Navigator : S.A. informs about the 2nd quarter and 1st half 2023 Results

CONTENTS

1.	PERFORMANCE IN 2ND QUARTER / 1ST HALF OF 2023	2
2.	LEADING INDICATORS	3
3.	ANALYSIS OF RESULTS	4
4.	A BIOINDUSTRY ON THE RIGHT SIDE OF THE FUTURE	10
5.	OUTLOOK	11
6.	FINANCIAL STATEMENTS	14

2023 FIRST HALF INTERIM RESULTS

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1. PERFORMANCE IN 1ST HALF 2023

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% from Q1 2023; down 26% from Q2 2022);
• EBITDA stood at € 122 million (down 6% from Q1; down 45% from Q2 2022), reflected in an EBITDA margin of 25.6% (down 0.5 pp on the previous quarter; down 8.7 pp from Q2 2022);
• Net income stood at € 66 million (down 8% from Q1; down 41% from Q2 2022);
• Pulp sales totalled 124 thousand tons (up 35% on Q1; up 72% 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% on Q1; down 36% 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% on Q1; up 50% 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% on H1 2022);

2023 FIRST HALF INTERIM RESULTS

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• EBITDA stood at € 253 million (down 27% from H1 2022), with an EBITDA margin of 25.8% (down 4.4 pp from H1 2022);
• Net income totalled € 137 million (down 15% 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.
• 
  2. MAIN INDICATORS

	Q2	Q1	Change (8)	Q2	Change (8)
Million euros	2023	2023	Q2 23/Q1 23	2022 Q2 23/ Q2 22
Total sales	478,3	501,2	-4,6%	649,8	-26,4%
EBITDA (1)	122,3	130,7	-6,4%	223,0	-45,2%
Operating profits	88,4	99,2	-10,9%	183,6	-51,8%
Financial results	- 5,8	- 2,7	117,0%	- 40,4	-85,6%
Net earnings	65,7	71,7	-8,4%	111,3	-41,0%
Cash flow	99,7	103,1	- 3,5	150,7	- 51,1
Free Cash Flow (2)	- 21,1	30,8	- 51,9	97,3	- 118,4
Capex	70,9	41,7	29,2	19,6	51,3
Net Debt (3)	572,5	351,4	221,1	520,6	51,9
EBITDA/Sales (%)	25,6%	26,1%	-0,5 pp	34,3%	-8,7 pp
ROCE (4)	20,8%	23,8%	-3,1 pp	43,2%	-22,4 pp
ROE (5)	21,4%	22,1%	-0,6 pp	39,0%	-17,6 pp
Equity ratio	43,4%	44,4%	-1,0 pp	44,2%	-0,8 pp
Net Debt/EBITDA (6)(7)	0,89	0,47	0,42	0,95	-0,06

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 invested (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 (2023) of 0.99; Net Debt / EBITDA (2022) of 1.44;
8. Variation in figures not rounded up/down

2023 FIRST HALF INTERIM RESULTS

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3. ANALYSIS OF RESULTS

Energy	Packaging
9% (vs 10%	2% (vs 4% in 2022)
in 2022)
Tissue
14% (vs 8%
in 2022)

	€980M	Paper
Pulp	Turnover	62% (vs 70%
in 2022)
13% (vs 8%
in 2022)

Continued success in reducing cash costs approaching those recorded in the 2nd quarter of 2022, which, combined with international paper and tissue prices that are still at historically high levels, despite a downwards correction after peaking in 2022, allowed to achieve good results.

The printing and writing papers industry

Throughout the 1st half of 2023, we see a continuation of the reduction in accumulated stocks across the supply chain that started during the 2nd half of 2022, albeit at a slower pace than expected.

Particularly in Europe, the first quarter saw a historically low level of orders, which continued throughout the second quarter.

As a result, capacity utilization rates in the industry (output/capacity) have fallen sharply, and Navigator has also adjusted the pace of production, although it maintained an average operation rate of 75% for the first half, as compared with 67% average of our competitors.

kt, YoY

Global demand for printing and writing papers

	28.0	17.7	5.6	2.4	2.3	Mt, YTD
0
-500					-454
				-655
-1000		-955
-1500			-1170
-2000
-2500
-3000
-3500	-3234
	Total	Uncoated	Coated	Uncoated	Coated
		Woodfree	Woodfree	Mechanical	Mechanical

-10.4%

-5.1%

-17.3%

-21.8%

-16.7%

%, YoY

2023 FIRST HALF INTERIM RESULTS

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