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Rottneros AB’s stock surged 11.13% following its Q2 2025 earnings call, reflecting strong investor confidence in the company’s operational improvements and strategic initiatives. The company reported improved EBITDA, reduced net debt, and launched new products, signaling a positive outlook despite some market challenges. According to InvestingPro data, the stock is currently trading at significant discount to its Fair Value, with an EBITDA of $10.25 million in the last twelve months. Discover 10+ exclusive ProTips and comprehensive analysis for Rottneros AB with an InvestingPro subscription.
Key Takeaways
- Rottneros AB’s stock increased by 11.13% post-earnings call.
- The company improved Q2 EBITDA and reduced net debt significantly.
- New product launches focus on sustainable packaging solutions.
- Market challenges include asset write-downs and U.S. tariff increases.
Company Performance
Rottneros AB demonstrated notable operational improvements in Q2 2025, with EBITDA improving sequentially from Q1. The company successfully reduced its net debt from approximately SEK 550 million to SEK 250 million, indicating a stronger financial position. InvestingPro analysis shows a current ratio of 1.11 and a debt-to-equity ratio of 0.37, suggesting manageable leverage despite recent challenges. The launch of an industrial-scale packaging tray factory and focus on sustainable solutions highlight Rottneros’ commitment to innovation and market adaptation. Access detailed financial health scores and comprehensive metrics with an InvestingPro subscription.
Financial Highlights
- EBITDA: Improved sequentially from Q1.
- Net debt: Reduced from ~SEK 550 million to SEK 250 million.
- Equity to assets ratio: Recovered to 64%.
- Asset write-down: SEK 140 million for Rotneros Mill.
Market Reaction
Rottneros AB’s stock price surged by 11.13% in the wake of the earnings call. This increase reflects strong investor sentiment, likely driven by the company’s improved financial performance and strategic initiatives. The stock’s movement positions it closer to its 52-week high of SEK 10.78, indicating robust market confidence.
Outlook & Guidance
The company remains optimistic about the demand for renewable fiber and anticipates a market recovery in the packaging and electrical transformer sectors. Rottneros is targeting cost efficiencies and operational improvements, aiming for a gradual reduction in raw material costs.
Executive Commentary
CEO Leonard Eberle emphasized the company’s focus on sustainability and operational stability, stating, "Sustainability is key and will always be key for consumers." He also noted, "The things that have caused most headache over the last three years, the raw material finally seems to have reached its peak."
Risks and Challenges
- Asset write-downs: SEK 140 million write-down of Rotneros Mill assets.
- Market oversupply: Weak demand in bulk grades of pulp.
- Tariff increases: 15% U.S. tariff on imports poses competitive challenges.
- Economic pressures: European paper and board production drop of ~12 million tonnes annually.
Q&A
During the earnings call, analysts inquired about the pulpwood market balance and the impact of U.S. tariffs. The company clarified its personnel cost reduction timeline and detailed its emission rights accounting, addressing key investor concerns. InvestingPro data reveals the company faces challenges with cash burn and profitability, with a negative free cash flow yield of -86%. Get access to the full Pro Research Report, featuring expert analysis and actionable insights, available exclusively to InvestingPro subscribers.
Full transcript - Rottneros AB (RROS) Q2 2025:
Tim, Moderator/Host: Hi, and welcome to Rotneros second quarter report 2025. With us to present, we have CEO, Leonard Eberle and CFO, Monika Pasanen. 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, Leonard.
Leonard Eberle, CEO, Rotneros: Thank you very much, Tim, and hello, everybody, to our second quarter report and the 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 Rotneroos 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 tonnes, and high invoicing, especially from the Valvik 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 thermal chips. And going forward, the negotiations for the second half have 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 successfully closed the rights issue in the July that was announced earlier in June, and we raised some EUR 300,000,000. Some more details on the updated balance sheet as a consequence of that, well, Monica 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 pulp is not immune against. If we look at the stock development, which are the bars, we’ve seen stocks have increased during the 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 USD 700. There is an oversupply and a lack of demand in the bulk grades. Nevertheless, the niches that we are supplying to from Valvik with the UKP and ECF for filter grades, electro technical applications, specialty applications still is healthy, and we see a good demand to move the volume out into the market.
Calculating the prices into Swedish kronas, we have seen, of course, the effect of a strengthening kroner against the dollar. You see that we are closer to the bottom for the last three dips, around about SEK 7,000. And the lower line is the CTMP price line, and we’ve seen that deteriorating since the 2023 due to an overcapacity and increased capacity of hardwood based CTMP 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, 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 containerboard and some other grades.
Containerboard, 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 our Valvik and Rotten Russe pulp, has seen a sideline movement here, no real pickup, and 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 rates, 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 throw. 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 twelve 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 1,000,000 tonnes on a monthly basis or 12,000,000 tonnes 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 into together, we see an increased deliveries of some 3% for both grades, long fiber and short fiber. But again, we see that the European market has dipped, and that has, of course, led to those prices have been coming down during the first six months of this year. North America is still having slightly higher prices, both list and net, but also there, we’ve 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 Rotten Russe is selling our products for the first half year compared to the full year of 2024. Cart and board is continuously shrinking, mainly driven by that we have seen lower production coming out of Rottenroots Mill, which is very dominated by deliveries into the cartonboard 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 electro technical 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 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 Monika to take us more in detail through the financials.
Monika Pasanen, CFO, Rotneros: Thank you, Leonard. 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 twenty twenty four compared to this year. Lower prices both in US Dollar, sorry, 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 of finished goods in stock at the lower of production costs or selling price, and this is impacting the change change in finished goods. So the volumes have as such have been very good during this period. New production record for the in Balviq and very good production also in Rotneros 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 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 140,000,000, and that’s, of course, impacting impacting the EBIT for the period. Then looking at the first half here, 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 35,000,000 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 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 40,000,000 Swedish crowns per year.
Looking specifically at variable cost, we see here how big importance the wood costs has in our of our total variable cost. It is 75%. And, of course, 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 Leonard mentioned, we had the rights issue during the summer.
The the proceeds was approximately 300,000,000 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 250,000,000, which is the same amount as the rights issue. Looking after the issue, the 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 SEK $340,000,000. 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 Leonard.
Leonard Eberle, CEO, Rotneros: Thank you very much, Monika. So while the macro environment still is supplying plenty of headwind to our results, we effortlessly strive to optimize the things which are under our own control, operational setup, our structure, our cost position and our financial position, as Monika just has explained. And we start to see the small fruitful results of that if we compare the 2025 when all of this suddenly has exploded compared to the second quarter. So we will continue to do our very best to take care and do this going forward. But there are also some major macro trends that we believe will continue favoring the usage of cellulose fibers from a renewable and respectful managed forest.
We have a growing number of people with a higher disposal of income that wants to have a better standard of living using more tissue. This will consume a lot of the short fiber pulp capacity that has been built up historically. That will minimize also the Thrive for substitution into applications which are more dominated by the long fiber pulp, which is produced in the Nordic Hemisphere, Canada and Scandinavia, especially in packaging grades, which are then more and more also used in e commerce corrugated boxes for secondary packaging, but also primary carton boxes are using still a high amount of long fiber pulp that’s used to have efficient packaging at a low grammage to give the right technical functionality, a good printing surface. And this area will continue to grow. More people, more consuming.
And even though if it’s turbulent times, I believe we will continue to see global trade also needing packaging materials to ship goods around and not destroying them. We, of course, have a strong movement into renewable energy. Renewable energy needs more transformers and cables to bring the electricity to where it is needed. We see our customers in this area are investing into creating transformer board, more capacity for electrotechnical paper grades. And that will mean that in the future, they need this very high clean pulp from us and a limited number of competitors with very low conductivity.
It’s once, of course, the investments in the renewable energy, but it also is the modernization of old grids in the Western world, which have reached the end of their lifetime. And of course, we all agree on that we have to continue fight for a better world going forward. Sustainability is key and will always be key for consumers when making their choices in the store. And here, it’s about having cost competitive, functional solutions, which we’re also working with to provide, not the least through our own development focus in Rotten Rusk packaging, together with Poland, where we are now having started up our industrial scale factory after the summer. Customers are coming more and more.
We see more products and more shapes coming out of this factory. And of course, while we are focusing on one certain way of producing these kind of trays within wet molding, we also have a foot into a new technology provider, bluish enclosures, that does this in a dry forming technology. There are certain differences, and we believe both these technologies will complement each other going forward, and this still is a very exciting application for fibers and offering very good substitution for fossil based packaging materials. So summarizing it, the company stands on a very strong, solid financial foundation, thanks to all the shareholders that have participated in the rights issue. That was concluded in July.
We have worked on stabilizing our operations. The investments that we have taken are giving their effects. We have reached the operational targets, and the mills are running fine. And the things that have caused most headache over the last three years, the raw material finally seems to have reached its peak, and we see the first small signs of raw material costs coming down, and then, of course, gives a lot of hope for the future. So with that, I’m happy to open up for questions and answers.
Tim, Moderator/Host: Thank you for that presentation. Now moving over to the Q and A. First question here: What has driven the improved market balance for pulpwood? Is this due to seasonal lower demand from the energy sector? Or is this broader trend?
Leonard Eberle, CEO, Rotneros: I think that’s a combination of both. Yes, we do see that the energy sector in general has less demand. They’re not this big off takers, and we see less of a sort of gliding between the segments. So that is, of course, releasing pressure. Continued good focus on harvesting, on sustainable and respectfully managing levels is also doing it.
And of course, that in general there has been outages, there have been capacity reductions, so the industry as such has adopted to the amount of pulpwood that is available, and that has to be then mirrored by the harvesting capacity that is in place. So right now, this is, of course, playing into our hands, and we hear anecdotal stories of suppliers that would like to place pulpwood volumes. And once they’re harvested, of course, they have to be moved very quickly. So I think this will open up for quite an interesting price development going forward.
Tim, Moderator/Host: Thanks. What is the situation in The U. S. Market? How do you assess the impact of the change in tariffs from 10% to 15% on competitiveness?
Leonard Eberle, CEO, Rotneros: There is, of course, a heavy impact on our competitiveness. There remains to be seen what the final tariffs will be for our Canadian competitors. I would say we have to compare that to zero tariff that we used to have prior to this trade war, so it’s a 15% increase. On the other hand, we are supplying around about 8% to 9% of our tire sales into The U. S.
On very specific tailor made products. A 15% disadvantage to other grades is not sustainable. Our customers will look, I think, in the long run for substitution if that will prevail. But we do have very good relations. We do have unique product properties.
So I’m confident that we find a solution for this going forward. But again, it’s 9% of sales, so it’s not too much. And there are no local competitors that you could switch to by plug and play and then just one to one. So customers will have to change their validation processes and find other substrates to work with. And for the grades we’re working with, these are long cycles to work through.
It’s quite an effort from our customers. So cautiously optimistic that we will find a solution going
Tim, Moderator/Host: forward. Thanks. Why did personnel costs rise despite the workforce being reduced by 26 people? And when will we see the impact of the savings?
Monika Pasanen, CFO, Rotneros: Yes. The personnel costs are, of course, for the period we are in right now. We initiated our cost saving program during the first quarter, and we announced the outcome during the second quarter. We still have approximately by by the June that we are talking about now, we have the same amount of people, and, we will see that, that our workforce will gradually decrease during, mainly during the third quarter. So the effect of fewer people will come a bit later on.
And in addition, we had some onetime costs connected with the reorganization that that we have taken during q one and and q two. We believe that we will have, as I mentioned before, a positive impact from our cost savings program of of some 35 to 40,000,000, crowns per year, and we think that we will see that from from the autumn, and forward. Back to you, Tim.
Tim, Moderator/Host: Thanks. Now for the final question here. Where in the financial statement could you find the cost of purchased emission allowances?
Monika Pasanen, CFO, Rotneros: Yeah. I I think that we’re talking about the sales of emission rights, which we we have had in excess, and we have sold emission rights last year and also during the first and second quarter. And we record these sales under other operating income in the profit profit and loss statement. If you look a bit higher up in the profit and loss and and look at net turnover, we consider also our byproducts from our pulp production as as part of our main business. So the sales of tall oil and turpentine or or bark is part of our net turnover.
So that was a short summary about accounting.
Tim, Moderator/Host: Thanks. Now I’ll give the word to you, Leonard, for the closing remarks.
Leonard Eberle, CEO, Rotneros: Thank you very much, Tim, and also to Monika assisting us here with all the financial analysis. Thank you, everybody, for listening in. And all of you, I wish you continued nice summer. And looking back to rejoin you in October for quarter three results. Thank you very much.
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