Billerud Ab · OMXSTO:BILL
Billerud Ab — Q3 2007 Earnings Presentation
31 slides from Billerud Ab's earnings presentation, Nov 14, 2007
Slide 1: January-September 2007
January-September 2007 Per Lindberg, CEO Bertil Carlsén, CFO Presented on November 14th, 2007 The Packaging Company
Slide 2: Quarterly update & news
Quarterly update & news • Highlights • Activities in Focus • Development by Business area • Financials • Outlook 2
Slide 3: Achievements
Achievements • Continued strong demand • Higher prices on all products • New product launches, Quick Fill X-run and MicroWavePac. • NINE Total Packaging Partner started 3
Slide 4: Result
Result • Operating result 153 MSEK in Q3, compared to 17 MSEK in Q2 • Operating margin 8% (1% in Q2 2007) • Operating result 347 MSEK for 9 months 2007, compared to 376 MSEK in 2006 • Operating margin 6% (7%) 4
Slide 5: Challenges: Wood cost development
Challenges Wood cost development • Full effect of Q1 price increase in Q2 Q2 Report • January-June – average wood price +10% compared to Q4 2006 • A continued increase in wood price during Q2, mainly on imports • January-Sept – average wood price + 19% compared to Q4 2006 5
Slide 6: Actions taken
Actions taken • Complete review of how to react to higher wood prices in progress » Production cut backs to reduce wood import » Review of recipes and product specifications » Production review to lower wood consumption » Focus on market segments, quality, value & pricing » Review additional efficie
Slide 7: Building on our strengths to face current challenges
Building on our strengths to face current challenges Billerud challenges Billerud strengths • 100% exposure to the growing • Sharp increase in wood costs for the packaging market whole industry • Strong niche positions, with strong demand • Tight supply of wood • Cost efficient integrated production
Slide 8: Business areas and segments
Business areas and segments Packaging & Speciality Paper MG, MF & Sack Paper Packaging Boards S/C Fluting, Liner, Liquid Board Market Pulp Nordic Bleached Softwood Kraft Pulp 8
Slide 9: Packaging & Speciality Paper: Market situation
Packaging & Speciality Paper Market situation Q3 • Sack paper market is good & stable • Quick-Fill X-run has been introduced • MG and MF markets are good (with a tendency of weakening in bags and flexible packaging) • To compensate for increased wood costs, price increases of 5-7%, (~EUR 50) have be
Slide 10: Packaging & Speciality Paper: Financials
Packaging & Speciality Paper Financials 120 • Deliveries -1% vs. Q2 2007 100 • Turnover +1% vs. Q2 2007 80 EBIT 60 40 20 0 Q3 Q4 Q1 Q2 Q3 2006 2007 Q3 2007 Q2 2007 Q3 2006* 2006* Net sales, MSEK 969 960 948 3,750 Operating profit, MSEK 96 17 116 350 Operating margin 10 2 12 9 * restated to 2007 defi
Slide 11: Packaging Boards: Market situation
Packaging Boards Market situation Q3 • Continued strong order book for S/C fluting • Market for white liner is picking up • Announced price increases » EUR 50 from September 1 for S/C fluting » 5-8% from October 1 for white liner 11
Slide 12: Packaging Boards: Financials
Packaging Boards Financials 80 • Deliveries +3% vs. Q2 2007 60 • Turnover +7% vs. Q2 2007 40 EBIT 20 0 -20 Q3 Q4 Q1 Q2 Q3 2006 2007 Q3 2007 Q2 2007 Q3 2006* 2006* Net sales, MSEK 546 508 541 2,188 Operating profit, MSEK 64 -9 56 175 Operating margin 12 -2 10 8 * restated to 2007 definitions 12
Slide 13: Market Pulp: Market situation
Market Pulp Market situation Q3 • Continued strong demand situation • Price increase from USD 730 per ton beginning of 2007 to USD 830 per ton • Price increase to USD 850 per ton announced from 1st of November • Price increases does not fully compensate for USD erosion and cost increase 13
Slide 14: Market Pulp: Financials
Market Pulp Financials 40 • Deliveries -17% vs. Q2 2007 30 • Turnover -15% vs. Q2 2007 EBIT 20 10 0 Q3 Q4 Q1 Q2 Q3 2006 2007 Q3 2007 Q2 2007 Q3 2006* 2006* Net sales, MSEK 360 425 355 1,382 Operating profit, MSEK 11 16 23 46 Operating margin 3 4 6 3 * restated to 2007 definitions 14
Slide 15: Billerud continue to increase prices
Billerud continue to increase prices Bille rud SEK price s to KPI inde x 320 PSP PB PULP KPI 315 310 305 300 295 290 285 280 275 270 2006Q4 2007Q1 2007Q2 2007Q3 Notes: PB includes S/C fluting and white liner, together 86% of PB sales. KPI from SCB. 15
Slide 16: Financials
BILLERUD Financials
Slide 17: Key figures Q3 2007 vs. Q2 2007
Key figures Q3 2007 vs. Q2 2007 Q3 2007 Q2 2007 vs. Q2 2007 Deliveries (‘000 tonnes) 318 331 -4% Net sales, MSEK 1,874 1,884 -0,5% Operating profit, MSEK 153 17 +800% Operating margin 8% 1% +7% Profit/share, SEK 1.65 -0.17 +1.82 Debt/Equity ratio 1.02 1.02 +-0 17
Slide 18: Key figures Jan-Sept 2007 vs. Jan-Sept 2006
Key figures Jan-Sept 2007 vs. Jan-Sept 2006 Jan-Sept Jan-Sept vs. Jan-Sept 2006 2007 2006 Deliveries (‘000 tonnes) 992 1025 -3% Net sales, MSEK 5,690 5,502 +3% Operating profit, MSEK 347 376 -8% Operating margin 6% 7% -1% Profit/share, SEK 3.56 4.33 -18% Debt/Equity ratio 1.02 0.98 -0.04 18
Slide 19: Reason for EBIT Development
Reason for EBIT Development 2007 vs. 2006 Jan-Sep Q3 Q2 Q1 07 vs 06 07 vs 06 07 vs 06 07 vs 06 Deliveries and prod. volumes, incl. product mix -35 +5 -40 0 Sales prices (in local currencies) +545 +163 +199 +183 Change in variable costs -249 -144 -80 -25 Change in fixed costs -97 -5 -96 +4 Change in
Slide 20: Cash Flow
Cash Flow MSEK Q3 2007 Q2 2007 Q3 2006 2006 Operating surplus etc +241 +98 +268 +802 Working capital change -187 +26 +186 +42 Finance net, taxes -18 -30 -55 -50 Cash flow from operating activities +36 +94 +399 +794 Capex, excl. energy investments -140 -196 -102 -359 Capex (energy inv.) - - - -269 Ca
Slide 21: D/E ratio development
D/E ratio development 1,2 1,14 1,1 0,96 0,98 1,02 1,02 0,99 1 0,94 0,89 0,86 0,9 0,9 0,8 0,76 0,7 0,6 0,5 0,4 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 2005 2005 2005 2006 2006 2006 2006 2007 2007 2007 21
Slide 22: In focus: Costs, Margins
In focus • Costs • Margins 22
Slide 23: Cost reduction programs completed
Cost reduction programs completed • Energy program » Completed » Investment 1090 MSEK, total savings above 250 MSEK yearly » Savings of 90 MSEK expected in 2007 compared to 2006 » Increased depreciation 50 MSEK • Billerud 2007 » 100% completed decision wise » 92% completed in form of cost savings »
Slide 24: Cost reduction programs - continued
Cost reduction programs - continued • Process efficiency program – ”One Billerud” » Order fulfillment » Procurement and logistics » Production and maintenance » Sales » Administration and control • Wood cost combat review » Reducing wood consumption » Choosing segments/markets » Additional efficienc
Slide 25: Market prices affecting result
Market prices affecting result Electricity index (Sweden*) Wood price index 240 160 220 140 200 120 180 100 160 80 140 60 120 40 100 20 80 0 2004 Q2 Q4 Q2 Q4 Q2 2004 Q2 Q4 Q2 Q4 Q2 Source: Nordpool. *Price area Sweden Source: Billerud Market Pulp (USD/t) TCW index 860 106 820 104 780 740 102 700 100
Slide 26: USD exposure
USD exposure • USD Sales 250-300 Pulp price increase in USD and SEK (adjusted scales) MUSD/yr • 85% of USD sales are market pulp sales • 0% of market pulp sales are to the US 2006Q1 2006Q2 2006Q3 2006Q4 2007Q1 2007Q2 2007Q3 • USD depreciation so far USD SEK compensated by price increase 26
Slide 27: Currency situation
Currency situation Q2 2007 Q3 2007 Q4 2007 • Positive profit effect of net flow Average Average Average Average Average hedging MSEK +3 for Q3 2007 hedged current hedged current hedged currency rates currency rates currency rates rates rates • Hedge level 12 months forward: EUR 59% 9.16 9.26 9.13 9.
Slide 28: Financial objectives
Financial objectives » Long term organic sales growth rate of at least 3% » An EBIT margin of 10% as an average for a business cycle » Investments should give a return well above WACC » Net debt to equity 0,6-0,9 » Dividends 50% of net profits over a business cycle 28
Slide 29: Outlook
BILLERUD
Slide 30: Outlook
Outlook • Supply and demand are in good balance on most of the markets for Billerud’s products, and the market situation is expected to remain good for the rest of this year and the start of next year. • Considerable increases in prices for wood materials and the changed currency situation means the
Slide 31: BILLERUD
BILLERUD