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Rottneros AB (OSTO:RROS) Q2 2024 Earnings Call Highlights: Navigating Growth Amidst Rising Costs

Published 2024-10-09, 09:09 a/m
Rottneros AB (OSTO:RROS) Q2 2024 Earnings Call Highlights: Navigating Growth Amidst Rising Costs
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GuruFocus -

  • Revenue Growth: Increased turnover by 4% in Q2 2024.
  • EBIT: SEK30 million for Q2 2024, down from SEK41 million in Q2 2023.
  • Sales Volume: 7% higher sales volume, driven by CTMP production.
  • Net Debt Position: First net debt position since 2021 due to investment program.
  • Available Liquidity: SEK298 million at the end of the period.
  • Equity to Assets Ratio: 64% at the end of the period.
  • Investment Spending: SEK135 million in Q2 2024; SEK216 million year-to-date.
  • Long-term Financing: Up to SEK200 million secured for solar panels and batteries.
  • Production Records: New production records for mechanical pulp.
Release Date: July 24, 2024

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

  • Rottneros AB (OSTO:RROS) achieved a new production record for mechanical pulp in Q2 2024.
  • The company reported a 4% increase in turnover, ending the quarter with an EBIT of SEK30 million.
  • Strong market conditions in Europe and the US contributed to rising prices for softwood kraft pulp.
  • Rottneros AB (OSTO:RROS) has secured long-term financing for its solar panels and battery investments, supported by a green credit guarantee.
  • The company is focusing on niche markets, such as fiber cement and molded fiber trays, which are seeing increased demand.
Negative Points
  • Rottneros AB (OSTO:RROS) experienced a decrease in EBIT from SEK41 million in Q2 2023 to SEK30 million in Q2 2024.
  • The company faced production issues in the first quarter, impacting sales of NBSK and UKP pulp.
  • Pulpwood prices are at record highs, affecting profitability.
  • The company has moved some maintenance CapEx forward due to a rocky start to the year, increasing total CapEx to SEK430 million.
  • Rottneros AB (OSTO:RROS) has transitioned from a net cash position to a net debt position due to ongoing investments.
Q & A Highlights Q: The result was weighed down by a negative mix effect, such as more CTMP deliveries where prices have not risen as much. How do you see the mix in the coming quarters?

A: The mix is dependent on production capabilities. CTMP was higher due to good production, while NBSK and UKP were low due to first-quarter issues. We expect normalization with good production in both mills and future capacity increases in Rottneros Mill for CTMP, improving profitability.

Q: The pulp prices are at an all-time high, but your earnings are far from it. What's holding you back, and how will you capitalize fully on the increased prices?

A: We focus on niches with good profitability and stable customers to capitalize on prices. There's a time lag with our sales prices, but we expect increases. Earnings are also affected by costs, with record-high wood pulp prices impacting profitability.

Q: The pulpwood prices keep rising. How do you see the effects quarter on quarter in SEK?

A: We've seen some increases quarter on quarter, but at a lower pace than last year. We manage costs by choosing a good mix of suppliers, minimizing cost increases.

Q: If I recall correctly, CapEx for '24 was initially expected at SEK350 million to SEK400 million. Now you're saying SEK430 million. What is the result of the increase? Is it a CapEx overrun?

A: It's not an overrun. Current projects are on time and budget. We've moved forward some maintenance CapEx to ensure good utilization and production quality, contributing to the increase.

Q: How do you plan to leverage the continued growth in the pulp market to further enhance profitability and market share?

A: We focus on areas where our products deliver unique properties, maintaining long-term relationships with key customers. This strategy allows us to offer lower rebates than those for commodity grades, ensuring a good margin between selling price and input cost.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

This content was originally published on Gurufocus.com

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