BillerudKorsnas Interim Report – January-June 2018

Quarterly data
Net sales were SEK 5 898 million (5 600), an increase of 5% mainly as a result of increased local sales prices.
A provision of SEK 452 million was made in the quarter relating to workplace efficiency and environment and unifying accounting principles.
EBITDA was SEK 203 million (863), a decrease of 76% mainly as a result of provisions made, increased wood costs and higher than expected costs relating to planned maintenance shutdowns.
Adjusted EBITDA was SEK 671 million (882), a decrease of 24%.
The adjusted operating margin was 5% (9%).
Adjusted operating profit was SEK 309 million (515), a decrease of 40%.
Earnings per share amounted to SEK -0.64 (1.71).

Key highlights
Continued strong demand driving increased pricing.
Production records achieved at four mills.
Start-up issues relating to planned maintenance shutdowns.
Negative earnings impact from cost inflation and wood shortage.
Provision for workplace efficiency and environment initiative, and unified accounting principles, related to spare parts and consumables.
Strategic investments are progressing according to plan.

COMMENTS BY CEO – High pace in changes and continued strong growth
The second quarter was characterised by continued strong demand for innovative and sustainable packaging. Net sales in the quarter increased by 5% compared with the same period last year, mainly driven by higher sales prices. The increased sales prices have compensated for higher wood costs. However, both raw material costs and wood supply will continue to challenge our result and production.

The production has been stable during the quarter, apart from the start-up issues related to the planned maintenance shutdowns. It is encouraging to note that four of our mills achieved production records, and that our growth investments are progressing according to plan. The new machine at Skärblacka has been started successfully.

Within the scope of the group-wide programme for improved production efficiency, we have decided to implement measures with the aim of strengthening the workplace efficiency and environment at several of our mills. Linked to this, and to unify accounting principles related to spare parts and consumables, a provision of SEK 452 million has been made.

In order to achieve faster decision-making and implementation of our strategy and plans, we have begun negotiations on a new organisational structure that will consist of three business divisions with full profit and loss responsibility.

The result
EBITDA for the quarter amounted to SEK 203 million, a decrease of 76% primarily related to provisions. Net sales increased by 5%, mainly driven by increased prices and a positive currency impact. Variable costs increased, due to demand-driven price increases for wood and chemicals.

The adjusted EBITDA margin was 11%. Production losses due to continued wood shortages had a negative impact of SEK 100 million on EBITDA. The planned and prolonged maintenance shutdowns at Gruvön and Skärblacka were carried out at a total cost of SEK 401 million, which was SEK 66 million higher than expected due to certain start-up issues.

Packaging Paper is delivering a strong result, driven by increased demand and higher prices. Consumer Board had high availability, but EBITDA decreased compared with last year due to contractual unchanged sales prices and increased raw material costs. Managed Packaging, within Corrugated Solutions, is continuing to deliver strong sales growth and is now contributing positively to earnings.
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