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    NVG   PTPTI0AM0006

THE NAVIGATOR COMPANY

(NVG)
  Report
Real-time Quote. Real-time Euronext Lisbonne - 09/24 11:35:26 am
3.036 EUR   -1.04%
08/27NAVIGATOR : increases paper prices in Europe up to 6%
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07/29NAVIGATOR : Apresentação de Resultados Conf. Call 1º Semestre/2º Trimestre 2021
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Navigator S A : informs on results for the first half of 2021

07/27/2021 | 02:00pm EDT

PERFORMANCE 2nd QUARTER 2021 AND 1st HALF 2021

After a first quarter marked by new waves of Covid-19 infections and lockdown periods in most of the Group's key markets, the last three months have seen a gradual reopening of economies and a recovery in the demand for paper. Following the strong recovery of pulp prices, paper prices registered a continued upward adjustment along the second quarter.

Analysis: 2nd Quarter 2021 vs. 1st Quarter 2021 and vs. 2nd Quarter 2020

  • The 2nd quarter of 2021 brings up a clear improvement compared with the 1st quarter of the year, and by all means in relation to the 2nd quarter of 2020, period in which the Group's activities were particularly hard hit by the pandemic;
  • Paper volumes were up by 9% on the 1st quarter of 2021 and 58% in relation to the 2nd quarter of 2020; pulp sales volume, instead, evolved on a different way, given the reduced availability of market pulp (down 6.5% on Q1 2021 and down 33% on Q2 2020) due to higher paper integration, whilst tissue volumes fell short the levels of previous quarters (down 7% on Q1 2021 and down 4% on Q2 2020);
  • Although pulp prices strongly rallied over the period (with benchmark index in Europe up 31% in USD vs. Q1 2021 and up 51% vs. Q2 2020), paper index was down by 3% vs. Q2 2020, while starting to show some recovery as compared to the start of 2021 (up 1.3%);
  • Turnover stood at € 374 million, up 10% on the 1st quarter of 2021 and 29% on 2020, thanks to the recovery in paper volumes and the improvement on pulp prices;
  • Accordingly, EBITDA for the quarter totalled € 80 million (up 13% vs. Q1 202 and up 55% vs. Q2 2020), corresponding to a margin of 21.4% (0.7 pp higher than in the first quarter of 2021 and up 3.5 pp on Q2 2020);
  • Net income in the second quarter of 2021 stood at € 41 million, as compared to € 23.5 million in the first quarter (up 74%) and € 13.4 million in Q2 2020 (up 205%);
  • Free Cash Flow was strong at € 65 million (as compared to € 56 million in the previous quarter and € 99 in the second quarter of 2020);
  • Navigator distributed dividends of € 100 million at the end of May, and Net Debt decreased by € 22 million (vs. 2020) to € 658 million, improving Net Debt / EBITDA ratio from 2.38 to 2.22 X;
  • The Company negotiated a Sustainability Linked Bond of € 100 million maturing in 5 years, whose terms are indexed to the attainment of ESG indicators; this reflects the Company's full commitment to sustainability goals.

Analysis: 1st Half 2021 vs. 1st Half 2020

  • Improved conditions on paper market, with a gradual increase in volumes, though selling prices remain below the values of the first half of 2020;
  • Annual maintenance shutdown at Figueira da Foz pulp mill and paper machines, with an impact of 11 days in the 1st quarter, and annual shutdown at Aveiro tissue mill with an impact of 5 days in June;
  • Sales volume totalled 700 thousand tons of paper (up 17%) and 152 thousand tons of pulp (down 21%). Tissue sales volume was in line with the first half of 2020, at 52 thousand tons;

1 | 12

  • Turnover recovery of 3% to € 715 million, with the increase in paper volumes offsetting the lower level of prices;
  • The Company achieved an EBITDA of € 150 million and a sales margin of 21.4% (vs. € 140 million and a margin of 20% in H1 2020), benefiting from an improvement in paper volumes, pulp sales price and savings on unitary variable costs;
  • Net income for the first half totalled € 64 million, as compared to € 44 million in the 1st half of 2020 (up 46%);
  • Strong generation of Free Cash Flow of € 121.5 million, vs. €114 million;
  • Capital expenditure in the first half totalled € 32.8 million, essentially related with maintenance and environmental investment;
  • In line with its goal of creating sustainable value and contributing to the reduced use of plastics through its replacement for sustainable materials, Navigator took an important step forward in its diversification strategy by entering into a new business area and developing a series of new products in the packaging sector.

Leading Indicators

H1

H1

Change (8)

Million euros

2021

2020

H1 21/ H1 20

Total Sales

714.7

695.5

2.8%

EBITDA (1)

150.5

140.1

7.4%

Operating Profits (EBIT)

90.7

63.7

42.4%

Financial Results

- 10.1

- 8.3

22.4%

Net Earnings

64.4

44.0

46.3%

Cash Flow

124.2

120.5

3.8

Free Cash Flow (2)

121.5

114.0

7.5

Capex

32.8

48.7

- 15.9

Net Debt (3)

658.1

700.4

- 42.3

EBITDA/Sales

21.1%

20.1%

0.9 pp

ROS

9.0%

6.3%

2.7 pp

ROCE (4)

10.8%

7.2%

3.6 pp

ROE (5)

12.8%

8.4%

4.4 pp

Equity Ratio

40.9%

40.1%

0.8 pp

Net Debt/EBITDA (6)(7)

2.22

2.29

-0.07

Q2

Q1

Change (8)

Q2

Change (8)

Million euros

2021

2021

Q2 21/Q1 21

2020

Q2 21/ Q2 20

Total sales

373.9

340.8

9.7%

289.7

29.1%

EBITDA (1)

79.9

70.6

13.2%

51.7

54.6%

Operating profits

50.6

40.1

26.3%

15.4

229.6%

Financial results

- 0.4

- 9.7

-95.9%

- 2.1

-81.2%

Net earnings

40.9

23.5

74.0%

13.4

204.8%

Cash flow

70.2

54.0

16.2

49.7

20.5

Free Cash Flow (2)

65.1

56.4

8.7

99.1

- 34.0

Capex

12.7

20.1

- 7.4

26.0

- 13.3

Net Debt (3)

658.1

623.6

34.5

700.4

- 42.3

EBITDA/Sales (%)

0.0

21.4%

20.7%

0.7 pp

17.8%

3.5 pp

ROS

10.9%

6.9%

4.0 pp

4.6%

6.3 pp

ROCE (4)

12.1%

9.5%

2.6 pp

3.4%

8.7 pp

ROE (5)

16.2%

9.1%

7.2 pp

5.1%

11.1 pp

Equity ratio

40.9%

39.9%

0.9 pp

40.1%

0.8 pp

Net Debt/EBITDA (6)(7)

2.22

2.33

-0.11

2.29

-0.07

  1. Operating profits + depreciation + provisions;
  2. Variation net debt + dividends + purchase of own shares
  3. Interest‐bearing liabilities ‐ liquid assets (not including effect of IFRS 16)
  4. ROCE = Annualised operating income / Average Capital employed (N+(N‐1))/2
  5. ROE = Annualised net income / Average Shareholders' Funds last ‐1 months
  6. (Interest‐bearing liabilities ‐ liquid assets) / EBITDA corresponding to last 12 months
  7. Impact of IFRS 16: Net Debt / EBITDA H1 2021 of 2.40; Net Debt / EBITDA as restated 30/06/2020: 2.47;
  8. Variation in figures not rounded up/down

2 | 12

ANALYSIS OF RESULTS

2nd Quarter 2021 vs. 1st Quarter 2021 vs. 2nd Quarter 2020

The 2nd quarter of 2021 brings up a clear improvement compared with the 1st quarter of the year, and by all means in relation to the 2nd quarter of 2020, period in which the Group's activities were particularly hard hit by the pandemic.

Turnover stood at € 374 million, up 10% on the 1st quarter of 2021 and 29% on 2020, thanks essentially to the recovery in paper volumes and higher pulp prices.

Paper volumes grew by 9% in relation to the 1st quarter of 2021 to 365 thousand tons, recovering 58% compared with the 2nd quarter of 2020. A4-Copy B paper price index (PIX) recovered by 1.3% from the 1st to the 2nd quarter, though it remains lower than in the second quarter of 2020. After the implementation of the two price increases in the European market, Navigator's average sales price recovered by around 3% between both quarters of 2021.

Pulp volumes sold evolved differently, due to the reduced availability of market pulp (down 6.5% vs. Q1 2021 and vs. 33% on Q2 2020), due to the maintenance shutdowns and higher integration level of UWF paper. Higher pulp prices recorded in 2021 enable the impact mitigation of lower sales volume, wherefore pulp sales in the 2nd quarter totalled € 42 million, up by 17.5% in relation to the 1st quarter of 2021, but still down by 2.7% on the 2nd quarter of 2020.

Sales volume in the tissue segment through the second quarter was lower than in previous quarters (down by 7% on Q1 2021 and down 4% on Q2 2020), given the slower than expected recovery in the Away-from-Home segment and the stock drop of domestic consumers. The positive evolution of tissue average sales price allowed to minimise the impact on total sales value, which was down by 5% in relation to Q1 2021 and down 2% compared with Q2 2020.

In this context, EBITDA for the quarter stood at € 80 million (up 13% vs. the 1st Quarter and up 55% vs. the 2nd Quarter of 2020) and EBITDA/Sales margin improved to 21.4%. Free Cash Flow of the quarter stood at € 65 million, positively comparing with the 1st quarter of 2021 but lower than the 2nd quarter of 2021, where a number of measures were adopted in working capital management as a response to the situation of great uncertainty. Net income totalled € 41 million, significantly better than in previous quarter (up 74%) and in the same quarter last year (up 205%).

1st Half 2021 vs. 1st Half 2020

In the first half of 2021, The Navigator Company recorded a turnover of € 715 million, with paper sales accounting for around 70% of turnover (vs. 67%), pulp sales 11% (vs. 11%), tissue sales 10% (vs. 10%) and energy sales 9% (vs. 10%). After a first quarter marked by new waves of Covid-19 infections and lockdown periods in most of the Group's key markets, the last three months have seen a gradual reopening of economies and a recovery in demand for paper. Following the strong recovery in the level of pulp prices, paper prices had an upward adjustment during the second quarter.

3 | 12

Paper market gradually recovers, with demand for UWF growing by 4%

Global demand for printing and writing papers rose by 1% YTD May, and UWF paper grew by 4%, clearly outperforming coated paper (0%) and mechanical papers (-5%). In Europe, demand for UWF paper during the first half grew even faster, up by 6%, with strong monthly figures in May (up 35%) and June (up 36%).

In the United States, preliminary figures for accumulated demand for UWF paper in the first six months of the year already broke into positive territory, with YTD growth of 0.3%, and very strong positive evolutions in May and June (18% and 17%, respectively). Such recovery is also visible in other global regions, particularly in China, where YTD growth in 2021 stood at 17%.

In this context, Navigator maintained a very robust order book over the first half, and ended June with orders of 55 days. This figure favourably compares with the 32 days of its competitors, and also compares well with the approximately 30 days in the same period last year. Navigator saw a reduction on its paper stocks over the first six months, and ended June with around 13 days' stocks, a historically low level, that compares with an average of 29 days of its competitors.

The A4 benchmark index for Europe stood at € 823 /ton at the end of June, a positive evolution compared with 806 €/ton at the start of the year, which points to a gradual recovery in prices. Such recovery was still not enough to bring the index above its 2020 level, reflected in a H1 2021 average that still compares unfavourable with the average for the same period- € 814 /ton vs. € 855 /ton. The Group implemented price increases across all regions over the first half and its average sales price has clearly improved since the start of the year, in particular between the first and the second quarters. It should be noted that the average sales price ended up being significantly penalised by the evolution of exchange rates on international markets, with product and market mixes reflecting the pandemic situation in Europe, and a larger share taken by overseas markets with a strong recovery in demand and prices.

In this context Navigator's sales reflect the improvement in demand for paper over the course of the year: sales in quantity grew by 17% to 700 thousand tons, although the value of sales was conditioned by price levels, resulting in a growth of approximately 9% YoY.

Expressive recovery on pulp prices during the 1st Half

There was a sharp and significant recovery in benchmark prices in the pulp market in the beginning of 2021, first in China and then in Europe. The benchmark index for hardwood pulp in Europe - PIX BHKP in euros - was up by 69% in June as compared to the start of the year, at € 938 /ton, with an increase of approximately 22% in average prices in the first half of 2021 vs. the first half of 2020. The benchmark index in China for hardwood pulp rose by 52% between the start of the year and end of June, to USD 759 /ton, peaking at USD 780 /ton in May. Despite a downward adjustment in pulp prices in China during the second half of the 2nd quarter, the European price grew until the beginning of July.

Despite the narrowing of the price differential between hardwood and softwood pulp, it is still wider than historical averages, especially in China, providing support for hardwood pulp prices in Europe in the months ahead.

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This is an excerpt of the original content. To continue reading it, access the original document here.

Disclaimer

The Navigator Company SA published this content on 27 July 2021 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 27 July 2021 17:59:04 UTC.


© Publicnow 2021
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Sales 2021 1 524 M 1 786 M 1 786 M
Net income 2021 142 M 166 M 166 M
Net Debt 2021 645 M 755 M 755 M
P/E ratio 2021 15,2x
Yield 2021 6,42%
Capitalization 2 159 M 2 528 M 2 531 M
EV / Sales 2021 1,84x
EV / Sales 2022 1,79x
Nbr of Employees 3 232
Free-Float 30,0%
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Average target price 3,75 €
Spread / Average Target 23,5%
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António José Pereira Redondo Chief Executive Officer & Executive Director
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