Earnings Release • May 10, 2018
Earnings Release
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(quarterly indicators unaudited)
| Q1 | Q1 | % Change (7) | |
|---|---|---|---|
| Million euros | 2018 | 2017 | Q1 18/Q1 17 |
| Total Sales | 384.9 | 392.7 | -2.0% |
| EBITDA (1) | 110.9 | 90.2 | 23.0% |
| EBITDA Without Pellets (2) | 101.5 | 94.3 | 7.6% |
| Operating Profits (EBIT) | 78.0 | 52.0 | 49.8% |
| Financial Results | - 5.5 | -3.9 | 40.1% |
| Net Earnings | 53.2 | 35.6 | 49.7% |
| Cash Flow | 86.2 | 73.7 | 17.0% |
| Free Cash Flow (3) | 134.0 | 24.2 | 109.8 |
| Capex | 28.6 | 14.3 | 14.3 |
| Net Debt (4) | 558.7 | 616.6 | -57.8 |
| EBITDA/Sales | 28.8% | 23.0% | 5.9 pp |
| EBITDA Without Pellets/Sales (5) | 26.4% | 24.2% | 2.2 pp |
| ROS | 13.8% | 9.1% | 4.8 pp |
| ROE | 17.7% | 11.4% | 6.3 pp |
| ROCE | 17.0% | 11.1% | 6.0 pp |
| Equity Ratio | 49.7% | 51.8% | -2.0 pp |
| Net Debt/EBITDA (6) | 1.3 | 1.6 | -0.2 |
(1) Operating profits + depreciation + provisions
(2) EBITDA without net impact of pellets business
(3) Net debt + dividends + purchase of own shares
(4) Interest-bearing net debt – liquid assets
(5) EBITDA margin excl. pellets/value of sales excl. pellets
(6) EBITDA corresponding to last 12 months
(7) Variation in figures not rounded up/down
Turnover in the first quarter of 2018 stood at € 385 million, down by 2%, as a result of a series of maintenance shutdowns at pulp and paper mills over the quarter, affecting the quantity of pulp available for sale on the market.
Navigator's pulp business was affected by the reduction in the volume of pulp available for sale due both to the planned maintenance shutdown at the Setúbal pulp mill (with no
stoppage in the same quarter in 2017), and to the built up of pulp stocks at the Figueira da Foz mill, in advance of the production stoppage planned for April, to complete the capacity expansion project. As a result, pulp sales stood at 53 thousand tons, as compared to 90 thousand tons in the first quarter of 2017, when the Group recorded its highest figure ever. The upward trend in pulp prices observed in the previous year continued, and the average PIX BHKP index in Euros was up 28% in the quarter in relation to the average benchmark price in the 1st quarter of 2017. The Group´s average selling price also improved 28%, allowing to partially mitigate the drop in sales volume, with total sales value reaching € 33 million (down 24%).
In paper business, market conditions evolved positively, and at the end of the quarter most producers had order books at the comfortable level of 34 days' output, well above the average level of orders for the past 10 years. Over the course of the quarter, Navigator took the lead in 2 price rises in Europe, announced in January and March (for implementation in April), as well as announcing other price increases in the United States and International markets. In this context, the average PIX A4 B-copy benchmark index in Euros for the quarter stood at 845 €/ton, up by 5.2% in relation to the same quarter in 2017.
The Group recorded positive evolution in its product mix, with the premium segment and mill brands representing a growing proportion of sales, but registering a change in the market mix, with less sales going to Europe and the United States. Navigator's average price improved by 3.1% in relation to the 1st quarter of 2017 but with very different developments depending on the markets. In Europe, the price recovered significantly, having also grown in International markets, although penalized by the evolution of the Euro/USD exchange rate. It should be noted that the average exchange rate for the quarter was 1.23 (vs. 1.06 in the 1st quarter of 2017), which caused a sharp erosion in sales prices in the United States, which evolved negatively YoY. The increase in the average sales price combined with a slight decline in the volume available for sale resulted in a modest increase in the value of paper sales, which totalled € 283 million.
The tissue market suffered a sharp increase in production costs in the 1st quarter, in particular in pulp prices which, despite the efforts of the main manufacturers, have not been reflected in higher prices for sales of tissue products to retailers. At Navigator, tissues grew in volume to approximately € 19 million, benefiting from an increase in the average sales price, due essentially to an improvement in the mix (with reels
representing a smaller proportion of sales) and to step-by-step implementation of a price increase which started in October, with the second rise taking place in January.
In energy business, electricity sales edged down by 1% in value to € 42 million, nonetheless reflecting smooth operation of our power generation assets. It is significant to note that the power sales recorded in the 1st quarter of 2017 occurred in the historical context of strong performance in the past five years, and were second only to the figures recorded in 2015. Navigator's total gross power output at the end of the first quarter of 2018 was also slightly lower, down by 1% YoYr, mainly due to production stoppages in pulp mills.
In this context, EBITDA totalled € 110.9 million, roughly 23% up on the previous year, including the gains recorded on disposal of the pellets business, completed in February 2018. The value of EBITDA excluding pellets business would be € 101.5 million and the recurrent EBITDA/Sales margin would have been 26.4%, 2.2 pp up on the same period last year.
On the costs side, attention should be drawn to rising prices for certain chemicals, in particular caustic soda, for which unit prices increased by more than 60% over the quarter. Also significant was the increase in personnel costs, due essentially to the growing workforce because of the new tissue project in Cacia, but also to severance pay and pension fund costs associated with the rejuvenation programme under way.
Navigator has pressed ahead with its M2 programme, improving operational efficiency through sustained reduction of production costs. This programme has had an estimated impact of € 3.8 million YoY on EBITDA, thanks in particular to successful savings initiatives in consumption of fibres (€ 1.3 million) and chemicals (€ 0.6 million). In addition to this reduction, the Group was also active in the renegotiation of its electricity and natural gas contracts, with savings estimated at market prices of around € 7.3 million.
Financial results showed a loss of € 5.5 million, as compared to a loss of € 3.9 million in 2017. This increase was caused essentially by the recording of a loss of € 3.3 million resulting from advance recognition of the difference between the nominal and present values of the differed amount related to the disposal of the pellets business (USD 45 million). The nominal interest receivable shall bear interest at the rate of 2.5%.
Pre-tax profits totalled € 72.4 million, as compared to € 48.1 million in 2017, and net income stood at € 53.2 million, up by 50% in relation to the first quarter of 2017.
At the end of March, the Group's net debt stood at € 558.7 million, representing a significant reduction in relation to year-end 2017 (€ 692.7 million) and reflecting the inflow from sale of the pellets business (€ 67.6 million) as well as strong cash flow generation over the period. It should be stressed that the Group is going through a period of heavy investment, with capital expenditure of € 29 million in the first half (as compared to € 14 million), relating to construction of the new tissue plant in Cacia, expansion of capacity in Figueira da Foz and other investment projects in regular pulp, paper and tissue operations.
With regard to working capital, the amount invested during the first quarter was significantly lower, with a crucial contribution from the very considerable improvement in balances receivable/payable to the State, thanks to the high amount of VAT refunds in the period. The Group recorded a balance receivable from the State of approximately € 51 million, which more than offset the increase of € 14 million in the value of inventories.
In this context, free cash flow generated in the period rose to € 134.0 million (vs. € 24.28 million in 2017). The Net debt/EBITDA ratio is 1.3, representing a significant improvement from the figure of 1.7 recorded at year-end 2017.
| (in 000 to ns) |
Q1 2017 | Q2 2017 | Q3 2017 | Q4 2017 | 1T 2018 |
|---|---|---|---|---|---|
| BEKP Output | 382.4 | 377.4 | 357.3 | 371.9 | 346.1 |
| BEKP Sales | 90.4 | 92.0 | 68.8 | 59.7 | 53.1 |
| UWF Output | 396.4 | 383.4 | 406.1 | 406.7 | 385.8 |
| UWF Sales | 371.3 | 400.6 | 386.4 | 419.9 | 361.2 |
| FOEX – BHKP Euros/ton | 645 | 719 | 747 | 805 | 824 |
| FOEX – BHKP USD/ton | 686 | 792 | 877 | 948 | 1013 |
| FOEX – A4- BCopy Euros/ton | 803 | 808 | 819 | 831 | 845 |
| (in 000 to ns) |
Q1 2017 | Q2 2017 | Q3 2017 | Q4 2017 | 1T 2018 |
|---|---|---|---|---|---|
| Reels Output | 14.7 | 13.6 | 13.0 | 14.8 | 14.1 |
| Output of finished products | 11.7 | 12.6 | 12.2 | 12.4 | 13.6 |
| Sales of reels and goods | 2.7 | 1.7 | 1.1 | 1.8 | 0.7 |
| Sales of finished products | 11.3 | 12.3 | 12.3 | 12.2 | 12.8 |
| Total sales of tissue | 14.0 | 14.0 | 13.3 | 14.0 | 13.5 |
Energy
| Q1 2017 | Q2 2017 | Q3 2017 | Q4 2017 | 1T 2018 | |
|---|---|---|---|---|---|
| Production (GWh) | 561.3 | 556.4 | 535.9 | 573.7 | 553.5 |
| Sales (GWh) | 449.4 | 446.8 | 426.0 | 462.8 | 444.7 |
The Group's capital expenditure in the first quarter of 2018 totalled approximately € 28.6 million. Two major development projects - construction of a new tissue mill in Cacia (able to produce 70 thousand reels and including converting capacity) and improvements to pulp production efficiency and environmental performance at the Figueira da Foz mill accounted for 53% of this figure.
As a result, in the first quarter of 2018, the project to expand capacity in Figueira da Foz represented investment of € 4.2 million and the new tissue mill in Cacia approximately € 11 million. Recurrent investment in pulp and paper business totalled € 11.4 million, as well as € 1.9 million in the current tissue operation in Vila Velha de Rodão and other projects.
The pulp sector again recorded surprisingly strong performance in the first quarter of 2018, as the upward pressure on prices continued. Demand in the market remains robust and has been able to absorb the resumption of the normal pace of operations at mills which unexpectedly shut down production in 2017, as well as the new capacities which came on line last year and continue to ramp-up production.
In UWF paper, order books remain strong and the Group again took the lead in 2 price increases during the quarter in Europe, as well as announcing increases in the US market and in international markets. New price increases have already been announced for May and June in the United States and in International markets, and Navigator has announced to its clients (already in May) a further price increase in Europe taking effect from 1 July.
There are currently no foreseeable signs to a significant change in conditions in the pulp and paper market, and the main factors of uncertainty continue to be exchange rates and the costs of certain chemicals. It is important to note that the Group's pulp business performance in the second quarter will be affected by the maintenance stoppage at the Figueira da Foz mill, which will also be used to finalise and start up the project for expanded pulp capacity.
The tissue market will remain under strong pressure from the high level of pulp prices, and it is absolutely critical that tissue producers should succeed in passing on part of this increase in their sales prices for the rest of the year.
Setúbal, 10 May 2018
Navigator sees confirmation of reduction in anti-dumping duty to 0% by US authorities for period August 2015 to February 2017
In the course of April, Navigator was informed by the US authorities that the provisional anti-dumping duty to be applied retroactively to paper sales to the United States for the period from August 2015 to February 2017 will be 0%. This decision confirms the position consistently defended by Navigator, i.e. that there were no grounds for applying measures of this type to its products sold in the United States.
It should be recalled that the rate initially applied between 20 August 2015 and 11 January 2016 was 29.53% and was revised to 7.8%. This rate was in force until February 2017. The Company deposited an amount equivalent to about € 30 million until that date and, once the decision to apply the 0% rate has been confirmed, will proceed with the request for reimbursement of the amount already deposited.
Date: 10 May 2018
Schedule: 17:15 PM (Western European Time – UTC)
PORTUGAL: +351 210609110
SPAIN: +34 911140101
UNITED KINGDOM: +44 (0) 2071943759
All numbers should be followed by the pincode: 23680404#
| 3 Months Ending | 3 Months Ending | |
|---|---|---|
| Amounts in Euros | 31-03-2018 | 31-03-2017 |
| Revenues | ||
| Sales | 383,558,961 | 391,254,865 |
| Services Rendered | 1,380,538 | 1,402,109 |
| Other Operating Income | ||
| Gains on the Sale of Non-current Assets | 17,199,398 | 1,427 |
| Other Operating Income | 2,471,951 | 4,250,654 |
| Change in the Fair Value of Biological Assets | 1,215,853 | (502,582) |
| Costs | ||
| Cost of Inventories Sold and Consumed | (172,993,517) | (181,731,681) |
| Variation in Production | 22,176,632 | 15,764,876 |
| Cost of Materials and Services Consumed | (96,196,092) | (97,862,055) |
| Payroll Costs | (40,839,377) | (37,084,975) |
| Other Costs and Losses | (7,051,157) | (5,323,909) |
| Provisions | 890,419 | (1,736) |
| Depreciation, Amortization and Impairment Losses | (33,861,430) | (38,143,318) |
| Operational Results | 77,952,180 | 52,023,674 |
| Net Financial Results | (5,516,289) | (3,936,664) |
| Profit Before Tax | 72,435,892 | 48,087,010 |
| Income Tax | (19,187,500) | (13,244,421) |
| Net Income | 53,248,392 | 34,842,589 |
| Non-Controlling Interests | (929) | 730,816 |
| Net Profit for the Period | 53,247,462 | 35,573,406 |
| Amounts in Euros | 31-03-2018 | 31-03-2017 | 31-12-2017 |
|---|---|---|---|
| ASSETS | |||
| Non-Current Assets | |||
| Goodwill | 377,339,466 | 377,339,466 | 377,339,466 |
| Other Intangible Assets | 7,988,725 | 8,698,436 | 3,878,245 |
| Fixed Tangible Assets | 1,166,837,122 | 1,271,646,151 | 1,171,125,052 |
| Investment in Property | 98,762 | 424,781 | 99,174 |
| Biological Assets | 130,612,789 | 125,110,366 | 129,396,936 |
| Other Financial Assets | 33,699,231 | 260,486 | 424,428 |
| Deferred Tax Assets | 44,874,221 | 43,937,615 | 44,727,571 |
| 1,761,450,316 | 1,827,417,301 | 1,726,990,872 | |
| Current Assets | |||
| Inventories | 202,356,559 | 229,920,601 | 187,795,595 |
| Receivable and Other Current Assets | 254,830,356 | 221,928,761 | 237,704,322 |
| State and Other Public Entities | 33,696,309 | 67,886,287 | 75,076,422 |
| Cash and Cash Equivalents | 206,227,572 | 90,508,419 | 125,331,036 |
| 697,110,796 | 610,244,068 | 625,907,375 | |
| Non-Current Assets Available for Sale | |||
| Non-Current Assets Available for Sale | - | - | 86,237,049 |
| - | - | 86,237,049 | |
| Total Assets | 2,458,561,112 | 2,437,661,369 | 2,439,135,296 |
| EQUITY AND LIABILITIES | |||
| Capital e Reservas | |||
| Share Capital | 500,000,000 | 717,500,000 | 500,000,000 |
| Treasury Shares | (1,002,084) | (1,002,084) | (1,002,084) |
| Fair Value Reserves | (2,138,684) | (6,094,490) | (3,020,990) |
| Legal Reserves | 109,790,475 | 99,709,036 | 109,790,475 |
| Other Reserves | 217,500,000 | - | 217,500,000 |
| Translation Reserves | (27,191,426) | 1,837,660 | (13,966,898) |
| Advancement on Profits | 371,874,638 | 424,892,070 | 167,388,264 |
| Net Profit for the Period | 53,247,462 | 35,573,406 | 207,770,604 |
| 1,222,080,381 | 1,272,415,598 | 1,184,459,371 | |
| Non-Controlling Interests | 208,959 | 1,145,816 | 420,277 |
| Total Equity | 1,222,289,341 | 1,273,561,414 | 1,184,879,648 |
| Liabilities | |||
| Non-Current Liabilities | |||
| Deferred Taxes Liabilities | 60,672,120 | 61,072,757 | 83,023,517 |
| Pensions and Other Post-Employment Benefits | 9,939,618 | 5,301,580 | 5,090,242 |
| Provisions | 39,750,844 | 28,385,919 | 19,536,645 |
| Interest-bearing Liabilities | 670,248,062 | 637,371,054 | 667,851,880 |
| Other Non-Current Liabilities | 23,998,979 | 31,401,026 | 25,466,139 |
| 804,609,624 | 763,532,336 | 800,968,424 | |
| Current Liabilities | |||
| Interest-Bearing Liabilities | 94,702,381 | 69,702,381 | 150,205,591 |
| Payables and Other Current Liabilities | 284,160,997 | 252,820,886 | 259,509,848 |
| State and Other Public Entities | 52,798,770 | 78,125,988 | 43,571,785 |
| 431,662,148 | 400,649,255 | 453,287,224 | |
| Total Liabilities | 1,236,271,772 | 1,164,181,591 | 1,254,255,647 |
| Total Equity and Liabilities | 2,458,561,113 | 2,437,743,005 | 2,439,135,296 |
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