Billerud Ab (Sweden)

Good day and thank you for standing by. Welcome to the Billerwood Q4 Report 2025 webcast and conference call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there'll be a question and answer session. To ask a question during the session, you will need to press star 1 and 1 on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star 1 and 1 again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your first speaker today, Lena Shatawa, Head of Investor Relations. Please go ahead.

Good morning and welcome to the presentation of the Builders 2025 year-end report. I'm joined by our President and CEO, Iva Vatne, and our CFO, Andrei Kleos. They will present the results and afterwards open up for questions from the telephone conference. With that, let's get started. Over to you, Ivan.

Thank you, Lena, and good morning, everyone. And thank you all for listening in this Friday morning. 2025 has come to an end, and also for this year. It has been another eventful year with several twists and turns in our packaging universe. And as usual in IQ4, we will do a bit of an evaluation of the full year, before swimming into the quarterly results. So, let's get into it. Next slide, please. So, for 2025, you have heard me repeatedly talking about two stories or different realities in our regions. And that's really the essence of what 2025 has been familiar with. Continuing a very good run in North America while navigating through highly challenging market conditions in Europe. And North America has really had another outstanding year. And on a currency-neutral basis, net sales grew by 5%, although the market for choreographic paper is in secular decline. Now, that's a true testament to a very strong value proposition as a local partner in the U.S. And coming in at 20% EBITDA is certainly satisfactory. In some contrast, a region, Europe, has had a challenging year after a promising start. And the themes throughout the year have circled around uncertainty, continued slow demand, and oversupply within the sector. This has pulled down both top and bottom line versus year ago. We have remained focused on items we can control, and our relentless discipline on working capital has paid off, meaning we have succeeded with a strong cash conversion. And to further strengthen the competitiveness in Europe, we launched a cost reduction program during the second half of the year, which is progressing as per plan. A balance sheet is healthy, and the board of directors proposes a dividend of two SEC per share. Now, over to some comments for Q4. So next slide, please. Now, in general, our Q4 was a challenging quarter. Net sales currently adjusted down 14% versus a year ago. And continuing on the same spirit, as I mentioned, for the full year, our region, North America, recorded yet another excellent quarter with 20% EBITDA. For region Europe, both net sales and profitability is down, both sequentially and versus year-ago. And it's first and foremost lower sales, even on board categories, that is driving the development. And it also continues as the whole sector finds difficult market conditions. Another clear theme during the quarter has been acceleration of falling public prices in Nordic, and that will certainly be a big topic for us into 2026, but more on that later. But first, some additional comments on the market sentiment, so next slide, please. Now, market conditions during the fourth quarter continue to be polarized, and in the U.S., again, overall economic sentiment is better versus other regions. and we continue to see solid conditions. Graphic paper is in secular decline, but we managed to gain share throughout the year. And we would expect the secular market decline to continue into 26. Now, back in region Europe, liquid packaging board is relatively flat on a global basis, but with big regional differences. And in essence, we see three trends. A, the plastic is gaining some category share. at the expense of packaging materials. And B, competition of packaging material suppliers has intensified, first and foremost in Asia. And C, some of our converters are losing market share to local competition. Now, for carton board, it is a challenging market with slow demand, a lot of available supply. We are keeping our focus on brown carton board, which is actually growing quite nicely. that we are not expecting any improved situation short-term. For container board, situation is weak, but situation is stabilizing. And also, a recently announced price increase on recycled could potentially help us and improve the competitiveness on new fiber products. For our paper grade, situation has been tough in Q4 with additional pricing pressure, but different versus board. The situation for paper is more related to muted demand and not that much oversupply as the case is on board. For SAC, brown is in a bit tougher situation versus a white SAC, but in general, we have good position to stand on in our regions, Europe, Asia, and Africa. Next slide, please. Now, on the more positive side, And this is likely a well-known fact by now. We do see pulpwood prices in Nordic are falling significantly. And we see similar situation for both soft and hardwood. A key driver point of decline is less demand from the pulp and paper industry recently, but also still low or slow activity on the sawmill side and on the bioenergy sector. We expect this trend to continue its decline into 26, and for Billiard, as the biggest pop-up purchaser in Nordic, this will provide a needed and significant cost relief. We are seeing some impact on the declines already now, but given the two, three months inventory turnover, the impact will start to accelerate from Q2 onwards, but more on that in a few minutes. Next slide, please. Another highlight of 25 has been a progress on the evolution program in North America. And as a reminder, these programs aims to shift gradually our portfolio towards packaging material with local US production. We have engaged with numerous trials and qualifications across both existing and new customers over the past year. And we aim to reach a more meaningful sales now during 26. We will start reporting packaging material as a separate line item in North America from Q1 and onwards. We are investing in the U.S. to enable the packaging materials journey with a $1.4 billion SEC investment program as previously communicated. And the first batch of that has successfully been completed with the upgrade of the Escanaba wood yard. And success in this context means on time, on budget, and safely executed. We will continue to update you on our journey throughout 2016.