- Turnover -16% y/y & EBITDA -20% y/y (-6% q/q): Lower volumes for Paper (-14%) and Pulp (-14%), while Tissue was up 11%. With lower UWF production, the EBITDA margin contracted by 107bps y/y (-128bps q/q) to 20.7%. With strong FCF generation (+279% y/y), this helped reduce net debt (-22% y/y and -8% q/q), with net debt/EBITDA declining to 2.33x.
- Q1 21A UWF demand was in line q/q but demand recovery underway seen in April: Global P&W demand declined by 8% y/y in Q1 (UWF: -5%; coated paper: -8% and CM: -18%). In Europe, UWF demand was down
9% y/y in Q1 but with April apparent demand up 16%. In contrast, US UWF demand dropped 14%, despite a 15% capacity reduction. - Navigator’s UWF sales declined by 2% q/q (-8% y/y): Production was impacted by annual maintenance downtime brought forward for both its pulp mill and paper machines in Figueira da Foz.
- Navigator ended March with an order book of 49 days (Q1 20A: 40 days) vs. peers of 30 days: This is an improvement of 60%, where the quarter started off at c.30 days. Accordingly, Navigator drew down on UWF stocks, ending with 13 day’s stock vs. competitors’ average of 31 days.
- Tissue margins have been under pressure due to rising pulp prices: In February, Navigator announced a 6-8% price increase for tissue products from April, which are currently under way.
- Navigator thinks there is more room for pulp price convergence: Given China prices are net and Europe are gross before discounts, “there will be room for price convergence between Europe and China”. Navigator expects prices in China to remain stable, with prices in Europe to rise further.
- Outlook for pulp, UWF and tissue expected to remain positive overall: Continued high pulp prices globally are supportive of the gradual implementation of UWF price increases. At the end of April, Navigator’s order books and industry were at historically high levels (57 and 32 days, respectively). Q2 remains impacted by supply constraints (high levels of maritime freights, logistic delays). UWF supply/demand fundamental continue to improve with 8% of European capacity to be taken out as well as 26% of US capacity (1.8-2.1mtpa between 2019-21E).
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