• Europe August average price changes: NBSK pulp +2% m/m; +11% y/y; BHKP pulp +2% m/m; +21% y/y; China BHKP net pulp +1% m/m; +35% y/y; China NBSK net pulp +0% m/m; +16% y/y; LWC +1% m/m; +74% y/y; CWF +2% m/m; +73% y/y; UWF +2% m/m; +51% y/y; Newsprint +1% m/m; +78% y/y; Kraftliner -1% m/m; +27% y/y; Testliner -1% m/m; +31% y/y; OCC -9% m/m; +15% y/y.
  • CMPC share price increased the most (+11% m/m) in August (+19% YTD): Other top gainers included UPM (+10%) and SCA (+8%). Top losers included Sappi (-17%); Nordic Paper (-17%); Mondi (-8%); and DS Smith (-8%).
  • In terms of EV/EBITDA multiples, all peers are trading at a discount to their 5-yr and 10-yr averages: Sappi is trading at the deepest discount at 3.0x (38% discount to its 5-yr average) and Mondi is trading at 5.4x (26% discount to its 5-yr average). UPM has held up best, with its 8.8x only at a 1% discount to its 5-yr average.
  • Pulp prices stable, for now: NOREXECO pulp futures for CY 23E imply a 13-18% decline in Europe, and a decline of 8-20% in China. UTIPULP released June data: European pulp consumption was up 2% y/y (-1% m/m); Inventories -19% y/y (+2% m/m); and Inventory days -21% y/y (+6 m/m) to 19. EUROPULP released July data for stocks of wood pulp at European ports: -6% y/y & -5% m/m (YTD to July: -10% y/y).
  • UWF up 1% w/w leading Graphic Paper gains: After factoring in a 30% discount to list pulp prices, the CWF/HW spread was up 3% w/w to EUR 189/t, while the UWF/HW spread increased by 4% w/w to EUR 330/t.
  • Despite testliner weakness, producers target another price increase: The kraftliner/testliner spread was up 1% w/w to EUR 166/t, while the testliner/OCC spread was stable at EUR 597/t. DS Smith, Heinze, PKV and Prinzhorn Group’s Hamburger Containerboard are set to increase prices for testliner grades by EUR 100-140/t, effective October 1. This is on the back of higher energy prices and the implementation of the German national gas price surcharge (adds EUR 50/t in extra gas cost from October).
  • Positive update on the ramp-up of Klabin’s Puma II Project: Within the first year of operation of the M27 (capacity: 450ktpa), the machine produced 330kt (average capacity utilisation: 73%, 95% expected in 2023) of Eukaliner and Eukaliner White from 100% eucalyptus (a world 1st). Eukaliner uses 40% less planted area than products developed with other fibres. Eukaliner has surpassed the characteristics observed in the laboratory during the tests for the manufacture of the product. Currently, Eukaliner has a Column Resistance Index (responsible for maintaining the integrity of the boxes when stacked) that is 80% higher compared to papers currently on the market. This result enables the production of more robust boxes and up to 20% lighter, increasing its competitiveness. Sales have been into Europe (Belgium, Holland, Italy, United Kingdom, Iberia, Portugal, and Spain, among others) and Latin America (Peru, Chile, Argentina). In Chile, Eukaliner made it possible to save 20% in the volume of paper used when replacing a product with similar characteristics.
  • Stora Enso to acquire De Jong Packaging Group: The deal is expected to close in H1 23E for an EV of EUR 1.02bn, and will increase Stora’s net debt/EBITDA from 1.0x to 1.4x. with an implied EV/EBITDA of 8.9x (<6.0x with synergies and existing projects) based on an adjusted EBITDA of EUR 144mn for 2022: The deal strengthens Stora’s European market presence in corrugated packaging, with an entry into the Netherlands, Belgium, Germany and the UK focussed on fresh produce, e commerce and industrial packaging. Stora’s Packaging Solutions division will increase its corrugated packaging capacity by c. 1,200mm2 to > 2,000mm2. In 2025, when the ongoing expansion projects in packaging converting are ramped up, an additional EBITDA of EUR 40mn is estimated to be delivered. In the mid-term, after 3 years, the acquisition is expected to generate average annual synergies of EUR 30mn over the cycle, mainly through sourcing, containerboard integration optimisation and commercial opportunities. If Stora Enso decides to proceed with the currently studied conversion of the Langerbrugge paper production site in Belgium to containerboard, further synergies will be possible. FY 2022 sales is estimated at EUR 1bn, with an implied EBITDA margin of 14.4%.

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