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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).
08 Dec 16
Elderstreet stake acquired 02 GENERAL NEWS Globalworth premium In this issue Venture capital firm Draper Esprit has taken a 30.8% stake in venture capital trust manager Elderstreet. Both investment managers focus on the technology sector and they will be able to co-invest. Elderstreet has investments in a number of AIM-quoted companies through its VCTs. The purchase was funded by an issue of Draper Esprit shares worth just over £250,000. Simon Cook, the chief executive of Draper Esprit, is a former partner at Elderstreet so he knows the business and the people who run it, although he did leave more than 14 years ago. Cook has previously acquired portfolios from 3i and Cazenove, two other firms where he has worked. Draper Esprit has an option to acquire the remaining shares in Elderstreet, which has more than £25m under management. Adding Elderstreet to the group enables Draper Esprit to offer investors a range of EIS funds, VCTs and an ISA qualifying listed evergreen patient capital fund. The enlarged group has venture capital assets under management of more than £350m. At the end of September 2016, Draper Esprit had a net asset value of 352p a share, which is similar to the current share price. The June 2016 flotation price was 300p a share. Draper Esprit is quoted on Ireland’s Enterprise Securities Market as well as AIM.
01 Nov 16
Since our last outlook note, Quadrise has begun to supply MSAR for extended LONO sea trials, paving the way for commercial adoption from calendar H217 onwards. In August it signed a memorandum of understanding with clients in the Kingdom of Saudi Arabia (KSA), which is a key enabler for progressing the production-to-combustion pilot there. In October it completed a placing and open offer raising a total of £5.25m (gross). This should enable it to transition comfortably to the commercial phase on successful completion of the LONO and KSA trials.
Dividends reinstated; is it time to turn (more) optimistic?
08 Dec 16
Glencore continues to surprise the markets, earlier with its fast pace of asset disposals and now with the reinstatement of dividends. The following were the key details shared with investors in a meeting held on 1 December 2016: 1/ completed $6.3bn of asset disposals; 2/ reduced net debt (including readily marketable inventories) by $12.5bn over the last 18 months; 3/ reiterated trading’s 2016 EBIT guidance towards the upper end of the $2.5-2.7bn range; 4/ expects healthy annualised 2016 free cash flows – even at Q1 16 commodity price lows; at 2017 forward prices, FCFs are guided to be $6.5bn; 5/ dividends would be reinstated from 2017 – with $1bn to be paid in two equal tranches in H1 and H2; thereafter (i.e. 2018 onwards), $1bn would be a fixed annual dividend payment (banking on the stability of trading’s cash flows) plus a minimum 25% of FCFs from industrial activities. Production guided to grow Source – Investor Presentation December 2016 While copper would be negatively impacted by the end-of-life impact at Alumbera and the Ernest Henry divestment, the output for all other commodities is guided to be higher (in varying degrees).
Conviction List Q4 2016
05 Oct 16
Since its inception in 2010, the Conviction List has outperformed the market in 13 of 18 periods and a reinvested Conviction List would have returned 255% against a Small Companies index that would have returned 130%. Our Conviction List returned 3.7% over the last quarter; this was set against the benchmark UK Small Companies index that returned 11.3% over the same period. Our Q4 portfolio reflects our outlook for a temporary sweet spot for UK growth during the second half of 2016. The downside risk from the uncertainty of the EU Referendum result has been countered by stimulus from the Bank of England, signs of a looser fiscal stance and an 18% YoY reduction in the Sterling Exchange Rate. Compressed corporate fixed income spreads continue to provide a valuation underpin for global equities.