly in the paper segments.
The demand for Billerud’s products is expected to be solid in the fourth quarter, despite the macro-economic uncertainty. Market conditions are however expected to gradually change to more normalized conditions. The cost inflation in Europe is expected to accelerate with higher costs for wood and chemicals. In North America, the cost development for inputs is expected to be flat.

Events in the quarter

Scheduled maintenance stops were carried out at Gävle, Karlsborg and Escanaba, and a planned maintenance and major upgrade shutdown was performed at Quinnesec. The total negative impact of the shutdowns in the third quarter amounted to around SEK 890 million, whereof around SEK 705 million was attributed to product area Paper and around SEK 185 million to product area Board. The impact of the shutdowns was higher than estimated mainly due to higher contribution margins than normal for the lost volume.
The scheduled maintenance and upgrade at Quinnesec included an upgrade investment that will increase the annual pulp capacity by around 30 ktonnes and upgrades that will enable production of more premium paper grades. These improvements are expected to have a positive annual earnings impact of around SEK 70-100 million.
On 1 July, the Wood Supply and Purchasing functions were merged into one organisation under the leadership of Anna-Maria Tuominen-Reini, EVP Procurement and Wood Supply. All sourcing tasks are thus coordinated in one organisation to deliver sourcing security and cost savings.
The building of a new recovery boiler at Frövi proceeded as planned during the third quarter. 50% of all activities to be completed before the project is finished were achieved. The new recovery boiler is planned to be in operation by the end of 2023.


Events after the end of the quarter

On 5 October, Billerud announced that it will investigate a relaunch of its OptiLabel™ HB made at the Quinnesec mill. Producing this speciality paper, which is designed for high-end pressure sensitive label applications, not only at the Escanaba mill but also at Quinnesec, will provide more manufacturing flexibility to support the American market.
On 12 October, the company simplified its name to Billerud to cater to its international customers. A new Articles of Association with the name Billerud Aktiebolag (publ) was registered by the Swedish Companies Registration Office in accordance with a resolution made by the 2022 Annual General Meeting. The costs for rebranding activities in the third quarter was around SEK 15 million.
On 24 October, the Board of Directors of Billerud appointed Ivar Vatne to Deputy CEO in addition to his current responsibilities as CFO. Deputy CEO is a newly created position reflecting the increased scope of the Billerud Group.

* Excluding the acquisition of Verso in 2022 and the divestment of Beetham in 2021.

** For key figures and a reconciliation of alternative performance measures including adjusted EBITDA, adjusted operating profit, adjusted EBITDA margin, adjusted operating profit margin, adjusted ROCE and interest-bearing net debt/adjusted EBITDA, see pages 16-18.


For further information:
Ivar Vatne, CFO, +46 8 553 335 07
Lena Schattauer, Director Investor Relations, +46 8 553 335 10


This information constituted inside information prior to publication. This is information that Billerud 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 25 October 2022.