Interim Report Q1 2024People Green Innovation Technology

Sales revenues in Q1 2024 decreased from NOK 636.7 million in Q1 2023 to NOK 541.6 million in Q1 2024 corresponding to a decrease of NOK 95.1 million (14.9 %). Adjusted operating profit decreased from NOK 92.6 million in 2023 to NOK 39.2 million in 2024.

The construction materials sector is currently facing the most challenging market conditions observed since the financial and housing crises of the 1980s and 1990s, marked by a significant downturn. A critical barometer for market size fluctuations is the residential construction companies' reports on the volume of houses sold and initiated. Over the past year, these figures stand at 13,058 and 14,065 units, respectively, against Norway's annual housing requirement of 29,000. Like many sectors, ours is influenced by various elements, including global unrest, rising interest rates, and pronounced inflation, leading many to defer their homebuilding plans. However, a silver lining exists in the increasing fundamental demand for housing. Consequently, when home sales are substantially below the necessary levels, the theoretical backlog of orders surges, which will eventually catalyze a robust upswing for the industry. It is a testament to Byggma Group's resilience that, in spite of the exceptionally challenging market conditions, the group has maintained solid profitability throughout the year to date.

In the first quarter, it was affirmed that Huntonit qualifies for the CO₂ compensation scheme. This development is advantageous for Huntonit's competitive edge and instrumental in preventing carbon leakage. "Carbon leakage" refers to the phenomenon where businesses relocate investments or operations from Europe to non-European countries with less stringent climate regulations, resulting in increased emissions. This recognition under the CO₂ compensation scheme fortifies Huntonit's market position while contributing to the global effort to mitigate climate change.

As of 31 March, Byggma ASA and its related party Drangsland Kapital AS owns ca. 26.8 % of the share capital in Norske Skog ASA. Byggma aims to be a long-term owner in Norske Skog ASA. There are several synergy effects between Norske Skog and Byggma regarding process equipment, raw materials, logistics, product development and environment.

In 2022, Forestia made a strategic investment in a new 4,000 m² logistics center located at Braskereidfoss. This facility enables our clientele to consolidate orders and receive chipboard, OSB, and plywood boards in a single shipment. The statistics are a testament to the success of this initiative, and customer feedback underscores the added value this brings to both Forestia and our clients, alongside the environmental benefits derived from more efficient goods transportation. The rising sales figures for OSB and plywood reinforce the attractiveness of this solution to our customers, confirming its success.

Our product launches Forestia Premium Ceiling, Smart Veneer, Forestia Ergospon and Huntonit Pro Wall are still experiencing increasing sales in the market. These decorative interior products add more value for the customer and hence have high unit prices. The increasing sales of these products are consequently increasing the profitability of the group.

The Group is constantly identifying new valuable sustainability projects that reduce emissions to both air and water, which simultaneously are economically profitable for Byggma. See more in the Sustainability section in this report.

Forestia has for a period been in dialogue with Innovasjon Norge to receive grants to support the building of a plant for reception and cleaning of wood waste to be reused in new woodchip boards. On 8 April 2023, Forestia was informed by the Minister of Finance, Trygve Slagsvold Vedum, and Minister of Trade and Industry, Jan Christian Vestre, that the Board of Directors of Innovasjon Norge had resolved to grant Forestia NOK 80 million for this project. This project will be value enhancing for Forestia. It will also make the woodchip boards from Forestia even more circular because the wood waste will be material recycled into new boards and sequestrate CO₂ instead of energy recovered and release CO₂ into the atmosphere through combustion. This will be a better usage of the wood waste in accordance with the multi-step cascading principle for biomass. It will also reduce sourcing risk as it makes Forestia less dependent on raw materials from the sawmills. Forestia is working with vendors to secure good, stable, and long-term supply agreements for the project.