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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 2388 2167
Sales growth (%) 19,7 0,7 -9,3
EBITDA 394 416 284
EBITDA margin (%) 16,6 17,4 13,1
EBIT adj 279 296 178
EBIT adj margin (%) 11,8 12,4 8,2
Pretax profit 276 293 161
EPS rep 1,45 1,49 0,8
EPS growth (%) 93,9 2,8 -46
EPS adj 1,34 1,4 0,8
DPS 0,7 0,4 0,33
EV/EBITDA (x) 3,6 3,8 5,4
EV/EBIT adj (x) 5,1 5,3 8,6
P/E (x) 5,7 6,8 12,6
P/E adj (x) 6,1 7,3 12,6
EV/sales (x) 0,6 0,7 0,7
FCF yield (%) -2,5 16,4 6,9
Dividend yield (%) 8,5 3,9 3,2
Net IB debt/EBITDA 0,4 0,1 -0,1
SEKm 2018 2019e 2020e
Sales 2372 2388 2167
COGS -1211 -1195 -1102
Gross profit 1161 1193 1065
Other operating items -767 -777 -781
EBITDA 394 416 284
Depreciation on tangibles -99 -106 -106
Depreciation on intangibles 0 0 0
EBITA 295 310 178
Goodwill impairment charges 0 0 0
Other impairment and amortisation 0 0 0
EBIT 295 310 178
Other financial items 0 0 0
Net financial items -19 -17 -17
Associated income 0 0 0
Other EO items 0 0 0
Pretax profit 276 293 161
Tax -55 -66 -38
Net profit 221 227 123
Minority interest 0 0 0
Net profit discontinued 0 0 0
Net profit to shareholders 221 227 123
EPS 1,45 1,49 0,8
EPS Adj 1,34 1,4 0,8
Total extraordinary items after tax 16 14 0
Tax rate (%) -19,9 -22,5 -23,8
Gross margin (%) 48,9 50 49,1
EBITDA margin (%) 16,6 17,4 13,1
EBITA margin (%) 12,4 13 8,2
EBIT margin (%) 12,4 13 8,2
Pretax margin (%) 11,6 12,3 7,4
Net margin (%) 9,3 9,5 5,7
Growth rates Y/Y 2018 2019 2020
Sales growth (%) 19,7 0,7 -9,3
EBITDA growth (%) 59,5 5,7 -31,8
EBIT growth (%) 89,1 5,2 -42,7
Net profit growth (%) 93,9 2,8 -46
EPS growth (%) 93,9 2,8 -46
Profitability 2018 2019 2020
ROE (%) 16,6 15,2 7,8
ROE Adj (%) 15,4 14,2 7,8
ROCE (%) 17,1 16,3 9
ROCE Adj(%) 16,2 15,6 9
ROIC (%) 15,3 13,8 7,8
ROIC Adj (%) 14,5 13,2 7,8
Adj earnings numbers 2018 2019 2020
EBITDA Adj 378 402 284
EBITDA Adj margin (%) 15,9 16,8 13,1
EBITA Adj 279 296 178
EBITA Adj margin (%) 11,8 12,4 8,2
EBIT Adj 279 296 178
EBIT Adj margin (%) 11,8 12,4 8,2
Pretax profit Adj 260 279 161
Net profit Adj 205 213 123
Net profit to shareholders Adj 205 213 123
Net Adj margin (%) 8,6 8,9 5,7
SEKm 2018 2019e 2020e
Net IB debt adj. / equity (%) 10,8 1,7 -1,3
Current ratio (%) 271,6 341,1 364
EBITDA / net interest (%) 2073,7 2420,4 1709,5
Net IB debt / EBITDA (%) 39,8 6,2 -7,2
Interest cover (%) 1480 1804,1 1071
EBITDA 394 416 284
Net financial items -19 -17 -17
Paid tax 0 -17 -38
Non-cash items 0 0 0
Cash flow before change in WC 375 382 229
Change in WC -215 31 6
Operating cash flow 223 381 235
CAPEX tangible fixed assets -255 -127 -128
CAPEX intangible fixed assets 0 0 0
Acquisitions and disposals 0 0 0
Free cash flow -32 254 107
Dividend paid -56 -107 -61
Share issues and buybacks 0 0 0
Other non cash items -1 -16 0
Decrease in net IB debt -89 131 46
Balance Sheet (SEKm) 2018 2019 2020
Goodwill 0 0 0
Indefinite intangible assets 17 15 15
Definite intangible assets 0 0 0
Tangible fixed assets 1179 1217 1239
Other fixed assets 94 70 70
Fixed assets 1290 1302 1324
Inventories 389 395 379
Receivables 484 377 373
Other current assets 0 0 0
Cash and liquid assets 238 385 431
Total assets 2401 2460 2507
Shareholders equity 1460 1534 1596
Minority 0 0 0
Total equity 1460 1534 1596
Long-term debt 395 411 411
Pension debt 0 0 0
Convertible debt 0 0 0
Deferred tax 0 0 0
Other long-term liabilities 137 175 175
Short-term debt 0 0 0
Accounts payable 409 339 325
Other current liabilities 0 0 0
Total liabilities and equity 1489 2007 2401
Net IB debt 157 26 -20
Net IB debt excl. pension debt 157 26 -20
Capital invested 1754 1735 1751
Working capital 464 433 427
EV breakdown 2018 2019 2020
Market cap. diluted (m) 1257 1553 1553
Net IB debt Adj 157 26 -20
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 1579 1533
Capital efficiency (%) 2018 2019 2020
Total assets turnover (%) 107,6 98,3 87,3
Capital invested turnover (%) 154 136,9 124,3
Capital employed turnover (%) 137,3 125,7 109,7
Inventories / sales (%) 14,1 16,4 17,9
Customer advances / sales (%) 0 0 0
Payables / sales (%) 16,1 15,7 15,3
Working capital / sales (%) 15 18,8 19,8
Financial risk and debt service 2018 2019 2020
Net debt / equity (%) 10,8 1,7 -1,3
Net debt / market cap (%) 10,5 1,7 -1,3
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 1,49 0,8
Dividend per share Adj 0,7 0,4 0,3
EPS Adj 1,34 1,4 0,8
BVPS 9,57 10,06 10,46
BVPS Adj 9,57 10,06 10,46
Net IB debt / share 1 0,2 -0,1
Share price 9,85 10,18 10,18
Market cap. (m) 1502 1553 1553
Valuation 2018 2019 2020
P/E 5,7 6,8 12,6
EV/sales 0,6 0,66 0,71
EV/EBITDA 3,6 3,8 5,4
EV/EBITA 4,8 5,1 8,6
EV/EBIT 4,8 5,1 8,6
Dividend yield (%) 8,5 3,9 3,2
FCF yield (%) -2,5 16,4 6,9
P/BVPS 0,86 1,01 0,97
P/BVPS Adj 0,86 1,01 0,97
P/E Adj 6,1 7,3 12,6
EV/EBITDA Adj 3,7 3,9 5,4
EV/EBITA Adj 5,1 5,3 8,6
EV/EBIT Adj 5,1 5,3 8,6
EV/cap. employed 0,8 0,8 0,8
Investment ratios 2018 2019 2020
Capex / sales 10,8 5,3 5,9
Capex / depreciation 257,6 119,8 120,8
Capex tangibles / tangible fixed assets 21,6 10,4 10,3
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 8,6

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 % 31 Jul 2019
Stefan Sundh 6.4 % 6.4 % 31 Jul 2019
Avanza Pension 2.8 % 2.8 % 31 Jul 2019
Dimensional Fund Advisors 2.0 % 2.0 % 30 Jun 2019
SEB Fonder 1.0 % 1.0 % 31 Jul 2019
Joakim Borell 0.7 % 0.7 % 31 Jul 2019
Nordnet Pensionsförsäkring 0.7 % 0.7 % 31 Jul 2019
Magallanes Value Investors SGIIC 0.6 % 0.6 % 30 Jun 2019
Rottneros AB 0.5 % 0.5 % 31 Jul 2019
XACT Fonder 0.5 % 0.5 % 31 Jul 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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