YEAR-END REPORT JANUARY–DECEMBER 2009
• Income after net financial items amounted to SEK 0 (-169) million for the fourth quarter of 2009
• Income after net financial items amounted to SEK -69 (-385) million for the full year 2009
• Cash flow from operating activities amounted to SEK 84 (-49) million for the full year 2009. Loans were repaid by SEK 407 million for the full year 2009
• Operations at Rottneros’ pulp mill in Miranda, Spain ceased at the turn of the year 2008/2009
• Rockhammar Mill’s fixed assets were sold to Korsnäs Rockhammar AB on 1 April
• During the fourth quarter, Rottneros implemented a new issue of shares, which added SEK 202 million to equity following a deduction for guarantee and issue expenses. The company also implemented a new issue aimed at Rottneros’ bank syndicate, which involved offsetting loans equivalent to SEK 200 million
• Net loan debt, amounting to SEK 729 million as at 31 December 2008, has been transformed into an interest-bearing net loan receivable of SEK 10 million following amortisation and the new issues of shares implemented
• The pulp market remains strong and demand has increased. At the same time, global pulp stock levels are generally low, which has resulted in a positive price trend; also, further price increases have been announced for January and February 2010
• The company will not be providing a full-year forecast for 2010
• Following the end of the reporting period, Kjell Ormegard was appointed chair of the board up to and including the annual general meeting in April owing to Rune Ingvarsson having requested his immediate resignation from the board of Rottneros for personal reasons.
Rottneros in brief
Rottneros, a company that was originally established in the 1600s, is an independent and flexible supplier of customised paper pulp of high quality. Rottneros has been able to adapt in order to meet high customer expectations by continually developing its products and maintaining high levels of delivery reliability, technical support and service.
Rottneros has an annual production capacity of almost 400,000 tonnes of pulp at two mills in Sweden. Increasingly intensive product development in line with the requirements of customers will result in profitability that is higher and more stable throughout the business cycle.
SIGNIFICANT EVENTS
New issue of shares implemented
During the fourth quarter, Rottneros implemented a new issue of shares amounting to SEK 225 million, with preferential rights for Rottneros' shareholders. An extraordinary general meeting held on 11 November resolved to entitle holders of each of the existing shares to subscribe for five new shares at SEK 0.25 per share. In addition, it was also resolved that for 100 newly subscribed shares, the holder will receive 27 options to acquire an additional share per option within two years at SEK 0.82 per share.
The subscription period ran from 23 November 2009 up to and including 7 December 2009. The new share issue resulted in 886 million shares, corresponding to 98.3 per cent of the shares offered, being subscribed for through the exercise of subscription rights. In addition to this, interest was notified in subscribing for an additional 461 million shares without subscription rights, which altogether meant that the new issue of shares was oversubscribed by 49.5 per cent.
The extraordinary general meeting held on 11 November also resolved to implement a new share issue aimed at Rottneros’ bank syndicate, which involved offsetting loans equivalent to SEK 200 million. The subscription price per share was SEK 0.45. As the requirement for the new share issue to bring in more than SEK 200 million has been realised, Rottneros' lending banks have converted interest-bearing liabilities corresponding to SEK 200 million into 444,444,444 shares in Rottneros.
The new share issues have meant that Rottneros' equity has increased by SEK 402 million following guarantee and issue expenses, and SEK 182 million has been added to the cash balance. Interest-bearing liabilities decreased by SEK 280 million in December as a consequence of the banks' conversion, an additional amortisation amounting to SEK 60 million and also Nemus Holding offsetting a loan receivable within the framework of the new share issue. The share capital increased by SEK 59,177,834.40 to 153,393,886.90 following the reduction of share capital as resolved by the extraordinary general meeting and due to the new share issue and conversion that were implemented.
The new share issue has increased the number of shares in Rottneros by 901,062,320, and the banks' conversion of interest-bearing liabilities into shares has further increased the number of shares by 444,444,444. This means that the total number of shares has increased by 1,345,506,764 to a total of 1,533,938,869 shares (including shares redeemed by the company).
The extraordinary general meeting resolved to issue a total of 30 million subscription warrants in two series that were offered to the senior management of the Group. They chose not to acquire any subscription warrants, which means that the anticipated dilution effect of two per cent was not realised.
Decisions concerning investments in Vallvik Mill
Rottneros has afforded the improvement projects at Vallvik Mill the highest priority. These projects aim to improve competitiveness by increasing the production of both pulp and green energy. As a first step in Vallvik's improvement projects, the Board of Rottneros has approved an investment of SEK 77 million in an evaporation plant at Vallvik Mill. By increasing evaporation capacity, more of the mill's internal process water can be evaporated, which in its turn enables more of the organic material to be recovered and incinerated, and also increases bioenergy production. It is expected that this installation work will be carried out during the fourth quarter of 2010 in conjunction with the annual maintenance shutdown.
By an environmental judgment of the Environmental Court of Appeal, Vallvik Mill has been ordered to commission a biological treatment plant or corresponding treatment plant to meet the treatment requirements for water emissions from the mill. The Supreme Court denied the request made by Vallvik Mill concerning leave to appeal against this judgment and Vallvik Mill must commission a new treatment plant by 31 December 2011. By investing in the evaporation plant, special equipment can be used to separate the steam from the evaporation process into biogas that is burnt and water vapour that is condensed into pure water. Both of these are recycled while producing pulp, which reduces the need for oil and cuts down on the amount of wastewater. This reduces the impact on the external water environment, and the external water treatment plant that is planned can be of a much smaller scale, resulting in lower costs.
New chair of the board following the end of the reporting period
On 22 January 2010, the Board of Rottneros AB appointed board member Kjell Ormegard to chair the Board of Rottneros up to and including the annual meeting of shareholders in April 2010. The change was made on this date as a result of Rune Ingvarsson, the former Chair, asking to resign from the Board of Rottneros with immediate effect for personal reasons.
UNITS THAT HAVE BEEN DISCONTINUED AND SOLD
Rottneros Miranda
Operations at Rottneros’ pulp mill in Miranda, Spain ceased at the turn of the year 2008/2009. The background is that the plant was affected by sharp cost increases in terms of pulpwood, natural gas and chemicals (see also Accounting Principles, side 6).
Rockhammar Mill
Rockhammar Mill’s fixed assets were sold to Korsnäs Rockhammar AB on 1 April 2009 as a phase during Rottneros’ strategic transformation toward long fibre based pulp manufacture in the northern hemisphere.
THE PULP MARKET
Market and products
Demand for all grades of pulp was low at the beginning of the year and global pulp deliveries dropped sharply at this time, but have since shown a recovery. Overall, global pulp deliveries were at slightly higher levels in 2009 compared with the previous year. The market has been characterised by a better balance, which has enabled the price of pulp to increase. The main reasons for the improved balance are substantial reductions in pulp production and very strong demand from China.
The price of pulp in USD fell at the start of the year and bottomed out in March, but has since improved. Further price increases were announced at the start of 2010. Statistics for the total global market for bleached chemical market pulp showed that deliveries for eleven months of 2009 amounted to 36.1 (35.6) million tonnes, which was 1.4% more than the corresponding period of 2008. 91% (88% for the corresponding period in 2008) of the global supply capacity for bleached chemical pulp was utilised for the period January to November. It is estimated that 86% (92%) of production capacity was utilised for the same period.
The average price of bleached long-fibre chemical pulp amounted to USD 657 per tonne (USD 852 per tonne) for the period January to December 2009, which represented a reduction of 23%. The price of long-fibre chemical pulp (NBSK) at the end of December was USD 799, which was an increase of 24% from the beginning of the year when the price was USD 642.
The price of short-fibre chemical pulp increased from USD 585 at the beginning of the year to USD 700 by the end of December, which represents an increase of 20%.
Global producer stocks of bleached chemical pulp amounted to 4.6 million tonnes at the beginning of the year and were estimated at 2.7 million tonnes at the end of November.
Long-fibre chemical pulp (NBSK) (produced in Vallvik)
The price was USD 642 per tonne at the beginning of the year and it reached its lowest level of around USD 577 in March, when it started to increase. The price at the end of December was USD 799. The long-fibre chemical pulp market was weak during the first part of the year owing to weak demand for paper and board on the global market. Both permanent and temporary production cuts resulted in producer pulp stocks reducing from very high levels at the beginning of the year to low levels at the end of the year.
Delivery capacity utilisation during the period January to November was 93% (89% for the same period in 2008), and production capacity utilisation was around 88% (92%). Delivery capacity utilisation was 93% for the period October to November (84% for October to November 2008), and production capacity utilisation was 91% (87%).
Mechanical pulp and CTMP (produced in Rottneros)
The price of short-fibre CTMP on the Western European market at the beginning of the year was around USD 550 per tonne and over the year the price of CTMP developed in line with the price of chemical pulp, i.e. a gradual increase. Like the long-fibre pulp market, the CTMP market experienced weak demand during the first part of the year. This resulted in production restrictions mainly during the first quarter, which in its turn has balanced out the market.
Delivery capacity utilisation for the period January -to November was 84% (87%) and production capacity utilisation was 78% (91%). Delivery capacity utilisation for the period October to November was 85% (62% for October to November 2008), and production capacity utilisation was 93% (73%).
PRODUCTION AND DELIVERIES
The Group’s pulp mills in Rottneros and Vallvik have a combined production capacity of nearly 400,000 tonnes per year. In 2008, a production level of 602,700 was achieved for the full year. The reason for the reduced level of production is the sale of Rockhammar Mill (which produced 62,000 tonnes of CTMP pulp in 2008) and the fact that the operations at the Miranda Mill, which produced 134,000 tonnes in 2008, have been at a standstill since December 2008.
The level of production during the period January to¬ December 2009 was lower than the same period of the previous year, amounting to 335,900 (602,700) tonnes. In 2009, weak demand in the first part of the year resulted in production restrictions of around 65,000 tonnes. In 2008, Utansjö Mill, Rockhammar Mill and Rottneros Miranda produced 257,800 tonnes. There were annual maintenance shutdowns at the mills in Vallvik and Rottneros during the third quarter. All costs relating to maintenance shutdowns are recognised in the period during which the shutdowns take place.
Deliveries in 2009 amounted to 376,700 (617,900) tonnes, representing a reduction of 39%.
(For full report see attached file)