Company achieves further goals of IPO and acquires Grycksbo paper mill

Arctic Paper S.A., the second-largest European producer of high-bulk book paper and one of Europe’s leading producers of high-quality graphic paper, achieved excellent financial results through four quarters of 2009. The Group earned sales revenues of nearly PLN 1.8 billion, up more than 42% from the previous year. Operating profit rose by more than 170% compared to the four quarters of 2008, to PLN 179.3 million. Net profit was nearly PLN 132.4 million, up more than 163% from 2008. The operating margin increased to 9.9%, from 5.2% in 2008, and the net margin increased to 7.3%, from nearly 4% in the four quarters of 2008.

FINANCIAL RESULTS – DETAILS
The detailed financial results of the Arctic Paper Group through four quarters of 2009 are presented in the table below:

Through four quarters of 2009, net sales revenue grew by over 42% to nearly PLN 1,809.1 million, from PLN 1,269.6 million in 2008.

One of the reasons for dynamic sales growth was consolidation of the results of the paper mill in Mochenwangen, Germany, acquired in December 2008, whose revenues were not reflected in the results for the first three quarters of 2008. Growth was also due to good sales results for specific paper mills and favourable changes in exchange rates, particularly EUR/PLN and EUR/SEK.

During the period profit on sales rose by over 80%, to PLN 468.5 million, from nearly PLN 253.1 million 2008. The margin on sales rose in 2009 to 25.9%, from 19.9% the year before.

Operating profit increased from PLN 66.2 million through four quarters of 2008 to PLN 179.3 million 2009. The profit margin on operations rose in 2009 to 9.9%, from 5.2% in 2008.

In 2009 the Company earned a high net profit, which rose by 163%, to PLN 132.4 million, from PLN 50.3 million in 2008. The net profit margin rose during the same period to 7.3%, from about 4%.

Sales volume grew significantly in 2009, at 573,000 metric tonnes, compared to 455,000 tonnes in 2008—an increase of 118,000 tonnes or 25.8%. LFL sales volume* increased in the four quarters to 463,000 tonnes, an increase of over 15,000 tonnes, or 3.4%, over 2008 sales.

* Analogous with respect to operating results. With respect to the Group’s financial results, after excluding the effect of acquisition of Arctic Paper Mochenwangen in December 2008.

ACHIEVEMENT OF ISSUE GOALS
Repayment of debt
On 23 October 2009, after successfully carrying out a public offering, the Company debuted on the Warsaw Stock Exchange. The Group raised gross proceeds of PLN 121.5 million, which in line with the issue goals was earmarked for payment of bridge financing provided by Bank Pekao S.A.

Achievement of acquisition – finalizing purchase of Grycksbo paper mill
On 1 March 2010 the Company realized the acquisition announced in the prospectus by acquiring the Grycksbo paper mill. 

The agreement for acquisition of Grycksbo Paper Holding AB was signed on 7 December 2009. Legal title to 100% of the shares in Grycksbo Paper passed to Arctic Paper S.A. on 1 March 2010.

Arctic Paper S.A. acquired 7,978,007 shares in Grycksbo, representing 26.6% of the total shares, while Arctic Paper Investment AB (a wholly-owned subsidiary of Arctic Paper S.A.) acquired 22,021,993 shares, representing 73.4% of the total shares.

The final purchase price for Grycksbo Paper Holding AB was PLN 264.7 million, comprising a cash payment and issuance of 3,000,000 shares of the Company, in the following proportions: 

Cash in the amount of PLN 212,4 million;
Issuance of 3,000,000 shares of Arctic Paper S.A. to the Sellers, at a value defined as the average price for the Company’s shares for the 20 trading days immediately prior to the closing, that is, PLN 17.43 per share, multiplied by 3,000,000.

The cash payment was financed from the proceeds of the private placement of bonds in February 2010 and from the Company’s own funds.

The acquisition strengthens the Group’s position on the European paper market, significantly increasing its market share. The entry of the Grycksbo paper mill into the Arctic Paper Group will also mean an expansion of the portfolio of products offered by the Group and an increase in production capacity by nearly half, to 800,000 metric tonnes per year from the existing 540,000 tonnes. Arctic Paper also anticipates significant growth in consolidated revenues earned by the Group as a result of the acquisition.

“We are pleased with the excellent results of the Arctic Paper Group,” said Michał Jarczyński, CEO of Arctic Paper S.A. “We are also happy that we have already been able to fulfil our promises made to the investors during the public offering. We have paid down a third of the debt and acquired the Grycksbo paper mill, which fits in perfectly with our structure both in terms of the product range and the sales network. Thanks to the acquisition our production capacity will also grow by nearly half, to reach 800,000 metric tonnes per year. The effects of this acquisition will be visible in the consolidated results from 1 March 2010.” – said Michał Jarczyński, CEO of Arctic Paper S.A.

“In the 4th quarter we observed an upswing in the paper market, which translated into an increased level of orders, and our plants have been operating at full capacity,” Jarczyński added. “We will devote the upcoming months to integrating the Grycksbo paper mill into the Arctic Paper structure and exploiting the opportunities offered by the increased demand visible on the paper market.” – added Michał Jarczyński.

More information: Hans Karlander, Sales and Marketing Director, Arctic Paper S.A., +46 31 63 17 08.

About Arctic Paper S.A.:
Arctic Paper S.A. is one of the leading European manufacturers of bulky book paper and graphic fine paper. The group produces high quality coated, uncoated wood-free and uncoated wood-containing papers. The main customer groups are primarily the printing and advertising industries and end users in the book and magazine publishing industry.
The Group’s product portfolio consists of the brands Amber, Arctic, G-Print, Munken, Pamo and L-Print. Production is carried out at four different European paper mills: in Poland at Arctic Paper Kostrzyn; in Sweden at Arctic Paper Munkedals and Arctic Paper Grycksbo, and in Germany at Arctic Paper Mochenwangen. The total production capacity of the Group’s four paper mills is 810,000 metric tonnes of paper per year.
Arctic Paper S.A. is listed on the Warsaw Stock Exchange since October 2009. The majority shareholder of Arctic Paper S.A. is the Swedish company Arctic Paper AB, and 20.7% of the shares are held by other stock market investors. The company currently employs 1,650 people across Europe and has sales offices in 15 European countries.