BillerudKorsnäs' First Quarter 2014 Income Up Sharply on Operating Efficiency, Synergies

"Our integration efforts are moving forward relentlessly and we continue to realise synergies as planned for 2014." — Per Lindberg, President and CEO, BillerudKorsnäs.

April 24, 2014 - BillerudKorsnäs' CEO Per Lindberg said the company is off to a solid start in 2014 and he expects demand across all of the company's product lines to remain stable through the remainder of the year.

“We have started the year in a good way by delivering a strong result for the first quarter without any major hick-ups in our operations. Our adjusted operating profit reached SEK 555 million and our margin was 10%. The cash flow was quite strong and we are back on a net debt/equity level of 0.78 even after the consolidation of Bomhus Energi AB.

We experienced some price reductions compared to the previous quarter within the business areas Packaging Paper and Containerboard, primarily within the sack and fluting product groups. But the demand was good and mix, volume and currency improvement offset the price effects. The price pressure that we have anticipated from increased capacity on the market has not been realised yet and perhaps we have overestimated the impact. Time will tell.

Our integration efforts (Billerud and Korsnäs) are moving forward relentlessly and we continue to realise synergies as planned for 2014. The pace of realisation is expected to slow down though as the activities now mostly contain implementation of new systems and ways of working. Integration continues to be a high priority, and we are setting the foundation of a new common culture by starting implementation of our corporate values.

In our quest to reach our long-term financial targets and 15-20% organic growth by 2018, we have stated that we within our financial policy would focus on restoring margins, pay down debt and manage our capital employed. I think we clearly show that we are moving forward on this path. We see improved margins as an effect of synergy realisation and our net debt/equity ratio has come down further.

Our working capital improvement project is moving into implementation and many activities are being performed to reach a working capital level of 10% of sales. From our asset review we are developing the plans regarding our future asset structure, plans that will be communicated in due time.”

First quarter 2014

  • Net sales increased 14% compared to previous quarter due to increased volumes and customer re-stocking.
  • Adjusted operating profit reached SEK 555 million. The increase from the previous quarter is mainly explained by no planned maintenance shutdowns in the quarter.
  • Synergies equivalent to an annual run-rate of approximately SEK 445 million were realised by the end of March. During the first quarter, synergies amounting to approximately SEK 110 million were realised.

January-March 2014 compared with the same period in 2013

  • The first quarter 2014 was the first comparable quarter after the combination of Billerud and Korsnäs.
  • In spite of slightly reduced local prices, net sales increased due to mix, volume and more favourable currency exchange rates.
  • During the year there has been intensive work with realising synergies and the effects are evident on the operating profit level that has improved with SEK 117 million.
  • Synergies of approximately SEK 78 million have impacted the quarter compared to the same period last year.

Outlook

  • Demand and order situation is expected to remain stable during the second quarter 2014 for all business areas.
  • Average prices in local currency are anticipated to stay on current level for the second quarter 2014 for all business areas.
  • Wood prices are expected to stay on current level for the second quarter of 2014.
  • The target of approximately SEK 530 million in annual synergies and savings is unchanged, and is expected to be reached by the end of 2014.

BillerudKorsnäs full report can be accessed on the company's website: www.billerudkorsnas.com.

BillerudKorsnäs is a world-leading manufacturer of packaging papers, including: kraft and sack paper, liquid packaging board and cartonboard, and containerboard (fluting and liner). The company also produces market pulp. To learn more, please visit: www.billerudkorsnas.com.

SOURCE: BillerudKorsnäs