Hello, and a warm welcome to today's broadcast with Rottneros, who will present the report for the third quarter of 2026. With us, we have CEO Per Bjurbom and CFO Monica Pasanen. At the end of the broadcast, there will be a Q&A. If you would like to ask a question, you can do so via the form found to the right of the broadcast. With that said, I will hand over to you guys, and I will be back for the Q&A. Please go ahead.
Thank you, [Elliot]. I wish to welcome you all to the Q3 report of Rottneros here. With me, I have Monica Pasanen, the CFO, and myself, I am the CEO of the company, Per Bjurbom. First, let us start this off then with some highlights for the quarter. We are reporting an EBITDA of SEK 26 million , an improvement compared to last year. We can also see that we are continuing reporting lower wood prices. That is, of course, extremely important for us because this is the biggest cost driver that we have in our company. The demands in the marketplace, especially in our niches, has been positive and stable. All over, the market has maybe been a little bit challenging. In the quarter, we have also had two things that have affected our output that has been planned.
It has been the summer shut for vacation in our Rottneros Mill, and we have started our maintenance stop in Vallvik at the very end of September, that the quarter is affected with some production volumes that have gone out. Let us go on to the next slide. A short presentation of the Rottneros company. We are a company specialized in producing pulps for demanding customers. The special thing with our pulps is that they are very pure and have high strength, and they are then produced on the fibers here in central Sweden that has very good properties for long fiber pulp. The company, we have a turnover roughly about SEK 2.4 billion . We are 258 employees, and a production volume of roughly 335,000 tons. Of these tons, we are placing those in our prioritized niches, like 78%.
Our mills is located here in central Sweden, and we also have a wood procurement operation here in Värmland and in the Baltics. We also have a part in a joint venture packaging with Arctic Paper in Kostrzyn, Poland. Going over to the market then. Still, the pulp markets are challenging. Compared to last quarter, still moving sideways. There are some positive things happening, and then especially within the unbleached segment. There is a higher demand of this. The driver behind this demand is the recycled fiber in China, where in China they have produced recycled pulp importing this, and in China, they have new legislation now that this pulp is more inspected than before, and this is putting down the availability of recycled pulp, and the substitute for this is unbleached pulp. The good thing for us is then this market grows.
Some of our competitors doing bleached pulp is turning over to unbleached pulp, and the capacity utilization for normal bleached pulp goes down, and this will then reduce output in the market. That is good for us. For our unbleached pulp, we are so specialized, so we are not affected by more competition in the unbleached segment. If you then look over on the pricing here, it is moving slightly upwards. There are some effects on U.S. pricing being positive, but also the situation here with the dollar. The Swedish krona has weakened compared to the dollar, and of course, has effect on our pricing in SEK. There is a positive trend in this slide. It is a slight positive trend that is the global producing stocks level is moving down.
You see the last three months here, it has been on a slightly lower level, and hopefully this is a trend that will go on going into Q4. The production of different paper grades in Europe has declined this year compared to last year with 0.3%. Last year, it was down 2.5%. If you look on the slides here, you can see that it is a negative development in all grades except for the packaging-related grades, so containerboard and cartonboard. If you then look on deliveries of chemical pulp, then you can see that has decreased compared to last year with 2.7%. The big driver in the global pulp market is China. You can see in the slide here that China has had a tough year with a decline this year.
What happened in China is important for what will be the future in the pulp market. If you look on the European Rottneros market positions, production of paper and board in Europe decreased by 0.3% compared to last year. If you look on our deliveries, we have been able to increase our deliveries into Europe. For us, as a local producer here in Europe, this is of course important. We have also done our stable position in Asia and North America, but our home market is Europe. With that, I leave it over to you, Monica, and take the financials.
Thank you, Per. Yes, the highlight for the quarter is the improved earnings as we had already in the second quarter, and lower costs. When we see on the EBITDA development, we go from +SEK 21 million last year to +SEK 26 million. That is an improvement of SEK 47 million. As we saw on the previous slides, there is not much happening on price and currency in the last a bit more than a year of fairly flat curve. We also have similar volumes this year compared to last year. The big difference is really the lower cost of wood. They were at their peak in the spring of 2025 and started declining. During the year, we have seen a big improvement in our biggest cost item, which is wood. Wood is really the majority of these SEK 51 million that you see on the slide.
We do have increased fixed costs. I would say that it's not our cost base that has increased as such. We have had our savings program, which is developing well, but this is depending on when the costs come into our books for the maintenance shutdown in Vallvik Mill that started in September. It's more of a timing issue than any underlying increase. During the third quarter, we sold emission allowances, which had a positive effect on other items. A small negative effect is coming from our wood procurement units. As the wood prices are declining, we have lower profitability this year versus last year. Looking at the full year, it is a slightly different picture. We see here that price and currency has a negative impact. The prices were very high at the beginning of 2025.
The Swedish krona was weak at that stage, so the majority of this price and currency effect is for the first half year. Volume is negative. Those of you who have been following us might remember that we had a troublesome production in the beginning of the year. It was a cold winter, and Vallvik experienced production problems, which is the main reason for the negative development. Here you see the big positive impact of the wood prices. Also that our fixed cost base is on a lower level than we have had in previous years. Item other is -SEK 33 million for the first nine months. A big portion comes from emission allowances. We sold more emission allowances in 2025 than this year, but also the prices for our byproducts have been lower this year. Those are the main reasons.
But all in all, we are going from -SEK 63 million to +SEK 20 million for the period. This is good to see what the cost structure is. You see all the cost items here. Wood is really a big portion of our costs as well as variable costs. This is why it is important to be as efficient as possible on the wood procurement. Going to the balance sheet. We have an improved EBITDA, but in the quarter, we also had some increased working capital. Part of that is due to this maintenance shutdown as we need to build up stocks as we are not producing for almost two weeks. That is affecting the operating cash flow for the quarter. We are very diligent with our investments.
So far this year, we have invested SEK 23 million versus SEK 102 million for the same period last year, and we expect to have approximately SEK 60 million-SEK 65 million in investments for the full year. The investments are usually in combination with the maintenance shutdown, that is why they come in the last quarter. We have a solid equity to assets ratio, around 60%. It's 61% at the end of the third quarter. With that, I hand back to Per.
Thank you, Monica. Saying something about our business then. We are active in fields that have strong megatrends supporting the development of these different areas. We experience, in relation to electrification, we can see that that is a trend that is also affecting us. That's a lot of electrical equipment being built, driven by different things happening on the planet. The sustainability megatrend in relation to packaging is still moving forward, and of course, e-commerce is becoming more and more normal and developing fast. Tissue is, of course, a business that we all like. We all like tissue at home. So we are quite convinced that these selected niches that we are active in is quite good for us.
We can see here on our sales of pulp here in relation to 2026, nine months compared to full year 2025, as we have been growing our segment of electrotechnical pulps, and we are also growing in our filter segments. The one prioritized niche that is a little bit down here is the packaging cartonboard niche, and hopefully this segment of the board market will pick up. They've been under a lot of pressure here the last couple of years, but hopefully that will pick up. So we are quite well-positioned with our offering here going forward. Just in summary here then, we have improved our earnings. Wood prices have come down, and in these selected niches, we see good demand. With that, I would like to hand over to [Elliot], and please put some questions to us.
Thank you so much for that presentation. We will now open up for a short Q&A, and as mentioned earlier, if you would like to ask questions, you can do so via the forum found to the right of the broadcast. We can go straight ahead since we received some questions. The first question is that Q3 EBITDA of SEK 26 million included the SEK 8 million from emission allowance sales and SEK 8 million inventory write-down reversal. Were there any other non-recurring items in Q3 or the first nine months?
Those are the main items. We also talked about the maintenance shutdowns that have some impact already in Q3, but they are not non-recurring. It depends on when we get the invoices and when we record them. But I think you summed up quite nicely the ones that are out of ordinary business.
Yes. Thank you for that. How much of the SEK 51 million year-on-year reduction in Q3 variable costs came from wood? What was the quarter-on-quarter change in delivered wood costs, and how much of the earlier purchasing price reductions has yet to flow through inventories in the income statement? Do you expect further savings in Q4 and 2027, or have wood prices largely bottomed out?
Long question. I am not sure. I will hand over to you in a while, Per. I think one question was how big portion of the SEK 51 million that was related to wood costs.
Yes.
It is really the majority, let us say 90% or similar. We do have also costs for chemicals and electricity and fuels, but they have smaller movements, and some moved up and some moved down. If we want to comment on how the wood prices have been moving, maybe I hand over to you, Per?
Yes, I do not want to do any forecast regarding wood prices, but the wood prices have come down. I do not think we should expect, say, the momentum in the reduction of wood prices would not be as big going forward compared to what they have had. Then, of course, let us see where this goes in the short while. We are coming from a situation where the pricing on wood has been quite good for the forest owners, and of course, if prices goes down, maybe are a little bit reluctant and wishes that you want to have the old prices back. I do not know. Let us see. We hope that this movement will move on further, but how big the reduction will be, that we cannot speculate.
Yes. Thank you for that. For the SEK 285 million Grycksbo biomass and pellet project, what energy savings, pellet sales, and net EBITDA contribution?
Now you are on the wrong company here. That is Arctic Paper. We are Rottneros. This is not within our company that that investment has been done.
I received that through the Rottneros, but excuse me.
No, it is okay.
Then we can move to the next question. I am sorry. How much of the total impact of SEK 70 million-SEK 80 million from the Vallvik maintenance shutdown has already been charged to the third quarter?
The SEK 70 million-SEK 80 million has two parts. One is the actual costs for the maintenance activities carried out during the stop, and the other part is the lost income on tons of pulp not being produced. Vallvik Mill is producing, apart from this maintenance stop, all days during the year, and we have customers for this production. So if we lose a ton, it is the gross margin on that ton that is affecting the profitability in a certain quarter. What has happened this year is that we started the annual maintenance shutdown one day earlier than last year. It has to do when the weekends arrive. So we had approximately five days out of the total of approximately two weeks already in September. So that has affected the Q3 result, as well as some additional costs that were incurred also ahead of the stop.
But the majority will really come in the fourth quarter. That is where we have the big impact of the maintenance shutdown. If you look at our historical earnings per quarter, you will see the same pattern.
Yes. Thank you for that. How much headroom do you estimate you will have to the limits in your loan terms when the original covenants come back into force in the second quarter of 2027?
Yes. This is, of course, an interesting question to have. We are at the moment with temporary covenants, and we will go back to the normal covenants at the second quarter of 2027. We are not giving forecasts, but what will affect us is how the pulp market is developing and the pricing in the pulp market. But of course, the wood costs have a big impact. Also, currency rate. With the currency rate where we are now, it is favorable to us at closer to SEK 10 to the dollar. We continue to focus very hard on our cost savings and improving operations. It is not only fixed cost, but also other improvements, so it can be more efficient and also decrease variable costs.
Yes. Thank you for that. EBITDA improved by almost SEK 47 million, and almost all of the improvement is explained by lower variable costs, mainly cheaper pulpwood. At the same time, you write that the decline in wood prices is leveling out. Where will the next earnings improvement come from when that tailwind fades?
[inaudible] Okay. We continue to work on all cost issues that we can affect. Then, of course, the pricing of pulp has been depressed for some time. It is about how long time will this situation be before the prices on pulp will start to increase. That is the key for the future, but we cannot affect that, so we need to work on what we can affect, and that is cost, working capital, these kind of issues. Of course, if the pricing turns up, then it is And the market has an historical pattern of it goes up, and it goes down. We have been now on this lower level now for quite some time.
I could add that we have always been strong in our niches, where we see that we can make a difference with our pulps, but that is something we also continuously work with to be able to use the pulp where it has the most benefits.
Yes. Thank you so much for that. Electrotechnical applications are now your largest end-use segment and grew to SEK 130 million in the quarter. How much more can you grow there, and what is required from your side to capture a larger share of that demand?
The electrotechnical pulp is made in our Vallvik Mill, and this is a matter of choice for us how much we want to produce. This is our prioritized end segment. The strategy is to grow with the market and also if opportunity arises, take more market shares. We will not sacrifice our profit margins on the product.
Yes. Cash was SEK 23 million, and available liquidity was SEK 109 million at the end of the quarter. While a maintenance shutdown at Vallvik is expected to impact earnings by SEK 70 million-SEK 80 million in the fourth quarter. How does liquidity look through the shutdown, and can you rule out the need for new capital?
It is costly to have the maintenance shutdown, and it is the same thing every year. What we are working on to have a good liquidity, apart from being efficient on our cost side, is really on working capital. That is a high priority for us to be efficient on the working capital side. Here we have room for improvement to release capital and improve liquidity through such measures.
Yes. Your target is 415,000 tons of pulp production by 2030. You are currently at 335,000 tons on a rolling 12-month basis. At the same time, investments have been cut to around SEK 60 million for the year. Is the production target still realistic?
From an operational point of view, yes.
Yes. Thank you for that. Or you want to say something more?
No, that's enough.
Yes. On the other hand, filter has decreased from SEK 140 million to SEK 150 million and tissue from SEK 75 million to SEK 45 million compared with the same quarter last year, and sales to China have been more than halved. What is behind this, and do you expect to win those volumes back?
Were you-
Can you repeat the question, please?
Yeah, I'm sorry. Filter has decreased from SEK 140 million to SEK 150 million and tissue from SEK 75 million to SEK 45 million compared with the same quarter last year. Sales to China have been more than halved. What is behind this, and when do you expect to win those volumes back?
Tissue is not a prioritized end use, so that has to do with how we choose to sell our pulps. If we are selling more to the electrotechnical segment, we will reduce others. I have to admit that I haven't made a big, deep dive into the Chinese volumes. As you saw from earlier slides, Europe is our prioritized, where we want to stay. That's where we want to have our sales, and that is what we're focusing on.
Yes. Thank you so much for that. That was actually the last question for today. With that, we round off today's broadcast. Thanks to everybody who joined, and a big thanks to Per and Monica. We'll now some closing words from Per.
Yes. Thank you all that have been listening in. We would like to thank you for taking the time and show interest in our company, and we will strive on to do our very best to improve the profitability of Rottneros. Thank you very much for--