Earnings call transcript: BillerudKorsnas Q1 2025 sees strong sales growth

BillerudKorsnas AB reported robust financial performance for the first quarter of 2025, driven by a 7% increase in total sales year-over-year and a 19% rise in EBITDA. The Swedish packaging company, which InvestingPro data shows maintains an impressive 85% gross profit margin, demonstrated resilience with its stock price rising by 2.38% to 103.2 in pre-market trading. As a prominent player in the Containers & Packaging industry with a "GOOD" Financial Health Score of 2.8, the company continues to focus on strategic investments and innovation in packaging materials, as highlighted in its recent earnings call.

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Key Takeaways

• Total sales increased by 7% year-over-year.
• EBITDA rose by 19%, with a margin improvement of 2 percentage points.
• The stock price increased by 2.38% in pre-market trading.
• Strategic investment in packaging materials transformation continues.
• Maintenance shutdown in Q2 expected to impact costs.

Company Performance

BillerudKorsnas demonstrated a solid start to 2025, with significant improvements in financial metrics compared to the previous year. The company’s focus on pricing strategies helped offset increased input costs, contributing to improved profitability. The return on capital employed rose to 7% from 1% last year, indicating efficient use of resources. The company is targeting a cash conversion rate of 80% for the full year, up from 41% in Q1.

Financial Highlights

• Revenue: Increased by 7% year-over-year.
• EBITDA: Increased by 19% with a 2 percentage point margin improvement.
• Return on Capital Employed: Increased to 7% from 1% last year.
• Cash Conversion: Improved to 41% for Q1.

Market Reaction

The company’s stock price rose by 2.38% in pre-market trading, reflecting investor confidence in its strategic direction and financial performance. According to InvestingPro analysis, the stock generally trades with low price volatility, with analysts setting a high target of $120. The stock appears undervalued based on InvestingPro’s Fair Value analysis. The positive reaction suggests that investors are optimistic about the company’s ability to navigate current market challenges, supported by its 16-year track record of consistent dividend payments.

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Outlook & Guidance

BillerudKorsnas expects stable conditions in Q2, with anticipated price increases of 1% in both European and North American markets. However, the company remains cautious due to increasing economic uncertainty and potential long-term impacts of trade tariffs. The company is also planning a $3.5 billion capital investment for 2025, with one-third allocated to strategic investments.

Executive Commentary

CEO Ilva Vatne emphasized the importance of the company’s strategic direction, stating, "2025 is the first year of our way forward strategy." She also highlighted the company’s focus on cash generation as a critical target, adding, "Our cash generation is a very important target." Meanwhile, Vatne assured investors of the company’s proactive approach, saying, "We will monitor the situation and adjust if needed and continue to focus on items we can control."

Risks and Challenges

• Maintenance Shutdown: A planned shutdown in Q2 is expected to cost approximately $380 million.
• Wage Increases: Full impact of annual wage increases expected in Q2 could increase costs by 60-80 million.
• Economic Uncertainty: Potential long-term impacts of trade tariffs and economic conditions could affect performance.
• Market Demand: Lukewarm demand conditions and weakness in the carton board segment, particularly in luxury consumer channels, pose challenges.

Q&A

During the earnings call, analysts raised questions about potential tariff implications and the company’s pricing strategies across different product segments. Concerns about volume declines in Europe were addressed, along with clarifications on FX hedging and exposure strategies. The management’s responses highlighted their proactive approach to managing these challenges.

Full transcript - BillerudKorsnas AB (BILL) Q1 2025:

Conference Operator: Good day and thank you for standing by. Welcome to the Billiard Q1 Report twenty twenty five Webcast and Conference Call. At this time, all participants are in a listen only mode. After the speakers’ presentation, there’ll be a question and answer session. Please be advised that today’s conference is being recorded.

I would now like to hand the conference over to your first speaker today, Lena Schatauer, Head of Investor Relations. Please go ahead.

Lena Schatauer, Head of Investor Relations, Billiard: Thank you. Hello and welcome to Billard’s Q1 twenty twenty five presentation and thanks for joining us this morning. Billerica’s President and CEO, Ilva Vatne, and our CFO, Andre Kriess, will hold the presentation. And after that, they will take questions from the conference call. So by that, I would like to hand over to you, Ilva.

Please go ahead.

Ilva Vatne, President and CEO, Billiard: Thank you, Lena, and good morning, everyone. And thanks for listening in this Tuesday. I’m excited to present our Q1 results, which we think represent an encouraging start of 2025 for BIRD. And we certainly have plenty of results we feel good about. So let’s get into it, please, and next slide.

2025 is the first year of our way forward strategy. Hence, I’m excited to see so many of our outspoken priorities already going into the right direction. Recorded net sales growth 7% versus a year ago, with positive growth figures coming from both region and almost all categories. We make a significant profitability improvement, EBITDA up 19% and EBITDA up 42% versus a year ago, with a margin uplift of two percentage points. Region North America continues to impress us and come in yet again with a very strong quarter.

And 21% EBITDA, 15% sales growth, is rock solid. But I also want to highlight Region Europe, which also comes in with a clearly improved profitability with 15% EBITDA margin, and that is four percentage points up versus year ago. Our cash conversion and cash generation is greatly improved since comparable period last year, and that is yet again what is highly important for us. We reached a milestone also in Q1 when we sold our first batch of locally produced containerboard in The US and more on that later. Next slide, please.

Now to get a proper read of the market and that can be a handful these days, but at least for Q1, the sentiment was pretty much what we had expected with normal or normalized conditions for most categories and channel. So not strong, not weak, it’s somewhere right in the middle. Okay ish demand and some upward pricing moves towards the end of the quarter. First and foremost in containerboard, sack and graphic paper. The only exception to call out is carton board and the consumer luxury channel that is still performing weaker with slower demand and quite a lot available capacity.

Now going into next quarter in Q2, we would expect more or less unchanged conditions from what we’ve seen so far in 2025. And we do have solid order books for most of our categories until the summer. Now I want to highlight that this is short term guidance for Q2 and not a reflection for the full 2025. Next slide, please. So over to the topic that seems to be on everyone’s lips these days, tariffs and implications.

And I would start with probably the same narrative that most companies refer to, that if the situation is to stay long term, right now it’s too early to assess any financial impact with credibility. Now having said that, Bill Root is well positioned and probably one of the better players within our industry. And looking at the direct impact and starting with a region North America, we have available production capacity at our US mills ready to serve both current and new customers. We are placed in attractive Midwest region with close proximity to wide range of customers and can offer both high service levels and a reliable and predictable supply chain. And that is of key importance, not least since 25% of the category is imported in our competing paper grades.

And for Europe, we only export around 2% of our total volume to North America. So our exposure is clearly limited. Now, the much more difficult question to answer is any potential indirect implications when you see changed trade flows for the full industry leading to a new competitive landscape. And it’s too early to say anything, but there will quite likely be both opportunities and challenges coming to the surface if the situation will prevail over a longer period of time. We will monitor the situation and adjust if needed and continue to focus on items we can control.

So with that, I hand it over to Andre.

Andre Kriess, CFO, Billiard: Thank you, Ivar. And we can take next slide, please. Good morning, everyone. So our total sales growth of 7% was supported by price increases in our Europe region and volume growth in the North American region. For Europe, year over year, the volumes were down with 6%, while the pricing had actually a positive impact of 9%.

And despite strengthening of Swedish krona during quarter one, the year over year FX impact on net sales was minimal. In North America, we had an excellent volume growth of 14% and largely unchanged pricing versus year ago. Next slide, please. Summarizing our profitability, it was on a solid level in the first quarter, and I’m particularly pleased with the profitability uplift coming from both regions. Our EBITDA margin improved with two percentage points versus last year and was in line with our Q4 performance.

Pricing was the main driver behind the uplift and more than offset total input cost increase. The input cost increase was primarily driven by the pulpwood costs in The Nordics. And strengthening of the Swedish krona during the first quarter of twenty twenty five was a headwind. Revaluation of our receivables and payables balances had a negative impact of approximately $160,000,000 in the first quarter. And as a reminder, the major impact was from revaluation of the payables and receivables balance, which is a one off in nature now in the first quarter, and we do not expect the same impact heading into the second quarter.

Now the positive other bucket is primarily favorable year over year effect from inventory revaluation. There was no major impact in the first quarter this year, but we had negative impact last year. And now let’s move over to the regions. Next slide, please. Top region Europe had a broad based sales growth across all categories except liquid packaging board.

Quarter one last year was a record high volume quarter for liquid packaging board, but with this year saw somewhat slower start to the year. Demand for liquid packaging board in Europe is a normal level, but exports to Asia are somewhat slower as expected. Pricing has been the key driver for profitability uplift for the region, and we will see impact from earlier announced price increases for containerboard and second kraft segments starting from the second quarter this year. So in summary, strengthened performance for the region in the first quarter, in line with the region’s key objective to strengthen financial performance from existing asset base. And heading into the second quarter, we expect overall positive pricing impact of approximately 1% and volumes in line with the first quarter.

Quarter ’2 will be the heaviest maintenance shutdown quarter for the region and we expect total cost impact of approximately $380,000,000 compared to the $40,000,000 we had now in the first quarter. And now let’s move over to region North America. Next slide, please. As I mentioned, we had an excellent volume growth with volumes up 14% versus last year. And with that, also the highest sales volume in the quarter in more than two years.

The volume improvement moved also our operating rates to 74% for the quarter. EBITDA margin for the region improved significantly versus last year, entirely related to volume uplift and improved operating grades. The price increases we announced in the first quarter on coated freesheet reels will be materialized and we expect a positive pricing impact of around 1% for the region into the second quarter. At this point, we expect flat volumes and operating rates for the region in the second quarter. Next slide, please.

Now we have an overall strategic objective for our region North America to evolve towards packaging materials. And in that regard, we reached an important milestone on that journey with first commercial sale of coated liner from our Quinosec mill. We are now active with several trials with our existing and also new customers and expect to ramp up commercial volumes in the remainder of this year. Another part of this project is, of course, the capital investment program of 1,400,000,000.0, and that is progressing according to plan. In ’25, the major investment will be made in upgrade of wood yard at the Escanaba mill and also upgrade of the winders.

These investments will enable large scale production of paperboard at both of our mills in North America. So very good progress, both from commercial and investment perspective. And we will, of course, provide more updates on this journey as we go along. Next slide, please. A couple of words on cost development.

And this slide illustrates the input cost movements in the first quarter for our both regions. So seasonally higher energy costs in both regions and also pulpwood prices in Nordics were the headwinds, while all other input costs were flat to slightly down. And overall input costs were flat sequentially, with Europe being up by about $20,000,000 but that was offset by corresponding decrease in North America. Heading into the second quarter, we expect input cost tailwinds in the region of $30,000,000 with majority of it being in Europe and driven by lower energy prices. And I would also like to comment on the pulpwood cost situation in Nordics.

We are continuing to have all time high pulpwood costs, but expect no changes in costs into the second quarter. Our view currently is that we now have much more balanced pulpwood market, which should support short term price stability. On the fixed costs into the second quarter, firstly, we will have a full impact of annual wage increases, which means sequentially, our employee benefit costs will go up with approximately 60 to 80,000,000 into the second quarter. And also, we have a heavy maintenance schedule with a cost impact of around $380,000,000 in the second quarter. Next slide, please.

A couple of points on our cash flow. We had an expected working capital buildup in the quarter and change in working capital was also in line with what we saw the last year. With that said, we did improve our cash conversion to 41% for the quarter, and we target 80% cash conversion for the year, in line with our updated financial targets. And I’m also pleased with significant improvement in return on capital employed, with now return on capital employed being at 7% versus 1% last year, moving towards our target of above 11% over a business cycle. We maintain our solid balance sheet position with healthy leverage level, and we look to invest 3,500,000,000.0 in our operations this year, where approximately one third will be targeted towards strategic investments primarily in North America.

And now I would like to hand it back to you, Ivar.

Ilva Vatne, President and CEO, Billiard: Thank you, Andre. So to round it up, uncertainty has increased since the beginning of the year, but we do enter Q2 with pretty stable market conditions for both regions. It is too early to assess any financial impact of tariffs if they will prevail long term, but we are well positioned with our industry with local production in The US with available capacity and only marginal export exposure from our Nordic mills into North America. And we do expect higher sales prices for the quarter with lower input costs. And as we tend to have, there is planned an extensive maintenance quarter in Q2, first and foremost here in Region Europe.

So with that, I hand it back to operator for Q and A.

Conference Operator: Thank you. We will now go to your first question. And your first question comes from the line of James Perry from Citi. Please go ahead.

James Perry, Analyst, Citi: Morning. For the presentation. I’d just like to ask a couple about North America and Europe. So in North America, you mentioned the higher sales volumes in all the products and the strong margin. I know it’s difficult to determine, but do you have any sense as to where the customers could have been bringing forward the orders as we’ve heard from some other players?

Or are you seeing the good demand sustain into Q2 and the rest of 2025? And then in Europe, you said you expect normal conditions except for carton board and coated liner. What do you think it is about those products that’s leading to the relative weakness? And what do you think we should be looking for in order to see carton board picking up? Thanks.

Ilva Vatne, President and CEO, Billiard: Yeah, hi, good morning, James. I think on the first part around North America, it’s a good question. And I have to be boring in the sense of trying to be too clever of estimating kind of long term second half of ’twenty five into ’twenty six. It’s just not very feasible at this stage. I can confirm as Andrea also went through that Q2 looks solid, order books are good and we have no real signs of any inventory buildup or problems per se on the customer side to not be able to pass that through.

But I mean, uncertainty has increased. Consumer sentiment in US, Craig has taken a drop. But the key figures still are pretty good. So order books tend to be at least for the coming months in a good place and that should enable us to deliver a strong Q2. But beyond that is very, very difficult to say anything certain.

I think for Europe, and in particular if you go into carton board and consumer luxury, think it’s a bit of probably our view coming from Bilderid maybe more than what you will hear from some of the other players. We have a pretty large exposure into the premium side of carton board. Clearly that is categories. If you think about that as a fine fragrance or chocolate or champagne, etcetera, that tend to be more sensitive to consumer uncertainty. And I think that has still been a little bit of a wet cloth over the whole category and channel going into ’25.

I think if you couple that as well, there is quite a bit of available capacity out there in that field. It’s just pointing towards that channel is still being a bit more difficult. It’s not really bad, but it’s certainly not the more normal side as we have labeled the other categories.

James Perry, Analyst, Citi: That’s helpful. Thank you.

Conference Operator: Thank you. Your next question comes from the line of Robin Santavirta from Carnegie. Please go ahead.

Robin Santavirta, Analyst, Carnegie: Yes, good morning. I was wondering if you could detail what price increases you have made in North America when it comes to your paper grades and when it comes to pulp?

Andre Kriess, CFO, Billiard: Yes. Good morning, Robin. So in terms of the price increases in North America, these were announced during the first quarter in the beginning of the quarter and it was up to 5% on the coated freesheet reels, which is approximately 60% of our graphical sales in North America. And we are implementing those price increases starting from quarter two up to 5%. In terms of pulp, we announced $80 per tonne price increase.

They are to a large extent following the index and we will have some pricing impact now heading into the second quarter.

Lars Kjellberg, Analyst, Stifel: Thanks. Can you just I know it’s a bit

Robin Santavirta, Analyst, Carnegie: of a speculation, but with the tariffs on imports, what are you hearing and seeing in the markets related to what the importers will do or what the exporters will do with their prices? And could that open up an opportunity to more price increases? Or could you just sort of give some color on those dynamics and what you see at the moment?

Ilva Vatne, President and CEO, Billiard: Yeah. Hi, good morning, Robin. I can take that one. The question is good. And I can say that probably we see all colors of the palette in terms of behavior at the moment.

That means that we see examples of, exporters for the time being absorbing this tariff fully versus others, passing it fully on and also other players choosing to go somewhere right in the middle. So I think it’s not really a full theme that you see. I think it also depends a bit on the category and the competitive landscape. I think our view is that this will stay long term. It’s difficult to absorb it fully.

And I think there is certainly some speculation going in the industry players that they are thinking, hoping, probably combination, but this is still some kind of a short term play and it might go out and they don’t want to go overboard too fast. But again, this is where it starts to get more into speculation. It is not unreasonable to think that this could potentially open up for pricing opportunities if tariffs just staying at this level or they are increased long term. But again, right now, think that’s just more speculation than anything else tangible.

Robin Santavirta, Analyst, Carnegie: All right, thanks. And two quick technicals, inventory revaluation Q2, Q1, Q1, what do you see? And also just to clarify with regards to FX rates, what is the Q on Q earnings impact in Q2 that you see at the moment, including the receivables revaluation?

Andre Kriess, CFO, Billiard: Yes, I can take those, Robin. In terms of inventory revaluation, really no drama. I mean, have previously talked about normal variation there of zero to 50,000,000, both on positive and negative 50,000,000. In quarter one this year, it was positive 20,000,000, so really no drama. But we had slightly higher inventory revaluation impact last year.

So that’s why we had positive deviation year over year. In terms of FX and the impact heading into the second quarter. Now, first of all, we, as you know, hedge our FX exposure and we have approximately 80% of our euro exposure hedged for the coming fifteen months and closer to 70% of U. S. Dollar exposure.

Now, in the first quarter, the revaluation of our accounts receivables and accounts balances, payables balances had a biggest impact and that is determined by the FX rates on the last day of the quarter. So if we look at end of the first quarter FX rates and assume that those rates prevail for the second quarter, we would have a positive impact of plus 200,000,000 within other by not having the same hit on accounts receivables revaluation, but we would have a negative impact from transactions within Europe region of 100,000,000. So net, a positive impact of hundred million heading into the second quarter. Again, this will be dependent on the rates ending up at the end of the quarter. So this is an early indication for the Q2 impact now.

Robin Santavirta, Analyst, Carnegie: Thank you very much.

Conference Operator: Thank you. Your next question comes from the line of Linus Larsson from SEB. Please go ahead.

Linus Larsson, Analyst, SEB: Thank you, and good morning, gents. I’d like to continue on North America, if I may. And you have been commenting on the price increases in the coated fine reels business. Could you just focus through what’s going on with coated fine in sheets and the specialties business? What are the dynamics?

Why aren’t we seeing some similar price moves there? So that would be my first question, please.

Ilva Vatne, President and CEO, Billiard: Yeah, hi, good morning, Linus. I can take that one. I think the simple answer on the first one is on the on the parts of the graphic paper. You do have the coated freesheet sheets, as you mentioned, you also have the ground wood. But again, those are smaller comparison to the freesheet walls.

And that part of the business is certainly slower. It’s also exposed to pretty heavy competition. So it’s simply our view that categories which is much more challenging to take pricing in the same manner. I think on specialty, the situation is a little bit different. I mean, specialty is going well.

As you know, it’s first and foremost our label business. I mean, we are fully sold out on the E3 machine then in Escanaba that we produce that on. Margins are still pretty good. There is also pretty intense competition pressure. There has been pricing moves also there for the last couple of years.

So right now our view is that that market is still all right. It certainly is something we continue to evaluate, but right now there’s no immediate plans to also do pricing on the specialty.

Linus Larsson, Analyst, SEB: Okay. And if compare, say, the import share in these various categories, how do they differ roughly?

Ilva Vatne, President and CEO, Billiard: Yeah, I can give you a bit more directional figure. It’s around 25% on graphic paper, which we see is coming from import. And that is a bit of a diverse market. Where is it coming from? Quite a big piece is coming from Asia, but not the usual suspect.

This is actually Korea is a pretty big market. And it’s also coming quite a bit in from Europe, Germany and Italy in particular, also Finland. I think our specialty is a bit higher. It’s more in the 30%, thirty five % range of import share and that we have mainly coming in from Finland. That’s the big piece of import source on specialty.

Linus Larsson, Analyst, SEB: Great. That’s super helpful. And then just also North America on volumes, you had a pretty decent operating rate comparing history, at least in the quarter. Do you expect that to increase going into the second quarter? And if you have any thoughts beyond the second quarter as well?

And as part of that question, what type of contribution or what’s the pace of ramp up in containerboard? Is that in any way meaningful for the remainder of the year? But maybe start with Q2 and then if you like some additional comment on the second half, please.

Andre Kriess, CFO, Billiard: Yeah, I can take this, Linus, and good morning. So in terms of the volumes for our North American region, as Ivar was mentioning earlier, really difficult to assess anything beyond quarter two. Right now, we are looking into the second quarter and flat volumes compared to quarter one. This is the best estimate we have now based on continued solid order books in the region. In terms of the containerboard ramp up, as I mentioned, we have made the first commercial sale and are now in several trials.

The uncertainty surrounding tariffs is certainly increasing interest in locally produced containerboard, But we will just need to do the trials, ourselves with North American production within those segments and ramp up those volumes for remainder of the year. Anything to add, Juvekar?

Ilva Vatne, President and CEO, Billiard: No, I can just add quickly. I think, yeah, it’s not going to be very meaningful volume now in the beginning. It’s maybe not unreasonable to say that 15,000 ton for the full year might be a bit of a stretch goal that we put out for ourselves and most of that coming into second half of the year. The margin line also for this, it should be solid, but it’s not unreasonable to think that it will a little bit lower than the average that you see for the total region, given that also that this period includes quite a lot of trial and errors and also relook of trying to get the qualification through. But, we will come back to this with a decent interval stop date on the progress and how we are doing.

Linus Larsson, Analyst, SEB: That’s great. Super helpful. Thank you.

Conference Operator: Thank you. Your next question comes from the line of Cole Harthorn from Jefferies. Please go ahead.

Cole Harthorn, Analyst, Jefferies: Good morning. Thanks for taking my question. I just like your thoughts on European packaging market by area. I’m just wondering if you’re seeing any kind of restock or ordering from customers because we’re seeing quite a big divergence between U. S.

And European markets. I mean, the box data was something like down five in The U. S. And it’s been pretty robust in Europe. So I’m just wondering what you’re seeing across, your containerboard segment, what you’re seeing across Sac and Croft and any thoughts around customers kind of restocking or kind of any inventory effects impacting what is a decent Q1?

Ilva Vatne, President and CEO, Billiard: Hi, good morning, Cole. Again, another good question. And I think in general, we’re not picking up any big worries or tangible items around inventory being built up. But again, I’m continuing to kick in the most open door in the world that uncertainty has certainly increased. Consumer confidence is probably a bit more troublesome and yeah, situation is certainly worried and what it might even then start impacting on consumer demand.

It’s just very difficult to say at the moment. But if I do a quick round the table, if you may for category of what we’re seeing right now, mean containerboard. Yeah, demand is what I referred to a bit earlier as lukewarm right in the middle between strong and weak. And you probably expect that going into Q2. We have pretty specific niches also within our containerboard proposition, particularly on fluting and that is performing well.

We are moving up on pricing. Think also Andre touched on that on fluting on coated lighter. But in general situation is pretty okay. Uncoated liner still for us is doing relatively well. Coated liner is in that container board time is still a little bit the black sheep.

It was weak going into the year and it’s still relatively weak. That’s also partly because a chunk of our coated liner is exported into US and surely that is now more troublesome with everything happened also on the tariffs. Carton board, I still come back to that is a bit weak and that’s our part of it. We’re also a relatively high exposure to the more premium side of carton. Europe is doing all the right.

So maybe smaller steps that we could see improvement, but right now it’s still on a relatively low level. We are taking some new business opportunities specifically within the kraft side of carton board. But also here we do export some of it into The US and say the situation there now is much tougher. Might create opportunities in Europe if there will be counter tariffs on import from US. There is quite a lot of both virgin and recycled cart more coming into Europe.

But at the moment we don’t see any big impact either of counter tariffs or any implications there. On our kind of kraft paper and SAC family, still solid. We had a good quarter in Q1. We would expect also relatively stable conditions going into Q2. Yes, some risk with tariffs, but for us, at least it should not be too bad.

We’re pricing up the white sack and kraft paper now we’re getting impact from Q2. The pretty normalized conditions on demand in our geographical side on paper. I mean, Europe, not necessarily doing too well. It’s quite a bit exposure there on some of our cement bags and construction is certainly now a bit more back to this wait and see mode. Latin American, Southern Europe for us is doing better.

And in general food for us within paper, that will be dry food and any deliveries to food service actually doing quite okay. Same for medical, good, it’s a smaller segment for us, but they’re growing and good conditions. It is resilient channel. E comm also pretty solid. And, know, SACS in general, still with what I talked about this turmoil around the construction it’s actually performing pretty okay.

So again, all in all, mostly stable, but slightly different temperature based on the category that at least we have exposure to.

Cole Harthorn, Analyst, Jefferies: That’s very helpful color. Then maybe if I just follow-up on how are you encouraging your sales team not to get carried away and kind of run production to demand? How are you kind of managing the risk so don’t overproduce if there is a demand softness firstly? And then secondly, it is nice that you are not calling out incremental wood cost inflation for the first time in a long time, but your recycled peers are calling out higher waste paper costs. Are there any categories that you as a virgin producer might be able to benefit from better margin or future pricing?

Thank you.

Ilva Vatne, President and CEO, Billiard: Why don’t I start maybe on the first part? Well, on the last part, maybe I should take that first. I don’t know if there’s any specific categories right away that comes to mind. I think there’s always a bit of a delta between what you would expect from recycled versus virgin. And if that starts to go out of line, surely it creates kind of like this magical market.

Yeah, almost like a hand who take care of that. We don’t really see that right now. Is so as Andre also went through that we are at all time high prices for fiber, but the market is much more balanced and right now we would expect that to be pretty stable. So I have nothing further to add. Now on your first part, all I can say is, it’s quite linked into the strategy that we just launched, as you know, end of last year and the value of a volume.

Our cash generation is very important and we have a clear target to deliver 80% cash generation of our EBITDA. We’re not going to be able to do that if you produce much more than what we sell. And this is a quite moving target because clearly if things change on the market, we need to adjust. I can say that we’ve gotten better of getting used to this over the last years with these fluctuations going quite hard. So I can only say that our cash generation is a very important target.

We will continue to do that and that should drive the sufficient discipline across the organisation to not go overboard. I don’t know

Martin Malby, Analyst, ABG Sundal Collier: if there’s anything else Andre.

Ilva Vatne, President and CEO, Billiard: No, okay.

James Perry, Analyst, Citi: Thank you.

Conference Operator: Thank you. Your next question comes from the line of Lars Kjellberg from Stifel. Please go ahead.

Lars Kjellberg, Analyst, Stifel: Thank you for taking my question. Most of the ground has been covered, but I just wanted to come back to a bit your demand outlook because it does seem, given all the uncertainty, relatively positive compared to what one maybe could have expected. So maybe rephrase the question a bit. Have you seen any changes in the order patterns as we enter increasingly more uncertain environments? Also, are you seeing any differences in the customer behavior in North America where the consumer sentiment seems to be turning down quite sharply, while in Europe it seems to be holding up.

So any directional changes overall patterns and any meaningful differences between the regions?

Ilva Vatne, President and CEO, Billiard: Yeah, hi, good morning, Lars. I can only reiterate the point because I think you’re touching on something very important and the comments that we provide, first and foremost for the very short term Q2, where we can say the pretty high certainty that should look pretty solid as we had in Q1. And we can say that also because our order books are still in a pretty solid manner. And that tend to be a very just strong indication that we would land that order also well. It is very difficult to start predicting into second half.

And we also saw that last year, how things could change relatively fast going into the summer and then coming out of the summer. Situation might be a little bit different this time, but it’s certainly something that we are extremely aware of how fast this can change. I mean, main KPIs of The US economy are still solid. Production is well in general, it’s a good low level of unemployment. So right now there is nothing really that screams out short term.

But as I already mentioned, the consumer sentiment has changed also in US and it’s taken a short, a sharp dive downwards and to the level even to the level we saw in the pandemic. And that’s clearly a sign that people are stressed, worried. And again, this uncertainty that the tariffs bring certainly doesn’t help. So surely there is a question mark of the solidity of the North American business when we’re coming into second half or going into ’26. But right now, it’s not something that we wanted to try to get any numbers into because it’s just very difficult to do that.

In Europe, slightly different. I mean, you know that Europe economy has not performed as well as we’ve seen in North America for the last couple of years. I think there was a hope going into 2025 that with falling interest levels you would start to see consumer confidence picking up. It may be a notch better still of what we saw for 2024, but I can only confirm that it is now starting to be shaky, more uncertain. And it’s again, very difficult to say anything else than for the next couple of months.

We don’t see necessarily big change of consumer behavior, but we are picking up comments from certain customers to say that, hey, let’s wait and see. Meaning again, from most of the customer side, it’s a little bit of a worry about how strong now the full end market really is. And that’s not what you want to hear. So there’s surely also question mark in both of the regions about a bit of this wait and see mentality, but nothing that should at least impact us going into Q2.

Lars Kjellberg, Analyst, Stifel: And just to be clear, you’re not seeing any of those uncertainties in your orders as of yet, but they continue to come at fairly regular basis and no particular change from what it’s been in the prior months.

Ilva Vatne, President and CEO, Billiard: Yes, I can confirm that.

Lars Kjellberg, Analyst, Stifel: Then I just want to lean in a bit on liquid packaging board, which of course you see only category in Europe that actually saw a decline. Can you comment a bit about how that translates into mix effects in EBITDA margin? But also, should we read anything into this? Is this market behaving differently from the other markets? Or is there anything else that is driving that number down, for example, your price increases that you’ve implemented in Q1?

Andre Kriess, CFO, Billiard: I can take that. Good morning, Lars. I mean, we will not comment profitability per our segments. But I mean, if we look at the situation here in the beginning of the year, we guided for lower volumes heading into the first quarter compared to the fourth quarter of 30,000 to 60,000 tonnes and we come at a lower range of that. And there were really two product groups impacting that.

So first of all, it was half of it was market pulp, where we had very high deliveries in the fourth quarter and now they are more on the normal level. And the second half of the decline was liquid packaging board. And liquid packaging board demand in Europe is looking solid, but we talked about high inventory levels in Asia and also slower demand. This is also what we experienced now during the first quarter, and we expect that to actually continue into the second quarter. So a bit slower demand in Asia also due to tough competition and generally lower demand from the end customers.

Lars Kjellberg, Analyst, Stifel: Final question for me then, if you look at only carton segment, of course, STORE has now started to launch the order product. Are you seeing any heightened competition? I mean, you commented that demand remains weak, of course, right now we’ve got incremental supply. Does that make any difference or not?

Ilva Vatne, President and CEO, Billiard: I don’t think that piece yet would impact, but it also saw that when you ramp up a new facility, it takes time to get to the certain grades, which can match some of our more premium propositions. But, there is no doubt that that would be another pillar a bit further down into the future that, yeah, again, put more capacity out there. But right now we don’t. The other caveat just to add on this is, again, if these tariffs will stay and also there will be potentially some importers into Europe, It could also then just open up some new opportunities and challenges. Again, a lot of the export of carton board from US goes to Europe and we would expect that to change the whole flow within the industry, but nothing that we see big signs of at this point in time.

Lars Kjellberg, Analyst, Stifel: Understood. Thank you.

Conference Operator: Thank you. Your next question comes from

Ilva Vatne, President and CEO, Billiard: the line

Conference Operator: of Johannes Gouncilias from DNB. Please go ahead.

Lena Schatauer, Head of Investor Relations, Billiard0: Yes. Hello, everyone. It’s Johannes here. I have a question on the volumes in Europe, which were down, I think it was 5% here year over year. Is the volumes or shipments influenced by your sort of pricing strategy or being very price disciplined or does this sort of reflect your end market development?

Ilva Vatne, President and CEO, Billiard: Yeah. Hi, good morning, Johannes. I can start by taking that one. I mean, in general, as you know, we’ve had a pretty clear outspoken strategy that we also talked in the Capital Market Day about value over volume. And we do evaluate continuously a certain position that we just won’t not be able to fight for given low margin that it potentially generates.

But I think in the case of what we see right now, I think Andre also touched upon it. You know, we came from a Q4 level where, you know, the pulp sales was unusually high. That’s much more now on a normalized level for Q1 and onwards. And this has also been a little bit drop in the liquid packaging, which is again related to higher inventory levels and more serious competition in particular in Asia. Most of the categories is performing well.

The packaging in Europe is performing well. So there’s not a lot of movements that we have that. Also keep in mind that Q1 last comparable base was very, very high because some unusual one off deliveries. But yeah, this is now the level that we saw in Q1. We would expect pretty much for Q2 as well.

Lena Schatauer, Head of Investor Relations, Billiard0: Okay. Yes, that’s helpful comments. Thanks for that. I also have a question on your ramp up of packaging now in The U. S.

If you could remind us about what kind of volumes you are foreseeing for the coming quarters? And I mean, does it have any sort of real impact on the divisional earnings or even group earnings? Or is it more smaller numbers, smaller dollar tickets? Yes, thanks.

Ilva Vatne, President and CEO, Billiard: Yeah, I can repeat that one. We have a call it a stretch target of around 15,000 tonnes for the full 2025. That should come first and foremost in second half of the year. So that is not significant. But again, you have to start somewhere and it should be gradually coming up quarter by quarter and you know, clear ambition that going into ’26, it should be more.

But right now, for ’25, this should not be in any way a meaningful impact of either the region or the group.

Lena Schatauer, Head of Investor Relations, Billiard0: Okay. Thank you very much for helping me. Thank you.

Conference Operator: Thank you. Your next question comes from the line of Martin Malby from ABG Sundal Collier. Please go ahead.

Martin Malby, Analyst, ABG Sundal Collier: Yes, good morning. A couple of questions. First, clarifications on FX. So you say plus CHF 100,000,000. Is that also including the underlying FX exposure or is that just FX hedging quarter to quarter and the inventory revaluations, etcetera?

Andre Kriess, CFO, Billiard: Yes, Martin. Good morning. So the positive SEK 100,000,000 is really a combination of two things. Negative impact of SEK 200,000,000 within other or currency hedging, etcetera, as we report and positive 100,000,000 within Europe region. And that’s the transactional exposure we have in the Europe region.

Martin Malby, Analyst, ABG Sundal Collier: There’s also covering the underlying exposure. The quarter to quarter effect from FX is plus a hundred per year.

Andre Kriess, CFO, Billiard: Yes. Again, based on the currency rates at the end of the first quarter, which will and, of course, the revaluation will be determined by the FX rates at the last day of quarter two.

Martin Malby, Analyst, ABG Sundal Collier: Excellent. Second question. So there have been several pulpwood price increases announced, yet you say that the price will be flat for you in Q2. Does that mean that there is no price increase or does it mean that you have a lag and you get it in Q3, Q4?

Andre Kriess, CFO, Billiard: Yes. So in terms of the pulpwood, there were price increases or price list changes announced during the first quarter. First of all, if we look at who announced or the players that announced, we do not source that much from these suppliers, which means that if we look at our sourcing mix and our outlook for quarter two, we see stable pulpwood prices for our part. We would not stretch to any comments into the second half. As I said, we for now see much more stable situation on the pulpwood market in terms of demand and supply, which should support more stable pricing also going forward.

Martin Malby, Analyst, ABG Sundal Collier: Excellent. And a similar question on output prices. So there’s 1% price increase in Q2. You have announced more on Sack Craft and coated fine in The U. S.

Is there a spillover effect in Q3, or is everything handled in Q2?

Andre Kriess, CFO, Billiard: The absolute majority of it is within Q2. And again, those are parts of the segments. So 1% is for the whole region. So it’s 1% both for Europe and 1% for North America. But of course, the announced price increases are not on all the categories.

Sure. Thank you.

Conference Operator: Thank you. We will now go to the next question. And your next question comes from the line of Oscar Lindstrom from Danske Bank. Please go ahead.

Lena Schatauer, Head of Investor Relations, Billiard1: Thank you. Good morning. Really just one question left here for me, and that’s talking a little bit about how you will handle the more long term effects of the strengthening of the Swedish krona versus euro, US dollar. I I mean, this will, everything else being equal, move your mills relative to foreign competitors up on the cost curve, maybe not immediately, but once hedges have run out. Are you do you see, you know, the need for you to take further action in terms of of of either, you know, more incremental cost reduction or perhaps structural actions to mitigate the cost increase or the worsening competitive position of your mills in Sweden?

Ilva Vatne, President and CEO, Billiard: Yeah, can start and maybe Andre jumps in. I mean, it’s another good question. I can say the following though that to also give you perspective, right? Mean, we had a weakening Swedish krona for more than ten years and that certainly also helped in many ways the competitiveness for Swedish export business. And, you know, now it’s gone slightly the other way around.

And I think in that sense, it’s not a major drama for us. We don’t have tremendous exposure into, you know, US dollar. But I can say that as a more of a principle, more as a kind of overall theory that if you would see the Swedish kronor appreciating more against both the euro and the dollar, that just means that we need to evaluate the options. And that could be everything from further going into pricing, as I think you alluded to, absolutely right what even further can we do with internal cost base as if this is just the Swedish krona phenomenon, it does impact the competitiveness. So, you know, right now, not anything that causes a lot of alarms and drama for us.

But again, if it will stay accelerate and also, you know, spread in many ways to the Euro, surely that is something that people then look what options could be and probably answer is a mix of certain actions.

Lena Schatauer, Head of Investor Relations, Billiard1: All right, thank you. And then just more of a check with Andre on the bridge going into Q2, just so that I have everything or that we have everything. So you said prices up 1%, energy costs down and then volumes flat and then wages between 60,000,000 and $80,000,000 negative in the quarter and then FX positive 100,000,000 and then maintenance negative, I guess, $330,000,000. Is that a good summary of the impacts that we should have in looking Yeah.

Andre Kriess, CFO, Billiard: That’s a good summary, Oscar, of what we went through. Yes.

Lena Schatauer, Head of Investor Relations, Billiard1: And on the ramp up in North America for the packaging line, is that going to give any one off costs or heightened OpEx either in Q2 or second half for that matter?

Ilva Vatne, President and CEO, Billiard: No, it shouldn’t. The only thing to keep in mind is when we build up new positions as people do in this case tend to be a bit margin dilutive on the total. So again, the margins probably should be a little bit below the average we see for the region, maybe a bit longer payment terms to get our foot fully through the door. But given this is a marginal now at least for 25, this shouldn’t impact and move the needle in any shape and form.

Lena Schatauer, Head of Investor Relations, Billiard1: Wonderful. Thank you very much. Those were my questions.

Conference Operator: Thank you. There are currently no further questions. I will hand the call back to the room.

Lena Schatauer, Head of Investor Relations, Billiard: Thank you, everybody. That concludes today’s meeting, our next earnings presentation will be on the July 18. So thanks again for participating, and goodbye.

Conference Operator: Thank you. This concludes today’s conference call. Thank you for participating. You may now disconnect.

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