Robust fourth quarter concluded a year of improved results and launch of new strategy
Key highlights
• Net sales growth of 20%, supported by both regions
• Continued excellent profit delivery in North America
• Improved profitability in Europe
• Cash conversion of 95% and further strengthened financial position
• The Board of Directors proposes a dividend of SEK 3.50 per share (2.00)
Quarterly data
• Net sales increased by 20% to SEK 11,468 million (9,566)
• Adjusted EBITDA* SEK 1,443 million (774)
• Adjusted EBITDA margin 13% (8)
• Operating profit SEK 1,091 million (-191) including items affecting comparability of SEK 373 million (-244)
• Net profit SEK 806 million (-330)
• Earnings per share SEK 3.24 (-1.33)
Outlook for Q1
• Solid market conditions for Region North America
• Normal conditions for Region Europe except for cartonboard and coated liner that will remain weak
• Pricing continues to offset input cost increase
• Temporarily lower sales volumes in Region Europe
Comments by the CEO
We delivered robust financial performance in the fourth quarter and ended 2024 on a good note. During the fourth quarter, we recorded outstanding net sales growth of +20% driven by better-than-expected volume growth, enabling a solid adjusted EBITDA margin of 13%, up 5% pts vs year ago. Once again, our North American region recorded impressive results with 17% net sales growth and 19% EBITDA margin. I am also satisfied with our result in Region Europe which, despite softer market conditions, managed to grow the topline by 16% and achieve an EBITDA margin of 12%.
2024 was characterized by challenging and rapidly changing market conditions. It was nevertheless a year with significantly improved financial performance versus 2023. Our proactive actions, discipline and flexible approach with strong focus on items we can control have served us well. Our net sales grew by 5% through volume growth, mix and price management. We successfully limited the fixed cost increase below inflation and delivered another sizable contribution to the efficiency enhancement program. This means that we reached the program target of SEK 1.5 billion well ahead of schedule. The cash conversion in the fourth quarter of 95% was strong. Our healthy operating cash flow and strong balance sheet will support necessary mill maintenance, selective value-creating strategic investments as well as dividends to our shareholders. The Board of Directors proposes a dividend of SEK 3.50, which is an increase of 75% versus last year and in line with our dividend policy.
At the Capital Markets Day in December, we shared the new strategic framework for Billerud. Going forward, we will be more predictable in terms of our strategic choices. Our new vision, "We make high performance packaging materials for a low carbon society", sets the strategic direction. The safety of our people remains the number one priority. Our current safety performance is unsatisfactory, and we need to improve. To successfully deliver on our strategy, we will amplify the focus on value creation, prioritize profitability over growth and promote a stronger performance culture. Our new long-term financial targets emphasize the importance of capital efficiency, profitability and cash generation.
We continue to be impressed with our North American operations that consistently deliver outstanding results. We are well positioned with local production in the attractive Midwest region and remain committed to specialty and graphic paper. However, as the latter is in secular decline, we need to improve our capacity utilization. Hence, we will evolve towards packaging materials, benefitting on market opportunities, our attractive location and cost-competitive asset base. We will invest a total of SEK 1.4 billion, whereof most in Escanaba and during 2025, to enable this transition towards paperboard production. Our sales and marketing efforts have already started, with numerous promising customer trials ongoing for our US produced containerboard Tribute® and cartonboard Voyager®.
In the European operations, the focus will be to strengthen performance through the existing asset base. We have clarified the roles for each product category to match market opportunities, our commercial / manufacturing capabilities and flexible production footprint. Securing cost competitive wood supply and improving mill efficiency will be instrumental enablers to succeed. Going forward, the investments beyond normal maintenance will be limited.
Sustainability is embedded in everything we do, contributing towards a low-carbon future. We are committed to Science Based Targets and have a clear transition plan for CO2e emission reductions until 2030. In Europe, we are already an industry leader in terms of carbon footprint derived from production, so for the next five years the greatest positive climate impact will be in the North American region.
As we enter 2025, geopolitical and macroeconomic uncertainty remains high. In Region Europe, we seem to have passed the bottom of the curve and are starting to see early signs of improved market sentiment in many of our product categories. Market conditions in North America remain solid and in line with a well performing US economy. With the import tariffs that the new presidential administration in the US has introduced, Billerud is well positioned and will likely increase its local capacity utilization and sales volumes within North America.
Although the pulp and paper markets have been challenging over the past years, Billerud is in a strong position to evolve and strengthen. Long-term, we are a firm believer in fiber-based packaging to replace fossil-based materials. Billerud has attractive positions in core markets due to our superior product performance and manufacturing expertise. We are at our best when we work with customers and applications requiring lighter, stronger and more sustainable materials. With our updated strategy, modest investment level and strong balance sheet we have a solid foundation. We now look forward to continuing to execute and deliver our strategy.
Ivar Vatne
President and CEO
Fourth quarter
Sales and results
Net sales for the fourth quarter increased by 20% to SEK 11,468 million (9,566). Currency changes had a positive impact of 2%. The currency-neutral net sales increased by 18%, mainly due to increased sales volumes in both regions and higher sales prices compared to last year. The sales volumes totaled 940 ktons (872), positively impacted by inventory reductions and higher than normal market pulp sales in Region Europe. Both regions had production curtailments.
Adjusted EBITDA improved to SEK 1,443 million (774), corresponding to a margin of 13% (8). The Group's result increased mainly as a result of sales growth and efficiency gains which were only partly offset by higher input costs in Region Europe. Annual maintenance shutdowns were in the quarter carried out at the Frövi and Escanaba mills, with a total cost impact of SEK 109 million.
Items classified as affecting comparability in the fourth quarter totaled SEK 373 million (-244). The items affecting comparability were costs for the US transformation program of SEK 89 million, positive result effects from two transfers of pension obligations and related assets in the US of SEK 389 million, released provisions for restructuring costs related to personnel reductions of SEK 58 million, and a positive result of the revaluation of biological assets in the associated company BSÖ Holding AB Group of SEK 15 million.
Market development and outlook
In the fourth quarter, Billerud experienced normal market conditions for most of the product categories. Demand for coated liner and cartonboard was weak. Sales prices were largely maintained, except for market pulp where the price decreased. Input costs increased in Europe, while they were stable in North America.
For the first quarter of 2025, Billerud expects normal market conditions for most categories in Region Europe except for coated liner and cartonboard which are expected to remain weak. Sales volumes in Region Europe are estimated to be 30-60 ktons lower than in the fourth quarter. Prices for liquid packaging board have been raised from 1 January. Solid conditions for graphic and specialty paper in North America are expected and Billerud announced a price increase on coated freesheet (CFS) rolls graphic paper in January. Total input costs are expected to increase, mainly for wood in Europe and logistics in the US, as well as seasonally higher energy costs in both regions.
Events in the quarter
On 1 October, Billerud agreed on a transfer of pension obligations and related assets in the US, which resulted in a positive result effect of USD 25 million. On 27 November, Billerud agreed on another transfer of pension obligations and related assets in the US, which had a positive result effect of USD 12 million. The combined result effect of these transfers amounted to SEK 389 million and were in the fourth quarter reported as an item affecting comparability. The transfers of pension obligations and related assets had no cash flow impact.
On 2 December, ahead of Billerud's Capital Markets Day, the Board of Directors decided on a strategic investment program of SEK 1.2 billion in the Escanaba mill and SEK 0.2 billion in the Quinnesec mill, that will enable a transition towards paperboard production in North America. The Board of Directors also decided on new, long-term financial targets for Billerud. As the premises for pulp, paper and packaging production in Europe have changed structurally since 2022 with elevated fiber costs, the EBITDA margin target was adjusted to above 15% over a business cycle. In parallel, a target for return on capital employed (ROCE) was reintroduced, and a target for cash conversion was introduced. The financial policy governing the company's indebtedness and dividends to shareholders remained unchanged.
Billerud announced on 12 December that its targets for reducing its CO2e emissions had been approved by the Science Based Targets initiative. Billerud commits to reduce its scope 1 and 2 emissions by 42% by 2030, with 2022 as base year, and to reduce its scope 3 emissions by 25% within the same timeframe.
On 20 December, Billerud announced that Jaakko Nikkilä is the new President, Billerud Europe from 1 May 2025. Jaakko Nikkilä has extensive experience in both international sales and production of fiber-based packaging materials and has recently served as Executive Vice President in UPM, where he has been a member of the Group Executive Team since 2019.
Matthew Hirst, who decided to leave Billerud, remained in the role as President Billerud Europe until 31 January 2025. From 1 February to 30 April, Ivar Vatne will be interim President, Region Europe.
* For key figures and a reconciliation of alternative performance measures including adjusted EBITDA, adjusted operating profit, adjusted EBITDA margin, adjusted operating profit margin, adjusted ROCE and interest-bearing net debt/adjusted EBITDA, see pages 14-16.
For further information:
Andrei Krés, CFO, +46 8 553 335 72
Lena Schattauer, Director Investor Relations, +46 8 553 335 10
ir@billerud.com
This information constituted inside information prior to publication. This is information that Billerud AB (publ) is obliged to make public pursuant to the EU Market Abuse Regulation. The information was submitted for publication, through the agency of the contact persons set out above, at 07.00 CET on 4 February 2025.
