Bergs Timber is the only listed timber pure-play in Sweden. It sells sawn and processed wood products. ~80% of the group’s products are exported, mainly to the UK, US and other European countries. In January 2018, the company announced its intention to acquire Norvik Timber, a transformational acquisition that will approximately double the group’s production capacity and revenues. Norvik Timber is a vertically integrated group with sawmills, production of processed wood products like windows, houses and furniture, and distribution of own and third-party products.
Historically, Bergs Timber has been a typical sawmill group with a high degree of commoditised wood products. Going forward, however, the group’s strategy is to increase focus on value-added processing and perform complementary acquisitions. Combined with strong macroeconomic fundamentals, industry consolidation and improvement programs there should be room for earnings uplift over the coming years. The acquisition of Norvik Timber will transform the group into a more vertically integrated player with potential for margin improvement and a higher degree of earnings stability.
The primary end-market for the group’s products is the building and construction industry. As a result, demand for the group’s products is cyclical and depends on global economic developments. Due to a high degree of commoditised products, the group’s earnings are highly sensitive to the market prices of its products. An increase in the price of saw logs could have negative impact the group’s earnings since it is the most important input factor in its operations. ~80% of the group’s products are sold in foreign currencies like GDP, EUR and USD. Currency fluctuations is therefore another major risk factor.