BillerudKorsnäs AB (publ)

Good morning and welcome to this presentation following the publication of our Intervene report for the first quarter 2026. Billerud's President and CEO Ivar Vatne and our CFO André Kress will present and after that we will open up for questions. By that I would like to hand over to Ivar.

Thank you Lena and good morning everyone. And thank you all for listening in to our comments this Tuesday morning. It's been another quarter with twists and turns, and yet again, some unexpected events to navigate through. The heading on the slide is our summary of the quarter, but as you would expect, some nuances between our regions. So let's get into it. And next slide, please. As expected, it's been a tough start of 2026, fighting a challenging market, but we continue to see different realities between our two regions. And there are also some clear positives to comment on. In North America, we record another strong quarter and we continue to be well positioned with a local US production to serve a broad customer base from our Midwest manufacturing footprint. 16% EBITDA margin is solid, but we were hit by some unusually heavy snowfalls and freezing temperatures that forced us to take a couple of days on planned production stop, and it drove our energy and the logistic costs higher than expected. For Region Europe, it was a quarter of incremental price pressure, currency headwind, and loss of emission rights that pushed down the profitability to a level below expectations. And having said that, we have plans in place, and we are taking further action to strengthen the situation going forward. And we are certainly more optimistic about our Q2, and we do expect a profit recovery, but more on that later. One clear positive for our Q1 was the shipment. We managed to grow volume with 9% versus Q4, And that growth came from both region and broad-based across several categories, and is a number we are happy with. A cash conversion for the quarter was solid, and we're delivering well on a cost-saving program, and we are ahead of our plan. Some additional comments on the market sentiment. So next slide, please. So if I start with North America, we continue to meet more stable and solid conditions. Consumption seems to be okay across our core categories, and order books are solid for the foreseeable future. We produce now at approximately 80% operating rate. Another highlight of this is our strategic priority to grow our position within packaging materials, The start of 2026 was encouraging, and it continued to take new positions with both existing and new customers. And Q1 was, as expected, our best sales quarter in that regard. In Europe, the market continues to be difficult, but with some rays of light, we shipped better than expected and was a clear uplift from Q4, in particular on liquid packaging board. Now, we are a bit cautious as our sense of this strong start is partly linked to three buckets. A, customers building up some inventory after a slow end of 25. B, supply chain uncertainty in the wake of the Middle East conflict. And C, some customers ordering a bit extra ahead of announced price adjustments from Q2 and onwards. For the Asia and the rest of the world, we see a mixed picture. It's mostly weak, but we do see some encouraging sign on the liquid packaging board where we are picking up some signals that in particular demand in China is better than expected. Also in the industrial in the rest of the world has strengthened a bit during the quarter, in particular on SAC. So with that, I hand it over to André.

Thank you, Ivar, and good morning, everyone. So our currency neutral sales are down 5% versus a year ago, and that was primarily driven by the price decline in region Europe. In North America, the pricing was flat versus a year ago. And clearly, the strengthening of Swedish krona since last year has had a significant impact on our sales and also profit, which I will get back to. Volume-wise, they were marginally down with 1% in both regions. Next slide, please. The profit for the group declined significantly versus last year, primarily driven by region Europe. Foreign exchange and pricing have been the two big drivers for the decline. In addition, loss of emission rights and also more extensive maintenance shutdown schedule Q1 this year, were other two major building blocks. Since we have decline in input costs in the quarter, we are also having a negative inventory revaluation impact, while last year that impact was positive. And hence, year over year, it's a significant item in our bridge. Now, on the positive side, our cost-saving program is delivering ahead of plan, and we have significant decline in fixed costs versus a year ago. Now, let's move over to the regions. Next slide, please. Despite the strong sequential volume uplift versus the fourth quarter, the profit for region Europe declined. Lower pricing together with loss of emission rights And also stronger Swedish grown-up were the main drivers behind the profit decline compared to Q4. We did see pulpwood costs to come down, although it was slightly slower than expected due to slower inventory turnover of the pulpwood. And we do expect the decline on pulpwood costs to continue also into the second quarter. And that will, of course, be a major cost relief for the region. Now, to restore the profitability, we have announced price increases on second craft grades and also on container board. And we expect the positive pricing impact to start materializing in quarter two. For other categories, we have implemented surcharges for increased logistical costs due to the situation in the Middle East. Moving over to region North America. Next slide, please. Profitability for region Europe declined also versus quarter four, but that was entirely driven by higher input costs. As Ivar mentioned, we did experience some challenging weather conditions with both extreme cold and also heavy snowstorm, which impacted our energy and logistics costs. And we had to take two days of production downtime during the quarter. We certainly do not expect the same extreme weather conditions in quarter two, and the region should be back to strong underlying profitability. On the back of solid demand and, to some extent, cost inflation in the region, we have announced broad-based price increases for our paper grades. The impact for quarter two will be quite limited but we should see full impact materializing in quarter three. And finally, our North American team is continuing to ramp up sales of paper board grades. And we have also now started to provide turnover figure for carton board and container board sales in our quarterly report. Next slide, please. Now, in terms of the input costs, both regions had somewhat higher input costs versus our ingoing expectations for the first quarter. For North America, again, the weather conditions resulted in approximately 40 million higher input costs compared to quarter four. For Europe, we did see costs to come down on pulpwood, but that was partly offset by higher electricity costs. And all in all, the costs were down around 60 million compared to quarter four for region Europe. The earlier announced price list changes on pulpwood are materializing. And just recently, there was a wave of price list decreases, which were particular to the storm areas in mid Sweden. Next slide, please. Now, in terms of cost development for the second quarter, we do expect overall costs to come down, but there are quite a lot moving pieces from where we stand. For region Europe, we should see costs to continue to come down, both from declining pulpwood prices and also seasonally lower energy costs. We do, however, expect cost inflation to start materialize on chemicals and logistics due to the situation in the Middle East. At this point, all in all, we expect a sequential cost relief over 150 million for Europe compared to Core 1. For North America, the overall input cost should remain quite flat with somewhat higher fiber and chemical costs expected to be offset by seasonally lower energy costs. And our U.S. operations are mostly exposed to natural gas prices, and they have been relatively stable in U.S. despite the situation in Middle East. Next slide, please. And continuing on the topic of the Middle East conflict, it didn't have any material impact on our Q1 results. We have managed the sales deliveries to our customers well, and we do not have any significant exposure through sales to the region. With that said, indirectly, we do see input costs to start coming up, and that is primarily on chemicals and logistics through higher oil and gas prices. And we do expect that to be a factor in 2026. Our plan, is to mitigate the cost inflation through pricing. And we have already announced broad-based price increases in both of our regions and plan to do further increases to compensate for the higher costs. And with that, I hand it back to you, Ivar.

Thank you, André. As I already mentioned, we are doing good progress on a cost-saving program, and we are ahead of our plan. enabling us to raise ambition for 2026 impact. All of the planned staff reductions are now completed, and we record 100 million saving in the first quarter. And I'm pleased to see how we come together as a company to execute the program. We will see sequential impact of 50 million sets in Q2, and it takes the plan for 2026 up to 550 million. The remaining 250 million SEC to reach the full program ambition of 800 million can be expected in 2027. Next slide, please. So in terms of cash flow and cash conversion, we managed a cash conversion of 55% for the quarter, which is improved versus what we did last year. And with our continued focus on working capital, we remain focused and committed to deliver 80% plus cash conversion for the year. Our net depth is pretty stable around 6 billion SEC and leverage remains well below target. And lastly, our capex for 2026 remain unchanged. Base capex for both regions at 2 billion SEC, while 600 million SEC for the strategic capex which is first and foremost earmarked to the evolution program in North America. Next slide, please. So to round it up, for Q2, we would expect an improved performance and profit recovery, especially through benefits from pulpit prices in Nordic and more help from a cost-saving program. Market sentiment is still challenging in Europe while solid in North America. The situation is highly volatile and changes almost by the week. But we will likely see additional cost inflation for chemicals and logistics coming out of the Middle East crisis. But our plan is to more than mitigate through both announced and new price announcements. And lastly, in line with our annual shot schedule, somewhat higher sequential maintenance costs. So with that, I hand it back to operator for Q&A.

Thank you. To ask a question, you will need to press star 1 and 1 on your telephone and wait for your name to be announced. To withdraw your question, please press star 1 and 1 again. We will now go to our first question. One moment, please. And your first question today comes from the line of Robin Santivita from D&B Carnegie. Please go ahead.

Thank you very much. Good morning, everybody. First question I have is related to the demand out going into Q2. You mentioned there's a lot of uncertainty going on related to the Middle East crisis and other things as well. So in Europe and in North America, how does your audiobook look like right now, and what is the rate of order intake over the past few weeks?

Good morning, Robin. So in terms of volume and the demand outlook, I think it's better to, of course, break it up into the regions. And for North America, we have solid order books, and we should at this point expect pretty much stable volumes heading into the second quarter, maybe slightly up. For Europe, the situation is a bit different, and it is a bit more uncertain with everything going on. I think if we look at the sequential volume uplift we had from Q4, as Igor mentioned, we had a couple of factors playing in there, and I think there was some pre-ordering ahead of the announced price increases. Of course, this puts a bigger question mark around Q2 volumes. At this point, we would probably look to slightly lower volumes for the second quarter.

All right, thanks. The second question I have is related to pricing. Can you shed some light about the earnings impact from price increases? going into Q2 and if you have any more on Q3 as well.

Yeah, I'll start with Q2, Robin. And we look actually, looking at the both regions, we expect prices to increase with around 1 to 2%. Now, that's a combination of announced price increases, but also our ability to improved mix based on slightly better order books that we have seen. So at this point, we would expect for both of our region, you know, price and mix effect to be a positive between 1 and 2%. I think Q3, of course, the price announcements that we have made during the quarter, they will be, you know, impacting also the third quarter. But I think it's quite a lot uncertain at this point, so we will need to wait a bit and see traction on the price announcements before we can provide some more color on quarter three.

I understand. Thanks. The final question I have is maybe for you, Ivar. You mentioned in the report persistent overcapacity in a lot of your segments. speak about potential consolidation the need for consolidation when it comes to the meal operating rates and potential closures potential consolidation is this something you are involved in as well could you comment a little bit about the industry and also your perspective, your own actions. Would you go to this?

Good morning, Robin. Let me just start by saying a couple more things before specifically trying to answer on the bit with the slide. It has been quite a long period of time now that we see for our European sector that the margins are underwhelming. If you look at some of the return of capital employed, you know, they are almost consistently low single digit and in the lower end of that. And, you know, quite frankly, that is unsustainable in the long future and specifically given the capital intensity of our sector. So we do see this reality starting to, you know, take place and regionalization is a word I use from time to time where, yeah, each region now and the local production in the region is going to start to have a more prominent place. It means just straight to the point that we in Europe, there is too much installed capacity versus what the defined market now seems to be. I mean, we're still operating at a pretty decent operating rate now in Q1 and that number is close to 90%, but very, very squeezed pricing situation and margins being certainly compressed. And yeah, in many ways something has to be done. So we would expect that is just the law of the nature law here now that something has to yield and something has to come out to restore a more healthy long-term supply and demand balance. I expect most players now in the sector to take at least very deep conversation about this topic that includes ourselves. And there are plenty items, of course, you can do in this field. There's nothing else I can share at this moment and nothing that is, you can say, advanced enough that we would share. But clearly, this is a topic I expect the whole sector now to the rest of it in a more intense manner than some quarters and years ago.

I understand. Thank you very much.

Thank you. Your next question today comes from the line of Martin Melbaugh from ABG Sundarokalja. Please go ahead.

Good morning. Many of the pieces for the puzzle for Q2 have been answered now, Pulp wood costs and the inventory revaluation, is that something to keep an eye on for Q2, or is that flattish? And you mentioned further price reductions being made. What is the remaining of EBIT effect for, say, Q3, Q4 on wood costs?

Good morning, Martin. So I can start with the pulpwood and inventory revaluation. So I would like to separate them just because it's easier to talk around them. I mean, the inventory revaluation impact. we had on a group level was negative 50 million in the first quarter. And we do expect that to be roughly the same, negative 50 million also for the second quarter, just on the back of continued input cost decline on the pulpwood. In terms of the pulpwood costs for the second quarter, we do expect reduction of roughly 110 million for our region, Europe. And as I mentioned, the 150 million in total for Europe, that also includes some reduction in the energy prices. Looking now for the third and fourth quarter, again, there's quite a lot going on. But at this point, we would still look at, on average, price per cubic meter to be roughly 100 sec lower in 2026 compared to 2025. That's still our ingoing assumption and outlook.

Okay, but what does that mean in sector cubic meter for Q3, Q4 versus Q2?

Well, it's difficult to point out the exact impact in quarter three and quarter four, but after the second quarter now, we should have the majority of the declines behind us and probably some marginal effect in quarter three and quarter four.

Okay, thank you.

Thank you. Your next question today comes from the line of Linus Larsen from SEB. Please go ahead.

Thank you very much and a very good morning to everyone. Just on the topic of costs, if you could maybe come back to how you look at freight costs in the second compared to the first quarter and if that's part of the guidance that you've been giving here, quantifying or if that comes on top and if so what that impact might be.

Good morning Linus. Now the logistics costs is included in our guidance so when we talk again 150 million input cost relief for region Europe that also includes a slight increase on the on the logistics costs that we expect due to the situation in the Middle East.

Excellent. That's great. Thanks for clarifying that. And then just coming back to your low profitability in Europe, now you've been a bit negative for the past couple of quarters. You're still a bit DA positive in the first quarter, but only slightly. So I wonder if you could share maybe some tips some view on how it differs across your various assets and if there are huge differences in terms of profitability when you compare the various production units within Europe.

Hi, good morning Linus. I can take that. I'm not going to comment on any profit situation or specific cost competitive per mill. Clearly they are in some sense a variation depending on everything from size of machines, energy situation, pulp integration, etc. But I can say the following that you point out that the margin is squeezed and profitability is certainly under pressure in Europe. I think that is obvious for everyone. It's a sector, I think, that is seeing the same pattern. And for us now, I mean, we are keeping a very tight control on on the items we can influence and cost program is still going to be an important piece as a building block for us, 26 versus 25. André mentioned already, but we certainly expect more help going forward also on this pulpwood price decreases. That should help us and that should also enable us to have a certain profit recovery. you know, going into Q2 and onwards. But the situation is, as I said, it's strained. And, you know, it's a reflection of the unhealthy balance we currently have. So you can say that these steps we're taking now, they are, you know, intermediate or they are needed items. But, you know, the bigger picture still hangs over the sector as a supply-demand imbalance.

And as you may understand, the reason that I'm curious is because I wonder whether there are opportunities to address certain paper machines or certain mills to make a significant improvement on overall profitability. And when you talk about restructuring, do you see that you have very much in your own hands or do you see the big opportunities in combination with other potential partners?

I think it's all of the above. If I'm honest, I think everybody should be on the menu. And I mean, in general, I have to say our commercial portfolio is one of the stronger points of Billerud. And we do have exposure into mostly categories that are growing and have had a higher degree of resilience in the past. But, yeah, right now, I mean, there's just too much board capacity in particular that just makes it challenging in pricing in general. But I think we will look at everything we can internally in terms of mix optimization and, yeah, you can call it mill optimization, either alone or in combination. I think everything now is on the table. Great.

Thank you very much.

Thank you. We will now take the next question. And the question comes from the line of Oscar Lindstrom from Danske Bank. Please go ahead.

Good morning. Three sets of questions for me. The first one is, do you expect any further quarter-on-quarter impact from loss of emission rights in Q2? That's my first question.

Yes, good morning, Oskar. No, we do not expect any effect into the second quarter.

Excellent. The second question, I mean, you talked a little bit about signs of improving demand. You mentioned liquid packaging board in Asia. I think you mentioned also SACCRAFT paper. Do you believe this is sort of inventory building or underlying demand or something else? Can you be certain about any of that?

Hi, good morning, Oscar. I think it's a good question. I don't think I need to remind everyone what happened 12 months ago where Q1 was pretty strong for the sector and then we ran into a very different situation from Q2 onwards. And honestly, now everything happening almost at the same time in the Middle East, coming in as another black swan, it is difficult to really pinpoint. And clearly we're having the discussion with a broad range of customers to get a feel for this. We are pretty certain that a piece of the volume uplift we saw in Q1 is around inventory adjustments. either pre-ordering ahead of announced pricing, partly also nervousness around supply chain uncertainty given the Middle East crisis. Our view is that that is not a significant part, but there are some volume. You can call it a minor or somewhat of a volume uplift. I think we don't see broad-based... sign or credible sign that the marketing is struggling. But there are pockets of it. I mentioned already one that you referenced. Liquid packaging in Asia and particularly China has started better, which is encouraging after we had quite a few years with some negative market growth in China. We shouldn't also forget this, and that tends to be overlooked as a topic that given now that everything from oil price and some raisin-based derivatives have increased also make fiber-based packaging more competitive versus some of the substrate of plastic and you know we have signs of that as well especially for instance on the sack that you know our products are more competitive and customers are you know adjusting their behavior quite fast will that last is that now a more of a longer trend who knows depending a bit on also what's going to happen how long down in the Middle East. But certainly some signs are a little bit more encouraging in fewer wear segments than three months ago.

All right. Thank you. My third and final question is also, I guess, a little bit more of a general one. I mean, we're seeing increasing use of hardwood pulp in several paper segments. Do you see this sort of impacting liquid packaging board and your other segments? Is it a step change or is it more of a continuation of a gradual trend that's been going on for a long time?

Yeah, that's another good question. I think if you go through our portfolio and look at what we can offer to our customers, I mean, softwood will be, I can tell you for the foreseeable future, the dominant component. And that is partly everything from stiffness, from flexibility, to strength, to some of the items of bulk that characterizes a heavy softwood content. So in that sense, we are not super worried about it. I think we have these niches where we talk about high performance packaging material, which has always been the core and the DNA of Bitroot. I think carton board is maybe one area that stands out. There is more carton coming our way, and I think we see some signs of higher hardwood content on that, in particular in Asia. You could probably even put in some liner in that as well, with the Jukka liner being a product that is getting a bit of traction. So you can say that it's starting to eat its way into some of the segments for us, given where we stand in our portfolio today. Nothing dramatic. That's what I would expect to change anytime soon.

All right. So it's more of a gradual development than something that's new that's happening in 2026.

Yeah, at least for our side, the answer is yes.

Wonderful. Thank you. Those were my three questions.

Thank you.

Thank you. As a reminder, if you would like to ask a question, please press star 1 and 1 on your telephone keypad. That is star 1 and 1 to ask a question. We'll now go to our next question. And our next question today comes from the line of Cole Hawthorne from Jefferies. Please go ahead.

Morning. Thanks for taking my question. I'd just like to follow up on the wood cost. You mentioned kind of 100 sec cube lower, 26 versus 25, so sticking with the kind of billion cost relief. Now, into the third and fourth quarter, I was still expecting a little bit more kind of pulpwood cost relief. Are you guiding that because there's kind of diesel costs increasing that the cost of the mill gate, you're kind of sticking to that $1 billion, or... Are there some moving parts in that kind of wood cost relief is what I'm asking. Is kind of stumpage still coming down, but cost of the mill gate is going up a little bit just considering diesel?

Yeah, good morning, Cole. I think, I mean, obviously, we have some parts of the price increases for the energy and diesel in particular that's specific to the harvesting, which is carried by the forest owners when it comes for the logistics to bringing the wood from the forest or roadside to our mills. We do expect some increase on the cost side. We have activities in place to mitigate those effects. I think also the additional price reduction for the storm area now. That's obviously something that is partly offsetting that increased cost. And that's why we also at this point at least stick to the same outlook for 26, i.e. 100 sec per cubic meter lower output costs. That's our best guess at this point.

Thank you. And then you talked about pricing announced as well as potential need for further ones for the costs. Can I just understand how you're thinking about that? Because liquid packaging board, I imagine just for the logistics, you're going to need to try and push through some surcharges there. But the rest of the portfolio, is this kind of surcharging for logistics or do you think you need to go out to the market for underlying price increases where possible?

Good morning, Cole. I think it is both or the latter that you pointed to. So I think it will be a combination category by category Uh, I think it also depends quite a bit on what we see on the recycle side. Uh, and there has been moments, uh, I guess, broad based in that field, as you know, and, and I'm pretty certain that we would see more just on the basis of some of the cost situation and how it will be hitting harder than non-integrated and the more energy depending players specifically in continental Europe. And, and, and clearly that's something that, uh, know we also take with us so we've seen you can many ways say round one i'm i'm certainly there will be around two and be certainly also gearing up for that uh it will be a combination then on what position we have on on that to what we also see on on the recycle side but it's a it's a pretty fast moving situation and i would certainly expect more moments to happen now during second quarter

The last one, it's a difficult one, and it might be a bit of an unfair question, but you've been very open on the need for capacity closures and industry consolidation to improve the supply-demand balance, and everyone's looking at it. But we still haven't seen as much action as we probably should. The industry's been talking about this for the last year, and we just haven't seen the closures that the industry needs. How do you think about it going forward from here? Do you think that price increases are ultimately delaying the inevitable here? And, you know, are we going to be in a position where we actually need the closures rather than the price hikes? Just like your thoughts on the general industry. Yeah, no, it's...

Yeah, it's a good question. I don't think it's unfair at all. Yeah, it could very well be so that what we see right now might short term, I don't know, give a little bit more of optimism back or, you know, push the margin in the right direction. I still think that the underlying challenge that we are wrestling with, and we've seen this in Europe for years now, it's not only a quarter or two, it's, you know, how they compress margin and returns are just, you know, unsatisfactory. And, you know, we see completely different ballgame in the US, where I think also it has been a much tighter race in terms of managing capacity. And yeah, I do expect everything else equal, unless that we see something now that there's some import tariffs that have been reversed, or you would see something, you know, the X factor of, you know, pulp from Russia coming back in. And all of this seems now unlikely. I think we are facing as a sector, the inevitability that some capacity has to come up.

And then just because we don't get much visibility on the SAC and, you know, speciality craft side, would you just mind providing a little bit more color on, you know, what are you seeing in those end markets by customers would just be very helpful. Thank you.

Yeah, no, I can do that. I think if I start with our SAC and maybe going to Brown first, situation is stable on a quite low level. There are some demand increases in some niche areas. I mean, Africa and Asia are important sector for us. We do think that a lot of that so far or the more order intake is linked in certainly around the Middle East. But as I mentioned earlier here in the call, price on rates and derivatives have gone through the roof and it is enabling us to be more competitive. And some of our products, I mean, particularly, you know, this woven poly bag is a product we now have a much better value proposition on our SAC to compete with. White SAC, quite similar, you know, quite decent order books, you know, going into Q2. But, you know, I think we are at this stage careful to say anything about the underlying strength. But probably we can confirm that some customers are now trying to secure positions. on craft paper and starting with MG quite stable on again low level not as good order books as we see on SAC now uncertainty on the supply chain is also making some customers especially overseas booking a bit more than they normally do but yeah maybe one notch down then in terms of where we are on the market versus the SAC. And lastly, I think on MF, we do have a good product on the e-commerce and that part is performing quite well. It fits well to our portfolio and also, you know, talking back to my point about how we can have a product that has high performance. Strength of market is okay for the time being, nothing more, but very decent order books also on the MF going into second quarter. Thank you.

Thank you. Once again, if you would like to ask a question, please press star 1 and 1 on your telephone keypad. That is star 1 and 1 to ask a question. There are currently no further questions. I will hand the call back to Lena.

Thank you. And that concludes this conference. So thank you for participating. And welcome back the 17th of July when we report the second quarter results.