Interim Report 1 January – 30 September 2022
Weakened wood market but continued good development for windows, doors and pellets
PRESS RELEASE
27 October 2022
THIRD QUARTER
During the third quarter, the Group was affected by the deteriorating economic situation. Net sales amounted to SEK 708 million compared to SEK 846 million in the same period last year. The lower net sales were mainly explained by lower prices and lower sales volumes for Wood Protection. Operating profit before depreciation and amortisations, EBITDA, amounted to SEK 46 million compared to SEK 186 million the previous year.
The drop in result was explained by lower sales prices and sales volumes for Wood Protection and by lower sales prices and higher raw material costs for Sawn Wood. The development for Joinery continues to be favourable where both sales volumes and prices have increased during the quarter. The same applies to pellets within Energy & Logistics. The Group’s cash flow was strong in the quarter and amounted to
SEK 305 million, which reduced the financial net debt to SEK 34 million as of 30 September 2022.
MARKET
The effects of the uncertain situation with an ongoing war, high inflation and rising interest rates reduce demand for several of the Group’s products. The decline in demand for wood products in the do-it-yourself sector has continued during the quarter. At the same time, the pace of new construction, renovation and infrastructure projects remains good in several of our important markets. Demand for windows and doors remains good.
The market for sawn timber has deteriorated during the quarter with falling prices as a result. As a result of increased stocks and lower profitability, a number of planing and sawmill companies have announced production curtailments for the rest of the current year.
Rising energy costs have increased the demand for energy wood and pellets with sharply rising prices as a result. The increased demand for energy- and pulpwood is now slowing the harvesting of saw logs in sev-
eral places, which will further reduce sawmill production.
PERFORMANCE BY PRODUCT AREA
WOOD PROTECTION
Continued reduced demand in the do-it-yourself sector means that sales volumes during the quarter have decreased significantly. The unexpectedly low sales volume has created an imbalance in our raw material stocks with increased costs and significantly reduced profitability as a result. We have implemented cost-saving measures and adapted production to a lower demand and are prepared to take further measures to keep costs and stocks in balance. The assessment is that the stock reductions that are now taking place with us and our customers will result in a better situation during the coming spring season. Within Wood Protection, there is a shift towards more processed products and logistics solutions. It is pleasing that we note a clearly increased demand for linseed oil-treated wood, which is a premium product with good profitability.
JOINERY
Demand for windows and doors remains good and we currently see no slowdown in the market. We see some improvement in the supply of input material, which contributes to a margin improvement. Integration of the recently acquired Polish window and door company Pinus follows plan and the possibilities for increasing the production rate are good.
At the same time, we see a clear decrease in demand and profitability for our garden products, where we primarily sell to do-it-yourself stores. However, this range makes up a smaller proportion of Joinery.
SAWN WOOD
Reduced demand and lower prices characterized the business during the quarter. The price of saw logs remains high but has been partially offset by increased prices for by-products such as sawdust and wood chips. Despite the deteriorating market, our finished goods stocks are still low. During the fourth quarter, we will reduce production at our Estonian sawmill, while we plan to maintain normal production volumes at our Latvian sawmill.
The market for sawn timber continues to be volatile and after this spring’s sharp price increase, we are now seeing a corresponding decrease in price. With announced production reductions and the fact that Russian timber export to Europe have ceased, the supply of sawn timber products is now decreasing. Our assessment is that the market for solid-wood products will be in balance in the coming spring
OTHER (ENERGY & LOGISTICS)
The demand for pellets for heating is still very good and there is currently a shortage throughout Europe. The prices have increased by about three times since the previous summer. Despite increased raw material costs, margins during the winter will continue to be good.
Our English port, Creeksea, shows an improved margin. We have attracted new customers and volumes have increased.
OUTLOOK
With high inflation, rising interest rates and the ongoing war in Ukraine, the outlook remains uncertain. The decline in demand in the do-it-yourself sector is obvious and reduction in new construction is likely. At the same time, renovations, efforts for energy improvements and infrastructure projects continue to show better stability.
Profitability for the Wood Protection product area will be under pressure in the coming quarter, which normally is a seasonally weak quarter. As a result of production curtailments, cost adjustments and reduced stocks, the situation should gradually improve during the spring. We also see signs that the price decline has stopped for Sawn Wood and Wood Protection.
Our business within windows and doors in Joinery continues to be good and the order intake for next spring is normal. Likewise, the situation for pellet operations remains favourable.
Wood products have many good properties, not least in terms of energy and sustainability. This means that we have a long-term positive view of the demand for our products.
Stockholm, 27 October 2022
Peter Nilsson
President and CEO
THIRD QUARTER (1 JULY–30 SEPTEMBER)
- Net sales decreased by 16% to SEK 708 million (846). The decrease was related to lower sales volumes and sales prices for Wood Protection.
- EBITDA amounted to SEK 46 million (186). The lower result was explained by lower sales volumes and sales prices for Wood Protection and lower sales prices and higher raw material costs for Sawn Wood. Higher sales prices and sales volumes for the pellet business contributed positively. The EBITDA margin was 6.5% (22.0).
- Operating profit amounted to SEK 23 million (166), corresponding to an operating margin of 3.2% (19.6).
- Profit for the period amounted to SEK 22 million (158).
- Earnings per share, before and after dilution, were SEK 0.63 (4.56).
- Cash flow from operating activities amounted to SEK 305 million (63), positively affected by a lower level of working capital.
- Financial net debt totalled SEK 34 million (256) as of 30 September, corresponding to a net debt/equity ratio of 0.02 (0.17).
- All shares in the Polish window and door company Pinus were acquired in July.
INTERIM PERIOD (1 JANUARY–30 SEPTEMBER)
- Net sales increased by 16% to SEK 2,627 million (2,265). The increase was related to higher sales prices for all products and higher sales volumes in Joinery.
- EBITDA amounted to SEK 301 million (397). The decrease was explained by lower sales volumes and higher raw material costs for Wood Protection. Higher sales prices for Sawn Wood, increased sales volumes within Joinery and improved earnings for the pellet business contributed positively. The EBITDA margin was 11.5% (17.5).
- Operating profit amounted to SEK 235 million (341), corresponding to an operating margin of 8.9% (15.1).
- Profit for the period amounted to SEK 238 million (329).
- Earnings per share, before and after dilution, were SEK 6.86 (9.49).
- Cash flow from operating activities amounted to SEK 411 million (–18).
- 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.
- A consolidation of shares (reverse split) was made in May, whereby ten (10) shares were consolidated into one (1) share.
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 27 October 2022 at 1:00 p.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, Poland 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.
