Continued outstanding performance in the US while navigating weakening market in Europe
Key highlights
- Flat currency-neutral net sales development
- EBITDA margin of 22% in North America, highest since Q4 2022
- Challenging earnings in Europe due to weakening demand
- Excellent cash conversion
- Evolution program in North America exceeding expectations
Quarterly data
- Net sales decreased by 5% to SEK 10,244 million (10,764)
- Adjusted EBITDA* SEK 912 million (1,003)
- Adjusted EBITDA margin* 9% (9)
- Operating profit SEK 188 million (171)
- Net profit SEK 55 million (63)
- Earnings per share SEK 0.22 (0.25)
Outlook for Q3
- Continued solid conditions in Region North America
- Weak conditions in Region Europe
- Stable input costs
Comments by the CEO
The financial performance in the second quarter was mixed across our two regions. Yet again, our Region North America delivered outstanding results across all financial KPIs. However, outcome in Region Europe was challenging, fighting soft market conditions in most categories.
Currency-neutral net sales in Region North America grew by 5% versus the same period last year, and the production capacity utilization rate in our US mills continued to improve. We have reached a solid operating rate of 76%. Our mills in upper Michigan are well placed with proximity to a large customer base and continue to excel by being the local partner which can offer quality, speed, reliability and predictability. Our North American region delivered another outstanding quarter with an EBITDA margin of 22%, our best result since Q4 2022. Profitability was mainly strengthened by continued volume growth and price increase on coated freesheet paper reels, which represent 60% of our graphic paper sales.
Uncertainty continued to impact market conditions for our Region Europe in the second quarter. The currency-neutral net sales declined by 3% versus last year. The geopolitical and macroeconomic situation have caused consumers to hold back on spending. Also, the new reality around import tariffs have started to impact trade flows, causing an escalation of the already oversupplied fiber-based packaging materials market in Europe. For our largest product category, liquid packaging board, we continued to meet fierce competition and weak demand in Asia. The second quarter is the heaviest maintenance period for Region Europe and impacted earnings by around SEK 380 million. The region’s quarterly EBITDA margin was 5% (excluding maintenance impact: 11%).
In this challenging operating environment, our philosophy is simple: We continue to relentlessly focus on items we can control. As we had expected, the efforts to reduce working capital are paying off. Swiftly adjusting our production schedule to market reality and manage inventories carefully. Our cash conversion in the second quarter was excellent, coming in at 131%. Cash generation is one of our top company priorities, and I am encouraged to see a more than doubled operating cash delivery in the first half of 2025 versus a year ago. In the second quarter we also maintained fixed cost discipline, and so far in 2025 we have managed to offset a significant part of inflation through efficiencies.
The progress of program Evolution in North America, shifting our product portfolio towards packaging materials, is exceeding our expectations. Although it is still early days, we are experiencing strong customer support and we have numerous trials for both our bleached liner Tribute® and low-grammage cartonboard Voyager®. Being a local, reliable partner that can offer US-made products with speed has accelerated customer interest. We are well on track to exceed our initial target of commercializing 15 ktons US paperboard for 2025. Our upgrade of the Escanaba mill, to enable even further acceleration towards paperboard production, is progressing as per plan.
For the third quarter we expect stable market conditions for North America. For Region Europe, uncertainty remains high in the wake of the geopolitical turmoil. We do not foresee a fast recovery in Europe in the coming quarter, based on the current weak trading environment. After a long period of increasing wood prices in the Nordics, we have seen the first price reductions in the market. The impact for the third quarter is limited, but it is a clear trend shift in terms of inflation for our biggest input cost component.
Billerud is a leader in high performance packaging materials, with a strong financial position and low investment needs. We are well positioned in terms of product categories and geographies to evolve our business and to further strengthen our financial performance. Our focus remains on a few and selective priorities that all are in our control. By delivering on our Way Forward strategy, we will make Billerud stronger and more resilient to navigate future challenges and successfully capture opportunities to win versus competition.
Ivar Vatne
President and CEO
