Interim Report 1 January - 30 June 2022

Strong quarter despite increased uncertainty

SECOND QUARTER

The second quarter of the year was strong in terms of profitability and EBITDA amounted to SEK 173 million compared with SEK 146 million the previous year. Net sales during the quarter amounted to SEK 1,009 million, compared with SEK 826 million last year, an increase of 22%. The higher net sales are explained by higher sales prices for all products and increased sales volumes in the Joinery product area.

 

The improved result compared to the previous year is explained by higher sales prices for Sawn Wood, increased sales volumes within Joinery and improved earnings for the pellet business as a result of higher sales prices and volumes. Lower demand in the do-it-yourself market along with higher raw material costs lowered the result for Wood Protection.

 

MARKET

The market has been characterized by increased concern about the effects of the war in Ukraine, high inflation rates and rising interest rates. During the quarter, we see a decrease in activity in the do-it-yourself segment compared to the previous year. At the same time, the activity in construction and renovation has remained good.

 

The market for sawn timber products continues to be volatile. After the winter’s sharp price increases, we now have a market with falling prices. The sanctions for Russian timber products decided on in March did not enter into force until the beginning of July. This has meant that timber deliveries from Russia continued at a normal pace in Q2, which has partly been a surprise to the market. The market impact of the sanctions will therefore be seen in the second half of 2022.

 

As an effect of increased energy costs, we see an increased interest in heating pellets where prices rise sharply.

 

Bergs has a good raw material situation and supply to all units and non-delivery of Russian wood products is compensated by increased deliveries from other established suppliers.

 

PERFORMANCE BY PRODUCT AREA

WOOD PROTECTION

Increased raw material costs and the decline in the do-it-yourself market had a negative impact on margins during the quarter. The market for professional construction remains good and order intake is normal for the autumn. Our efforts towards increased market presence and product development continue. The strategy for our Latvian wood protection business, which has had a large part of its raw material supply from Russia and Belarus, will be reviewed in the autumn with the aim of further focusing the activities towards a more developed product range.

 

JOINERY

Demand for windows and doors remains good and order intake remains at a good level. Increased costs for raw materials and logistics have been offset by increased selling prices. We continue the expansion of our Timber Windows brand and the plan for five new showrooms during the year remains in place. Demand for garden products remains good although we are seeing some decline from the do-it-yourself sector.

 

SAWN WOOD

High sales prices and high-capacity utilization characterized the business during the quarter. Even though raw material prices in the Baltics have risen during the winter and spring, the margin in the business is good. Our finished goods inventories remain low. However, the market for sawn timber products is more uncertain for the autumn and prices are falling. The effect of this is expected to be partially offset by reduced raw material prices and increased prices for by-products such as wood chips and sawdust.

 

OTHER (ENERGY & LOGISTICS)

In the wake of increased costs for energy, the market for pellets has improved markedly during the first half of the year. Inventory levels are very low and prices are rising. After a weak development in 2021, we now see improved margins for our pellet business.

 

ACQUISITIONS

On July 5, we acquired the Polish company Pinus. The company, which manufactures bespoke windows and doors for the premium segment, has a turnover of approximately SEK 80 million and has about

100 employees. Pinus has for about 20 years been a supplier to our English subsidiary Timber Windows. The acquisition represents an investment in a new geographic market for Bergs. The acquisition, combined with the recently expanded production capacity in Latvia, enables Bergs’s continued expansion of the window and door business, which now has annual sales of approximately SEK 600 million.

 

OUTLOOK

There is clear uncertainty about how the world economy will develop during the rest of the year. Interest rates will certainly be raised in the autumn. Even if the increases are from a low level, this will cool down the economy and in the short term affect the demand for our products as well.

 

We continue to have a good order backlog for most of our products. At the same time, we are prepared to adapt production and costs to a possible decline in demand.

 

The market for sawn timber products is affected by lower demand. At the same time, it is difficult to assess the market effects of

non-delivery from Russia and lower production volumes in Central Europe and Canada. Our market for windows and doors is currently showing no signs of slowing down and this also applies to pellets that benefit from rising energy prices.

 

We expect a positive cash flow for the rest of the year.

 

Stockholm, 25 July 2022

Peter Nilsson

President and CEO

 

 SECOND QUARTER (1 APRIL–30 JUNE)

• Net sales increased by 22% to SEK 1,009 million (826). The increase was related to higher sales prices for all products and higher sales volumes in Joinery.
• EBITDA amounted to SEK 173 million (146). The increase was explained by higher sales prices for Sawn Wood, increased sales volumes within Joinery and improved earnings for the pellet business. Lower sales volumes and higher raw material costs lowered the result for Wood Protection. The EBITDA margin was 17.1% (17.7).
• Operating profit amounted to SEK 151 million (128), corresponding to an operating margin of 15.0% (15.5).
• Profit for the period amounted to SEK 153 million (118).
• Earnings per share, before and after dilution, were SEK 4.41 (3.40).
• Cash flow from operating activities amounted to SEK –18 million (27), negatively affected by a higher level of working capital.
• Financial net debt totalled SEK 278 million (263) as of 30 June, corresponding to a net debt/equity ratio of 0.16 (0.19).
• A consolidation of shares (reverse split) was made in May, whereby ten (10) shares were consolidated into one (1) share.

 INTERIM PERIOD (1 JANUARY–30 JUNE)

• Net sales increased by 35% to SEK 1,919 million (1,416). The increase was related to higher sales prices for all products and higher sales volumes in Joinery.
• EBITDA amounted to SEK 255 million (211). The increase was explained by higher sales prices for Sawn Wood, increased sales volumes within Joinery and improved earnings for the pellet business. Wood Protection was negatively affected by lower sales volumes and higher raw material costs. The EBITDA margin was 13.3% (14.9).
• Operating profit amounted to SEK 212 million (175), corresponding to an operating margin of 11.0% (12.3).
• Profit for the period amounted to SEK 216 million (171).
• Earnings per share, before and after dilution, were SEK 6.23 (4.93).
• Cash flow from operating activities amounted to SEK 106 million (–81).
• A new loan agreement was made with Danske Bank and SEB. The total credit facilities amount to SEK 650 million and have a three-year term.
• Performance Timber Products Group acquired all shares in the English company P&P Holdings Limited that sells, distributes and installs windows and doors in Surrey and South West London.

Further information regarding the interim report can be provided by the CEO, Peter Nilsson, on telephone number +46 70 315 09 27 or CFO, Anders Marklund, on +46 70 284 47 96.

 

The information in this interim report is such that Bergs Timber AB (publ) is required to disclose pursuant to the EU’s Market Abuse Regulation. The information was released for publication on 25 July 2022 at 8:00 a.m. CET. The interim report is available on the company’s website, www.bergstimber.com

 

Bergs Timber AB (publ), corporate registration no: 556052-2798, Västra Trädgårdsgatan 15, SE-111 53 Stockholm, Sweden.

Tel: +46 (0)10-199 84 00

 

 

About Bergs

 

An international wood products Group

The Bergs Group consists of independent subsidiaries, with clear responsibilities for results, that develop, produce and market processed wood for various applications.

 

With years of experience in wood and a great deal of competence in processing, Bergs promotes building a sustainable society based on renewable raw materials from sustainably cultivated forests in the Baltic Sea region.

 

Operations are conducted in Sweden, Estonia, Latvia and the UK, and the Group’s products are sold in some 20 countries. The largest markets consist of Scandinavia, the Baltic countries, the UK and France. The head office and Group management are located in Sweden.

 

The company’s share has been listed on Nasdaq Stockholm since 1984