Rottneros managed to avoid posting a quarterly loss

February 2, 2010 by timbercommunity

Forest company Rottneros makes zero profit in the fourth quarter. The company believes in higher paper prices during the beginning of 2010.


The current year looks relatively positive for the company according to Analyst Leif Pettersson at net magazine placera.nu  and his stock recommendation goes from increase to neutral.  The company is sensible with its cost because of the level of current uncertainty. Rottneros is dependent on a weak Swedish currency and furthermore lacks the woodland which makes the company sensitive to price increases.

The divestment of the Spanish operations of the loss-making pulp mill Miranda has been stopped and  the production decreased with 200 000 tonnes. Rottneros has now a total production capacity of nearly 400 000 tonnes of pulp per year at two factories in Sweden. A forum on net trading company Avanza speculates that the sale of Rockhammar mill was forced by the banks.  

Financial Statement Rottneros January-December 2009 

• Profit after financial items for the fourth quarter of 2009 was -169 m SEK. 
• Profit after financial items for the full year 2009 amounted to SEK -69 (-385) M 
• Cash flow from operations for full year 2009 amounted to 84 (-49) million. Repayment of borrowings during the full year 2009 made by 407 million 
• Operation of Rottneros pulp mill in Miranda in Spain ceased at the end of 2008/2009 
• Fixed assets in Rockhammars Mill was sold to Korsnäs Rockhammar AB April 1 
• Rottneros in the fourth quarter completed a rights issue, which has placed 202 million to shareholders' equity after deduction of the underwriting and issue costs. Furthermore, a private placement to Rottneros syndicate of banks conducted by setting off the loan equivalent to 200 million 
• Net debt as at end 2008 amounted to 729 million, has been servicing and implemented new issues to an improved net interest bearing debt of EUR 10 million 
• Mass market remains strong and demand has improved. At the same time, global pulp stocks at low levels, which enabled a positive price trend and the continued price increases have been announced for January and February 2010 
• The company refrains from giving an outlook for full year 2010 
• After the reporting period has Kjell Ormegard appointed Chairman until in April. This is because of that Rune Ingvarsson for personal reasons asked to leave Rottneros board with immediate effect. 

SIGNIFICANT EVENTS 

Completed rights issue 
Rottneros in the fourth quarter completed a rights issue of SEK 225 million, with preferential rights for shareholders in Rottneros. An extraordinary general meeting on 11 November the each existing share entitles the holder to subscribe for five new shares of SEK 0.25 per share. In addition, it was decided that for 100 new shares obtained 27 warrants that within two years to acquire an additional share for each option for 0.82 per share. 

The subscription period ran from November 23, 2009 and until 7 December 2009. The result was that the new issue of 886 million shares, representing 98.3 percent of the offered shares, signed on the basis of subscription rights. In addition, notification of requests for subscription of additional 461 million shares without subscription rights, all of which meant that the rights issue oversubscribed by 49.5 percent. 

The Extraordinary General Meeting on 11 November the even to undertake a private placement to Rottneros syndicate of banks by setting off the loan equivalent to 200 million with each share subscribed for SEK 0.45. Then the requirement that the new issue brings more than 200 million were realized, has Rottneros lending banks converted interest-bearing debt equivalent to 200 million to 444,444,444 shares of Rottneros. 
Through new issues have Rottneros equity increased by 402 million after underwriting and issuance costs and 182 million added to the checkout. As a result of banks' conversion, an extra amor-ment of 60 million and that Nemus Holding set-off of debt under the rights offering, the interest-bearing liabilities decreased by 280 million in December. The share capital has increased by U.S. $ 59,177,834.40 to EUR 153,393,886.90 for the reduction of share capital under extraordinary general meeting decisions and implemented new share issue and conversion. 

Through the rights issue, the number of shares in Rottneros increased by 901,062,320 shares, and as a result of banks' conversion of interest-bearing debt into shares for a further 444,444,444 shares. This means that the total number of shares increased by a total of 1,345,506,764 to 1,533,938,869 shares (including the company repurchased shares). 

The extraordinary general meeting decided to issue a total of 30 million warrants in the two series were offered senior executives. They chose not to acquire any warrants, which means that an estimated dilution of two percent failed to materialize. 
Decisions on investment in Vallviks Mill 
Rottneros highest priority improvement projects are in Vallviks Mill. These aim to improve competitiveness through increased production of both pulp and green energy. Rottneros Board has as a first step in Vallviks improvement projects granted an investment in the evaporation plant in Vallviks Mill for 77 million. Through the expanded indunstningskapaciteten be more of the mill's internal process water is evaporated, which in turn allows more of the organic material can be recovered and burned, and expand production of bioenergy. The installations will take place in the fourth quarter of 2010 in connection with the annual maintenance stoppage. 

Vallviks Mill By ENVIRONMENTAL of the Environmental Court assigned to operational an biological purification plant, or an equivalent treatment plant to meet the conditions of factory waste water discharges. The Supreme Court has rejected Vallviks Mill's request for leave to appeal on the ENVIRONMENTAL and Vallviks utility will, by December 31, 2011 have taken a new treatment plant in operation. The investment in the evaporation plant can, through special equipment; the evaporated vapor from the evaporation divided into both biogas burned and partly in the water vapor is condensed into pure water. These two re-used in mass production and reduces the need for oil and the quantity of wastewater. This will reduce the load on the external aquatic environment and the planned external water treatment plant can be dimensioned considerably smaller and at less cost. 

New Chairman of the Board after the reporting period 
The Board of Rottneros AB January 22, 2010 appointed director Kjell Ormegard the new Chairman of Rottneros Board until the AGM in April 2010. The change was prompted by the former chairman Rune Ingvarsson the day for personal reasons asked to leave Rottneros board with immediate effect. 

DISCONTINUED and divested units 

Rottneros Miranda 
Operation of Rottneros pulp mill in Miranda in Spain ceased at the end of 2008/2009. The background is that the plant has suffered from severe dietary market increases for both pulpwood ¬ natural gas and chemicals.

Rockhammars Mill 
Fixed assets in Rockhammars Mill was sold to Cross ¬ nose Rockhammar AB April 1, 2009 as a step in the strategic Rottneros the transformation of the northern hemisphere conduct mass-production based on long fiber. (Note northern hemispere=middle of Sweden)

MASS MARKET 

Markets and products 
Demand for all pulp grades were at the beginning of the year, weak and world pulp supply was a sharp drop at the beginning of the year and then show a recovery. Overall, the world's pulp supply is slightly higher for 2009 compared to last year. The market has been characterized by a better balance which allowed increases in mass. The main reasons for the improved balance are heavy production constraints of mass and a very strong demand from China. 
The price of pulp in USD was at the beginning of the year, declining and reached its bottom in March but has since improved. Continued price increases have been announced at the beginning of 2010. The statistics of the total world market for bleached chemical pulp, was supplied for eleven months of 2009 to 36.1 (35.6) million ton, which was 1.4% higher than the corresponding period in 2008. The use of delivery capacity for bleached chemical pulp in the world for the period January to November was 91% (88% for the corresponding period in 2008). Utilization of production capacity for the same period is estimated at 86% (92%). 

The price of bleached long-fiber chemical pulp amounted on average during January-December 2009 to USD 657 per tonne (USD 852 per tonne), a decrease of 23%. The price of long-fiber chemical pulp (NBSK) ratio at December's end to $ 799, which represents a 24% increase from the beginning of the year when the price was USD 642nd 

For short-fiber chemical pulp price has increased from U.S. $ 585 at the beginning of the year to $ 700 at the end of December, an increase of 20%. 

Producer inventories in the world of bleached chemical pulp were at beginning of year 4.6 million ton and were calculated at the end of November to 2.7 million ton. 

Long fiber chemical pulp (NBSK) 
(manufactured in Vallvik) 

The price was at beginning of year U.S. $ 642 per ton in March and reached its lowest level at approximately U.S. $ 577, but then improved. Price at the end of December amounted to USD 799th The market for long fiber chemical pulp was weak during the first part of the year because of weak demand for paper and paperboard in the world market. Producer stocks of pulp has both permanent and temporary production cutbacks reduced from very high levels at year start, at low levels at year-end. 

Shipping utilization during the period from January to November 93% (89% for the corresponding period in 2008), production and utilization was approximately 88% (92%). For the period October-November delivery was the use 93% (84% in October-November 2008), and utilization of production capacity 91% (87%). 
Mechanical pulp and CTMP (manufactured in Rottneros) 
The price of short-fiber CTMP was on the West ¬ European market at the beginning of the year approximately $ 550 per ton during the year, prices of CTMP developed in the same range as the price of chemical compounds, namely a gradual improvement. The first part of the year, the market for CTMP like the market for long ¬ fibrous mass revealed a low demand. This resulted in the production constraints especially in the first quarter, which in turn is balanced market. 

Shipping utilization for the period January to November was 84% (87%) and production utilizedtion was 78% (91%). For the period from October to November each supply utilization 85% (62% in October-November 2008) and utilization of production capacity 93% (73%). 

Production and deliveries 

The Group's mills in Rottneros Vallvik and have a combined production capacity of close to 400 000 tonnes per year. In 2008, reached a production of full ¬ year at 602 700 tonnes. The reasons for the decline in production is the sale of Rockhammars Mill who in 2008 produced 62 000 ton of CTMP pulp and operation of the mill in Miranda, who in 2008 pro ¬ producing 134 000 ton, has been down since Decem ¬ ask 2008th 
Production during January-December 2009 decreased compared with the mo ¬ tsvarande period the previous year and amounted to 335 900 (602 700) tonnes. The weak demand at the beginning of the year, with ¬ forward to production constraints ¬ tion of about 65 000 tonnes carried out in 2009. In 2008 production was ¬ tion at Utansjö Mill, Rockhammars Mill and Rottne ¬ Miranda rose by 257 800 tonnes. Annual kept under ¬ ¬ stop has been implemented at the mills in Vallvik and Rottneros Mill in the third quarter. The costs of maintenance shutdowns are reported during the period when the stops are implemented. 

Deliveries in 2009 amounted to 376 700 (617 900) tonnes, representing a decrease of 39%.