Rottneros CEO Comments on 2012 Fourth Quarter and Full Year Results

"This is not a great result, although we are pleased to have been able to produce a profit in a year that was tough for many pulp manufacturers." – Ole Terland, President and CEO, Rottneros.

Jan. 24, 2013 - Rottneros' president and CEO Ole Terland said that although 2012 results were not great, the Swedish pulp producer did turn a profit. His full comments about Rottneros' fourth quarter and full year 2012 results follow:

“The operating surplus (referred to internationally as 'EBITDA') amounted to SEK 61 million for the full year 2012. The corresponding figure for the previous year was SEK 97 million. The result after net financial items (EBT) was once more in the black at 'zero' for the fourth quarter of [2012] and SEK 6 million for the full year," Terland said.

“This is not a great result, although we are pleased to have been able to produce a profit in a year that was tough for many pulp manufacturers. Those of us based in Sweden not only had to struggle with an increasingly weak global economy but were also subject to a very strong Swedish currency during the autumn."

Pulp Market

“Despite things not running smoothly throughout the world, the consumption of pulp rose by approximately three per cent, slightly more for softwood and slightly less for hardwood,” Terland said. “The demand outlook for 2013 appears as though it will remain more or less the same. Prices, which increased during the first half of 2012, peaked at just over USD 850 per tonne to fall by around USD 100 per tonne during the summer and autumn and subsequently rise again to just over USD 800 per tonne by the end of the year.

“Global stocks fell during the autumn, particularly for softwood pulp, so that we are entering 2013 with some positive market momentum. Total global manufacturing capacity for softwood pulp will fall rather than rise in 2013 as several pulp mills are being built or converted for other grades. Together with the increase in demand, capacity utilisation is likely to increase, and price trends should therefore continue to rise.”

Rottneros' Markets

“Focusing specifically on Rottneros, we have during the year, successfully continued our move towards more sales within customer segments having specific requirements, where our raw materials and process equipment can prove their worth. This will reduce our exposure to the constrained and less specialised printing paper market. This applies to both mechanical and chemical pulp and is a development that we will continue in 2013.

“Our sales for different filter applications continue to increase slowly but surely.

“Deliveries to board manufacturers with an express requirement for bulk are steadily growing.

“The market for our customers within electrical applications has been tough, with a temporary reduction in infrastructure investments and consequently lower deliveries, which meant that our sales fell despite retaining market shares.

“On the cost side, both our variable and fixed costs have fallen. It was primarily the cost of timber that fell during the autumn, and then remained stable during the winter. All-in-all, comparing 2011 with 2012, variable costs per tonne reduced by almost ten percent. The corresponding figure for fixed costs per tonne for Rottneros Mill is over ten percent despite falling production, and slightly less than ten per cent for Vallvik Mill thanks to our annual production record of almost 209,000 tonne, of which we are proud.

“Rottneros Mill produced a small positive operating surplus for 2012 despite the ongoing programme of staff cuts. The cash flow after investments amounted to SEK 17 million.

“Vallvik Mill's operating surplus is SEK 55 million and has exceeded SEK 350 million for the past three years. This surplus is being reinvested in the mill. We do not intend to provide this kind of mill-specific result on an ongoing basis, but consider it was justified to do so on this occasion as in the course of last year certain information appeared in the media that conveyed erroneous perceptions."

Arctic Paper Offer

“Arctic Paper SA announced in early November 2012 an offer to all of the Rottneros shareholders to exchange their shares in Rottneros AB for shares in Arctic Paper. The intention was to subsequently merge the companies. A large number of shareholders declined the offer, for which reason a merger of the companies did not take place. A merger of the companies — with one management team and one income statement/balance sheet — could have realised substantial synergies. Rottneros is now continuing as an independent company, though with a different shareholder structure, where the shareholding within the sphere of influence of the main owner company increased from 20% to 40% while virtually all of the bank shareholdings have been relinquished.

“As we are two independent companies, only transactions for the benefit of both parties and all shareholders will be concluded, that is to say as is the situation is at present and as it has been for many years. We will continue to develop our ongoing business and further improve our supplier and customer relationships. Our doors are open to the discussion promised by Arctic Paper SA in respect of synergies, even without a merger. Any way of improving Rottneros is welcome.

“In conclusion, I would like to express my appreciation for the significant shareholder support expressed both by telephone calls and by email in recent months,” Terlander said.

SOURCE: Rottneros