Billerud Ab (Sweden)

Hello, and welcome to the Billerud Q3 Report 2023. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question, please press star 11 on your telephone to join the queue. To withdraw your question, press star 11 again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Lina Shatawa, Head of IR. Please go ahead.

Good morning and thanks for joining this conference call following the publication of the Billerud's interim report for the third quarter 2023. The results will be presented by Ivar Wattne and Andrei Kress. And after the presentation, we will open up for questions. By that, I hand over to the speakers. Ivar, please go ahead.

Thank you, Lena. And good morning, everyone. And thanks for joining. I'm excited to present the Q3 video result together here with André for the first time as acting CFO. We have an unusual eventful report this time around, so we better get straight to it. So next slide, please. And overall, we are pleased with the result we delivered this quarter for Q3. We've seen progress on several fronts where we have mobilized the focus of the company, which is highly encouraging. Versus a year ago, we are down on most KPIs, but we're also meeting a very high baseline period in also very different market conditions. However, sequentially, or versus Q2, we made strong progress, particularly on the profitability side, where we landed on 11% EBITDA. Sales volume are up versus Q2 for both Europe and North America, but that impact is fully offset by price deterioration and negative mix. Input cost has also come down versus last quarter from peak levels. On top of this, we've had lower than normalized fixed cost activity over the quarter, more related to timing and seasonality. One of the biggest projects for the company is our efficiency enhancement program, and we delivered well on the quarter, and we are on track to deliver our ambition for 2023. We also had an excellent cash flow this quarter, enabled by continued focus on working capital discipline. And lastly, on this slide, I mean, we are proud of being able to complete a three-year recovery boiler project on time, on spec, and on budget. So let's continue with the financial breaches. So next slide, please. So starting with the top line, we're down in net sales for both regions versus a year ago, mostly North America with heavily reduced volumes. where the customer de-stocking has been the most prominent effect. We continue to see negative mix impact, both on category and on customer side. And for the first time in quite some quarters, we're now seeing negative pricing impact versus a year ago, mainly on container board, pulp, and second craft. Some help we've had on the currency linked to development of the weak Swedish krona. So next slide, please. And moving over to the profitability bridge, There are several sizable negative building blocks versus a year ago. We already mentioned the pricing and volume mix, but we are on top facing additional input cost inflation, roughly 300 million versus a year ago. The 175 million impact over efficiency enhancement program is already something we talked about, and it's a clear highlight for us this quarter. The other bucket is unusually big this time around of minus 419 million, where the two biggest items are. impact from the inventory revaluation just out of 300 million negative and you should read that as 230 million positive in Q3 2022 and minus 65 million now in Q3 2023. The other point to mention here is the insurance proceeds of 75 million for Gävle incident back in 2019 which we received in Q3 last year meaning that one sits in our base. Last point I just want to mention on this slide is that we have quite a big item on the maintenance bucket, more than 500 million positive. This is first and foremost related to the very significant upgrade, the stop in our QINISEC mill last year, which is obviously not something we repeated this year. Next slide, please. So over to some general market comments. And in a nutshell, you can say that marketing condition has remained relatively unchanged. versus what we experienced in Q2, meaning that most categories are still operating what we at least would define as weak conditions. It means overall soft demand and price pressure across. Going a bit more into details per channel, food and drinks, that is our best performing channel, and that is also what you would expect in categories that tend to be more resilient through the market cycles. And having said that, it's still quite challenging condition for most of the categories within food and drink, VDEC section being Libre Packaging Board, which has characteristics of a more normalized level. Printing and publishing remain weak. Still slow demand with customary stocking being the main theme. Pricing holding up incredibly well, though, despite these conditions. Consumer luxury, overall weak condition. Demand is soft and adds to negative pricing pressure. And lastly, on this one, industrial. Probably the channel where we're most under pressure right now. I think the whole market would probably say the same. Sacked paper is certainly in tough conditions. Not least a brown bag with exposure to construction and cement. Going into Q4, we are not expecting very different marketing conditions versus what we've seen in Q3. So it's relatively stable across. And with that, I hand it over to André.