Last close As at 05/08/2026
PLN6.24
▲ −0.12 (−1.89%)
Market capitalisation
PLN433m
Research: Industrials
Arctic Paper has continued to face the challenging market trends that affected Q422, with lower demand, higher input costs and higher prices across most of its segments in Q123. Management continued to proactively respond to the conditions and EBITDA was only 10% down on Q122 while sequentially much improved from Q422, up 32%. With customers naturally hesitant to lock in a higher pricing environment given the macroeconomic shocks and geopolitical uncertainty, demand now appears unlikely to bounce back sharply. Management is set to continue to focus on profitability and cash flows, providing operating leverage for when conditions do improve.
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Arctic Paper |
Resilient Q123 in a challenging market
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Pulp and paper production |
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10 May 2023 |
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Arctic Paper is a research client of Edison Investment Research Limited |
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Arctic Paper has continued to face the challenging market trends that affected Q422, with lower demand, higher input costs and higher prices across most of its segments in Q123. Management continued to proactively respond to the conditions and EBITDA was only 10% down on Q122 while sequentially much improved from Q422, up 32%. With customers naturally hesitant to lock in a higher pricing environment given the macroeconomic shocks and geopolitical uncertainty, demand now appears unlikely to bounce back sharply. Management is set to continue to focus on profitability and cash flows, providing operating leverage for when conditions do improve.
Q123 results focus on profitability
In Q123 lower demand led to a 7% fall in group revenues to PLN1.03bn (Q122: PLN1.11bn), 4% down on Q422. Paper volumes of 113k ton were 32% down on Q122, when markets were strong, and were only down 3% on Q422. Pulp volumes actually improved to 87k ton, up 10% on Q422 but 13% lower than Q122. Pulp and paper prices showed signs of stabilising in Q123 with low single-digit declines during the period. Invoiced paper prices remained over 20% higher than Q122. Arctic buys-in pulp as well as selling its own pulp output. Management focus on cost control led to a significant sequential improvement in profits with EBITDA (PLN185.5m), EBIT (PLN155.6m) and net income up 33%, 42% and 76%, respectively, from Q422 and broadly c 10% below the strong Q122 result. EBITDA margin remained healthy at 18.0% (Q122: 18.5%). The group held net cash of PLN290m at Q123 (FY22: PLN307m).
Continuous transition to reflect market trends
Falling long-term demand in fine-grade paper is expected to continue and Arctic management continues to exploit its capabilities to mitigate the trend and transition to niche areas with greater stability. It has a leading position in book paper markets that remains relatively stable, although subject to the same macroeconomic trends that have moderated customer demand recently. In addition, it is seeking to develop products and segments, such as in non-graphic (packaging, technical) paper markets where it is investing to grow to c 20% of revenues over the next few years.
More cautious for FY23
Management’s outlook for FY23 is less favourable than had been anticipated at the start of the year. However, the resilient profitability and strong finances support the investment strategy, and the P/E rating is undemanding, with a healthy yield.
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Consensus estimates
Source: Company reports, Refinitiv |
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Research: TMT
We consider IP Group a compelling healthcare play with 31% of its end-2022 portfolio invested in life sciences companies, or 47% including Oxford Nanopore Technologies (ONT). These investments provide exposure to drugs developed for a variety of indications, including different types of cancer, autoimmune diseases (eg rheumatoid arthritis), as well as respiratory and kidney diseases. Investors may benefit from the platform established by management over the past decade and nurtured over many years, with nine life sciences companies expected to deliver major data over the next 24 months or so. Exposure to IP Group’s innovative portfolio is now available at a wide discount to NAV of c 60%.