Rottneros Reports Record Second Quarter Results on Volume, Pricing

"Production at record levels, together with the continued strong pulp market, resulted in a record quarter in terms of profit." – Lennart Eberleh, President and CEO of Rottneros.

July 26, 2022 - Rottneros on July 22 reported strong production and high pulp prices lead to record results in the second quarter of 2022.

"Production at record levels, together with the continued strong pulp market, resulted in a record quarter in terms of profit," said Lennart Eberleh, President and CEO of Rottneros. "At the same time, our costs rose due to growing external imbalances and accompanying rising inflationary pressures. We have therefore intensified our long-term focus on profitability through continuous efficiency and productivity improvements.

"We had one of our best quarters for production in our mills. The volume increased by 1 percent to 110 500 tonnes, compared with the same quarter last year. Our deliveries increased by 3 percent, to over 106 000 tonnes.

"Net sales grew by 32 percent during the quarter and EBIT more than doubled to SEK 219 million, which was a new record for a single quarter. In addition to the volume growth, the increase in pulp prices and a stronger USD were the main factors behind the improvement. We also benefited from steady flows of sawmill chips and pulpwood."

Inflation Means Intensified Focus on Costs

"Efficiency measures are a top priority to address the clear cost inflation on our input goods and external services. The external situation is now gradually leading to a tighter pulp wood market after a few years of favourable balance with rising prices going forward. The supply of wood raw material for our mills takes place mainly from the local area and is based on long-term relationships with our suppliers, both in terms of pulpwood and sawmill chips. Through our raw material companies in Latvia, Rottneros Baltic and Nykvist Skogs AB in Värmland, we have a good structure that complements our industrial supplier relationships, secures supply and can handle changes in volume.

"The tight electricity market continues to create significant challenges for the electricity-intensive production of Rottneros Mill, while electricity hedges continue to largely offset the negative impact on earnings. Because of the occasionally ultra-high spot price at which we buy electricity for production, we had to carry out some minor production shutdowns this quarter as well, corresponding to a production loss of about 800 tonnes. Electricity prices before hedging almost tripled in the second quarter compared with the second quarter of last year.

"Because of the challenging electricity market, the grinding line is not in operation in July for the holiday period. Consequently, we will have a planned production reduction of more than 5 000 tonnes and a certain negative impact on earnings in the third quarter.

"During the quarter, work continued on the in-depth strategic analysis to ensure that the Group's structure meets the requirements of sustainable profitability in line with our financial targets. The background is the changed situation on the energy market and the rising prices of other input goods."

Market Remained Strong, Prices Rose Further During the Quarter

"The pulp market continues to be solid and the list price of NBSK climbed almost USD 90 during the quarter, to USD 1 430. The European market continues to benefit from strong demand for regionally produced pulp due to continued limited shipping opportunities, mainly from Asia. The list price continued up at the beginning of the third quarter to USD 1,470.

"In conclusion, I would like to note that Rottneros Packaging's extensive investment project in Poland, together with Arctic Paper, is progressing according to plan, with start-up scheduled for the end of 2023.

"Last but not least, once again I would like to thank all of our employees for their dedicated efforts to achieve our overall goal of constantly developing and improving Rottneros. I would also like to take this opportunity to thank our customers, suppliers and owners for their outstanding cooperation."

Rottneros is an independent producer of market pulp. The Group comprises the parent company Rottneros AB and its subsidiaries Rottneros Bruk AB and Vallviks Bruk AB with operations involving the production and sale of market pulp. The Group also includes Rottneros Packaging AB, which manufactures fibre trays, the wood procurement company Rottneros Baltic SIA in Latvia and the forest operator Nykvist Skogs AB. To learn more, visit: www.rottneros.com.

SOURCE: Rottneros AB