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Third party research

Rottneros: Saw trouble coming - still got cut - ABG

Rottneros

This is a third party research report and does not necessarily reflect our views or values

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Q1 below, Q2e slightly better
Pulp prices down lately
Fair value range of SEK 2-11/share


Q1 below, Q2e slightly better

EBIT was SEK -62m, which compares to our estimate of SEK -45m. The miss was mainly driven by continued rising prices for pulp wood, the challenging market trend for CTMP pulp, and the weaker USD. Note that Rottneros sold emission rights totalling SEK 10m, i.e. clean EBIT was SEK -72m. Q2 clean EBIT should benefit from increased pulp prices (1Q lag) and somewhat lower wood costs, but this increase will be partly offset by FX. Rottneros breached its leverage covenant in Q1, leading to a reclassification of SEK 314m in loans to short-term. With SEK 37m in cash, the balance sheet is looking slim. Management says it is in constructive dialogue with lenders. Importantly, majority owner Arctic Paper (51% stake) has a strong financial position (leverage 0.0x), and we argue it could support Rottneros’ liquidity if required.
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