Arctic Paper (ARP) Q2 2024 earnings summary

Executive summary

• Q2 2024 sales revenues were nearly flat year-over-year at PLN 839.2mn, with higher paper sales volume at lower prices and stable pulp sales volume at slightly higher prices; adjusted EBITDA rose to PLN 78.4mn, up PLN 9mn from Q2 2023 but down PLN 34mn sequentially.

• H1 2024 net sales were PLN 1,804.6mn, a decrease from H1 2023; adjusted EBITDA for H1 2024 was PLN 190.4mn, down from PLN 254.5mn year-over-year.

• Net profit for Q2 was PLN 24.2mn, with a dividend of PLN 1.0 per share distributed.

• Economic slowdown in Europe, especially Germany, impacted demand and sales mix, with resilience shown amid high raw material prices.

• Strategic investments in renewable energy and packaging diversification continued, including a 17 MW PV-farm expansion and a new molded fiber tray facility.

Financial highlights

• Net income after tax decreased by 48.4% year-over-year, mainly due to negative currency exchange differences; Q2 net profit declined to PLN 24.2mn from PLN 46.9mn.

• Q2 2024 paper sales revenue increased 1% year-over-year to PLN 574mn; average price per tonne rose 4% sequentially.

• Pulp sales revenue in Q2 2024 was SEK 711mn, up 3% from Q1 2024; average price per tonne increased 5% sequentially.

• Operating cash flow in Q2 2024 was PLN 4.1mn, a significant drop from PLN 99.5mn in Q2 2023, driven by reduced gross profit and adverse forex movements.

• Net debt improved to PLN -142.1mn, with a net debt/EBITDA ratio of -0.35, among the best in the sector.

Outlook and guidance

• Q3 is expected to be similar to Q2 due to ongoing holiday season and slow recovery in key markets; market recovery in key segments is expected to remain slow, with current conditions likely persisting into Q3.

• Improvement in business activity anticipated towards the end of Q3 and into Q4, especially as pulp prices stabilize and decline.

• Ongoing investments in renewable energy and packaging are expected to support future growth, with the next phase of Kostrzyn solar farm expansion (9 MW) planned for Q1 2025.

• Continued focus on margin defense, cost awareness, and diversification into energy and packaging.