Billerud : Interim report January–September 2022

Another quarter with excellent growth, profitability and cash flow delivery

Key highlights Q3

  • Strong organic* and currency neutral sales growth of 20%
  • Record underlying EBITDA performance
  • Price and mix management more than offset cost inflation
  • Excellent cash delivery and all-time low leverage

Quarterly data Q3

  • Net sales increased by 82% to SEK 11,814 million (6,494), whereof Billerud North America accounted for SEK 3,718 million
  • Adjusted EBITDA** increased to SEK 2,196 million (1,117), whereof Billerud North America accounted for SEK 515 million
  • The adjusted EBITDA margin was 19% (17%)
  • Operating profit was SEK 1,536 million (639)
  • Net profit was SEK 1,347 million (477)
  • Earnings per share amounted to SEK 5.42 (2.31)

Outlook for Q4

  • Still solid demand for our products, but sentiment is changing towards being less favourable in Europe; stability in North America
  • Accelerated cost inflation in Europe with higher costs for wood and chemicals. Flat costs in North America
  • Continued focus on price and mix management to mitigate cost inflation

Comments by the CEO

2022 has been an excellent year so far for Billerud, and our third quarter performance was no exception. We delivered strong results for all our key performance indicators. Organic and currency neutral sales grew by 20% compared to last year, with broad-based growth across categories. Reported net sales grew by 82% compared to last year with the inclusion of the acquired North American business and currency tailwind.
Considering that the third quarter was unusually heavy on maintenance, the underlying EBITDA was all time high. We were able to more than offset higher costs in all input categories through continued focus on price management, driving profitable mix and continued delivery of our cost and efficiency program. Despite maintenance and upgrade shutdowns at four mills in the quarter, we delivered an EBITDA margin of 19%. The cash flow generation was outstanding, and our leverage has been reduced to an all-time low net debt to EBITDA ratio of 0.7. 
Our North American business is contributing significantly to both earnings and cash flow. A more balanced cost exposure following the acquisition of Verso makes us well positioned to meet more challenging market conditions. With continued North American contribution at current level, the acquisition payback period will be shorter than originally expected.
Our order book remains healthy and prices for deliveries in the end of the year are holding up. We start to see signs of a more gradual change towards normalized market conditions. There are signs of softening demand for some of our kraft and sack papers and some containerboard products, which is a natural effect of the lower consumer confidence in Europe. The demand for most of our products will however be robust even during recessionary conditions, with a proven resilience especially for liquid packaging board. For our graphic and speciality paper, prices are expected to be supported by capacity reductions in the industry.
Inflation phases and cost trends differ between Europe and North America. In Europe, pulpwood prices have increased significantly, mainly driven by lower availability of hardwood since the import stop from Russia. The volatile and high energy prices in Europe drive higher costs for chemicals, while logistics costs are expected to flatten out or decline. In North America, the cost inflation for pulpwood and other inputs is moderate and mainly driven by fuel and general price increases.
For the fourth quarter, we expect continued good demand for our products. In Europe, an accelerated cost inflation is expected with higher costs for wood and chemicals. In North America, the cost development is expected to be flat.
As geopolitical and macro-economic uncertainties are beyond our control, we will focus on what is in our hands to maintain a good performance. We continue to manage pricing to balance our need for cost coverage and the interest of our customers. We are developing new channels for wood sourcing, and we hedge our future energy consumption, which provides predictability. We are also planning an efficiency improvement programme as a continuation of our existing cost and efficiency programme, which will close in the fourth quarter.
We are currently running two significant pre-feasibility studies: The transformation from graphic paper to cartonboard in the USA and the construction of a bleached chemi-thermomechanical pulp mill together with our joint venture partner Viken Skog in Norway. Both projects are running on track with potential investment decision in 2023. These projects will both support our ambitions to grow in paperboard and have scopes that will provide considerable sustainability benefits.
On 12 October we changed the company name to Billerud. I would like to take this opportunity thank all our employees, customers, and all other stakeholders for the continuous trust in our company.
The name change was a natural step in our strategic journey to simplify and to integrate all our international businesses under One Billerud. Our mission remains the same: to challenge conventional packaging for a sustainable future.

Christoph Michalski
President and CEO