Billerud Interim Report Q3 2011 presentation
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1
INTERIM REPORT | JANUARY-SEPTEMBER 2011
THE NATURAL PART IN
SMARTER PACKAGING
Per Lindberg, CEO and President, and Susanne Lithander, CFO | 28 October, 2011
2
AGENDA
• Highlights
• Development by Business Area
• Financials
• Outlook
3
HIGHLIGHTS IN Q3 2011
• Strong earnings
‒ Operating profit of MSEK 296, margin 13%
• Very strong cash flow
‒ Cash flow from operating activities of MSK 531
• Significant increase in earnings for packaging paper
• Net cash position
• Growing uncertainty about packaging paper demand
‒ Weakened order situation
‒ Stable local prices for packaging paper
4
THE NATURAL PART IN SMARTER PACKAGING
• Pentawards Best of the Show
‒ Billerud’s design agency NINE received the world’s finest
design award
• Design Challenge 2011
‒ Billerud FibreForm® was rewarded at the largest Nordic
packaging fair
5
Business areas
STRONG RESULTS FROM BUSINESS AREAS
292
0
50
100
150
200
250
300
Apr-Jun 11 Jul-Sep 11
EB
IT, M
SE
K
Currency hedging, other, etc
Business areas
275296
+35%
+8%
0
50
100
150
200
250
300
Apr-Jun 11 Jul-Sep 11
EB
IT,
MS
EK
Packaging & Speciality PaperPackaging BoardsMarket Pulp
+40%
+27%
+50%
+35%
216
Billerud group
6
PACKAGING & SPECIALITY PAPERKraft & Sack Paper
PACKAGING BOARDS
S/C Fluting, Liner, Liquid Board
MARKET PULPNordic Bleached
Softwood Kraft Pulp
BUSINESS AREAS & SEGMENTS
Note: Graph shows sales breakdown per business area for July-September 2011.
7
PACKAGING & SPECIALITY PAPERMarket situation in Q3 2011
• Order situation for sack and kraft paper continued to
weaken gradually
‒ Seasonality and reduction of stock levels were main reasons
• Market-related production shutdowns implemented to
restore market balance
‒ Mainly related to sack paper
• Stable prices in local currency vs. Q2 2011
• Increased price pressure during the quarter
8
8
PACKAGING & SPECIALITY PAPERFinancials – Q3 2011 vs. Q2 2011
• Operating profit up MSEK 41
• Improved currency situation and
lower costs
• Lower sales volume had a negative
impact on operating profit
0
20
40
60
80
100
120
140
160
Q3 Q4 Q1 Q2 Q3
Opera
ting p
rofit,
MS
EK
20112010
Q3 2011 Q2 2011 Q3 2010 FY 2010
Net sales, MSEK 1,056 1,079 1,085 4,166
Operating profit, MSEK 143 102 106 417
Operating margin, % 14 9 10 10
9
PACKAGING BOARDSMarket situation in Q3 2011
• Order situation weakened to some extent
‒ Growing uncertainty about demand compared with Q2 2011
• Stable prices in local currency vs. Q2 2011
• Increased price pressure towards the end of Q3 2011
‒ Related to lower prices for recycled fibre-based grades
10
PACKAGING BOARDSFinancials – Q3 2011 vs. Q2 2011
• Operating profit up MSEK 25
• Improved currency situation and
lower fixed costs
0
20
40
60
80
100
120
140
Q3 Q4 Q1 Q2 Q3
Opera
ting p
rofit,
MS
EK
20112010
Q3 2011 Q2 2011 Q3 2010 FY 2010
Net sales, MSEK 696 704 649 2,428
Operating profit, MSEK 119 94 107 271
Operating margin, % 17 13 16 11
11
MARKET PULPMarket situation in Q3 2011
• Weakened pulp market vs. Q2 2011
• Producers’ pulp stocks increased
• Demand relatively good vs. Q2 2011
• Price in Europe fell to ~950 USD/tonne at end of Q3 2011
from ~1,025 USD/tonne at end of Q2 2011
12
MARKET PULPFinancials – Q3 2011 vs. Q2 2011
• Operating profit up MSEK 10
• Higher sales volume and an
improved currency situation compensated for less favourable
prices in local currency
0
10
20
30
40
50
60
70
80
90
100
Q3 Q4 Q1 Q2 Q3
Opera
ting p
rofit,
MS
EK
20112010
Q3 2011 Q2 2011 Q3 2010 FY 2010
Net sales, MSEK 465 435 452 1,731
Operating profit, MSEK 30 20 92 276
Operating margin, % 6 5 20 16
13
Q3 2011 IN SUM
• Strong earnings
‒ Operating profit of MSEK 296, margin 13%
‒ MSEK +76 in higher operating profit from business areas
• Very strong cash flow
• Growing uncertainty about packaging paper demand
• Billerud received two of the most recognised packaging
awards
14
FINANCIAL INFORMATION
15
QUARTERLY KEY FIGURES
332335335Sales volume (ktonnes)
Q3 2011 Q2 2011 Q3 2010
Net sales, MSEK 2,327 2,383 2,251
Operating profit, MSEK 296 275 276
Operating margin 13% 12% 12%
Profit/share, SEK 2.03 1.88 1.84
Net debt/equity ratio -0.03 0.06 0.12
16
OPERATING PROFIT BRIDGE Q3 2011 vs. Q2 2011
296
275
-22
-35
+4
+26
+57
-9
0
50
100
150
200
250
300
350
Operating
profit
Q2 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
Q3 2011
MS
EK
* Includes product mix.
17
JANUARY-SEPTEMBER KEY FIGURES
+0.150.12-0.03Net debt/equity ratio
Jan-Sep 2011 Jan-Sep 2010 vs. 2010
Net sales, MSEK 7,257 6,549 +11%
Operating profit, MSEK 903 711 +27%
Operating margin 12% 11% +1p.p.
Profit/share, SEK 6.19 4.66 +33%
Sales volume (ktonnes) 1,039 984 +6%
18
WELL ABOVE TARGET FOR OPERATING MARGIN
Financial target
-2%
0%
2%
4%
6%
8%
10%
12%
14%
FY 06 FY 07 FY 08 FY 09 FY 10Op
era
tin
g m
arg
in,
rolli
ng
12
mo
nth
s (
%)
19
WORKING CAPITAL KEY RATIOS
0
10
20
30
40
50
60
70
0901
3109
0430
0907
3109
1031
1001
3110
0430
1007
3110
1031
1101
3111
0430
1107
30
DS
O d
ays
OverdueDays sales outstanding WC as % of quarterly sales
0.0
1.0
2.0
3.0
4.0
5.0
6.0
0901
3109
0531
0909
3010
0131
1005
3110
0930
1101
3111
0531
1109
30%
of to
tal re
ce
iva
ble
s
0%
10%
20%
30%
40%
50%
60%
70%
0903
0906
0909
0912
1003
1006
1009
1012
1103
1106
1109
Work
ing c
apital (e
xcl. IA
S)/
quart
ely
net tu
rnover
20
STRONG CASH FLOW GENERATION FROM OPERATION
1) Minus equals increase in net debt
MSEKQ3 2011 Q2 2011 Q3 2010
Operating surplus, etc 464 421 417
Change in working capital, etc. 83 57 67
Net financial items, taxes, etc. -16 -10 -20
Cash flow from operating activities 531 468 464
Current net investments -121 -129 -113
Operating cash flow 410 339 351
Dividend - -361 -
Other items, not affecting cash flow -2 -1 1
Change in net debt 1) 408 -23 352
21
80
100
120
140
160
2004 Q3
2005
Q2
2006
Q1
2007
Q4
2007
Q3
2008
Q2
2009
Q1
2010
Q4
2010
Q3
2011
80
120
160
200
240
280
2004 Q3
2005
Q2
2006
Q1
2007
Q4
2007
Q3
2008
Q2
2009
Q1
2010
Q4
2010
Q3
2011
Electricity index (Sweden*) Wood price index
Source: Nordpool. *Price area Sweden Source: Billerud
MARKET PRICES AFFECTING RESULT
22
MARKET PRICES AFFECTING RESULT
550600650700750800850900950
1,0001,050
2004 Q3
2005
Q2
2006
Q1
2007
Q4
2007
Q3
2008
Q2
2009
Q1
2010
Q4
2010
Q3
2011
94
97
100
103
106
109
112
115
118
2004 Q3
2005
Q2
2006
Q1
2007
Q4
2007
Q3
2008
Q2
2009
Q1
2010
Q4
2010
Q3
2011
Market pulp (USD/t) TCW index*
Note: Average price for the quarter Source: Riksbanken *Total Competitiveness Weights Index
23
CURRENCY SITUATION
Average hedged currency rates (share of net flow)
Oct-Dec 2011
Jan-Mar 2012
Apr-Jun 2012
Jul-Sep 2012
Total 12 months
9.27 9.38 9.21 9.24 9.30
(84%) (64%) (27%) (14%) (47%)
6.59 6.57 6.57 6.68 6.59
(80%) (60%) (29%) (16%) (47%)
10.61 10.60 10.49 10.63 10.59
(87%) (55%) (34%) (13%) (48%)
Note: Data in table and graph are as of 30 September 2011. *As of 30 September 2011.
• Profit effect of net flow hedging MSEK -5 (119) for Q3 2011 and MSEK 146 (265) for Jan-Sep 2011
• Market value of outstanding contracts not relating to account
receivables was MSEK -24*
Hedge level 12 months forward:
48%
47%
47%
GBP
USD
EUR
24
OUTLOOK
25
OUTLOOK FOR FY 2011
• Market development at the start of the fourth quarter was
marked by some uncertainty about demand. Customers
have continued to reduce their packaging paper stock levels,
which is having a negative impact on orders. Underlying
demand, however, is estimated to be relatively stable in most
segments
• The start of the fourth quarter has been characterised by
continued price pressure
• Billerud continues its efforts to increase the proportion of
sales of packaging paper solutions, i.e. material combined
with services in order to create conditions for a relatively more stable development
26
Q&A
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