Miss due to higher costs and soft demand
Q2 group EBITDA came in at PLN 78m, which compares to ABGSCe of PLN 90m. Paper EBITDA came in at PLN 50m, below ABGSCe PLN 59m. The miss on paper was mainly driven by higher costs and slower demand recovery than expected. Note that Rottneros's weak report (Q2 published 24 Jul) also weighed on the result, where key was negative mix effects (higher deliveries of CTMP, which has had lower price increases compared to NBSK). Paper EBIT was PLN 24m, 38% below ABGSCe PLN 38m. Group EBIT came in at PLN 42m, -28% vs. ABGSCe of PLN 58m. EPS came in at PLN 0.26 vs our estimate of PLN 0.60. CEO states that the recovery may take time and that they "expect the current market situation to persist in Q3". We expect Q3 Paper EBIT of PLN 40-60m, driven by slightly higher prices.
Arctic Paper also announced a modernization programme for its paper sales and customer service organization, which will provide annual savings of PLN 15m (full effect in '25).
We expected Q2 Paper EBIT of PLN 38m, down from PLN 94m in Q1'24. The main effects q-o-q were likely PLN 1m from slightly higher paper prices (UWF prices flat q-o-q, CWF +3%), PLN 3m from marginally better volumes, and PLN -60m from higher pulp prices. Pulp EBIT was expected to be ~PLN 27m better q-o-q driven by higher pulp volumes and pulp prices. Hence, we expected Q2 group EBIT of PLN 58m vs. PLN 84m in Q1'24.
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