- Strong second quarter performance with EBITDA improving by+35% YoY & +24% QoQ, while revenue softened by -1% QoQ: The EBITDA margin expanded to 31.3%, the highest margin since Q2 22A. Net debt increased by +36% YoY & +38% QoQ impacted by acquisition of Accrol (€153mn) driving net debt/EBITDA to 1.2x.
- Uncoated woodfree paper showed continued signs of a rebound (UWF 65% of revenue): Sales volumes improved by +23% YoY; however, fell by -10% QoQ. Encouragingly, sales prices improved by +9% QoQ. Implementation of the last announced price increase (started in July) is expected to be concluded during Q3. Capacity utilisation rates in the European industry averaged 87% in H1, while Navigator operated at 92%.
- Global paper demand performed positively (+1.3%) through May y-t-d, driven essentially by restocking along the distribution chain, especially in Europe: UWF was the strongest (+1.6%), followed by CWF (+0.6%). Apparent demand for UWF in Europe grew by +14.8% YoY in H1. Within the UWF segment, the folio segment was the top performer (+20.6%), followed by cut size office paper (+14.8%) and reels (+10.1%). Navigator continues to increase in market share in Europe. In contrast, UWF demand in the US declined by -2.6% YoY through to May. Despite this, Navigator’s sales in the US grew again, as did its market share. Meanwhile, apparent UWF consumption in China recorded an impressive +7.1% growth (CAGR 2019-2023: +2.9%).
- Pulp demand has been strong (although recent softness in China), and stocks are still below their historical averages: In May, stocks at European ports stood at 1.3Mt, below the historic 5-yr average (1.5Mt). In China, pulp stocks stood at 1.7Mt in June 2024, also below the historical 5-yr average (1.8Mt).
- Packaging demand levels have pointed to a recovery and a return to normal: After a promising Q1, Q2 confirmed the recovery, with robust and consistent demand. H1 saw a reduction in the dependency on the paper bag segment, with the tilt towards flexible packaging segments. This helped drive European deliveries of Kraft MF papers (white and brown) reported by CEPI up +25% YoY.
- Demand for tissue paper remained buoyant, with growth of +3.5% since the start of the year in Western Europe: Positive effects have been felt from the recovery of household spending power (namely by lower inflation), accompanied by growth in region’s tourism sector, boosting the away-from-home segment.
- Third quarter outlook: Pulp demand is expected to slow and supply to increase, placing downwards pressure on prices. The effect of new capacity coming online in Latin America (+2.6Mt/yr) will be felt in 2025. Navigator expects the seasonal slowdown to impact UWF paper order books more sharply than in previous years. Strong pressure is expected to remain on costs, which are anticipated to stabilise at a level well above that existing before the pandemic. There is still scope for further capacity reductions (Q1 closures: Europe -200Kt; US: -170Kt and a further -280Kt in Germany by year-end) due to continued high level of variable costs and Navigator expects the structural increase in producers’ cost base, to sustain paper price levels in Europe at levels above pre-pandemic ones. Tissue paper demand continues to rise and growth of +3.2% is estimated for Europe in 2024 (Numera).
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