ROTTNEROS INTERIM REPORT JANUARY – MARCH 2018

STRONG PROFIT GROWTH

• Net turnover in the first quarter of 2018 rose by 15% to SEK 541m (472).
• The profit after financial items for the first quarter increased by 30% to 73m (56). Earnings per share for the quarter were SEK 0.37 (0.28).
• NBSK list price during the first quarter of 2018 was 18% higher in SEK compared with the first quarter of 2017. Compared with the fourth quarter of 2017, the list price in SEK was 8% higher.
• Rising pulp wood prices have a negative impact on results.
• Production volume for the quarter was 99.9 (102.9) thousand tonnes. A new quarterly production record was set for Rottneros Mill. An unplanned shutdown in Vallvik Mill held back the growth.
• Investments in the Agenda 500 development programme are progressing according to plan, in terms of both increased capacity and costs.
• Efficiency measures continue and have a clear focus on increased profitability.

COMMENTS BY THE CEO: STRONG PROFIT GROWTH DESPITE CHALLENGES

The first quarter was characterised by a continued strong market, resulting in a clear improvement in profits, in spite of certain items with a negative impact. The production in Vallvik was burdened by an unplanned shutdown, whilst Rottneros Mill set a new quarterly production record. In addition to lower production in Vallvik, the profit was held back by higher pulp wood prices and other disturbances due to the cold weather, as well as by pulp price hedges. Our systematic approach to increased efficiency is beginning to yield results and will be even more visible in our costs in the future.

Both net turnover and EBIT showed good growth compared to the corresponding quarter last year, rising by 15 per cent and 37 per cent, respectively, despite the pulp price hedges having a negative effect of SEK 13m on the results. The Group’s production decreased by 3 per cent due to production disturbances in Vallvik. Rottneros Mill increased its production by 4 per cent to a quarterly record of 45.6 thousand tonnes, which is a clear acknowledgement of our investments being successful.

The unplanned production shutdown in Vallvik, together with unfavourable weather conditions, resulted in a loss of a few days’ production around the turn of the month February/March. Therefore, the quarterly production in Vallvik decreased by 8 per cent compared with the previous year. During the latter part of March and in the beginning of the second quarter, however, the production has been running smoothly.

Full focus on efficiency
Our efficiency measures continue and are increasing in scale. We are beginning to see the effects in our income statement as the other external expenses decreased by 11 per cent. The new organisation with clear areas of responsibility is an important element when we optimise and increase our efficiency further.

The cost of raw materials and consumables increased by 17 per cent in Q1. The wet and mild weather during the autumn and in the beginning of the winter, together with high production in the forest industry as a whole, has led to shortage of pulp wood and rising wood prices, affecting our sourcing costs negatively by approximately SEK 26m when compared to Q1 last year. The pulp wood balance will continue to influence our costs going forward. In addition, the cold weather had a certain negative impact on the cost of other input goods, and also had an impact on the production efficiency in Vallvik, resulting in higher costs.

The hump in investments soon over
Work with our decided investments is proceeding as planned. By reaching a production capacity of approximately 440 thousand tonnes at the end of 2018, we will have passed the hump of large investments in the last few years. A more normal level in the long-term, between SEK 50-100m of annual investments, means that we can gradually and in smaller steps invest in removing bottlenecks in production. This allows us to focus on efficiency in an even wider scale.

In Rottneros Mill the work on investment stage 2 on the CTMP line is ongoing, increasing the capacity by some 18,000 tonnes per year after the planned commissioning in the autumn of 2018. In Vallvik Mill we are investing in a weak gas system, in order to fulfil the requirements of the environmental permit of 2016 that was granted for the higher production. The investment is planned to be operational in the end of 2018.

In Packaging, the development towards production and sales in a larger industrial scale continues as planned. We expect to start production in the new production facility in Sunne during the autumn. There is a large and constantly increasing interest in the market for sustainable packaging, giving us confidence for the future. 

Markets and outlook
The market continues to be strong in the beginning of the second quarter, with price increases driven by the favourable balance between supply and demand.  Our healthy order books give us a good starting point for the coming quarters. We see certain signs of increased consolidation in the market, which may be positive for the market balance in the longer term.

To sum up, we have made clear progress during the quarter within the framework of our strategy for profitable growth in our niche areas. The favourable market and our measures for increasing production and efficiency give us a positive outlook for the future.

Lennart Eberleh

(For full report, please see attached file)

This information is information that Rottneros AB is obliged to publish under the EU Market Abuse Regulation and the Securities Market Act. The information was submitted via the contact person below for publication on 24 April 2018 at 8 a.m. CET. This report has been drawn up in both a Swedish and an English version. The Swedish version shall prevail in the event of differences between the two reports.

For further information, please contact:
Lennart Eberleh, President and CEO, Rottneros AB, +46 270 622 65