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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 2376 2150
Sales growth (%) 19,7 0,2 -9,5
EBITDA 394 424 277
EBITDA margin (%) 16,6 17,8 12,9
EBIT adj 279 308 175
EBIT adj margin (%) 11,8 13 8,1
Pretax profit 276 306 159
EPS rep 1,45 1,56 0,79
EPS growth (%) 93,9 7,5 -49,4
EPS adj 1,34 1,47 0,79
DPS 0,7 0,4 0,33
EV/EBITDA (x) 3,6 4 6,1
EV/EBIT adj (x) 5,1 5,6 9,6
P/E (x) 5,7 7,2 14,2
P/E adj (x) 6,1 7,6 14,2
EV/sales (x) 0,6 0,7 0,8
FCF yield (%) -2,5 16,3 5
Dividend yield (%) 8,5 3,6 2,9
Net IB debt/EBITDA 0,4 0 -0,1
SEKm 2018 2019e 2020e
Sales 2372 2376 2150
COGS -1211 -1184 -1101
Gross profit 1161 1192 1049
Other operating items -767 -768 -772
EBITDA 394 424 277
Depreciation on tangibles -99 -102 -102
Depreciation on intangibles 0 0 0
EBITA 295 322 175
Goodwill impairment charges 0 0 0
Other impairment and amortisation 0 0 0
EBIT 295 322 175
Other financial items 0 0 0
Net financial items -19 -16 -17
Associated income 0 0 0
Other EO items 0 0 0
Pretax profit 276 306 159
Tax -55 -68 -38
Net profit 221 238 120
Minority interest 0 0 0
Net profit discontinued 0 0 0
Net profit to shareholders 221 238 120
EPS 1,45 1,56 0,79
EPS Adj 1,34 1,47 0,79
Total extraordinary items after tax 16 14 0
Tax rate (%) -19,9 -22,4 -24,2
Gross margin (%) 48,9 50,2 48,8
EBITDA margin (%) 16,6 17,8 12,9
EBITA margin (%) 12,4 13,5 8,1
EBIT margin (%) 12,4 13,5 8,1
Pretax margin (%) 11,6 12,9 7,4
Net margin (%) 9,3 10 5,6
Growth rates Y/Y 2018 2019 2020
Sales growth (%) 19,7 0,2 -9,5
EBITDA growth (%) 59,5 7,5 -34,6
EBIT growth (%) 89,1 9,1 -45,6
Net profit growth (%) 93,9 7,5 -49,4
EPS growth (%) 93,9 7,5 -49,4
Profitability 2018 2019 2020
ROE (%) 16,6 15,9 7,7
ROE Adj (%) 15,4 14,9 7,7
ROCE (%) 17,1 16,9 8,9
ROCE Adj(%) 16,2 16,2 8,9
ROIC (%) 15,3 14,5 7,8
ROIC Adj (%) 14,5 13,9 7,8
Adj earnings numbers 2018 2019 2020
EBITDA Adj 378 410 277
EBITDA Adj margin (%) 15,9 17,2 12,9
EBITA Adj 279 308 175
EBITA Adj margin (%) 11,8 13 8,1
EBIT Adj 279 308 175
EBIT Adj margin (%) 11,8 13 8,1
Pretax profit Adj 260 292 159
Net profit Adj 205 224 120
Net profit to shareholders Adj 205 224 120
Net Adj margin (%) 8,6 9,4 5,6
SEKm 2018 2019e 2020e
Net IB debt adj. / equity (%) 10,8 0 -1,6
Current ratio (%) 271,6 313,7 328
EBITDA / net interest (%) 2073,7 2681,8 1669,7
Net IB debt / EBITDA (%) 39,8 -0,1 -9,1
Interest cover (%) 1480 2036,2 1055,2
EBITDA 394 424 277
Net financial items -19 -16 -17
Paid tax 0 -40 -38
Non-cash items 0 0 0
Cash flow before change in WC 375 368 222
Change in WC -215 97 9
Operating cash flow 223 424 232
CAPEX tangible fixed assets -255 -145 -146
CAPEX intangible fixed assets 0 0 0
Acquisitions and disposals 0 0 0
Free cash flow -32 279 86
Dividend paid -56 -107 -61
Share issues and buybacks 0 0 0
Other non cash items -1 -15 0
Decrease in net IB debt -89 157 25
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 1237 1281
Other fixed assets 94 67 67
Fixed assets 1290 1321 1365
Inventories 389 383 366
Receivables 484 348 339
Other current assets 0 0 0
Cash and liquid assets 238 410 435
Total assets 2401 2463 2506
Shareholders equity 1460 1537 1596
Minority 0 0 0
Total equity 1460 1537 1596
Long-term debt 395 410 410
Pension debt 0 0 0
Convertible debt 0 0 0
Deferred tax 0 0 0
Other long-term liabilities 137 152 152
Short-term debt 0 0 0
Accounts payable 409 364 348
Other current liabilities 0 0 0
Total liabilities and equity 1489 2007 2401
Net IB debt 157 0 -25
Net IB debt excl. pension debt 157 0 -25
Capital invested 1754 1688 1723
Working capital 464 367 358
EV breakdown 2018 2019 2020
Market cap. diluted (m) 1257 1709 1709
Net IB debt Adj 157 0 -25
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 1708 1684
Capital efficiency (%) 2018 2019 2020
Total assets turnover (%) 107,6 97,7 86,6
Capital invested turnover (%) 154 138 126,1
Capital employed turnover (%) 137,3 125 108,8
Inventories / sales (%) 14,1 16,3 17,4
Customer advances / sales (%) 0 0 0
Payables / sales (%) 16,1 16,3 16,5
Working capital / sales (%) 15 17,5 16,9
Financial risk and debt service 2018 2019 2020
Net debt / equity (%) 10,8 0 -1,6
Net debt / market cap (%) 10,5 0 -1,5
Equity ratio (%) 60,8 62,4 63,7
SEKm 2018 2019e 2020e
Shares outstanding adj. 153 153 153
Fully diluted shares Adj 153 153 153
EPS 1,45 1,56 0,79
Dividend per share Adj 0,7 0,4 0,3
EPS Adj 1,34 1,47 0,79
BVPS 9,57 10,07 10,46
BVPS Adj 9,57 10,07 10,46
Net IB debt / share 1 0 -0,2
Share price 9,85 11,2 11,2
Market cap. (m) 1502 1709 1709
Valuation 2018 2019 2020
P/E 5,7 7,2 14,2
EV/sales 0,6 0,72 0,78
EV/EBITDA 3,6 4 6,1
EV/EBITA 4,8 5,3 9,6
EV/EBIT 4,8 5,3 9,6
Dividend yield (%) 8,5 3,6 2,9
FCF yield (%) -2,5 16,3 5
P/BVPS 0,86 1,11 1,07
P/BVPS Adj 0,86 1,11 1,07
P/E Adj 6,1 7,6 14,2
EV/EBITDA Adj 3,7 4,2 6,1
EV/EBITA Adj 5,1 5,6 9,6
EV/EBIT Adj 5,1 5,6 9,6
EV/cap. employed 0,8 0,9 0,8
Investment ratios 2018 2019 2020
Capex / sales 10,8 6,1 6,8
Capex / depreciation 257,6 142,2 143,1
Capex tangibles / tangible fixed assets 21,6 11,7 11,4
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 8,2 8

Equity research

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Media

Rottneros - Interview with CEO Lennart Eberleh (in Swedish)
Rottneros - Company presentation with CEO Lennart Eberleh (in Swedish)

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Main shareholders

Rottneros

Main shareholders Share capital % Voting shares % Verified
Arctic Paper SA 51.0 % 51.0 % 30 Jun 2019
Stefan Sundh 6.3 % 6.3 % 30 Jun 2019
Avanza Pension 2.8 % 2.8 % 30 Jun 2019
Dimensional Fund Advisors 1.9 % 1.9 % 31 May 2019
SEB Fonder 1.0 % 1.0 % 30 Jun 2019
Nordnet Pensionsförsäkring 0.7 % 0.7 % 30 Jun 2019
Joakim Borell 0.7 % 0.7 % 30 Jun 2019
Magallanes Value Investors SGIIC 0.6 % 0.6 % 31 Mar 2019
XACT Fonder 0.5 % 0.5 % 30 Jun 2019
Rottneros AB 0.5 % 0.5 % 30 Jun 2019
Source: Holdings by Modular Finance AB

Insider list

Rottneros

Name Quantity Code Date
Per Skoglund - 10 000 SELL 26 Apr 2019
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

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