INDEX

1. 1st QUARTER 2020 PERFORMANCE 3

2. COVID-19 4

3. SUMMARY OF LEADING INDICATORS 5

4. ANALYSIS OF RESULTS 6

5. IMPACT OF COVID-19 AND OUTLOOK FOR 2020 10

6. MEASURES TO PRESERVE BUSINESS CONTINUITY 13

7. CONSOLIDATED FINANCIAL STATEMENTS AND NOTES 16

1. 1st Quarter 2020 Performance

Quarter marked by the significant improvement of the mill's operational performance and by the improvement in our paper order book, for both YoY and QoQ. The impact of the decrease in paper and pulp prices in Q1 2020 (especially when compared to Q1 2019, when prices were still at high levels) was partially offset by the recovery in sales volumes across pulp, paper and tissue businesses.

YoY Analysis (1st Quarter 2020 vs 1st Quarter 2019)

  • Strong order book for paper in the quarter, with the second highest level ever for this period; the impact of the pandemic was visible from mid-March onwards

  • Substantial improvement in operational performance and overall increase in sales volume YoY: up 4% for paper, up 34% for pulp and up 10% for tissue

  • Performance constrained by falling sales prices in comparison to 1st quarter 2019: the BHKP pulp index (in euros) fell 29% and the A4 paper index dropped 5.5%

  • Turnover of € 406 million (down 3.8%) and Ebitda at € 88 million (down 15.7%); Ebitda / Sales margin of 21.8% (down 3.1 pp)

  • Production costs evolved positively (fixed and variable), mitigating the impact of lower sales prices

  • Free Cash Flow stood at approximately € 15 million (vs €10 million) and capital expenditure totalled €22.7 million (vs €32.5 million)

QoQ Analysis (1st Quarter 2020 vs 4th Quarter 2019)

  • Paper output in Q1 2020 was up 12% on Q4 2019, pulp output up by 8% and tissue by 25%, representing a return to normal levels.

  • Paper sales in quantity held steady (up 0.4%), pulp sales were 16% lower and tissue sales were up by 20% on the previous quarter.

  • Ebitda for the period grew by 23%, adding 4.4 pp to the Ebitda / Sales margin, up from 17.4% to 21.8%.

  • Operating income grew by 43% to € 48 million and net income improved by 47%, totalling € 31 million.

  • Operating cash flow stood at €71 million, around €12 up from the 4th quarter, with moderate implementation of the capex plan and careful management of working capital.

Financial position

  • Payment of reserves of € 100 million in January; Net debt of € 800 million at the end of the quarter (€ 715 million at year end 2019), with Net Debt / Ebitda of 2.25 X

  • Increase in immediate liquidity to € 256 million at the end of March (as compared to € 160 million at year end 2019), maintaining a level of financial strength that enables the group to see through comfortably the current situation and with all financial needs for 2020 assured.

2. Covid-19

Measures implemented

  • A contingency plan was drawn up at the end of February, and progressively updated, designed to protect the health of all employees and the wider community, whilst assuring operational continuity.

  • Implementation of preventive, sanitisation and strict containment measures has enabled operations to proceed normally, without any disruption to client service.

  • It was decided to postpone the maintenance shutdowns at the Setúbal and Figueira da Foz pulp until the second and third quarters.

  • The Group launched a number of initiatives to support local people in the municipalities where it operates, in particular by jointly donating digital radiology equipment to Figueira da Foz hospital and repeated donations of a range of protective materials to hospitals in Setúbal and Aveiro.

    Impact on business

  • As from mid-March, with the implementation of a state of emergency in several countries which are export destinations for the group, and the consequent strict lockdowns, economic activity slowed significantly in the Group's main markets, with a direct impact on its clients' business and global paper consumption.

  • The unprecedented drop in orders, experienced as from the end of March, forced Navigator to partially and temporarily suspend paper production as from 22 April, for a period initially estimated at around 30 days, affecting between 700 and 2000 tons a day; this shutdown has had no impact on employees' earnings.

  • The decision to partially suspend paper production was taken in a context of an economic slowdown which led paper manufacturers on every continent in the world to shut down production. Thanks to the excellent health of its order books in March, Navigator was able to postpone this decision as far as possible, and the adjustment has led to a better balance between supply and demand, minimising the risk of stocks building up along the supply chain.

  • Integrated pulp production was adjusted in line with the needs of the paper machines in operation; the Aveiro Pulp Mill, which supplies the Tissue mill and produces pulp for the market, has continued to operate within normal parameters.

  • The Tissue Mills in Aveiro and Vila Velha de Ródão have also continued to function with no restriction on their operations.

3. Summary of Leading Indicators (unaudited figures)

  • 1. Operating profits + depreciation + provisions;

  • 2. Variation net debt + dividends + purchase of own shares

  • 3. Interest-bearing liabilities - liquid assets

  • 4. ROCE = Annualised operating income / Average Capital employed (N+(N-1))/2

  • 5. ROE = Annualised net income / Average Shareholders' Funds (N+(N-1))/2

  • 6. (Interest-bearing liabilities - liquid assets) / EBITDA corresponding to last 12 months

  • 7. Impact of IFRS 16: Net Debt / EBITDA in 2020 of 2.38; restated 2018 Net Debt / EBITDA in Q1 2019 of

    1.6; Net Debt / EBITDA Q4 2019 of 2.05

  • 8. Variation in figures not rounded up/down

    NB:

    Impacts of application of IFRS 16 on Income Statements in 2020:

    • - reduction in the value of rentals in Third Party Supplies and Services of around € 2.2 million;

    • - increase in value of depreciation of approximately € 1.7 million;

    • - increase in value of interest of € 0.5 million

    Impacts of application of IFRS 16 on Balance Sheet in 2020:

    A sum of € 48.5 million has been stated under Lease Assets, with the corresponding contra-entry in Non-current Lease Liabilities.

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The Navigator Company SA published this content on 01 June 2020 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 23 June 2020 10:56:06 UTC