The Navigator Company Q2 2023 results

In 2022, paper had been in abnormally short supply in Europe, especially in the first half of the year, resulting in a consequently abnormal level of orders. The normalization of market conditions experienced in 2022 strongly conditioned the sector in the first half of 2023, with the slow process of reducing accumulated stocks along the supply chain continuing throughout the previous year. This imbalance significantly affected demand in all paper segments, with the exception of the tissue segment. Conditioned by the current economic slowdown, the destocking process is taking longer than anticipated.

Thanks to the continued focus by Navigator's teams on operational efficiency and controlling costs, combined with international paper and tissue prices which are still at historically high levels, despite a downwards correction after peaking in 2022, we succeeded in ending the first half of 2023 with the second-best result in our history.

The pro-active stance taken by the company and its teams is especially important at a time when, as well as managing its operations in hostile market conditions, Navigator has pressed ahead confidently with its plans for investment in growth and diversification.

2nd Quarter Analysis (vs Q1 2023 and vs Q2 2022)

Navigator recorded turnover of € 478 million down 5 percent from Q1 2023; down 26 percent from Q2 2022);

EBITDA stood at € 122 million (down 6 percent from Q1; down 45 percent from Q2 2022), reflected in an EBITDA margin of 25.6 percent (down 0.5 pp on the previous quarter; down 8.7 pp from Q2 2022);

Net income stood at €66 million (down 8 percent from Q1; down 41 percent from Q2 2022);

Pulp sales totalled 124 thousand tons (up 35 percent on Q1; up 72 percent on Q2 2022.

Decreased incorporation into paper resulted in more pulp being available for sale, which was quickly absorbed thanks to its distinctive properties, highly valued by the market. Excellent performance was again achieved in production, with the Aveiro and Figueira da Foz complexes once more recording high levels of output;

Paper sales totalled 260 thousand tons (down 5 percent on Q1; down 36 percent from Q2 2022), in a quarter when the destocking process throughout the supply chain continued to be felt, as well as a slight downturn in demand due to the significant economic slowdown in most of the markets in which we operate;

Sales of tissue stood at 37 thousand tons (up 57 percent on Q1; up 50 percent on Q2 2022), driven by growth in demand for finished products and by the new capacity added by Navigator Ejea;

The exploration of opportunities in the packaging segment continues to evolve, despite the currently adverse situation in the market; the gKRAFT brand continues to enjoy market recognition, with more than 230 active clients, in 30 countries, since starting up in 2021. But gKRAFT has won recognition not just in the marketplace. In the second quarter, the gKRAFT brand was awarded the National Innovation Prize and the Mobilising Agenda 'From Fossil to Forest', led by Navigator, was selected by Deloitte Portugal for its Transformation Award, distinguishing transformation, and innovation projects with an impact on markets. The award recognises the importance of the project in creating disruptive products and cellulose-based packaging as a response to the challenges posed by growing consumption of single use plastics.

Analysis 1st Half 2023 vs. 1st Half 2022

Navigator recorded turnover of € 980 million (down 14 percent on H1 2022);

EBITDA stood at € 253 million (down 27 percent from H1 2022), with an EBITDA margin of 25.8 percent (down 4.4 pp from H1 2022);

Net income totalled € 137 million (down 15 percent from H1 2022);

Net debt stood at € 573 million, reflecting the acquisition of Gomà-Camps Consumer in Q1, the distribution of € 200 million in dividends in Q2 and corporation tax (IRC) paid in May; the Net Debt / EBITDA ratio was 0.89x;

Attention is drawn to our Health and Safety Strategy, which achieved its best ever six-monthly safety result since monitoring began, as regards the number of accidents leading to sick leave, and also in terms of the severity of those accidents.

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