- Stable sales but EBITDA down 18% y/y: Growth in pulp and tissue sales offset weakness in lower pulp prices and paper volumes. However, the EBITDA margin came under pressure due to lower pulp prices and higher production costs (Energy, wood and chemicals).
- Cost inflation driven by energy: This was impacted by operational instability. Incremental energy costs of EUR 23m shaved 140bps off the EBITDA margin. Wood costs were also flagged due to rising woodchip prices globally. Chemical inflation driven by rising prices for optical brighteners (used in paper production). This eroded 60bps of the margin.
- Pulp uncertainty driven by the Corona Virus & trade wars: Conditions improving with demand in China sustained and Europe recovering; producer inventories corrected (now only +1.5mt > normal); recent price increases announced in China & North America for SW (Europe too) and HW.
- Chinese HW pulp demand growth between 2017-2019 was 10-15% higher than 2012-2016: Without any new major supply increase before H2 21e, increases in tissue and UWF capacity in 2020 should drive global pulp utilization higher.
- UWF sales strategy continues to bear fruit: In Europe, this allowed the Group to expand its market share with a slight gain within its branded products (FY 19A: 70% of sheeted products).
- UWF demand could be impacted by political instability in the Middle East and trade wars: Low pulp prices in ST to cap prices. 15-day Finland strike also to impact UWF and pulp output. However, supply chain expected to drive apparent consumption higher in 2020 (converse to 2019), supported by strong growth in new orders towards the end of 2019.
- P&W paper apparent demand (sales by mills): Worst performance since 2009 driven by global economic slowdown and contraction in stock levels along the supply chain (closely connected to the pulp price cycle).
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