Rottneros AB (publ)

Hi and welcome to Rottneros second quarter report 2025. With us to present we have CEO Lennart Eberle and CFO Monica Passanen. If you have questions for the company you can write them in the form to your right and with that I give the word to you Lennart.

Thank you very much Tim and hello everybody to our second quarter report and the first half of 2025. A bit later than usual, but still in summer, and summer certainly has come back to Sweden with sun and warm weather. But enough about the weather and more about Rottnerus and our results. We can see a sequentially better EBITDA for the second quarter compared to the first quarter, primarily driven by very good production, 90,000 tons, and high invoicing, especially from the Valvik Group. mill. Still this is not a result we are proud and happy for and the main headwinds are high raw material costs that have continued to rise but we have seen the first turnaround here already in April for sawmill chips and going forward the negotiations for the second half has also shown that we've reached a plateau and realized some first small reductions. So that is looking good going forward. Nevertheless, in order to put the company on a very stable financial position, we've successfully closed the rights issue in the middle of July. That was announced earlier in June. And we raised some 300 million, some more details on the updated balance sheet. As a consequence of that, Monica will come back to a little bit later. So with this being the highlights of the second quarter, let's look into the market for pulp, paper and board, which is still very uncertain, of course, due to the global insecurity and trade issues that we all are very much aware of. And that also a pulp is not immune against. If we look at the stock development, which are the bars, we've seen stocks have increased during the beginning of 2025. And that, as usual, has led to prices coming down. This is the list price in Europe for NBSK as net price. And it's close to the bottom that we have seen now since 2021, around about 700 US dollars. There is an oversupply and a lack of demand in the bulk grades. Nevertheless, the niches that we are supplying to from Volvic with the UKP and the ECF for filter grades, electrotechnical applications, speciality applications still is healthy and we see a good demand to move the volume out into the market. Calculating the prices into Swedish kronors, we have seen, of course, the effect of a strengthening kronor against the dollar. You see that we are closer to the bottom for the last three dips, around about 7,000 kronors. And the lower line is the CTMP price line, and we've seen that deteriorating since the middle of 2023. due to an overcapacity and increased capacity of hardwood-based CTP in China that has taken away a lot of the market from Canada and the Nordics. Also here, of course, we see the uncertainty when it comes to tariffs and where exchange rates will take us going forward. But looking a bit more specific into the market, again, Europe being our main market with some 67-68%, we see that the beginning of this year has been weak for most grades with the exception of container board and some other grades, container board that is paper for corrugated boxes. Newspaper and graphical paper has had a very weak start and also cotton board, which is one of the main end users for both Valvik and Rottenruth pulp has seen a sideline movement here, no real pickup that was expected. Even tissue has had a slow start into the year. Maybe also that the comparison to 2024 was a bit skewed to the fact that there has been some restocking going on in the beginning of last year. But nevertheless, This is what our customers are experiencing and that's why in the bulk grades the volumes aren't really moving as they should be. And what we've seen is that there have been production curtailments in the industry, both in the Nordics for long fiber, but also in the southern hemisphere for short fiber. And now here in August, the first price increase announcements have been put out into the market. So let's see how that will be affecting prices and market balances going forward and if this can trigger buying behavior from customers as they will see that this really might be the bottom for this throat. A little bit on a longer perspective, how the European paper and board production has developed. Have a look at the more straight line, which is not so erratic. It's the 12-month moving average, and here we see that there has been a significant drop in the entire paper and board production in Europe. We've lost around about 1 million tons on a monthly basis or 12 million tons on an annual basis. And that is, of course, setting the scene for this entire industry for the time being. Translating this into pulp, we see that Europe and North America had a weak start. We had good deliveries there last year as an industry, while China was weak and now has rebounded strongly. So all in all, taking everything seriously. into together we see an increased deliveries of some three percent for both grades long fiber and short fiber but again we see that the European market has dipped and that is of course led to those prices have been coming down during the first six months of this year. North America still having slightly higher prices both list and net but also there we've seen some decrease and how that will be going forward is a big question when it comes to the tariffs that will be imposed on Europe and Canada of course and how that will impact the market balance over there. But nevertheless volumes are moving and we all believe that there is a need for renewable fibers also in these markets going forward. Talking about the general market so far, we can also look a little bit more specifically into where Rottenruth is selling our products for the first half year compared to the full year of 2024. Carton board is continuously shrinking, mainly driven by that we have seen lower production coming out of Rottenruth Mill, which is very dominated by deliveries into the carton board sector. Here the Asian markets have come a lot under pressure with the competition from China, but on the other side, we can see that filter and electrotechnical are increasing and specialties are stable. We still have regular deliveries into tissue and also uptake in printing and writing. These are not our strategic segments, but again, we've got long-lasting customer relations here, which we can activate in market situations such as the one we are currently experiencing. But also fiber cement continuously growing year by year and now reaching 4%, which is quite nice. And then we see a positive movement forward in that segment. So with the overall description of the market and where we are. I leave the word over to Monica to take us more in detail through the financials.

Thank you, Lennart. We will talk about the balance sheet a bit later on, but let's start with the profit and loss and more specifically EBITDA. We are looking here at a waterfall between the second quarter in 2024 compared to this year. Lower prices both in US dollar and in Swedish crowns has really been a main theme during this period. We are seeing a drop in our invoicing, that is the first minus 19, but it is also impacting the following bar. Unfortunately, prices are at such a level that we are not covering full costs in all markets for all products. And in our accounting, we have to recognize the value of finished goods in stock at the lower of production costs or selling price. And this is impacting the change in finished goods. So the volumes as such have been very good during this period. New production record in Valvik and very good production also in Rottneros mill when they are producing. The big impact is of course the variable costs and primarily the cost of wood. They are still at a higher level than last year, even though we have seen some drops. We need to come down from the peaks and see lower levels to come back to where we were before. In this slide, we are following EBITDA. That is the result before depreciation and amortization. During the second quarter, we also had a write down, which is then below the EBITDA. According to accounting practices, we need to look at all the units where we have values and what future cash flows they will generate. And in particularly, we looked at the operating value for Rotneros Mill. And then we're looking at what we have in our books. and what the future discounted future cash flows will be and based on this analysis we took a decision to write down the value of the assets in Rotneros mill by 140 million and that's of course impacting the EBIT for the period. Then looking at the first half year We see that the lower price and currency has an impact also here, but the big impact is again the variable costs. When we saw what was happening during the first quarter and also seeing higher cost levels in general, we see here that we have minus 35 million on the fixed cost side. We initiated a cost reduction program and we are reducing the number of personnel. It has been announced. We are still basically the same amount of people, but we will see the full impact of the cost saving program during the autumn. And we estimate that the impact will be positive in the region of 35 to 40 million Swedish crowns per year. Looking specifically at variable costs, we see here how big importance the wood costs has of our total variable cost. It is 75%. And of course, the small variations in the price of wood will also have a big impact on our cost side. Looking more specifically then at the balance sheet, As Lennart mentioned, we had the rights issue during the summer. The proceeds was approximately 300 million Swedish crowns. We used part of the proceeds to pay back part of our long-term debt. We also reduced the short-term debt. So after the rights issue, our net debt decreased from approximately 550 to 250 million, which is the same amount as the rights issue. Looking after the issue, the equity to assets ratio recovered to 64%. And We also see a better liquidity position. We have available liquidity in our financing facilities of approximately 340 million Swedish crowns. What is positive for the quarter is that we have a positive operating cash flow. And this is mainly due to decreased working capital that has also been high on our agenda. to make sure that we don't have too much inventories, raw material inventories, finished goods inventories, and that we keep track of our receivables and also payables. And with that, I hand back to Lennart.