BillerudKorsnäs AB (publ)

Good morning and welcome to Biller's presentation about our 2022 year-end report. The presentation will be held by our president and CEO, Christoph Michalski, and our CFO, Ivar Vatne. And as usual, they will take questions after the presentation. So Christoph, let's begin, please.

Good morning, everyone. I'm here with Ivar and I'm very pleased to be able to present you our 2022 results and the quarter in particular. So, before we go to the quarter, I just want to highlight we had a record year in 2022. You can see reported 63% growth, which was the first acquisition, and on top of that, a very impressive 16% organic growth performance. All-time high profitability. adjusted EBITDA margin of 19%. We were able to mitigate most cost increases during the year with prices and mix. And with our new company, we have now achieved an EPS which has tripled versus a year ago. And most of the EBITDA was translated into cash which, as you know, is an important part of our going forward to transform the U.S. into cardboard and the projects we have in Norway. If I go a little bit through the key items of the year, you remember we had a Capital Market Day in November 21, where we basically presented you and discussed with you our strategy. I think in 2022 we have executed and we have worked on many, many other points of the strategy with some good success. So if you look at our record sales growth, it also means we had an excellent ROSI and our net debt level to EBDR is only 0.6, thanks to the performance and to the issuing of new shares in June last year. The acquisition of Verso has gone very smoothly after the closure on 31st of March. We have started an integration process and today we have basically decided already to finalize this project. It's now finalized in terms of integration and a few outstanding items will be run by the functions. So very good and very quick integration. We have also started to work immediately on the transformation plan, which is progressing well, and we continue to work towards the first half of this year where our pre-feasibility should be completed. When we talk about Norway, good progress as well. We have completed the pre-feasibility and are now in the feasibility phase. Just as a reminder, Norway is basically a joint venture with Wieck & Skog, where we would like to build a BCTMP pulp mill with a best-in-class performance, but also with the opportunity for biogas capture and carbon capture, and to integrate basically to create the first – our ambition is to create the first carbon-negative pulp mill in the world. All progressing well. Finally, you're aware, and this is not about our strategy of the CMD, but about a project that we launched a little bit before that, which is our recovery boiler in Frövi. Despite the war in Ukraine, despite all the logistics delay, despite all the missing items and components and chips in the world, I'm very happy that the team has progressed this project on track. So it's on time. budget and it will probably go online in quarter three next year a little bit in advance of the timing of quarter four let me go now in quarter four so quarter four continue to be to be strong both in net sales growth fourteen percent organic growth and also in profit I think we are very pleased about our North American business, which contributes significantly to these results. In Europe, we have a slightly different picture. We have now, I think, maxed out pricing, but cost continues a little bit to climb. And I think this is probably the first quarter where we see some more softer demand, which is, in my view, very much driven by some destocking of our customers and probably also about the future outlook of the economy, which probably November, December was still very much feared to be bad, which I sense is a little bit better now already. So I think we will see a change now in quarter one and then hopefully a quick recovery after that. Let me take you quickly through the bridge on net sales. You have seen pricing impact in this quarter is still 15% and basically currency rate a little bit. Volume growth has been flat overall, but strong performance by adding North America. You can see 60% of the growth. And then finally, I think BSIM is the last time we have it in the quarter because it was divested about a year ago. When we go to the profitability, again, outstanding profitability from North America. And for the first time, unfortunately, you can see that the cost inflation actually exceeds the pricing and mix that we achieved in Europe. We don't expect this to continue for many quarters, but I think quarter four is clearly the start, and we hope that in quarter one, 2023, the worst will be over. I think it comes from the double effect of economic unsecurity and some destocking, and this will be very quickly through, I think, through the system. Why do we are still very optimistic for the year 2023 despite a relatively weakness in quarter one and maybe already softening now in quarter four? It's because we have a very significant of our sales in the foods and drinks sector, which tends to be much more stable. But I think overall it comes from a very high level and therefore going forward by segment we will have more challenges going ahead. Clearly today we see already some significant weakness in industrial and but continue to see good performance in printing and publishing paper in the US and foods and drinks as I said are more stable as we go forward. Okay, I will stop here and hand over to Eva. Good morning Eva and please I leave you

Thank you, Christoph, and good morning, everyone. A couple of words on input costs and price development. We have seen another quarter, as Christoph was mentioning, with steep cost inflation. We've added roughly 325 million when we compared to previous quarter, so that will be Q3. However, the situation there is greater between the regions. For North America, Very good news. We've actually seen a reduction of costs. So about 60 million versus previous quarter. And this is first and foremost related to the decline in natural gas rates post the summer period. Chemicals and logistics pretty much flat for the US region. That means for region Europe, we've seen cost inflation in the area of 385 million. Fiber and chemicals are by far the biggest cost drivers. each with incremental 200 million each when we compare them versus Q3. Logistics being stable, why we see a slight help from energy around 15 million. Now going into Q1, we do expect the same regional trend to continue. So for North America overall, we expect to see a pretty flat cost picture when we then compare versus Q4. And however, for Europe, the pace of cost inflation is slowing down, which is good news. But we estimate around 270 million of additional costs to be added in the quarter. And most of that is expected to come from fiber pulpwood, 150 million, followed by energy, 100 million, and a small tail on chemicals of 20. We do expect logistics to be flat. Now, if we move on and we start with some coordinates for product area paper. Product area paper had another outstanding quarter with excellent performance, both when we look at top and bottom line. As we have seen over the previous quarters, we see double-digit net sales growth across all categories and for both regions, which is very pleasing. We managed to add approximately 100 million SEK of extra pricing when we compare that to Q3, pretty much solely coming from North America, impacting the graphic and speciality paper. Pricing in Europe was more or less flat. Volume came in a bit short for this quarter, and I think Christoph already alluded to this, but it's mainly related to softer demand across categories. and different channels combined with inventory adjusted by some of our customers. Profitability for the quarter outstanding, ending with a 28% EBITDA margin. Most of the profit growth is related obviously to the inclusion of our North American business, but also within Europe, we managed to keep an impressive profitability level that we are really pleased to see. So let's move over to product area board. And for product area board, there are some similarities. There are also some quite sizable differences. We start with the top line performance. It's another solid quarter. Yet again, we see high double-digit growth across all of the categories. We have managed to keep prices flat throughout the quarter. although the market is starting to show clear signs of pricing contraction within several categories. Also for product area board, the volume landed a bit soft versus expectations. Very similar drivers, as we mentioned, for paper, softer demand, in particular for container board and carton board, in addition to some inventory adjustment for some of our customers. We did see a pretty hefty profitability contraction for the quarter. I'd like to explain that for a couple of minutes. In essence, the margin is coming down mainly due to cost inflation has continued to accelerate while pricing is leveling out. And on top of this, we've had some production challenges during the quarter that encouraged some one-off costs. And actually, probably a better way to visualize this and give you a bit of a size of the magnitude is if you move into the next slide. This is a bit of a one-off event we do to show a quarter-over-quarter bridge for product area board, but I thought that might be very useful this time given the pretty hefty movement we've seen. So starting with the base, then Q3 from 22, there is a certain help coming from our net FX position of pricing is flat, volume hits us negatively, while the big item quarter-over-quarter is the cost inflation. Most of it, as I mentioned already, is pulp food and chemicals related. You find a small little item as well on the vacation accrual, and that is obviously linked to how we handle the vacation handling during Q3. And we also have some other items. There's a red box there at the bottom, 145 million of production disturbances during the quarter. You can say that is cost and items that needed immediate care, given how we had some troublesome items, not big insignificant, but for most of our board meals, we had some items that needed extra care in the quarter. Now, and I want to highlight that that is an item that is one of in nature, and we do not expect to carry with us that going into Q1. Good. So if you take the next slide, please. And moving over to cash flow, this has truly been one of the biggest successes during 2022. We've had and we have delivered strong cash conversion pretty much in all the quarters. And Q4 was no exception. 33% of EBITDA did we manage to see to operating cash flow. And that is a number that we are delighted with. We have seen very similar ratios for the full 2020 figure. I mean, the strong cash conversion has enabled us to further fuel our balance sheet at the end of the year. As also Christoph was alluded to, the all-time low net debt leverage ratio coming down then to 0.6 when we close the books for December. The very different profitability level we've also seen has ignited our return on capital employed. That has come a long, long way in a few years and reached now 18% for the total year. The Board of Directors proposes an increase of ordinary dividend from 430 to 550 SEK per share. And on top of this, the Board of Directors has proposed an extraordinary dividend of 2 SEK per share. As you know, this will go to the AGM further down the line in 2023. Slide change of the CapEx outlook for 2023. We move it up by roughly 100 million. So 3.1 is the best view we have at this stage. 2.2 of those coming from what we call base capex items between the region. And then the recovery boiler, 900 million as that project will start to come to completion. Right, so if you move to the next slide, please. And I think in a situation where the market situation is volatile, also difficult to predict, It is of high importance we continue to focus on items that sit in our own control. And that is obviously what we wanted to focus very hard on going into 2023 as well. We are launching a new profit improvement program that will run over the coming three years, setting also the ambition quite high, achieving a profitability uplift of 1.5 billion. measured then in the run rate when we come to end of 2025. And that is obviously measured in an EBITDA impact. Clear target for this year in 2023 is to already deliver a 400 million impact when we close the books then in December 2023. Now, a little bit more about what this program is all about. And I think it's probably useful in this context to talk about you know, the evaluation and the learnings we take with us from the cost and efficiency program that we started back in the fall 2019. We've run that program now for a bit more than three years and closing it down in the end of 22. You might recall we have raised the program ambition several times throughout the program. And that program was mainly focused on cost efficiency within fixed and variable cost buckets. And what we take with us from that, I would argue, very successful executed program is both what the impact the organization can generate with the right focus. And we also take with us quite a bit of confidence there is definitely more potential out there. And what we're really trying to achieve with this program is to reach further to the full potential of the company. And if I can use an analogy, we probably picked some of the lowest hanging fruits now in a previous cost and efficiency program. This time, we climb a bit higher up in the tree to pick some items that are a little bit more difficult to reach. And particularly in this case, we will be looking at items and activities that require a stronger functional collaboration. And examples in this case being areas to reduce trim, optimize further product recipes, and a much more seamless sales and operational planning across the company. You can expect quarterly updates on how we're progressing on this program. We will also at some point come back to a target split for the 2024 and 2025 impact respectively. So with that, I hand it back to Kristoff.