Billerud Ab · OMXSTO:BILL
Billerud Ab — Investor Day (November 2006)
65 slides from Billerud Ab's investor day presentation, Nov 15, 2006
Slide 1: Capital Markets Meeting
Capital Markets Meeting 15 November 2006 Stallet, Stockholm
Slide 2: Agenda
Agenda » Welcome » Strategic background and steps initiated Per Lindberg, CEO » Packaging market opportunities Per Lindberg, CEO » Vision, business concept and strategy Per Lindberg, CEO » Operational excellence Stina Blombäck, SVP Billerud Karlsborg » Sales & Business development in action Johan Ne
Slide 3: Strategic background and steps initiated
Strategic background and steps initiated Per Lindberg, CEO
Slide 4: Background strategy review
STRATEGIC BACKGROUND AND STEPS INITIATED Background strategy review »Significantly reduced profitability and slow growth »Five years since formation of Billerud – the synergies from the combination now taken »New management team »Review of strategy and targets a natural step 4
Slide 5: Billerud in brief
STRATEGIC BACKGROUND AND STEPS INITIATED Billerud in brief »Leading supplier of speciality products for consumer and industrial packaging »Sales turnover approx. SEK 7 billion »EBIT MSEK 200 in 2005 »2,200 employees in 11 countries 1) 1) 2006 5
Slide 6: Challenges to profitability
STRATEGIC BACKGROUND AND STEPS INITIATED Challenges to profitability »Rising global cost trends for wood fibre, electricity and oil »Currency fluctuations – weak USD »Cyclicality of market pulp price »Lower growth rates in Europe 6
Slide 7: Sales and operating profit 2001-2006
STRATEGIC BACKGROUND AND STEPS INITIATED Sales and operating profit 2001-2006 MSEK 2250 45% 2000 40% 1750 35% 1500 30% 1250 25% 1000 20% 750 15% Margin 500 Net turnover 10% Operating costs 250 5% 0 0% 2001 2002 2003 2004 2005 2006 Margin and operating costs data exclude MSEK 400 non-recurring item f
Slide 8: Actions initiated 2005/06
STRATEGIC BACKGROUND AND STEPS INITIATED Actions initiated 2005/06 » Cost savings program – speed up implementation of “Billerud 2007” » Customer focus - new organization with Business areas » Head office control strengthened - renewed focus on management by objectives » Initiated steps in marketing
Slide 9: New organization improve customer focus
STRATEGIC BACKGROUND AND STEPS INITIATED New organization improve customer focus 9
Slide 10: Actions initiated 2005/06
STRATEGIC BACKGROUND AND STEPS INITIATED Actions initiated 2005/06 » Cost savings program – speed up implementation of “Billerud 2007” » Customer focus - new organization with Business areas » Head office control strengthened - renewed focus on management by objectives » Initiated steps in marketing
Slide 11: Packaging market opportunities
Packaging market opportunities Per Lindberg, CEO
Slide 12: Packaging is a growing industry
PACKAGING MARKET OPPORTUNITIES Packaging is a growing industry - World packaging consumption USD billion Total packaging 600 CAGR 4.2 % Other Glass 500 Other Metal Glass 400 Metal Rigid plastics 300 Rigid plastics Flexible plastics 200 Flexible plastics Billerud customer Paper & Board 100 Paper & Bo
Slide 13: Regional differences - some regions with strong growth
PACKAGING MARKET OPPORTUNITIES Regional differences - some regions with strong growth Oceania 2.4% W estern Europe 2.1% Asia 6.2% Europe CAGR 2004-09 of 3.4% South- and Central Eastern Europe 6.0% America 7.5% Middle East 11.4% Africa 6.5% North America 2.0% 13
Slide 14: Market segments by end-user in Europe
PACKAGING MARKET OPPORTUNITIES Market segments by end-user in Europe Other 30% Food, beverages and argicultural products Bulding material 55% 5% Chemicals & Pharmaceuticals 10% Source: Jaakko Pöyry and Billerud estimates 14
Slide 15: The market presents opportunities
PACKAGING MARKET OPPORTUNITIES The market presents opportunities » Size and growth » Current strength position in priority segments will be exploited » Neglected paper promotion in value chain represents an opportunity » Fragmented value chains provides opportunities for new solutions » Recent trend
Slide 16: Recent trends favour paper in selective value chains
PACKAGING MARKET OPPORTUNITIES Recent trends favour paper in selective value chains » Lean retailing » Differentiation of brands » Convenience » Demographics and lifestyle » Environmental awareness stimulating demand for paper 16
Slide 17: Conclusion
PACKAGING MARKET OPPORTUNITIES Conclusion »Conventional measures needed, but not the only way forward »A change in performance and position is neccessary! 17
Slide 18: Vision, Business Concept and Strategy
Vision, Business Concept and Strategy Per Lindberg, CEO
Slide 19: Vision
VISION AND BUSINESS CONCEPT, STRATEGY Vision We set a superior global standard for sustainable, protective & promotive packaging. 19
Slide 20: Business concept
VISION AND BUSINESS CONCEPT, STRATEGY Business concept We offer demanding customers packaging materials and solutions that promote and protect their products – packaging that is attractive, strong, sustainable and based on renewable materials. 20
Slide 21: Billerud strategy – key components
VISION AND BUSINESS CONCEPT, STRATEGY Billerud strategy – key components New business growth People & Organisation Competencies & Capabilities Operational Sales & Business excellence development 21
Slide 22: Billerud strategy – key components
VISION AND BUSINESS CONCEPT, STRATEGY Billerud strategy – key components New business growth People & Organisation Competencies & Capabilities Operational Sales & Business excellence development 22
Slide 23: Operational excellence
Operational excellence Stina Blombäck, SVP, Billerud Karlsborg
Slide 24: Purpose: Secure cash flow and competitiveness
OPERATIONAL EXCELLENCE Purpose: Secure cash flow and competitiveness »Secure quality existing asset base »Maintain or improve product quality »Increase volume »Increase cost efficiency; fixed and variable costs 24
Slide 25: We commit to operational excellence
OPERATIONAL EXCELLENCE We commit to operational excellence »Productivity program to increase cost efficiency »Centralized purchasing and logistics »Selective investments to increase competitiveness 25
Slide 26: Productivity program increases volume
OPERATIONAL EXCELLENCE Productivity program increases volume » Target 2010 – 100,000 tonnes of additional paper with minor investments Number employees KTon 2 500 1 500 1) Personnel 2 300 1 300 Production 2 100 1 100 Paper production 1 900 900 1 700 700 1 500 500 2001 2002 2003 2004 2005 Q3 2006 2)
Slide 27: Fixed cost focus will be maintained
OPERATIONAL EXCELLENCE Fixed cost focus will be maintained » Billerud 2007 program close to completion » Continued focus on fixed cost reduction SEK/tonne 1 750 1 625 1 500 1 375 1 250 1 125 1 000 2001 2002 2003 2004 2005 1) 2006 2) 1) For comparable units 2) Data for 2006 are Q3 annualized 27
Slide 28: IT Investments will further increase efficiency
OPERATIONAL EXCELLENCE IT Investments will further increase efficiency »Centralized systems »New roll-handling and warehouse system »Corporate performance management system during 2007 28
Slide 29: Reduced energy costs is key to variable costs
OPERATIONAL EXCELLENCE Reduced energy costs is key to variable costs » We aim to continue the energy efficiency trend » Further energy saving options will be explored TWh 1 000 Cubm 1,5 80 1,2 60 Purchased 0,9 electricity 40 0,6 Oil 20 0,3 consumption 0 0 2001 2002 2003 2004 2005 2006E 2007E 2008E 2
Slide 30: Reducing cost through purchasing and logistics
OPERATIONAL EXCELLENCE Reducing cost through purchasing and logistics Total spend MSEK : ~2,250 »Purchasing Logistics: MSEK ~850 »Logistics Purchasing: MSEK ~1,400 Potential for large savings 30
Slide 31: Selective investments to increase competitiveness
OPERATIONAL EXCELLENCE Selective investments to increase competitiveness »Energy efficiency project »De-bottlenecking investments »Quality improvements investments 31
Slide 32: We commit to Operational excellence
OPERATIONAL EXCELLENCE We commit to Operational excellence »Will generate additional volume of 100,000 tonnes of paper in existing mills »Improved overall cost efficiency 32
Slide 33: Billerud strategy – key components
VISION AND BUSINESS CONCEPT, STRATEGY Billerud strategy – key components New business growth People & Organisation Competencies & Capabilities Operational Sales & Business excellence development 33
Slide 34: Sales & Business development in action
Sales & Business development in action Johan Nellbeck, SVP, Packaging & Speciality Paper
Slide 35: Target: Improve product and customer mix
SALES AND BUSINESS DEVELOPMENT Target : Improve product and customer mix EBIT (acc. %) » Product mix improvement » Between business areas » Between segments Current EBIT 100% » Within segments » Active adjustments of customer base » More partner and strategic customers » Fewer spot customers » Enter
Slide 36: Target: Improve product and customer mix
SALES AND BUSINESS DEVELOPMENT Target : Improve product and customer mix EBIT (acc. %) New EBIT +100% » Increased profit by selling to: » The right customers Current EBIT 100% » The right segments » The right markets » The right price Customers / products (acc. %) 36
Slide 37: A changed sales approach
SALES AND BUSINESS DEVELOPMENT A changed sales approach Customer benefit Paper Service Application Functionality Brands Availability Simplicity Technical specification Metals (Interleaving) Inventory ”Not-payed” ”Ad-hoc” Pricing potential 80% 20% 37
Slide 38: A new structure to target the possibilities
SALES AND BUSINESS DEVELOPMENT A new structure to target the possibilities Segments Responsibility We have: Sales Offices • Identified the potentials • Mapped value chains • Gained knowledge France Plan Plan Plan Target about end customers, Germany brand owners needs • Improve mix between Spain - Bu
Slide 39: We target more than increased paper sales
SALES AND BUSINESS DEVELOPMENT We target more than increased paper sales - retailers and brand owners our new contacts! Segment Illustrative Contribution 2006 Target 2006 Segment plans are the road map to Target success, by adding 2006 services and application sales in Target each segment! 2006 Targ
Slide 40: The segment teams have clear tasks
SALES AND BUSINESS DEVELOPMENT The segment teams have clear tasks Sales & » Increase knowledge marketing about the value chain manager » Create new business models Sales offices Customer Technical customer » Work with proactive need customer service service » Find new products and applications Produ
Slide 41: New business demands new offices
SALES AND BUSINESS DEVELOPMENT New business demands new offices New sales offices Warsaw Eastern Europe SE ASIA Shanghai 41
Slide 42: We are creating a new sales culture
SALES AND BUSINESS DEVELOPMENT We are creating a new sales culture » Scorecards for key development needs » Close follow up of results » Implement incentive models » Added new capabilities in Business Development and sales » We take a new position, from being a raw material supplier to supply value
Slide 43: Billerud strategy – key components
VISION AND BUSINESS CONCEPT, STRATEGY Billerud strategy – key components New business growth People & Organisation Competencies & Capabilities Operational Sales & Business excellence development 43
Slide 44: New Business Growth
New Business Growth Per Lindberg, CEO
Slide 45: The future: Exploiting new opportunities
NEW BUSINESS GROWTH The future: Exploiting new opportunities » Billerud can exploit market trends from a position of strength in key segments » This requires a new market definition » It also requires an expanded view of the value chain in which we operate » We intend to expand our capacity to move
Slide 46: New business potential
NEW BUSINESS GROWTH New business potential Customer benefit Paper Service Application Systems Value Functionality solutions Brands Availability Simplicity Extended Technical Value chain specification Metals (Interleaving) Inventory Pricing potential 46
Slide 47: Our traditional value chain…
NEW BUSINESS GROWTH Our traditional value chain… Billerud today l aw ria R te g Packaging a Growth of value chain m rt in GDP +/- 1% ve on s C ic t gis L o 47
Slide 48: …typically serves consumer goods chains
NEW BUSINESS GROWTH …typically serves consumer goods chains Billerud today l aw ria R te g Packaging a Growth of value chain m rt in GDP +/- 1% ve on s C ic t gis L o Raw Filling Consumer Process- Distri- material and Retail goods ing bution company producer packing 48
Slide 49: Other business models grow faster
NEW BUSINESS GROWTH Other business models grow faster Billerud today l aw ria R te g Packaging a Growth of value chain m rt in GDP +/- 1% ve on s C ic t gis L o Raw Filling Consumer Process- Distri- material and Retail goods ing bution company producer packing To ol in g Te st in De Growth of g Pack
Slide 50: Extending perspective on value chains
NEW BUSINESS GROWTH Extending perspective on value chains Billerud today l aw ria R te g Packaging value chain m a on ve rt in s Growth of GDP +/- 1% » Identify positions in C is t ic value chain that has o g L higher growth Raw Filling Consumer Process- Distri- goods company material producer ing a
Slide 51: Premium price for paper packaging - a trend to be exploited
NEW BUSINESS GROWTH Premium price for paper packaging - a trend to be exploited Other costs 120 Increased Price premium profit margin potential 20% 100 Paper cost Standard Incremental New premium Price Costs price Increased cost of paper represent only 5% of potential price premium 51
Slide 52: Significant savings opportunity – European fresh food example
NEW BUSINESS GROWTH Significant savings opportunity – European fresh food example …of which 2.5% is Total waste 10%... packaging related 100 90 Producer Distribution Sold to consumer Wholesaler Retailer Value of packaging related waste of damaged goods in EU is SEK >23 bn 52
Slide 53: Financial targets
Financial targets Bertil Carlsén, CFO
Slide 54: Targeting an organic sales growth of > 3%
FINANCIAL TARGETS Targeting an organic sales growth of > 3% » Operational excellence ~1% » Sales & Business development ~1% » New business growth ~1% » Option to enter new geographical markets ? New target of long-term organic annual sales growth >3% 54
Slide 55: Financial targets
FINANCIAL TARGETS Financial targets Revised » Long term organic sales growth rate of at least 3% » An EBIT margin of 10% as an average for a business cycle » Investments should give a return well above WACC Unchanged » Net debt/equity 0.6-0.9 » Dividends 50% of net profit, over a business cycle 55
Slide 56: Rationale for changed targets
FINANCIAL TARGETS Rationale for changed targets » Stronger focus on growth » Margin target put explicit pressure on efficiency in operations both externally and internally » Previous investment target was ”inflexible” 56
Slide 57: Performance management strategy
FINANCIAL TARGETS Performance management strategy » Simplicity and focus » Operative margin targets on all levels » Working capital management » Business areas focusing on pricing, product mix improvements and growth/business development in customer segments » Mills focusing on costs and production
Slide 58: Hedging strategies
FINANCIAL TARGETS Hedging strategies » Currencies »Revenues mainly in EUR (2/3) and USD (1/3) »Policy to hedge at least 50% of net currency exposure coming 12 months. » Energy »Consumption 1.6 Twh of which 0.95 Twh (60%) generated internally as of January 2007. »Policy to hedge 50% plus of annual ex
Slide 59: Cash flow generation and capex
FINANCIAL TARGETS Cash flow generation and capex Cash flow from operations Capex Dividend Cash flow available Available for business 2005 development or share repurchase 59
Slide 60: Investment strategy
FINANCIAL TARGETS Investment strategy »Secure operational excellence »Support growth strategy »“Opportunistic” acquisitions option All investments must give a return well above WACC 60
Slide 61: Billerud track record shareholder return
FINANCIAL TARGETS Billerud track record shareholder return Index – share price 350 300 Total share- holder return Average total 250 annual return: 20%+ 200 K x e d n I Share price E S 150 M 100 SIX Forestry 50 0 02 03 04 05 06 61
Slide 62: Summary
BILLERUD
Slide 63: Billerud strategy – key components
SUMMARY Billerud strategy – key components New business growth People & Organisation Competencies & Capabilities Operational Sales & Business excellence development 63
Slide 64: Billerud
BILLERUD
Slide 65: Capital Markets Meeting
Capital Markets Meeting 15 November 2006