THE NAVIGATOR COMPAN

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Navigator : Report for the First 9 Months 2021

12/10/2021 | 11:42am

CONTENT

1.

PERFORMANCE IN 3rd QUARTER 2021 AND 9 MONTHS OF 2021

2

2.

LEADING INDICATORS

3

3.

ANALYSIS OF RESULTS

4

4.

QUARTELY OPERATING FIGURES

9

5.

"FROM FOSSIL TO FOREST"

9

6.

PORTUCEL MOÇAMBIQUE

10

7.

OUTLOOK

10

8.

CONSOLIDATED FINANCIAL STATEMENTS AND NOTES

12

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1. PERFORMANCE IN 3rd QUARTER 2021 AND 9 MONTHS OF 2021

After a start of 2021 marked by fresh waves of Covid-19 infections and periods of lockdown, with employees required to work from home and students taking classes online, a gradual reopening of economies has now been taking place. As vaccine roll-out gathered speed, teaching activities set in to normal and workers returned to offices. At the same time, global transports chain saw an unbalance triggered by the pandemic, and the effects are being felt across the economy. In this context, paper demand is strong, especially in Europe, taking order books to historically high levels.

Analysis: 3rd Quarter 2021 vs. 2nd Quarter 2021 and vs. 3rd Quarter 2020

  • The third quarter of 2021 represents a clear improvement on the second quarter of the year, and also in relation to the third quarter of 2020;
  • Paper sales volumes were up by 4% on the 2nd quarter of 2021 and 13% higher than in the 3rd quarter of 2020. Pulp sales volumes moved downwards, given the reduced availability of market pulp (down 26% on the previous quarter and down 47% on the same period in 2020), due to higher paper integration; tissue sales volumes were up by nearly 4% in relation to the previous quarter, but fell short by 6% on the same period in the previous year. It should be recalled that in the 3rd quarter of 2020, COVID-19 led to a peak in demand in At Home (AH) products, making it one of the strongest quarters ever in the Tissue segment;
  • Strong growth in pulp prices (with the European benchmark index up 11% in USD vs. Q2 2021 and up 68% vs. Q3 2020); paper index in Europe had a positive evolution, in comparison both with the third quarter of 2020 (+2%), and in relation to the previous quarter (+3%), increasing about 7% since the start of the year;
  • Turnover stood at € 405 million, up 8% on the 2nd quarter of 2021 and 16% in 2020, thanks to the recovery in paper volumes and higher pulp prices;
  • EBITDA for the quarter totalled € 96 million (up 20% in relation to the 2nd quarter and 36% in relation to Q3 2020), which reflected an EBITDA margin of 23.6% (2.2 pp higher than in Q2 2021 and up by 3.4 pp on Q3 2020);
  • Net income in the third quarter of 2021 stood at € 50 million, as compared to € 41 million in Q2 2021 (+22%) and € 31 million in Q3 2020 (+60%);
  • Free Cash Flow was strong at € 61 million (vs € 65 million in the previous quarter and € 56 million in the 3rd quarter of 2020);
  • Net debt fell to € 597 million, down by approximately € 61 million compared with previous quarter (€ 47 million vs. 2020), improving Net Debt / EBITDA ratio from 2.22 to 1.86.

Analysis of first 9 months 2021 vs. first 9 months 2020

  • Expressive improvement on paper market conditions, with gradual increase in volumes;
  • Annual maintenance shutdown at Figueira da Foz pulp mill and paper machines, with an impact in 1st quarter, and annual stoppage at Aveiro tissue mill with an impact in the 2nd quarter; in the 3rd quarter, stoppages at Setúbal and Aveiro pulp mills; annual shutdown of PM4 paper machine in Setúbal and maintenance shutdown of tissue mill in Vila Velha de Ródão. It shall be noted that shutdowns were longer this year, as pandemic conditions last year did not allowed the execution of all planned maintenances.

2| 51

  • Paper volumes totalled 1 081 thousand tons (+16%), pulp stood at 207 thousand tons (-30%) and tissue at 77.8 thousand tons (-2%);
  • Turnover rose by 7% to € 1 120 million, with the increase in paper volumes offsetting the lower level of prices. Nonetheless, the period saw a clear recovery in prices, although the average price for the period is still slightly lower than 2020 average (-0.5%);
  • Navigator achieved an EBITDA of € 246 million and an EBITDA/sales margin of 22% (vs. € 210 million and 20% margin in 9M 2020), benefiting from an improvement in paper volumes, higher pulp and tissue prices and containment of production costs;
  • Net income YTD September improved by 52% YoY, to € 114 million;
  • The Group presented strong generation of Free Cash Flow of € 183 million, vs. € 170 million in the same period in 2020;
  • Capital expenditure in the first nine months totalled € 52 million (vs. 70 million in 2020), including mainly maintenance and environmental investments;
  • In line with its goal of creating sustainable value and contributing to the reduction of plastics usage through its substitution for sustainable materials, Navigator took another important step in its diversification strategy, by moving into a new business area and developing a series of new products for the packaging sector. On November 1, will be launched a brand which will consolidate the Company's diversification strategy and commitment towards sustainability.
    2. LEADING INDICATORS

9 M

9 M

Change (8)

Million euros

2021

2020

9M 21 / 9M 20

Total Sales

1 119.7

1 043.9

7.3%

EBITDA (1)

246.0

210.5

16.9%

Operating Profits (EBIT)

156.8

99.6

57.4%

Financial Results

- 12.7

- 9.1

40.6%

Net Earnings

114.2

75.2

51.8%

Cash Flow

203.5

186.1

17.4

Free Cash Flow (2)

182.7

170.4

12.2

Capex

51.8

69.7

- 17.9

Net Debt (3)

596.9

644.0

- 47.1

EBITDA/Sales

22.0%

20.2%

1.8 pp

ROS

10.2%

7.2%

3.0 pp

ROCE (4)

12.5%

7.6%

4.9 pp

ROE (5)

14.8%

9.4%

5.3 pp

Equity Ratio

42.0%

41.5%

0.4 pp

Net Debt/EBITDA (6)(7)

1.86

2.28

-0.42

Q3

Q2

Change (8)

Q3

Change (8)

Million euros

2021

2021

Q3 21 / Q2 21

2020

Q3 21/ Q3 20

Total sales

404.9

373.9

8.3%

348.4

16.2%

EBITDA (1)

95.5

79.9

19.6%

70.4

35.8%

Operating profits

66.1

50.6

30.6%

35.9

84.0%

Financial results

- 2.6

- 0.4

564.0%

- 0.8

229.0%

Net earnings

49.8

40.9

21.8%

31.2

59.6%

Cash flow

79.3

70.2

9.1

65.7

13.6

Free Cash Flow (2)

61.2

65.1

- 3.9

56.4

4.7

Capex

19.0

12.7

6.3

21.0

- 2.0

Net Debt (3)

596.9

658.1

- 61.2

644.0

- 47.1

0.0

0.0

EBITDA/Sales (%)

23.6%

21.4%

2.2 pp

20.2%

3.4 pp

ROS

12.3%

10.9%

1.4 pp

9.0%

3.3 pp

ROCE (4)

19.3%

12.1%

7.2 pp

8.2%

11.1 pp

ROE (5)

19.3%

16.2%

3.1 pp

11.7%

7.6 pp

Equity ratio

42.0%

40.9%

1.1 pp

41.5%

0.4 pp

Net Debt/EBITDA (6)(7)

1.86

2.22

-0.36

2.28

-0.42

3| 51

  1. Operating profits + depreciation + provisions;
  2. Variation net debt + dividends + purchase of own shares
  3. Interest-bearingliabilities - liquid assets (not including effect of IFRS 16)
  4. ROCE = Annualised operating income / Average Capital employed (N+(N-1))/2
  5. ROE = Annualised net income / Average Shareholders' Funds last -1 months
  6. (Interest-bearingliabilities - liquid assets) / EBITDA corresponding to last 12 months
  7. Impact of IFRS 16: Net Debt / EBITDA 9M 2021 of 2.02; Net Debt / EBITDA restated on 30/09/2020: 2.47;
  8. Variation in figures not rounded up/down

3. ANALYSIS OF RESULTS

3rd Quarter 2021 vs. 2nd Quarter 2021 vs. 3rd Quarter 2020

The third quarter showed a clear improvement compared with the second quarter of 2021, and naturally, in relation to the same period in 2020, when the Group's business was particularly hard hit by the pandemic. Turnover stood at € 405 million, up 8% on the 2nd quarter of 2021 and 16% on 2020, due essentially to the increase in paper volumes and higher pulp prices.

Paper sales volumes grew by 4% in relation to the 2nd quarter of 2021, to 380 thousand tons, recovering 13% as of the 3rd quarter of 2020. PIX A4-Copy B paper index rose by 3% from the 2nd to the 3rd quarter, and 2% in relation to the same period in 2020. Navigator average sales prices evolved well above market prices, increasing 9% between the 2nd and 3rd quarter, and 13% in relation to the same period in 2020. Paper prices positive evolution and rise in volumes allowed sales to grow 14% compared with the 2nd quarter and 28% in relation to the 3rd quarter of 2020.

Conversely, pulp sales volumes evolved differently, due to smaller availability of market pulp (- 26% as off 2nd quarter of 2021 and -47% in relation to the 3rd quarter of 2020), particularly due to maintenance shutdowns, higher UWF paper integration and destocking over the course of 2020, with the Company now working at minimum stock levels. Higher pulp prices registered in 2021 enabled some mitigation of smaller volumes, with pulp sales dropping 15% in relation to the 2nd quarter of 2021, and 7% in the same quarter of 2020.

On tissue, sales volume grew around 4% in relation to the previous quarter. Volumes are still 6% below the third quarter in 2020, via the slower than expected recovery in the Away From Home segment and destocking on domestic consumers. Tissue average sales price positive evolution allowed an improvement of 9% in relation to the 2nd quarter of 2021 and 1% in relation to the same period in 2020.

In this context, EBITDA stood at € 96 million (+20% vs the 2nd quarter and +36% vs the 3rd quarter of 2020) and the EBITDA/sales margin improved to 23.6%. Free Cash Flow in the quarter stood at € 61 million (vs. € 65 million in previous quarter and vs. €56 million in the 3rd quarter of 2020). Net income totalled € 50 million, significantly recovering versus the previous quarter (+22%) and same quarter of last year (+60%).

9 Months 2021 vs. 9 Months 2020

Navigator registered a turnover of € 1,120 million, with paper sales accounting about 73% of the total (vs. 68% in 2020), pulp sales 10% (vs. 11%), tissue sales 9% (vs. 10%) and energy sales 8% (vs. 10%). After a first quarter marked by fresh waves of Covid-19 infections and periods of lockdown in most of the Group's key markets, there has been a gradual reopening of economies and a recovery in paper demand. A strong hike on pulp prices levels, prepared the way for a sharp upwards adjustment in paper prices in the third quarter.

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The Navigator Company SA published this content on 10 December 2021 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 10 December 2021 16:41:01 UTC.

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