Billerud Interim report January–September 2023

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 SEK 175 million in the quarter
  • 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 SEK 10,210 million (11,814)
  • Adjusted EBITDA* SEK 1,167 million (2,196)
  • Adjusted EBITDA margin 11% (19)
  • Operating profit SEK 415 million (1,536)
  • Net profit SEK 656 million (1,347)
  • Earnings per share SEK 2.64 (5.42)

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 SEK 600 million target for 2023.

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 SEK 300 million, with majority of the run-rate savings in 2024. Restructuring costs related to this of MSEK 100 will be recorded in the fourth quarter.

Since mid-August we have a new operating model in place, with a clear regional organization for both Europe and North America. As well, our global management team is now a bit smaller. We see already positive signs of how our new structure is working, as it provides good conditions for agile, clearer and faster decision-making. I am confident that a holistic view of the value chain in each region will enable further synergies and value creation.

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 North America continue to be strong and remains Billerud’s most important growth opportunity. However, given the changed economic conditions, we are taking our time to evaluate alternatives for the US transformation. We will therefore not decide on the transformation investment program by the end of this year as previously announced, and we will revert when ready. Meanwhile, we are building the paperboard sales in the US through export.
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