Billerud Ab (Sweden)

Hello and welcome to Billiards Q1 2025 presentation and thanks for joining us this morning. Billiards President and CEO Ivar Vatne and our CFO André Kress will hold the presentation and after that they will take questions from the conference call. So by that I would like to hand over to you Ivar. Please go ahead.

Thank you, Lena, and good morning, everyone. And thanks for listening in this Tuesday. I'm excited to present the Q1 results, which we think represent an encouraging start of 2025 for Billrude. And we certainly have plenty of results we feel good about. So let's get into it, please. And next slide. 2025 is the first year of our way forward strategy. Hence, I'm excited to see so many of our outspoken priorities already going into the right direction. Recorded net sales growth, 7% versus a year ago, with positive growth figures coming from both regions and almost all categories. We make a significant profitability improvement, EBITDA up 19%, and EBITDA up 42% versus year ago with a margin uplift of two percentage points. Region North America continues to impress us and come in yet again with a very strong quarter. And 21% EBITDA, 15% sales growth, that is rock solid. But I also want to highlight region Europe which also comes in with a clearly improved profitability. It's 15% EBITDA margin, and that is four percentage points up versus a year ago. Our cash conversion and cash generation is greatly improved since comparable period last year, and that is yet again what is highly important for us. We reached a milestone also in Q1, when we sold our first batch of locally produced container board in the US. And more on that later. Next slide, please. Now, to get a proper read of the market, and that can be a handful these days, but at least for Q1, the sentiment was pretty much what we had expected. with normal or normalized conditions for most categories and channels. So not strong, not weak, but somewhere right in the middle. Okay-ish demand and some upward pricing moves towards the end of the quarter. First and foremost in container board, sack, and graphic paper. The only exception to call out is carton board and the consumer luxury channel that is still performing weaker with slower demand and quite a lot of available capacity. Now, going into next quarter in Q2, we would expect more or less unchanged conditions from what we've seen so far in 2025. And we do have solid order books for most of our categories until the summer. Now, I want to highlight that this is short-term guidance for Q2 and not a reflection for the full 2025. Next slide, please. So over to the topic that seems to be on everyone's lips these days, tariffs and implications. And I would start with probably the same narrative that most companies refer to, that if the situation is to stay long term, right now it's too early to assess any financial impact with credibility. Now, having said that, Billruth is well positioned and probably one of the better players within our industry. And looking at the direct impact and starting with a region, North America, we have available production capacity at our US mills, ready to serve both current and new customers. We are placed in an attractive Midwest region with close proximity to a wide range of customers and can offer both high service levels and a reliable and predictable supply chain. And that is of key importance, not least since 25% of the category is imported in our competing paper crates. And for Europe, we only export around 2% of our total volume to North America, So our exposure is clearly limited. Now, the much more difficult question to answer is any potential indirect implications when you see changed trade flows for the full industry leading to a new competitive landscape. And it's too early to say anything, but there will quite likely be both opportunities and challenges coming to surface if the situation will prevail over a longer period of time. We will monitor the situation and adjust if needed and continue to focus on items we can control. So with that, I hand it over to André.

Thank you, Ivar. And we can take next slide, please. Good morning, everyone. So our total sales growth of 7% was supported by price increases in our Europe region. and volume growth in the North American region. For Europe, year over year, the volumes were down with 6%, while the pricing had actually a positive impact of 9%. And despite strengthening of Swedish krona during quarter one, the year over year FX impact on net sales was minimal. In North America, we had an excellent volume growth of 14%, and largely unchanged pricing versus a year ago. Next slide, please. Summarizing our profitability, it was on a solid level in the first quarter, and I'm particularly pleased with the profitability uplift coming from both regions. Our EBITDA margin improved with two percentage points versus last year. and was in line with our Q4 performance. Pricing was the main driver behind the uplift and more than offset total input cost increase. The input cost increase was primarily driven by the pulpwood costs in the Nordics. And strengthening of the Swedish krona during the first quarter of 2025 was a headwind. Revaluation of our receivables and payables balances had a negative impact of approximately 160 million in the first quarter. And as a reminder, the major impact was from revaluation of the payables and receivables balance, which is a one-off in nature now in the first quarter. And we do not expect the same impact heading into the second quarter. Now the positive other bucket is primarily favorable year-over-year effect from inventory revaluation. There was no major impact in the first quarter this year, but we had negative impact last year. And now let's move over to the regions. Next slide, please. So region Europe had a broad based sales growth across all categories, except liquid packaging board. Quarter one last year was a record high volume quarter for liquid packaging board. But with this year, so somewhat slower start to the year. Demand for liquid packaging board in Europe is a normal level, but exports to Asia are somewhat slower as expected. Pricing has been the key driver for profitability uplift for the region, and we will see impact from earlier announced price increases for container board and second craft segments starting from the second quarter this year. So in summary, strengthened performance for the region in the first quarter in line with the region's key objective to strengthen financial performance from existing asset base. And heading into the second quarter, we expect overall positive pricing impact of approximately 1% and volumes in line with the first quarter. Quarter two will be the heaviest maintenance shutdown quarter for the region. And we expect total cost impact of approximately 380 million compared to the 40 million we had now in the first quarter. And now let's move over to region North America. Next slide, please. As I mentioned, we had an excellent volume growth with volumes up 14% versus last year. And with that, also the highest sales volume in the quarter in more than two years. The volume improvement moved also our operating rates to 74% for the quarter. EBTA margin for the region improved significantly versus last year, entirely related to volume uplift and improved operating rates. The price increases we announced in the first quarter on coated free sheet reels will be materialized and we expect a positive pricing impact of around 1% for the region into the second quarter. At this point, expect flat volumes and operating rates for the region in the second quarter next slide please now we have an overall strategic objective for our region north america to evolve towards packaging materials and in that regard we reached an important milestone on that journey with first commercial sale of coated liner from our Kvinasec mill. We are now active with several trials with our existing and also new customers and expect to ramp up commercial volumes in the remainder of this year. Another part of this project is of course the capital investment program of 1.4 billion and that is progressing according to plan. In 25, the major investment will be made in upgrade of wood yard at Escanaba mill and also upgrade of the binders. These investments will enable large scale production of paperboard at both of our mills in North America. So very good progress, both from commercial and investment perspective. And we will, of course, provide more updates on this journey as we go along. Next slide, please. A couple of words on cost development, and this slide illustrates the input cost movements in the first quarter for our both regions. So, seasonally higher energy costs in both regions and also pulpwood prices in Nordics were the headwinds. while all other input costs were flat to slightly down. And overall input costs were flat sequentially, with Europe being up by about 20 million, but that was offset by corresponding decrease in North America. Heading into the second quarter, we expect input cost tailwind in the region of 30 million, with majority of it being in Europe and driven by lower energy prices. And I would also like to comment on the pulpwood cost situation in Nordics. We are continuing to have all-time high pulpwood costs, but expect no changes in costs into the second quarter. Our view currently is that we now have much more balanced pulpwood market. which should support short-term price stability. On the fixed costs into the second quarter, firstly, we will have a full impact of annual wage increases, which means sequentially our employee benefit costs will go up with approximately 60 to 80 million into the second quarter. And also, we have a heavy maintenance schedule with a cost impact of around 380 million in the second quarter. Next slide, please. A couple of points on our cash flow. We had an expected working capital buildup in the quarter, and change in working capital was also in line with what we saw the last year. With that said, we did improve our cash conversion to 41% for the quarter. and we target 80% cash conversion for the year in line with our updated financial targets. And I'm also pleased with significant improvement in return on capital employed, with now return on capital employed being at 7% versus 1% last year, moving towards our target of above 11% over a business cycle. We maintain our solid balance sheet position with healthy leverage level. And we look to invest 3.5 billion in our operations this year, where approximately one third will be targeted towards strategic investments, primarily in North America. And now I would like to hand it back to you, Ivar. Thank you, André.