Solid performance with growth and increased profitability in both regions
Key highlights
• Organic and currency adjusted sales growth of 9%
• Strong profit recovery in Region Europe
• Another excellent quarter for Region North America
• Price and mix improvements fully offset cost inflation
• Continued good momentum for the efficiency enhancement program
Quarterly data
• Net sales increased by 6% to SEK 10,798 million (10,210)
• Adjusted EBITDA* SEK 1,555 million (1,167)
• Adjusted EBITDA margin 14% (11)
• Operating profit SEK 851 million (415)
• Net profit SEK 565 million (656)
• Earnings per share SEK 2.27 (2.64)
Outlook for Q4
• Softer demand and price pressure in Europe
• Stable market conditions in North America
• Increased input costs
Comments by the CEO
The third quarter was another solid quarter for Billerud. As we had planned, our net sales grew, and profitability improved in both regions. The positive profitability trend we have seen from the beginning of the year continued. The Group’s EBITDA margin ended at 14%, our strongest result since Q4 2022. Production stability was solid in the quarter and our scheduled maintenance stops in three mills went according to plan.
Yet again, region North America delivered an excellent financial performance with double digit sales growth and 18% EBITDA margin. All our categories in the US contributed to the strong result. In Region Europe, our fiber cost continued to increase, while most other input costs declined. Also for this quarter, we were successfully able to offset the cost inflation by proactive pricing and portfolio management for Europe. This is key and it will continue to be one of our top priorities going forward. Region Europe reached an EBITDA margin of 16%, the highest profitability in two years.
Our efficiency enhancement program continues to deliver structural savings. Disciplined work to eliminate price point outliers in the customer base as well as to increase our field-purchased pulpwood in the vicinity of our Swedish mills produces positive effects. The reduction of 350 positions throughout the entire company, that was announced a year ago, has progressed well and is now close to completion. We are well on track to outperform this year’s target for the efficiency enhancement program of SEK 700 million EBITDA uplift compared to 2023.
The market sentiment improved slightly in the third quarter as we had anticipated. However, we see now that the demand in several of our board and packaging paper categories is weakening. The underlying consumption of goods and packaging is at the moment below the long-term growth expectation. This is in particular true for Region Europe. We therefore expect to have a period of slower volume demand and pressure on pricing for most of our product categories. However, as input costs are not coming down, we will do our outmost to protect margins by continuing our relentless focus on price and mix management. We will drive value over volume across the company and apply an agile mindset for our production schedule.
The current market sentiment in the US is in comparison more stable, with the underlying consumption in a somewhat better shape. For the fourth quarter, we foresee stable market conditions in North America, with maintained prices for graphic and specialty paper and largely unchanged input costs. Our graphic paper has had a strong start of the quarter in the wake of the presidential election and Billerud is well placed as the natural choice of domestically produced material. For our maple hardwood pulp, we have seen significant pricing pressure during the third quarter and that is expected to continue towards the year-end.
We continue to focus on a few and selected priorities for the remainder of 2024:
• Execute our revised European strategy to mitigate the structurally higher wood costs
• Deliver our efficiency enhancement program
• Prepare for strategic investment projects
We and our JV partner Viken Skog AS were surprised and disappointed that our application for an environmental permit in Follum was rejected. We are confident in our consequence analysis of the project and will appeal this decision. Our plan to start bleached chemi-thermomechanical pulp (BCTMP) production at this existing production facility is supported by the local community and we have good hopes that the permit will be granted.
A lot of things have changed since we arranged our last Capital Markets Day (CMD) in November 2021. We have acquired Verso and the premise for the Nordic pulp and paper industry has changed dramatically since Russia’s war on Ukraine. We have developed a solid and exciting plan for both of our regions, and we look forward to hosting you at our CMD the 2nd of December, to convey our “Way Forward” and the next chapter for Billerud.
Ivar Vatne
President and CEO
Source: Billerud
