Displaying items by tag: Rottneros

Rottneros is reporting a positive 9-month result after net financial items of SEK 6 million for the year. Cash flow after investments and net financial income was also SEK 6 million. The customary four-week vacation shutdown at Rottneros Mill together with the annual maintenance shutdown at Vallvik Mill, which predominantly fell in September this year, had a significant effect on the result for the third quarter. The quarterly result was burdened with approx. SEK30million owing to these shutdowns.

•  Income after net financial items amounted to SEK 6 (-76) million for the period January to September 2012. The result for the previous year incurred total write-downs and one-off costs of SEK -148 million.

•  Income after net financial items amounted to SEK -26 million for the third quarter of 2012 compared to a profit of SEK 16 million for the same quarter of the previous year, excluding write-downs and one-off costs. There was a vacation and maintenance shutdown respectively at Rottneros Mill and Vallvik Mill during the third quarter of 2012. The maintenance shutdown at Vallvik, which in previous year took place during the fourth quarter, had a negative effect on the result of SEK 25 million.

•  Cash flow from current operations amounted to SEK 14 (27) million for the third quarter of 2012 and SEK 49 (57) million for the period January to September 2012.

The summer downturn was unusually severe this year for Swedish pulp producers such as Rottneros. There was a global fall in USD market prices, which had a major impact when added to the significant rise in the value of the Swedish kronor. The market price of our dominant product, NBSK (or chemical softwood pulp), is monitored via the PIX index, which is published weekly, and this price indicator was approx. SEK 5,000 per tonne for Europe at the end of September compared with approx. SEK 6,000 per tonne at the end of May and approx. SEK 5,700 per tonne at the beginning of the year. We now envisage an upward turn in price trends for the final quarter of this year. List prices in Asia have increased twice by USD 20 per tonne. In North America, which has the highest price level, the list prices increased by USD 20 per tonne and in Europe by approx. USD 30 per tonne. Nor was the Swedish krona as strong as it was in August, which means that revenues should now rise again.

Developments have been favourable for us on the cost side, with falling timber and electricity prices as well as fixed costs.  We must learn to live with being a high-cost country in an extremely competitive world. Our only protection will be our own competitiveness, including continuous productivity improvements. The continuous rationalisations that have taken place in recent years, including staff reductions, mean that we are not planning any further downsizing or closures at the current time. However, our focus on efficiency and improved customer offerings is stronger than ever. We are obviously pleased in this connection about the permit allowing an increase in production at Vallvik Mill to 242,000 tonnes in three years. This in itself will facilitate a significant improvement in efficiency. The Swedish Environmental Protection Agency has however appealed against this decision.

During the quarter just ended, the world’s largest CTMP supplier shut down a major plant in Canada and in Europe Södra announced that they were withdrawing from the CTMP market. This will entail the disappearance of around 10% of global capacity and significantly more of the current CTMP supplies to the European market. Hopefully this reduction on the supply side of mechanical pulp will result in improved price formation. These pulps have unique quality characteristics that are of value to paper and board makers and over time must be priced so that manufacturers also continue in existence.

• Profit after net financial items amounted to SEK 36 (37) million for the second quarter of 2012. Profit after net financial items amounted to SEK 32 (56) million for the first half of 2012.
• Cash flow from operating activities amounted to SEK 67 (55) million for the second quarter of 2012 and to SEK 35 (30) million for the first half of 2012.
• Over 20,000 tonnes of chemical sulphate pulp were produced at Vallvik Mill in June. This is the highest ever monthly production at the mill and well over the old record. A new daily record of 740 tonnes was also noted.
• In May 2012, the Board of Rottneros decided to enter into negotiations concerning the termination of continuous groundwood pulp production at Rottneros Mill. Negotiations have been concluded and approximately 50 employees at the mill were issued with notices of pending redundancy.

Vallvik Mill, which forms part of the Rottneros Group, produced well over 20,000 tonnes of chemical sulphate pulp in June. This is the highest ever monthly production at the mill and is well over the old record. Furthermore, a new daily record of 740 tonnes was achieved.

"It is very pleasing that several years of goal-oriented work has yielded such tangible results," says Robert Jensen, MD of Vallvik Mill. "Furthermore, we have an excellent outcome in terms of quality – we have managed to achieve our environmental objectives and are delivering to our customers according to plan. All of our employees have good reason to look forward to a well-deserved holiday."

Rottneros has invested over a quarter of a billion Swedish kronor in Vallvik Mill in recent years in order to satisfy the environmental requirements imposed on the mill, while annual capacity increases from 200,000 tonnes to 240,000 tonnes. The Environmental Court is considering a permit application to temporarily increase production from 220,000 to 242,000 tonnes, and a decision is expected during the third quarter of 2012. The company is preparing a permit application to enable it to permanently increase production up to 300,000 tonnes.

Rottneros has sold Rockhammars Bruk AB, which owns the property where sawmill operations were previously conducted. The purchaser is NA Sverige AB, which intends to run a recycling operation at the site. The book value has been zero since the pulp mill at Rockhammar was disposed of in 2009, and the sale has resulted in a small positive effect on the result and cash flow.

Rottneros AB sold the pulp mill at Rockhammar to Korsnäs in 2009 through an asset sale. No operation has been run at Rockhammars Bruk AB since then besides the leasing of timber storage areas and also the management of land and buildings within the area of the sawmill, which was shut down in 2005. The new owner intends to run an industrial operation within the recycling sector at the saw mill property.

An adjacent forestry property, which does not form part of the transfer, also comprises areas that are ideal for the storage of timber and the like. The intention is to dispose of this property as well.

Rottneros discloses the information provided herein pursuant to the Securities Markets Act and/or the Financial Instruments Trading Act. The Information was submitted for publication on Wednesday, 23 May 2012 at 10.30 CET.

The Board of Rottneros has decided to immediately commence negotiations regarding the termination of continuous groundwood pulp production at Rottneros Mill.  This is due to the rapidly declining consumption of printing paper in Europe, which has led to a dramatic reduction in demand for groundwood pulp. Rottneros Mill has around 100 employees, 50 of whom will be given notice of termination. CTMP production at the mill will continue, and limited investments will facilitate the development of quality for those customers that manufacture board at the same time as slightly increasing capacity.

In 2011, Rottneros announced first an improvement programme, which included the implementation of staff reductions, and second the book value of fixed assets was written down at Rottneros Mill. These measures have now essentially been carried out, but unfortunately appear to be insufficient.

The manufacture of groundwood pulp is expected to cease this winter, but the actual date depends on the outcome of union negotiations and also agreements with customers affected. Costs during the period of notice will be recorded on an ongoing basis and the book values of the groundwood mill have already been written down to zero, which in the current situation means that there is no intention of making substantial one-off appropriations.

“It naturally feels very sad to have to conclude that the market for this product is shrinking. Thanks to raw materials and the high level of professional skills at the mill, we are producing a select and leading product in terms of quality, but this is still not enough,” says Ole Terland, President of Rottneros AB. “It is of course worse for our employees who have to leave us and we are therefore attempting to make the transition as smooth as possible,” Terland concludes.

“The improved preconditions for CTMP will make us a leading manufacturer in terms of quality, primarily for the board and packaging segment, which is where we see the greatest potential for customer value," says Olle Dahlin, MD of Rottneros Bruk AB. “The production line for groundwood pulp is being left where it is, as it is not out of the question that demand could return, for example owing to changes in the supply of suitable recycled fibres. This will result in an opportunity to alternate staff between the two production lines, thereby generating flexibility," continues Dahlin.

The cut-backs at the groundwood mill will not affect the preconditions for the production of packaging within SilviPak and likewise for the potential manufacture of ‘green’ vehicle fuel at Rottneros Mill.

Finansinspektionen (the Swedish Financial Supervisory Authority) made an order on 12 April 2012 requiring Rottneros to pay a charge of SEK 200,000 for violating the provisions on publication of changes to share capital. Rottneros has appealed against this decision to the Stockholm Administrative Court.

The provisions concerned aim to ensure that no shareholder might be put at risk of breaching the flagging obligation, which can arise in the event of changes to a company’s share structure without the owner themself having taken any action by a purchase or sell. This may for instance occur as a result of a share issue.

Rottneros claims that the formal error that was committed by the company, that it had not published the number of outstanding shares on the last date of trading in the month, could not have entailed any problems for the company’s shareholders, as those who could have been affected by the flagging obligation were not only very well informed about the changes that were made but they were in fact also participative in the negotiations that led to the changes to the share structure. Rottneros has also on a number of occasions and in various ways informed the market of the changes when they were planned and subsequently when implemented.

Rottneros is consequently of the opinion that full leniency should be granted for the special charge for the violation or that it should be reduced to a minimum.

• 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)

Rottneros Mill is increasing its sales price for all CTMP grades by 30 Euro/tonne for all deliveries as of 1 March 2012.

The increased sales price for CTMP is a result of good demand, particularly in Asia, and this has encouraged Rottneros to increase its prices in Europe as well.

In addition to the good demand for CTMP, there has been a considerable reduction in global stock levels of Eucalyptus Kraft and prices have improved since December 2011, which also supports the decision to increase the price for CTMP grades.

2011 was a year of two quite different halves. Demand for sulphate pulp was good during the first six months of the year, which resulted in prices increasing to a new record level of USD 1,025 per tonne by midsummer. However, the price of mechanical pulp remained virtually static despite the good momentum for chemical pulp. Global stock levels for pulp increased, which was probably due to purchasers worrying about further price rises. The market psychology changed during the summer; demand for printing and writing paper was weak, the financial crisis worsened in Member States in the Eurosystem and high levels of pulp stock suddenly became a good reason to push pulp prices down. This price correction did not cease during the third quarter but accelerated instead during the autumn, and the final months of the year were noticeably weak. Purchasers of pulp were very inclined to postpone any buying as pulp would soon be cheaper, and the risk of running out of pulp was considered to be worth taking in spite of consumer stocks being at a record low. The price of NBSK (bleached long fibre sulphate pulp) fell to approximately USD 830 per tonne by the end of the year. Stocks continued to rise despite global pulp producers taking significant production curtailments. These price fluctuations occurred against the background of the US dollar weakening during the first half of the year and then strengthening again during the autumn. For the Swedish pulp industry this means that the average pulp price for the year was almost SEK 500 per tonne lower than in 2010, despite record high USD pulp prices. This obviously had an adverse effect on the result. Before the one-off items charged to Quarter 3, the full-year result for Rottneros before depreciation fell from SEK 224 to 98 million.

We completed extensive improvements and investments at Vallvik Mill during the last quarter of the year; this satisfied the requirements imposed on us by the authorities, but also boosted production capacity at the factory by almost 20%. These investments constituted an important reason for our financial reconstruction and rights issue which took place at the end of 2009. Weak demand during the third quarter meant that no costly measures were approved to minimise production losses during the shutdown and start up, which resulted in volume losses being slightly higher than estimated. These have been included under the item ‘negative effect on result from annual maintenance shutdown’; they were previously forecast at SEK 15-20 million, but ended up as SEK 25 million. So far the results of these investments appear to be very promising. A full evaluation cannot be made until the operation has been running for a longer period and it has been possible to see the impact of both winter and summer climates on the process and biological water purification plant.

Negotiations have been concluded in respect of the improvement programme at Rottneros Mill, which was announced in September, and notices of termination given and early retirements arranged. The programme will be fully implemented during the summer. The mill restricted production quite significantly during the last quarter – approximately one week per month – in order to balance stocks while avoiding unnecessary price compression through focussing on volumes.

• Profit after net financial items amounted to SEK 28 (138) million for the full year 2011 before write-downs and one-off costs. Profit after net financial items amounted to SEK -44 (13) million for the fourth quarter of 2011. Costs of SEK 25 million for the normal maintenance shutdown at Vallvik Mill have been charged to this quarter.
• The result for the third quarter of 2011 was charged with write-downs of SEK -118 million and one-off costs of SEK -30 million (SEK -148 million in total). Loss after net financial items amounted to SEK -120 million for the full year 2011 after these write-downs and one-off costs.
• As a consequence of the weak market for mechanical pulp, Rottneros Mill is implementing an improvement programme involving changes to the product range as well as staff reductions and cutting other production costs.
• The board proposes a dividend of 0.10 (0.20) Swedish kronor per share for the financial year 2011.

There was certainly a high level of macroeconomic uncertainty at the start of 2012, at least in those Member States in the Eurosystem and, as regards the export industry, a disadvantageous relationship between the value of the Euro and the Swedish krona. On the other hand, our customers’ stock levels are low, activity is good in China – a country that is becoming increasingly important – Swedish timber prices are falling and electricity has been at its lowest winter level for some time. The official pulp price index (PIX) experienced a slight upturn in January after having continuously fallen since the end of June, so there are signs that the pulp price has bottomed out this time round.

The prospects for 2012 are unusually uncertain although they appear to be brighter. The situation seems more promising on leaving the gloomy fourth quarter behind us at a time when timber and electricity prices are falling and also as the fall in PIX prices of pulp in Europe tailed off in December and started to rise slightly in January.

Ole Terland

President and CEO

ACCOUNTING PRINCIPLES

This interim report has been prepared in accordance with IAS 34 ‘Interim Financial Reporting’, which complies with Swedish law through the application of the Swedish Financial Reporting Board’s Recommendation RFR 1 ‘Supplementary Accounting Rules for Groups’ together with RFR 2 ‘Accounting for Legal Entities’, in respect of the parent company.

The accounting principles, definitions of key ratios and calculation methods are the same as those applied in the last Annual Report, except as regards the following:

• Amendments to the existing standard IAS 24, which entered into force on 1 January 2011. Revised IAS 24 ‘Related Party Disclosures’ clarifies and simplifies the definition of ‘related party’. Rottneros has applied the revised standard with effect from 1 January 2011. The amended accounting principle has not yet had any effect on recognised amounts, though requires further information in the company’s financial reports.

• The parent company’s comparative figures have been amended as a consequence of the Swedish Financial Accounting Board having withdrawn UFR 2 . Group contributions are reported for the financial year commencing on 1 January 2011 or later in accordance with RFR 2[IAS27]p2 and also RFR 2[IAS18]p3. This amendment applies retroactively. The amended reporting had a positive effect of SEK 114 million on the net income of the parent company for the full year 2010. The amendment had no effect on the company’s equity.

FORECAST for 2012

The company is not providing an earnings forecast for 2012.

FORTHCOMING FINANCIAL INFORMATION

The AGM for Rottneros AB will be held in Stockholm on Thursday 19 April 2012.

The Annual Report for 2011 will be available from the company’s website during Week 11 of 2012.

For more information, please visit Rottneros’ updated website, www.rottneros.com.

Stockholm, 27 January 2012