The pandemic puts pressure on the market, stable production in Rottneros

·
THE LIST PRICE was 19 % lower in USD and 17 % lower in SEK compared with the second quarter 2019.
 

· NET TURNOVER decreased by 12 % to 510 (582) MSEK in line with the decreasing market prices.
 
· EBIT for the second quarter 2020 was 2 (103) MSEK. The result was strongly influenced by developments in the pulp market.
 
· THE PLANNED MAINTENANCE SHUTDOWN at Rottneros Mill has a negativ effect of -23 (0) MSEK on the results. In 2019 the maintenance stop was in Q3.
 
· PROFIT AFTER FINANCIAL ITEMS the second quarter was -3 (98) MSEK. Earnings per share for the quarter was -0,02 (0,50) SEK.
 
· A STRONG BALANCE SHEET in uncertain times. The equity/assets ratio is 56 (60) %. Available liquidity amounts to 505 (519) MSEK.
 
· THE PRODUCTION VOLUME was impacted by the maintenance shutdown at Rottneros Mill and amounted to 97,7 (107,7) thousand tons. Sales volume decreased somewhat to 93,1 (95,2) thousand tons.
 
· THE ANNUAL GENERAL MEETING was held on 24 June 2020. The AGM resolved that no dividend shall be paid for 2019 and that the retained earnings and net income for the year, shall be carried forward.
 
· THE CORONA PANDEMIC has not had a negative effect on Rottneros' production. The pulp market, however, is under continued pressure, prices are negatively affected and demand is expected to decline by 4% for the full year.
 

COMMENTS FROM THE CEO
The effects and challenges of the corona pandemic weighed on our market and operations during the quarter. The underlying production rate was stable, adjusted for the maintenance shutdown at Rottneros Mill. Lower pulp prices squeezed net sales and earnings. Our committed employees, a strong balance sheet and high efficiency in the mills make us well equipped for the continued tough situation that the pandemic brings. Our strategic focus, to systematically create continuous improvements, remains.

The consequences of the corona pandemic continued to affect our operations during the second quarter. As always, the health of our employees comes first, and we have worked systematically to avoid the spread of infection among our staff and in our workplaces. The pandemic had no major impact on our operations during the quarter in terms of sick leave, but it affects the working environment and the possibilities to meet customers, both existing and new ones.
    Net sales decreased by 12 per cent during the second quarter compared with the corresponding period last year. At the same time, the EBIT result decreased by just over 100 MSEK to 2 MSEK. The decline was mainly explained by lower sales prices due to the deteriorating market, but also by the annual maintenance shutdown at Rottneros Mill. Compared with the same quarter last year, the Group's production volume decreased by 9 per cent and the deliveries by 2 per cent. Adjusted for the planned, annual maintenance shutdown at Rottneros Mill during the quarter, however, the Group's underlying production volume was relatively stable. The corresponding shutdown last year occurred in Q3.
 

THE PANDEMIC SQUEEZED THE MARKET AND INCREASED VOLATILITY
The pulp market is under continued pressure due to the pandemic's far-reaching consequences on the global economy, and the negative development is likely to continue during the second half of the year.
    Overall, supply during the second quarter was greater than demand. To match production volumes, we have sold a larger share on shorter contracts and as a consequence margins and profitability have decreased. However, the list price for NBSK rose during the quarter from 840 USD per ton to 858 USD per ton. After the end of the quarter, the price has declined slightly.
    Consumption of printing and writing paper has declined and forecasts indicate that demand will decrease by more than 20 per cent for the full year. At the same time other important segments grew, mainly pulp for tissue. Manufacturers of filters and packaging are also showing healthy demand.
    The supply of pulp wood remained good during the quarter. The supply balance between local wood and imports was at a normal and favorable level. A lower production rate in the pulp and paper industry at the same time as the bark beetle problem continues to push the supply of damaged timber benefits the balance in the market and means that prices fall.
    When it comes to our large purchases of electricity in Rottneros Mill, it is worrying with the significant price differences between the area price we pay and the system price, which is a theoretical price for the whole of Sweden. The lack of transmission capacity between the different parts of the country has resulted in extremely high prices for us during shorter time periods, significantly higher than the system price.
 

ORGANIZATION: KEY APPOINTMENTS IN PLACE
During the quarter, several key appointments within our organization and group management were finalized. The recruitment of a new purchasing director, Arvid Svanborg, means that we have secured the succession in the best possible way after Ingemar Eliasson, who retires in early 2021. Arvid has a solid background in the timber market and most recently from the position as CEO of Västkustens Skog AB.
    Since 1st of June Jens Hallendorff is Site Manager at Rottneros Packaging in Sunne. He comes from the position as Head of Sales for high-yield pulp within Rottneros AB. Jens' task will be to lead the development of Packaging in the next phase as we have doubled our production capacity. Nils Hauri can now focus entirely on his area of responsibility, Innovation and strategic projects.
SYSTEMATIC WORK WITH CONTINUOUS IMPROVEMENTS
In parallel with dealing with the challenges of the corona pandemic, we place great focus on our long-term plan, to increase production through continuous improvements of our processes and routines. The medium-term goal is to reach the Group's production capacity, 440 thousand tons. This corresponds to an increase of 5 per cent from the current level.
    Our strong balance sheet with significant liquidity makes us well prepared for the uncertainty that prevails in the pulp market. The equity/assets ratio at the end of the second quarter was 56 per cent. At the same time, the Group's cash and cash equivalents amounted to 323 MSEK and unutilized credits to 182 MSEK. The interest-bearing net debt was 88 MSEK.
    In the current turbulent times, it is very satisfying to have a strong organization with highly motivated employees who handle the new circumstances with a systematic approach.
   I would like to thank all colleagues for their wholehearted efforts to take the Group to the next level and for standing up to the great challenges we face. We try to keep the corona effects as far away from the business as possible through our measures and focus on the systematic work to develop Rottneros further for increased production, efficiency, sustainability and cooperation with our customers. 
    To conclude, I would like to thank both customers and suppliers for working together with us to manage the corona situation in the best possible way and thus keeping the business going.
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(For full report, see attached pdf)

This information is such information that Rottneros AB is required to disclose in accordance with the EU Market Abuse Regulation and the Securities Market Act. The information was submitted for publication on July 23, 2020 at 08.00 by the contact person below. This report has been prepared in both a Swedish and an English version. In the event of deviations between the two, the Swedish version shall prevail.

Rottneros AB (publ) 
P.O. Box 144, 826 23 Söderhamn, Sweden 
+46 (0)270 622 00 
rottneros.com 
info@rottneros.com

Rottneros is an independent producer of market pulp. The Group comprises the parent company Rottneros AB, listed on Nasdaq Stockholm, and its subsidiaries Rottneros Bruk AB and Vallviks Bruk AB with operations involving the production and sale of market pulp. The Group also includes Rottneros Packaging AB, which manufactures fibre trays, the wood procurement company Rottneros Baltic SIA in Latvia and the forest operator Nykvist Skogs AB. The Group has about 315 employees and had a turnover of approximately SEK 2,4 billion in the 2019 financial year.

https://news.cision.com/rottneros-ab/r/rottneros-interim-report-april-june,c3158329

https://mb.cision.com/Main/15260/3158329/1282531.pdf

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