• Loss after net financial items amounted to SEK -4 million for the first quarter of 2012, compared with a loss of SEK -44 million for the fourth quarter of 2011 and a profit of SEK 19 million for the first quarter of 2011.
• The USD price for chemical pulp is increasing and price increases of USD 20-30 per tonne have been announced for  April (to USD 870 per tonne). However, the average price in Swedish kronor during the first quarter of 2012 was less than it was in the fourth quarter of 2011.
• Global stock levels for pulp are falling and deliveries of pulp to Asia are strong. There has simultaneously been a reduction in the cost of timber and electricity, which has a positive impact on margins.
• Cash flow from operating activities amounted to SEK -32 (-25) million for the first quarter of 2012. This negative cash flow is largely explained by investments implemented at the end of 2011 being paid for at the start of 2012.

CEO’s statement

The beginning of 2012 was significantly more stable than the end of 2011 from the perspective of a pulp supplier. Strong deliveries to China, which started before and continued after the turn of the year, have altered the momentum of the global pulp market. The price falls have been transformed into an upturn. Demand has primarily been for short-fibre chemical pulp, as the price fell too low and there was a very significant price difference in relation to long-fibre pulp; more than USD 200 per tonne compared with the normal historical difference of USD 50-100 per tonne. The PIX Europe price index for short-fibre pulp rose by over USD 100 per tonne in 2012, while the index for long-fibre pulp rose by just over USD 10 per tonne, which means that the price difference is now normal. The Swedish krona strengthened in relation to the US dollar during the first quarter of the year, so that the PIX index in Swedish kronor is now lower than it was at the turn of the year. Howeve r, there is momentum in the market. All of the major market pulp suppliers announced price increases for both March and yet again for April so that the list price in Europe now amounts to USD 870 per tonne for long-fibre chemical pulp. These price increases will gradually have an impact during the spring; this combined with falling pulpwood prices will mean that our margins will improve once again. Our operational surplus for the quarter was SEK 10 million and our operating loss after depreciations was SEK -3 million.

It finally looks as though CTMP prices will follow chemical pulp prices upwards. Three price increases have already been made this year in Asia, albeit from a low level. In the course of the significant price rise for chemical pulp following the global financial crisis in 2008/09, CTMP prices became entrenched at a low level, with an ensuing negative impact for both the Canadian and Nordic forestry industry, which persisted until 2012. We are now seeing a high demand for primarily long-fibre CTMP for the packaging sector in Asia, where this pulp’s unique combination of properties makes it possible to manufacture packaging that is both rigid and light. Better demand including improved sales prices combined with low timber and electrical energy prices mean that the low margins will now improve.

Despite the improving position for both of our two main products, a shadow is being cast over an old and proud Rottneros product, namely groundwood pulp. We are the last remaining supplier of bleached fine groundwood pulp and have therefore been able to retain a good price level. However, non-integrated groundwood pulp customers in the tough and vulnerable printing paper sector are losing both volume and market shares and are increasingly being forced to discontinue this paper production. We are still hoping for renewed opportunities in Japan where groundwood pulp is traditionally used for thin printing paper. We are also attempting to offer the board market an extremely high bulk pulp to keep the cost of board to a minimum without impairing the stiffness of the product.

Ole Terland

President and CEO

(For full report, see attached file below)