Research

Key message: Pulp prices continue to rise in China and Europe and London Pulp Week revealed how well pulp supply has been managed in 2023, but uncertainty remains around demand heading into 2024. Graphic paper prices stable to slightly down. After weeks of stable Containerboard prices, kraftliner and testliner soften 1-2%.

Key message: Sappi reported stronger than expected Q4 23A results with EBITDA of $168mn and net debt of $1.085mn (net debt/EBITDA of 1.5x) and maintained a cash dividend of $0.15/share. Q1 24E EBITDA is expected to be lower q-o-q, somewhat impacted by planned shuts (-$40mn).

Dissolving wood pulp segment continues to gain traction, while Packaging & Specialties destocking is taking longer than expected. Graphic Paper is still struggling, with further capacity reductions needed in Europe. Gearing to pick-up in the next 12-24m but covenants (net debt/EBITDA <4x) should not be tested based on our current estimates. We expect Q4 23E EBITDA of $135mn.

Key message: Smurfit Q3 23A trading updated pointed to slight EBITDA margin expansion to 19%, while the cadence of corrugated box volume declines easing further. FY EBITDA guidance implies a weaker Q4, mainly driven by lower corrugated box prices. Smurfit confirmed that the WestRock deal is on track to close in Q2 24E.

Key message: Navigator’s Q3 23A results confirmed that profitability is improving, despite challenging conditions. UWF order books are set to improve in Q4 and 2024 and UWF delivery times are increasing (now at 2021 levels). Navigator believes a more balanced S/D outlook for UWF and higher costs will support further UWF price increases. Pulp prices have been driven by Chinese demand – prudence is needed for pricing in 2024 as new supply ramps up vs. the volatility of the Chinese market.