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Regulatory
Press release
25 Oct 2001, 15:13 CET

Interim Report January-September 2001

INTERIM REPORT January-September 2001 The establishment of Billerud through the merger of AssiDomän's Skärblacka and Karlsborg paper mills with Stora Enso's Gruvön paper mill has created a new, competitive and in many respects leading company in packaging paper. On 30 September, Billerud was 50% owned by AssiDomän and 50% by Stora Enso. After the end of September, Stora Enso agreed with AssiDomän to sell 20% of the shares in Billerud to AssiDomän, AssiDomän therefore now holds 70% of the shares in Billerud. (All financial information relating to 2000 is pro forma) January- Quarter September 2001 2001 2000 III II III 2001 2000 Net turnover, MSEK 1,593 1,742 1,696 5,175 4,895 Operating profit, MSEK 246 319 483 1,034 998 Operating margin, % 15 18 28 20 20 Profit after financial items, 217 292 -1) 951 -1) MSEK 1) Historical data not available Earnings per share, SEK 2.45 3.33 -1) 10.83 -1) · Downward trend in the market continued. · Operating profit for the period January-September 2001 was slightly better than in the same period last year. · Earnings declined by MSEK 73 in the third quarter compared with the previous quarter, mainly due to lower average prices for market pulp, maintenance shutdowns at Gruvön and Karlsborg and costs for the build-up of Billerud and stock-exchange listing (MSEK 22). · Return on capital employed, measured as a moving 12-month figure, amounted to 30% (30% for the full year 2000). · Stock-exchange listing planned for 20 November 2001. · Earnings for the fourth quarter are expected to be slightly below the level in the third quarter. The accounts are prepared in accordance with the recommendations of the Swedish Financial Accounting Standards Council. For further details, see page 7. Billerud Group Market Demand for Billerud's products has been relatively stable during the year with delivery volumes only marginally below the previous year's level. The market for Billerud's packaging paper was strong at the beginning of the year, but has subsequently gradually weakened. Price reductions were implemented in local currencies but this was compensated by the weakening of the Swedish krona. Demand for market pulp has been low but, due to substantial production curtailments, stocks held by pulp producers fell during the year. The price of long-fibre market pulp fell considerably, from USD 710 per tonne at the beginning of the year to USD 450 per tonne at the end of September. Starting in October, however, some price increases have been effected for market pulp. Billerud implemented production curtailments due to the demand situation in the first half of the year. The annual maintenance shutdowns took place at Gruvön and Karlsborg in the third quarter, which led to lower production and deliveries. Sales and results Third quarter Net turnover for the period amounted to MSEK 1,593, a decrease of 9% compared with the second quarter. The lower turnover is explained by lower deliveries, mainly of containerboard, as well as reduced prices for market pulp. Prices for Billerud's paper products, expressed in Swedish kronor, were on average relatively stable. The lower volumes are mainly due to the annual maintenance shutdowns at two mills (Gruvön and Karlsborg) in the third quarter but only in one mill (Skärblacka) in the second quarter. Operating profit amounted to MSEK 246, a decline compared with the previous quarter of MSEK 73 or 23%. The reduced prices for market pulp and lower deliveries due to the maintenance shutdowns had a negative impact on earnings. Furthermore, earnings for the quarter were charged with MSEK 22 in non-recurring costs for the build-up of Billerud and the stock-exchange listing. Comments on the earnings trend for each product area are provided on page 5. January - September Compared with the first nine months of 2000, net turnover increased by 6% and amounted to MSEK 5,175. The higher turnover was attributable to higher prices for kraft paper and containerboard and the weakened Swedish krona. This was offset by lower prices for market pulp. In total, deliveries decreased by 3% compared with the same period in 2000. The operating profit of MSEK 1,034 represents an improvement compared with the first nine months of 2000 of MSEK 36 or 4%. The increase was attributable to the higher average prices for Billerud's paper products. The effect of the higher prices in Swedish kronor was offset, however, by reduced pulp prices and higher variable costs, mainly due to higher wood and chemical prices. Compared with the previous year, earnings were charged with MSEK 32 in non-recurring costs for the formation of Billerud and the stock-exchange listing. In the previous year, a MSEK 25 repayment of funds was received from SPP. Adjusted for these two items, the earnings improvement, compared with 2000, amounted to MSEK 93. Net financial items, amounting to MSEK -83, related to interest paid at market rates on loans from the company's owners. The estimated tax charge was MSEK 271. The tax charge corresponds to a tax rate of just over 28%. Return on capital employed, calculated on the latest 12-month period, amounted to 30%, compared with 30% for the full year 2000. Return on equity was 35%. Foreign exchange exposure 25% of the Group's sales are in Swedish kronor and 75% in foreign currency, primarily EUR, USD and GBP. Most sales in SEK, however, are closely related to market pricing in other currencies, primarily USD. The Group's currency hedging takes these underlying flows into account. The majority of costs are in Swedish kronor. The Group is therefore exposed to exchange rate fluctuations. In order to manage this, Billerud has hedged exchange rates as shown below. Currency breakdown of the Group's sales in % of turnover, Jan-Sept 2001 EUR 40% SEK 25% USD 20% GBP 5% Others 10% Total 100% Hedging as % of forecasted underlying net flows for the next 12 months Currency Months 1- Months 4- Months 7- Total Average 3 6 12 rates EUR 100 80 55 70 9.58 USD 100 100 95 95 10.56 GBP 100 60 50 65 15.21 Investments, cash flow and financial position Billerud's capital employed amounted to MSEK 4,745 on 30 September 2001, compared with MSEK 4,828 pro forma on 1 January 2001. Gross investments amounted to MSEK 275, while depreciation during the same period amounted to MSEK 259. Most of the investment amount relates to investment projects started before year-end 2000, primarily an evaporation unit and soda recovery boiler at Gruvön. Investment projects decided after year-end 2000 include replacement of washing filters at Skärblacka. Cash flow from operating activities amounted to MSEK 1,035. After net investments (MSEK 272) the operating cash flow amounted to MSEK 763. The operating cash flow corresponds to the change in Billerud's net debt. After amortisation of interest-bearing liabilities (MSEK 1,356) the total cash flow amounted to MSEK -593. The interest-bearing net debt amounted to MSEK 1,841 on 30 September 2001 compared with MSEK 2,604 pro forma on 1 January 2001. The Group's net debt/equity ratio at the end of the period was 0.6 compared with 1.2 at the beginning of the year. The positive operating cash flow explains the reduced net debt/equity ratio. In the third quarter, Billerud concluded a bridge financing agreement with SEB. This means that refinancing of loans from the present owners has been secured. This relief will be implemented in conjunction with the planned stock-exchange listing. Personnel The average number of employees in the first nine months of 2001 amounted to 2,357 compared with 2,486 in the same period a year ago. The average number of employees thus decreased by approximately 130 people. ------------------------------------------------------------ This information was brought to you by Waymaker http://www.waymaker.net The following files are available for download: http://www.waymaker.net/bitonline/2001/10/25/20011025BIT01270/bit0001.doc The full report http://www.waymaker.net/bitonline/2001/10/25/20011025BIT01270/bit0001.pdf The full report