Arctic Paper S.A., the second-largest European producer of high-bulk book paper, by production volume, and one of Europe’s leading producers of high-quality graphic paper, after 3 quarters of 2010 earned revenues of PLN 1.6 billion, up 22.8% on the similar period in 2009. The Company recorded a net loss of nearly PLN 6.2 million after 3 quarters, which has been due to very high prices of pulp during the period and foreign exchange rates adversely affecting the Company when compared with the similar period in the previous year.

Revenue generated per tonne of the paper sold in 3Q 2010 expressed in PLN increased by 6.9% when compared with the figure generated in 2Q 2010 and was up 11% in comparison with 1Q 2010 and stood at PLN 3,200.

Demand for paper higher than in the last year made it possible to implement further price increases for paper manufactured by the Arctic Paper Group’s mills. In September the Group introduced price increases that would more noticeably affect performance in the next months.

In 3Q 2010 the use of production capacity calculated for all mills in the Group stood at over 94%. The average use of production capacity over the last seven quarters amounted to 96%.
 
FINANCIAL RESULTS – DETAILS

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

In 3Q 2010, the Group recorded growth in profit on sales by 22.6% compared to 2Q 2010, among others, owing to changes in revenue and reductions in costs.

The Group also recorded increase in its operation performance. EBITDA in 3Q 2010 amounted to PLN 25,405 thousand and was up by 23,962 thousand than in 2Q 2010. The Group also generated a much better positive operating result (EBIT) in the 3rd quarter compared to a loss generated in the 2nd quarter of 2010.

Revenue per tonne of paper sold in 3Q 2010 expressed in PLN increased by 6.9% in comparison with the result achieved in 2Q 2010 and was up 11% on the figure in the 1st quarter 2010 and stood at PLN 3,200. This result was achieved with nearly neutral influence of the EUR/PLN currency pair and negative influence of the EUR/SEK currency pair.

Sales revenue per tonne of paper (PLN ‘000)

A continuously very high price of the primary raw material used by the Group, i.e. pulp, was the major factor adversely affecting the generated margins and financial performance. That was a major burden having a negative impact on the Group’s results. The average price for NBSK in 3Q 2010 was 44.8% higher than in the same period of 2009, while BHKP was over 61.6% higher. YTD through the 3rd quarter, the average price of pulp was 48.8% higher for NBSK and 59.3% higher for BHKP.

A persisting high demand for pulp diminishes chances for a clear several percentage correction of prices for this raw material. However, according to forecasts, an upward trend of pulp prices has been stopped over the last weeks and first symptoms of decline by 50 USD/t for non-coniferous pulp and a few dollar drop in prices for coniferous pulp.

In the first nine months of 2010 the Polish zloty and the Swedish krona strongly appreciated against the EUR, which adversely affects the Group’s financial performance, primarily with regard to sales revenue generated by Arctic Paper that is expressed in PLN.

Growth in the total volume and sales revenue after the three quarters of 2010 compared with the previous year figure was mainly driven by sales generated by AP Grycksbo which has been included in the 2010 results starting from 1 March 2010.

“Results after the three quarters of this year have been under a huge pressure of unfavourable market factors, such as a persistently high price of our basic raw material, or pulp and a strong appreciation of PLN and SEK against EUR, which adversely affects the Group’s financial performance, primarily with regard to sales revenue generated by Arctic Paper that is expressed in the zlotys”, said Michał Jarczyński, CEO of Arctic Paper S.A.

“We continue our efforts aimed at improvement of results, among them, we have implemented price increases for our products and we keep pursuing our plans to improve profitability in all our mills. As a result of undertaken action, in the third quarter we achieved higher revenue per tonne of paper sold expressed in zlotys, despite a lower volume of like-for-like sales (excluding Grycsbo). Owing to price increases and cost reductions, we’ve improved also profits on sales against the previous quarter. It’s also worth noting that thanks to satisfactory demand, the use of production capacity in the 3rd quarter 2010 calculated for all mills of the Group stood at over 94%, which means that we are actually running at full capacity”, added Michał Jarczyński.

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


ARCTIC PAPER S.A. is the second-largest European producer of high-bulk book paper by production volume and one of the Europe’s leading producers of high-quality graphic paper. The Group produces many types of uncoated and coated wood-free paper and uncoated wood-containing paper for printers, paper distributors, book publishers, and the magazine publishing and advertising sectors. The Group’s portfolio line includes such 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 275,00 metric tonnes annually and produces chiefly uncoated wood-free paper for general printing uses, such printing of books, brochures, forms, and for making envelopes;
• The paper mill in Munkedal has a production capacity of about 160,000 metric tonnes per year and produces mainly high-quality uncoated wood-free paper used for printing books and high-quality advertising brochures;
• The paper mill in Mochenwangen has a production capacity of about 115,000 metric 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 metric tonnes and produces high-quality coated paper, used for printing maps, books, magazines, posters, and direct mail materials.

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

The Arctic Paper Group employs a total of over 1,600 people. The headquarters of the international Group are in Poznań. The majority shareholder of Arctic Paper S.A. is the Swedish joint-stock company Arctic Paper AB. After the public offering in October 2009 and the share issue at the beginning of 2010, 25% of the shares are held by stock market investors.

More information at www.arcticpaper.com