Bergs Timber — Annual Report 2021

Feb 3, 2021

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Year-end report 1 January–31 December 2020

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SUMMARY

2

Year-end report 1 January–31 December 2020

**FOURTH QUARTER (1 OCTOBER–31 DECEMBER) ***

• Net sales increased by 38% to SEK 558 million (405). The higher net sales were related to higher sales volumes and higher sales prices.

• EBITDA amounted to SEK 78 million (6). Adjusted EBITDA (adjusted for items affecting comparability) amounted to SEK 78 million (9), an increase primarily related to higher margin for sawn products but also to higher sales volumes and higher sales prices for processed products. Adjusted EBITDA margin was 14.0% (2.2).

• Operating profit amounted to SEK 58 million (-7). Adjusted operating profit amounted to SEK 58 million (-4).

• Cash flow from operating activities amounted to SEK 51 million (2).

• Earnings per share, before and after dilution, was SEK 0.13 (-0.06). Earnings per share, before and after dilution, including discontinued operations, was SEK 0.13 (-0.09).

• Financial net debt totalled SEK -32 million (675) as of 31 December.

• The Board of Directors proposes an ordinary dividend of SEK 0.12 and an extra dividend of SEK 0.08 per share, for a total of SEK 0.20 (0.00) per share. The total proposed dividend is approximately SEK 69 million.

**FULL-YEAR (1 JANUARY–31 DECEMBER) ***

• Net sales increased by 5% to SEK 2,149 million (2,056), mainly related to higher sales volumes for processed wood products.

• EBITDA amounted to SEK 212 million (133). Adjusted EBITDA amounted to SEK 212 million (115). Lower sales volumes and sales prices for sawn products were offset by lower costs for raw material. Higher sales volumes to the DIY sector contributed positively. Adjusted EBITDA margin was 9.9% (5.6).

• EBITDA, including earnings from discontinued operations prior to the sale of the Swedish sawmills, amounted to SEK 251 million (172). Adjusted EBITDA amounted to SEK 264 million (154), corresponding to an adjusted EBITDA margin of 8.8% (4.8).

• Operating profit amounted to SEK 137 million (73). Adjusted operating profit amounted to SEK 137 million (55).

• Cash flow from operating activities, including discontinued operations, amounted to SEK 355 million (147).

• Earnings per share, before and after dilution, was SEK 0.30 (0.13). Earnings per share, before and after dilution, including discontinued operations, was SEK 0.49 (0.13).

*) The Swedish sawmill business was sold on 1 September 2020 and was recognised as discontinued operations. Comparative periods in the consolidated income statement have been restated. The consolidated income statement, balance sheet (current period) and key performance indicators reflect the continuing operations, unless otherwise indicated. For more information on discontinued operations, see pages 6 and 15. The comparison between periods for discontinued operations is impacted by the fact that the operations encompassed 8 months in the period January–December 2020. No discontinued operations have been recognised for the fourth quarter of 2020.

The Group’s key performance indicators

AMOUNTS IN SEK million	2020 Oct–Dec 3 months 2019 Oct–Dec 3 months	2020 Jan–Dec 12 months 2019 Jan–Dec 12 months
Net sales	558 405	2,149 2,056
EBITDA	78 6	212 133
Adjusted EBITDA (adjusted for items affecting comparability)	78 9	212 115
Adjusted EBITDA margin, %	14.0 2.2	9.9 5.6
Operating profit/loss	58 -7	137 73
Operating margin, %	10.4 neg	6.4 3.6
Adjusted operating profit	58 -4	137 55
Adjusted operating margin, %	10.4 neg	6.4 2.7
EBITDA incl. discontinued operations	78 3	338 172
Adjusted EBITDA incl. discontinued operations	78 6	264 154
Adjusted EBITDA margin incl. discontinued operations, %	14.0 0.9	8.8 4.8
Earnings per share, before and after dilution, SEK	0.13 -0.06	0.30 0.13
Earnings per share, including discontinued operations, SEK	0.13 -0.09	0.49 0.13
Equity per share, SEK	3.61 3.18	3.61 3.18

Note: For a reconciliation of alternative performance measures including adjusted EBITDA and adjusted operating profit and corresponding margins, see page 18.

BERGS TIMBER AB

Year-end report January–December 2020

CEO COMMENTS

3

Bergs reports strong earnings for the fourth quarter

BERGS REPORTS CONTINUED IMPROVED EARNINGS

Deliveries and order intake remained strong for the most of the Group’s products. Activity in the DIY sector and the RCE sector were high for the season. Continued low interest rates, and financial stimulus packages, contributed to positive market performance. Demand for sawn and planed wood products was unexpectedly strong in the second half of 2020, and the rate of production did not keep pace. This resulted in low inventories and price increases.

Deliveries of impregnated wood and garden products were good for the season. Similarly, deliveries and order intake for our window and door production were healthy. Our two Baltic sawmills, oriented on industrial customers, strengthened profitability in the fourth quarter with gradually rising sales prices. During the quarter, we also noted an improvement in our operations in the UK, the result of such events as the addition of several new customers in our port and distribution operations.

EBITDA for the fourth quarter totaled SEK 78 million, an improvement of SEK 72 million year-on-year. The improved earnings were attributable to higher sales volumes and margins for our products, especially for sawn product. EBITDA for the full year, including discontinued operations, totalled SEK 338 million, of which capital gains from the sale of the Swedish sawmill operations totalled SEK 87 million. EBITDA for continuing operations totalled SEK 212 million, which is an improvement year-on-year when adjusted EBITDA totalled SEK 115 million.

The earnings trend and cash flow for the year were strong. Net profit for the full year totalled SEK 169 million, and net debt decreased from SEK 675 million at the start of the year to net cash holdings of SEK 32 million at 31 December 2020. Bergs is thus well equipped to grow and develop its operations. Taking this strong financial position into account, the Board of Directors proposes an ordinary dividend of SEK 0.12 and an extra dividend of SEK 0.08 per share, totalling SEK 0.20 per share. The total proposed dividend is approximately SEK 69 million.

STRATEGIC OVERVIEW

The strategic overview begun during the autumn and will be communicated in early March.

FUTURE PROSPECTS

2021 will be marked by the ongoing pandemic as well. The continued strong market for construction and renovation benefits Bergs. We note healthy demand for our products in the first half of the year. Prices for raw materials in the form of sawn products and timber are rising. In our judgement, we will be able to offset increased raw materials costs with price increases in the currently strong market.

Vimmerby, 3 February 2021

Peter Nilsson

Chief Executive Officer

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EFFECTS OF COVID-19

After the easing of restrictions this summer, we are again seeing robust measures in all markets to slow the spread of COVID-19. These restrictions impact parts of society in different ways. Bergs operates in market and customer segments that to date have been negatively impacted to only a lesser extent, and in our opinion this will continue to be the case.

During the quarter, we had a small number of employees who fell ill with COVID-19. There have been no serious cases, and production has not been impacted.

BERGS TIMBER AB Year-end report January–December 2020

4

Net sales and operating profit

OCTOBER–DECEMBER 2020, COMPARED WITH OCTOBER– DECEMBER 2019

Net sales for the fourth quarter 2020 amounted to SEK 558 million (405). The increase of SEK 153 million was mainly attributable to higher sales volumes and sales prices for sawn and processed wood products.

EBITDA increased to SEK 78 million (6). Adjusted EBITDA amounted to SEK 78 million (9), corresponding to an adjusted EBITDA margin of 14.0% (2.2). The increase was primarily an effect of higher margins for the sawmills due to higher sales prices and sales volumes as well as lower raw materials costs. Higher sales volumes and sales prices to the DIY sector contributed positively.

Operating profit amounted to SEK 58 million (-7). Adjusted operating profit amounted to SEK 58 million (-4).

JANUARY–DECEMBER 2020, COMPARED WITH JANUARY– DECEMBER 2019

Net sales were SEK 2,149 million compared to SEK 2,056 million for the year-earlier period, up SEK 93 million. The increase was primarily attributable to higher sales volumes of processed wood products to the DIY sector.

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Cash flow and financing

Cash flow from operating activities for January–December, including discontinued operations, amounted to SEK 355 million (147). The cash flow effect of changes in working capital was SEK 132 million (38). The lower tied-up capital was mainly explained by lower stocks. Investments in property, plant and equipment amounted to SEK -69 million (-131). Cash flow from operating activities in the fourth quarter amounted to SEK 51 (2) million, negatively affected by seasonally high inventory levels.

The Group’s net financial debt at 31 December 2020 totalled SEK -32 million (net cash holdings), compared to SEK 675 million at 31 December 2019. The net debt/equity ratio was -0.03. The decrease in net debt was attributable to the sale of the Swedish sawmill business alongside higher earnings and lower working capital.

In conjunction with the sale of the Swedish sawmill business, repayments of SEK 364 million in term loans and SEK 70 million to Norvik pertaining to a vendor’s mortgage were made. The

EBITDA amounted to SEK 212 million (133). Adjusted EBITDA amounted to SEK 212 million (115), corresponding to an adjusted EBITDA margin of 9.9% (5.6). Lower sales volumes and sales prices for sawn products were offset by lower costs for raw material. Higher sales volumes to the DIY sector contributed positively.

Operating profit amounted to SEK 137 million (73). Adjusted operating profit amounted to SEK 137 million (55).

OCTOBER–DECEMBER 2020, COMPARED WITH JULY– SEPTEMBER 2020

Net sales for the fourth quarter 2020 amounted to SEK 558 million, compared with SEK 518 million for the third quarter 2020, up SEK 40 million. Seasonally lower sales volumes for processed wood products were offset by higher sales prices and sales volumes of sawn product.

EBITDA amounted to SEK 78 million (53), corresponding to an EBITDA margin of 14.0% (10.2).

Operating profit amounted to SEK 58 million (31).

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revolving credit facility limit was lowered to SEK 100 million from SEK 250 million as a consequence of reduced borrowing needs.

Summary of loans and credit facilities at 31 December 2020, SEK million:

Loan Limit	Repayments, years 0–1 1–2 2– Total utilised
Term loans	22 165 187
Revolving credit facility 100	0
Overdraft facilities 115	9
Total	22 165 – 196

Available cash and cash equivalents, including unutilised credit facilities, totalled SEK 447 million. In addition, there were granted but unused bank guarantee limits of SEK 25 million. The Group’s net financial items for the period from January to December totalled SEK -44 million (-33), of which SEK -15 million in unrealised currency exchange differences.

BERGS TIMBER AB Year-end report January–December 2020

SEGMENTS

5

Segment reporting

Bergs has identified two segments that are reported and monitored on an ongoing basis: Sawmills and Further processed. The distribution and port business in the UK and Group-wide activities are reported in Other. The now-sold Swedish sawmill business, previously reported in the Sawmills segment, is recognised as discontinued operations. Comparative periods have been restated; see pages 6 and 15 for more information on discontinued operations.

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SAWMILLS

Sawmills consist of Vika Wood in Latvia and Laesti in Estonia. The now-sold sawmills in Sweden are recognised as discontinued operations, see pages 6 and 15.

	Oct–Dec	Oct–Dec Jan–Dec	Oct–Dec Jan–Dec	Jan–Dec
Amounts in SEK m	2020	2019	2020	2019
Net sales	263	182	842	876
EBITDA	59	10	117	53
Operating profit	52	1	87	19
EBITDA margin, %	22.4	5.5	13.9	6.1
Operating margin, %	19.8	0.5	10.3	2.2
Sales volumes,
thousand m3	97	81	351	376
Production volume,
thousand m3	84	77	333	379

Net sales for the fourth quarter amounted to SEK 263 million (182). The increase was attributable to higher sales prices and sales volumes.

EBITDA for the fourth quarter was SEK 59 million (10). The increase was primarily attributable to higher sales prices and lower raw materials prices.

Net sales for the January–December period decreased to SEK 842 million (876). The decrease was related to lower sales volumes and sales prices. The lower sales volumes were attributable to the discontinued sawmills in Broakulla and Savi.

EBITDA for the period January–December totalled SEK 117 million (53). Lower sales prices and sales volumes were compensated by lower costs for raw material.

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BERGS TIMBER AB

Year-end report January–December 2020

6

SEGMENTS

FURTHER PROCESSED

Further Processed comprises Byko-Lat in Latvia, Bitus, Fågelfors and Woodworks by Bergs in Sweden. The product range comprises planed wood products for the DIY sector, doors and windows, prefabricated element- and modular houses, garden products and pellets. Bitus is one of Europe’s largest plants for wood preservatives. Fågelfors is a major producer of pellets and fire logs for the energy market. Woodworks by Bergs is a newly established sales company for further processed products in the Swedish market.

market.
Amounts in SEK m	Oct–Dec 2020 Oct–Dec 2019	Jan–Dec 2020 Jan– Dec 2019
Net sales	289 207	1,272 1,074
EBITDA	25 10	104 75
Operating profit	14 4	63 52
EBITDA margin, %	8.7 4.8	8.2 7.0
Operating margin, %	4.8 1.9	5.0 4.8

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OTHER

Other consists of the distribution and port business in the UK and Group-wide activities.

Net sales for the fourth quarter amounted to SEK 289 million (207). The increase was primarily attributable to higher sales volumes and sales prices for the DIY sector.

EBITDA for the fourth quarter was SEK 25 million (10). The higher earnings were mainly attributable to higher sales volumes and sales prices as well as lower costs for raw material.

Net sales for the January–December period increased to SEK 1,272 million (1,074). The increase was mainly due to higher sales volumes and the pellet business that was acquired in the second quarter of 2019.

EBITDA for the period January–December totalled SEK 104 million (75). The higher earnings were mainly attributable to higher sales volumes and lower costs for raw material.

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Adjusted EBITDA amounted to SEK -9 million (-13), whereof UK was SEK 14million (6).

Net sales for the period January–September 2020 amounted to SEK 254 million (208). EBITDA amounted to SEK -9 million (8).

Discontinued operations

The Swedish sawmill business was sold on 1 September 2020 and is recognised as discontinued operations. For more information on discontinued operations, see page 15.

	2020,	2019	2020	2019,
Amounts in SEK m	Oct–Dec	Oct–Dec	Jan–Dec Jan–Dec
Net sales	–	282	858	1,150
EBITDA	–	-3	126	39
Adjusted EBITDA	–	-3	52	39
Operating profit/loss	–	-15	91	5
Adjusted operating profit	–	-15	34	5
Adjusted EBITDA margin,
%	–	neg	6.1	3.4
Adjusted operating
margin, %	–	neg	4.0	0.4

Net sales for the January–December period decreased to SEK 858 million (1,150). The decrease was primarily attributable to lower sales volumes as a consequence of the sale of the sawmills, as well as lower sales prices.

EBITDA for the period January–December totalled SEK 126 million (39). Adjusted EBITDA amounted to SEK 52 million (39). Lower sales prices were offset by lower costs for raw material.

BERGS TIMBER AB

Year-end report January–December 2020

OTHER INFORMATION

7

Other information

TAX

Recognised tax for the period January–December 2020 was SEK 12 million (3). The effective tax rate was -13 per cent, lower than Sweden’s corporate tax rate. The lower effective tax rate was attributable to no tax having been recognised for the Baltic companies.

In Latvia and Estonia, the corporate income tax is 0 per cent on reinvested profits. Corporate tax is applicable and payable when dividends are distributed. No corporate income taxes have been recognised for the Group companies in the Baltics. Unrecognised deferred taxes regarding undistributed profits in the Baltic companies totalled approximately SEK 70 million at 31 December 2020.

After the sale, Bergs consists of wood processing operations in wood preservatives, planing, buildings, windows, doors, garden products and pellets. Net sales total approximately SEK 2,100 million on an annual basis, with a margin that over time has been higher and more stable than that reported by the Swedish sawmill business. In addition, Bergs conducts sawmill business in Latvia and Estonia with annual production of approximately 350,000 cubic metres, as well as port and distribution operations in the UK.

For further information on the effects of the sale, refer to Note 3.

EVENTS AFTER THE END OF THE QUARTER

There are no events after the end of the quarter to be reported.

SEASONAL FLUCTUATIONS

Bergs’s business is subject to seasonal fluctuations. The demand for processed wood products in the construction sector is generally higher in April–October. The demand for sawn products is normally higher in March–June and September–November. Sales volumes during the winter and summer months are normally lower. The market for pellets correlates to the winter season. The production volume in the sawmills is lower in the third quarter as a result of the summer holidays and maintenance work.

DIVESTMENT OF THE SWEDISH SAWMILL BUSINESS

The sale of Bergs’s Swedish sawmill business to Vida was completed on 1 September. The transaction encompassed the sawmills in Orrefors, Vimmerby and Mörlunda. All personnel employed at each sawmill and in the purchasing organisation for raw materials were offered employment at Vida. Vida also acquired the assets of the already discontinued operation at Gransjö.

The total purchase consideration for the operations, including the working capital involved, was approximately SEK 390 million, of which SEK 303 million pertained to non-current assets. Earnings from the sale amounted to SEK 87 million.

The transaction, taken together with the liquidation of other working capital, means that Bergs’s financial net debt has been substantially reduced. Net debt at 31 December totalled SEK -32 million (net cash holdings), corresponding to a net debt/equity ratio of approximately -3 per cent.

PARENT COMPANY

The activities of the Parent Company pertain to the management of shares in subsidiaries, Group-wide administrative tasks and Group financing. Operating loss for the Parent Company for the January–December period amounted to SEK -23 million (profit: 1).

PROPOSED DIVIDEND

The Board of Directors proposes that the Annual General Meeting resolve an ordinary dividend of SEK 0.12 and an extra dividend of SEK 0.08 per share, for a total of SEK 0.20 (0.00) per share. The total proposed dividend is approximately SEK 69 million.

2021 ANNUAL GENERAL MEETING

The Annual General Meeting for 2020 financial year will be held on 5 May 2021. Additional information on time and venue will be indicated in the notice to attend, which will be published on the Bergs Timber website.

CALENDAR

CALENDAR
Interim Report, January–March 2021	5 May 2021
Annual General Meeting	5 May 2021
Interim Report, January–June 2021	29 July 2021
Interim Report, January–September 2021	28 October 2021

This year-end report has not been subject to review by the company’s auditors.

The undersigned declare that the interim report provides a fair review of the Parent Company’s and Group’s operations, financial position and earnings and describes the material risks and uncertainty factors facing the Parent Company and the Group companies.

Vimmerby, 3 February 2021

Peter Nilsson Chief Executive Officer

Further information regarding the year-end report can be provided by the CEO, Peter Nilsson, on telephone number +46 70 315 09 27 or CFO, Anders Marklund, on +46 70 284 47 96.

This information in this year-end report is such that Bergs Timber AB (publ) is required to disclose pursuant to the EU’s Market Abuse Regulation. The information was released for publication on 3 February 2021 at 8:30 a.m. CET. The year-end report is available on the company’s website, www.bergstimber.com

Bergs Timber AB (publ), corporate registration no: 556052-2798, Stora Torget 3, SE-598 37 Vimmerby, Sweden. Tel: +46 (0)10-199 84 00

BERGS TIMBER AB

Year-end report January–December 2020

INCOME STATEMENT AND BALANCE SHEET

8

Condensed consolidated income statement

statement
	2020	2019	2020	2019
Amounts in SEK m (Pertains to continuing operations	Oct–Dec	Oct–Dec	Jan–Dec	Jan–Dec
unless otherwise stated)	3 months	3 months	12 months	12 months
Net sales	558	405	2,149	2,056
Changes to products in process
and finished goods	-10	12	-30	18
Other operating income	5	6	5	42
Total	553	423	2,124	2,116
Operating expenses
Raw materials and consumables	-309	-287	-1,311	-1,431
Other external costs	-93	-70	-341	-298
Personnel costs	-73	-59	-260	-254
Depreciation/amortisation and impairment	-20	-14	-75	-60
Other operating expenses	0	0	0	0
Total operating expenses	-495	-430	-1,987	-2,043
Operating profit/loss	58	-7	137	73
Finance income	1	0	1	1
Financial expenses	-23	-14	-45	-34
Profit/loss after financial items	36	-21	93	40
Tax on profit for the period	8	1	12	3
Profit/loss for the period from continuing operations	44	-20	105	43
Profit/loss from discontinued operations, net after tax	0	-11	64	2
Profit/loss for the period	44	-31	169	45
Attributable to
Parent Company shareholders	44	-31	169	45
Non-controlling interests	–	–	–	–
Earnings per share, before and after dilution, continuing
operations, SEK	0.13	-0.06	0.30	0.13
Earnings per share, before and after dilution, including
discontinued operations, SEK	0.13	-0.09	0.49	0.13
Average number of shares, thousands	346,728	346,728	346,728	343,758

*) When calculating earnings per share, the average number of shares held is used

BERGS TIMBER AB Year-end report January–December 2020

INCOME STATEMENT AND BALANCE SHEET

9

Statement of comprehensive income (net after tax)

	2020	2019	2020	2019
	Oct–Dec	Oct–Dec	Jan–Dec	Jan–Dec
Amounts in SEK m	3 months	3 months	12 months	12 months
Profit/loss for the period	44	-31	169	45
Change in hedge reserve (net after tax)	0	3	2	-1
Translation differences	-19	-13	-22	22
Comprehensive income for the period	25	-42	149	66
Attributable to:
Parent Company shareholders	25	-42	149	66
Non-controlling interests	–	–	–	–

BERGS TIMBER AB Year-end report January–December 2020

INCOME STATEMENT AND BALANCE SHEET

10

Condensed consolidated balance sheet

Amounts in SEK m	31 Dec 2020 31 Dec 2019
ASSETS
Non-current assets
Intangible assets	187 193
Property, plant and equipment, incl. right-of-use assets	665 948
Financial assets	1 3
Deferred tax assets	6 6
Total non-current assets	859 1,150
Current assets
Inventory	349 667
Current receivables	241 328
Cash and bank balances	242 86
Total current assets	832 1,081
TOTAL ASSETS	1,691 2,231
Equity and liabilities
Equity	1,251 1,102
Liabilities
Non-current liabilities
Interest-bearing liabilities	168 604
Other non-current liabilities and provisions	5 2
Deferred tax liabilities	19 17
Total non-current liabilities	192 623
Current liabilities
Interest-bearing liabilities	42 157
Non-interest bearing liabilities	206 349
Total current liabilities	248 506
TOTAL EQUITY AND LIABILITIES CHANGES IN EQUITY *) Amounts in SEK m	1,691 2,231 2020 Jan–Dec 12 months 2019 Jan–Dec 12 months
Equity, opening balance	1,102 1,052
New share issue after issue expenses	– 18
Dividend paid	– -34
Comprehensive income for the period	149 66
Total equity at the end of the period	1,251 1,102

*) There is no minority.

BERGS TIMBER AB Year-end report January–December 2020

CASH FLOW STATEMENT

11

Condensed cash flow statement (incl. discontinued operations*)

Amounts in SEK m	2020 Oct–Dec 3 months	2019 Oct–Dec 3 months	2020 Jan–Dec 12 months	2019 Jan–Dec 12 months
Operating activities
Profit/loss after financial items, incl. discontinued operations	36	-36	184	45
Adjustments for non-cash items**	42	22	39	64
Income taxes paid	0	0	0	0
Cash flow from operating activities before changes in working capital	78	-14	223	109
Change in inventory	-70	-20	181	11
Change in operating receivables	109	56	79	71
Change in operating liabilities	-66	-20	-128	-44
Cash flow from operating activities	51	2	355	147
Acquisition of subsidiaries	–	–	–	-25
Acquisition of property, plant and equipment	-11	-35	-69	-131
Sale of operations	–	–	390	–
Sale of property, plant and equipment	0	11	6	11
Change in financial assets	0	8	0	8
Cash flows from investing activities	-11	-16	327	-137
Change in financial receivables and liabilities	1	-5	-524	35
Dividend paid	–	–	–	-34
Cash flow from financing activities	1	-5	-524	1
Cash flow for the period	41	-19	158	11
Cash and cash equivalents at start of period	204	107	86	74
Translation differences in cash and cash equivalents	-3	-2	-2	1
Cash and cash equivalents at end of period	242	86	242	86

*) All balance items have not been fully allocated to discontinued operations since the Swedish sawmill business was operated in the same legal entity as other continuing operations. Therefore, the cash flow statement includes the discontinued operations.

**) Pertains primarily to depreciation and earnings from the sale of operations.

BERGS TIMBER AB Year-end report January–December 2020

KEY PERFORMANCE INDICATORS

12

The Group's key performance indicators and targets

and targets
Amounts in SEK m	Financial targets	2020 Oct–Dec 3 months	2019 Oct–Dec 3 months	2020 Jan–Dec 12 months	2019 Jan–Dec 12 months
Net sales		558	405	2,149	2,056
EBITDA		78	6	212	133
Adjusted EBITDA		78	9	212	115
Adjusted EBITDA margin, %	>7	14.0	2.2	9.9	5.6
Operating profit/loss		58	-7	137	73
Operating margin, %		10.4	neg	6.4	3.6
Adjusted operating profit		58	-4	137	55
Adjusted operating margin, %		10.4	neg	6.4	2.7
Return on capital employed, %, 12 months	>10	-	–	8.3	4.1
Earnings per share, SEK		0.13	-0.06	0.30	0.13
Earnings per share, incl. discontinued operations,
SEK		0.13	-0.09	0.49	0.13
Interest-bearing net debt		-32	675	-32	675
Net debt/equity ratio	<1.0	neg	0.61	neg	0.61
Equity/assets ratio, %		74.0	49.4	74.0	49.4
Average number of shares, thousands		346,728	346,728	346,728	343,758
Equity per share, SEK		3.61	3.18	3.61	3.18

BERGS TIMBER AB Year-end report January–December 2020

PARENT COMPANY

13

Condensed Parent Company statement of income

income
Amounts in SEK m	2020 Jan–Dec 12 months 2019 Jan–Dec 12 months
Other operating income	8	29
Total	8	29
Operating expenses
Other external costs	-15	-12
Personnel costs	-16	-16
Depreciation	0	0
Other operating expenses	0	0
Total operating expenses	-31	-28
Operating profit/loss	-23	1
Finance income	9	400
Financial expenses	-41	-420
Profit after financial items	-55	-19
Appropriations	145	19
Profit before tax	90	0
Tax on profit for the period	-19	-1
Profit/loss for the period	71	-1

Condensed Parent Company balance sheet

Amounts in SEK m	2020 31 Dec 2019 31 Dec	2020 31 Dec 2019 31 Dec
Assets
Property, plant and equipment	1	0
Financial assets	1,136	1,332
Total non-current assets	1,137	1,332
Receivables from Group companies	160	222
Other current receivables	4	15
Cash and bank balances	196	22
Total current assets	360	259
TOTAL ASSETS	1,497	1,591
Liabilities and equity
Equity	936	865
Non-current liabilities	165	582
Current liabilities	396	144
TOTAL EQUITY AND LIABILITIES	1,497	1,591

BERGS TIMBER AB Year-end report January–December 2020

NOTES

14

Notes

1. ACCOUNTING POLICIES

This year-end report for the Group has been prepared in accordance with IAS 34 Interim Financial Reporting and the Swedish Annual Accounts Act, and for the Parent Company in accordance with the Annual Accounts Act. Other accounting policies and calculation methods that are applied for the Group and the Parent Company conform to the principles that were used when preparing the most recent annual report for 2019; refer to pages 56–62. There are certain new and changed standards and interpretations that will enter into force in 2020 or later, but these are not considered to have any significant impact on the company’s accounts. IFRS 3 Business acquisitions may affect to the extent that future acquisitions in certain cases may be reported as asset acquisitions instead of business acquisitions. Disclosures according to IAS 34 Interim Financial Reporting are provided both in notes and elsewhere of the interim report. Amounts in brackets refer to the amount for the same period in the previous financial year, unless otherwise stated. There may be differences due to rounding.

2. EXTERNAL NET SALES BY MARKET

Income is recognised at a point in time, normally upon delivery, and after the sale of the Swedish sawmills, income essentially pertains only to sawn and processed wood products.

only to sawn and processed wood products.
January–December 2020 Amounts in SEK m Sawmills Further processing Other Internal sales	Group total
Sweden 5 268 0 -61	212
UK 19 303 254 -118	458
Baltics 454 48 0 -21	481
Rest of Europe 117 542 0 -18	641
Rest of world 247 111 0 -1	357
Total 842 1,272 254 -219	2,149
January–December 2019 Amounts in SEK m Sawmills Further processing Other Internal sales
	Group total
Sweden 0 167 0 -14	153
UK 29 426 207 -74	588
Baltics 489 13 0 -2	500
Rest of Europe 120 445 0 -8	557
Rest of world 238 23 0 -4	257
Total 876 1,074 207 -102	2,056

3. DISCONTINUED OPERATIONS

On 1 September 2020, the sale the Swedish sawmill business to Vida Aktiebolag was completed. The transaction encompassed the sawmills in Orrefors, Vimmerby and Mörlunda. Vida also acquired the assets of the already discontinued operation at Gransjö. The purchase consideration, including liabilities assumed, amounted to SEK 390 million. The purchase consideration was paid in cash and has impacted the Group’s cash and cash equivalents in a corresponding amount. Earnings from the sale amounted to SEK 87 million including transaction costs.

The Swedish sawmill business was recognised as discontinued operations. Comparative periods in the consolidated income statement are restated to reflect the classification of the Swedish sawmill business as discontinued operations. Profit for the period, net after tax, from discontinued operations are presented as a single amount in the consolidated income statement.

BERGS TIMBER AB Year-end report January–December 2020

15

NOTES

Net earnings from discontinued operations

Amounts in SEK m	2020 Oct–Dec 3 months 2019 Oct–Dec 3 months	2020 Jan–Dec 12 months 2019 Jan–Dec 12 months
Net sales	– 282	858 1,150
Earnings from the disposal	– –	87 –
Expenses*	– -285	-819 -1,111
EBITDA	– -3	126 39
Depreciation	– -11	-35 -34
Operating profit/loss	– -14	91 5
Taxes	– 3	-27 -3
Net earnings from discontinued operations Assets and liabilities sold	– -11	64 2

Amounts in SEK m

Amounts in SEK m
Property, plant and equipment, incl. right-of-use assets	210
Inventory	119
ASSETS	329
Interest-bearing liabilities, non-current	2
Interest-bearing liabilities, current	15
Other current liabilities	9
Liabilities	26
Disposed net assets	303
Impact on cash and cash equivalents, purchase consideration	390

4. RESULTS AND KEY PERFORMANCE INDICATORS—CONTINUING AND DISCONTINUED OPERATIONS

	2020	2019	2020	2019
	Oct–Dec	Oct–Dec	Jan–Dec	Jan–Dec
Amounts in SEK m	3 months	3 months	12 months	12 months
Net sales	558	687	3,007	3,206
Continuing operations	558	405	2,149	2,056
Discontinued operations	–	282	858	1,150
Adjusted EBITDA	78	6	264	154
Continuing operations	78	9	212	115
Discontinued operations	–	-3	52	39
Adjusted EBITDA margin, %	14.0	0.9	8.8	4.8
Continuing operations	14.0	2.2	9.9	5.6
Discontinued operations	–	neg	6.1	3.4
Adjusted operating profit	58	-19	171	60
Continuing operations	58	-4	137	55
Discontinued operations	–	-15	34	5
Adjusted operating margin, %	10.4	neg	5.7	1.9
Continuing operations	10.4	neg	6.4	2.7
Discontinued operations	–	neg	4.0	0.4

BERGS TIMBER AB Year-end report January–December 2020

NOTES

16

5. FINANCIAL INSTRUMENTS BY CATEGORY

5. FINANCIAL INSTRUMENTS BY CATEGORY
Amounts in SEK m Level	Carrying amount 31 Dec 2020	Fair value 31 Dec 2020 Carrying amount 31 Dec 2019 Fair value 31 Dec 2019
Financial assets measured at fair value through profit or loss
Financial investments –	1 1 1 1
Financial assets at amortised cost
Trade receivables –	207 207 265 265
Other receivables –	12 12 28 28
Cash and cash equivalents –	242 242 86 86
Derivatives for hedge accounting
Derivatives 2	0 0 2 2
Financial liabilities measured at amortised cost	462 462 382 382
Liabilities to credit institutions –	200 200 680 680
Accounts payable –	96 96 210 210
Loans from Norvik 3	0 0 70 70
Earnout 3	10 10 9 10
Other liabilities –	21 21 31 31
Derivatives for hedge accounting
Derivatives 2	0 0 2 2
	327 327 1,002 1,003

The Group has a framework agreement with the primary bank for trade in derivatives. Fair value of foreign exchange forward contracts and currency option contracts are equal to the market value of the contracts at the balance sheet date, which is recognised under level 2. Liabilities to credit institutions run with variable interest and a market-based credit margin, which is why fair value corresponds to carrying amount. There are no financial instruments included in the transaction to divest the three Swedish sawmills. The difference between carrying amount and fair value of the liabilities of valuation level 3 is in this report a marginal amount. Derivatives used for hedge accounting have been of a marginal volume at the end of the reporting period as sales in foreign currency for the Swedish part of the group is estimated to a small amount following the divestment of the Swedish sawmills. The company stopped new hedging activity after the divestment since the sales in foreign currency more or less have ceased and as a consequence hedge accounting have also ceased.

Valuation levels:

• 1: Quoted prices in an active market for identical assets or liabilities, such as shares or obligations listed on the stock market.

2: Other observable inputs for the asset or liability than quoted prices included in Level 1, either direct (as quoted market prices) or indirect (obtained from quoted market prices), such as foreign exchange forwards or rate swaps.

• 3: Inputs for the asset or liability that is not fully based on observable market data.

6. INFORMATION ON RISKS AND UNCERTAINTIES

Price trends

The price trend for wood products is largely governed by how global consumption corresponds with global production. The cost of raw materials is a large component of the finished product's sales value, which is why the product is very sensitive to changes in prices for raw forestry materials. Raw material is best sourced locally and the supply and demand of raw material has a considerable effect on pricing in the short term.

COVID-19

The coronavirus crisis, the outcome and consequences of which are difficult to assess, has increased uncertainty and may impact the Group’s performance and profitability; refer to page 3.

Financial risks

Bergs Timber is exposed to financial risks, which are primarily related to liquidity and cash flow risks in conjunction with liquidity and liability management and currency risks in export transactions. A large part of the financing is dependent on fulfilling conventional financial undertakings. Regarding exposure to exchange rate risk, the Group’s policy states that normally 50–75 per cent of the expected currency flow for the next six months shall be hedged.

BERGS TIMBER AB Year-end report January–December 2020

NOTES

17

Cost of fixed assets

Owing to the existence of goodwill, the recognised cost of fixed assets tested for impairment. The test is based on our best assessment of the future performance. The testing performed in conjunction with the previous year-end report showed that there was no need for impairment. In light of the positive earnings performance in 2020, there are no indications of a need for impairment. A future negative deviation may affect the recognised cost of fixed assets. For a further description of impairment testing please, refer to page 74 of the 2019 Annual Report.

For a complete presentation of the identified risk as well as the company’s risk management efforts, refer to pages 28–30 of the 2019 Annual Report.

7. RELATED-PARTY TRANSACTIONS

Transaction with members of the Board, senior executives and related-party companies include advisory services, timber products and construction services as well as sales of mechanical equipment, by-products and impregnation services. All transactions took place at market value. The transactions did not have any material impact on the Group’s financial position or results.

The Parent Company has conducted transactions with the Group’s subsidiaries in the form of sales of management and administration services. The scope of transactions with related parties has not changed compared to the information provided in the 2019 Annual Report.

In September, the Parent Company amortised the vendor’s mortgage of SEK 70 million that the primary shareholder, Norvik, issued in connection with Bergs’s acquisition in May 2018 of Norvik’s operations in the Baltics and the UK. As a result of this payment, the entire purchase consideration has been settled with the exception of earnouts totalling SEK 10 million that will be paid pertaining to earnings for 2020. The purchase consideration will be paid by 30 June 2021 at the latest.

8. ALTERNATIVE PERFORMANCE MEASURES

Bergs Timber presents key performance indicators (KPI) in the interim report that supplement the financial measures defined according to IFRS, known as alternative performance measures (APM). The company believes that these performance measures provide valuable information to investors and the company’s management since they enable, among other things, measurement of the company’s performance, trends and financing. Because not all companies calculate financial key performance indicators in the same way, these are not always comparable. The alternative performance measures should be regarded as a supplement to the key performance indicators defined under IFRS. For further definitions and reasons for use, please refer to Note 32 in the 2019 Annual Report.

Definitions of key performance indicators

EBITDA	Operating profit before depreciation/amortisation and impairment of tangible and intangible assets.
EBITDA margin	EBITDA as a percentage of net sales
Adjusted EBITDA	Operating profit before depreciation/amortisation and impairment of tangible and intangible assets,
	adjusted for items affecting comparability.
Adjusted EBITDA margin	Adjusted EBITDA as a percentage of net sales
Operating profit	Earnings before financial items and tax
Operating margin	Operating profit as a percentage of net sales
Adjusted operating profit	Earnings before financial items and tax, adjusted for items affecting comparability
Adjusted operating margin	Adjusted operating profit as a percentage of net sales
Return on capital employed	Profit/loss after financial items plus financial expenses in relation to the average capital employed
Capital employed	Equity plus interest-bearing liabilities and provisions
Interest-bearing net debt	Interest-bearing liabilities and provisions less cash and cash equivalents and current investments
Net debt/equity ratio	Net interest-bearing liabilities in relation to equity
Equity/assets ratio	Equity as a percentage of the balance-sheet total
Equity per share	Equity in relation to the total number of shares outstanding
Items affecting comparability	Items affecting comparability comprise the financial effects from events or transactions with significant
	consequences that are relevant to understanding earnings when comparing between periods. Items
	affecting comparability encompasses items of a non-recurring nature and may be attributable to
	restructuring, depreciation, acquisitions and profit or loss from sales of operations.
Production volume	Nominal sawn volume in cubic metres less estimated offcuts and wastage in further internal production
	processes
Sales volumes	Nominal delivered volume in cubic metres (volume calculated before planing, if any)

BERGS TIMBER AB Year-end report January–December 2020

NOTES

18

RECONCILIATION TABLE FOR ALTERNATIVE PERFORMANCE MEASURES

Continuing operations

Continuing operations
Amounts in SEK m	2020 Oct–Dec 3 months 2019 Oct–Dec 3 months	2020 Jan–Dec 12 months 2019 Jan–Dec 12 months
Equity	– –	1,251 1,102
Interest-bearing liabilities	– –	210 761
Provisions	– –	3 5
Capital employed	– –	1,464 1,868
Profit after financial items	– –	93 40
Financial expenses	– –	45 34
Total	– –	138 74
Average capital employed	– –	1 666 1,789
Return on capital employed, %	– –	8.3 4.1
Interest-bearing liabilities, non-current	168 604	168 604
Interest-bearing liabilities, current	42 157	42 157
Total interest-bearing liabilities	210 761	210 761
Cash and cash equivalents	-242 -86	-242 -86
Interest-bearing net debt	-32 675	-32 675
Interest-bearing net debt	-32 675	-32 675
Equity	1 251 1 102	1 251 1 102
Net debt/equity ratio	neg 0.61	neg 0.61
Equity	1,251 1,102	1,251 1,102
Total assets	1,691 2,231	1,691 2,231
Equity/assets ratio, %	74.0 49.4	74.0 49.4
Operating profit/loss	58 -7	137 73
Depreciation, amortisation and impairment	20 14	75 60
EBITDA	78 7	212 133
Items affecting comparability	0 3	0 -18
Adjusted EBITDA	78 10	212 115
Net sales	558 405	2 149 2,056
Adjusted EBITDA margin, %	14.0 2.5	9.9 5.6
Operating profit/loss	58 -7	137 73
Net sales	558 405	2 149 2,056
Operating margin, %	10.4 neg	6.4 3.6
Operating profit/loss	58 -7	137 73
Items affecting comparability	0 3	0 -18
Adjusted operating profit/loss	58 -4	137 55
Net sales	558 405	2 149 2,056
Adjusted operating margin, %	10.4 neg	6.4 2.7

BERGS TIMBER AB Year-end report January–December 2020

19

NOTES

SPECIFICATION OF ITEMS AFFECTING COMPARABILITY

Continuing operations

Continuing operations
Amounts in SEK m	2020 Q4 2020 Q3 2020 Q2 2020 Q1 2019 Q4 2019 Q3 2019 Q2 2019 Q1
Settlement of negative goodwill	– – – – – – 11 –
Restructuringcosts	– – – – -3 -5 – –
Earnout reversed	– – – – – 15 – –
Impact on EBITDA	– – – – -3 10 11 –
Impact on operating profit	– – – – -3 10 11 –

Items affecting comparability in Q2–Q3 2019 are recognised in the Other segment. The item affecting comparability in Q4 2019 is recognised in the Sawmills segment.

RECONCILIATION TABLE FOR ALTERNATIVE PERFORMANCE MEASURES

Discontinued operations

Discontinued operations
	2020	2019	2020	2019
	Oct–Dec	Oct–Dec	Jan–Dec	Jan–Dec
Amounts in SEK m	3 months	3 months	12 months	12 months
Operating profit/loss	–	-15	91	5
Depreciation, amortisation and impairment	–	12	35	34
EBITDA	–	-3	126	39
Items affecting comparability	–	0	-74	–
Adjusted EBITDA	–	-3	52	39
Net sales	–	282	858	1,150
Adjusted EBITDA margin, %	–	neg	6.1	3.3
Operating profit/loss	–	-15	91	5
Net sales	–	282	858	1,150
Operating margin, %	–	neg	10.6	0.4
Operating profit/loss	–	-15	91	5
Items affecting comparability	–	0	-57	–
Adjusted operating profit	–	-15	34	5
Net sales	–	282	858	1,150
Adjusted operating margin, %	–	neg	4.0	0.4
EBITDA continuing operations	78	6	212	133
EBITDA discontinued operations	-	-3	126	39
EBITDA including discontinued operations	78	3	338	172
Adjusted EBITDA continuing operations	78	9	212	115
Adjusted EBITDA discontinued operations	-	-3	52	39
Adjusted EBITDA including discontinued operations	78	6	264	154
Net sales continuing operations	558	405	2,149	2,056
Net sales discontinued operations	-	282	858	1 150
Net sales including discontinued operations	558	687	3,007	3,206
Adjusted EBITDA-margin including discontinued
operations	14.0	0.9	8.8	4.8

BERGS TIMBER AB

Year-end report January–December 2020

NOTES

20

SPECIFICATION OF ITEMS AFFECTING COMPARABILITY

Discontinued operations

Discontinued operations
Amounts in SEK m	2020 Q4 2020 Q3 2020 Q2 2020 Q1 2019 Q4 2019 Q3 2019 Q2 2019 Q1
Earnings from sale of sawmills	– 87 – – – – – –
Closure of sawmill	– – – -13 – – – –
Impact on EBITDA	– 87 – -13 – – – –
Depreciation of non-current assets	– – – -17 – – – –
Impact on operating profit	– 87 – -30 – – – –

9. QUARTERLY OUTCOME BY SEGMENT, CONTINING OPERATIONS

Segments are monitored and reported including operating profit.

Statement of income Amounts in SEK m	2020 Q4 2020 Q3 2020 Q2 2020 Q1 2019 Q4 2019 Q3 2019 Q2 2019 Q1
Net sales	558 518 545 528 405 463 619 569
Sawmills	263 175 202 202 182 171 267 256
Further Processed	289 339 342 302 207 265 333 269
Other	69 80 46 59 46 52 56 54
Intra-Groupdeliveries	-63 -76 -45 -35 -30 -25 -37 -10
EBITDA	78 53 52 29 7 31 51 44
Sawmills	59 18 26 14 7 2 13 28
Further Processed	25 31 32 16 10 21 27 17
Other	-6 4 -6 -1 -10 8 11 -1
Adjusted EBITDA	78 53 52 29 10 21 40 44
Sawmills	59 18 26 14 10 2 13 28
Further Processed	25 31 32 16 10 21 27 17
Other	-6 4 -6 -1 -10 -2 0 -1
Adjusted EBITDA margin, %	14.0 10.2 9.5 5.5 2.5 4.5 6.5 7.7
Sawmills	22.4 10.3 12.9 6.9 5.5 1.2 4.9 10.9
Further Processed	8.7 9.1 9.4 5.3 4.8 7.9 8.1 6.3
Operating profit	58 31 35 13 -7 12 36 32
Sawmills	52 12 16 7 -2 -8 5 21
Further Processed	14 18 23 8 4 12 23 13
Other	-8 1 -4 -2 -9 8 8 -2
Adjusted operating profit	58 31 35 13 -4 2 25 32
Sawmills	52 12 16 7 1 -8 5 21
Further Processed	14 18 23 8 4 12 23 13
Other	-8 1 -4 -2 -9 -2 -3 -2
Adjusted operating margin,%	10.4 6.0 6.4 2.5 neg 0.4 4.0 5.6
Sawmills	19.8 6.9 7.9 3.5 0.5 neg 1.9 8.2
Further Processed	4.8 5.3 6.7 2.6 1.9 4.5 6.9 4.8

BERGS TIMBER AB Year-end report January–December 2020

ABOUT BERGS

21

This is Bergs – an international wood products Group

Bergs Timber processes raw materials from sustainable forests in Sweden, Estonia and Latvia. The entire business process creates value for a large number of stakeholders.

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RAW FORESTRY
SAWMILLS FURTHER OTHER
MATERIALS
0.4 m m [3] PROCESSED DISTRIBUTION
0.8m m [3] fub
Purchase of saw timber from Planks and boards in various Planed products Harbour and logistics centre
private and state forest owners dimensions, lengths and for construction and in the UK
in Estonia qualities. renovation Logistics services
and Latvia.
Windows, doors, wooden
buildings
and house modules
Cellulose chips, sawdust
Garden products O utdoor
and bark to external
furniture, fences,
customers.
windbreaks, privacy screens
Wood preservatives
Impregnated and fire-
retardant wood
Pellets and fire logs
----- End of picture text -----

Our operations—conducted through wholly owned subsidiaries in Sweden, Estonia, Latvia and the UK—encompass sawmills and processing as well as distribution and logistics. Bergs is listed on Nasdaq Stockholm.

SEK 2.1 billion Sales

850 Employees

Business concept

Bergs owns and develops companies that produce and sell processed timber products to discerning customers in selected markets.

This means that:

• We own and develop companies in the timber industry

• Our subsidiaries develop and produce processed wood products, with the customer’s needs in focus

• We have a decentralised business model

• We work sustainably throughout the value chain—with raw materials

Financial targets

• EBITDA margin: >7% over a business cycle

• Return on capital employed: >10% over a business cycle

• Growth: 2% organic and 5–10% including acquisitions over a business cycle

• Dividends normally 25–40% of net profit

• Net debt/equity ratio: <1.0

www.bergstimber.com

BERGS TIMBER AB

Year-end report January–December 2020