Back to growth, improved profitability and solid cash generation
Key highlights
- Underlying EBITDA improvement both sequentially and versus a year ago
- Positive pricing and mix effects more than offset sequentially higher input costs
- Excellent financial performance in Region North America
- Annual maintenance stops in four mills according to plan, cost impact SEK 515 million
- Strong cash conversion through continued working capital focus
Quarterly data
- Net sales increased by 8% to SEK 10,764 million (9,953)
- Adjusted EBITDA* SEK 1,003 million (188)
- Adjusted EBITDA margin 9% (2)
- Operating profit SEK 171 million (-496), including items affecting comparability of SEK -119 million (–)
- Net profit SEK 63 million (-481)
- Earnings per share SEK 0.25 (-1.94)
Outlook for Q3
- Market conditions to improve slightly
- Positive price and mix impact to offset higher input costs
Comments by the CEO
I am pleased with the result we were able to produce for the second quarter of 2024. We are back to net sales growth, our underlying profitability improved, both sequentially and versus the same period a year ago, and we delivered yet again a solid cash conversion for the quarter. I’m encouraged to see the progress we are doing to improve our margins as it’s such an important priority for the company. The underlying profitability, when excluding the impact of the maintenance shutdowns, improved substantially. Hard focus on pricing and portfolio management and continued delivery of our efficiency program helped us offset higher input costs.
Demand for our products improved during the quarter, partly due to supply and logistics disturbances within our industry that worked in our favor. This helps us in the short to medium term, but end consumer demand has not strengthened significantly over the past months. We remain cautiously optimistic going forward about gradually improved market conditions. We have adopted an agile mentality to adjust to fast-changing market conditions, which we consider to be the new normal.
Our financial performance in North America was excellent in the second quarter, with an EBITDA margin of 18%. Paper volumes increased and the quarter was again a clear testimony to our highly competitive asset base in Upper Michigan. With better-than-expected flexibility on most of the assets and cost-leading position situated in an attractive region, we remain true to our strategy to successfully shift the product mix towards high-performance packaging materials with lower investment level than originally planned. The optionality of our paper machines in the US has been once again confirmed by performing successful trials for uncoated liner with encouraging results and positive customer feedback.
In Europe, deliveries in the second quarter came in slightly lower than anticipated but our order books remain strong. We implemented price increases for containerboard, sack and kraft paper, and could thereby more than offset cost increases and improve our margins compared with the previous quarter.
Our profitability in Europe is however under pressure by all- time-high costs for pulpwood. It’s the dawn of a new era for the Nordic pulp and paper industry with both regulatory forces and an unbalanced supply and demand situation driving prices towards unprecedented levels. We will ontinue to work hard to establish new partnerships and optimize recipes to reduce the fiber consumption, which is core of the European strategy. However, being successful in such difficult operational environment will ultimately be about the attractiveness and the relative strength of the product portfolio. I am confident that Billerud has developed, through our excellent production know-how, a highly attractive offering platform with long-term demand growth, but we will need to continuously perform at our best to navigate in the challenging conditions.
To strengthen profitability and cash conversion we continue to focus on items that we control, such as our production efficiency and reducing our cost base. Our three-year efficiency enhancement program, that now has run halfway, continues to deliver and we are ahead of the ambition we set 18 months ago. For the first six months of this year, the efficiency enhancement program has provided a positive contribution of SEK 390 million compared with last year. We are on track to deliver the program target of SEK 700 million incrementally in 2024.
Our priorities for this year remain. The health and safety of our employees is always our most important focus area. We continue to work systematically to institutionalize a stronger safety mentality across all areas of our company. We also focus on progressing with our strategic projects, executing our revised European strategy to mitigate higher wood costs, and delivering our efficiency enhancement program. With the new path for transforming of our US operations and a new premise for the Nordic pulp and paper industry, we will continue to adapt to the changes in our industry. I look forward to providing more insights about our strategic priorities and execution at a Capital Markets Day, which we plan to hold in Stockholm in the fourth quarter 2024.
Ivar Vatne
President and CEO
Source: Billerud
