BillerudKorsnas Year-end report January–December 2019

KEY HIGHLIGHTS
Strong net profit for the year and proposed increased dividend as a result of the successful divestment of Bergvik Skog Öst.
Fourth quarter sales volume growth offset by negative changes in pricing and mix due to weaker market conditions.
KM7 start-up impact in the fourth quarter in line with expectations.

QUARTERLY DATA
Net sales were flat and amounted to SEK 5 815 million (5 843).
Adjusted EBITDA* was SEK 618 million (810), negatively affected by KM7 start-up effects of around SEK 170 million.
Operating profit was SEK 103 million (414).
Net profit was SEK 333 million (309), including dividend from Bergvik Skog AB of SEK 244 million and profit from discontinued operations of SEK 50 million.
Earnings per share amounted to SEK 1.61 (1.49).
The Board of Directors proposes an ordinary dividend of SEK 4.30 (4.30) per share and an extra dividend of SEK 4.30 (–). The Board also proposes that mandate is obtained for repurchase of shares.

COMMENTS BY CEO
The year 2019 has in many ways been a challenging year. Since the summer the market has weakened considerably for several of our products, particularly for sack paper where both prices and volumes have dropped drastically. On the positive side liquid packaging board and cartonboard are holding up nicely and the downward trend for sack papers appears to have flattened out and stabilized.

In the fourth quarter sales volumes increased, but were offset by negative pricing and mix effects. Division Board delivered strong sales growth, while Division Paper continued to be under pressure and declined. Fourth quarter earnings were in addition to the weaker market also negatively impacted by start-up effects of the new board machine at Gruvön, KM7, of around SEK 170 million, which was in line with expectations. The ramp-up is proceeding and until the end of December the machine had produced more than 90 ktonnes of liner and cupstock.

A key event during the year was the successful divestment of Bergvik Skog Öst, which has resulted in a strong net profit and a solid balance sheet. After a period of heavy investments in capacity additions and upgrades the level of investments at our mills can be expected to be substantially lower for a period of time compared to the past couple of years. Against this context, the Board of Directors proposes an extra dividend of SEK 4.30 per share and in total a dividend of SEK 8.60 per share, a doubling of last years’ dividend level. The Board also proposes that authorization is obtained to repurchase own shares.

For 2020 we expect continued challenges and act accordingly. The cost and efficiency programme is running according to plan and is expected to result in savings of SEK 250 million in 2020. We also start to see some positive effects from decreasing wood prices, but we take a cautious stance since the warm and wet winter might cause some accessibility problems during the spring.

The ramp-up of KM7 is our number one priority for 2020. We recognize that we are somewhat behind our plan and have the ambition to catch up during the year. The share of prime grades and higher value products is expected to increase at an accelerating rate over the year. The first volumes of coated grades have been produced in the first quarter and our expectation is to initiate a process to certify material for liquid packaging board and cartonboard in the second quarter. Our present assessment is that the start-up of KM7 will impact EBITDA in 2020 negatively by SEK 150-350 million, primarily during the first half of the year.

SALES AND RESULTS
Net sales for the fourth quarter were at the same level as for the previous year and amounted to SEK 5 815 million (5 843). Positive currency effects and higher sales volumes were offset by reduced prices as well as mix impact of the start-up of the new board machine at Gruvön. Net sales for the quarter were positively impacted by currency effects of 3%.

Adjusted EBITDA decreased to SEK 618 million (810), negatively affected by KM7 start-up effects of approximately SEK 170 million as well as reduced sales prices. Lower fibre costs, cost savings and currency effects had a positive impact.

The implementation of IFRS 16 affected adjusted EBITDA positively by SEK 27 million in the fourth quarter, see note 1.

Costs affecting comparability, reported in Other, amounted to a net amount of SEK 24 million (29) and included restructuring costs related to management severance pay as well as costs for the new board machine at Gruvön.
more detail at: https://www.billerudkorsnas.com/media/press-releases/2020/year-end-report-januarydecember-2019

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