Arctic Paper S.A., the second-largest European producer of bulky book paper and one of Europe’s leading producers of high-quality graphic paper, generated revenues of over PLN 634.63 million in Q1 2011, 32.4% higher than in the same period of 2010. LFL revenue (excluding Grycksbo) stood at PLN 471,71 million and were 11.7% higher than in the 1st quarter of 2010. The company recorded a net loss in Q1 2011 of PLN 8.46 million, which was partly caused by higher amortization resulting from revaluation of assets acquired from Grycksbo.

In Q1 2011 the Group achieved an increase in sales volume by almost 20% v.s.Q1 2010, and by 5.7% v.s. Q4 2010. Like-for-like sales volume (i.e. excludingArctic Paper Grycksbo) grew by 1.3% v.s. Q1 2010 and 6.6% v.s. Q4 2010.

The production capacity utilization for all the Group’s mills together was 95% —practically the same as the average since the beginning of 2009.

In March 2011 the Group announced further increases in paper prices, the effects of which will be visible in the financial results in upcoming quarters.

FINANCIAL RESULTS – DETAILS

The financial results of the Arctic Paper Group are presented in the table below:

The Arctic Paper Group’s sales revenue in Q1 2011 was 32.4% higher than in Q1 2010. However, sales profit in Q1 2011 was similar to that generated in Q1 2010 and more than twice as high as in Q4 2010.

The negative net profit in the quarter were caused in part by the higher amortization due to revaluation of assets acquired from Grycksbo, as confirmed by the final settlement of the purchase price for the plant in the 4th quarter of 2010.

LFL sales in the 1st quarter of 2011 were PLN 472 million, 11.7% higher than Q1 2010 and 7.3% higher than Q4 2010.

Revenue per tonne of paper sold, expressed in PLN, was PLN 3,190 in 1Q 2011, which represents growth of 0.4% v.s. Q4 2010 and 10.4% v.s. 1Q1 2010.

This result was achieved under a slightly negative influence of the PLN/EUR currency pair (with the average exchange rate down 0.5% from Q4 2010 to Q1 2011) and with a decidedly negative effect of the SEK/EUR pair (average exchange rate down 4.2% from Q4 2010 to Q1 2011).

SALES VOLUME

In Q1 2011 the sales volume of Arctic Paper Group grew by about 20% from Q1 2010, and 5.7% from Q4 2010.

During the same period there was an increase in LFL sales volume (i.e., excluding AP Grycksbo), at +6.6% from Q4 2010 and +1.3% from Q1 2010.

TOTAL and LFL sales volume ('000 tonnes)

Michał Jarczyński, CEO of Arctic Paper S.A., commented: “In the 1st quarter of 2011 we generated good sales revenue, accompanied by growth in sales volume as well as revenue in Polish zloty per tonne of paper. I would like to stress that despite the reduced demand for graphic fine paper observed in Europe this year, Arctic Paper Group increased its sales by about 1.3% in like-for-like terms, that is, without including the Arctic Paper Grycksbo paper mill. This demonstrates the effectiveness of the measures we are taking. Additionally, the lack of a clear revival in demand on the European market increased pressure on paper prices, which is why we had to wait until March 2011 to increase prices on selected markets. The effects of the increases will show up in our financial results in upcoming months.”

For more information, please contact:
Iwona Mojsiuszko, M+G
tel. +48 22 625 71 40, + 48 501 183 386
e-mail: iwona.mojsiuszko@mplusg.com.pl

ARCTIC PAPER S.A. is the second-largest European producer of bulky-book paper in terms of production volume, and one of Europe’s leading producers of high-quality graphic paper. The Group produces uncoated and coated wood-free paper and uncoated wood-containing paper for printers, book publishers, magazine publishers, the advertising sector and paper distributors. The Group’s product line includes such well-known brands as Amber, Arctic, G-Print, Munken, Pamo and L-Print.

The Group has four paper mills, in Kostrzyn, Poland; Munkedal and Grycksbo, Sweden; and Mochenwangen, Germany. The total production capacity of the four paper mills in the Group is over 800,000 metric tonnes of paper per year.

 - The paper mill in Kostrzyn has a production capacity of about 275,000 tonnes annually and produces chiefly uncoated wood-free paper for general printing uses, such as printing of books, brochures, forms, and envelopes.

 - The paper mill in Munkedal has a production capacity of about 160,000 tonnes per year and produces mainly high-quality uncoated wood-free paper chiefly used for printing books and advertising brochures.

 - The paper mill in Mochenwangen has a production capacity of about 115,000 tonnes per year and produces chiefly uncoated wood-containing paper used primarily for printing books and flyers.

 - The paper mill in Grycksbo has a production capacity of about 265,000 tonnes per year and produces highquality coated paper, used for printing maps, books, magazines, posters and direct mail materials.

Distribution companies and sales offices handling distribution and marketing of the Group’s products are an important part of the Group. Currently the Group has 18 distribution companies and sales offices in Europe, providing it access to all European markets and allowing it to obtain 20% of the European market for bulky-book paper.

The Arctic Paper Group employs a total of about 1,600 people. The headquarters of the international Group are in Poznań, Poland. The largest shareholder of Arctic Paper S.A. is the Swedish company Arctic Paper AB. After the public offering in October 2009 and share issue at the beginning of 2010, 25.2% of the shares are held by minority shareholders.

More information at www.arcticpaper.com