INTERIM REPORT JANUARY–SEPTEMBER 2010
* Profit after net financial items amounted to SEK 125 (-69) million for the period January to September 2010. Operating profit amounted to SEK 123 (-172) million for the first nine months of 2010. Profit after net financial items amounted to SEK 64 (43) million for the third quarter of 2010.
* Cash flow from operating activities amounted to SEK 163 (85) million for the period January to September 2010.
* An interest-bearing net receivable of SEK 116 million was reported as at 30 September 2010, compared with SEK 10 million at the start of the year
* Demand for pulp continues to be good, although the strong krona has led to a reduction in net proceeds.
Rottneros’ profit before tax amounted to SEK 64 million in the third quarter of the year, which was about 30 per cent higher than the previous quarter. Return on capital employed for the quarter amounted to 21 per cent. Vallvik Mill was producing at full steam during the quarter, while Rottneros Mill had its planned long holiday break. The negative impact of this shutdown on the quarterly result amounted to almost SEK 10 million. Production at both mills has been excellent and the quality of the outcome has been very good. During the quarter, the board approved the investment in a biological water treatment plant at Vallvik Mill, which has been under discussion for a long time. The plant will be installed in 2011 and be fully operational towards the end of the year.
A lot of preparatory work was done at Vallvik Mill prior to the extended shutdown in the autumn, which is taking place now in October and will last for almost three weeks. Preparations included building up stock levels to cover the supply of customers during the standstill. The negative impact that the loss of production and major periodic maintenance work will have on the result for the last quarter of the year will be approximately SEK 35 million.
As I wrote in my last CEO statement, the fairly weak demand for pulp in China in 2010 has now resulted in price reductions for all pulp qualities. Since the summer, the main reference mark for pulp prices – namely NBSK, i.e. bleached long-fibre sulphate pulp – has fallen in China from just under USD 900 to just over USD 800 per tonne. This has resulted in market leaders in North America reducing their price by USD 50 per tonne in their home territory. There has not been a reduction in the official prices of NBSK in Europe, but the weakened dollar in relation to the Euro has given European purchasers of pulp a considerable cost relief. The impact of the strong krona is significant for Rottneros, as our costs are almost entirely in SEK and the underlying revenues are completely dominated by USD. The average USD rate was SEK 7.27 for the third quarter and SEK 6.71/USD at the end of the quarter, a change of eight per cent.
Several leading pulp market observers consider that this price reduction is less than previously anticipated, which may be due to a combination of a weaker dollar rate, an increase in purchases from China and increased paper production in Europe. These observers expect that pulp prices rise again after the turn of the year, at least in dollars.
President and CEO