Botnia reports operating profit for first nine months of 2011 down 12.2% year-over-year to €246.5M, citing falling U.S. dollar-euro exchange rate, rising production costs; sales up 1.1% to €1.01B as pulp sales volume stays flat

Kendall Sinclair

ESPOO, Finland , November 7, 2011 (press release) – Weakened dollar and rising production costs put pressure on profitability

Botnia’s turnover for the first nine months of 2011 was slightly higher than in the corresponding period last year, reaching EUR 1010.9 million (EUR 999.8 million for 1-9/2010). The volume of pulp sales for this period remained unchanged. The company’s profitability for the first three quarters deteriorated slightly year-on-year, but remained at a good level, with operating profit standing at EUR 246.5 million (EUR 280.6 million). The principal factors underlying this deterioration were the falling USD-EUR exchange rate and rising production costs. The average currency-denominated market prices of softwood pulp were six per cent higher than in the corresponding period of the preceding year, whereas the average prices of hardwood pulp remained unchanged. On the other hand, the US dollar weakened by nearly seven per cent, resulting in a fall in euro-denominated prices.

The profitability of Botnia also deteriorated in comparison with the preceding quarter, with a fall in turnover of about two per cent to stand at EUR 332.4 million for the third quarter (EUR 338.6 million for 4-6/2011). Total sales were about three per cent higher than in the preceding quarter. Operating profit also fell to EUR 61.9 million (EUR 89.0 million). Earnings were impaired by the scheduling of maintenance shutdowns at two mills in the third quarter of the year. The currency-denominated market prices of pulp fell by three per cent for softwood pulp and seven per cent for hardwood pulp. The dollar fell by two per cent compared to the second quarter.

Investments progress on schedule

Botnia’s ongoing investments are progressing as planned. A new causticizing plant came on stream at the Kemi mill during the period under review, whereas a water facility will be completed in the fourth quarter. These investments will improve production reliability and environmental performance at the mill. They have taken the form of entirely new installations applying the best available technology.

A gasification plant investment project at the Joutseno mill is progressing as planned. This plant will increase the proportion of bioenergy used at the mill, and is due to come on stream by the end of 2012. Thereafter the Joutseno mill will no longer generate any carbon dioxide from fossil sources during normal production.

Short-term outlook

The capacity utilisation rate at Botnia in the last quarter of the year will be slightly lower than normal due to upcoming annual maintenance shutdowns.

The market situation for pulp will depend on the general economic climate over the next few months.

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