Release Date: October 23, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Rottneros AB (OSTO:RROS, Financial) has maintained stable prices and signed contracts for higher volumes despite market challenges.
- The company is completing significant investments in its pulp mills, which are expected to enhance efficiency and competitiveness.
- Rottneros AB (OSTO:RROS) benefits from a favorable exchange rate between the Swedish krona and the US dollar.
- The company has a strong balance sheet with a 60% equity to assets ratio and good liquidity.
- Rottneros AB (OSTO:RROS) is investing in renewable energy solutions, such as a solar farm, to generate new income and stabilize the Swedish grid.
Negative Points
- Rottneros AB (OSTO:RROS) faces squeezed margins due to increased variable costs, particularly from rising wood prices.
- The company experienced slightly lower production and sales volumes compared to the previous year.
- There is an oversupply situation in the hardwood market, impacting the overall pulp market dynamics.
- Rottneros AB (OSTO:RROS) is dealing with production challenges, especially during the winter months, affecting its output.
- The company anticipates continued high investment levels, which may impact cash flow and financial flexibility in the short term.
Q & A Highlights
Q: You sold SEK11 million of emission rights. Do you expect to sell in Q4 as well?
A: We have looked at our emission rights and what we have in our books, and we saw that this was a good time to sell some of the emission rights. We are also considering the possibility to sell more.
Q: Given that the molded fiber trace production start was postponed to Q4, when do you first expect to see revenues?
A: We have already had some revenues during the last years while validating the technology. With the expansion from one machine to three, we expect to see more substantial volumes starting in the beginning of next year, although it will still be marginal compared to the overall turnover of Rottneros.
Q: CapEx for 2024 is expected at SEK460 million. What about 2025 and 2026?
A: We will have some cash flow in 2025 from the larger investments. Going forward, we expect to return to investment levels approximately equal to our depreciation, which is around SEK120 million.
Q: What can you say about volume and price development in Q4?
A: Production volume will be impacted by maintenance shutdowns at both mills. Vallvik mill has completed its maintenance and is back in production, while Rottneros mill is currently undergoing maintenance. Regarding prices, we rely on external market insights as we cannot provide our own view.
Q: How do you plan to manage the slowdown in demand from China and the broader decline in the packaging board segment, especially considering the reduced profitability in the CTMP market?
A: We are preparing for downturns by becoming more efficient and resilient. China is a limited market for us, and we are well-placed to find new markets. We believe there will be continued growth in the packaging board market, and the larger downturn is on the hardwood side, which impacts us less.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
