Rottneros Posts Second Quarter 2014 Profit on Strong Pulp Market

Rottneros' deliveries amounted to 89,500 tonnes during the second quarter of 2014, representing a volume increase of 2% compared with the previous year.

July 23, 2014 - Swedish market pulp producer Rottneros announced the following highlights from its 2014 Interim Report (Jan. 2014 - June 2014):

  • Profit after net financial items amounted to SEK 31 million for the second quarter of 2014, compared with a profit of SEK 20 million for the first quarter of 2014 and a loss of SEK -20 million for the second quarter of 2013. Profit after net financial items amounted to SEK 50 (-24) million for the first half of the year.
  • A strong market has led to that the average PIX price for NBSK continued to rise during the second quarter and amounted to an average of USD 924. The price increase in Swedish kronor amounts to ten per cent compared with the corresponding period of 2013. The price increase amounts to two per cent compared with the previous quarter.
  • Production continued to be stable at Vallviks Bruk during the second quarter, which resulted in lower direct costs and had a positive impact on the result.
  • The increase in working capital had a negative impact on cash flow of SEK 73 million, mainly due to the high level of invoicing in June. Cash flow from operating activities amounted to SEK -3 (-9) million for the second quarter of 2014. Net borrowing amounted to SEK -42 (-45) million on 30 June.

Comments from Carl-Johan Jonsson, CEO:

"I would like to start by saying that I am very satisfied with our performance during the first six months of this year, which resulted in an operating profit of SEK 53 million, a level we have not been close to achieving since the first half year of 2011.

"Our strong focus on management by objectives and new working methods combined with clear leadership has brought good order and improved production availability. Stable market conditions together with our programme of change have resulted in a strong first half year.

"Our programme of change — Focus15 — continues to be pursued vigorously within our operations. New working methods have, among other things, resulted in more stable production and fewer production hours lost at Vallviks Bruk compared with previously. We are running several parallel projects to increase our capacity, which are expected to yield results after the annual maintenance shutdown in the autumn. The operation at Rottneros Bruk has performed well, with more stable production and continued good demand during the second quarter.

"We are launching an advanced leadership training programme in the autumn. Our work to develop modern, uniform leadership with clear management by objectives represents an integral component of our programme of change and is both a vital and central part of our plan to become a market leader.

"The paper pulp market remains stable and demand is being underpinned by the moderate recovery of the world economy. Capacity utilisation for long-fibre sulphate pulp was 93 per cent for the year, which must be considered good, and the price of NBSK has been USD 925 per tonne for some time now.

"In conclusion, I am looking forward to an exciting second half to the year and to seeing the future effects of Focus15. "

THE PULP MARKET

The underlying demand for paper pulp is currently being underpinned by the moderate recovery of the international economic situation, though changes to consumer patterns within media are having a negative impact. A structural decline in graphic paper in the mature economies can be observed, though this has been partly offset by an increase in the consumption of packaging materials and tissue paper. Paper production continues to increase in China, but at a slower pace than in previous years.

So far this year global deliveries of chemical market pulp have remained at the same level as in 2013, while there has been a slight reduction in CTMP deliveries. Producer stock levels were 36 days for chemical pulp and 31 days for CTMP at the end of May.

A good balance prevails in the long-fibre sulphate market. Capacity utilisation has been 93% so far this year, and producer stock levels corresponded to 26 days' production at the end of May. There was a marginal increase in the price of NBSK during the second quarter, which lay at USD 925 by mid-year, almost 20 dollars above its level at the beginning of the year.

The short-fibre pulp market is more uncertain and characterised primarily by increase pressure on the supply side from new manufacturing capacity in Latin America. Capacity utilisation was significantly lower during the year than for long-fibre. Producer stock levels are higher and prices have fallen by almost 30 dollars so far this year to the current level of around USD 740. Price trends for CTMP have largely followed those for short-fibre pulp.

PRODUCTION AND DELIVERIES

The Group's pulp mills at Rottneros Bruk and Vallviks Bruk have a combined annual production capacity of approximately 400,000 tonnes. Production amounted to 88,100 (88,400) tonnes for April to June 2014.

Deliveries amounted to 89,500 (87,800) tonnes during the second quarter of 2014, representing a volume increase of 2% compared with the previous year.

Rottneros full report, including tables, is available for download: Rottneros 2Q Report (962k, PDF).

SOURCE: Rottneros