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Rottneros

Specialists in pulp

Rottneros produces mechanical and chemical pulp, which is used in a wide range of applications, i.e. packaging (27%), paper (26%), filters (18%), special applications (13%), electrotechnical applications (10%) and tissue (6%). Most of the group’s products are sold on the European market, which accounts for ~75% of its revenues. Through its Agenda 500 strategic plan, Rottneros has invested ~SEK 700m to increase its capacity from an annual production of 345,000 tonnes pulp in 2014 to a long-term capacity of 460,000-500,000 tonnes. In 2016, Rottneros also initiated the development of a new business area, Rottneros Packaging.

As a raw material, pulp is an attractive alternative to plastic due its environmentally friendly qualities. This should support long-term growth for pulp application areas such as fibre-based packaging. Following its large investments in increased production capacity, Rottneros is likely to shift its focus to efficiency improvements. This could result in higher profit margins and improved RoCE. Rottneros recently entered packaging, which has the potential to be a future growth area for the company. In addition, it is considering going into the highly profitable lignin business, which could give both higher sales and improved profit margins.

The vast majority of Rottneros profits comes from the sale of pulp, which is a highly commoditized product. As a result, demand for the group’s products is cyclical and depends on the global economic cycle. It also means that the group’s earnings are highly sensitive to changes in the market price of pulp, as well the prices of its input factors: pulp wood, electricity and chemicals. Another factor affecting the global demand for pulp negatively is the structural decline of several of pulp’s application areas such as paper for printing, newspapers and magazines. The group’s earnings are also sensitive to currency fluctuations, particularly in USD/SEK and EUR/SEK.

SEKm 2018 2019e 2020e
Sales 2372 2322 2078
Sales growth (%) 19,7 -2,1 -10,5
EBITDA 394 368 250
EBITDA margin (%) 16,6 15,9 12
EBIT adj 295 269 151
EBIT adj margin (%) 12,4 11,6 7,2
Pretax profit 276 255 134
EPS rep 1,45 1,3 0,67
EPS growth (%) 93,9 -10 -48,8
EPS adj 1,45 1,3 0,67
DPS 0,7 0,4 0,33
EV/EBITDA (x) 3,6 5,1 7,4
EV/EBIT adj (x) 4,8 7 12,3
P/E (x) 5,7 9,2 17,9
P/E adj (x) 5,7 9,2 17,9
EV/sales (x) 0,6 0,8 0,9
FCF yield (%) -2,5 11,7 4,5
Dividend yield (%) 8,5 3,4 2,8
Net IB debt/EBITDA 0,4 0,1 0,1
SEKm 2018 2019e 2020e
Sales 2372 2322 2078
COGS -1211 -1187 -1058
Gross profit 1161 1135 1021
Other operating items -767 -767 -771
EBITDA 394 368 250
Depreciation on tangibles -99 -99 -99
Depreciation on intangibles 0 0 0
EBITA 295 269 151
Goodwill impairment charges 0 0 0
Other impairment and amortisation 0 0 0
EBIT 295 269 151
Other financial items 0 0 0
Net financial items -19 -14 -17
Associated income 0 0 0
Other EO items 0 0 0
Pretax profit 276 255 134
Tax -55 -56 -32
Net profit 221 199 102
Minority interest 0 0 0
Net profit discontinued 0 0 0
Net profit to shareholders 221 199 102
EPS 1,45 1,3 0,67
EPS Adj 1,45 1,3 0,67
Total extraordinary items after tax 0 0 0
Tax rate (%) -19,9 -22 -24,1
Gross margin (%) 48,9 48,9 49,1
EBITDA margin (%) 16,6 15,9 12
EBITA margin (%) 12,4 11,6 7,2
EBIT margin (%) 12,4 11,6 7,2
Pretax margin (%) 11,6 11 6,4
Net margin (%) 9,3 8,6 4,9
Growth rates Y/Y 2018 2019 2020
Sales growth (%) 19,7 -2,1 -10,5
EBITDA growth (%) 59,5 -6,5 -32,2
EBIT growth (%) 89,1 -8,7 -44,1
Net profit growth (%) 93,9 -10 -48,8
EPS growth (%) 93,9 -10 -48,8
Profitability 2018 2019 2020
ROE (%) 16,6 13,2 6,5
ROE Adj (%) 16,6 13,2 6,5
ROCE (%) 20,5 16,7 9,3
ROCE Adj(%) 20,5 16,7 9,3
ROIC (%) 16 12,7 6,9
ROIC Adj (%) 16 12,7 6,9
Adj earnings numbers 2018 2019 2020
EBITDA Adj 394 368 250
EBITDA Adj margin (%) 16,6 15,9 12
EBITA Adj 295 269 151
EBITA Adj margin (%) 12,4 11,6 7,2
EBIT Adj 295 269 151
EBIT Adj margin (%) 12,4 11,6 7,2
Pretax profit Adj 276 255 134
Net profit Adj 221 199 102
Net profit to shareholders Adj 221 199 102
Net Adj margin (%) 9,3 8,6 4,9
SEKm 2018 2019e 2020e
Net IB debt adj. / equity (%) 10,8 3,3 1,9
Current ratio (%) 271,6 302,9 319,5
EBITDA / net interest (%) 2073,7 2557,4 1503
Net IB debt / EBITDA (%) 39,8 13,9 12,3
Interest cover (%) 1480 1869,9 906,7
EBITDA 394 368 250
Net financial items -19 -14 -17
Paid tax 0 -56 -32
Non-cash items 0 0 0
Cash flow before change in WC 375 298 201
Change in WC -215 65 31
Operating cash flow 223 362 232
CAPEX tangible fixed assets -255 -150 -150
CAPEX intangible fixed assets 0 0 0
Acquisitions and disposals 0 0 0
Free cash flow -32 212 82
Dividend paid -56 -107 -61
Share issues and buybacks 0 0 0
Other non cash items -1 0 0
Decrease in net IB debt -89 106 21
Balance Sheet (SEKm) 2018 2019 2020
Goodwill 0 0 0
Indefinite intangible assets 17 17 17
Definite intangible assets 0 0 0
Tangible fixed assets 1179 1230 1281
Other fixed assets 94 94 94
Fixed assets 1290 1341 1392
Inventories 389 348 317
Receivables 484 417 385
Other current assets 0 0 0
Cash and liquid assets 238 344 364
Total assets 2401 2450 2458
Shareholders equity 1460 1552 1593
Minority 0 0 0
Total equity 1460 1552 1593
Long-term debt 395 395 395
Pension debt 0 0 0
Convertible debt 0 0 0
Deferred tax 0 0 0
Other long-term liabilities 137 137 137
Short-term debt 0 0 0
Accounts payable 409 366 334
Other current liabilities 0 0 0
Total liabilities and equity 1489 2007 2401
Net IB debt 157 51 31
Net IB debt excl. pension debt 157 51 31
Capital invested 1660 1646 1666
Working capital 464 399 368
EV breakdown 2018 2019 2020
Market cap. diluted (m) 1257 1822 1822
Net IB debt Adj 157 51 31
Market value of minority 0 0 0
Reversal of shares and participations 0 0 0
Reversal of conv. debt assumed equity 0 0 0
EV 1414 1873 1852
Capital efficiency (%) 2018 2019 2020
Total assets turnover (%) 107,6 95,7 84,7
Capital invested turnover (%) 160,9 140,4 125,5
Capital employed turnover (%) 164 144,2 128,8
Inventories / sales (%) 14,1 15,9 16
Customer advances / sales (%) 0 0 0
Payables / sales (%) 16,1 16,7 16,8
Working capital / sales (%) 15 18,6 18,5
Financial risk and debt service 2018 2019 2020
Net debt / equity (%) 10,8 3,3 1,9
Net debt / market cap (%) 10,5 2,8 1,7
Equity ratio (%) 60,8 63,3 64,8
SEKm 2018 2019e 2020e
Shares outstanding adj. 153 153 153
Fully diluted shares Adj 153 153 153
EPS 1,45 1,3 0,67
Dividend per share Adj 0,7 0,4 0,3
EPS Adj 1,45 1,3 0,67
BVPS 9,57 10,17 10,44
BVPS Adj 9,57 10,17 10,44
Net IB debt / share 1 0,3 0,2
Share price 9,85 11,94 11,94
Market cap. (m) 1502 1822 1822
Valuation 2018 2019 2020
P/E 5,7 9,2 17,9
EV/sales 0,6 0,81 0,89
EV/EBITDA 3,6 5,1 7,4
EV/EBITA 4,8 7 12,3
EV/EBIT 4,8 7 12,3
Dividend yield (%) 8,5 3,4 2,8
FCF yield (%) -2,5 11,7 4,5
P/BVPS 0,86 1,17 1,14
P/BVPS Adj 0,86 1,17 1,14
P/E Adj 5,7 9,2 17,9
EV/EBITDA Adj 3,6 5,1 7,4
EV/EBITA Adj 4,8 7 12,3
EV/EBIT Adj 4,8 7 12,3
EV/cap. employed 0,9 1,2 1,1
Investment ratios 2018 2019 2020
Capex / sales 10,8 6,5 7,2
Capex / depreciation 257,6 151,5 151,5
Capex tangibles / tangible fixed assets 21,6 12,2 11,7
Capex intangibles / definite intangibles N/A N/A N/A
Depreciation on intangibles / definite intangibles N/A N/A N/A
Depreciation on tangibles / tangibles 8,4 8 7,7

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Main shareholders

Rottneros

Main shareholders Share capital % Voting shares % Verified
Arctic Paper SA 51.0 % 51.0 % 31 Mar 2019
Stefan Sundh 5.7 % 5.7 % 31 Mar 2019
Avanza Pension 3.0 % 3.0 % 31 Mar 2019
Dimensional Fund Advisors 1.7 % 1.7 % 28 Feb 2019
WisdomTree Asset Management Inc 0.9 % 0.9 % 29 Mar 2019
Nordnet Pensionsförsäkring 0.9 % 0.9 % 31 Mar 2019
Joakim Borell 0.9 % 0.9 % 31 Mar 2019
SEB Fonder 0.7 % 0.7 % 31 Mar 2019
Magallanes Value Investors SGIIC 0.6 % 0.6 % 31 Dec 2018
Rottneros AB 0.5 % 0.5 % 31 Mar 2019
Source: Holdings by Modular Finance AB

Insider list

Rottneros

Name Quantity Code Date
Ingemar Eliasson + 32 000 BUY 15 Feb 2019
Kristin Israelsson Saadio + 11 000 BUY 15 Feb 2019
Michael Berggren + 22 457 BUY 13 Feb 2019
Michael Berggren + 4 693 BUY 12 Feb 2019
Klas Ragnar Lundberg + 12 764 BUY 12 Feb 2019
Nils Hauri + 8 000 BUY 12 Feb 2019
Kasper Skuthälla + 14 150 BUY 11 Feb 2019
Kasper Skuthälla + 15 850 BUY 11 Feb 2019
Monica Still Pasanen + 15 000 BUY 11 Feb 2019
Ida Mörtsell + 10 200 BUY 8 Feb 2019

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