Billerud Ab · OMXSTO:BILL
Billerud Ab — BillerudKorsnäs — BAML Pan-European Paper & Packaging Conference 2017
50 slides from Billerud Ab's conference presentation, September 2017
Slide 1: BAML Pan-European Paper & Packaging Conference 2017
WE PACKAGING FOR A BAML Pan-European Paper & Packaging Conference 2017 Susanne Lithander, CFO
Slide 2: BillerudKorsnäs in Brief
BILLERUDKORSNÄS IN BRIEF PURE PLAY PACKAGING COMPANY NET SALES Europe 73% Asia 17% PACKAGING PAPER OTHER 21.7 Africa 4% South America 3% 8% Kraft paper Sack paper Market pulp SEKbn Middle East 2% 38% SHARE Other 1% 37% OF SALES EBITDA CONSUMER BOARD 17% 17% Liquid packaging board CORRUGATED SOLUTION
Slide 3: Three Business Areas
THREE BUSINESS AREAS PACKAGING PAPER CONSUMER BOARD CORRUGATED SOLUTIONS Kraft and sack paper for Liquid packaging board and Fluting and liner add value customers with tough demands cartonboard with uniqe properties Packaging for flour, sugar, carrier Packaging for milk, juice, preserved Packaging f
Slide 4: Investment Highlights
INVESTMENT HIGHLIGHTS 1. 2. 3. Leading Growth Clear growth position in segments backed strategy to our up by global capture segments megatrends market potential 4. 5. Clear innovation Stable earnings focus for a and shareholder sustainable returns future 4
Slide 5: Leading Position in Our Segments
1. Leading position in our segments LEADING POSITION IN OUR SEGMENTS Packaging Consumer Corrugated Paper Board Solutions Only primary fibre KRAFT PAPER #1 LIQUID PACKAGING BOARD – AMBIENT PACKAGES NSSC FLUTING #1 in portfolio targeting customers and applications #1 GLOBALLY GLOBALLY EUROPE requiring
Slide 6: Growth Segments Backed Up by Global Megatrends
2. Growth segments backed by global megatrends GROWTH SEGMENTS BACKED UP BY GLOBAL MEGATRENDS Global megatrends driving long-term demand for packaging material Urbanisation E-commerce Sustainability awareness is increasing demand for renewable packaging material 6
Slide 7: Targeting the Global Packaging Market
2. Growth segments backed by global megatrends TARGETING THE GLOBAL PACKAGING MARKET 0.3% 1.5% 2.0% 1.8% 3.3% 3.0% 4.7% 5.1% 2.8% 4.4% 2.7% 3.7% 0.4% 2.2% Global market for packaging …with a growth of 3.4% paper & board has a growth Key to success is new of 2.2% packaging solutions and We aim to exp
Slide 8: Clear Growth Strategy to Capture Market Potential
3. Clear growth strategy to capture market potential CLEAR GROWTH STRATEGY TO CAPTURE MARKET POTENTIAL Increasing sales of Increasing Maximizing Continuously solutions to brand innovation efforts to customer value by improving owners and develop new offering sustainable production efficiency expandi
Slide 9: Investing to Move Further Up the Value Chain Towards Brand Owners
3. Clear growth strategy to capture market potential WE ARE INVESTING TO MOVE FURTHER UP THE VALUE CHAIN TOWARDS BRAND OWNERS Packaging Packaging material material 50-85 % of 2-5% of the cost the cost Price Brand image Payment terms Package solution Runability Sustainability Delivery terms Shelf app
Slide 10: Two Major Restructuring Projects
3. Clear growth strategy to capture market potential TWO MAJOR RESTRUCTURING PROJECTS IMPROVING EFFICIENCY AND SECURING GROWTH 1 Moving unintegrated MG paper machine from Karlsborg Tervasaari, Finland to Skärblacka, Sweden and making it integrated to the pulp production. Pietarsaari SEK 1.3 billion
Slide 11: Production and Capex Impact
3. Clear growth strategy to capture market potential PRODUCTION AND CAPEX IMPACT PRODUCTION CAPEX ktonnes SEKm 1000 5 000 ~910 4 700 900 4 500 4 300 ~780 800 4 000 700 3 500 600 550 3 000 500 2 500 400 330 2 000 1 645 1 500 300 1 500 1 300 200 1 000 100 500 0 0 2019 2020 2021 2022 2023 2024 2025 201
Slide 12: Investments to Improve Underlying Profitability and Secure Organic Growth
3. Clear growth strategy to capture market potential INVESTMENTS TO IMPROVE UNDERLYING PROFITABILITY AND SECURE ORGANIC GROWTH PACKAGING PAPER CONSUMER BOARD CORRUGATED SOLUTIONS Selective growth Volume growth Value growth Focusing on growth segments Increasing volumes on growing Expanding solution
Slide 13: Clear Innovation Focus for a Sustainable Future
4. Clear innovation focus for a sustainable future CLEAR INNOVATION FOCUS FOR A SUSTAINABLE FUTURE Proportion of sales accounted for by new products Long history of award winning packaging 13% innovations 2016 Challenging boundaries of fibre based packaging in order to reduce usage of fossil materia
Slide 14: We Provide Sustainable Solutions
4. Clear innovation focus for a sustainable future WE PROVIDE SUSTAINABLE SOLUTIONS Paper bag* - Best choice for the climate MAXIMIZING POSITIVE IMPACT SUSTAINABLE INCREASED AND BIO-BASED CUSTOMER VALUE SOCIETY Walk the talk RESPONSIBLE VALUE CHAIN ADVANCED LEVEL Towards fossil-free production MINIM
Slide 15: Stable Earnings and Shareholder Returns
5. Stable earnings and shareholder returns STABLE EARNINGS AND SHAREHOLDER RETURNS 32 000 20% 16% Stable underlying earnings over 24 000 12% recent years 16 000 8% Average ROCE of 13% during 8 000 4% the history of the company 0 0% Average TSR of 23% per year 2012 2013 2014 2015 2016 Net Sales Adjus
Slide 16: Selective M&A to Support Long-Term Growth
5. Stable earnings and shareholder returns SELECTIVE M&A TO SUPPORT LONG-TERM GROWTH We have the financial capacity to add M&A growth to organic growth We have proven experience in merging businesses and extracting synergies Bolt-on acquisitions with synergy potentials are currently the most interes
Slide 17: Financial Targets and Target Fulfillment
5. Stable earnings and shareholder returns FINANCIAL TARGETS AND TARGET FULFILLMENT FULL YEAR 2016 Area Target Outcome 2016 1 Growth 3-4% 0.3% 2 EBITDA >17% 18% ✔ 2 ROCE >13% 14% ✔ Net debt/EBITDA <2.5 1.1 ✔ Dividend policy 50% 59% ✔ 1. For comparable units (excluding divested and acquired operation
Slide 18: Summary
SUMMARY Focused product portfolio with leading global and regional positions in growing markets Global trends imply growth opportunities Sustainability, demographic shifts, digitalization and changed consumer behavior We invest in all of our four strategic pillars: Position expansion, Innovation, Su
Slide 19: Q2 Development
BILLERUDKORSNAS Q2 DEVELOPMENT 19
Slide 20: Q2 2017 Results at a Glance
Q2 2017 RESULTS AT A GLANCE NET SALES 3% OTHER PACKAGING PAPER Kraft paper 5 600 GROWTH 9% Sack paper Market pulp SEK million 38% SHARE 37% OF SALES EBITDA CONSUMER BOARD 16% 15% Liquid packaging board CORRUGATED SOLUTIONS 863 MARGIN Cartonboard Fluting Liner SEK million Managed Packaging 20
Slide 21: Q2 2017 Key Highlights
Q2 2017 KEY HIGHLIGHTS Continued high demand across all business areas Stable production volumes EBITDA affected by one-off and extra costs of SEK 55 million and maintenance shutdown costs of SEK 230 million Strong operating cash flow Favourable outlook on both short and long term 21
Slide 22: Financial Development
BILLERUDKORSNAS FINANCIAL DEVELOPMENT 22
Slide 23: Net Sales
NET SALES SEK MILLION 6000 +3% 5800 5600 5636 5600 5489 5478 5468 5400 5439 5393 5357 5200 5213 5000 4800 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 2015 2016 2017 23
Slide 24: EBITDA
EBITDA SEK MILLION 1600 0% 1400 1384 1200 1000 1037 1017 897 923 800 859 863 671 693 600 400 200 0 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 2015 2016 2017 24
Slide 25: Operating Cash Flow
OPERATING CASH FLOW SEK MILLION 1000 696 631 619 500 541 360 323 314 155 0 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 -294 -500 2015 2016 2017 25
Slide 26: Return on Capital Employed
RETURN ON CAPITAL EMPLOYED ADJUSTED, ROLLING 12 MONTHS (%) 16 Target: >13% 14 14 13 13 13 13 13 13 12 12 8 4 0 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 2015 2016 2017 26
Slide 27: Leverage
LEVERAGE NET DEBT/EBITDA (X) 3,00 2,50 Target: <2.5x 2,00 1,92 1,50 1,30 1,32 1,35 1,24 1,24 1,27 1,19 1,00 1,08 0,50 0,00 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 2015 2016 2017 27
Slide 28: Business Areas
BILLERUDKORSNAS BUSINESS AREAS
Slide 29: Packaging Paper Business Area
PACKAGING PAPER BUSINESS AREA KRAFT AND SACK PAPER FOR CUSTOMERS WITH TOUGH DEMANDS Packaging for flour, sugar, carrier bags, medical KRAFT PAPER SACK PAPER packaging, building materials, chemicals and more #1 #2 Growth driven by population growth in emerging GLOBALLY GLOBALLY markets, ageing popula
Slide 30: Packaging Paper Business Area: Q2 Development
PACKAGING PAPER BUSINESS AREA Q2 DEVELOPMENT Continued strong performance Net sales +3% vs Q2-16 2 151 NET SALES SEK MILLION Improved FX and increased local prices EBITDA +17% vs Q2-16 Good sales mix, increased local prices and favourable FX 312 EBITDA SEK MILLION Improved market for all kraft and s
Slide 31: Consumer Board Business Area
CONSUMER BOARD BUSINESS AREA LIQUID PACKAGING BOARD AND CARTONBOARD WITH UNIQUE PROPERTIES LIQUID LIQUID Packaging for milk, juice, preserved foods, beauty PACKAGING BOARD – AMBIENT PACKAGES PACKAGING BOARD – ALL PACKAGE TYPES and healthcare products, confectionary and more #1 #2 Growth driven by hi
Slide 32: Consumer Board Business Area: Q2 Development
CONSUMER BOARD BUSINESS AREA Q2 DEVELOPMENT Continued volume growth Net sales +4% vs Q2-16 2 099 NET SALES SEK MILLION EBITDA +4% vs Q2-16 Increased sales volumes Continued growth in all parts 498 EBITDA SEK MILLION Expected continued firm order situation for liquid packaging board with normal seaso
Slide 33: Corrugated Solutions Business Area
CORRUGATED SOLUTIONS BUSINESS AREA FLUTING AND LINER ADD VALUE Packaging for fruit and vegetables, white goods and electronics, exclusive drinks and more COATED WHITE PURE WHITE NSSC FLUTING TOP LINER LINER Supply chain solutions and packaging #1 #2 #2 optimisations for brand owners EUROPE EUROPE EU
Slide 34: Corrugated Solutions Business Area: Q2 Development
CORRUGATED SOLUTIONS BUSINESS AREA Q2 DEVELOPMENT Net sales +8% vs Q2-16 Improved local prices and FX 902 NET SALES SEK MILLION EBITDA +25% vs Q2-16 Lower maintenance cost Negative impact from digester breakdown 163 Strong order books and increased prices in Europe EBITDA SEK MILLION Expected contin
Slide 35: Outlook
BILLERUDKORSNAS OUTLOOK 35
Slide 36: Outlook
OUTLOOK Demand and order situation are expected to be strong in the third quarter with normal seasonal variances for all business areas. The Packaging Paper and Corrugated Solutions business areas see opportunities for local price increases in the next quarter. Longer transportation of wood is expec
Slide 37: Skärblacka and Gruvön Well Under Way
SKÄRBLACKA AND GRUVÖN WELL UNDER WAY IMPROVING EFFICIENCY AND SECURING GROWTH A Yankee cylinder of 160 tons on the move from Tervasaari to Skärblacka Investing in MG integrated to New board machine in Gruvön, pulp production in Skärblacka, Sweden with capacity of Sweden; approx. 550 000 t/a; SEK 1,3
Slide 38: Understanding Solution Sales
UNDERSTANDING SOLUTION SALES CONCEPT DEFINITIONS Packaging Solutions Systems Solutions Ready-to-use packaging solutions Product solutions including both materials BillerudKorsnäs sells ready-made and machine (and machine service) packaging Products using BillerudKorsnäs material May use BillerudKors
Slide 39: Appendix
BILLERUDKORSNAS APPENDIX 39
Slide 40: Global Packaging Market
GLOBAL PACKAGING MARKET GLOBAL PACKAGING MARKET, GLOBAL PACKAGING MARKET, BY REGION1 BY MATERIAL1 Asia, 38% Paper and board, 36% Europe, 27% Hard plastics, 22% North America, 22% Flexible materials excl. Paper, 16% South and Central America, 5% Metals, 14% Middle East, 3% Africa, 2% Glass, 7% Pacifi
Slide 41: Sales per Region
SALES PER REGION PACKAGING PAPER CONSUMER BOARD CORRUGATED SOLUTIONS SALES PER REGION SALES PER REGION SALES PER REGION • Europe 69% • Europe 70% • Europe 69% • Asia 15% • Asia 22% • Asia 21% • Africa 7% • Middle East 4% • Africa 4% • South America 4% • Africa 2% • South America 3% • Middle East 1%
Slide 42: BillerudKorsnäs Capex 2015-2019
BILLERUDKORSNÄS CAPEX 2015-2019 CAPEX SEK 4 700m SEKm SEK 4 500m 5 000 4 500 4 000 3 500 3 000 2 500 SEK 1 500m 2 000 1 500 1 000 500 0 2015 2016 2017 2018 2019 Base capex Tervasaari move + KM7 42
Slide 43: Cost Structure
COST STRUCTURE Fibre (wood and external pulp), 34% No significant forest assets Employee benefits expense, 17% Purchases made from handful of major Chemicals, 9% suppliers Bergvik Skog, Holmen, Mellanskog, Norra Delivery expenses, 10% Skogsägarna, Stora Enso and Sveaskog Large amount of private land
Slide 44: Sensitivity Analysis
SENSITIVITY ANALYSIS IMPACT ON PROFIT/LOSS BEFORE TAX Variable Change SEKm Sales volume +/- 10% +/-900 Exchange rate, SEK1 +/- 10% -/+640 Fibre prices +/- 10% -/+700 Price of electricity2 +/- 10% -/+30 Interest rate on loans3 +/- 1 percentage point -/+43 1 Excluding effects of currency hedging. 2 Ex
Slide 45: Production Units
PRODUCTION UNITS SWEDEN Gävle, 725 ktonnes Gruvön, 685 ktonnes Frövi/Rockhammar, 470 ktonnes Skärblacka, 420 ktonnes Karlsborg, 300 ktonnes FINLAND Pietarsaari, 200 ktonnes Tervasaari, 100 ktonnes UNITED KINGDOM Beetham, 45 ktonnes Total production capacity 2 945 ktonnes 45 All figures relate to pro
Slide 46: BillerudKorsnäs Share
BILLERUDKORSNÄS SHARE Symbol: BILL Trading platform: Nasdaq Stockholm IPO: November 20, 2001 Share performance 2017 Share performance 2006-2016 170 160 160 140 150 120 140 130 100 120 80 110 60 100 40 90 20 80 0 BILL OMX Stockholm PI OMX Stockholm Forestry & Paper PI BILL OMX Stockholm PI OMX Stockh
Slide 47: FX Risk
FX RISK Total net currency exposure of SEK 6.4 billion BK uses Swedish Riksbank’s FIXING rate (Month End) During month Sales, AP, AR etc: End of month rate previous month GBP 10% AP and AR: revalued to at end of month using End of month rate. Revaluation of AR booked in ”Currency hedging etc” Re
Slide 48: Debt Maturity and Funding
DEBT MATURITY AND FUNDING DEBT MATURITY PROFILE FUNDING Syndicated credit facilities SEK 5,500m RCF maturing June, 2022 – back bone funding Bilateral credit agreements 8 000 Mix of short and long term funding 7 000 6 000 Bonds SEK million 5 000 MTN Program frame SEK 5,000m of which SEK 3,500m issued
Slide 49: Ownership Structure
OWNERSHIP STRUCTURE N umb er o f N umb er o f Shareho ld er shares vo t es, % FRAPAG Beteiligungsholding AG 31 300 000 15,1 AMF Insurance & Funds 20 372 421 9,8 Sw edbank Robur Funds 9 273 858 4,5 Fourth Sw edish National Pension Fund 7 264 082 3,5 Alecta 6 948 000 3,4 Handelsbanken Funds 4 910 285
Slide 50: BillerudKorsnäs
BILLERUDKORSNAS
BillerudKorsnäs — BAML Pan-European Paper & Packaging Conference 2017 on 6ix