- Billerud returned to growth in the second quarter with improved profitability and solid cash generation: Sales growth of +8% YoY (+3% QoQ) was largely driven by volume and mix. EBITDA improved significantly YoY as positive pricing and mix effects more than offset sequentially higher input costs, where the headwind of SEK 130mn q-o-q was mainly driven by pulpwood.
- The European business was impacted by significant planned maintenance, which reduced EBITDA by 40%: Sales improved by +8% YoY & +1% QoQ. EBITDA increased by over +400% YoY, but slumped -20% QoQ, with an EBITDA margin of +9.0% (+720bps YoY and -234bps QoQ). In terms of sales mix, kraft paper (+15% of sales) and containerboard (+19% of sales: strong demand for fluting) sales improved sequentially (positive read-through for Mondi), while liquid packaging board was under pressure. Higher input costs were mainly driven by pulpwood costs which reached an all-time-high level during the quarter and are expected to increase further into Q3.
- Excellent profitability in North America despite operating rates <70% (positive read-through for Sappi North America) fuelled by volumes, up +4% QoQ: Sales improved by +15% YoY & +10% QoQ, this was driven by both graphic paper (70% of sales) and specialty paper (+18% of sales). EBITDA increased by +26% QoQ, with an EBITDA margin of +18.5% (+231bps QoQ). Total input costs remained stable with a minor decline expected into Q3.
- New direction to transform production in the US towards packaging materials: Billerud will not proceed with plans to convert its Escanaba mill to cartonboard production, positive for Sappi, in our view. Instead, the company will target to shift the product mix gradually towards packaging materials with a moderate investment level. Further plan details and investment estimates will be provided at their Capital Markets Day during Q4 2024.
- Market conditions improved for most categories during Q2 with a slight improvement expected going into Q3: Market conditions to improve slightly, with positive price and mix impact to offset higher input costs. Capex guidance remains unchanged at SEK 2.3bn in FY 24e, with 70% flagged for Europe and 30% for North America. In North America, P&W stocks are more normalised and expect the US election to fuel demand, while pricing is expected to remain stable. In Europe, pricing is expected to improve further to offset cost headwinds of SEK 180mn (mainly pulpwood and pulp).
Download Report
