Slide 1: Resilient performance with strong cash generation Q3 2020
Interim report Jan–Sep 2020 Resilient performance with Q3 strong cash generation 2020 22th of Oct 2020 Lennart Holm, CEO, Ivar Vatne, CFO
Slide 2: Key highlights Q3 2020
Key highlights Q3 2020 Stable sales volume despite challenging markets Successfully accomplished maintenance shutdowns Accelerated delivery of cost- and efficiency program Strong operating cash flow generation Recyclable Flow Wrap launched 2
Slide 3: Q3 2020 key figures
Q3 2020 NET SALES ADJUSTED EBITDA ROCE* SEK 5 561 m (5 833) SEK 570 m (639) 3% NET SALES Adj EBITDA NET DEBT/ GROWTH Y/Y MARGIN EBITDA* -5% 10% 2.3 3 *Adjusted, Rolling 12 months
Slide 4: Introducing Recyclable Flow Wrap
Introducing Recyclable Flow Wrap Enables a shift from plastic to paper and high-speed production Based on primary fibres, i.e. renewable and biodegradable Suitable for confectionery and bakery products Excellent barrier properties for medium to high barrier requirements
Slide 5: Business status and outlook
Business status and outlook Sales split, % Food & Drink Medical & Hygiene Consumer & Luxury Industrial LPB (7.6bn*) 100% Cartonboard (1.5bn) 15% 85% Containerboard (3.6bn) 80% 10% 10% Kraft Paper (3.5bn) 35% 10% 15% 40% Sack Paper (2.9bn) 20% 15% 65% Managed Packaging (0.8bn) 100% Trend Q3 Stable Mo
Slide 6: KM7 Q3 and 2020
KM7 Q3 and 2020 Overall direction positive - progress continues Maintenance stop in September successfully completed: All key activities and planned upgrades executed Will enable both a higher speed and stability Very strong customer feedback on delivered material Producing all intended Board qualit
Slide 7: Capturing the value of KM7
Capturing the value of KM7 Focus is now fully on commercialization A combination of Covid-19 related market effects have slowed down the commercial ramp-up somewhat Shift of customer priorities // limited evaluation ability Weaker market for containerboard Expected to reach EBITDA break-even during
Slide 8: Driving right mix is instrumental for KM7 contribution
Driving right mix is instrumental for KM7 contribution Ktonnes Material produced, ktonnes 2nd grade Uncoated material Continuous Coated material process to June 2019 Oct 2020 improve 100% Material produced, % EBITDA Waste going into 2nd grades 2021 Prime 0% June 2019 Oct 2020
Slide 9: Net Sales impacted by lower market price level and currency fluctuations
Net Sales impacted by lower market price level and currency fluctuations Net sales, SEKm -5% -5% +3% -4% -2% +1%
Slide 10: Reduced EBITDA due to maintenance phasing
Reduced EBITDA due to maintenance phasing Negative pricing off-set by several positive initiatives Adj EBITDA, SEKm -11% adj for MS Adj EBITDA 11% 10% margin
Slide 11: Product area Board
Product area Board Share of net sales KEY FIGURES Q3 2020 57% Change vs SEKm Q3-20 Q3-19 Net sales 3 149 -4% of which liquid packaging board 1 701 -3% of which cartonboard 393 -1% of which fluting & liner 912 +9% Net operating expenses, other -2 880 -1% EBITDA 269 -30% EBITDA margin 9% +3%pts Mixed
Slide 12: Product area Paper
Product area Paper Share of net sales KEY FIGURES Q3 2020 31% Change vs SEKm Q3-20 Q3-19 Net sales 1 707 -12% of which sack paper 605 -7% of which kraft paper 773 -6% Net operating expenses, other -1 471 -12% EBITDA 236 -12% EBITDA, % 14% – Relatively stable market conditions for Product Area Paper
Slide 13: Solutions
Solutions Share of net sales KEY FIGURES Q3 2020 4% Change vs SEKm Q3-20 Q3-19 Net sales 216 -19% of which Managed Packaging 169 -21% of which other solutions 48 -9% Net operating expenses, other -193 -22% EBITDA 23 +35% EBITDA, % 11% +5%pts Continued challenging market conditions hamper our net sal
Slide 14: Cost and efficiency program performing well
Cost and efficiency program performing well Another sizable contribution added in Q3’20 – SEK 95m Accelerated delivery in 2020 – SEK 300m Raised the ambition level of the program by SEK 50m to 650m - run-rate Q4’2021 14
Slide 15: Raw material costs in Q3
Raw material costs in Q3 Cost of Caustic Purchased Higher energy pulpwood soda cost pulp cost cost in Q3 decreased increased impact decreased Expected to Forward looking decrease slightly in trend for chemicals Q4 volatile 15
Slide 16: Strong operating cash flow generation
Strong operating cash flow generation Working capital improvement, mainly SEK m Q3-20 Q3-19 from lower payables post KM7 program Operating surplus, etc. 506 576 Normalized CAPEX levels for 2020 Change in working capital, etc. 126 -365 Estimate SEK ~ 1.3 bn Net financial items, taxes, etc. 55 -43 Cas
Slide 17: Q3 Summary
Q3 Summary • Resilient performance – stable volume and strong cash generation • Successfully accomplished maintenance shutdowns • Accelerated delivery of our cost- and efficiency program. Raised program ambition to SEK 650 m • Recyclable Flow Wrap launched 17
Slide 18: Q4 Outlook
Q4 Outlook Unchanged market conditions Raw material costs expected to decline slightly Several planned maintenance stops Continued KM7 ramp-up built on positive customer feedback 18
Slide 19: Billerud
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