Billerud Interim Report Q4 2011 presentation

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Billerud Interim Report Q4 2011 presentation

Billerud - the natural part in smarter packaging

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Billerud Interim Report Q4 2011 presentation

  1. 1. 1 YEAR-END REPORT | JANUARY-DECEMBER 2011 Per Lindberg, CEO and President, and Susanne Lithander, CFO | 1 February, 2012
  2. 2. 2 AGENDA • Highlights • Development by Business Area • Financials • Outlook • Acquistion of UPM-Kymmene’s packaging paper business
  3. 3. 3 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
  4. 4. 4 INCREASED RESULTS FOR PACKAGING PAPER 73 94 276 64 688 820 0 200 400 600 800 1 000 1 200 2010 2011 Currency hedging, other, etc Market Pulp Packaging paper 1 037 +19% Operating profit breakdown, MSEK 978 Operating profit breakdown, % 7% 10% 27% 6% 66% 84% 0% 20% 40% 60% 80% 100% 2010 2011 Currency hedging, other, etc Market Pulp Packaging paper
  5. 5. 5 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
  6. 6. 6 PACKAGING & SPECIALITY PAPER Kraft & Sack Paper PACKAGING BOARDS S/C Fluting, Liner, Liquid Board MARKET PULP Nordic Bleached Softwood Kraft Pulp BUSINESS AREAS & SEGMENTS Note: Graph shows sales breakdown per business area for 2011.
  7. 7. 7 PACKAGING & SPECIALITY PAPER Market 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
  8. 8. 8 PACKAGING & SPECIALITY PAPER Financials – Q4 2011 vs. Q3 2011 • Operating profit down by MSEK 78 • Mainly due to lower prices but also to higher costs 0 20 40 60 80 100 120 140 160 Q4 -10 Q1 -11 Q2 -11 Q3 -11 Q4 -11 Operatingprofit,MSEK 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
  9. 9. 9 PACKAGING BOARDS Market 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
  10. 10. 10 PACKAGING BOARDS Financials – Q4 2011 vs. Q3 2011 • Operating profit down by MSEK 59 • Increased costs and lower sales volumes due to the periodic maintenance shutdown at Gruvön ‒ ~60% of the total cost for the shutdown • Lower prices 0 20 40 60 80 100 120 140 Q4 -10 Q1 -11 Q2 -11 Q3 -11 Q4 -11 Operatingprofit,MSEK 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
  11. 11. 11 MARKET PULP Market 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
  12. 12. 12 MARKET PULP Financials – Q4 2011 vs. Q3 2011 • Operating profit down by MSEK 54 • An improved currency situation compensated partly for less favourable prices in local currency • Write-down of the value of finished goods stocks due to lower pulp price -30 -20 -10 0 10 20 30 40 50 60 Q4 -10 Q1 -11 Q2 -11 Q3 -11 Q4 -11 Operatingprofit,MSEK 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
  13. 13. 13 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
  14. 14. 14 FINANCIAL INFORMATION
  15. 15. 15 QUARTERLY KEY FIGURES Q4 -11 Q3 -11 Q4 -10 Net sales, MSEK 2,086 2,327 2,279 Operating profit, MSEK 75 296 326 Operating margin 4% 13% 14% Profit/share, SEK 0.44 2.03 2.19 Net debt/equity ratio -0.05 -0.03 0.03 Sales volume (ktonnes) 315 335 323
  16. 16. 16 OPERATING PROFIT BRIDGE Q4 2011 vs. Q3 2011 * Includes product mix. 296 75 -26 -111 -7 -24 -63 +10 0 50 100 150 200 250 300 350 Operating profit Q3 2011 Sales & production volumes* Selling prices (in respective sales currency) Effects of exchange rate fluctuations, incl. hedging Change in variable costs Change in fixed costs Change in depreciation Operating profit Q4 2011 MSEK
  17. 17. 17 FULL YEAR KEY FIGURES FY 2011 FY 2010 vs. 2010 Net 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 +0.08 Sales volume (ktonnes) 1,354 1,307 +4%
  18. 18. 18 OPERATING PROFIT BRIDGE FY 2011 vs. FY 2010 * Includes product mix. 1 037 978 +22 +943 -608 -243 -92 -4 0 500 1 000 1 500 2 000 2 500 Operating profit 2010 Sales & production volumes* Selling prices (in respective sales currency) Effects of exchange rate fluctuations, incl. hedging Change in variable costs Change in fixed costs Change in depreciation Strike compensation Operating profit 2011 MSEK -77
  19. 19. 19 FINANCIAL TARGETS 0% 2% 4% 6% 8% 10% 12% 14% 2007 2008 2009 2010 2011 Operating margin Operating margin -2% 0% 2% 4% 6% 8% 10% 12% 14% 16% 2007 2008 2009 2010 2011 Organic growth Organic growth 0% 5% 10% 15% 20% 25% 2007 2008 2009 2010 2011 Return on capital employed WACC before tax Return on investment
  20. 20. 20 FINANCIAL TARGETS DividendNet debt/equity ratio -20% 0% 20% 40% 60% 80% 100% 2007 2008 2009 2010 2011 Net debt/equity ratio 0% 10% 20% 30% 40% 50% 60% 0.0 0.5 1.0 1.5 2.0 2.5 3.0 3.5 4.0 2007 2008 2009 2010 2011 SEK Dividend per share, SEK Dividend payout ratio, %
  21. 21. 21 CASH FLOW GENERATION FROM OPERATION 1) Minus equals increase in net debt 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 activities 274 531 461 1,272 1,393 Current net investments -178 -121 -81 -510 -331 Operating cash flow 96 410 380 762 1,062
  22. 22. 22 Electricity index (Sweden*) Wood price index Source: Nordpool. *Price area Sweden Source: Billerud MARKET PRICES AFFECTING RESULT
  23. 23. 23 MARKET PRICES AFFECTING RESULT Market pulp (USD/t) TCW index* Note: Average price for the quarter Source: Riksbanken *Total Competitiveness Weights Index
  24. 24. 24 CURRENCY SITUATION Average hedged currency rates (share of net flow) Q1 -12 Q2 -12 Q3 -12 Q4 -12 Total 12 months 9.35 9.19 9.22 9.19 9.26 (92%) (68%) (41%) (17%) (54%) 6.65 6.71 6.79 6.90 6.71 (92%) (60%) (41%) (19%) (53%) 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. • 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* Hedge level 12 months forward: 50% 53% 54% GBP USD EUR
  25. 25. 25 OUTLOOK
  26. 26. 26 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
  27. 27. 27 THE NATURAL PART IN SMARTER PACKAGING ACQUISITION OF UPM-KYMMENE’S PACKAGING PAPER OPERATION | FEB 2012
  28. 28. 28 ACQUISITION OF UPM-KYMMENE’S PACKAGING PAPER 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
  29. 29. 29 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
  30. 30. 30 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%
  31. 31. 31 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
  32. 32. 32 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
  33. 33. 33 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
  34. 34. 34 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.

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