Resilient performance with strong cash generation
Key highlights
· Stable sales volumes despite challenging markets
· Successfully accomplished maintenance shutdowns
· Accelerated delivery of the cost and efficiency programme
· Strong operating cash flow generation
· Recyclable Flow Wrap launched
Quarterly data
· Net sales declined by 5% to
· Adjusted EBITDA* was
· Operating profit was
· Net profit from continuing operations was
· Earnings per share amounted to
Q4 Outlook
· Unchanged market conditions
· Raw material costs expected to decline slightly
· Several planned maintenance stops
· Continued KM7 ramp-up built on positive customer feedback
COMMENTS BY THE CEO
The third quarter was impacted by annual maintenance shutdowns at our mills in Karlsborg, Gävle and Gruvön. These shutdowns were planned for the first half of the year but were rescheduled due to the Covid-19 outbreak. Considering the ongoing pandemic, carrying out these large shutdowns was a challenging task. I am happy to say that they were successfully accomplished as planned and this without compromising the safety of our employees and contractors.
The market continued to be challenging. Mix effects combined with further softening of the market prices, inventory adjustments and slow demand impacted sales and margins negatively. The quarterly result was also heavily affected by maintenance costs. On a positive note, lower raw material costs and further improved performance of our new board machine (KM7) at Gruvön and very strong delivery of our cost- and efficiency programme helped to defend our financial result.
Market conditions were largely unchanged compared with the second quarter. While facing a challenging market situation, we continue to focus our efforts on our three core priority areas; the ramp-up of our new board machine at Gruvön (KM7), ensuring a safe and stable production, and delivering on our cost and efficiency programme.
During the maintenance shutdown at Gruvön certain modifications were made on KM7, these will enable us to move into a new phase of the ramp-up. We have now started to deliver coated material to customers and received very positive feedback. The focus for KM7 is now on the commercial development, finding new homes for incremental volumes and stepwise improving the product mix. In addition to the ongoing required certification process for liquid board, we will expand our premium-quality cartonboard business. KM7 is expected to reach break-even EBITDA during 2021, and will in the coming years deliver a significant profit contribution.
Production in the quarter was affected by the maintenance shutdowns and some related start-up problems in Gävle and Gruvön, which caused a few days of additional unplanned production loss. We also took demand-related downtime on a few of our paper machines. Overall, our continuous efforts to achieve a safe and stable production is making progress and is expected to be further strength¬ened by the new organization with all mills operating under one leadership.
We continue to make great progress on our cost and efficiency programme, which generated structural savings of
The corona crisis is far from over, uncertainty remains and visibility going forward continues to be limited. We don't foresee a fast recovery for the fourth quarter and expect unchanged market conditions. Raw material costs are expected to decline slightly.
Sustainability is a key factor to consider for all businesses and climate change is probably the major issue of our time. Here BillerudKorsnäs has an important role to play. A recent study shows that the net CO2 emissions into the atmosphere as a consequence of our activities are negative, i.e. we take up more CO2 than we discharge. Our products make it possible to replace packaging products based on fossil plastics, aluminium and glass. Our recently launched recyclable product Flow-Wrap is the latest in a series of BillerudKorsnäs' innovative solutions that make it possible to substitute plastic with paper packaging.
In a few weeks, I will be handing over the baton to
Acting President and CEO
The quarter in review
SALES AND RESULTS
Net sales for the third quarter declined by 5% to
Adjusted EBITDA declined to
No costs affecting comparability impacted the results for the third quarter (4).
Market development AND OUTLOOK
During the third quarter, market conditions were largely unchanged compared with the second quarter. The demand for some of our products and services continued to be affected by Covid-19, mainly within product area Paper and
For the fourth quarter, market conditions are expected to be unchanged. However, uncertainty is high and the market visibility continues to be limited.
events in the quarter
BillerudKorsnäs announced on 17 July that
In August and September annual maintenance were carried out at Karlsborg, Gävle and Gruvön. The total maintenance shutdown costs amounted to
In September, BillerudKorsnäs launched Recyclable Flow Wrap - an innovative paper-based packaging solution that can be applied for many products in the fast moving consumer goods sector. This solution enables a shift from conventional plastics to paper and is suitable for medium to high barrier requirements such as chocolate bars, confectionary and bakery products. BillerudKorsnäs' Flow Wrap can be installed on existing and new flow wrapping machines. A patent application for BillerudKorsnäs Recyclable Flow Wrap is pending.
The Board of Directors of BillerudKorsnäs decided on 10 September not to submit a proposal for an extra dividend for 2019 against the assessment that the uncertainty remains high and the visibility in the market is still limited. The Board's dividend proposal for the current year will as customary be submitted in the year-end report.
From 1 August, BillerudKorsnäs has introduced a more efficient organization which is based on the business flow and with functional areas Wood supply, Operations and Commercial. As a consequence of the organizational changes, a new reporting structure will be implemented. See page 12 for more information.
BillerudKorsnäs announced on 3 July that it had changed the accounting method for valuing forest land assets and had made a valuation of around 36 000 hectares of forest assets, of which around 18 000 hectares are productive forests. See pages 10 and 20 for more information.
events After the quarter
There were no significant events after the quarter.
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This information constituted inside information prior to publication. This is information that BillerudKorsnäs AB (publ) is obliged to make public pursuant to the EU Market Abuse Regulation. The information was submitted for publication, through the agency of the contact persons set out above, at 07.00 CET on
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