Billerud Interim Report Q4 2011 presentation

YEAR-END REPORT | JANUARY-DECEMBER 2011Per Lindberg, CEO and President, and Susanne Lithander, CFO | 1 February, 2012 1

AGENDA • Highlights • Development by Business Area • Financials • Outlook • Acquistion of UPM-Kymmene’s packaging paper business 2

HIGHLIGHTS IN 2011 • 6% increase in net sales vs. 2010 • 10% operating margin • Return on capital employed of 20% • Significant price increases achieved ‒ Price increase of MSEK 943 (local currency) vs. 2010 • 4% increase in sales volumes vs. 2010 • Higher wood costs • Changed market environment in H2 2011 3

INCREASED RESULTS FOR PACKAGING PAPEROperating profit breakdown, MSEK Operating profit breakdown, %1 200 100% 1 037 9781 000 80% 800 66% 688 60% 84% 600 820 +19% 40% 400 200 276 20% 27% 64 6% 0 73 94 0% 7% 10% 2010 2011 2010 2011 Currency hedging, other, etc Currency hedging, other, etc Market Pulp Market Pulp Packaging paper Packaging paper 4

HIGHLIGHTS IN Q4 2011 • Weak earnings ‒ Operating profit of MSEK 75, margin 4% • Price pressure ‒ ~4% lower prices in local currency for packaging paper ‒ ~125 USD/tonne price drop for NBSK pulp in Europe • Periodical maintenance stop at Gruvön mill • Order situation for packaging paper at lower levels than normal ‒ Uncertainty about demand, signs of more stable development • Market-related shutdowns increasingly implemented vs. Q3 2011 • Seasonally higher fixed costs vs. Q3 2011 5

BUSINESS AREAS & SEGMENTSPACKAGING &SPECIALITY PAPER PACKAGING BOARDSKraft & Sack Paper S/C Fluting, Liner, Liquid Board MARKET PULP Nordic Bleached Softwood Kraft PulpNote: Graph shows sales breakdown per business area for 2011. 6

PACKAGING & SPECIALITY PAPERMarket situation in Q4 2011 • Order situation stable but at an low level • Customers continued to focus on reducing stock levels • Market-related production shutdowns implemented to restore market balance • Price pressure continued ‒ Price level in local currency deteriorated for all products vs. Q3 2011 7

PACKAGING & SPECIALITY PAPERFinancials – Q4 2011 vs. Q3 2011 160 • Operating profit down by MSEK 78 140 Operating profit, MSEK 120 • Mainly due to lower prices but also to 100 higher costs 80 60 40 20 0 Q4 -10 Q1 -11 Q2 -11 Q3 -11 Q4 -11 Q4 -11 Q3 -11 Q4 -10 FY 2011 Net sales, MSEK 941 1,056 1,020 4,293 Operating profit, MSEK 65 143 131 450 Operating margin, % 7 14 13 10 8

PACKAGING BOARDSMarket situation in Q4 2011 • Order situation at lower levels than normal • Order situation continued to weaken • Customers reduced their stocks to a greater extent vs. Q3 2011 • Price pressure continued ‒ Lower prices in local currency for most products vs. Q3 2011 9

PACKAGING BOARDSFinancials – Q4 2011 vs. Q3 2011 140 • Operating profit down by MSEK 59 120 Operating profit, MSEK • Increased costs and lower sales 100 volumes due to the periodic 80 maintenance shutdown at Gruvön 60 40 ‒ ~60% of the total cost for the 20 shutdown 0 • Lower prices Q4 -10 Q1 -11 Q2 -11 Q3 -11 Q4 -11 Q4 -11 Q3 -11 Q4 -10 FY 2011 Net sales, MSEK 644 696 648 2,772 Operating profit, MSEK 60 119 122 370 Operating margin, % 9 17 19 13 10

MARKET PULPMarket situation in Q4 2011 • Pulp market continued to weaken vs. Q3 2011 • Several non-integrated NBSK producers implemented market related production shutdowns • Price in Europe fell to ~825 USD/tonne at end of Q4 2011 from ~950 USD/tonne at end of Q3 2011 11

MARKET PULPFinancials – Q4 2011 vs. Q3 2011 60 • Operating profit down by MSEK 54 50 Operating profit, MSEK 40 • An improved currency situation 30 compensated partly for less 20 favourable prices in local currency 10 0 • Write-down of the value of finished -10 Q4 -10 Q1 -11 Q2 -11 Q3 -11 Q4 -11 goods stocks due to lower pulp price -20 -30 Q4 -11 Q3 -11 Q4 -10 FY 2011 Net sales, MSEK 416 465 450 1,752 Operating profit, MSEK -24 30 53 64 Operating margin, % -6 6 12 4 12

Q4 2011 IN SUM • Weak earnings • Price pressure • Periodical maintenance stop at Gruvön mill • Order situation for packaging paper at lower levels than normal • Market-related shutdowns increasingly implemented vs. Q3 2011 • Seasonally higher fixed costs vs. Q3 2011 13

FINANCIAL INFORMATION 14

QUARTERLY KEY FIGURES Q4 -11 Q3 -11 Q4 -10Net sales, MSEK 2,086 2,327 2,279Operating profit, MSEK 75 296 326Operating margin 4% 13% 14%Profit/share, SEK 0.44 2.03 2.19Net debt/equity ratio -0.05 -0.03 0.03Sales volume (ktonnes) 315 335 323 15

OPERATING PROFIT BRIDGE Q4 2011 vs. Q3 2011 350 296 300 -26 250 200 MSEK 150 -111 -7 -24 100 +10 75 -63 50 0 Operating Sales & Selling prices Effects of Change in Change in Change in Operating profit production (in respective exchange rate variable costs fixed costs depreciation profit Q3 2011 volumes* sales currency) fluctuations, Q4 2011 incl. hedging* Includes product mix. 16

FULL YEAR KEY FIGURES FY 2011 FY 2010 vs. 2010Net sales, MSEK 9,343 8,828 +6%Operating profit, MSEK 978 1,037 -6%Operating margin 10% 12% -2p.p.Profit/share, SEK 6.63 6.84 -3%Net debt/equity ratio -0.05 0.03 +0.08Sales volume (ktonnes) 1,354 1,307 +4% 17

OPERATING PROFIT BRIDGE FY 2011 vs. FY 2010 2 500 +943 2 000 1 500 MSEK -608 1 037 +22 -243 978 1 000 -4 -92 -77 500 0 Operating Sales & Selling prices Effects of Change in Change in Change in Strike Operating profit production (in respective exchange rate variable costs fixed costs depreciation compensation profit 2010 volumes* sales fluctuations, 2011 currency) incl. hedging* Includes product mix. 18

FINANCIAL TARGETSOrganic growth Operating margin Return on investment 25%16% 14%14% 12% 20%12% 10%10% 15% 8%8% 6% 10%6% 4%4% 5%2% 2%0% 0% 0% 2007 2008 2009 2010 2011 2007 2008 2009 2010 2011 2007 2008 2009 2010 2011-2% Return on capital employed Operating margin WACC before tax Organic growth 19

FINANCIAL TARGETS Net debt/equity ratio Dividend 100% 4.0 60% 3.5 80% 50% 3.0 60% 40% 2.5 SEK 40% 2.0 30% 20% 1.5 20% 1.0 0% 2007 2008 2009 2010 2011 10% 0.5 -20% 0.0 0% 2007 2008 2009 2010 2011 Dividend per share, SEK Net debt/equity ratio Dividend payout ratio, % 20

CASH FLOW GENERATION FROM OPERATION MSEK Q4 -11 Q3 -11 Q4 -10 2011 2010 Operating surplus, etc 238 464 583 1,604 1,625 Change in working capital, etc. 48 83 -115 -113 -147 Net financial items, taxes, etc. -12 -16 -7 -219 -85 Cash flow from operating 274 531 461 1,272 1,393 activities Current net investments -178 -121 -81 -510 -331 Operating cash flow 96 410 380 762 1,0621) Minus equals increase in net debt 21

MARKET PRICES AFFECTING RESULTElectricity index (Sweden*) Wood price indexSource: Nordpool. *Price area Sweden Source: Billerud 22

MARKET PRICES AFFECTING RESULTMarket pulp (USD/t) TCW index*Note: Average price for the quarter Source: Riksbanken *Total Competitiveness Weights Index 23

CURRENCY SITUATION • Profit effect of net flow hedging MSEK 44 (79) for Q4 2011 and MSEK 190 (344) for FY 2011 • Market value of outstanding contracts not relating to accounts receivable was MSEK 17* Average hedged currency rates (share of net flow) Hedge level 12 months forward: Q1 -12 Q2 -12 Q3 -12 Q4 -12 Total 12 months EUR 54% 9.35 9.19 9.22 9.19 9.26 (92%) (68%) (41%) (17%) (54%) USD 53% 6.65 6.71 6.79 6.90 6.71 (92%) (60%) (41%) (19%) (53%) GBP 50% 10.59 10.56 10.68 10.75 10.61 (85%) (60%) (38%) (15%) (50%)Note: Data in table and graph are as of 31 December 2011. *As of 31 December 2011. 24

OUTLOOK 25

OUTLOOK • At present there is uncertainty about the order situation for the Group in the first part of 2012. However, the market is showing signs of more stable development • Continued price pressure is expected for the packaging paper segments at the beginning of 2012 • If required, market-related production shutdowns will be implemented in order to restore the balance in the market 26

THE NATURAL PART INSMARTER PACKAGINGACQUISITION OF UPM-KYMMENE’S PACKAGING PAPER OPERATION | FEB 2012 27

ACQUISITION OF UPM-KYMMENE’S PACKAGINGPAPER OPERATION • Billerud Finland Oy, a wholly-owned subsidiary to Billerud AB, has signed an agreement with UPM-Kymmene (UPM) to acquire UPM’s packaging paper operation in Pietarsaari and Tervasaari, Finland • Transaction amount is MEUR 130 (SEK ~1.2bn) • Expected to be cash flow positive from closing • Earnings per share is expected to increase with approximately SEK 1.20 including fully realized synergies • The transaction is subject to approval by relevant competition authorities 28

EXCELLENT STRATEGIC FIT • Strengthen Billerud’s platform within smarter packaging − Complements Billerud’s existing product offerings − Strengthen the development of future renewable packaging solutions − World-class asset and product quality • Significantly reduced pulp market exposure ‒ Around 85% of the current market pulp exposure virtually hedged ‒ Will decrease volatility in Billerud earnings • Favourable impact on currency exposure − Substantially increased cost base in EUR 29

SYNERGIES AND FINANCIALS • Annual net synergies of approximately MSEK 30 − Full effect from end of 2013 − Non-recurring costs in 2012 of approximately MSEK 22 − Allows for increased flexibility in production structure and product mix • Financials 2011 for the acquired operation − Sales: approximately MEUR 220 (SEK 2bn) − EBITDA: approximately MEUR 18 (MSEK 165) − EBITDA margin: approximately 8% 30

ACQUIRED OPERATION • PM1 in UPM’s Pietarsaari mill, Finland − PM1 is physically integrated with one of the largest European pulp mills, which remains in UPM’s ownership − White and brown sack and kraft paper − 200,000 tonnes in annual production capacity • PM7 in UPM’s Tervasaari mill, Finland − PM7 is non-integrated − White and brown kraft paper − 100,000 tonnes in annual production capacity • Very efficient and well invested assets with low reinvestment needs • Around 185 employees 31

LONG-TERM AGREEMENTS SIGNED • The acquired operation will continue to be dependent on supply of raw materials from UPM • Long-term agreements have been signed on commercial terms between UPM and Billerud, including: − Pulp − Steam − Electricity − Mill services • Pulp at market price 32

FULLY FINANCED • Transaction financed by a combination of cash at hand and debt via existing credit facilities • Net debt-to-equity (ND/E) ratio will increase by 24 percentage points following the transaction − After closing of the transaction, the Group’s net debt-to-equity is expected to be below the financial target of 0.6-0.9 ND/E, all other things being equal 33

Q&A We believe in embracing what is important to our customers, our company,our employees and the environment. By always giving back more than we take, we are building a company for future generations. 34

Billerud Interim Report Q4 2011 presentation

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Billerud Interim Report Q4 2011 presentation — Presentation Transcript

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