BillerudKorsnäs Second Quarter Profit Slips on Mill Maintenance Shutdown

July 18, 2013 - BillerudKorsnäs’posted lower than expected second quarter earnings promarily due to start-up problems of a rebuilt board machine, KM 5, at the company's Frövi mill in Sweden.

Second quarter 2013

  • Net sales amounted to SEK 4 973 million, down 3% compared to the previous quarter. The decrease was due to lower volumes.
  • Adjusted operating profit, excluding non-recurring costs of SEK 62 million, reached SEK 318 million. The decrease of SEK 114 million from the previous quarter was mainly attributable to periodic maintenance shutdown.
  • Integration and realisation of synergies are progressing well and accumulated synergies of SEK 121 million have been realised whereof SEK 44 million relate to the second quarter.

January-June 2013 (compared with the same period in 2012)

  • The increase in both net sales and adjusted operating profit was due to the Finnish acquisition in June 2012 and the combination with Korsnäs in November 2012. Today BillerudKorsnäs has a stronger platform for future growth on the attractive and expanding packaging market.
  • The 2013 AGM resolved on a dividend of SEK 2.00 per share for 2012.

Outlook

  • The target of approximately SEK 530 million in annual synergies and savings by the end of 2015 remains unchanged.
  • Demand in Consumer Board is expected to remain stable and satisfactory during the third quarter. For Containerboard the order situation is expected to be stable during the third quarter, but with increased uncertainty. Business area Packaging Paper faces a slower than normal market situation and as a consequence downtime may occur during the third quarter.
  • Prices in local currency are anticipated to stay on current level for the next quarter. Within Packaging Paper there is a risk for price pressure as Europe continues to be slow resulting in increased competition outside Europe. In addition new capacity will enter the market in 2014.
  • Average price of wood for 2013 is expected to be approximately 5% below average price level for 2012.

BillerudKorsnäs' CEO Per Lindberg made the following comments on the company's integration process and second quarter 2013 results:

“We continue to focus on integration and to create the new BillerudKorsnäs. I am therefore first and foremost very pleased to see that we have realised synergies corresponding to an annual pace of approximately SEK 260 million, which takes us almost half way to our target of SEK 530 million. This means that integration is making good progress. We have also received approval from the EU Commission to sell PM2 in Gävle to SwedPaper and we expect closing on 1 August, thus fulfilling the formal requirements from the authorities concerning our acquisition of Korsnäs.

"As already communicated our adjusted operating profit for the second quarter of SEK 318 million fell short of expectations primarily due to start-up problems after the rebuild of the board machine KM5 in Frövi. The cost for the rebuild became almost SEK 50 million higher than expected, but it is not uncommon that this happens in connection with such a large remodelling. We now have created a platform for higher capacity and increased quality. I am also pleased to see that production now has stabilised and is in line with expectations.

"We have noted varying market conditions during the second quarter. In short, the European demand in some segments is still treading water, which in combination with overcapacity is putting pressure on some European segments. We will therefore actively pursue sales outside of Europe in the medium- to long term.

"During the quarter, our new communication platform was launched. We view ourselves as challengers, where we challenge conventional packaging for a sustainable future. Our target remains to deliver smarter packaging, both through better materials as well as better solutions. Smarter packaging adds value at every step of the value chain; attracting consumers, increasing productivity, lowering cost of transportation, reducing waste and not the least lowering environmental impact.

"We therefore continue to be very optimistic about the future prospects for BillerudKorsnäs. We will share more of our views at our Capital Markets Day planned for 14 November 2013, in Stockholm. I look forward to meeting you there! More information about the event will be posted on www.billerudkorsnas.com."

SOURCE: BillerudKorsnäs