Bergs Timber - Strategic update: ready to grow

New targets: grow 10% p.a., EBITDA margin of 9% Debt-free and ready to grow organically and via M&A Trading at ‘21e EV/EBITDA of 6x Strategic update – growth target of 10% p.a. Bergs Timber announced today its new strategic focus and increased its growth and profitability targets. The updated strategy reflects the focus for the “new Bergs” i.e. without the Swedish sawmills.

The company will focus to grow and it now targets to grow 10% p.a. (both organically and via M&A) vs. its previous target of 5-10%.

It has identified investments of ~SEK 500m in ‘21-‘23, incl. capacity increases, digital investments and productivity improvements. Its key growth areas are within value-added wood products such as wood protection and joinery (windows, doors, outside furniture etc.).

Bergs also raised its EBITDA margin target to 9% p.a (7% previously) and it targets net debt below equity. As of January 1, the company has changed its segment structure. The new segment structure consists of wood protection, joinery, sawn wood and other.

A less cyclical company with strong cash flow Following the divestment of its Swedish sawmills, Bergs is now a more downstream-focused company with less cyclicality in its earnings and exposure to structurally growing end-markets (building with wood is more environmentally-friendly). Its remaining assets are modern and well-invested, meaning that the cash-flow generation will be strong. Combined with a debt-free balance sheet, we see plenty of room to grow both organically and inorganically.

Further Processed now makes up the majority of sales and EBITDA. It has 7-9% EBITDA margins vs. sawmilling at 4-5% (avg.

last 10 years). Bergs Timber has historically had EBITDA margins below its new target of 9%, and we expect Bergs to achieve higher and more stable group margins as further processed now makes up a larger share of its earnings. New Bergs is trading at a ‘21e EV/EBITDA of 6x We expect the “new Bergs” to generate EBITDA of ~SEK 205m in ‘2....