Clean EBIT of ~SEK 61m

Strong market outlook short-term

Norvik acquisition could double EBIT

Clean EBIT of ~SEK 61m
Clean EBIT came in at SEK 60.7m, 90% above ABGSCe at SEK 32m. The acquired Norvik companies were consolidated from 15 May, which we had not assumed in our estimates. The acquired units contributed SEK 7.5m to EBIT. Clean EBIT for the “old” Bergs Timber was SEK 53m, up from SEK 20m in the same period last year. The improvement was primarily driven by higher prices for sawn wood products and internal improvement programs, while higher prices of wood affected the results negatively. The “old” Bergs Timber delivered a clean EBIT margin of 12.3%, which is the company’s best margin since 2007. We raise our estimates for Q4 and FY 18/19 on the back of higher prices and positive currency developments. However, we do see potential for higher wood costs in 2019.

Market fundamentals for the sawmill industry are strong
A strong global economy has resulted in increased demand for lumber and other forest products. The market fundamentals are strong with low stock levels and high exports. As a result, output prices for sawmills have trended upwards. However, higher wood costs are likely to follow higher output prices, but with a lag. In addition, the sawmill industry is cyclical and a slowdown in global economic activity would be negative for Bergs.

Transformative acquisition could double EBIT
On 15 May, Bergs Timber acquired several companies previously owned by Norvik Timber Industries. The transaction is transformational for the group and increases the sawmill capacity from ~530,000m3 to ~920,000m3 per year. In addition, it makes the company more vertically integrated, which could give higher margins and less volatile earnings. LTM ending 31 May, the acquired units had EBIT of SEK 118m, compared to Bergs at SEK 103m.

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