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Second quarter 2012

• Net sales amounted to SEK 2 440 million, compared with SEK 2 291 million in the previous quarter.
• Operating profit amounted to SEK 161 million, an increase of SEK 19 million compared with the previous quarter. All three business areas reported higher operating profit than in the previous quarter.
• Results for the quarter were charged with acquisition-related non-recurring costs of SEK 38 million. Adjusted for these non-recurring costs, operating profit totalled SEK 199 million.
• The company completed its acquisition of UPM’s packaging paper operation in Pietarsaari and Tervasaari, Finland.
• It was announced that Billerud and Korsnäs were to combine. The new company, BillerudKorsnäs, will be a leading player in primary fibre-based packaging materials and packaging solutions, with annual sales of approximately SEK 20 billion.

January-June 2012 compared with the same period in 2011

• Net sales totalled SEK 4 731 million, down 4%.
• Operating profit was halved to SEK 303 million, mainly as a result of lower prices.
• The 2012 AGM approved the Board of Directors’ proposed dividend of SEK 3.50 (3.50) per share for 2011.

Outlook

• At the beginning of the third quarter 2012, the order situation in the packaging paper segments was on average normal and is anticipated to remain stable over the next quarter.
• It is expected that price rises in sack and kraft paper, announced in the second quarter 2012, will show through in the second half of 2012.
• Non-recurring transaction costs pertaining to the combination with Korsnäs are thought likely to total approximately SEK 50 million, the major part of which is expected to be charged to the quarter in which the combination will take place. Added to these costs, financing and integration costs of a non-recurring kind will be incurred after the transaction is completed.
• Wood prices are anticipated to be lower in 2012 than in 2011.

Comments by Billerud’s CEO Per Lindberg:
Historic first half-year
“The first half-year of 2012 will go to history as the period in which we successfully concluded negotiations on two major strategic acquisitions. In January, we acquired UPM’s packaging paper operation, with ownership being transferred in June on approval by the competition authorities. This generated sales of SEK 168 million and an operating profit of SEK 10 million in the second quarter. On 20 June, we announced the combination with Korsnäs. In the transaction, Billerud will acquire Korsnäs shares from the current holder, Kinnevik, in exchange for cash and shares in Billerud. The combination represents a natural progression in consolidating the successful businesses of Billerud and Korsnäs in packaging materials and packaging solutions, with the objective of creating a strong international player in the packaging industry. The deal is conditional on approval by the AGM and the competition authorities.

It is pleasing to note that Billerud’s three business areas are performing better than in the first quarter and that the operating margin for our packaging papers is higher than 10%. Overall, Billerud reports sales of SEK 2 440 million and an operating margin of 7%. Our price increases are not yet reflected in earnings. Their impact is only expected to emerge during the next half-year.

Through our acquisitions, Billerud will become an even stronger partner for our customers. We would like our customers to see our expansion and strengthened position as something greatly to be welcomed. Billerud’s focus going forward will be to integrate our acquisitions in such a way as to offer customers an extended product portfolio and improved service and to the shareholders deliver the increased return that they expect.”

Billerud’s President and CEO Per Lindberg and CFO Susanne Lithander will present the interim report at a press and analyst conference at 11.00 CET on Thursday, 19 July.
Venue: Tändstickspalatset, Västra Trädgårdsgatan 15, Stockholm.

Billerud Finland Oy's acquisition of UPM's packaging paper operations at Pietarsaari and Tervasaari is now completed. Billerud Finland Oy is a wholly owned subsidiary of Billerud AB. The purchase price is around EUR 130 million.

The acquired operations will be consolidated as of 1 June 2012, and will be included in the Packaging & Speciality Paper business area.

In the January–June 2012 interim report, sales of the Billerud Group's market pulp will continue to be reported as a separate business area, that is Market Pulp. As of 1 July 2012, market pulp sales will not be reported separately but will be included in the Packaging and Speciality Paper business area.

Financial pro forma information will be published in the January–June 2012 interim report.

In 2011, the acquired operations' sales amounted to approximately EUR 220 million, and EBITDA was approximately EUR 18 million (pro forma). Annual depreciation is estimated to be approximately MEUR 6.5.

The transaction is financed through half cash and cash equivalents, half through raising loans within existing credit frameworks. The impact of the acquisition on Billerud's net debt/equity ratio will be +24 percentage points.

The acquisition has been described previously in a press release dated 1 February 2012 and 22 May 2012.

The requisite regulatory authorities have approved Billerud Finland Oy's acquisition of UPM's packaging paper operations at Pietarsaari and Tervasaari. Billerud Finland Oy is a wholly owned subsidiary of Billerud AB. The purchase price is around EUR 130 million.

“The acquisition strengthens our offering in packaging paper and provides us with a strong platform for the further development of smarter packaging solutions. Also, the acquisition sharply reduces our pulp exposure as we will purchase an annual pulp volume corresponding to around 85% of Billerud's present pulp sales volume. We also reduce our currency exposure,” says Per Lindberg, President and CEO of Billerud.

The transaction involves Billerud taking over one paper machine at Pietarsaari and one at Tervasaari, both in Finland. In 2011, sales amounted to around EUR 220 million (SEK 2 billion). Manufactured products are various packaging papers (sack/kraft paper) with extensive areas of use in the food, retail, construction and other industries.

Completion of the acquisition is expected to take place during the second quarter of 2012.

At Hispack, the largest packaging exhibition in Spain, two FibreForm based products won distinguished awards within the food and beverage categories. One was a three-dimensional pack for candy and the other a creative box for sparkling wine. The packaging producer behind the success was Cycobox, a company part of the Leca Graphics group.

Since 1995, the Líderpack Awards have been the most highly respected awards in Spain in the Packaging and . The elected winners then represent Spain in the Worldstars for Packaging, which are the most important awards in the world of packaging.

“It has been a wonderful experience to work with the FibreForm paper. It has allowed us to create innovative shapes and to offer surprising packaging solutions which is hand in hand with the spirit of Leca Graphics.” says Ramón Lantero, Chief Executive from Cycobox of the Leca Graphics Group.

“We are delighted that people from the industry who are packaging professionals have selected FibreForm-based products for two of the awards. This clearly shows that the shelf appeal and the new brand image opportunities that smarter packaging can offer are attractive on the market.” says Nuría Renom, Business Development Manager, Sustainable Packaging Solutions at Billerud.

FibreForm is FSC®-certified and is made from renewable raw materials that also ensure compostable and recyclable packaging.

The handwritten screenplay for Fanny and Alexander, diary entries and letters are among Ingmar Bergman’s personal documents now being rescued for posterity thanks to Billerud. The secret? Smart packaging, of course!

In 2002 the Ingmar Bergman Foundation took over more than 40 packing boxes containing documents from the master director’s private archive on the island of Fårö. Most of the material was handwritten, which caused the foundation a lot of problems.

“The fact is that ordinary packing boxes literally suck the ink from documents stored in them. In short, Bergman’s notes ran the risk of disappearing into thin air thereby destroying a priceless cultural treasure,” says Jimmy Nyström, Business Development Director at Billerud.

The solution to the problem was Billerud Pure Archive, an acid free material of primary fibre, which is manufactured at Gruvön and protects paper documents from ageing.

“Billerud Pure Archive is a good example of our use of intelligent materials and smart packaging; it’s all about conserving, not storing. Many museums and institutions have digitised their archives but have not yet found a good solution for conserving the original documents. This means there’s a global market waiting to be developed and Billerud Pure Archive gives us a unique product to offer,” says Mikael Andersson, Sales and Marketing Director of Packaging Boards at Billerud.

Jan Holmberg, CEO of the Ingmar Bergman Foundation, is of course pleased that the old archive boxes are now being replaced by new boxes, with each box tailored to the measurements of the conserved documents. These include everything from customs documents for the export of yoghurt, to post from neighbours about snow clearing on Ymervägen outside Bergman’s former home in the Stockholm suburb of Djursholm, but above all, the notebooks that were the basis of Bergman’s theatre and film productions.

Jan Holmberg has two favourites:

“The screenplay for Love with no Lovers, which Bergman himself finally rejected and aptly wrote in an accompanying note that he ‘consigned the script to the archive department for unrealisable visions and dreams’. And the other is the stock of unused notebooks. It’s a titillating thought to reflect on what Bergman had planned to write in these books,” says Jan Holmberg.

The jewel in the foundation’s archive – listed at Unesco The Memory of the World Register – at the Film House in Stockholm is the workbook for the Oscar-winning film Fanny and Alexander, which Per Lindberg, CEO of Billerud, carefully leafs through when he visits the foundation.

“It’s a fantastic archive and of course a great honour for us to be involved in conserving this cultural treasure. Standing here with Bergman’s handwritten notes and knowing that they will now be conserved for many centuries thanks to a Billerud innovation is naturally very gratifying,” says Per Lindberg.

Link to filmclip about Billerud Pure Archive and the Ingmar Bergman Foundation

Adoption of income statement and balance sheet, resolution on dividend
At the Annual General Meeting, the income statement and the balance sheet as well as the consolidated income statement and consolidated balance sheet for 2011 were adopted. In accordance with the Board’s proposal, the meeting decided that SEK 3.50 per share should be distributed to the shareholders and that the record date for the dividend should be 14 May 2012. The dividend is estimated to be delivered from Euroclear Sweden AB on 18 May 2012.

Election of Board members and Chairman of the Board
The meeting decided to re-elect Ingvar Petersson, Helena Andreas, Mikael Hellberg, Gunilla Jönson, Michael M.F. Kaufmann, Ewald Nageler and Yngve Stade, and to elect Lennart Holm and Jan Homan as ordinary Board members and that no deputy members were to be elected. The meeting also decided to re-elect Ingvar Petersson as Chairman of the Board and Michael M.F. Kaufmann as Deputy Chairman of the Board.

Nominations Committee for 2013 Annual General Meeting
The meeting decided that the nomination committee shall comprise of a maximum of four members. The Chairman of the Board shall be the secretary of the Nomination Committee. During the autumn of 2012, the Chairman shall contact the major shareholders (judged by size of shareholding) regarding the formation of a Nomination Committee. The names of the members of the Nomination Committee, and the names of the shareholders they represent, shall be announced no later than six months before the 2013 Annual General Meeting.

The introduction of a Long Term Incentive Programme and transfer of shares under the Long Term Incentive Programme ("LTIP 2012")
The meeting decided on the introduction of LTIP 2012 and of transfer of shares under LTIP 2012. LTIP 2012 comprises a total of maximum 20 managers and other key employees within the Billerud Group. To participate in LTIP 2012, the participants must purchase Billerud shares at market price on NASDAQ OMX Stockholm. Previously held Billerud shares may also be included in the required investment. Thereafter, the participants will, after a three year vesting period, free of charge, be allotted Billerud shares, provided that certain conditions are fulfilled, such as certain performance conditions relating to financial targets during the period 2012-2014.

Authorisation for the Board to decide on the transfer of the company’s own shares
The Meeting decided to authorise the Board, during the period up to the next Annual General Meeting, on one or more occasions and with deviation from preferential rights for shareholders, to decide on transfer of no more than the number of Billerud shares that the company holds at the time of the Board’s decision, either to a third party as payment in connection with acquisition of companies, and/or as a transfer on the stock exchange in order to raise liquid funds for payment in connection with such acquisitions. A transfer on the stock exchange may only be carried out at a price per share within the range of share prices registered for the company at any given time. The company’s existing holding of own shares at the time of the issuance of the notice to the Annual General Meeting was 1,720,314 shares.

Decision regarding amendment of the Articles of Association regarding the name of the company
The Meeting decided to amend the Articles of Association so that the company name shall be Billerud Aktiebolag (publ).

Other
Furthermore the meeting decided on discharge from personal liability for Board Members and the CEO for their administration for the year 2011, on fees for Board Members and remuneration for Committee work and fees for the auditors, and to approve the Board’s proposal for guidelines for remuneration to senior executives.

“The order situation has improved in our packaging paper segments and is now at a normal level. However, our sales of SEK 2 291 million and operating margin of 6% reflect a low level of prices. In local currency, prices for packaging paper fell by around 2% in the first quarter, as a result of pressure on prices during the previous quarter. We are today announcing an increase of EUR 80 per tonne in the prices of our sack and kraft paper, with effect from 1 June.

As we disclosed earlier, we reached agreement with UPM-Kymmene on 1 February concerning the acquisition of its packaging paper operations in Pietarsaari and Tervasaari, at a cost of EUR 130 million. The acquisition will complement our current product offering and enable us to develop and strengthen our offering in renewable, smarter packaging.

Through the acquisition, we will also reduce our pulp exposure, in turn bringing down the volatility in our results. It also enables us to expand our EUR cost base. We are anticipating net annual synergies amounting to SEK 30 million, and that earnings per share will rise once the effects of the synergies are achieved. It is anticipated that the take-over of the acquired business will be completed in the second quarter.”

Metso will supply a new evaporation plant and an upgrade of an existing recovery boiler for Billerud Skärblacka AB’s Skärblacka mill outside Norrköping in Sweden. The goal is to strengthen the mill for the future by improving environmental performance and energy efficiency as well as to enable future company expansion. Metso’s delivery will contribute to this environmentally-oriented investment. The value of the order will not be disclosed.

Metso’s delivery will allow for a substantial increase in production capacity in the future. In addition, the mill’s energy efficiency will be improved leading to a significant reduction in consumption of fossil oil and external biofuels.

“This investment is very important for Billerud as the mill’s overall energy efficiency and environmental performance will improve significantly,” says Johanna Lindén, Director, Scandinavia from Metso.

The project will go through two project phases. The first is to install the new evaporation plant and the second to upgrade the recovery boiler. The entire project is scheduled for completion at the end of 2013.The order is included in Pulp, Paper and Power’s first quarter 2012 orders received.