2015 Q2

Strong result impacted by extra costs from upgrade

(Tables included in attached PDF)

KEY HIGHLIGHTS

  • Net sales for the quarter was SEK 5 489 million (5 128).
  • Earnings per share for the quarter was SEK 1.92 (1.39).
  • Operating profit increased with 20% compared to Q2 2014 to SEK 542 million (450).
  • The fluting machine in Gruvön (PM6) was successfully upgraded during the planned maintenance shutdown and the quality improvements are above expectations.
  • Start-up of PM6 was delayed and caused extra costs of approximately SEK 50 million.
  • Net sales Jan-Jun 2015 increased 6% and operating profit increased 25% compared to the same period last year mainly due to a favourable currency situation.

Outlook

  • Demand and orders situation for the third quarter is expected to be stable with normal seasonal variances for all business areas.
  • Average prices in local currency in the third quarter are anticipated to be stable as effects from previously announced price increases for fluting are starting to show.
  • No changes to wood prices are anticipated for the third quarter.
  • There are planned maintenance shutdowns in Gävle and Karlsborg in the third quarter of 2015.
  • The divestiture of Latgran will improve net debt/equity with 0.10 and operating profit with approximately SEK 400 million in the third quarter.

   
Comments by BillerudKorsnäs’ CEO Per Lindberg:
Strong result impacted by extra costs from upgrade

“We deliver a result for the quarter that is strong, but burdened with extra costs for the upgrade of our fluting machine in Gruvön. Technically, the upgrade is a success and the quality improvements are above expectations, but it took a bit longer to implement than estimated.”

THE RESULT
The second quarter’s operating margin of 10% was negatively impacted by the planned maintenance shutdown and the extra costs for implementation of the upgrade of the fluting machine in Gruvön, all in all approximately SEK 170 million. I am however content with the underlying result we produce. Overall the weak SEK continues to be positive for us. Our growth 2015 is largely driven by favourable currency developments, and our volumes have suffered partly due to investments and rebuilds. We have given priority to longer-term capacity enhancements rather than short term volume maximizations. Still our volume growth in business area Consumer Board for the first half of the year was 6% and above the plan.
Our net debt/equity ratio increased to 0.62 due to our dividend pay-out. Return on capital employed improved to 12% and we continue to close in on our targeted 13%, so overall we are performing well in line with our targets.

MARKET OUTLOOK
The overall market has been stable during the quarter. We expect the market to continue to be stable with good demand and little changes in local prices.

We see no reason to change our outlook for business area Packaging Paper. Increased competition pressures local prices within the MF segment and we did not utilise our full capacity during the quarter. This situation was anticipated and is likely to continue. Meanwhile the market situation for sack paper and the MG segments are solid which makes the outlook for the business area quite stable and balanced.
Consumer Board market continues to be stable.
Within Containerboard, the fluting segment is currently very strong, with strong order books and with previously announced local price increases starting to show. We are also expecting the improved product quality from the machine upgrade to support additional value growth in the business area in the longer-term. In the liner segment, competition continues to increase with increased capacity on the market. But local prices have been kept stable during the quarter, helped by low stocks, announced price increases for waste based papers, and a strong USD that favours European kraftliner.

STRATEGY
One of our strategic stepping stones is to expand our position both in the value chain as well as geographically. We want to expand our offering and our networks to include stakeholders beyond converters, for instance brand owners.
In our efforts to achieve our ambitions in this area it is worth mentioning that our JV, FibreForm Packaging, has taken its first order where a complete system solution has been sold containing a FreeFormPack machine with deliveries of FibreForm material to one of Europe’s largest co-packer, Vetipack.
When it comes to geographical expansion our goal is that more than 50% of our future growth will come from outside of Europe. Here we have finalised establishment of companies in India and USA and they are fully operational. We are also finalising the set-up of a company and a complete customer service center in Singapore.

BillerudKorsnäs’ President and CEO Per Lindberg and CFO Susanne Lithander will present the interim report at a press and analyst conference at 11.00 CET on Monday 20 July 2015.
Venue: BillerudKorsnäs’ head office, Frösundaleden 2B, Solna, Stockholm

   
For further information, please contact:

Per Lindberg, President and CEO +46 (0)8 553 335 00
Susanne Lithander, CFO, +46 (0)8 553 335 00

   
The information in this report is such that BillerudKorsnäs AB (publ) is obliged to disclose under the Swedish Securities Market Act and was submitted for publication at 10.00 CET on 20 July 2015. This report has been prepared in both a Swedish and an English version.

BillerudKorsnäs provides packaging materials and solutions that challenge conventional packaging for a sustainable future. We are a world leading provider of primary fiber based packaging materials and have customers in over 100 countries. The company has 8 production sites in Sweden, Finland and the UK and about 4 300 employees in over 13 countries. BillerudKorsnäs has an annual turnover of about SEK 21 billion and is listed on Nasdaq Stockholm. www.billerudkorsnas.com

Last updated: 2015-07-20