Improved profit and cash delivery in continued weak market conditions
Key highlights Q3
** Higher sales volumes in both regions compared to last quarter, offset by price and mix deterioration
** Sequentially lower input costs and lower fixed cost than normalized level
** Efficiency enhancement program on track - delivered
** Earnings per share positively impacted by recognition of tax credits in the US
** Strong operating cash flow with tight control on working capital
** Frövi recovery boiler project completed on time, spec and budget
Quarterly data Q3
** Net sales decreased by 14% to
** Adjusted EBITDA*
** Adjusted EBITDA margin 11% (19)
** Operating profit
** Net profit
** Earnings per share
Outlook for Q4
** Customer destocking largely completed, however continued weak demand driven by subdued macroeconomic environment
** Negative mix for most categories and lower sales prices for sack and kraft paper, partly offset by lower input costs
** Further steps are taken to drive efficiency and long-term competitiveness through reducing up to 350 positions
Comments by the CEO
We delivered a meaningfully improved result in the third quarter compared with the previous quarter. Profitability and cash generation were significantly up, and encouragingly, we see progress in both our European and North American regions. The adjusted EBITDA margin for the quarter was 11% with excellent cash conversion. The improved performance was mainly due to volume pick-up in both regions, lower than normalized fixed cost level, accelerated delivery of our efficiency enhancement program and strong focus to keep our working capital low. In particular, we are happy to see the mobilization we have gained throughout the organization related to our efficiency enhancement program, and we are on track to deliver our
However, the market conditions remain weak for most product categories. We continue to navigate through challenging demand and customer destocking by adjusting our production output. We do not foresee strong recovery near-term, and will continue to adjust to the new conditions, aiming to improve our long-term competitiveness. As part of our efficiency enhancement program, we have decided to reduce the number of positions by up to 350. It will mean redundancies and affect all parts of the company. Union negotiations begin today. These measures will provide annual structural savings of
Since mid-August we have a new operating model in place, with a clear regional organization for both
18 months post the acquisition of Verso, we are very pleased with the results and developments, which has exceeded our expectations, driven by solid margins and cash generation. The business fundamentals and strategic fit for paperboard production in
The new recovery boiler in the Frövi mill has been put into production and will be handed over from the supplier to the line organization during November. We are proud that this project has been delivered on time and budget despite plenty of external challenges since investment decision was made in early 2021. The successful project management creates confidence in our ability to carry out large and complex capital investments in the future.
We are continuing to execute on Billerud's strategy on packaging materials and focusing on the core and have divested the business unit
For the fourth quarter, we expect continued weak market conditions for most product categories. Customers' destocking is expected to be largely completed, but we foresee lower consumer spending to suppress demand for the majority of our products. We expect continued negative mix for most categories and sales prices within sack and kraft paper to decline. These effects should partly be offset with lower input costs, primarily within chemicals and pulpwood.
Looking into 2024 we are cautiously optimistic as volume recovery will kick in post a largely completed customer destocking phase. However, the geopolitical and macroeconomic uncertainty will continue to negatively impact consumption and thereby the demand for paper and packaging materials. We do not expect strong recovery, but rather step-by-step improvements throughout the year driven by volume growth.
The strategic direction for Billerud remains intact, but our priorities are being updated to reflect the regional organisation and changed conditions on several fronts. Our near-term focus will continue to be on items that we control and where we already have built up good momentum during 2023. By accomplishing efficiencies, cost reductions and solid business cases, Billerud will be well positioned to capture future opportunities.
Acting President and CEO
Third quarter
Sales and results
Net sales for the third quarter declined by 14% to
Adjusted EBITDA amounted to
Items classified as affecting comparability of
Market development and outlook
In the third quarter, market conditions remained stable on a weak level for all products. Exception being liquid packaging board, where conditions were stable on a normalized level. Demand was negatively affected by customers' continued inventory destocking and reduced consumption. Prices decreased for most categories, expect for liquid packaging board and graphic paper, where prices were stable.
For the fourth quarter, we expect market conditions to remain weak for most product categories. Demand is expected to be weak driven by the subdued macroeconomic environment, although the inventory destocking will be largely completed. Negative mix is expected for most categories and sales prices are expected to deteriorate for sack and kraft papers. Input costs are in total expected to decrease, mainly driven by reduced costs for chemicals and pulpwood in
Events in the quarter
On 5 July, Billerud divested its holding in Kezzler AS, a company with a digital platform for packaging traceability.
On 13 July, Billerud agreed with the investment company
On 28 July, The Board of Directors appointed
On 17 August, Billerud implemented a new organization in line with its operation in the two regions
Following test runs of the new recovery boiler at the Frövi mill it was successfully put into operation during September. The new, fossil-free recovery boiler will enable increased energy efficiency and improved environmental performance. Its capacity will also allow for higher pulp production in the future. The project to build and install the new recovery boiler in Frövi is being completed in time and on budget. For more information about this investment, see page 7.
In September, Billerud decided to divest its ownership in the joint venture Paboco and related intellectual property to its joint venture partner Alpla. Impairment of shares in Paboco of
Billerud's sustainability work was recognized as it for the fourth consecutive year received a Platinum grade in
* 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:
Andrei Krés, Acting CFO, +46 8 553 335 72
ir@billerud.com
This information constituted inside information prior to publication. This is information that
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