Bergs Timber : Interim report 2022 Q2

Interim Report

1 January - 30 June

2022

Q2

Summary

2

Interim Report

1 January - 30 June 2022

SECOND QUARTER (1 APRIL-30 JUNE)

• Net sales increased by 22% to SEK 1,009 million (826). The increase was related to higher sales prices for all products and higher sales
  volumes­ in Joinery.
• EBITDA amounted to SEK 173 million (146). The increase was explained by higher sales prices for Sawn Wood, increased sales
  volumes­ within Joinery and improved earnings for the pellet business. Lower sales volumes and higher raw material costs lowered the result for Wood Protection. The EBITDA margin was 17.1% (17.7).
• Operating profit amounted to SEK 151 million (128), corresponding to an operating margin of 15.0% (15.5).
• Profit for the period amounted to SEK 153 million (118).
• Earnings per share, before and after dilution, were SEK 4.41 (3.40).
• Cash flow from operating activities amounted to SEK -18 million (27), negatively affected by a higher level of working capital.
• Financial net debt totalled SEK 278 million (263) as of 30 June,
  corresponding­to a net debt/equity ratio of 0.16 (0.19).
• A consolidation of shares (reverse split) was made in May, whereby ten
  (10) shares were consolidated­into one (1) share.

INTERIM PERIOD (1 JANUARY-30 JUNE)

• Net sales increased by 35% to SEK 1,919 million (1,416). The increase was related to higher sales prices for all products and higher sales
  volumes­ in Joinery.
• EBITDA amounted to SEK 255 million (211). The increase was explained by higher sales prices for Sawn Wood, increased sales
  volumes­ within Joinery and improved earnings for the pellet business. Wood Protection was negatively affected by lower sales volumes and higher raw material costs. The EBITDA margin was 13.3% (14.9).
• Operating profit amounted to SEK 212 million (175), corresponding to an operating margin of 11.0% (12.3).
• Profit for the period amounted to SEK 216 million (171).
• Earnings per share, before and after dilution, were SEK 6.23 (4.93).
• Cash flow from operating activities amounted to SEK 106 million (-81).
• A new loan agreement was made with Danske Bank and SEB. The total credit facilities amount to SEK 650 million and have a three-year term.
• Performance Timber Products Group acquired all shares in the
  English­ company P&P Holdings Limited that sells, distributes and installs windows and doors in Surrey and South West London.

The Group's key performance indicators

	2022	2021	2022	2021	2021
	Apr-Jun	Apr-Jun	Jan-Jun	Jan-Jun	Jan-Dec
AMOUNTS IN SEK million	3 months	3 months	6 months	6 months	12 months
Net sales	1,009	826	1,919	1,419	3,055
EBITDA	173	146	255	211	503
EBITDA margin, %	17.1	17.7	13.3	14.9	16.5
Operating profit	151	128	212	175	426
Operating margin, %	15.0	15.5	11.0	12.3	13.9
Profit for the period	153	118	216	171	417
Earnings per share, SEK*	4.41	3.40	6.23	4.93	12.03
Equity per share, SEK*	51.08	39.19	51.08	39.19	46.61

* Earnings per share and Equity per share have been adjusted retroactively for the reverse split 1:10 in May 2022.

First page: On July 5, the Polish company Pinus was acquired. The company, which manufactures bespoke windows and doors in the premium segment, will contribute to the Groups production capacity and enabling further growth.

B E R G S T I M B E R A B

I n te r i m R e p o r t J a n u a r y  -  J u n e 2 0 2 2

CEO comments

3

Strong quarter despite increased uncertainty

SECOND QUARTER

The second quarter of the year was strong in terms of profitability and EBITDA amounted to SEK 173 million compared with SEK 146 million the previous year. Net sales during the quarter amounted to SEK 1,009 million, compared with SEK 826 million last year, an increase of 22%. The higher net sales are explained by higher sales prices for all products and increased sales volumes in the Joinery product area.

The improved result compared to the previous year is explained by higher sales prices for Sawn Wood, increased sales volumes within Joinery and improved earnings for the pellet business as a result of higher sales prices and volumes. Lower demand in the do-it-yourself market along with higher raw material costs lowered the result for Wood Protection.

MARKET

The market has been characterized by increased concern about the effects of the war in Ukraine, high inflation rates and rising interest rates. During the quarter, we see a decrease in activity in the do-it-yourself ­segment compared to the previous year. At the same time, the activity in construction and renovation has remained good.

The market for sawn timber products continues to be volatile. After the winter's sharp price increases, we now have a market with falling prices. The sanctions for Russian timber products decided on in March did not enter into force until the beginning of July. This has meant that timber deliveries from Russia continued at a normal pace in Q2, which has partly been a surprise to the market. The market impact of the sanctions will therefore be seen in the second half of 2022.

As an effect of increased energy costs, we see an increased interest in heating pellets where prices rise sharply.

Bergs has a good raw material situation and supply to all units and non-delivery of Russian wood products is compensated by increased deliveries from other established suppliers.

PERFORMANCE BY PRODUCT AREA

WOOD PROTECTION

Increased raw material costs and the decline in the do-it-yourself market had a negative impact on margins during the quarter. The market for ­professional construction remains good and order intake is normal for the autumn. Our efforts towards increased market presence and product development continue. The strategy for our Latvian wood protection business, which has had a large part of its raw material supply from Russia and Belarus, will be reviewed in the autumn with the aim of further focusing the activities towards a more developed product range.

JOINERY

Demand for windows and doors remains good and order intake remains at a good level. Increased costs for raw materials and logistics have been offset by increased selling prices. We continue the expansion of our Timber Windows brand and the plan for five new showrooms during the year remains in place. Demand for garden products remains good although we are seeing some decline from the do-it-yourself sector.

SAWN WOOD

High sales prices and high capacity utilization characterized the business during the quarter. Even though raw material prices in the Baltics have risen during the winter and spring, the margin in the business is good. Our finished goods inventories remain low. However, the market for sawn timber products is more uncertain for the autumn and prices are falling. The effect of this is expected to be partially offset by reduced raw material prices and increased prices for by-products such as wood chips and sawdust.

OTHER (ENERGY & LOGISTICS)

In the wake of increased costs for energy, the market for pellets has improved markedly during the first half of the year. Inventory levels are very low and prices are rising. After a weak development in 2021, we now see improved margins for our pellet business.

ACQUISITIONS

On July 5, we acquired the Polish company Pinus. The company, which manufactures bespoke windows and doors for the premium segment, has a turnover of approximately SEK 80 million and has about

100 employees. Pinus has for about 20 years been a supplier to our ­English subsidiary Timber Windows. The acquisition represents an investment in a new geographic market for Bergs. The acquisition, combined with the recently expanded production capacity in Latvia, enables Bergs's continued expansion of the window and door business, which now has annual sales of approximately SEK 600 million.

OUTLOOK

There is clear uncertainty about how the world economy will develop during the rest of the year. Interest rates will certainly be raised in the autumn. Even if the increases are from a low level, this will cool down the economy and in the short term affect the demand for our products as well.

We continue to have a good order backlog for most of our products. At the same time, we are prepared to adapt production and costs to a possible decline in demand.

The market for sawn timber products is affected by lower demand. At the same time, it is difficult to assess the market effects of non-delivery from Russia and lower production volumes in Central Europe and Canada. Our market for windows and doors is currently showing no signs of slowing down and this also applies to pellets that benefit from rising energy prices.

We expect a positive cash flow for the rest of the year.

Stockholm, 25 July 2022

Peter Nilsson

President and CEO

B E R G S T I M B E R A B

I n te r i m R e p o r t J a n u a r y  -  J u n e 2 0 2 2

4

Net sales and operating profit

APRIL-JUNE 2022 COMPARED WITH APRIL-JUNE 2021

Net sales for the second quarter of 2022 amounted to SEK 1,009 million (826). The increase of SEK 183 million, corresponding to 22 per cent, is attributable to higher sales prices for all products and higher sales volumes in Joinery.

EBITDA increased to SEK 173 million (146), which corresponds to an EBITDA margin of 17.1% (17.7). The increase was explained by higher sales prices for Sawn Wood, increased sales volumes within Joinery and improved earnings for the pellet business. Lower demand in the do-it-yourself market along with higher raw material costs lowered the result for Wood Protection.

Operating profit amounted to SEK 151 million (128), which corresponds to an operating margin of 15.0% (15.5).

JANUARY-JUNE 2022 COMPARED WITH JANUARY-JUNE 2021

Net sales for the first half year of 2022 amounted to SEK 1,919 million (1,419). The increase of SEK 500 million, corresponding to 35 per cent, is attributable to higher sales prices for all products and higher sales volumes in Joinery.

Net sales

• 000
  900
  800
  700
  600
  500
  400
  300
  200
  100
  0

Q1 2021

Q2 2021

Q3 2021

Q4 2021

Q1 2022

Q2 2022

EBITDA increased to SEK 255 million (211), which corresponds to an EBITDA margin of 13.3% (14.9). The increase was explained by higher sales prices for Sawn Wood, increased sales volumes within Joinery and improved earnings for the pellet business. Lower demand in the do-it-yourself market along with higher raw material costs lowered the result for Wood Protection.

Operating profit amounted to SEK 212 million (175), which corresponds to an operating margin of 11.0% (12.3).

APRIL-JUNE 2022 COMPARED WITH JANUARY-MARCH 2022

Net sales amounted to SEK 1,009 million, compared with SEK 910 million for the first quarter of 2022, up SEK 99 million. The increase is attributable to higher sales prices for all products and higher sales volumes in Joinery and Wood Protection.

EBITDA amounted to SEK 173 million (82), corresponding to an EBITDA margin of 17.1% (9.0). The increase is primarily related to higher sales prices for Sawn Products, higher sales prices and lower raw material costs in Wood Protection and higher sales prices for pellets.

Operating profit amounted to SEK 151 million (61), corresponding to an operating margin of 15.0% (6.7)

SEKm		EBITDA & EBITDA-margin	%
200																				25
180																				20
160
140																				15
120
100																				10
80
60																				5
40
20
0																		0
	Q1 2021	Q2 2021	Q3 2021	Q4 2021	Q1 2022	Q2 2022
								EBITDA		EBITDA, %

Cash flow and financing

Cash flow from operating activities for the period January-June amounted to SEK 106 million (-81). The cash-flow effects from changes in working capital amounted to SEK -120 million (-280). Investments in property, plant and equipment amounted to SEK -51 million (-44).

The Group's net financial debt at 30 June 2022 totalled SEK 278 million, compared to SEK 223 million at 31 December 2021. The net debt/equity ratio was 0.16.

In January, Bergs entered a new loan agreement with Danske Bank and SEB regarding among other things, refinancing of the major part of the Group's existing loans. The new credit facilities in the total of

SEK 650 million have a three-year term and include one term loan of SEK 250 million and a revolving loan facility of SEK 400 million. In addi- tion, the Group has an overdraft facility with Danske Bank of

SEK 50 million.

Loans and credit facilities on 30 June 2022, SEK million:

		Repayments, years
					Total
LOAN	Limit	0-1	1-2	2-	utilised
Term loans		25		219	244
Revolving credit facility	400	200			200
Overdraft facilities	50				0
Total		225	-	219	444

Available cash and cash equivalents, including unutilised credit facilities, totalled SEK 422 million.

Net financial items for the Group for January-June amounted to SEK 3 million (0).

B E R G S T I M B E R A B

I n te r i m R e p o r t J a n u a r y  -  J u n e 2 0 2 2

Segments

5

Product areas

Bergs's operational activities consist of independent subsidiaries with clear responsibilities for results, conducting operations in three different product areas. These are Wood Protection, Joinery and Sawn Wood. Moreover, Bergs is engaged in the production of pellets as well as port and distribution ­operations in the UK.

The product areas constitute reporting segments as of 2021.

PRODUCT AREA

Wood Protection

Joinery

Sawn Wood

Other (Energy & Logistics)

Products	Treated wood (impregnated,
	fire-retardant, etc.) in accordance
	with international standards and
	environmental requirements. This
	also includes a special range of
	untreated and treated planed
	products for the DIY sector.

High-quality wood products	Sawn products for processing Pellets and fire logs for heating.
such as doors, windows,	by industrial customers.
houses, outdoor furniture and	Port and distribution opera-
garden products.	tions in the UK.

Net sales

	Apr-Jun	Apr-Jun	Jan-Jun	Jan-Jun
AMOUNTS IN SEK m	2022	2021	2022	2021
Wood Protection	394	421	716	687
Joinery	226	102	424	182
Sawn Wood	403	313	749	540
Other	60	30	121	70
Internal net sales	-74	-40	-91	-60
External net sales	1,009	826	1,919	1,419

EBITDA

	Apr-Jun	Apr-Jun	Jan-Jun	Jan-Jun
AMOUNTS IN SEK m	2022	2021	2022	2021
Wood Protection	27	79	15	111
Joinery	21	8	42	15
Sawn Wood	116	80	189	113
Other	16	-5	24	-5
Joint and eliminations	-7	-16	-15	-23
EBITDA	173	146	255	211

B E R G S T I M B E R A B

I n te r i m R e p o r t J a n u a r y  -  J u n e 2 0 2 2