Billerud is strengthening its market position for paperboard in North America and proceeding with plans for a BCTMP mill

Billerud is strengthening its market position for paperboard in North America and proceeding with plans for a BCTMP mill

-In Region Europe, positive price and mix effects are expected to compensate for higher input costs, mainly related to pulpwood.
-Billerud implemented price increases for containerboard, sack and kraft paper, and could thereby more than offset cost increases and improve our margins compared with the previous quarter
The Pulp and Paper Times

Billerud is a global leader in high performance paper and packaging materials – passionately committed to sustainability, quality and customer value. Billerud serves customers in more than 100 countries with recyclable products made from cellulose fibers.

“2023 was without doubt a challenging year for Billerud, especially compared to an extremely successful 2022 with record-high financial performance. Early in 2023, our entire industry faced unusually high inventory levels throughout the value chain and it is only recently that we are seeing signs that destocking is phasing out. We adapted to the situation by carrying out production curtailments which resulted in dramatically lower sales volumes. Organic and currency-neutral net sales decreased by 7% in 2023. EBITDA declined on the back of low sales, high input costs and pricing pressures in several of our product categories,” Mr. Ivar Vatne President and CEO of Billerud said in the annual report for FY 2023

Talking about the 2024’s outlook, Mr. Ivar stated, entering 2024, we are cautiously optimistic that our sales volumes will start to recover. We see clear indications that customers’ inventories are returning to normal levels, which should boost our sales. However, consumption in certain categories will likely be negatively impacted by continued geopolitical and macroeconomic uncertainties. We will remain focused on those areas within our control and will execute plans to realize efficiencies. We are optimistic about the strategic investment opportunities that will be decisive for Billerud’s future direction.

He further said, “Demand for our products improved during the Q2 FY24 quarter, partly due to supply and logistics disturbances within our industry that worked in our favor. This helps us in the short to medium term, but end consumer demand has not strengthened significantly over the past months. We remain cautiously optimistic going forward about gradually improved market conditions. We have adopted an agile mentality to adjust to fast-changing market conditions, which we consider to be the new normal,”

“Our financial performance in North America was excellent in the second quarter, with an EBITDA margin of 18%. Paper volumes increased and the quarter was again a clear testimony to our highly competitive asset base in Upper Michigan. With better-than-expected flexibility on most of the assets and cost-leading position situated in an attractive region, we remain true to our strategy to successfully shift the product mix towards high-performance packaging materials with lower investment level than originally planned. The optionality of our paper machines in the US has been once again confirmed by performing successful trials for uncoated liner with encouraging results and positive customer feedback,

“In Europe, deliveries in the Q2 FY 24 came in slightly lower than anticipated but our order books remain strong. We implemented price increases for containerboard, sack and kraft paper, and could thereby more than offset cost increases and improve our margins compared with the previous quarter.” He spoke.

“Our profitability in Europe is however under pressure by all time-high costs for pulpwood. It’s the dawn of a new era for the Nordic pulp and paper industry with both regulatory forces and an unbalanced supply and demand situation driving prices towards unprecedented levels. We will continue to work hard to establish new partnerships and optimize recipes to reduce the fiber consumption, which is core of the European strategy. However, being successful in such difficult operational environment will ultimately be about the attractiveness and the relative strength of the product portfolio. I am confident that Billerud has developed, through our excellent production know-how, a highly attractive offering platform with long-term demand growth, but we will need to continuously perform at our best to navigate in the challenging conditions,” Mr. Ivar informed.

Informing about the strategic investment projects, Mr. Ivar said that we remain convinced about the opportunities with converting some of our graphic paper assets to board production in the US, but the transformation must deliver strong shareholder value. We continue to fine-tune the scope of the project and remain in close dialogue with suppliers. Meanwhile, we are strengthening our market position for paperboard in North America through exports from Europe. Our plans to start bleached chemi-thermomechanical pulp (BCTMP) production together with Viken Skog in Norway is also proceeding. We have completed the feasibility study and submitted the application for the necessary environmental permit.

Market development and outlook 

In the second quarter, market conditions improved for all paper and board product categories except for liquid packaging board where conditions were stable on a normal level. Price increases were implemented for sack and kraft paper, containerboard and market pulp, while price levels were unchanged for liquid packaging board, graphic and specialty paper and cartonboard. 

For the third quarter 2024, market conditions are expected to improve slightly. In Region Europe, positive price and mix effects are expected to compensate for higher input costs, mainly related to pulpwood. Price increases will be implemented for sack and kraft paper, containerboard and cartonboard. In Region North America, prices for graphic and specialty paper as well as input costs are expected to be stable. The price of market pulp is expected to have a positive impact.

Region Europe (Market development):

During the second quarter of 2024, the market conditions for the materials produced in Region Europe improved. Price increases were implemented for containerboard and for sack and kraft papers, and additional price increases for these product categories as well as for cartonboard were announced. For liquid packaging board, prices remained at the same level as in the previous quarter. Costs for wood raw material, chemicals and transports increased, while energy costs decreased.

The Above view has been extracted from Billerud’s Annual Report 23 and Q2 FY24 interim report. 
 

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