Hello, and welcome to today's web call with Rottneros, where CEO Lennart Eberleh and CFO Monica Pasanen will present the company's Q3 report. With that said, I'll leave the word over to you guys.
Thank you very much. Hello, and welcome everybody to our today's report presentation. With me, I have our newly appointed CFO from early September, Ms. Monica Pasanen. Welcome everybody, and let's dive into our report straight away. If we look at the highlights, driven by a continued strong pulp market with high prices and also additionally fueled by the currency rate development, we have record high turnover fourth quarter. As announced earlier, in mid-August, the decision was taken to close the groundwood pulp line. This pulp is mainly used for newsprint applications, which is a market in decline, and this is also the product line which is mostly exposed to the electricity market. It's needing a lot of electricity to free up the fibers.
In the current turmoil, and also in the long-term perspective that we see, the board has come to the conclusion that in the long view and strategic direction of the company, this will not be sufficiently profitable to continue running it. It's with great sadness that we took that decision. We've went into union negotiations, which have been finalized now as well. The new organization will be in place as of January first, with a reduction of staff of some 35 people versus the 40 that we've announced earlier on. It will be full production until the end of the year on this legacy part of our company. We also have a very strong balance sheet that we feel is worthwhile pointing out as we are bracing for a storm.
We don't know where the macroeconomy is taking us, and in such a situation, having a good and solid balance sheet with a strong cash position, of course, also opens up for opportunities if they should arise in the coming months and years. Rottneros, as an investment, we are part of the circular economy that is not changing any way, by way of restructuring our operations. We are an established niche supplier. We've seen how these niches that we chose to focus on have developed very strongly during the past years, and especially this year, which also is contributing to our position. We continue to have a strong cash flow, which enables us to create shareholder value while also developing the company. Having a quick glance at the market and how the pulp market has developed since we last talked about it.
Here you see the quarterly average prices, both in dollars as the dark line, and recalculated into Swedish kronor in the lighter line. You see on the very right, how prices in Swedish kronor have gone to record high levels. Be aware that these are gross prices, so there is a net rebate to be calculated from this. Even though on net levels, these prices are unprecedented in the pulp market. A very strong market that we have been able to leverage on the back of our stable production. If we look at the monthly price development, again, the blue line is the price of the long fiber sulfate bleached kraft pulp in Europe. You see it on the left axis, the US dollar price, $1,500, just touched upon it in the last month.
Now you can see also that, there on the monthly average prices, it's leveling out. As we've seen early October, there is a slight settling in the market. October prices have come down by $20. But as you see, the green line, the tables are showing the balance between supply and demand, and stock levels are stable. Slightly elevated, but as you can see, that hasn't driven any prices going down. As we see, there is more pulp in transit, and there's also a move towards more pulp from Latin America as the eucalyptus pulp becomes a larger share of the take, and thus, longer transit times are structurally inflating the stock levels.
What we see currently is more the effect of the macroeconomic situation and the uncertainty in our major markets, Europe, for our customers on how they will be able to continuously forward electricity prices and product prices to their paper and board customers. So far, what we've seen, this has been done very successfully, so we have continued in a situation where both paper market and pulp market are very profitable. The European market is tending towards more and more packaging. It's now half of the market and a little bit more than that, and the graphic papers are decreasing. They're now just about 26%. This is the total production during the first half year.
If you look at how these segments have developed, you see there to the left side how the graphical segments have decreased during this year versus last year, which was also very strong. 2021 versus 2022, on the rebound of the Corona pandemic. Now the structural changes that we're seeing for a long time are coming back. On the basis of that, we also have been taking that decision to close down the groundwood line, as it is primarily supplying into the newsprint area, which you can see here is a declining market. Paper market's down minus 2.8%. Board still up, which you will see in a second is of course favorable for us as a pulp supplier.
If we look at the pulp market, the global deliveries of market pulp have a positive development of 2.8%, despite the fact that China, which is the largest market, has been weak during this period. Especially Europe and North America have pulled the markets up, and we could benefit from that. If we look in a split here between the various grades, the hardwood kraft pulp from Latin America is the one that has seen the largest increase in deliveries. The long fiber chemical pulp is slightly minus, but that is more a restriction of supply due to fiber shortage in North America and logistics issues rather than a decreased demand. The brown pulp, the UKP, also has continued seeing a very strong growth with the double-digit figures during this period.
Of course, at our Vallvik Mill, we are one of the premier producers of unbleached pulp with the highest quality demands. If we look at how our sales are distributed by product area, this is January to September deliveries in turnover versus the full year 2021, tissue is declining. Board and packaging is increasing, and here we can create substantial value for our customers. Filter stable. Electrotechnical applications, also very stable, as well as special. You see already here during the course of this year that printing and writing is decreasing, and we will see a much larger decrease of that segment going into 2023, when the groundwood line will be out of production.
Others have increased from 1%-5%, and that's a basket of various specialty grades that we run for some of our customers. The niche strategy that we have and the focus we have to create customer value by making customized pulps is paying off, and we are exposing ourselves more and more to those segments where we see a long-term growth of demand. With that, I leave over to Monica to guide us through the financial figures. Please, Monica.
Thank you, Lennart. Yes, we've had a very eventful quarter, record high turnover, good profitability. At the same time, we see that inflation starts hitting us, on input costs. We have the decision about the groundwood pulp line in Rottneros Mill happening during the quarter. All in all, we can see that we had a net profit for the quarter of SEK 270 million. On this slide you see the EBIT, but the net profit was SEK 270 million. I will spend a few words on describing that. If you have read the report, you have seen that we have accounted for the electricity hedges that we will not be using for our cash flow hedging.
Normally, we have electricity hedges to cover our future cash flow. Now when we are closing the groundwood line in Rottneros Mill, the group's total consumption of electricity will go from 300 GWh to approximately 220 GWh. That means that we have more electricity hedges than future cash flows, which means that this portion has to be recognized as financial derivatives. The value of this part goes into financial net, which is then seen in the net profit for the quarter when you look at the full profit and loss. More interestingly, we should look at what is really happening to our operating profit, our EBIT. We go from SEK 101 million to SEK 185 million.
We see that the majority comes from price and currency, and you have seen the graphs on the previous slides. Quarter-over-quarter, the list price, the gross price increased by 11%. At the same time, the dollar against the Swedish crown increased from 8.6 to approximately 10.6. We are selling approximately half of our products in US dollars, so we're very exposed to the US dollar. All in all, the gross price in Swedish crowns is 35% higher this quarter compared to last quarter. That is the biggest driver for our profitability this quarter. We also have higher volumes.
Despite having taken some downtime in Rottneros Mill due to the electricity prices, we have higher production and one reason is that the CTMP at the mill is doing very well, and the other reason is Vallvik Mill has had a good quarter, production quarter. When we compare to last year, we have been running full until the last day of September, when the annual maintenance stop started, whereas it started a week earlier in 2021. That also affects the volume. On variable costs, we can see that we have SEK 60 million higher variable costs, and this is measured per ton, so it's not affected by the volume. Surprisingly enough, it's not electricity that is giving a higher cost, and that is thanks to our high hedging policy.
It is rather wood and pulpwood and chemicals that is higher than a year ago. Split this more or less 50/50 in the increase in cost between pulpwood and other input materials. Fixed cost is a big number. We are SEK 82 million higher than a year ago, and the big reason here is of course the provisions that we have taken for the groundwood line at Rottneros Mill. In the fixed cost, SEK 52 million is recognized for personnel costs and other costs associated with discontinuing the operations, and we have another SEK 10 million increase in depreciation cost due to obsolete equipment at Rottneros Mill, and also an adjustment in Rottneros Packaging of the machinery we have there to adjust to current operations.
All in all, the EBIT for the quarter was SEK 185 million. If we adjust for the provisions for the groundwood line of 62 in total, that gives SEK 247 million, but a quarter with above SEK 200 million in profit if it had been a more normal quarter. If we then look at the first 9 months, it's very much the same picture, so I will not go through the various reasons because it's almost identical. It's just that the numbers are a bit higher. We go from SEK 209 million to SEK 549 million in EBIT, and that is compared to other years in recent times when we have been between SEK 260 million and SEK 295 million in full year EBIT. Of course it is a very high number this year.
Going forward, just a few words about our financing. In July, we exercised the option to prolong our current financing. We took a new financing in July 2021 for two years with an option to prolong and that is what we did now in July, which means that the current long-term financing that we have in place will expire in July 2024. Looking at the balance sheet, the new loan facility that we now have, that I talked on the previous page, you can see that also in the equity to assets ratio.
In the third quarter last year, when we decreased the amount of long-term financing we had, our equity to assets ratio increased from the high 50s to the high 60s. We're now at 68%. We have a very strong cash flow, which means that our net cash position right now is SEK 311 million. If we look at cash and cash equivalents, we had at the end of the quarter approximately SEK 430 million in cash. In addition, we have SEK 282 million in unused credits, which means that we have available liquidity above SEK 700 million, which was at the end of the quarter, and the situation is fairly similar right now as well.
We invest approximately SEK 100 million in normal operations each year, and that is also the number we are looking at for 2022. Of this, we have already invested a bit more than SEK 60 million, and of course with the maintenance shutdown in Vallvik Mill now in the fourth quarter, there are quite a few projects ongoing that will then end up at a total a bit above SEK 100 million. With that, I hand back to Lennart.
Thank you very much, Monica, let us look ahead what we believe can happen in our industry and for our markets despite the very turbulent times we are in. We don't see any major changes in the general trends which are favoring pulp. We believe there will be an increased need for tissue that absorbs already now a major share of the market pulp. We will continue to do that going forward. E-commerce is driving the use of packaging, which is mostly fiber-based and continues to do that as well. Of course, the green transition which is taking place in Europe and in the US and other places of the world, where windmills and solar farms are being built, which means the need for cables where our E-grade pulp are very well used as much as transformers.
The order books we understand from our customers here are stretching quite a long time into the future, so we will foresee a stable demand for our most specialized grades. Of course, sustainability is an underlying fact. It might be a little bit less so now when we are in a period of strong inflation and price increases. People have to cope with energy price increases, mortgages are becoming more expensive. Maybe you tend to use the cheaper solution and maybe not the most environmentally eco-friendly one, but it is there, and it is one of the large questions and challenges we have to face to fight climate change.
I think that the pulp industry and the paper industry is as much as the forest industries were very well positioned to help do that transition away from fossil-based. Rottneros Packaging is part of that, transition, helping to substitute fossil-based, packs with fiber-based packs. We have the first fiber-based modified atmosphere packaging tray in the market. Couple of millions of packs that have been filled with single meals ready to warm up in the microwave. Our project in Poland is according to plan, and we believe and see no reason why that shouldn't be the case, that we will start it up by the end of 2023 to scale up the technology that we have developed.
We also see that, on the latest packaging fairs that, A, there's a large interest, there are many players, and B, we still have a quality which is currently second to none. We do not rest there. We know that, the competition is out there and everybody tries to reach the very high-quality fiber-based packaging in order to be part of this massive market that we see going forward. Summarizing, quarter three, a record high turnover for the quarter and for the first nine months. From a position of strength, we have taken the necessary changes and decisions to further strengthen the company's structure going forward.
It is not without sadness that we will close down the groundwood pulp line, which have been an integral part of our production, and we have to part from loyal and dear colleagues, which have devoted their working life to this mill. Unfortunately, this is the situation we are facing. At the same time, we're also running a feasibility study to increase the production of CTMP at the Rottneros Mill. We do have a strong balance sheet to support the changes we will do going forward to support the investments we see and deem necessary, at the same time being able to fight a situation where prices might come under pressure and we already see increases in costs. The packaging project is according to plan, which is, of course, very nice to see.
With that, I leave the word back to our host to take some questions and answers.
Thank you for the presentation. We will now move on to the Q&A. Net sales increased by 41%, which is a quarterly record for you. Which are the main drivers behind this?
I leave that to Monica to answer.
Yes, thank you. It is of course the pricing in the market. We see higher prices on the pulp that we are selling in currency, and then when we translate it into Swedish crowns, we get an additional benefit. One thing that I didn't touch upon when I talked about the result is that we even though the pulp prices are increasing to such an extent and we have a record high turnover, we still see that 9% of our turnover comes from other products than the sales of pulp, which means that we are also increasing the volume and prices in the other segments being byproducts and wood mainly, and of course, also packaging. Thank you.
Do you believe that the prices on pulp will continue to rise in the future?
That is always one of the big questions this industry is working on and trying to understand. It's a cyclical market. If we try to learn from history, we see the pulp prices go up and down. We might have seen a temporary peak at this time. We've already seen the prices have come down. I think the underlying development is such that there is a need for more sustainable, renewable products made from renewable sources and raw materials, and this will drive the demand. I think on the basis of that, pulp prices will continue on a sort of trend basis going forward.
How does the more uncertain global situation affects Rottneros?
It is affecting us in such a way that we, of course, see a large input cost increase. Inflation is hitting us there, chemicals, electricity, wood prices. It will later on also might mean that our customers are facing more difficult times to forward their price increases. I think in general, that will put pressure on pulp prices going down in the near-term future. How far is difficult to say, and it's also always a question of supply and demand. We already see now announcements in North America that pulp mills are closing down due to lack of fibers and transportation.
Given that it continues to be a favorable balance between supply and demand, it's a question of how much our customers actually can afford to support pulp prices we need to drive a profitable business.
Looking ahead, are you thinking about any investments in the future to reduce electricity costs?
Absolutely. There are various ways to mitigate the situation we are currently in. On the basis of what we see, and I think everybody believes, is those electricity prices we had in Sweden historically are a piece of the history. Going forward, they will be higher, and they will be more volatile. What can we do to mitigate those risks? We're looking into be more energy efficient. We're looking into closing the gap on our self-sufficiency. We are looking into how we can start increasing the usage of renewable energies, and how can we ourselves contribute to it by, for example, investing in our own solar farms.
We are also looking into complementing our very successful hedging portfolio with power purchase agreements, PPAs, which are usually used as a term to describe when you are sourcing electricity from windmill farms, for example, on a long-term basis. All of these things combined together with investments which are more focused on becoming more energy efficient. One of the big steps, of course, is to end the groundwood pulp, which is the most electricity consuming product we have, and subsequently continue to invest in CTMP. That as such will sort of decrease our exposure, and there are more steps to be taken there.
Thanks. Do you have any new comments on the potential new CTMP line at Rottneros Mill?
No new comments there. It's a feasibility study which is undergoing. Of course, we do have very close discussions with our suppliers. Global constraints and supply chains, especially in electronics, semiconductors and so forth, is a restricting factor. We're working on it, and we would like to launch it as soon as possible, as we see this is one of the big possibilities for us going forward.
Moving on to the last question. Given the strong balance sheet, can we expect a dividend distribution for this year at the higher end of your targeted range?
I leave that question to our board to answer, but I'm sure they are looking into having a long-term stable financial situation in Rottneros. I hope they will come back on that one very, very soon.
Thank you so much for the presentation and good luck going forward. Thank you all the viewers for tuning in. Have a nice day.
Thank you very much. All the best. Until next time, bye-bye.