Last close As at 05/08/2026
PLN6.24
▲ −0.12 (−1.89%)
Market capitalisation
PLN433m
Research: Industrials
FY23 was a year with numerous obstacles for the European paper and pulp industry, including lower demand due to an economic downturn and customer destocking. Nevertheless, Arctic Paper’s performance was resilient, with an EBITDA margin of 13%, substantially higher than the long-run historical average, although this is somewhat masked by a record comparator year. The strength of the balance sheet was maintained with net cash of PLN348m, which should bolster the company’s capex programme, focused on diversifying into the higher-margin renewable energy and packaging markets and moving up the value chain.
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Arctic Paper |
Resilient FY23 masked by record comparator
Paper and pulp |
Spotlight - Update
15 February 2024 |
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Arctic Paper is a research client of Edison Investment Research Limited |
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FY23 was a year with numerous obstacles for the European paper and pulp industry, including lower demand due to an economic downturn and customer destocking. Nevertheless, Arctic Paper’s performance was resilient, with an EBITDA margin of 13%, substantially higher than the long-run historical average, although this is somewhat masked by a record comparator year. The strength of the balance sheet was maintained with net cash of PLN348m, which should bolster the company’s capex programme, focused on diversifying into the higher-margin renewable energy and packaging markets and moving up the value chain.
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Consensus estimates
Source: Refinitiv. Note: FY23 report set to be published on 4 April. |
Sturdy performance despite cyclical weakness
Despite sequential declines in the demand and price of paper and pulp in Europe in FY23, effective cost control measures shielded margins. The EBITDA margin of 13.4% (paper: 15.3%) was substantially higher than the long-run historical average of 10%. European pulp prices now appear to be on an upward trajectory, with paper prices following with a slight lag; NBSK pulp list price reached $1,300 in January 2024 (cyclical low of $1,145 in Q323). FY23 revenue declined 27% to PLN3.5bn compared to PLN4.9bn in its record FY22 (paper saw a 31% fall as customers continued to reduce inventory) and EBITDA stood at PLN475.3m, 51% lower y-o-y. Despite these seemingly drastic y-o-y declines, EBITDA and net income have increased by 71% and 118% vs FY19, with a 450bp increase in EBITDA margin.
Focus on moving up the value chain
Arctic’s strategy has allowed for a period of cyclical weakness, bolstered by a strong balance sheet with record FY23 net cash of PLN348m. In 2023 it made the decision to invest SEK286m in upgrading the Grycksbo biofuel boiler and steam turbine, which will increase energy output and produce c 50kt of wood pellets annually (expected annual revenue of SEK100m). Also, the new moulded cellulose fibre packaging plant in Kostrzyn is expected to be active from Q324, with anticipated annual revenue of c PLN60m at full capacity. Arctic’s strategy is based on increased diversification and better vertical integration to mitigate the long-term decline in paper demand.
Valuation: Wide discount to peers
Based on its consensus FY23e P/E (6.2x) and EV/EBITDA (3.2x), Arctic trades at discounts of 44% and 52% to European paper and packaging peers. The disparity may reflect the current business structure (mainly lower value-add pulp and paper), whereas peers are operating historically higher-margin packaging businesses.
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Research: Investment Companies
Finsbury Growth & Income Trust (FGT) has been managed by Nick Train since the beginning of 2001 and in 2019 Madeline Wright was appointed as the trust’s deputy portfolio manager. Despite an impressive long-term record – during Train’s tenure to the end of 2023, FGT’s NAV generated a 9.0% annual total return versus the UK market’s 5.1% annual total return – there have now been three consecutive years of underperformance. The managers will continue to employ the long-term successful strategy of running a concentrated fund, investing in quality growth businesses, with high returns and low capital intensity, which can thrive throughout the economic cycle. Train and Wright believe that the market will reward FGT’s shareholders over time. Portfolio names change infrequently in keeping with the fund’s very low turnover, but in September 2023, property platform Rightmove entered the portfolio; this was the first new holding since 2020.