Release Date: July 17, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- EBITDA for the company came in at NOK510 million, close to the all-time high of NOK537 million a year ago.
- BioSolutions achieved an all-time high for a single quarter with an EBITDA of NOK318 million.
- Strong cash flow from operating activities, amounting to NOK546 million in the second quarter.
- Fine Chemicals maintained a solid EBITDA margin of 46%, close to last year's level.
- Borregaard ASA (FRA:BO4, Financial) is well-capitalized with an equity ratio of 54% and a leverage ratio of 1.23.
Negative Points
- BioMaterials experienced lower sales prices and higher wood costs, resulting in a reduced EBITDA of NOK90 million compared to NOK143 million last year.
- Net currency effects were negative by NOK30 million compared to the second quarter last year.
- Higher depreciation, increased interest expenses, and other financial costs led to reduced earnings per share (NOK 2.45 compared to NOK2.84 last year).
- Operating revenues in BioMaterials were 6% lower than the same quarter last year.
- The company faces ongoing uncertainties in the global economy, with no significant upturn expected in the near term.
Q & A Highlights
Q: Can you comment on the ASP development for BioSolutions quarter-on-quarter? Why does it come down and what should we expect for Q3?
A: The decrease in average sales price (ASP) for BioSolutions from Q1 to Q2 is primarily due to a mix issue. Typically, construction sales, which are higher in volume during the summer quarters, drive down the average price. This trend has lessened as we have reduced sales into construction, but it still affects the average price calculation.
Q: Would you mind elaborating on the price increase within BioMaterials and the potential for further increases? Did you expect this increase moving out of Q1, or is it more so a reactive response to the improved market balance?
A: Historically, we had significant price increases post-COVID and during the Ukraine war due to cost escalations. Some of these increases are being returned to customers as costs normalize. However, higher wood costs this year have impacted margins more than expected. We still expect to sell more than we produce, which will influence future price negotiations. The reported price increases for the second half reflect these factors.
Q: Could you break down the negative currency effect on turnover and EBITDA by business? Have you expectations on this effect for the year?
A: We have not disclosed the effect by business area, but the hedging losses mainly impact operating revenues. The currency effect on operating revenues is slightly larger than on the EBITDA level.
Q: You have raised prices on cellulose grades with a 1% to 2% effect for the second half already. Are there any more opportunities to reprice further through the remainder of this year? And what is speaking in favor of your ability to send cost increases on to clients for 2025?
A: Typically, prices are set for the full year or six months at a time, so there are limited opportunities to adjust pricing in Q4 unless there are dramatic cost escalations. The market balance is becoming tight due to external incidents, which will impact negotiations for 2025.
Q: What are the main reasons for the reduced earnings per share compared to last year?
A: Higher depreciation, increased interest expenses, and other financial costs were the main reasons for the reduced earnings per share. Despite a solid EBITDA margin, these factors contributed to the lower earnings per share.
Q: Can you provide more details on the strong cash flow in the second quarter?
A: The strong cash flow from operating activities, amounting to NOK546 million, was mainly due to a significant reduction in working capital, particularly accounts receivable. This was offset by investments of NOK172 million and a dividend payment of NOK374 million.
Q: What is the outlook for BioSolutions for the remainder of the year?
A: The outlook for BioSolutions remains unchanged, with a forecasted sales volume of approximately 330,000 tonnes for the full year. The sales volume for Q3 is expected to be between 80,000 and 85,000 tonnes. The Biovanillin market will continue to be impacted by the high supply of synthetic vanillin products.
Q: How is the outlook for BioMaterials for the remainder of the year?
A: The outlook for BioMaterials is also unchanged. We expect the sales volume in 2024 to be higher than the production output and to increase the sales of highly specialized grades compared to 2023. The sales volume for Q3 is expected to be between 42,000 and 44,000 tonnes, a significant increase from Q2.
Q: What are the expectations for Fine Chemicals for the remainder of the year?
A: The outlook for Fine Chemicals remains unchanged. The sales volume for fine chemical intermediates will increase compared to 2023. Market conditions for advanced bioethanol continue to be favorable, with sales prices and volumes expected to be in line with 2023.
Q: What are the expected cost developments and impacts from recent investments?
A: Wood costs are expected to increase by roughly 8% in the second half compared to the first half. However, lower energy and other raw material costs in Q3 are expected to partly compensate for this increase. We will also benefit from investments in our biorefinery system to reduce CO2 emissions and improve energy efficiency and flexibility.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
