Schur International Holding A/S

Management’s Review

Key events in 2022/23This financial year has been marked by inflation, price increases and decreasing demand from our customers. Volumes have dropped for the group as a whole.Despite these macroeconomic challenges - high inflation, inventory adjustments and subsequent lower demand for our products - we consider the result for 2022/23 as satisfactory.Following the raw material shortage and cost increases of 2022, our purpose was to secure a stable and healthy business for 2023 and on.Inflation and volumesDespite the fact that the biggest part of our products is delivered to the food industry - which is normally relatively stable - we have also seen a drop in demand from our customers in this segment as a consequence of the inflationary pressure. In some of our companies up to 15% reduction, whereas others have managed to maintain same volume level as last year.The inflation has also been a challenge for our employees and in January 2023, we decided to give a one-off inflation aid to all of our employees. The total expense was DKK 8 million.Even though energy prices have declined in general in 2022/23, our total energy costs have increased as some of our plants have had a fixed price agreement for electricity.Optimization of production flowThis year we have invested significantly in internal logistics in our carton factories in Vejle and Kumla. In Vejle, a new high-storage warehouse has been built and the entire production has been moved around to achieve a more optimal production flow.In Kumla, the production flow from the gluing department to the finished goods warehouse and outbound logistics has also been improved with a new hall and automatization of the packaging lines.Both projects are expected to be completed in the beginning of the new financial year.Continuous investment in the group's production facilities will always be key for us to be able to deliver the best service to our customers in an efficient and competitive way. Furthermore, we are proud that these two projects, as well as previous projects, have been completed in close cooperation between the carton companies and our automation experts from Schur Technology.Financial performance 2022/232,108 DKK million net revenue191 DKK million profit before taxIn our recent annual report, we forecasted revenue to be between DKK 2.0 and 2.2 billion and a profit before tax between DKK 160 million and DKK 180 million.Despite great uncertainties related to inflation and fluctuating demand, these expectations have been met. Revenue increased by DKK 54 million (2.6% increase) and profit before tax was DKK 20 million higher than last year.However volumes have decreased in most of our companies, with the exception of our Swedish and German carton companies, which have maintained the volumes. This year's increase in revenue is thus primarily due to inflationary adjustments.The improved result is primarily the result of improvements in production efficiency due to investments in new production technology as well as increase in other operating income. Furhtermore last year was affected by extraordinary expenses in connection with the integration of Interket in the label business.105 DKK million net interest bearing debt0.35 leverage ratioAllthough we invested DKK 177 million in intangible and tangible fixed assets the positive cash flow from operating activities made it possible for us to lower the net interest-bearing debt by 205 DKK million.This year we have had a very strong focus on bringing our working capital down to an acceptable level. This has made a positive contribution of DKK 148 million to our cash flow.Leverage ratio (net interest-bearing debt/adjusted EBITDA) has decreased from 1.03 to 0.35, mainly driven by our focus on reducing our working capital.Outlook 2023/24Packaging is very much in focus these days. Many initiatives have been started in order to change consumer behaviour (sorting at source) and new products are being introduced with the goal to increase recycling and reduce environmental impact. We constantly aim to develop new solutions, which can help reduce food waste and increase the extent of recycling and reuse, and we seek to lead the industry with our contribution to a circular economy.The market situation for the West European carton market is estimated to show an increase in demand in the long term primarily due to the industry being geared towards recyclability and reusability. In the short term though, we expect to see a minor decrease in demand as a result of a contiuned slow economy in Europe going in to 2024Schur is committed to setting the stage for the most modern production and logistics technology on the market and has in recent years invested heavily in product development and state-of-the-art production technology. We will continue to invest in new production equipment with expected investments between DKK 140 million and DKK 160 million in 2023/24 alone. We strive to be a total solution supplier for our customers and therefore see our internal developments across the companies in our group, as a vital part of our continuous aim to be Leader of the Pack.We depend on our customers’ sales and product development, and we are pleased to contribute with an innovative approach while creating new sustainable solutions in close collaboration with our customers.With the EU's upcoming packaging regulation, there will be new challanges, but also opportunities for the packaging industry. We will aim to create value from these opportunities and take our group of companies to the next level as an innovative total soloution supplier of packaging. We expect that the decreasing demand in volumes and continued price pressure from customers will affect the entire financial year 2023/24.In 2023/24, we expect a revenue between DKK 2.0 - 2.2 billion and a profit before tax between DKK 140 million and DKK 160 million.