BillerudKorsnäs: Year-end report January–December 2020

KEY HIGHLIGHTS
-Sales volumes increased by 5%
-Continued positive development of the ramp-up at Gruvön (KM7)
-Cost and efficiency programme exceeding target
-Strong operating cash flow
-The Board of Directors proposes dividend of SEK 4.30 per share

Quarterly data
-Net sales amounted to SEK 5 803 million (5 815). Excluding currency effects sales grew by 2%
-Adjusted EBITDA* was SEK 568 million (618). Lower sales prices and higher maintenance costs were partly offset by lower fibre costs and a positive trend of the ramp-up at Gruvön
-Operating profit rose to SEK 163 million (103), including SEK 73 million revaluation gain in an associated company
-Net profit from continuing operations was SEK 242 million (283)
-Earnings per share amounted to SEK 1.17 (1.61)

Q1 Outlook
-Stable and improved market conditions for most of our products, however demand in some segments continue to be affected by the coronavirus pandemic
-Positive price movements in selective segments
-Unchanged fibre costs
-Operational efficiencies and continued ramp-up at Gruvön

COMMENTS BY THE CEO Christoph Michalski (photo):
The year 2020 was an extraordinary period in which the coronavirus pandemic threatened people’s health, lives and livelihoods around the world. At BillerudKorsnäs, we have been relatively unscathed and are humbled by the resilience of our business and our employees’ ability to handle challenges and adapt to new working conditions. We have taken precautionary measures to prevent the spread of infection and to secure our operations and deliveries. Reduced demand in some end-user markets has meant challenging market conditions, although our largest market segment, packaging material for food and beverages, has been resilient.

BillerudKorsnäs delivered a decent fourth quarter financial results. Net sales excluding currency effects grew as a result of higher sales volumes. Adjusted EBITDA declined due to lower market prices, higher maintenance costs and unfavourable currency effects, while lower fibre costs had a positive impact. The company has a healthy financial position and the Board of Directors proposes a dividend of SEK 4.30 per share.

The year 2021 is looking brighter than the past year thanks to the widespread roll-out of vaccines. It is, however, still too early to celebrate as the coronavirus will continue to affect life in large parts of the world. While the macro-economic outlook remains uncertain, we expect stable market conditions for most of our product segments and price improvements in selective segments in the first quarter. We also anticipate a recovery in liquid packaging board. Demand in some market segments, such as paper for medical and hygiene products and food service, is however expected to remain challenging. The total cost of fibre is expected to be unchanged in the first quarter.

The world is undergoing a rapid transformational shift towards environmentally friendly packaging and e-commerce, and BillerudKorsnäs is perfectly positioned to capture values in that transformation. We are a leading provider of fibre packaging materials in attractive niches and offer innovative packaging solutions. The strength and purity of our materials means they are lightweight and have smaller environ-mental footprint than alternatives. We are taking a proactive lead on sustainability and have maintained our leading position in the containers and packaging category of the Dow Jones Sustainability Index.

This position provides a good foundation for value creation, and our ambition is to increase growth and profitability. We will continue our work on sustainability, with safety always coming first. It goes without saying that we will strengthen our efforts to further reduce the accident rate in our operation.

Our priorities for the current year are about further increasing customer satisfaction through our continual quality management work, progressing with the ramp-up of our new board machine at Gruvön to achieve increased production volumes and an improved sales mix, pursuing continued cost and efficiency measures, and securing a competitive wood supply. We will also initiate the investment in a new recovery boiler at Frövi. It will ensure continued long-term operation of this mill, improve environmental performance and provide opportunities for enhanced efficiency. The project is planned to be financed by cash flow from operating activities.

The quarter in review
SALES AND RESULTS
Net sales for the fourth quarter was almost unchanged and amounted to SEK 5 803 million (5 815). Excluding currency effects sales grew by 2%.

Adjusted EBITDA declined to SEK 568 million (618), negatively impacted by lower market prices and higher maintenance costs compared with last year, and positively impacted by lower fibre costs, reduced negative KM7 ramp-up impact and cost savings.

Items affecting comparability, reported under Other operations, amounted to SEK 73 million (-24) and were related to the result effect of a revaluation of biological assets in the associated company BSÖ Holding AB Group.

Market development AND OUTLOOK
During the fourth quarter, market conditions were largely unchanged compared with the third quarter. Demand for some of our products and services continued to be affected by Covid-19, mainly within Product area Paper and Managed Packaging. In general, all market segments were stable.

For the first quarter 2021, market conditions are expected to be stable and improved for most of our products, however demand in some segments are expected to continue to be affected by the coronavirus pandemic. Positive price movements in the first quarter are expected in some segments.

EVENTS IN THE QUARTER
On 1 November, Christoph Michalski assumed the position as President and CEO of BillerudKorsnäs. Christoph Michalski was from 2015 CEO and Executive Director of Vinda International Holding Ltd, an Asian producer of high quality and innovative tissue and hygiene products, listed on the Hong Kong stock exchange. Before that, he held a series of senior executive positions in the SCA Group. Christoph has also extensive experience from the fast-moving consumer goods sector as he has held executive positions at Unilever and the New Zealand dairy company Fonterra.

Lennart Holm, who was acting President and CEO of BillerudKorsnäs from 5 November, 2019 to 31 October, 2020 and member of the Board of Directors 2012-2020, whereof Board Chairman 2014-2019, remained in the company until the end of 2020.

For the third year in a row, BillerudKorsnäs maintained its leading position in the Dow Jones Sustainability Index. The results from this year’s ranking showed that BillerudKorsnäs is one of the 10% most sustainable companies in the world and the company with the highest score in the Containers & Packaging category.

Annual maintenance shutdowns were carried out at Frövi/Rockhammar, Skärblacka and Pietarsaari in the quarter. The total maintenance costs amounted to SEK 295 million.

At Gruvön, a leak in the soda recovery boiler occurred and was repaired in October. The incident caused two unplanned stops and a total of six days of lost production.

In December, the subsidiary BillerudKorsnäs Venture agreed to divest its 10.1% ownership in BioBag to Novamont. The divestment was completed in January 2021 and does not impact the result in 2021.

From 1 October, BillerudKorsnäs has implemented a new reporting structure as a consequence of organizational changes earlier in the year. The three operating segments are Product area Board, Product area Paper, and Solutions and Other operations. All comparable figures for the full year 2019 and 2020 in this year-end report have been restated according to the new reporting structure.