Arctic Paper S.A.,Q1 2021: Arctic Paper is stronger than in many years

“As pulp prices rise, the balance between pulp and paper segments is shifting, but the benefits of combining paper and pulp remain significant. The recovery continued for the paper segment during the period and we have gained market positions.” (Michał Jarczyński, CEO)

Arctic Paper stand strong while the pandemic is still affecting the European market. For the first quarter of 2021, consolidated sales amounted to PLN 782.8 million (813.9) with an EBITDA of PLN 72.2 million (111.8) – a solid result as the quarter for comparison was one of the best in the Group ́s history. As pulp prices rise, the balance between pulp and paper is shifting, but the benefits of combining paper and pulp remain significant; two segments with different cycles that together provide a more balanced development.

The Groups financial position has been strengthened. During the period, a new five-year financing agreement was entered into, where the previous bond loans and other credits have been replaced with loans and credits totalling PLN 300millionat better terms than before, which reduces our financial costs.

For the first quarter, the paper segment reached total sales of PLN 547.3 million (PLN 587.8 million) with an EBITDA of PLN 56.7 million (PLN 84.8 million). The recovery continued for the paper segment during the period and we have gained market positions. Paper sales volumes was 161 000 tonnes (171 000) and capacity usage reached 94 percent (97), to be compared to the European average of around 80 percent.

Innovations, strong brands, a tradition of working close to the customers and flexible production are the key factors behind our progress. In line with our strategy for diversification, we saw strong growth within packaging, and we expectan increase in demand as the EU single-use plastics directive is finalised later this year. The Munken Kraft range sales grew by 152 percent during the period compared to Q1 last year. Arctic Paper Grycksbo will launch its first packaging product in Q2. Our goal is to continue to increase the shareof packaging in the portfolio - not only as a paper supplier but also sustainable packaging. We have set up a new group R&D function to further increase the development of new products, including specialty papers (eg medical paper).

Although we have succeeded in protecting our employees, Covid-19 still affect the communities in which we operate. As the vaccine roll-out continues, we expect an upturn in the European economies and subsequently higher demand, but also higher raw material costs. From the beginning of the year pulp prices have increased significantly. These increases arenot reflected in the result for Q1, as the price mechanisms in concluded contracts cause the changes to affect revenues and costs with a certain time delay. I expect these increases will have an impact on the results of both segments in the coming months. With the experience from the pulp price rally of 2017-2018 fresh in mind, our paper sales organisation is working proactively in order to offset the effects.

For the Group company Rottneros – the pulp segment – the improvements in the pulp market contributed positively during Q1, while an unusually cold winter and a weaker USD had negative effect. Sales reached SEK 542 million (585) with an EBITDA of SEK 40 million (80). Production reached 103000 tonnes (109000). The financial position remains strong with available liquidity amounting to SEK 513million(569).

Despite the turbulent times, Arctic Paper is stronger than in many years. We are ready to meet the challenges and opportunities that 2021 may bring.We are currently working to revise our strategy and will return after the summer period with an update. (Michał Jarczyński, CEO of Arctic Paper S.A.)