Holmen s interim report January June 2016

Transcription

1 Holmen s interim report January June Net sales Operating profit excl. items affecting comparability Operating profit Profit after tax excl. items affecting comparability Profit after tax Return on capital employed, %* Return on equity, % Earnings per share, SEK Cash flow before investments Debt/equity ratio * Excluding items affecting comparability, which are included in operating profit at SEK -232 million in the first quarter of 216 and SEK -931 million in the fourth quarter of 215. Operating profit excluding items affecting comparability for the first half-year of 216 increased by SEK 232 million to SEK 1 63 million as a result of higher profits in paper. Compared with the first quarter, operating profit for the second quarter decreased by SEK 97 million to SEK 483 million as a result of running in the rebuilt board machine, seasonally lower hydro power production and earnings from timber trading returning to normal levels. Profit after tax for January June amounted to SEK 587 million (62), which corresponds to earnings per share of SEK 7. (7.4). Excluding items affecting comparability, profit after tax amounted to SEK 815 million (62) and earnings per share to SEK 9.7 (7.4). Sale of the newsprint mill in Madrid was completed in the second quarter. The sale represents a decisive step towards concentrating the paper business into magazine paper and speciality products. The rebuilt board machine in Workington reached full capacity towards the end of the quarter, while a further stage in the expansion of pulp production at Iggesund Mill was completed. At mid-year, forest and hydro power accounted for two thirds of the Group s operating capital. excl. items affecting comparability % excl. items affecting comparability % Net sales Operating margin Operating profit Return on capital employed 1

2 Interim report January June 216 Forest Holmen performs active and sustainable forestry on over a million hectares of own land Net sales of which from own forests Operating costs Depreciation and amortisation according to plan Earnings from operations Change in value of forests Operating profit Investments, net Operating capital Return on operating capital, % Harvesting ow n forests, ' m The demand for logs and pulpwood in Sweden was normal in the second quarter. Selling prices were largely unchanged. Earnings from operations for January June amounted to SEK 355 million (355). Harvesting decreased from a high level, but the impact was offset by higher prices and lower costs. Operating profit, which includes a change in value of SEK 139 million, increased to SEK 494 million (46). Compared with the first quarter, earnings from operations for the second quarter decreased by SEK 55 million to SEK 15 million as a result of seasonally higher silviculture costs and the fact that earnings from timber trading returned to normal levels. Harvesting increased seasonally. Operating profit amounted to SEK 227 million (267). % 45 7, , ,5 1, Net sales own forests Return on operating capital Operating profit Earnings from operations 2

3 Interim report January June 216 Consumer board Holmen is a market leader in the highest quality segments for consumer packaging and board for advanced graphics printing Net sales Operating costs EBITDA Depreciation and amortisation according to plan Operating profit Investments Operating capital EBITDA margin, % Operating margin, % Return on operating capital, % Production, consumer board, ' tonnes Deliveries, consumer board, ' tonnes The market for consumer board was stable in the second quarter and prices were unchanged. In the first half-year, demand in Europe was unchanged compared with the same period last year. Holmen s consumer board deliveries amounted to 25 tonnes during January June, which was the same level as last year. In March, the board machine in Workington was rebuilt to increase capacity by 2 tonnes annually and to improve product quality. The start-up went well and full capacity was reached towards the end of the period. In the second quarter, the last stage of the expansion to increase pulp production at Iggesund Mill by 5 tonnes annually was completed. Operating profit for January June totalled SEK 436 million (411). Earnings were negatively affected by SEK 1 million as a result of the rebuilding shutdown at the mill in Workington. This was to a certain extent offset by the resolution of a water cost dispute, in Holmen s favour, which resulted in a refund of SEK 6 million. Earnings for the first half of last year were negatively affected by SEK 6 million as a result of a maintenance shutdown. Compared with the first quarter, profit for the second quarter decreased by SEK 36 million to SEK 2 million. Profit was negatively affected by SEK 4 million as a result of the running in of the rebuilt board machine. Earnings for the first quarter were negatively affected by SEK 6 million from the rebuilding, which was offset by the water charge refund. % % Net sales Operating margin Operating profit Return on operating capital 3

4 Interim report January June 216 Paper Holmen produces paper that utilises the properties of fresh fibre to provide cost-effective alternatives to traditional paper choices Net sales Operating costs EBITDA Depreciation and amortisation according to plan Operating profit* Investments Operating capital EBITDA margin, %* Operating margin, %* Return on operating capital, %* 9 7 neg 8 neg neg Production, ' tonnes Deliveries, ' tonnes * Excluding items affecting comparability Demand for printing paper in Europe fell by 3 per cent during January May compared with the same period in 215. Selling prices were largely unchanged in the second quarter. Holmen s deliveries in the first half-year amounted to 615 tonnes, which was 6 per cent lower than the same period last year as a result of production losses and rebuild of inventories following the fire at Hallsta in November 215. Production has been at full capacity since March. Operating profit for January June was SEK 131 million (-9), excluding items affecting comparability. The improvement was due to good production, a better product mix following the launch of the new Holmen UNIQ product and lower depreciation. The result in the preceding year was impacted by cost from rebuilding a paper machine. Production losses and additional costs resulting from the fire are covered by insurance. Compared with the first quarter, operating profit for the second quarter increased by SEK 16 million to SEK 73 million, excluding items affecting comparability. The improvement was due to lower depreciation as a result of the sale of the newsprint mill in Madrid. The sale was completed in the second quarter, when International Paper took over the facility. Holmen will sell the newsprint produced at the mill until the second half-year of 217, when the mill will be converted for containerboard production. During the third quarter, Braviken Paper Mill will have a maintenance shutdown, which is expected to negatively affect earnings by SEK 4 million. excl. items affecting comparability % excl. items affecting comparability Net sales EBITDA margin Operating profit EBITDA 4

5 Interim report January June 216 Wood products Holmen produces wood products for the joinery and construction industry at two large-scale sawmills that are integrated with the Group s paper and consumer board mills Net sales Operating costs EBITDA Depreciation and amortisation according to plan Operating profit Investments Operating capital EBITDA margin, % Operating margin, % Return on operating capital, % neg neg 3 neg 3 1 Production, ' m Deliveries, ' m Market conditions for wood products in Europe was stable in the second quarter. Minor price increases have been implemented following considerable decreases during 215. Holmen s deliveries of wood products amounted to 396 cubic metres, which was unchanged from the same period last year. Operating profit for January June was SEK -6 million (14). The decrease in earnings was due to lower selling prices, which were partly offset by lower raw material costs. Compared with the first quarter, earnings for the second quarter improved by SEK 4 million to SEK -1 million. During the quarter, a decision was taken to invest SEK 5 million in a wood treatment plant and distribution warehouse at Braviken Sawmill. The aim is to increase added value and boost sales in Sweden. excl. items affecting comparability % excl. items affecting comparability Net sales EBITDA margin Operating profit EBITDA 5

6 Interim report January June 216 Renewable energy Holmen produces renewable hydro and wind power Net sales Operating costs Depreciation and amortisation according to plan Operating profit Investments Operating capital Operating margin, % Return on operating capital, % Production hydro and w ind pow er, GWh Operating profit during January June amounted to SEK 78 million (123). The decrease is due to production declining to a normal level. Compared with the first quarter, operating profit for the second quarter decreased by SEK 41 million to SEK 19 million as a result of seasonally lower production. At the end of the quarter, the levels in Holmen s water storage reservoirs were lower than normal for the time of year. In June, a political agreement was reached concerning Sweden s future energy policy. The agreement proposes among other things that the property tax on hydro power should be gradually lowered such that by 22 it will be on the same level as for other electricity production. % Net sales Operating profit Return on operating capital 6

7 Interim report January June 216 Net financial items and financing Net financial items for January June amounted to SEK -43 million (-52). The cost of borrowing was 1.5 per cent (1.7). Cash flow from operating activities during January June totalled SEK 1 11 million. Cash flow from investment activities was, as a result of the sale of the newsprint mill in Madrid, positive at SEK 16 million net. Dividend of SEK 882 million was paid in the second quarter. In January June, the Group s net financial debt decreased by SEK 235 million to SEK million. On 3 June the debt/equity ratio was.22. Financial liabilities including pension provisions totalled SEK million, SEK million of which were current liabilities. Cash, cash equivalents and financial receivables totalled SEK 714 million. The Group has unused committed long-term credit facilities of SEK 3 77 million, of which SEK 27 million matures in 22 and SEK 3 5 million matures in 221. Standard & Poor s has revised the outlook for Holmen s credit rating from stable to positive. The long-term credit rating is BBB and the short-term A-2. Tax Recognised tax for January June amounted to SEK -22 (-159) million. Recognised tax as a proportion of profit before tax was 26 per cent (2), which was higher than normal as a result of the sale of the newsprint mill in Madrid. Equity The Group s equity decreased by SEK 525 million in January June to SEK million. Profit for the period totalled SEK 587 million and the dividend paid was SEK 882 million. In addition, other comprehensive income totalled SEK -23 million. Hedging exchange rates and electricity prices The Group hedges parts of future estimated net flows in foreign currencies. Operating profit for January June includes currency hedges of SEK 24 million (-56). The market value of currency hedges not yet recognised as income amounted to SEK -59 million at the end of the quarter. For the next two years, 8 per cent of expected flows in EUR/SEK are hedged at an average of For other currencies, 4-6 months of flows are hedged. Exchange rates differences made impact to second quarter earnings in the amount of SEK -3 million, compared to the first quarter. Changes in exchange rate are expected to affect third quarter earnings marginally. Investment and disposals Cash flow from investment activities in January June totalled SEK 16 million (-425), SEK -483 million from investments in non-current assets and SEK 498 million from disposal of assets. Depreciation and amortisation according to plan totalled SEK 521 (617) million. Personnel The average number of employees (full-time equivalents) in the Group was (3 25). Share buy-backs At the 216 AGM, the Board s authorisation to purchase up to 1 per cent of the company s shares was renewed. No buy-backs took place during the period. The company owns.9 per cent of all shares outstanding. Share saving programme The Annual General Meeting approved a proposal to introduce a long-term share saving programme aimed at Group and business area management teams. The participation has been good, and 43 individuals have acquired just over 24, shares within the scope of the programme. The Company s undertaking to provide shares to those participating in the share saving programme, which is estimated at no more than 1, shares, will be effected via transfers of the Company s holding of own shares. Material risks and uncertainties The Group and the parent company s material risks and uncertainties relate primarily to changes in demand and the prices of its products, the cost of key input goods, and changes in exchange rates. For a more detailed description of material risks and uncertainties see Holmen s annual report for 215, pages and note 26. Transactions with related parties There were no transactions between Holmen and related parties that had a significant effect on the Company s financial position and performance. Accounting policies This report has been prepared in accordance with the Swedish Annual Accounts Act and Securities Market Act, and, for the Group, in accordance with IAS 34 Interim Financial Reporting. The parent company and the Group s accounting policies are unchanged from the latest published annual report. The figures in tables are rounded off. Information in accordance with IAS 34:16A has been submitted in the financial statements and in other parts of this interim report. Prices for the Group s estimated net consumption of electricity in Sweden are 8 9 per cent hedged for , 7 per cent hedged for and 4 per cent hedged for

8 Interim report January June 216 The Board of Directors and the Chief Executive Officer hereby confirm that this interim report provides a true and fair view of the parent company s and Group s operations, position and performance, and describes material risks and uncertainties which affects the parent company and Group companies. Stockholm, 17 August 216 Holmen AB (publ) Fredrik Lundberg Lars G Josefsson Carl Kempe Chairman Board member Deputy Chairman Carl Bennet Lars Josefsson Henrik Sjölund Board member Board member Board member and Chief Executive Officer Steewe Björklundh Louise Lindh Henriette Zeuchner Board member Board member Board member Kenneth Johansson Ulf Lundahl Tommy Åsenbrygg Board member Board member Board member The report has not been reviewed by the company s auditors. For further information please contact: Henrik Sjölund, President and CEO, tel Anders Jernhall, EVP and CFO, tel Ingela Carlsson, Communications Director, tel

9 Interim report January June 216 Group Income statement, Net sales Other operating income Change in inventories Raw materials and consumables Personnel costs Other operating costs Depreciation and amortisation according to plan Impairment losses Change in value of biological assets Profit from investments in associates and joint ventures Operating profit Finance income Finance costs Profit before tax Tax Profit for the period Earnings per share, SEK Operating margin, % * Return on capital employed, % * Return on equity, % * Excl. items affecting comparability. Statement of comprehensive income, Profit for the period Other comprehensive income Revaluations of defined benefit pension plans Tax attributable to items that w ill not be reclassifed to profit for the period Items that will not be reclassifed to profit for the period Cash flow hedging Translation difference on foreign operation Hedging of currency risk in foreign operation Tax attributable to items that w ill be reclassifed to profit for the period Items that will be reclassifed to profit for the period Total other comprehensive income after tax Total comprehensive income Change in equity, January-June Opening equity Profit for the period Other comprehensive income Total comprehensive income Dividends paid Closing equity Share structure Votes No. of shares No. of votes Quota value A-share B-share Total number of shares Holding of ow n B-shares bought back Total number of shares in issue

10 Interim report January June 216 Group Balance sheet, June 31 March 31 December Non-current assets Intangible non-current assets Property, plant and equipment Biological assets Investments in associates and joint ventures Other shares and participating interests Non-current financial receivables Deferred tax assets Total non-current assets Current assets Inventories Trade receivables Current tax receivable Other operating receivables Current financial receivables Cash and cash equivalents Asset held for sale Total current assets Total assets Equity Non-current liabilities Non-current financial liabilities Pension provisions Other provisions Deferred tax liabilities Total non-current liabilities Current liabilities Current financial liabilities Trade payables Current tax liability Provisions Other operating liabilities Liabilities attributable to assets held for sale Total current liabilities Total liabilities Total equity and liabilities Debt/equity ratio, times Equity/assets ratio, % Operating capital Capital employed Net financial debt Pledged collateral Contingent liabilities Carrying amount Fair value Financial instruments, June 31 December 3 June 31 December Assets at fair value Assets at acquisition cost Liabilities at fair value Liabilities at acquisition cost Holmen measures financial instruments at fair value or acquisition cost in the balance sheet depending on classification. In addition to items in net financia debt, with the exception of the pension liability, financial instruments cover trade receivables and trade payables. Financial instruments measured at fair va in the balance sheet belong to measurement level 2 pursuant to IFRS 7. All of the Group's derivatives are covered by ISDA or FEMA agreements, which entails a right to offset assets and liabilities in relation to the same counterparty in the case of a credit event. Assets and liablities are not offset in the report. Recognised derivatives totalled SEK 49 million on the asset side and SEK 391 million on the liabilities side. 1

11 Interim report January June 216 Group Cash flow statement, Operating activities Profit before tax Adjustments for non-cash items * Paid income taxes Cash flow from operating activities before changes in working capital Cash flow from changes in working capital Change in inventories Change in trade receivables and other operating receivables Change in trade payables and other operating liabilities Cash flow from operating activities Investing activities Acquisition of non-current assets Disposal of non-current assets Change in non-current financial receivables Cash flow from investing activities Financing activities Change in financial liabilities and current financial receivables Dividends paid to the shareholders of the parent company Cash flow from financing activities Cash flow for the period Opening cash and cash equivalents Exchange difference in cash and cash equivalents Closing cash and cash equivalents Change in net financial debt, Opening net financial debt Cash flow from operating activities Cash flow from investing activities (excl financial receivables) Dividends paid Revaluations of defined benefit pension plans Foreign exchange effects and changes in fair value Closing net financial debt * The adjustments consist primarily of depreciation according to plan, impairment losses, change in value of biological assets, change in provisions, interests in earnings of associated companies, currency effects and revaluations of financial instruments as well as capital gains/losses on sale of fixed assets. 11

12 Interim report January June 216 Parent company Income statement, Operating income Operating costs Operating profit Net financial items Profit after net financial items Appropriations Profit before tax Tax Profit for the period Statement of comprehensive income, Profit for the period Other comprehensive income Cash flow hedging Tax attributable to other comprehensive income Items that will be reclassifed to profit for the period Total comprehensive income Balance sheet, June 31 March 31 December Non-current assets Current assets Total assets Restricted equity Non-restricted equity Untaxed reserves Provisions Liabilities Total equity and liabilities Sales to Group companies accounted for SEK 43 million (55) of operating income in January June. Net financial items include SEK 7 million (-1) result from hedging equity in foreign subsidiaries and SEK -33 million () impairment loss on shares in subsidiaries. Balance sheet appropriations include group contributions of SEK 2 million (13). The parent company s investments in property, plant and equipment and intangible non-current assets totalled SEK 22 (7) million. 12

13 Interim report January June 216 Group ly figures, Q2 Q1 Q4 Q3 Q2 Q Income statement Net sales Operating costs Profit from investments in associates and joint ventures Depreciation and amortisation according to plan Change in value of forests Operating profit excl. items affecting comparability Items affecting comparability* Operating profit Net financial items Profit before tax Tax Profit for the period Earnings per share, SEK Net sales Forest Consumer board Paper Wood products Renew able energy Elimination of intra-group net sales Group Operating profit/loss by business area** Forest Consumer board Paper Wood products Renew able energy Group-w ide Group Operating margin, % ** Consumer board Paper Wood products Group EBITDA by business area** Forest Consumer board Paper Wood products Renew able energy Group-w ide Group Return on operating capital, % ** Forest Consumer board Paper neg neg 7.9 neg neg Wood products neg neg 2.4 neg neg Renew able energy Group Key indicators Return on capital employed, % ** Return on equity, % Deliveries Harvesting ow n forests, ' m³ Paperboard, ' tonnes Printing paper, ' tonnes Saw n timber, ' m³ Ow n production of hydro and w ind pow er, GWh * Items affecting comparability in operating profit in Q1 216 refers to impairment losses on non-current assets, provisions for costs and the effects of a fire. ** Excl. items affecting comparability. 13

14 Interim report January June 216 Group Full year review, Income statement Net sales Operating costs Profit from investments in associates and joint ventures Depreciation and amortisation according to plan Change in value of forests Operating profit excl. items affecting comparability Items affecting comparability Operating profit Net financial items Profit before tax Tax Profit for the year Diluted earnings per share, SEK Operating profit by business area* Forest Consumer board Paper Wood products Renew able energy Group-w ide Group EBITDA by business area* Forest Consumer board Paper Wood products Renew able energy Group-w ide Group Deliveries Harvesting ow n forests, ' m³ Paperboard, ' tonnes Printing paper, ' tonnes Saw n timber, ' m³ Ow n production of hydro and w ind pow er, GWh Balance sheet Non-current assets Current assets Financial receivables Total assets Equity Deferred tax liability Financial liabilities and interest-bearing provisions Operating liabilities Total equity and liabilities Cash flow Operating activities Investing activities Cash flow after investments Key indicators Return on capital employed, % * Return on equity, % Return on equity, % * Debt/equity ratio Dividend Dividend, SEK * Excl. items affecting comparability 14

15 Interim report January June 216 Use of performance measures Holmen uses performance measures to supplement measures defined by IFRS or directly in the income statement and balance sheet in order to clarify the company s financial position and performance. Operating profit, EBITDA, earnings from operations and items affecting comparability Operating profit is the principal measure of results that is used to monitor financial performance. It includes all income and costs, as well as depreciation/amortisation of non-current assets. EBITDA is used as a supplementary measure to illustrate the cash flow that a business area generates before investments and changes in working capital, excluding items affecting comparability. For the Forest business area, the measure earnings from operations is used, which summarises operating profit/loss excluding change in fair value of biological assets. To clarify how the earnings measures are affected by material matters, such as impairments, disposals and restructuring, the term items affecting comparability is used. The purpose is also to increase comparison between different periods EBITDA Depreciation and amortisation according to plan Change in value of forests Operating profit excl. items affecting comp Items affecting comparability Operating profit Earnings from operations of forest Change in value of forests Operating profit of forest Earnings for the first quarter of 216 were negatively impacted by SEK 232 million from the sale of the mill in Madrid, and insurance compensation for reconstruction following a fire at Hallsta Paper Mill, which were treated as items affecting comparability. Operating margin and EBITDA margin Operating profit, excluding items affecting comparability, as a proportion of sales is known as the operating margin. Profit before depreciation/amortisation as a proportion of sales is known as the EBITDA margin. Return on operating capital and return on capital employed For the Group, the key figure return on capital employed is used to measure the operating profit, excluding items affecting comparability, as a proportion of capital employed. Capital employed is calculated as net financial debt plus equity. For the business areas, the key figure return on operating capital is used to measure the operating profit, excluding items affecting comparability, as a proportion of capital employed. Operating capital is calculated as capital employed plus the net sum of deferred tax liability and deferred tax assets, which corresponds to noncurrent assets plus working capital June 31 March 31 December Equity Net financial debt Capital employed Deferred tax assets Deferred tax liabilities Operating capital

16 Interim report January June 216 Net financial debt, debt/equity ratio and equity/assets ratio Net financial debt consists of the following components: June 31 March 31 December Non-current financial liabilities Current financial liabilities Pension provisions Non-current financial receivables Current financial receivables Cash and cash equivalents Net financial debt The debt/equity ratio is calculated as net financial debt divided by equity. The equity/assets ratio is calculated as equity divided by total assets. 16

17 Interim report January June 216 Holmen in brief Holmen s strategy is to own forest and energy assets and to develop industrial operations in paperboard, printing paper and sawn timber. The substantial forest and energy assets shall deliver stable revenue that grows over time. Large-scale industrial operations at efficient facilities shall provide good profitability through the refining of forest raw material into high-performance consumer paperboard, cost-effective printing paper and sawn timber for the joinery and construction industries. Press and analyst conference Following publication of the year-end report, a press and analyst conference will be held at 14.3 CET on Wednesday, 17 August. Venue: Tändstickspalatset, Kreugersalen. Västra Trädgårdsgatan 15, Stockholm. Holmen President and CEO Henrik Sjölund will present and comment on the report. The presentation will be held in English. The conference is also directly available as a webcast on Holmen s website, You may also participate in the conference by telephone, by calling +46 () (within Sweden), +44 () (from the rest of Europe) or (from the US) no later than CET. Financial reports 26 October 216 Interim report January September February 217 Year-end report May 217 Interim report January March August 217 Interim report January June 217 This is information that Holmen AB is obliged to disclose under the Swedish Securities Market Act and the Swedish Financial Instruments Trading Act. The information was submitted for publication on 17 August 216 at 12.2 CET. This is a translation of the Swedish interim report of Holmen Aktiebolag (publ.). In the event of inconsistency between the English and the Swedish versions, the Swedish version shall prevail. 17