Year-end Report January-December 2013

• Loss after net financial items amounted to SEK ‑43 (0) million for the fourth quarter of 2013.
• Loss after net financial items for the full year 2013 amounted to SEK -66 (6) million before impairment losses (write-downs) and one-off costs, which amounted to SEK -92 (0) million. One-off costs basically comprise an impairment loss of SEK 80 million in respect of plant at Utansjö. Operating loss amounted to SEK -154 (6) million for the full year.
• Cash flow from operating activities amounted to SEK 2 (-8) million for the fourth quarter of 2013 and SEK 62 (41) for the full year. Net borrowing amounted to SEK 25 (52) million.
• The strong Swedish krona during the year had a negative impact on the result.
• Carl-Johan Jonsson took office as the new CEO and President on 1 July 2013.
• The Board of Directors proposes that no dividend be declared for 2013.

CEO’s statement

In many ways 2013 was a year of change, review and fresh ideas for Rottneros. We have been conducting extensive and necessary work with change since the summer of 2013. Our objective is to strengthen our competitiveness and generate the profitability that is ultimately decisive for the long-term survival of the Group. In terms of results, 2013 represented a weak year in the history of Rottneros. This was due to both foreign currency effects and lower production than planned.

The entire fourth quarter was characterised by our ongoing work with change, the aim of which is to generate increased profitability. The programme will be implemented by January 2015. Change takes time, but we have already seen some results. We are pleased to note good production levels at Vallvik Mill in both November and December following the annual maintenance shutdown.

This work affects the whole Group and is both practical and strategic. For production we are focusing on safety, clear routines and responsibility. A strong safety culture and a safe work environment – putting our house in order if you like – represent, like a positive and open attitude and clear leadership, important framework conditions to enhance availability and productivity. We place a strong emphasis on identifying, taking stock of and analysing the risks associated with production and also providing the necessary rules and regulations, but this also involves establishing the common outlook required to succeed. In addition to changes in our way of working in production, we will of course endeavour to optimise our sales, purchasing and financial control in order to secure our long‑term profitability. 

We have submitted our application for a permit to increase production at Vallvik Mill. If the relevant public authorities grant their approval, we will get a permit to produce 255,000 tonnes per year. We currently have a temporary permit for 240,000 tonnes maximum per year. We see a need for limited investments with a view to eliminating bottlenecks. We activated the groundwood line at Rottneros Mill during the autumn and achieved good production levels. 

In terms of the market, the last quarter was also characterised by a continued increase in demand for NBSK pulp, and the market is currently strong with NBSK prices continuing to rise. CTMP pulp also continued to develop in a strong and positive way during the fourth quarter.

All of these changes – large and small – are time-consuming. I am convinced that the work that we have now initiated, one step at a time, will give us the availability, production and not least the culture that we need for long‑term profitability.

Carl-Johan Jonsson

ACCOUNTING POLICIES

This Year-end Report has been prepared in accordance with IAS 34 ‘Interim Financial Reporting’, which complies with Swedish law through the application of the Swedish Financial Reporting Board’s Recommendation RFR 1 ‘Supplementary Accounting Rules for Groups’ together with RFR 2 ‘Accounting for Legal Entities’, in respect of the parent company.

The accounting policies, definitions of key ratios and calculation methods are the same as those used in the last annual report.

FORTHCOMING FINANCIAL INFORMATION

The Annual General Meeting for Rottneros AB will be held in Stockholm on Friday 25 April 2014.

The information in this Year-end Report is such that Rottneros is required to disclose under Sweden’s Securities Market Act. The report was released for publication on 24 January 2014 at 08.30.

This Year-end Report and additional information are available on www.rottneros.com

Stockholm, 24 January 2014

(For full report, see attached file)

ROTTNEROS IN BRIEF

Rottneros is a supplier of customised and high quality paper pulp with its origins dating back to the 17th century.

Around 250 people are employed at Rottneros, which had a turnover of SEK 1.4 billion in 2013.

Rottneros produces market pulp; i.e. paper pulp sold on the open market in contrast to pulp that is produced at mills with integrated paper production.

The Group has an annual production capacity of almost 400,000 tonnes of pulp at its two mills in Rottneros and Vallvik.

Business concept

Rottneros’ business concept is to be an independent and flexible supplier of high-quality, customised pulp. Rottneros adapts its product range to meet the needs and high expectations of customers by continuously developing its products and providing a high level of supplier reliability, technical support and service.

Business model

Rottneros operates in the market for market pulp and is a global supplier of bleached and unbleached long-fibre chemical pulp, together with mechanical CTMP and groundwood pulp.

Pulp is produced at two Swedish pulp mills. Vallvik Mill produces two grades of long-fibre sulphate pulp: fully bleached sulphate pulp (ECF – Elemental Chlorine Free) and unbleached sulphate pulp (UKP – Unbleached Kraft Pulp).

Rottneros Mill manufactures CTMP and groundwood pulp, which are mechanical grades of pulp.

Adding value

Rottneros adds value by focusing on segments where the Group has achieved, or can achieve, a strong position in the market for market pulp. Rottneros is an important supplier of, for example, pulp for electrical applications imposing very high purity requirements, filters where air permeability is crucial, food packaging where the most important factor is its stiffness, and pulp for thin printing paper with high requirements for opacity.

An essential part of adding value is the effective and rational management of the input goods required for pulp production. Rottneros primarily uses three input goods:

• Timber, which accounts for approximately 39 per cent of our costs.
• Electricity, which accounts for approximately eight per cent of our costs.
• Chemicals, which account for approximately eight per cent of our costs.

In order to achieve security and stability, Rottneros is looking for long-­term relationships and contracts with the suppliers of these goods.

Operative objectives and strategies

Rottneros has a number of overall objectives for its operational activities, which are intended to result in a competitive return for shareholders over a business cycle by creating value and yielding dividends. In order to achieve these objectives, the Group needs to create added value for its customers as well as be an attractive employer and competitive producer.

One of our objectives is growth. Rottneros works according to two main strategies to create a favourable environment for achieving this goal:

• Rottneros is looking for development opportunities to strengthen the existing pulp operation through strategic alliances in Sweden and abroad. The Group is also planning to further increase capacity at Vallvik Mill.
• Rottneros is preparing for a possible entry into related activities, where the Group’s knowledge of pulp refining is utilised and represents a precondition, and where there are clear synergy effects. One step in this development is that the Group is running projects in cooperation with industrial and financial partners aimed at leading to the production of high-­refined bio fuel at both mills.

Another objective is for Rottneros to gradually lay the foundation for less volatile movements in the share price over the course of a business cycle by focusing increasingly on more specialised grades of pulp.

Rottneros, a company that was originally established in the 17th century, 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 total 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.