Year-end report January–December 2021
Strong fourth quarter to end a successful 2021
Key highlights
- 15% net sales growth
- Strong production in the quarter
- Record-high earnings for 2021
- Another strong cash flow delivery
- The Board of Directors proposes a dividend of SEK 4.30 per share
Quarterly data
- Net sales grew by 15% to SEK 6 688 million (5 803). Currency effects had a marginal impact on net sales
- Adjusted EBITDA* increased to SEK 1 075 million (568), corresponding to an adjusted EBITDA margin of 16% (10%)
- Operating profit was SEK 418 million (163), including items impacting comparability of SEK -177 million (73)
- Net profit was SEK 320 million (242)
- Earnings per share amounted to SEK 1.55 (1.17)
Outlook FOR Q1
- Strong market conditions expected to prevail
- Higher costs for logistics, energy, and chemicals
- Marginally increased pulpwood prices and good fibre availability
- Continued focus on mix, efficiencies and price management to counteract cost inflation
Comments by the CEO
The fourth quarter was another quarter of solid growth and strong performance, driven by strong market conditions. Higher prices, product mix improvements, continued cost program delivery and productivity increases offset cost inflation for logistics, chemicals and energy in the fourth quarter. Net sales excluding currency effects and adjusted for Beetham, which was divested on 31 October 2021, increased by 17%. The adjusted EBITDA margin was 16% and the cash flow generation continued to be strong.
In the year 2021 we made important progress. Both the injury frequency rate (LTIFR) and the overall production stability improved, despite two major unplanned production stops in Gävle. Our net sales excluding currency effects grew by an impressive 12% and adjusted EBITDA were the highest in the company’s history. Operating profit strengthened and the net debt decreased. The Board of Directors proposes a dividend for the year of SEK 4.30 per share, which corresponds to 60% of the net profit.
As communicated at our capital markets day in November, we have set a strategy for profitable growth to 2030. Whilst Europe will still be our home market, we see great opportunities for growth in North America, specifically with cartonboard and containerboard. We will accelerate growth in liquid packaging board with selected opportunities. For sack and kraft paper we will continue to improve mix by focusing on the most profitable applications. All areas are supported by innovation where we are enhancing the impact and relevance to our core business. To achieve our ambitions, production needs to be highly efficient, and therefore, we will increase investments in mill maintenance and development. To secure a competitive wood supply we aim to optimize fibre consumption, build long term sourcing partnerships, secure competitive fibre availability and build a lean, green and flexible supply chain.
The merger agreement with Verso that was announced in December is fully in line with this strategy. Verso will mean a platform for expansion in North America, creating growth opportunities for the next ten years and beyond. We will continue to serve the existing customers while sequentially converting two paper machines into board machines. We will thereby create one of the most cost-effective paperboard production structures in North America. The combination of BillerudKorsnäs’ expertise in high-quality packaging products and Verso's attractive assets in a region with abundant and competitive fibre supply will form one of the largest companies in primary fibre packaging and paper with both quality and cost advantages. We expect the transaction to be completed in the second quarter of 2022.
Going into 2022 we expect the strong market conditions to prevail in the near future. We will continue to gradually increase board volumes and improve the sales mix. We foresee good availability of fibre and marginally increased wood costs. However, we anticipate logistic costs to increase, mainly due to overheated oversea shipping markets and higher fuel prices for road transports. We also expect costs for energy and chemicals to rise. To counteract the cost inflation, we will continue to focus on price and mix management and improved efficiencies.
Our priorities for 2022 are to continue to deliver our strategy in commercial, operations and wood supply, as well as to close the deal with Verso and deliver the integration work. For the past year, I would like to thank all customers, employees and other stakeholders for your support.
Christoph Michalski
President and CEO
The quarter in review
SALES AND RESULTS
Net sales for the fourth quarter grew by 15% to SEK 6 688 million (5 803), driven by higher prices and an improved product mix. Net sales excluding currency effects increased by 15%. The Beetham mill, which was divested on 31 October 2021, had sales of SEK 78 million in the period November–December 2020.
Adjusted EBITDA increased to SEK 1 075 million (568). The strengthened earnings were a result of higher prices, improved product mix and productivity, and continued delivery under the cost and efficiency program. Cost inflation for logistics, energy and chemicals had an adverse effect.
Items affecting comparability amounted to SEK -177 million (73) and included the negative result from the divestment of Beetham of SEK 123 million (–), acquisition-related costs of SEK 135 million (–), and the positive result of revaluation of biological assets in the associated company BSÖ Holding AB Group of SEK 81 million (73).
Market development AND OUTLOOK
During the fourth quarter of 2021, market conditions for all product segments were strong. Implemented price increases had effect across all segments in paperboard and sack and kraft paper.
The market outlook for the next quarters is positive. The strong market conditions are expected to prevail. Higher costs for logistics, energy and chemicals are anticipated and will need to be compensated by further price increases in the quarters to come.
events in the quarter
Annual maintenance was carried out at Frövi and Skärblacka under extensive precautionary measures due to the coronavirus pandemic. The total maintenance shutdown costs in the fourth quarter amounted to SEK 284 million.
On 31 October, it was announced that BillerudKorsnäs had agreed with the British investment firm Inspirit regarding the divestment of the Beetham mill and that the transaction was completed the same day. The strategic importance of Beetham to the rest of the group had been reduced since the machine glazed (MG) paper business was focused to Skärblacka. The divestment of Beetham resulted in a negative result effect of SEK 123 million in the fourth quarter results.
On 17 November, BillerudKorsnäs presented a new strategy to 2030 at a capital markets day. It was announced that the strategy for profitable and sustainable growth in packaging materials focuses on attractive markets with good growth opportunities and product segments where the company has strong abilities to compete. New opportunities will be explored, specifically for paperboard in America, and possibilities to increase capacity at existing facilities or via mergers and acquisitions will be evaluated. Operational efficiency will be critical to maximise the growth opportunity, and therefore, investments in maintenance and development of the mills will increase to SEK 1.5-1.7 billion on an annual basis for the current mills. Transformation towards a professional sourcing organisation for wood supply is an integral part of the strategy.
On 20 December, it was announced that BillerudKorsnäs had entered into a merger agreement with Verso Corporation (Verso), according to which BillerudKorsnäs had agreed to acquire Verso for a cash consideration of approximately USD 825 million. Verso is a leading producer of coated papers in North America. The company has paper mills in Midwestern U.S., strategically located in a region with abundant and cost-effective fibre supply. For the last twelve months ended 30 September 2021 Verso’s net sales amounted to USD 1 264 million, and the adjusted EBITDA was USD 158 million. The company has around 1 700 employees.
BillerudKorsnäs aims to convert Verso’s largest facility, the Escanaba mill, into a world-class, integrated paperboard production site and thereby build one of the most cost-efficient and sustainable paperboard platforms in North America. One machine is estimated to be converted to board production by 2025 and a second machine by 2029. The investment for the conversion is estimated to be up to SEK 9 billion. The increased net capacity of 400 ktonnes together with a more profitable product mix will create significant shareholder value over time.
Verso’s Board of Directors, acting upon the recommendation of a special committee, has unanimously approved, and resolved to recommend the transaction to Verso’s shareholders. The transaction is expected to be completed during the second quarter of 2022, subject to the approval of Verso’s shareholders as well as the receipt of applicable regulatory approvals and satisfaction of other customary closing conditions.
The merger with Verso and the business transformation are planned to be financed through a combination of additional debt, a rights issue and operating cash flow. BillerudKorsnäs has a new credit facility of SEK 6 billion, planned to be used for this purpose and to be refinanced by issuance of debt instruments and a rights issue. The Board of Directors intends to propose to a general meeting of BillerudKorsnäs’ shareholders that it is authorized to resolve upon a rights issue of up to SEK 3.5 billion, to be carried out in 2022 following completion of the acquisition of Verso.
events AFTER the quarter
BillerudKorsnäs’ production in Pietarsaari is from 1 January 2022 affected by the strike at UPM’s nearby pulp mill, which supplies the operation with pulp, purified water, steam and compressed air. Although production in Pietarsaari is ongoing, there are still production interruptions due to the strike. The strike is estimated to negatively affect BillerudKorsnäs’ first quarter result by around SEK 10 million.
For further information, please contact:
Ivar Vatne, CFO, +46 8 553 335 07
Lena Schattauer, Head of Investor Relations, +46 8 553 335 10
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 28 January 2022.