Rottneros

Statement by the CEO

The favourable pulp market and a strong USD mean that we can sum up the whole year 2022 as both an eventful one and a year with profits at record levels,
despite the turbulent environment. Profitability during the fourth quarter, however, was weighed down by several temporary factors and increasing cost inflation
on our input goods, while the economic slowdown affected demand negatively. The systematic and targeted work for additional efficiency improvements
will thus be given even higher priority going forward. Our robust balance sheet gives us significant financial resilience.
 

Net turnover increased by 22 percent during Q4 to 730 MSEK. EBIT amounted to 1 MSEK, mainly affected by lower deliveries, significant price increases on our input goods, higher maintenance efforts than normally related to the electric turbine in Vallvik, and certain additional costs in connection with the closure of the groundwood line. For the whole year, the group registered a new record with a good margin for both the turnover and EBIT-earnings, 2,980 MSEK and 550 MSEK, respectively. In addition, the net financial income increasd with the value of the electricity futures that were not matched by future cash flows, as the groundwood line was being closed.
The effect was +165 MSEK and means that the profit after financial items amounted to a full 714 MSEK.
 

EVENTFUL LAST QUARTER OF 2022
During the quarter, the high pulp prices continued and a strong USD affected our margins while production and deliveries were restrained by lower volumes mainly in Rottneros Mill, as the groundwood line was shut down according to schedule during December. Production in Vallvik was hampered by certain minor unplanned stoppages. The comparison to last year was also somewhat negatively affected by the timing of the maintenance shutdown, which now took place entirely during Q4. CTMP-production continued to develop well as a result of our continuous and structured measures to increase availability. It increased 5 percent during the quarter and 6 percent during the whole year, despite recurring production constraints related to high electricity costs.

THE STRATEGIC WORK ON REDUCING EXPOSURE TO THE ELECTRICITY MARKET CONTINUES
To date, our strategy of hedging our electricity prices with electricity futures has been very successful and by and large compensated for the higher market prices. Our hedging rate is now at a high level until and including 2025. At the same time, the strategic work on diversifying the energy supply by supplementing with very long-term purchasing agreements for fossil free energy and self-produced green electricity continues. The aim is to gradually reduce exposure to the volatile and uncertain electricity market. Investments in even higher energy efficiency in our mills may also become relevant. During the quarter, clear signs of a general increase in cost inflation on our input goods were noticed, mainly for chemicals and pulp wood. Our focus on efficiency improvements thus increased even further in order to counteract the higher costs.
 

OUR SAFETY WORK IS PAYING OFF
Employees’ health is a pivotal issue in our day-to-day operations. It is very satisfying that this persistent work is showing results. During 2022, the number of incidents requiring sick leave dropped to 4 compared to 7 the previous year. During the fourth quarter the number was zero.

THE MARKET IS ABOUT TO SLOW DOWN
The balance in the pulp market shifted during the quarter in favour of buyers as a result of the slowdown in the global economy leading to weaker demand. The list price for NBSK thus dropped by about 70 USD compared to the end of Q3, to just under 1,430 USD at the end of December.
 

EQUIPPED TO FACE POSSIBLE CHALLENGES 2023
Our robust balance sheet continues to form an important buffer ahead of possible challenges that may arise as a result of the economic trend. The equity ratio at year-end was 66 percent, our liquid assets were 465 MSEK and available liquidity amounted to a total of 747 MSEK. Net cash after deduction for interest-bearing liabilities was also reassuring, 354 MSEK. The uncertain macro-prospects ahead of 2023 mean that we have a high level of preparedness to face possible future challenges.
 

PACKAGING IS GOING ACCORDING TO PLAN
During the year, Packaging continued with technology and product validation of the production line for thermoformed trays that Rottneros has developed. At the same time, the
project for scaled-up production in Poland is progressing together with Arctic Paper. The new factory is expected to start at the end of 2023.

To conclude, I would also like to say how proud I am to be part of Rottneros’ team and at the same time express my gratitude to all those colleagues who with their wholehearted commitment contributed to our record-profit during 2022. I would also like to thank our customers, suppliers, owners and the board for the good cooperation.

(For a full report, see appendix)

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The interim report for the fourth quarter 2022 will be presented on 2 February 2023, at 12.00 CET.

All participants can follow the presentation via the web link: Rottneros - Q4 presentation 2022 - Finwire Questions can be asked via the link in advance or during the presentation. You can also watch the presentation afterwards via Rottneros'  Youtube channel and website: https://www.rottneros.com/investors/presentations/

The presentation will be held in English. Questions can be asked in English or Swedish.

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