“In the second quarter of 2016, sales excluding the structurally declining paper business and the divested Consumer Board Barcelona Mill increased 3.6% compared to the same quarter last year. This was primarily due to the ramp-up of Varkaus kraftliner mill and additional volumes from the Ostrołęka containerboard mill. Cash flow year-on-year was record high, due to higher profitability and release of working capital.
This quarter we have stepped up a gear in our transformation to a renewable materials growth company. We have taken a major leap forward and many parts of the puzzle are falling into place. We are now ready for the next chapter in our transformation journey. The consumer board machine at Beihai Mill in China successfully started production, ahead of plan, which is an historical milestone for us. Our aim is to benefit from the growing demand in China and Asia Pacific for high-quality consumer board. One of the key end products from Beihai Mill will be Liquid Packaging Board, of which more than 80 per cent today is imported to China.
In June, production started at our new production line in Varkaus Mill in Finland, which makes wooden building components. The new laminated veneer lumber (LVL) line will meet the growing need for sustainable, high quality engineered wooden elements. We are also assessing the feasibility of building a cross-laminated timber (CLT) production unit in connection to Gruvön Mill in Sweden. This would support our ambition to capture market share from non-renewable materials in the construction sector.
Also in accordance with our transformation into a renewable materials growth company, we will divest our Kabel magazine paper mill in Germany. Furthermore, we have announced closure of our Suzhou paper mill and divestment of the site in China. In Sweden, we have divested our 33.33% ownership in the Swedish recycled materials company IL Recycling, as our need for paper for recycling in Sweden has decreased during the past years.
We continue to invest for growth and strengthened competitiveness. To further enhance our position as a leading global supplier of premium paperboards, we are investing EUR 70 million in Imatra Mills in Finland. This is to increase coating capacity and allow further product development of the new generation bio-barriers. Customer demand for food service board and liquid packaging board is estimated to grow above industry average. Furthermore, to meet the growing demand in the hygiene market, we will invest EUR 26.5 million in Skutskär pulp mill to increase the mill’s fluff capacity.
To strengthen our bio-based chemicals development, we have signed a joint technology development agreement with specialty chemicals company Rennovia Inc. This is a logical next step for us as we are targeting new markets and developing new products in this area. The commercialisation of lignin from Sunila Mill in Finland is going forward and the first customer agreement has been signed.
During the quarter, we have also successfully completed a Eurobond refinancing.
I am very pleased that we have entered into a strategic partnership with Aalto University, Chalmers University of Technology and the Royal Institute of Technology. This collaboration with leading engineering universities will allow us to further advance our positions in the field of innovation. The priority competence areas for research collaboration are bio-based chemistry, design, digitalisation, material science and process solutions.
When it comes to outlook for the third quarter of 2016, sales are estimated to be similar to or slightly lower than the amount of EUR 2 526 million, and operational EBIT is expected to be in line with or somewhat lower than the EUR 226 million recorded in second quarter of 2016. These estimates include the negative impacts of the scheduled annual maintenance shutdowns and Beihai Mill start-up, which are estimated to be approximately EUR 30 million and EUR 16 million higher than in Q2/2016 respectively.
As always, I would like to thank our customers for their business, our employees for their dedication and our investors for their trust.”