• Underlying EBITDA down 20% y/y to EUR 306mn: As expected, the quarter was impacted by lower average selling prices across the board and adverse FX, offsetting relief from lower costs. The planned maintenance shuts impacted EBITDA by EUR 35mn (Q3 19A: EUR 40mn).
  • Uncoated Fine Paper saw volumes significantly up q/q but down y/y: Despite some weakness still, MNP appears confident in their ability to provide customers security of supply as well as a full portfolio of solutions, allowing them to outperform the market. MNP alluded to “lots of high cost capacity under extreme pressure”. MNP’s UFP portfolio benefits from its mills being mostly mixed use (various products). With the exception of the SA strike, MNP’s UFP machines are running full.
  • MNP appears confident that most, if not all of the EUR 50/t containerboard price increase should go through: Markets are “tight” hence price increases due to good demand in Europe and inventories lower y/y and at “relatively low levels”. MNP will benefit fully from any price increase as their maintenance shuts for containerboard in Poland and Russia were completed in Q3. MNP appear to think that Stora’s Oulu ramp-up is likely to be sensible and help displace some imports into Europe.
  • China Wastepaper Ban and impact on containerboard demand: There has been no reversal of the trend of imports seen in H1 (+2mtpa y/y) and has helped tighten the market in Europe. MNP believes China has the potential to be LT reliable importer.
  • Corrugated Solutions continues to benefit from higher volumes (y/y and q/q): Q3 20A has been slightly higher than H1 (volumes >5%), indicating a demand recovery is under way, but not representative of the whole of Europe.
  • Sack kraft end use has been resilient with year-end pricing negotiations under way: Security of supply and shortening of supply chains have been key trends recently seen and MNP has been pleasantly surprised by the strength of the business. This has been driven by robust demand from construction and exports coupled with increased usage in consumer applications. With a “fairly resilient picture”, it appears that the pricing negotiations (most annual) are likely to be positive, especially with no new supply on the horizon. This sentiment has been echoed with recent price increases announced in the US.
  • The focus for Engineered Materials is to stabilize profitability: Volume trend in H1 (-6-7%) continued into Q3. MNP is in the process of discussing the extent of restructuring at their Gronau (Germany) operations as Personal care remains under pressure. MNP intends to close their release liner plant in Wisconsin (US) and transfer volumes to their other plants. MNP is expected to incur special item charge of EUR 50-60mn (cash portion: 33%).  
  • Key projects update: The EUR 67mn Štêti conversion from containerboard to specialty kraft paper (75ktpa: for shopping bag applications) is scheduled to be commissioned in Q4. Ramp-up should be quicker than a new machine; however, with the rebuild, the current machine will be down for a month (impact included in guidance). Ružomberok project (hybrid white top liner) is still scheduled for H1 21e.
  • Outlook statement vanilla: MNP expects costs in Q4 to remain stable with the exception of OCC, which remains volatile. If spot FX persists, there will be a FX headwind in Q4, especially from a weaker USD (bad for USD revenue). FV gain expected to be a “modest” in H2. Expected impact on EBITDA from planned shuts remains at EUR 100mn, with EUR 55mn expected in Q4 (Q4 19A: EUR 30mn). Maintenance impact on EBITDA likely to be higher in FY 21e (for example, shuts this year were complete with remote support).

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