Rottneros AB (publ)

Hello everyone and welcome to this webcast presentation where we have Rottner Rose presenting the Q2 report for 2024. With us presenting we have the CEO Lennart Ebele and CFO Monica Pasane. After the presentation there will be a Q&A and if you'd like to ask any questions please feel free to use the form that is located to the right. And with that said please go ahead with your presentation.

Thank you, Martin. And hello everybody to our second quarter report of 2024. If we look at the highlighted summary here, we have focused very hard to stabilize our operations after the slightly bumpy start into this year, and we've seen good delivery figures. We've seen a new production record during the second quarter for our mechanical pulp, but also Valvik has had solid production numbers. We've been able to capitalize on our excellent customer relations and especially in Europe we've seen a strong pulp market with rising prices for softwood craft as well as in the US where some volumes from us are going. So all in all the increase in turnover has been summed up to 4% and we ended the quarter with a EBIT of 30 million. Looking a bit more into detail in the market, we can see that the pulp market once again is diverging on a global basis. As I've mentioned, Europe has been very strong and so has the US been, especially on the soft put side. Whereas China has seen some weaker months during the past. If we look at the prices, they have turned up here. These are the quarterly average prices, both in Swedish kronors as well as in US dollars. The upper two lines are the gross prices and the lower ones are the net prices according to TTO. And you see that the gap between the gross and the net is increasing over time as we see an annual rebate inflation for the gross prices. But the currency has been favorable as well. And we are back on price levels on a net basis almost where we were at the former peak towards the end of 2022. Looking at the monthly prices and also the stock development, stock levels have come up to 41 days. It's a slight increase, which is primarily driven by the hardwood craft supplies from Latin America, whereas softwood still is at some 35 days. We have seen some disruptions during the beginning of the year, a strike in the Finnish pulp and paper industry and an outage of one large crop pulp mill in the Nordics. The mill is coming back and the strike is over, so we see a more stabilized supply situation. And you see here also that net prices have peaked a little bit south. The PIX has gone up and while speaking here at the beginning of July we've now seen numbers of 1625 for PIX in Europe. So a good market development and of course very good and solid deliveries from us into this pulp market. If we look more closely into the European market for pulp and paper, which is our main market with some 68% of our deliveries, we see that across the board, all grades have seen an improvement for the first four months of this year versus the same period of 2023, which was extremely weak and thus prices have come down. But even graphical papers are moving up as well as the packaging rates, which are more important for us nowadays. And the overall volume has increased with some 7%. We've also seen announces of packaging great price increases, which is, of course, testimony of that the market is stabilizing and the demand is picking up, which can be related into better pricing situation for our customers. And we've seen in our niches such as UKP for E-grades as well as our filter grades that good continued demand and also leading forward for demand from our customers. Looking at the grades and the relation to each other, the importance of board and packaging is continuously increasing despite the fact that the overall volume is slightly decreasing between 2018 and 2024. The importance of packaging is growing and here our investment into the mechanical pulp placed well in hand as mechanical pulp is extremely well suited for packaging grades. So we were looking optimistically into the further development of this market. Leaving Europe and looking into the global market for pulp. Also here we've seen an increase of close to 4%, primarily driven by Europe and North America. We've seen good demand pickups on the back of some shortages. Customers have made sure that they are restocking. That has led to this very dramatic price increase that we've seen over the past month. While China has remained relatively calm and stable and we have to see how the Chinese market is developing going forward. Bear in mind that China is some 40% of the global pulp market. So what happens there, as long as the markets are linked through functioning logistic systems, will sooner or later play into the other markets. But again, in our core market, Europe, we see a good situation and positive development downstream for our grades. Looking more into detail into where we are supplying a pulp into, carton board remains to be the biggest areas with some 25%, a slight decrease versus the full year of 2023. Filter and electrotechnical stable and together close to some 45%, almost half of all our volumes going into these very special applications. And you can see that tissue has increased quite a bit. That was on the back of the second half of 2023. And tissue being one of the global biggest areas for market pulp, where there's constant growth. It is giving us the opportunity that when, for example, the carton board is a bit weaker, we have a chance to offset our volumes. And that is important in order to always be able to run our production sites full and make sure that we can deliver the pulp that we produced. So all in all, our mix is shifting more and more towards niches. We're basically out of the printing and writing, and we start to see increased volumes into fiber cement, which is quite interesting to see how a renewable product can help in the building sector to reinforce concrete constructions. And with that, I hand over the word to Monica to guide us through the financials.

Thank you, Lennart. So we will first have a look at the first quarter or the second quarter of the year and compare it to last year. We go from having 41 million in EBIT last year to 30 million this year in the quarter. And we can see that price and currency has had a fairly big negative impact. This can be looked at in different ways. First of all, we have three main grades that we are producing and selling. We have NBSK, which is the bleached sulfate pulp. We have UKP, which is the same pulp, but before bleaching it. And then we have the CTMP pulp, the mechanical pulp. And these have different patterns when it comes to price fluctuations. So NBSK rose by 16% in this period. Whereas CTMP was fairly flat. So that can have an impact on our prices or it has an impact on our prices. Also the mix between these grades, how much we are selling of each will have an impact. There are pretty much one third each for the different grades. And then the final impact is from the lag between our sales prices and the market prices that you saw on the previous charts, we do have a time lag and seen in when we have rising prices, we are lagging behind to some extent, quarter on quarter. On the other hand, we had a big positive impact from volume. We had 7% higher sales volume and it was especially driven by by CTMP that has had good production throughout the year and also good sales. The sales of sulfate pulp, the NBSK and UKP was only held back due to that we didn't have enough material to sell. We had good production in the second quarter, but the production problems from the first quarter held back sales to some extent. On the variable cost side, we can see that it had hardly any impact at all, which means that we know that the wood price of wood is high, but the mix that we are buying has not changed dramatically for us. And also the other input costs have been fairly stable. could have a final comment on the quarter regarding depreciation. When we're doing our investment programmes, we are taking out some old equipment and related to that, we had a book value of 5 million that was taken out as an additional item in depreciation in the quarter. Then we can look at the first six months. We come from a very strong first half or especially the first quarter of 2023. The prices had been high up until the end of 2022 and started going down in 2023 and Here we have the positive effect of the time lag, so we're enjoying high prices, especially in the first quarter, which is where we see the biggest drop in change from last year to this year. Once again, we see a good increase from volumes and once again, driven especially by CTMP that has had a very stable and good production throughout the year. On this slide, or for this period, we see that the variable costs have had a negative impact this year. It is partly the wood costs, but it is also partly due to production problems in the Valvik mill during our first quarter, when production problems will mean that we have to buy more electricity and fuels and have a less efficient production and thus higher costs per ton. So for the first half year, we have had 35 million in EBIT. Then we can move on to the balance sheet. We still have a solid balance sheet and we have 298 million Swedish crowns in available liquidity and the Equity to assets ratio is at 64% at the end of the period. We can see now that we have a net debt position for the first time. That is debt instead of a net cash position since 2021. And this is of course partly due to our ongoing investment program. In the quarter we invested 135 million Swedish crowns and so far this year 216 out of the total cash flow for investments that we estimate to be around 430 million. After the quarter ended in the beginning of July, in the beginning of this month, we secured long-term financing And this financing is connected to the solar panels and batteries that are being built at Rottnerosmil. It is an up to 100 million Swedish crown loan that we can draw on when we have the payments for the investments. It has a tenure of five years. And we can take this loan with such long tenure thanks to a green economy. credit guarantee that is provided by the Swedish agency EKN, Exportkreditnämnden. So that is part of securing the financing for our ongoing investment program. With that, I hand back to Lennart.