Hello, and welcome to today's webcast presentation, where we have Rottneros presenting the Q3 report for 2023. With us presenting, we have the CEO, Lennart Eberleh, and CFO, Monica Pasanen. If you have any questions, please feel free to use the form that is located to the right, and we'll take up your questions during the Q&A after the presentation. With that said, please go ahead with your presentation.
Thank you, Martin, and hello, everybody, to our Q3 results. It's a pleasure to be speaking to you here today. Looking at the highlights, we see that we have a positive result of SEK 49 million in EBIT, and this is a consequence of all the changes we have taken historically to adopt ourselves to the times that we're in currently. We're focused on efficiency. We see that our production is stable and well-developed, and we're also taking care of our fixed cost basis. The market has been in a negative downward trends for the last periods, but we have seen towards the end of the quarter, that in Europe, prices have been stabilized, and in the beginning of this quarter, quarter four, beginning of October, we already have seen some increases in European prices.
The market has led by the Chinese development, where we, since the summer, have seen significant increases in demand and prices, and thus, the gap between China and Europe has been closed. We come back into that in just a little while. We'll start off by looking a bit on what is Rottneros, and why we are a good investment case. We, as the entire forest industry, are part of the green transition. We offer sustainable products and solutions, which can replace fossil-based ones. We are a company that is providing long-term profitability. We're working on broadening our revenue base. We have a target for 2023 to have 10% of non-pulp sales, and we're also working on increasing our volumes, and thus increasing our productivity. We're responsible when it comes to a capital allocation.
We work with a maintaining a robust balance sheet, and thus be able to create also stable shareholder returns. All of that, of course, is based on our core business, specialty pulp grades, custom-made for our customers around the world in selected niches, where we see clear advantages for Rottneros in collaboration with their clients. If we go into the market and see what has happened here, we can follow the price development since 2019. The upper two lines are the gross prices or the list prices, dollars to the left and Swedish kronor to the right. And the lower lines, as we have included them now for a couple of quarters, are the net prices. So there is a rebate on the gross price, which you have to deduct to get to the net price.
These are the quarterly average prices, and if this becomes the bottom of this cycle, we see that we will be bottoming out somewhere around the same net levels than what we've seen them in 2021 on Swedish kronor, and that is, of course, being helped by the weak exchange rate that we have towards the dollar. Dollar prices are still a bit lower, but so far, not as low as they have been in the last low of 2019 or 2020. As I've said, this downward trend has stopped up because the Chinese demand has increased, volumes have been redirected there, and thus, the failing demand in Europe could have been balanced out by an increased demand in China. If we look at the stock development and the monthly prices, you see here, the lower line again is the net price.
It already has turned upwards during September, and we now also see that list prices are following there in October. That is on the basis of strongly declining stocks. Those are the lighter bars in the background. We peaked at some 53 days of consumption in stock at the beginning of this year, and this is now close to 40 days, which I believe will be the sort of new normal, giving that more and more pulp is being shipped from Latin America to China, thus, there is more pulp in transit. We also see signs of that the destocking in the value chain is coming to an end, and this hopefully will help our European customers to start producing at better levels going forward. Some words about the European market for paper and board.
We see that the entire market has been decreasing in 2023. And if we look here, this is 100%, so the 100% is a little bit less tonnage in 2023 than it has been before. But we see that the share of board and packaging is growing year by year, and the share of paper diminishing. And that has also led us to closing down the groundwood line last year in order to exit this market and focusing more with our mechanical pulp on the board and packaging, as we have done with our UKP grades previously. So this is an important part of our market in Europe, and we see over time that this will come back to a better development going forward.
So currently, it's a very full supply chains that we've seen that have been built up during last year and the beginning of this. If we're looking at the European paper market by grade and their development, all grades have turned negative. Still, the graphical papers are in a much stronger decline, which is a structural decline due to digitization, but also packaging grades have seen some negative growth over the course of this year. So the total decrease of paper and board production in Europe is 17% for the period of January to August of this year. So we're hoping that this will be reversed fairly soon.
If we then go over to the market pulp, on a global basis, you see here how the various geographies have developed, and you see here the strong growth in China, more than 20%, and now China is more than 40% of the entire pulp market, usually is around one third. But as we have seen strong declines in Europe and North America, the share of China simply has increased. Looking at our sales to various segments, we can follow the development here. To the top left part, around 11 o'clock in the circle, you see the decrease in our sales to the printing and writing. This was mainly groundwood pulp from Rottneros Mill.
There were some sales during quarter one of this year, but since then, basically none at all, and that explains the decrease from 10% last year into 3% this year. Whereas most of the other segments are fairly stable when it comes to the share of our sales. And as historically and previously explained, tissue is not really a strategic core application for us, but it is an opportunity to find a home for volumes when other markets are a bit weaker, and this is what we've done during the course of this year. And that also explains that we could see extremely good deliveries during the last quarter.
There were no more logistical issues that were restraining us to where to ship our pulp, and the efforts we've undertaken during the beginning of the year, when we saw the weaker markets for our standard sales, we were adopting quickly and finding new homes, and one of those homes is tissue and some other markets, and that has played well out, and we see that we found homes for all the volumes that we could produce. And what that means for our financials, I leave over to Monica to guide us through.
Thank you, Lennart. Yes, let's have a look at what impacted the quarterly results, but also the accumulated a bit later on. We are comparing against a very strong Q3 last year. It was actually our second strongest quarter ever, so it's a tough match, especially since we see the drastically lower sales prices. The list price or gross price in U.S. dollar decreased by 21%. We got a bit of help from the crown, but it was still -19% lower sales prices in Swedish crowns. This has meant lower demand from regular markets, customers, and more spot sales, but we have had an agile sales force, and that we have been able to produce full and also have very good sales, especially in the third quarter.
And this has given a positive contribution. So the major impact for the quarter-on-quarter comparison is of course from price. The second biggest impact is from the high cost of wood, and in the third quarter, the variable cost increase comes mainly from wood alone. We had previously higher chemical costs as well, but that has not been the case in this quarter. Wood prices continue to be high, pretty much on the same level or slightly higher in the market. For us, we see a slight decrease in our cost, thanks to good availability and less imports, so we have a better mix coming in. On the fixed cost side, we can see that our efforts are paying off.
Of course, the closure of the groundwood line takes away quite a lot of the fixed cost base, which is the majority of the change. Maybe worth noting as well is that we have the annual maintenance shutdown in Rottneros Mill during the third quarter. It doesn't affect the comparison because it was the same quarter also last year, but when you look at fixed cost in SEK million, you will see a slightly higher in Q3 than in Q2. Then we have the item +SEK 73 million in other. That needs some explanation, I think. This comes from the closure costs last year.
So when it was decided in August 2022 that the groundwood line would close, we took a provision for fixed cost in personnel and writing down stocks and such parts, and also impairment in fixed assets. So in total, that was a bit more than SEK 70 million that reduced last year's quarterly result. So there are one-off items that affected last year negatively, but since we don't have any negative effects this year, it shows as a positive in this slide. But the total for the year or for the quarter is SEK 49 million, and we haven't had any major one-off items during the quarter. So this is a fairly clean result that we can see for the quarter.
For the first nine months, we see a slightly different picture. We see that the price and currency is not affecting results as much, and that is prices were going up last year and now coming down, so on a longer period, it doesn't have the same impact, plus we have a weaker Swedish krona during the period. On the variable cost side, we see that is the major impact, and it's really wood, but also quite high chemical costs at the beginning of the year. For fixed cost and also the other items, it is a similar explanation as for the quarter.
There is one-off item affecting this year, and that is a provision of SEK 16 million that we took in the second quarter for the reorganization in Vallvik Mill. But so far this year, we have accumulated SEK 239 million. If we look at the following slide, we have EBIT and EBITDA per quarter. This is to show that even in the very tough times that we have had in Q2 and Q3, we can see that our efforts are paying off. We have been able to affect the items that we can affect with lower fixed cost, with looking at sales outlets, so we can complement our regular business with new business.
This means that we have a EBIT margin of 8% on rolling 12 months. If we only look at the nine months, it's higher, it's at 11%, but we know that we have the maintenance shutdown in Vallvik Mill in the fourth quarter, which is always impacting with higher costs. Then looking at the balance sheet, we continue having a very strong balance sheet. We have almost SEK 700 million in available liquidity. Throughout the year, we will have a positive cash flow from the financial derivatives that these are the electricity price hedges that were in excess for 2023 after closing the groundwood line. But we have spent some money during the year as well, some highlight.
Since we had a very good result last year, we are also paying income tax, so we have approximately SEK 100 million paid in taxes during the first nine months. We have invested so far totally SEK 177 million in our factories, but also as equity and capital contribution to the joint venture in Poland. And we have also paid a dividend to our shareholders of SEK 213 million, so almost 500 million were in these three items that have been outflows during the year. With that, I give the word back to Lennart.
Thank you, Monica, and let's look ahead of what we see is coming and how we will be acting in order to capture opportunities. We have some general macro trends which are favoring the usage of cellulose-based pulp from renewable sources such as forest. We have a growing middle class, which has a higher disposable income at hand, and thus, the demand for tissue will continue to increase. It's a general demand for pulp, not specifically for our specialty grades, but the more pulp that goes into tissue, the lesser the competition will be in other fields where we have our unique selling points.
E-commerce, I think we all agree, is here to stay, and that will continue favoring fiber-based packaging solutions in the future as well, and as we've seen earlier, board and packaging is a growing part, especially in Europe, but also around the world, and here we really do have some very strong points with both our mechanical and chemical pulp. There's more and more renewable energy being installed. This means more transformers, but also more cables to transport the electricity. Our UKP is a very pure pulp with very low conductivity, and here, customers within the electrotechnical field are using more and more of our pulp to meet that demand when the networks around the world are being built out and adopted for renewable energy, such as wind power or solar power.
But we also have a general trend towards more sustainability. There's more and more legislation around the world being put into place to ban single-use plastic packaging, and this, of course, plays well in hand with our efforts in the molded fiber or fiber-based packaging area. So some words about Rottneros Packaging that we have had since 2006. We've been following this trend for a long time.
We've started back in 2016 with a big European project with 11 partners around Europe to develop a fully sustainable, biodegradable and non-fossil-based fiber tray with a barrier to protect food packaging, and that has led to that we have started to increase our activities in Sweden, and at the end of last year and beginning of this year, formed the joint venture with Arctic Paper to promote more and more molded fiber trays in Poland. The plant is under construction. Major equipment has been bought, and we are now eagerly waiting for it to be built and shipped to be installed in Poland. We see some problems, of course, on lead times, the semiconductor problems that we've seen at the end of last year and the beginning of this year.
Raw material shortage and other problems in pipelines have affected the lead times. So we have to come back here with an updated plan on when we believe the plant will be starting up. But we have seen a lot of customer interest, and we are here still in the lead when it comes to wet molded packaging, and more and more manufacturers are entering this area. So if we sum it up, quarter three has created a positive result of SEK 49 million. We have a very positive result for the first nine months. We continue to have a strong balance sheet despite the fact that we're paying a record-high dividend, as much as taxes and investments.
We have had a stop in quarter three in Rottneros Mill, and I just want to point out that we will have the bigger stop in Vallvik, with an estimated cost of SEK 60 million-SEK 70 million at the beginning of quarter four. We have come through the stop. The mill has started up successfully after the stop, and now we are well equipped to run through the end of this year and into the next year to capture the opportunities that the pulp market and the packaging market are holding for us. And with that, I leave the word back to Martin to take some questions and answers.
Thank you very much for that presentation. And like you said, now we'll start the Q&A section here, and we'll take the first question: Given that the economic climate remains the same in 2024, would you say that Rottneros is well positioned to perform next year?
Absolutely. I think we've demonstrated that already during this year. We have taken necessary precautions and taking tough decisions in order to be right for the circumstances that we are in at the time. We have demonstrated that we have a very agile and flexible sales organization. We have a great network of partners and agents that we work with, and of course, customers that are appreciating our qualities. So giving anything else, I think we've been early out to do the necessary things and are now focusing on the things we can always focus on, and that is running our mills in a very good way, finding outlets for our products, and make sure we keep our costs under control.
You've mentioned that the pulp market is stabilizing. What indicators are you looking at, and what exactly does that mean for Rottneros?
Well, Rottneros is part of the global pulp market, and the indicators we're looking at is, of course, the total demand. How is the general pulp market developing? Is it growing? Is it not growing? And also, how the stock situation is. So it's always a balance between demand and supply. And if there's an oversupply, of course, prices are under pressure. If it's more balanced and stock levels have come down, it's more into the favor of the sellers. And given what we've seen lately, we believe that the pendulum is swinging somewhat back to the sellers' advantages, and maybe we have walked through the bottom of this cycle.
It is very early days to make that judgment, and we have to be cautious because there's a lot of uncertainty around, and of course, pulp development is closely linked to the general GDP development, and that is also a link that we're following very closely.
Can you elaborate on how the dialogue with your customer is going, and what the response has been like?
We have a very open and tight dialogue and direct dialogue with our customers. We have very long-standing client relations. We have many custom-made products for specific end users, and, as I've said, we get a very early heads-up on when our customer sees how their demand situation is developing, whether they need more or they need less, and then we can act accordingly to make sure that our customers, the most prioritized ones, always get what they need. Then we have the flexibility to balance out with a bit markets which are a bit further away or not as strategic as the most important areas.
What measurements have you taken in order to make sure that both of your mills are safe?
We've always had a focus on the work environment for our employees. We have a good track record. We're towards the end of the third quarter, coming to almost a year of no lost time injuries. That means nobody got hurt and had to stay away from work. We are allocating a part of our investments for safety. We're working a lot also with the social and cultural environment. There we have a little bit more to do currently as we have undergone a strong reorganization, and that always leads to many more dialogues that needs to be taken to make sure that everybody is on board, and we know all in which direction to march. But we're focusing on the well-being of our people, both from a physical and psychological perspective.
Historically, you have sourced between 15%-20% wood from the Baltics. How do you see the Baltic sourcing in Q4?
Yeah, we have seen a much more stable supply of wood locally in Sweden, which we saw already in Q3, have impacted with lower levels. And we foresee to have similar levels in Q4, meaning that they are lower than the historical numbers, and we will end up with a year with an average of 10%-15%, as we had much higher imports at the beginning of the year when the market was tight.
Has anything changed in your sensitivity analysis from your annual report? An example, how are the effects of pulp price, FX, electricity, et cetera, on profit now?
In the annual report, we noted that they were based on the running business in 2022, which means that they were including the groundwood pulp line. So of course, the sensitivities will change somewhat. Electricity price is one example. A big part of the groundwood pulp line consumed much electricity, and of course, when that is not running anymore, we consume less. But at the same time, we are hedging such a big part of our electricity prices, so that makes a smaller difference. But we will update the sensitivity analysis going forward when we publish the annual report for this year.
You have three big investment projects now. What have started, and are the procurements done?
Yeah. None of them have started as such. The three big investment projects, the first one is in Vallvik Mill, the tall oil plant. Of course, a lot of preparations are ongoing, and the timetable is that it will be taken into operation at the annual maintenance shutdown next year. And in Rottneros Mill, we have the CTMP production, the increase in capacity. We have a similar time plan. It will be taken into use during autumn next year. So for these two projects, quite a lot has been procured, the major parts, not 100%. And we see also in the investments done so far this year, that we have had some. That we are on a higher level than other years at this time.
Then we have the third project, is the solar panels and batteries. That is not connected to the maintenance shutdown and having to be commissioned at the same time. Their procurement is ongoing, and hopefully, we will be online during summer next year.
Is the equity investment done now for packaging Poland?
Yeah. We have done our part of the equity and capital contribution during second and third quarter this year, as our JV partner. And, we have also secured the financing with a local bank in Poland for the JV.
We'll take one final question here. What should investors look out for in the coming quarters?
I think that is a question that any investor has to answer for themselves. I cannot give any guidance there, unfortunately.
Okay. Thank you very much, Lennart and Monica, for that presentation and answering our questions. And also a big thanks to everyone who followed along today for Rottneros' Q3 webcast. Hope you have a great rest of the day, and until next time, thank you very much, and goodbye.
Thank you.
Thank you. Bye-bye.