BillerudKorsnäs CEO Says Broader Product Portfolio to Strengthen Company in 2013
"We enter 2013 as a new and stronger company with a broader market offering." — Per Lindberg, President and CEO, BillerudKorsnäs.
April 3, 2013 - BillerudKorsnäs published its 2012 Annual Report which said net sales amounted to SEK 10 427 million, an increase of 12%, as a result of higher volumes.
Operating profit was reduced by 50% to SEK 489 million, which equates to an operating margin of 5%. The decline was mainly due to lower prices in local currency and a less favourable currency situation. Adjusted to reflect non-recurring costs of SEK 170 million, operating profit totaled SEK 659 million.
BillerudKorsnäs' President and CEO Per Lindberg made the following opening comments in the Annual Report:
"We enter 2013 as a new and stronger company with a broader market offering.
Net sales are up from SEK 9 billion to approximately SEK 20 billion. BillerudKorsnas has great potential that we will be capitalising on by developing the right
materials and solutions to satisfy the packaging needs of today and tomorrow.
"It is no exaggeration to say that 2012 was a year that will forever
mark a milestone for Billerud as it combined with Korsnäs.
However, there was more to the year than just structural change.
We entered 2012 with the same uncertainty as everyone else, facing a
flood of reports about the financial crisis and a pervading pessimism
about the economy. The economy also weakened sharply from the
end of 2011, causing a fall in our sales prices. The Swedish krona
gradually strengthened, peaking against the euro after the summer,
which had a negative impact on our profits. And yet I believe the
year as a whole turned out relatively well. The operating margin
amounted to 5%, adjusted to 6% to account for non-recurring costs.
Cash flow from operating activities was SEK 1 002 million."
FINNISH ACQUISITION BRINGS STABILITY
"We also had a very strong balance sheet and a desire to continue
driving the company forward, despite the wider economic situation.
One use for our balance sheet was to seek out acquisitions that could
improve Billerud’s structure and resolve the cyclical problems associated
with market pulp. Between 2008 and 2011, our packaging paper saw
a steady rise in its operating margin from 8% to 12%. During that
same period, the margin for market pulp fluctuated greatly between
-11% and +16%. The varying pulp price rather overshadowed the
positive trend for packaging paper, our largest operational area. In
my judgement this also contributed to a valuation of Billerud as a
company that was too low relative our peers.
"Consequently, we acquired two packaging paper machines in
Finland from UPM — machines that offer the very best in terms of
both quality and efficiency. The deal, which came in at around
SEK 1.1 billion, was completed on 1 June 2012. The Finnish business
consumes almost as much pulp as we sell from our Swedish
production units, so in one stroke we consolidated the market for
packaging paper and eliminated our exposure to the volatile pulp
market. The structuring of the Finnish business and the subsequent
integration have gone very well and I am very pleased with the
BILLERUDKORSNAS IS BORN
"The next major move, at the end of November 2012, was to acquire
Korsnäs. There were several motives behind this decision, the leading
one being that Korsnäs has a very strong position in consumer
products, which reinforces the Group’s position over a business
cycle. Both companies were too small individually to invest heavily
in innovation and growth, but together we can both speed up the
pace of development work and generate growth in markets outside Europe. BillerudKorsnäs is very much one of our industry’s most
specialised businesses, concentrating on renewable packaging materials
from primary fibre with a strong orientation towards quality and
innovation and, not least, a strong customer focus. When the deal
was announced on 20 June 2012, many were caught off guard but
not particularly surprised. The combination makes strong industrial
sense. Most commentators consider BillerudKorsnäs to be one of
the industry’s most interesting companies, with a broad product
portfolio and the strength to drive cost-efficiencies and product
development. I could not agree more.
Our net exposure to the currency markets is falling due to our
two major acquisitions, which I see as a positive move in light of the
strong krona. We have already begun to achieve synergies from both
deals and I expect this to lead to annual savings worth around
SEK 330 million."
OWNERS BACKED US ALL THE WAY
"The combination with Korsnäs makes Kinnevik, Korsnäs’ former
owner, the largest stakeholder in BillerudKorsnäs with around 25%
of the shares. The financing of the acquisition involved a direct issue
to Kinnevik and a rights issue worth around SEK 2 billion which
was oversubscribed by 37%. I’m exceedingly pleased that a full 98%
was taken up, underpinned by subscription rights. It really shows
how keen the interest was among both Swedish and international
shareholders. BillerudKorsnäs’ share price saw very strong growth in
2012, rising by 30% over the year, compared with the stock market
average of 12%. I believe this indicates the soundness of our actions
in 2012 and we will continue to work on giving our shareholders a
"We have set new financial targets to take us forward. The operating
margin should on average exceed 10% over a business cycle. In addition,
over a business cycle the return on capital employed should on
average exceed 13%. In order to achieve these targets, we need not
only to improve our operating margin, but also our utilisation of
capital. The net debt/equity ratio should be less than 0.9. After the
completed preferential issue, the net debt/equity ratio amounted to
0.85 as per 31 December 2012. We are keeping our previous dividend
target and, over a business cycle, the dividend should average
out at 50% of net profit."
BillerudKorsnas' 2012 Annual Report can be downloaded on the company's website: www.billerudkorsnas.com.