The Profitability Report simulates a standard format income statement by combining regional product price with company, mill and country specific inputs. The profitability report can be viewed at individual machine or aggregated to mill level with the option to add delivery cost. Prevailing corporate tax rate in the mill’s region is used. Note that the Profitability Report is not available for tissue paper or for specialty & industrial paper.

The Profitability Report uses the following calculation: 

Net Sales = Regional product price (derived from Fastmarkets reported prices when available, taking into account discounts. Estimates are used in other regions and for other grades.). Note that the product price is fixed to the mill’s region even if delivery is selected to another world region. The product price can be changed via the Scenario Tool, though. 

Gross Profit = Net Sales – Cash Cost 

Operating Expense = Delivery cost (if included) + Selling expense + Overhead. The inclusion of delivery cost increases operating expenses and indirectly the SG&A costs. It is advisable to add the delivery cost estimate for a more realistic simulation.  

EBITDA = Gross Profit – Operating Expense 

Taxable Income = EBITDA – Capital cost (Capital Charge + Depreciation)

Net Income = Taxable Income – Tax 

SG&A Cost = Operating Expense + Tax + Inventory Cost 

Total cost = Cash Cost + Capital cost (Capital Charge + Depreciation) + SG&A Cost 

Notes:

Selling expense is estimated based on a percentage of current net sales price. 

Overhead is a fixed figure derived from company financials or using an industry average for non-public companies. Overhead covers costs related to IT, R&D, company HQ personnel, etc. Note that financial reporting also varies in different regions/countries.

WACC can be an industry average or company-specific. 

Inventory: There is a separate cost for capital tied up in inventory, which is calculated as Current assets %*net sales price. The current assets % would also be derived from financials when possible.

Depreciation and interest (capital cost) are related to a machine’s investment history of major capex events. We use a 17-year straight-line depreciation method and leave a 15% salvage value of original investment. 

Taxes are estimated based on regional tax rate. As the tax can vary a lot, it is possible to eliminate it by using the scenario tool, setting the regional tax rate to zero.