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Research Tree provides access to ongoing research coverage, media content and regulatory news on HOLMEN AB-B SHARES. We currently have 6 research reports from 1 professional analysts.
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HOLMEN AB-B SHARES
HOLMEN AB-B SHARES
All key businesses post healthy performance/recovery
03 Nov 16
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.
Healthy Q2 performance; paper improvements continue
19 Aug 16
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.
All key businesses delivered in Q1 16
02 May 16
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.
Bottom-line marred by one-off expenses and paperboard disruptions
09 Feb 16
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).
No positive surprise unlike peers
06 Nov 15
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.
Forex benefits mask operating weakness
14 Aug 15
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).
The Slide Rule
12 Jan 17
What is The Slide Rule? The Slide Rule has been designed to dramatically simplify the identification of the best companies in the UK small/mid-cap sector by making a quantitative assessment of the relative potential of each company. At its core, The Slide Rule aims to identify those companies that create genuine shareholder value through strong returns on capital and solid growth, but also present a value opportunity with the potential tailwind of earnings momentum. Companies are assessed within a Quality, Value, Growth and Momentum (QVGM) framework.
The Monthly January 2017
09 Jan 17
Despite all the hullaballoo of the Brexit vote and the subsequent election of Donald Trump as the next US President, the UK stock market prospered last year, especially in the latter few months of 2016. The combination of a depreciating currency – making $ earnings more valuable in relative terms - and the Trump emphasis on infrastructure expenditure drove the stock market higher
10 for 17
09 Jan 17
As always at the start of a year, there are significant uncertainties about the year ahead but I think in 2017, the level of uncertainly has decisively moved up a gear. In fact, a leading economist at the LSE, Ethan Ilzetzki, was recently quoted as saying “I view the current global economic environment as the most uncertain in modern history”. Wow.
Minor delay but lower cost and better visibility enhance the investment profile
13 Jan 17
First oil at Stella is delayed by about a month, reducing the contribution of Stella to FY17 production by the same period. While this has an impact on FY17e free cash flow, this is negligible to our valuation. More importantly, FY17 opex are estimated at only US$18/boe, below our estimates of US$20/boe. There are opportunities to reduce opex further. Harrier is expected to reach first oil in 2018, one year earlier than we expected and at a cost of US$40 mm lower than we anticipated. The overall development cost is less than US$6.0/boe. Ithaca holds numerous discoveries around Stella that would be developed with a similar cost structure to Harrier.