Bong : Q4 2021

Year-end

Report

January-December

2021

Year-end Report Q4, January-December 2021

October - December 2021

• Net sales increased to SEK 507 million (505)
• Operating profit before depreciation increased to SEK 47 million (40)
• Operating profit before write-down of goodwill amounted to SEK 31 million (23)
• Operating profit increased to SEK 13 million (-8)
• Earnings after tax amounted to SEK 5 million (-19)
• Earnings per share amounted to SEK 0.03 (-0.09)
• Cash flow after investing activities amounted to SEK 58 million (12)

January - December 2021

• Net sales decreased to SEK 1,804 million (1,843)
• Operating profit before depreciation increased to SEK 128 million (97)
• Operating profit before write-down of goodwill amounted to SEK 64 million (16)
• Operating profit increased to SEK 46 million (-19)
• Earnings after tax amounted to SEK 3 million (-66)
• Earnings per share amounted to SEK 0.02 (-0.31)
• Cash flow after investing activities amounted to SEK 60 million (31)

Key Ratios	Oct-Dec	Oct-Dec	Jan-Dec	Jan-Dec
MSEK	2021	2020	2021	2020
Net sales	507	505	1,804	1,843
EBITDA	47	40	128	97
EBIT	13	-8	46	-19
Non-recurring items, goodwill	-18	-31	-18	-35
Adjusted EBIT	31	23	64	16
Earnings after tax	5	-19	3	-66
Earning per share, SEK	0.03	-0.09	0.02	-0.31
Cash flow after investing activities	58	12	60	31
Equity/asset ratio, %	30.5%	29.6%	30.5%	29.6%

Net debt	Equity ratio	Cash flow after investing	Operating profit/loss - Q4	Net sales - Q4
		activities - Q4

Adjusted net debt

Pension liabilities

IFRS 16

Bong is one of the leading providers of envelope products in Europe that also offers solutions for distribution and packaging of information, advertising materials and lightweight goods. Important growth areas in the Group are packaging within retail and e-commerce and the envelope market within Eastern Europe. The Group has annual sales of approximately SEK 1.8 billion and about 1,200 employees in 13 countries. Bong has strong market positions in most of the important markets in Europe and the Group sees interesting possibilities for continued development. Bong is a public limited company and its shares are listed on Nasdaq Stockholm (Small Cap).

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This is Bong

Envelopes
and Light
Packaging	From the
	forest to you
	since 1737

The

customer is our passion

1,200

Employees

Located in

13

countries

Double digit

growth in

Light

Packaging

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Letter to the shareholders

In a difficult business environment Bong continued its transformation into a larger Light Packaging company, and delivered a solid financial result, says Bong's CEO Kai Steigleder.

MARKET AND INDUSTRY

Once again Covid-19-related restrictions were implemented towards the end of the quarter in most European markets. Additionally supply chains of raw material remain very tense and we have seen drastic price increases.

In particular exploding gas and electricity prices on top of machine shutdowns and strikes which reduce paper capacity and put massive pressure on paper prices. In addition there are higher prices for glue, window films, freight, packaging, and difficulties in hiring qualified workforce. An end of this development is currently not predictable.

During Q3 and Q4 2021, we already significantly increased sales prices to our customers and will continue to do so also in Q1 and Q2 2022. This is to fully recover our additional raw material cost burden.

Light Packaging

The overall currency adjusted year to date increase amounts to +8%.

The reason for a relatively small +1% increase in sales in Q4 2022 vs. Q4 2021 was high uncertainty about potential Covid-19- related restrictions affecting our customers in the retail business and their high stock levels at the beginning of Q4.

However, the increase of light packaging sales in December 2021 amounted to a good growth rate of almost +15%. Since we hope for a relieve of the Covid-19 crisis with an overall economic recovery and higher consumption in Europe we are targeting for even higher growth rates in 2022.

The very good development in Gussets triggered mainly through sales of our new e-Green range continued in Q4 with +49% growth but also other products of our own production such as Board Backs, Corrugated Board and All board envelopes contributed positively to the sales development and were offsetting the negative development of our Retail business in Q4.

Envelope

Bong's Envelope sales in Q4 decreased currency adjusted by -1% compared to Q4 2020. The overall currency adjusted year to date Envelope sales decreased by -3% which is mainly negatively related to Q1 2021 as Q1 2020 was not affected heavily by Covid-19. On the other hand price increases towards our customer were having a positive impact.

The development of envelope sales is following the negative long-term trend.

OPERATING PROFIT

The Group's currency-adjusted sales is on the same level compared with 2020. Bong's gross margin has decreased compared to 2020 mainly because of drastically higher raw material prices and times lacks in increasing prices towards our customer due to fixed price contracts. Operating profit increased to SEK 46 million (-19) and the efforts to lower the breakeven point of the company are becoming increasingly visible. The operating profit in 2021 was affected negatively by restructuring cost of SEK 1 million (13) and by impairment of Goodwill of SEK 18 million (35).

IMPROVED CASH FLOW AND REDUCED ADJUSTED NET DEBT / ADJUSTED EBITDA

Cash flow from operating activities amounted to SEK 67 million (34). Adjusted net debt / adjusted EBITDA according to Bong's Bond loan amounts to 1.27.

FOCUS AND STRATEGY

Over the last two years, we have successfully managed to safeguard our business from Covid-19 related impacts, various supply chain challenges and we have increased our light packaging production capacities and product portfolio. Currently we are also on track to mitigate current headwinds related to costs in 2022.

In this tight business environment of a severe raw material market with unseen price increases and supply shortages Bong demonstrated strong resilience, supplying its customers without larger delivery disruptions, maintaining tight control over its costs and delivering a solid financial performance.

But we will remain in a tough business environment. Therefore we continue to focus on sales price increases, improvement of efficiency and reduction of cost.

We will further increase our light packaging production capacities and product portfolio despite a difficult labor market in Europe.

Last but not least I am particularly thanking all our hard working and dedicated employees as well as our stakeholders and shareholders for their support.

Kai Steigleder

Chief Executive Officer

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Financial overview

Sales and profit

January - December 2021

Consolidated sales for the period reached SEK 1,804 million (1,843). Exchange rate fluctuations had a negative impact on sales of SEK -45 million (-22) compared with 2020.

Operating profit increased to SEK 46 million (-19). The Group's gross margin was slightly lower than previous year. During the period operating profit was positively affected by a capital gain of SEK 10 million (10) attributable to sales of machinery. Operating profit was also affected negatively by restructuring costs of SEK -1 million (-15) and write-down of goodwill of SEK -18 million (-35). Exchange rate fluctuations for the period had a negative impact on operating profit of SEK -2 million (0).

Net financial items for the period amounted to SEK -36 million (-37).

Earnings before tax amounted to SEK 10 million (-56) and reported earnings after tax were SEK 3 million (-66).

Bong's total light packaging sales amounted to SEK 520 million (492). Currency fluctuations had a negative impact on light packaging sales of SEK -14 million (-6) compared with the corresponding period in 2020.

Bong's total envelope sales amounted to SEK 1,284 million (1,351). Currency fluctuations had a negative impact on envelope sales of SEK -31 million (-16) compared to same period 2020.

Sales and profit

October - December 2021

Consolidated sales for the period reached SEK 507 million (505). Exchange rate fluctuations had a negative impact on sales of SEK -13 million (-15) compared with 2020.

Operating profit increased to SEK 13 million (-8). The Group's gross margin is below the levels of the same period 2020. During the period operating profit was positively affected by a capital gain of SEK 8 million (8) attributable

to sales of machinery. Operating profit was also affected negatively by restructuring costs of SEK -1 million (1) and write-down of goodwill of SEK -18 million (-31). Exchange rate fluctuations for the period had a negative impact on operating profit of SEK -1 million (0).

Net financial items for the period amounted to SEK -7 million (-9).

Earnings before tax amounted to SEK 6 million (-17) and reported earnings after tax were SEK 5 million (-19).

Bong's total light packaging sales amounted to SEK 156 million (156). Currency fluctuations had a negative impact on light packaging sales of SEK -4 million (-4) compared with the corresponding period in 2020.

Bong's total envelope sales amounted to SEK 351 million (349). Currency fluctuations had a negative impact on envelope sales of SEK -9 million (-11).

Cash flow and investments

The cash flow after investing activities increased to SEK 60 million (31) compared to previous year. Cash flow from operating activities before changes in working capital amounted to SEK 79 million (27). Working capital had a negative impact on the cash flow of SEK -12 million (7). Postponed payments due to Covid-19 for rent and VAT in the UK have been paid during the first 9 months of 2021 in the amount of SEK 18 million.

Restructuring programs had negative impact on the cash flow of SEK -2 million (-25). Net investments in the period had a negative impact amounting to SEK -7 million (-3).

Financial position

Cash and cash equivalents at 31 December 2021 amounted to SEK 135 million (SEK 110 million at 31 December 2020). The Group had unutilized credit facilities of SEK 9 million on the same date. Total available cash and cash equivalents thus amounted to SEK 144 million (SEK 122 million at 31 December 2020). Consolidated equity at the end of December 2021 was SEK 440 million (SEK 412 million at 31 December 2020).

Translation of the net asset value of foreign subsidiaries to Swedish Krona and changes in the fair value of pension debt and derivative instruments increased consolidated equity by SEK 27 million. The interest bearing net loan debt amounted to SEK 410 million, whereof pension debt amounts to SEK 215 million and IFRS 16 leasing contracts amount to SEK 115 million (SEK 471 million at 31 December 2020, whereof pension debt amounts to SEK 236 million and IFRS 16 Leasing contracts SEK 107 million).

Employees

The average number of employees during the period was 1,141 (1,195). The Group had 1,129 (1,155) employees at the end of December 2021. Bong has intensively worked on improving productivity and adjusting staff to meet current demand and the reduction is the result of the implemented restructuring measures.

Parent Company

The Parent Company's business extends to management of operating subsidiaries and certain Group management functions. Sales were SEK 2.5 million (3.4) and earnings before tax for the period were SEK 1.3 million (-56.7).

Covid-19

A number of different measures have been taken at Bong to mitigate the short and long term effects of the corona virus, with health and safety for employees and customers as the highest priority. We follow the development carefully and adjust our measures according to local authorities' advice and regulations, while we strive to mitigate any disruptions to the Group's operations.

The contributions received from the governments shown as other operating income amount to SEK 1 million (16) for the Group. Other government fee reductions have reduced the social fees with SEK 0 million (2). Loan with guarantee from the government amounts to SEK 39 million. SEK 9 million is due within one year, and SEK 30 million within 5 years. Loan with guarantee from the government amounts to 8 MSEK with a duration of 10 years per terms at the issue date. The Group has no substantial losses on account receivables related to Covid-19.

Bong will monitor the development to assess any effects on the valuation of goodwill or on non-financial assets or financial assets. It is currently not possible to predict with sufficient reliability over what period and to what extent Bong will face further impacts during upcoming years including write- offs due to impairments of assets and goodwill.

Events after the end of the period

No material events have occurred after the end of the period.

Risks and opportunities

Business risks for the Bong Group are primarily related to market development and various types of financial risks. There has not been any change to significant risks and uncertain positions since Bong's annual report for 2020 was released. For further information, please refer to Bong's annual report and website bong.com.

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