• Strong performance with underlying EBITDA up 27% y/y (+9% q/q) to EUR 388mn (CRe EUR 373mn): This was driven by strong volume growth and higher prices. This performance was somewhat impacted by planned maintenance (Q3 21A: EUR 30mn vs. Q3 20A: EUR 35mn) and “sharply higher” input costs.
  • Corrugated Packaging (38% of H1 21A EBITDA) continues to benefit from tight global containerboard markets: Corrugated volumes were “significantly” higher y/y (we note H1 21A was up 18% y/y) but MNP did indicate that this type of growth is now tougher to realise.  MNP appears comfortable that containerboard markets are likely to remain strong on the back of structural demand drivers at play.   
  • Flexible Packaging (38% of H1 21A EBITDA) delivered strong volume growth (we note H1 21A kraft paper was +5% and paper bags +10%): The segment is benefitting from strong demand across key end uses (consumer, building and construction, e-commerce and specialised operations). Encouragingly, price increases across their kraft paper and paper bags were implemented during the quarter for non-fixed contracts (33% of volumes). MNP should be able to successfully reprice its contract business (67% of volumes), providing a tailwind for FY 22E.
  • UFP business (21% of H1 21A EBITDA) continues to improve: This is on the back of improving volumes (we note H1 21A: +12%) and pricing (Q3 21A: +1% y/y and +3% q/q), with further price increases to be realised. Unintegrated UWF producers are under further pressure from higher pulp and energy costs.
  • No new projects announced, however, MNP are evaluating further organic development opportunities: MNP’s projects continue to address growth, cost competitiveness and sustainability benefits. MNP are happy with the ramp-up of Štêti (conversion from containerboard to specialty kraft paper) and the Ružomberok project (hybrid white top liner), which are expected to add EUR 50mn to EBITDA in FY 21E (before adjusting for higher energy costs).
  • Input costs “significantly” higher (y/y and q/q): Despite MNP being 67% energy self-sufficient from biomass, energy costs (6% of total costs in FY 19-20A) are expected to negatively impact Q4 (gas and electricity prices in central Europe are up 5x). Energy costs in FY 19A were just under EUR 400mn, while moderating to
    c. EUR330mn in FY 20A. MNP has guided for FY 21E energy costs to be in the region of c. EUR 500mn, of which an incremental EUR 30-40mn is expected to be incurred in Q4 21E due to higher energy prices. Excluding the expected impact from Q4 21E, this implies that that MNP’s energy costs have increased by 22% since 2019, well ahead of volume growth over the same period (CRe: containerboard 7%; kraft paper 3%; UWF 2%, corrugated 22% and paper bags 9%).   
  • Outlook reinforces further strong demand and price increases for packaging grades and UWF: Order books remain strong, with no signs of weakness. Expected impact on EBITDA from planned shuts remains at EUR 150mn for FY 21E, with a EUR 70mn impact expected in Q4 21E (Q4 20A:  EUR 55mn). MNP has highlighted a EUR 30-40mn energy cost headwind expected in Q4 21E. We estimate Q4 21E EBITDA of EUR 347mn (FY 21E: EUR 1,444mn) after incorporating the incremental impact from shuts (-EUR 40mn), higher energy costs (-EUR 40mn), higher OCC costs (-EUR 5mn), benefits from capital projects (+EUR 15mn) and tailwinds from higher prices (+EUR 29mn: vs. the Q3 21A average, UWF is up 3% and kraftliner is up 6% already). There is upside risk to this estimate, assuming energy costs are closer to EUR 30mn and further price increases are realized, which we believe is likely.

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