Research, Charts & Company Announcements
Research Tree provides access to ongoing research coverage, media content and regulatory news on Holmen. We currently have 14 research reports from 1 professional analysts.
Holmen witnessed a healthy performance across divisions (ex. Paperboard). Forest remained the biggest profitability-generator and Paper benefited from the sustained focus on value-added products. Even the relatively smaller divisions did pretty well. While the industry’s operating environment is becoming somewhat challenging, the group’s ownership of sizeable natural resources should render critical strategic benefits.
Healthy price tailwinds were a key driver for Holmen’s 2018 results. While Forest continued to do well – both in terms of profit generation and rendering input self-sufficiency, other divisions (ex. Paperboard) also improved in varying degrees. Even though Paperboard’s current issues and a general pricing normalisation will result in margin gains receding through to 2021, the overall attractiveness of Holmen’s (natural resources-driven) earnings profile remains unchanged.
There was no major surprise in Holmen’s Q3 results, wherein Paper and Wood Products’ pricing gains helped reduce the impact of cost headwinds and some divisional (volume) issues. While price tailwinds should moderate over time, healthy volumes across businesses, limited downside risk in case paper market headwinds are reinstated and apt input cushions from forests and energy – which also limit the group-wide emissions, should help Holmen maintain its valuation premium vis-à-vis peers.
Healthy price-volume improvements across most divisions were the highlight of Q2 18. Profit improvement in Wood Products, similar to peers, was notable. Despite cost pressure, aggravated by adverse weather conditions, (Paperboard and Forest’s) earnings remained healthy. While the business fundamentals, backed by ample natural resource endowments, remain promising, Holmen’s valuation offers limited upside at current levels.
Q4 results fell short of expectations mainly because of the higher-than-guided maintenance shutdown impact in Paperboard. Nevertheless, a turnaround in Wood Products, some improvement in Energy and stability of Forests ensured that: 1/ cash flows remained healthy enough to support attractive dividends; and 2/ debt repayments continued. Moreover, with European recovery so far progressing unscathed, the business performance should remain impressive. However, the prospect of a material earnings upgrade should be averted by a simultaneous uptick in inflationary pressure.
Holmen reported strong Q3 17 results, with performance coming slightly ahead of consensus estimates. Sales were SEK4bn (+3.6% yoy; -4.8% qoq), with all divisions posting yoy growth (4-55%), while the sequential weakness was due to seasonal softness in Forests (-8.6%) and some ‘implied’ pricing pressure in Paperboard. The adjusted EBIT was much better at SEK598m (+14% yoy; +13% qoq), with Paper (profits down 17% yoy; 20% qoq) being the only underperforming division. Quarterly net profit was SEK456m (+15% yoy; +16% qoq). Reported OCFs came in at SEK478m (-14% yoy; +7.7% qoq) while capex was SEK100m (-34% yoy; -38% qoq). Overall healthy cash flows helped further reduce (-10% vs. Q2 17-end) net debt to SEK3.6bn. Q4 profitability is guided to be impacted by a SEK100m maintenance shutdown in the Paperboard division.
Holmen again reported impressive quarterly results, with the Q1 17 performance exceeding consensus estimates (by 5-7%). Sales increased (+7.9% yoy; +4.9% qoq) to SEK4.1bn, with all segments, except for paper (marred by still declining prices) and energy (impacted by lower production), witnessing growth to varying degrees. Almost mimicking the top-line trend, adjusted EBIT came in at SEK633m (+8.2% yoy and qoq) and net profit at SEK485m (+118% yoy – with Q1 16 weighed by exceptionals of SEK232m; +9.7% qoq). While forests and paperboards remained healthily profitable, the rebound in the timber division – generating adjusted EBIT of SEK17m (similar to levels last seen in Q2-Q3 14) vs. loss of SEK5m in Q1 16 and a profit of SEK4m in Q4 16 – was surprising. The impact of a strong operating performance was also visible in the reported OCFs, which came in at SEK693m (+28% yoy; +133% qoq), also benefiting from materially lower (-77% yoy; -79% qoq) working capital requirements. On the other hand, capex was down (-48% yoy; -4% qoq) to SEK144m. As a result, net debt reduced (16% vs. Q4 16 end) further to SEK3.2bn. Management reiterated its guidance of SEK150m of paperboard maintenance shutdowns in 2017 – of which SEK50m and SEK100m would be recognised in Q2 17 and Q4 17, respectively.
Holmen ended 2016 on a convincing note as the Q4 16 (and full-year) results were ahead of AV’s (and consensus) estimates. Despite sluggish top-line, … Q4 sales were up (6.7% yoy; 3.3% qoq) to SEK3.9bn. The performance across divisions was healthy / reasonable, Forests in particular (+3.9% yoy; +16% qoq). Moreover, Energy witnessed a staggering sequential volume (+52%) and price recovery, after a dismal Q3 16. But the full-year sales were down (3.1%) to SEK15.5bn, with varying degrees of weakness in all segments (paper and energy in particular) – except for timber (+2.1%). While paper (-12%) was impacted by the Spanish mill divestment (and still feeble European paper markets), the Nordic region’s energy markets have remained challenging. …profitability improvement was impressive Q4 adjusted EBIT was SEK585m (+59% yoy; +11% qoq) while for the full-year it was (+29%) SEK2.2bn. Material yoy improvement was largely a function of the (severe) underperformance in Paperboard, Forests and Paper divisions in Q4 15. The qoq improvement was driven by Forests (even though benefiting from the sale of properties) and the restoration of some normalisation in Energy and Timber, thereby more than offsetting the impact of seasonally higher costs in Paper and Paperboard. An impressive turnaround in Paper, and the continuation of healthy profits in Paperboard and Forests – together accounting for 95% of profits – summed-up an overall strong year. Unlike last year, impairment losses were low (SEK122m for the full-year vs. SEK555m in 2015), resulting in Q4 net profit of SEK442m (vs. a loss of SEK438m in Q4 15 and a profit of SEK395m in Q3 16) and a full-year profit of SEK1.4bn (vs. SEK559m in 2015). Net debt reduced further Although material working capital investments (use of SEK360m vs. release of SEK443m in 2015) resulted in full-year reported OCFs correcting (22%) to SEK2bn, relatively conservative capex (down 10% to SEK785m) and SEK662m of (the Spanish paper mill) disposal proceeds helped reduce net debt to SEK3.9bn (down 19% vs. 2015 end). As a result, full-year dividend was increased (14%) to SEK12/share. Paperboard maintenance shutdowns are guided to have a SEK150m profitability impact in 2017 (vs. SEK100m in 2016).
Holmen’s Q3 16 results were in line with consensus and ahead of AV’s expectations. Sales came in at SEK3.8bn (-5.5% yoy; -3.2% qoq) with weak volumes across divisions – energy in particular (-49% yoy; -31% qoq). Although, in the case of paper, weaker volumes (-27% yoy; -24% qoq) were attributable to divestments and the fire accident at Hallsta. Adjusted EBIT was up (+7.8% yoy; +8% qoq) to SEK527m, with an improvement in paper earnings (similar to UPM and Stora) being a key driver, in addition to some normalisation in paperboard (after Q2 was marred by rebuilding costs) and a consistently strong performance in forests. Although, sequentially, there was some benefit of seasonally lower costs. Holmen also benefited from a higher change in value of biological assets (+13% yoy; +34% qoq) of SEK103m, helping partly to offset the impact of higher taxes. Quarterly net income was SEK395m (+4.8% yoy; +8.5% qoq). Even though the reported OCFs were weak (SEK553m; -15% yoy; -2.8% qoq) due to materially higher tax payments and some working capital investments, the group still managed to reduce net debt further (down 8.6% vs. end Q2) to SEK4.1bn.
Holmen good Q2 16 results, wherein, despite a top-line miss, profitability remained robust and was largely in line with consensus estimates. Given that Q1 was an exceptionally strong quarter, some moderation was anticipated in Q2. Sales came in at SEK3.9bn (-4.9% yoy; +2.8% qoq) with weak harvesting (-11%), energy (-30%) and timber (-10%) volumes exerting yoy pressure. The sequential improvement was single-handedly driven by healthy paper deliveries (+25%) as Hallsta returned to full capacity after the fire accident in November 2015, more than compensating for maintenance shutdown-induced lower board volumes (-6.2%). Despite the top-line vagaries, adjusted EBIT was up 12% yoy to €488m – with paper earnings reviving at full-throttle (profit of SEK78m vs. a loss of SEK15m in Q2 15). Although, there was a sequential correction (17%) attributable to a series of factors: 1/ paperboard impacted by SEK40m of rebuild costs (guided earlier by management); 2/ forest’s earnings (-15%; accounting for 43% of total profit) impacted by seasonally-higher costs and reversion of timber trading to normalised levels; 3/ forex headwinds of SEK30m; and 4/ seasonally-lower energy production (-31%). Net profit came in at SEK364m (+13%; +64% qoq) with the sequential operating weakness being more than compensated by the absence of any one-off charges (SEK232m) recognised in Q1 16. Despite improving working capital efficiencies (release of SEK91m vs. SEK28m in Q2 15 and use of SEK213m in Q1 16), reported OCFs were down 1.2% yoy to SEK569m as taxes paid increased by a whopping 85%. Even though Holmen received SEK484m of proceeds from the Madrid mill sale, payment for the 2015 dividends resulted in a largely unchanged net debt position compared to Q1. Management guides for a SEK40m maintenance shutdown impact at the Braviken paper mill in Q3. Unlike Q2, the (negative) exchange rate impact is guided to be negligible in the current quarter.
Holmen started 2016 on a promising note by reporting strong Q1 results. Despite sales correcting 7.8% yoy to SEK3.8bn – due to the impact of weaker paper volumes (-11%) being amplified by the fire at the Hallsta paper mill and lower harvesting volumes (-13%) – adjusted EBIT was up 47% yoy (and 59% qoq) to SEK585m. This was driven by a combination of: 1/ a turnaround in paper earnings – thanks to a better product mix and some pricing improvements; 2/ restoration of normalcy at the paperboard operations (after a maintenance shutdown in Q4 15); 3/ continuation of the healthy contribution from forests (further supported by higher than normal income from timber trading). Even though SEK232m of one-off charges resulted in net profit coming in at SEK222m (vs. SEK298m in Q1 15), this was much better compared with a net loss of SEK438m (primarily due to asset impairments) in Q4 15. Reversion of working capital benefits (use of SEK213m vs. release of SEK101m and SEK290m in Q1 15 and Q4 15, respectively) resulted in reported OCFs coming in at SEK542m vs. SEK522m in Q1 15 and SEK775m in Q4 15. Still Holmen managed to reduce its net debt to SEK4.5bn – a decade low (despite strategic capex peaking during 2010-12). Management guides SEK40m of negative profitability impact in paperboard due to the start-up costs associated with the rebuilt board machine at Workington.
Unlike UPM and Stora, Holmen’s Q4 and FY15 numbers failed to meet AV's (and consensus) expectations, although (resurfacing) material paper business weakness was the common thread tying these three European paper majors. *Q4 disruptions dilute 2015 top-line performance* Sales: Q4 – SEK3.7bn (-8% yoy; -8.5% qoq); 2015 – SEK16bn (flat; 2.5% behind AV estimates) Q4 sales were severely impacted by the paperboard maintenance shutdown (volumes down 4.9% yoy and 12% qoq) and loss of paper production (volumes down 1.6% yoy and 11% qoq) due to a fire at the Hallsta mill. Although for the full year, the strong paperboard contribution (sales up 7%) and materially higher energy volumes (+29%) helped offset weaker prices in paper, timber and energy. *A bigger profitability impact* Adjusted EBIT (excluding income from associates and JVs): Q4 – SEK369m (-20%; -25% qoq); 2015 – SEK1.7bn (-2.8%; 5.4% behind AV estimates) The paperboard maintenance shutdown had a SEK100m profitability impact in Q4. While this resulted in Q4 paperboard profitability correcting 34% yoy (and 47% qoq), overall group profits also came under pressure (despite cost rationalisation – especially in paperboard and forests) as paper and energy succumbed to difficult markets. Even forex tailwinds faded (gains of SEK50m in Q4 vs. SEK450m - o/w >50% were in paper – in 2015) during the course of the year. Attributable net profit: Q4 – a loss of SEK438m (vs. a loss of SEK4m in Q4 14 and a profit of SEK377m in Q3 15); 2015 – SEK559m (-38%; materially behind AV's estimates). Similar to Stora, Holmen too impaired its paper assets by c.SEK620m in Q4 on account of the continuous weakening in long-term paper market fundamentals. Additionally, >SEK300m of one-off charges were recognised in Q4 to create a provision for early termination of electricity contracts and the fire at Hallsta. These unanticipated charges took a toll on Holmen’s bottom-line – which had been resilient during 9m 15. *Surprising working capital release bolstered gearing position* Despite marginal weakness in operating profits, the company managed a working capital release of SEK443m in 2015 (SEK290m in Q4 alone) vs. use of SEK217m in 2014, resulting in reported OCFs increasing 16% to SEK2.5bn. Also with the unchanged 2015 capex, net debt declined to SEK4.8bn – the first time below SEK5bn since 2006. However, a (gradual) reversion of the working capital benefits should result in an increase in the net debt position. The full-year dividend was increased to SEK10.5/share (+5%; in line with AV estimates). Management guides for another SEK100m of maintenance/rebuild costs in H1 16 as the paperboard capacities are being ramped-up (especially at Workington mill by 20ktpa).
Even though Holmen reported ahead of consensus Q3 15 results, they were lacklustre when compared with the Q3 performance of Stora and UPM. Sales increased 1.9% yoy to SEK4bn, driven by a continuously strong performance in paperboard (deliveries +5.6%; +8.2% qoq), and much higher energy production (+65%) and healthy paper volumes (+4.4%). Although weakness in paper, timber and energy prices has persisted. On a sequential basis, seasonally lower harvesting volumes (-14%) and weak timber deliveries (-24%; although impacted by a renovation at the Iggesund Sawmill), along with a weak price environment, resulted in a 2.6% top-line correction. Adjusted EBIT came in at SEK489m (-5.6%; +12% qoq) as an unrelenting weakness in paper (partly also aggravated by maintenance shutdowns) and higher costs in timber, overshadowed the cost optimisation achieved in paperboard and forests (Skog). Additionally, lower gains from the change in value of forest assets (unlike the hefty gains reported by Stora and UPM) disappointed. Similar to the last few quarters, again a big contributor to the overall profitability was SEK150m (SEK400m ytd) of forex gains. Although sequentially fading forex gains were more than offset by seasonally lower personnel costs. Thankfully somewhat lower borrowing costs (driven by a low interest rate environment in Sweden) resulted in net profit coming in slightly better at SEK377m (-2.1%; +17% qoq). Cash flows were partly impacted by a slowing pace in working capital release (SEK24m vs. SEK105m in Q3 14 and SEK28m in Q2 15), thereby resulting in 12% lower reported OCFs of SEK654m (+13% qoq). Management guides for another SEK80m profitability impact due to paperboard maintenance shutdowns in Q4.
Unlike 2014 (witnessing a staggering profitability recovery), 2015 has so far been a lacklustre year for the paper sector. Holmen too has followed suit by reporting weak Q2 results – profitability in particular, which was behind consensus estimates. Even though Holmen posted double-digit operating profit growth (unlike UPM and Stora – where the reporting currency is euros), the key driver was more weakness in the Swedish Krona and not any material operating improvements. Sales came in at SEK4.1bn (+4.9% yoy; -0.4% qoq), largely driven by strong paperboard operations (+9%) and higher paper (+11%; due to a growing contribution of value-add paper) and timber (+6.1%; seasonally strong demand) deliveries; while lower third-party forest operations and continuously weak paper (particularly newsprint) and hydropower prices dampened some of the gains. Although adjusted EBIT was up 19% to SEK437m, it was attributable to SEK150m of forex benefits and somewhat lower paperboard costs. Even sequentially, 10% profitability growth comprised SEK40m of currency benefits and favourable comps (as Q1 was impacted by SEK130m of maintenance shutdown and paperboard and paper mill rebuilding costs). Further down, lower financing costs culminated in a net profit of SEK322m (+29%; +8.1% qoq). Profitability growth (even though forex-driven) along with marginal working capital efficiencies resulted in reported OCFs of SEK574 (+19%; +10% qoq).
Research Tree provides access to ongoing research coverage, media content and regulatory news on Holmen. We currently have 14 research reports from 1 professional analysts.
This morning Hurricane Energy announced the flow test results from its Lincoln Crestal well, the second well of a three-well drilling campaign in the Greater Warwick Area (GWA). The well tested at a maximum stable flow rate of 9,800bopd using electrical submersible pumps (ESPs). The well flowed at an average rate of 4,682bopd under natural conditions and no formation water was produced. The well will now be suspended, with the intention that it will be used for production via tie-back to Lancaster’s Aoka Mizu FPSO in 2020, subject to further work, regulatory consent and final investment decision by the joint venture. Production from the tie-back would generate reservoir data to be used in planning future phases of development of GWA. The drilling rig will now move to the location for the third and last well of the 2019 drilling programme, Warwick West. Our latest risked valuation of Hurricane Energy stands at 102.8p/share, with GWA tie-back being valued at 3.5p/share and GWA FFD at 21.6p/share. Hurricane Energy is currently trading at 49.0p/share.
Companies: Hurricane Energy
This morning, Trinity released in H1/19 interim results, delivering another strong performance as the Company continues to increase base production whilst maintaining effective cost controls. Production averaged 3,008bopd for H1/19, up 9% year-on-year (YoY), generating revenues of US$32.2m on an average realised oil price of US$59.1/bbl. The Company's financial performance was impressive, with adjusted EBITDA increasing by 20% YoY to US$11.2m, facilitating a cash plus working surplus of US$22.0m at 30th June 2019. Post period, as part of Company's H2/19 drilling campaign, the Company has drilled three wells, including the Company's first High Angle Well (HAW), which successfully intersected net oil reservoir sandstone 1.5x the thickness of a conventional vertical well was prognosed to deliver on this target. The H2/19 programme will include up to eight new onshore infill wells, with drilling expected to increase base level production into 2020. We reiterate our BUY recommendation given today's strong financial and operational results.
Companies: Trinity Exploration & Production
Warren Buffett once said that as an investor, it is wise to be ‘fearful when others are greedy and greedy when others are fearful’. Fear is not in short supply right now.
Companies: OPM ALU ANCR BLV CONN CRC FDL GATC HAT LEK MMH MCB MWE NXR NTBR NOG PAF PEG RFX SRC TEF TEG TPT VTU WYN XLM
In January, we provided a list of 11 stocks for 2019 that we believed would perform strongly with attractive catalysts that could lead to material outperformance. In this Quarterly Research Outlook, we revisit these views, analysing what has happened and how the remaining six months of the year could play out.
Companies: AMS ANX ARS ATYM AVON BLVN PIER BUR CGS CAML CALL CSRT TIDE CYAN DTG DEMG ELM EMR FPO FST GTLY GENL GRI GEEC GKP HMI HAYD HEAD HILS HTG HUR HYR IBPO IOG INDI JHD JOG KAPE KEYS KCT KGH LAM LIT LOK MACF MANO PCA PANR PXC PHC PMO RBW RMM REDD RSW RNO RKH RBGP ROR SUS SCPA SHG SOLG SOM TWD TRAK TSG TRI VNET VTC ZOO ZTF
Petropavlovsk announced its H1 results this morning (a trading update was given on 23/7/2019). The company has also published its presentation to be delivered at its Capital Market Day today. Overall both the results and the messaging are strong reflecting the three critical achievements the company has delivered over the last 12 months towards full corporate recovery namely: successful start up of the POX operation, stabilization of management and board, and overhaul of the IRC exposure (including a commiserate fee for the US$240 million guarantee, amounting to US$8.9 million p.a. including services). The company now has “the luxury” of optimizing the expansion of its production base via numerous options, tightening its cost control therein, widening its exploration footprint and creating some “auction” tension in its stated target of selling its IRC stake. Meanwhile the US$1500/oz gold price environment of H2/2019 aligned with rising production and falling costs should allow material deleveraging of the balance sheet.
Over the last 18 months PowerHouse and its partners Peel Environmental and Waste2Tricity (W2T) have put most of the building blocks in place for commissioning the first commercial distributed modular generation (DMG) waste-to-energy plant by the end of FY20. This potentially represents the first of dozens of small sites in the UK and abroad using unrecyclable plastic that would otherwise go to landfill to generate hydrogen for electric vehicles and electricity.
Companies: Powerhouse Energy Group
The upper Captain sands at the Liberator well 13/23c-9 are pinched out. These were the main targets of this well, the purpose of which was to prove the location of a development well next year in this 2P reserves area. The well is interpreted to have missed the Captain upper sands channel which is laterally thin in this area. Further data is required to locate the exact position of these upper sands. This requires recalibrating the seismic and remapping the reservoir in order to define the position of next year’s first development well. The fact that the lower Captain sands were encountered shows that the channel is working and depositing sands.
Companies: I3 Energy
The Harvey well encountered a 49 feet gas column. The company is now assessing volumes and commerciality with more details expected to be provided within a period of about six weeks.The well has confirmed a discovery albeit at the very low end of expectations with regards to volume.
Companies: Independent Oil & Gas
This book is split into two parts. The first part is thematic and focuses on the UK North Sea, where we discuss the potential for smaller companies to benefit from making acquisitions of producing assets. This is based on a screen of potentially available assets, and their likelihood of being available for sale. In the second part, we include profiles of the oil and gas companies in our coverage, and take the opportunity to update several of our models and recommendations. We intend this to be the first in a series of periodic publications focusing on themes within the oil and gas sector.
Companies: JOG IOG RRE SQZ FPM PMO ENQ PMG AMER BLVN GENL GEEC HDY HTG HUR IOG LAM RKH
Sylvania has reported FY19 results (June Y/E) of $6.37/sh versus expectations of $5.95/sh due to a lighter tax expense than assumed. They have entered into a binding agreement to sell Grasvally for R115m ($7.6m at current FX), which should be settled in the next eight months.
Companies: Sylvania Platinum
AAOG’s preparations for the Tilapia sidetrack have commenced and discussions to secure a rig for November are continuing. The shares have languished in the past month, which is not helpful for the funds expected to be received as part of the Investor Sharing Agreement entered into in July. Nevertheless, there remains significant upside potential from a successful sidetrack and test on the middle Djeno reservoir at Tilapia.
Companies: Anglo African Oil & Gas
Savannah Resources has announced that it is raising £5m at 2p, including £3.76m through a placing and a further investment of £1.24m from major shareholder Al Marjan. The company’s principal project, the Mina do Barroso lithium project, is being rapidly advanced, although experience from recent spodumene mine startups in Australia has shown that there is a need to fine tune the plant design so that it can successfully process each individual deposit. As a result of the need for additional test work, the Feasibility Study is now expected to be completed in Q2 2020. We have reduced our price target to 15p, reflecting the additional shares and the current spodumene price.
Companies: Savannah Resources
The Joe-1 exploration well (TLW 60% WI, op, ECO/EOG 15%, AOI c. 2.8%) has found 14 m of net oil pay in high-quality oil bearing sandstone reservoirs of Upper Tertiary age. This derisks the petroleum system of the western area of the Orinduik block, where a number of Tertiary and Cretaceous age prospects have been identified. Additional thinner sands above and below the main pay at Joe-1 are being evaluated for possible incremental pay.
Companies: Tullow Oil
Last week, 88 Energy successfully completed a A$6.75m placing through the issue of 540m new ordinary shares at 7p per share. The net proceeds, together with the 88 Energy's existing cash resources (which we estimate to be cA$5m) will be used to fund the ongoing evaluation of the conventional and unconventional prospectivity of the Company's existing assets, including any potential costs from the Charlie-1 well, due to spud during Q1/20, and exploit any new opportunities on the North Slope of Alaska. 88 Energy also released its interim results. For the period ended 30 June, the Company recorded a loss of A$29.3m, with the loss largely attributable to the impairment of the Winx-1, Icewine-1 and Icewine-2 exploration wells (A$28.8m). Cash as at 30 June 2019 was A$6.7m, with 88 Energy raising A$6.75m post period, putting the Company on a much stronger footing heading into the potentially transformational Charlie well in Q1/20.
Companies: 88 Energy
PowerHouse Energy (PHE) has signed a collaboration agreement with Peel Environmental. This seeks to develop 11 DMG facilities at sites in the UK, primarily on Peel’s land, including the previously announced project at Peel’s Protos Energy Park on Merseyside. The collaboration is part of Peel’s strategy to develop ‘Plastic Parks’ where waste plastics that cannot be recycled are used to generate electric power and hydrogen rather than being sent to landfill.
Companies: Powerhouse Energy Group