Arctic Paper S.A., Q3, 2023: Our focus on margins continues to be successful

• Q3 consolidated sales revenue amounted to PLN 854.8mn (EUR¹ 186.5mn).
• EBITDA in Q3 was PLN 124.5mn (EUR¹ 27.2mn).
• EBIT in Q3 was PLN 95.0mn (EUR¹ 20.7mn) and net profit PLN 58.2mn (EUR¹ 12.7mn).
• Continued focus on margins: The consolidated EBITDA margin reached 14.6 percent.
• Energy investment in Grycksbo adds revenue streams and enhances competitiveness.
• Net debt PLN -306.7mn (PLN -199.6mn), net debt/EBITDA at new record low of -0.59 (-0.22).

¹Arctic Paper S.A. reports in PLN. In the English press release, the amounts above were converted to EUR at the average rates for the quarter respectively. The complete quarterly report is available at www.arcticpapergroup.com

“Our focus on margins rather than volumes continued to be successful and is helping to strengthen the Group at a time of significant investment in line with our strategy.” Michal Jarczyński, CEO

The third quarter of 2023 appears weak compared to the corresponding quarter of 2022 – which was one of the strongest in the Group's history – but nevertheless delivered an EBITDA margin in line with our target. Our focus on margins rather than volumes continued to be successful. Arctic Paper´s revenues decreased by 39 percent to PLN 854.8 million (1 402.1 million). EBITDA reached PLN 124.5 million (298.2 million) with a corresponding EBITDA margin of 14.6 percent. A strong cash flow during the period strengthened the Group’s financial position as the net debt/EBITDA ratio reached a new record low of -0.59 (-0.22). Solid finances are an advantage at a time of significant future investment in line with our strategy.

For the paper segment, revenue decreased to PLN 590.3 million (1,042.1 million). During the first half of the year, demand weakened as customers reduced their stocks. During the third quarter, however, we have seen early signs of a recovery in demand. Capacity utilization for the period was up to 66 percent. We have continued to focus on margins and delivered an EBITDA margin for the period of 16.0 percent. As the comparative quarter was exceptional, it is worth noting that the result for paper is historically strong.

We have obtained patent rights for an innovative barrier with antibacterial properties. The use of this specially developed formula ensures that Amber Care meets the ISO 20743 and ISO 18184 standards and the components of the mixture undergo decomposition without environmental pollution and are biodegradable.

The pulp segment – Rottneros – decreased its revenue to SEK 693 million (806) with an EBITDA of SEK 79 million (233), mainly driven by falling prices. The period was characterised by shrinking inventories and rising deliveries and the balance of market pulp shifted in favour of sellers. Investments are being made in the expansion of CTMP capacity, in renewable energy and energy storage.

The joint venture investment in a new production facility for molded fiber trays in Kostrzyn is progressing with the aim of being operational 2024. The timetable is impacted by lengthy equipment delivery times.

Arctic Paper continues to grow within sustainable energy solutions. During the quarter, a decision was made to invest SEK 285 million in an upgrade of the biofuel boiler and steam turbine in Grycksbo. The investment will increase the mill's competitiveness and generate a new revenue stream as the mill will produce 50 ktons of wood pellets per year at an estimated value of approximately SEK 100 million. The installation will also reduce energy costs by SEK 50 million. During the period, we also advanced our plan for the expansion of the 17 MW solar energy park in Kostrzyn.

Two years have passed since Arctic Paper launched its new strategy with the aim of diversifying into renewable energy and sustainable packaging. The challenges we have faced since then show that the strategy provides value, and we are on track to implement it. After strategy review, our focus in renewable energy will shift from wind turbines to solar parks. For packaging, we see more potential in fiber trays than in kraft paper. Our commitment to investing in higher margin, lower footprint and less volatile businesses remains intact.

Michal Jarczyński, CEO of Arctic Paper S.A.