• Net Income: SEK980 million for the second quarter.
• Return on Capital Employed: 16% for the first half of the year.
• Net Debt: 6% of equity, or SEK3.3 billion.
• Dividend Paid: SEK1.8 billion in the second quarter.
• Wood Prices: Increased, contributing to higher revenues in the forestry division.
• Electricity Division Profitability: Prices 20% below average, yet profitability doubled due to increased volumes and premium pricing.
• Log Costs: Increased by SEK200 million year-to-date.
• Board and Paper Division: Half of turnover and EBITDA from each; higher board volumes and good product mix offset high log costs.

• Warning! GuruFocus has detected 7 Warning Signs with HLMMF.

Release Date: August 15, 2024

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• Holmen AB (HLMMF) reported a strong financial position with a net debt of 6% of equity, even after paying SEK1.8 billion in dividends.
• The company achieved a 16% return on capital employed in the first half of the year, aligning with its historical average of 18%.
• Holmen AB (HLMMF) plans to buy back up to 3 million shares, indicating confidence in its financial stability and future prospects.
• The forestry division benefited from higher wood prices, leading to increased cash flow and profitability.
• The board and paper division showed improved order books and stable pricing, with a favorable product mix contributing to rising quarterly profits.

Negative Points

• The wood market in Sweden is experiencing supply shortages, leading to historically high price gaps between northern and southern regions.
• Demand for wood products remains weak globally, with prices moving sideways at best, driven by supply constraints rather than strong demand.
• The electricity division faced reduced profitability due to a 20% drop in Swedish electricity prices compared to the average second quarter.
• Holmen AB (HLMMF) faces challenges in the paper market, with industry operating rates around 75%, below the optimal 90% for profitability.
• The company is exposed to the spot market for energy, which can lead to volatility in profitability, as seen with the unhedged electricity prices.

Q & A Highlights

Q: Is the EBITDA of almost SEK500 million per quarter on the forest side a fair base given current prices for saw logs and pulpwood? A: Q2 is a clean underlying result, slightly higher due to a good mix with a lot of final harvesting. However, wood prices are still increasing, so higher sales prices are expected in the third quarter. - Anders Jernhall, CFO

Q: Can you maintain the favorable product mix in the board and paper division, or was it a one-time occurrence? A: Fluctuations in product mix are normal. While this quarter was favorable, maintaining a high-quality product mix is the goal, but it depends on market developments. - Anders Jernhall, CFO

Q: How much was the profit from electricity sales last year in the paper and board division, and will the Iggesund saw mill upgrade affect capacity given weak market conditions? A: Last year's electricity sales profit was close to SEK0.5 billion, not repeated this year. The Iggesund upgrade will focus on improving product and market mix rather than increasing capacity, depending on market conditions. - Henrik Sjolund, CEO

Q: What is the current demand and order book momentum for paper boards and graphic papers? A: The order book for paper board is better than last year, though not back to previous levels. Paper demand is stable, but industry operating rates are not sufficient. Prices are stable due to higher costs for producers. - Henrik Sjolund, CEO

Q: Can you explain the decision to buy back 3 million shares and the flexibility around this commitment? A: The Board authorized buying up to 3 million shares, representing 2% of shares, to maintain balance sheet strength. The decision is flexible, and further buybacks could be considered if authorized by the AGM. - Anders Jernhall, CFO

For the complete transcript of the earnings call, please refer to the full earnings call transcript.