Semapa : INTERIM REPORT - 9M 2023

PART 1

MANAGEMENT REPORT

IM REPORT | 9M 2023

1

IM REPORT | 9M 2023

1 HIGHLIGHTS

SEMAPA GROUP INVESTS 487 M€ IN THE FIRST 9 MONTHS

295 M€ USED IN NEW ACQUISITIONS

EBITDA IN THE PERIOD AMOUNTED TO 507 M€ AND NET PROFIT TO 167 M€

• In the first nine months of 2023, the Semapa Group continued its diversification strategy. On 31 March Navigator concluded its acquisition of Gomà-Camps Consumer in Spain, seeking to reinforce its footprint in the At Home segment. The integration of this new plant positions Navigator as the second largest Iberian producer of Tissue. At the end of the 2nd quarter, Semapa purchased 100% of the shares of Triangle's Cycling Equipment in Portugal. As a result of its strong commitment to R&D, Triangle's is currently a world reference in the production of e-bike frames, with a customer portfolio composed of several of the industry's prestigious brands.
• Investments in fixed assets made in the first nine months of 2023 totalled 192.2 million euros, much higher than in the same period in the previous year (121.1 million euros). Navigator stood out with 142 million euros (vs. 65 million year-on-year), 61% of which are ESG sustainable investments. Secil made investments amounting to 41 million euros, 13 million euros in the CCL - Clean Cement Line project at the Outão cement plant, maintaining the Group's commitment to the progressive decarbonisation of its business units.
• At the end of the first nine months of 2023, consolidated interest-bearingnet debt stood at 1 080.0 million euros,
• 1. million euros more than that at the end of 2022 despite the payment of dividends of 136 million euros and the investment amount of 487.3 million euros, which demonstrates the Group's ability to generate cash flow. As at 30 September 2023, the Group enjoys a comfortable liquidity position backed up by cash (248.1 million euros) and a set of committed and undrawn credit lines.
• In the first nine months of 2023, the Semapa Group recorded consolidated revenue of 2 021.9 million euros (vs. 2 312.3 million euros in the same period in 2022): 1 460.6 million euros were generated in Pulp and Paper / Navigator (-19.9% year on year), 518.8 million euros in Cement / Secil (+15.7%) and 42.9 million euros in Other Business (+3.9%). Exports and sales abroad for the same period amounted to 1 484.5 million euros, accounting for 73.4% of revenue.
• 
  After the extraordinary year of 2022, the normalisation of market conditions strongly conditioned the pulp and paper sector in the first nine months of 2023. In the first half of 2023, stocks of printing and packaging paper across the distribution chain were reduced at a slower pace than expected, with a slight improvement in the third quarter. Q3 had a 6% increase in volumes of UWF sold compared to the previous quarter. Despite the downward trend over the first 9 months of 2023, the benchmark index for UWF prices has been resilient and average price in that period remains 6% above that in the same period last year. The Tissue paper segment continued to perform well in the first 9 months of 2023. Cement revenue reflects mostly the favourable progress in Portugal, Tunisia and Lebanon.
• EBITDA in the first nine months of 2023 amounted to 507.3 million euros (vs. 673.2 million euros year on year): 376.5 million euros were generated in Pulp and Paper (-31.8% year on year), 117.5 million euros in Cement (+10.7%) and
• 1. million euros in Other Business (-11.0%). The consolidated EBITDA margin of 25.1% was -4.0 p.p. below that in the same period in 2022.

The reduction in EBITDA was mainly due to the performance of the Pulp and Paper segment. In the first nine months variable costs decreased, which, in conjunction with the efforts to maintain prices and enrich the product mix, partially compensated for the reduced paper sales volumes. EBITDA in the Cement segment evolved positively due to improvements in Portugal, Tunisia and Lebanon.

• Net profit attributable to Semapa shareholders at the end of the first nine months of 2023 stood at 167.2 million euros (vs. 231.4 million in 2022).

2

LEADING BUSINESS INDICATORS

IFRS - accrued amounts (million euros)

Revenue

EBITDA

EBITDA margin (%)

Depreciation, amortisation and impairment losses

Provisions

EBIT

EBIT margin (%)

Income from associates and joint ventures Net financial results

9M 2023		9M 2022		Var.
	2 312.3	-12.6%
2 021.9

507.3 673.2 -24.6%

25.1%

29.1%

-4.0 p.p.

(155.9)	(169.4)	8.0%
	0.3	<-1000%
(5.5)

346.0 504.1 -31.4%

17.1%

21.8%

-4.7 p.p.

1.84.0 -54.8%

(50.1)	(88.9)	43.7%

	Q3 2023	Q3 2022	Var.

677.7 846.6 -20.0%

176.0 248.1 -29.1%

26.0%	29.3%	-3.3 p.p.
	(59.0)	9.9%
(53.2)
	(1.1)	-56.4%
(1.8)

121.1 188.0 -35.6%

17.9%	22.2%	-4.3 p.p.

0.62.4 -74.0%

(16.8)	(24.9)	32.5%

Profit before taxes	297.7	419.2	-29.0%	104.9	165.4	-36.6%
Income taxes		(108.4)	33.6%		(43.8)	40.9%
(72.0)	(25.9)
Net profit for the period		310.8	-27.4%		121.6	-35.0%
225.6	79.0
Attributable to Semapa shareholders	167.2	231.4	-27.7%	59.6	89.9	-33.8%
Attributable to non-controlling interests (NCI)	58.4	79.4	-26.4%	19.4	31.6	-38.7%
Cash flow		479.9	-19.4%		181.7	-26.3%
387.0	133.9
Free Cash Flow		296.7	-144.0%		138.7	-76.9%
(130.5)	32.0
		30/09/2023		31/12/2022	Sept23
			vs. Dec22
Equity (before NCI)		1 408.5		1 323.4	6.4%
Interest-bearing net debt		1 080.0		794.2	36.0%
Lease liabilities (IFRS 16)		102.9		101.2	1.7%
Total		1 182.9		895.4	32.1%

IM REPORT | 9M 2023

3

2 PERFORMANCE OF THE SEMAPA GROUP BUSINESS UNITS

2.1. BREAKDOWN BY BUSINESS SEGMENTS

	IFRS - accrued amounts		Pulp and Paper		Cement		Other business		Holdings				Consoli
	(million euros)								dated
			9M 2023	23/22		9M 2023	23/22		9M 2023	23/22		9M 2023		23/22			9M 2023
	Revenue	1 460.6	-19.9%	518.8	15.7%	42.9	3.9%	(0.4)		-282.5%			2 021.9
	EBITDA	376.5	-31.8%	117.5	10.7%	13.4	-11.0%	(0.1)		-227.0%			507.3
	EBITDA margin (%)	25.8%	-4.5 p.p.	22.6%	-1.0 p.p.	31.3%	-5.2 p.p.	-		-			25.1%
	Depreciation, amortisation and
	(109.1)	14.7%	(42.9)	-10.5%	(3.7)	-51.1%	(0.2)		-7.9%			(155.9)
	impairment losses
	Provisions	(1.3)	-151.4%	(4.2)	-90.7%	-	-		-		-100.0%		(5.5)

EBIT

EBIT margin (%)

Income from associates and joint ventures

Net financial results

266.2	-37.6%	70.4	8.2%	9.7	-23.2%	(0.3)	-312.5%	346.0
18.2%	-5.2 p.p.	13.6%	-0.9 p.p.	22.6%	-8.0 p.p.	-	-	17.1%
-	-	0.1	114.3%	-	-	1.7	-63.1%
1.8
(15.7)	73.9%	(28.6)	-13.5%	(0.1)	-16.3%	(5.6)	-62.4%
(50.1)

Profit before taxes	250.5	-31.6%	41.9	6.8%	9.6	-23.5%	(4.2)	-482.6%		297.7
Income taxes	(58.0)	44.4%	(4.7)	68.9%	(0.6)	77.6%	(8.7)	-163.0%
(72.0)
Net profit for the period	192.5	-26.6%	37.1	54.9%	8.9	-8.0%	(12.9)	-186.8%
225.6
Attributable to Semapa
134.7	-26.6%	36.5	56.1%	9.0	-6.9%	(12.9)	-186.8%		167.2
shareholders
Attributable to non-	57.8	-26.5%	0.6	7.9%	(0.0)	-124.8%	-	-
	58.4
controlling interests (NCI)
Cash flow	302.9	-21.9%	84.2	29.6%	12.7	3.9%	(12.8)	-184.5%
387.0
Free Cash Flow	32.5	-89.9%	58.5	512.1%	1.3	-74.6%	(222.8)	<-1000%		(130.5)

Interest-bearing net debt	549.7	294.2	2.0	234.0	1 080.0
Lease liabilities (IFRS 16)	66.3	35.0	1.2	0.5	102.9
Total	616.0	329.2	3.1	234.5	1 182.9
Note 1: Figures for business segment indicators may differ from those presented individually by each Group, as a result of consolidation adjustments.

Note 2: On 19 June 2023, Semapa, through its subsidiary Aphelion, acquired 100% of Triangle's shares. Semapa has initiated the necessary procedures for the recognition and measurement in the Consolidated Financial Statements of Goodwill and the purchased assets and liabilities. As at 30 September 2023, the Other Business includes Triangle's and ETSA's business.

IM REPORT | 9M 2023

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2.2. OVERVIEW OF NAVIGATOR ACTIVITY

totalconsolidated

of% Revenue 9M 2023

72%

% of consolidated total

EBITDA 9M

2023

74%

HIGHLIGHTS IN 2023 (VS. 2022)

• Revenue amounted to 1 460.6 million euros (-19.9% vs. 9M 2022). There was an improvement in the 3rd quarter compared to the 2nd quarter of 2023 (+0.6%).

REVENUE

1 822.5

1 460.6

Million Euros

9M 2022	-19.9%	9M 2023

REVENUE BREAKDOWN BY SEGMENT

Million Euros

Δ% 23/22

9M

2022

130.4

1 460.6

216.1

198.9

915.1

-31.2%	+30.3%	+51.1%	-33.4%	-19.9%
UWF Paper	BEKP Pulp	Tissue	Energy	9M 2023
1 330.9	152.6	143.0	196.0	1 822.5

IM REPORT | 9M 2023

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IM REPORT | 9M 2023

																EBITDA
																EBITDA Mg
	∙ EBITDA amounted to 377 million euros (-31.8% vs. 9M			551.9
	2022). The increase in EBITDA in Q3 vs. Q2 2023
	(+1.0%) is worthy of note, reflected in an EBITDA												376.5
	margin of 25.7% (+0.1 p.p. vs. previous quarter).
	∙ Performance in 2023 featured lower sales volumes,
	partially offset by the effort to maintain prices and	Euros		30.3%							25.8%
	favourable developments in variable costs.
	Million
											9M 2022	-31.8%			9M 2023
LEADING BUSINESS INDICATORS
	IFRS - accrued amounts				9M 2023			9M 2022		Var.					Q3 2023			Q3 2022		Var.
	(million euros)
	Revenue			1 460.6			1 822.5	-19.9%					481.1			680.4	-29.3%
	EBITDA			376.5			551.9	-31.8%					123.5			207.4	-40.4%
	EBITDA margin (%)			25.8%			30.3%	-4.5 p.p.				25.7%			30.5%		-4.8 p.p.
	Depreciation, amortisation and impairment			(109.1)			(128.0)	14.7%					(37.4)			(45.5)	17.9%
	losses
	Provisions			(1.3)			2.5	-151.4%					-			(0.6)	100.0%
	EBIT			266.2			426.5	-37.6%					86.1			161.2	-46.6%
	EBIT margin (%)			18.2%			23.4%	-5.2 p.p.				17.9%			23.7%		-5.8 p.p.
	Net financial results			(15.7)			(60.1)	73.9%					(7.2)			(15.1)	52.2%
	Profit before taxes			250.5			366.4	-31.6%					78.9			146.1	-46.0%
	Income taxes			(58.0)			(104.2)	44.4%					(18.4)			(40.3)	54.4%
	Net profit for the period			192.5			262.2	-26.6%					60.6			105.8	-42.8%
	Attributable to Navigator shareholders			192.5			262.2	-26.6%					60.5			105.8	-42.8%
	Attributable to non-controlling interests (NCI)			0.0			(0.0)	409.2%					0.0			(0.0)	319.1%
	Cash flow			302.9			387.6	-21.9%					97.9			152.0	-35.6%
	Free Cash Flow			32.5			322.3	-89.9%					22.8			148.2	-84.6%
					30/09/2023			31/12/2022
	Equity (before NCI)			994.3			1 018.0
	Interest-bearing net debt			549.7			382.2
	Lease liabilities (IFRS 16)			66.3			61.6
	Total			616.0			443.9

Note: Figures for business segment indicators may differ from those presented individually by each Group, as a result of consolidation adjustments.

LEADING OPERATING INDICATORS

in 1 000 t	9M 2023	9M 2022	Var.	Q3 2023	Q3 2022	Var.
BEKP Pulp
FOEX - BHKP Usd/t	1 075	1 261	-14.7%	826	1 373	-39.9%
FOEX - BHKP Eur/t	994	1 192	-16.6%	758	1 365	-44.4%
BEKP Sales (pulp)	370	203	82.6%	154	53	190.7%
UWF Paper
FOEX - A4- BCopy Eur/t	1 243	1 172	6.1%	1 152	1 281	-10.1%
UWF Sales (paper)	810	1 133	-28.5%	277	399	-30.6%
Tissue
Total sales of tissue	102	77	31.8%	41	27	53.9%

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IM REPORT | 9M 2023

This year's figures are compared with 2022, an altogether exceptional year, where prices reached historical levels, due to an unprecedented imbalance between supply and demand in all products, created by logistical constraints and cost inflation which we have succeeded in controlling in 2023, keeping our cash costs at the level recorded at the start of 2022.

The reduction in cash costs across segments over the year continues and was even more significant in the current quarter. On the other hand, resilient international printing and tissue paper prices, combined with the commercial strategy and product and market diversification, made it possible to achieve good results in a context of a very strong contraction in international demand in most of the segments in which Navigator operates.

In the first nine months of 2023, Navigator revenue totalled 1 460.6 million euros, paper sales accounting for around 61% of the total (vs. 69% year on year), pulp sales 13% (vs. 8%), tissue sales 15% (vs. 8%), and energy sales 9% (vs. 11%).

Paper

The industry's capacity utilisation (production/capacity) underwent a sharp adjustment in 2023, alongside moderation of Navigator's production rates. The average utilisation rate in the first 9 months was 75%, which compares with the industry average of 66%.

Market conditions in Q3 2023 improved slightly compared to the 1st half. Although initially slow, destocking across the distribution chain seems to have gained momentum at the end of the third quarter, as most operators continued to adjust stock levels to their demand. This situation led to a slight increase in the level of incoming orders placed with European producers, particularly in September, significantly reducing the seasonality factor that the industry usually faces. There was thus a slight increase in capacity utilisation in the third quarter, which at Navigator stood at 76% (compared to the industry average of 66%).

In a global context of sharply falling apparent demand (down 11%), UWF paper remains the most resilient, as usual due to the versatility of its uses, with a reduction of almost 6%, as compared to CWF papers, for which demand dropped by 18%. Demand for paper produced from mechanical pulp contracted by 21%.

In Europe, apparent demand for UWF paper fell by 21% YoY (September), and this also remained the most resilient grade. In the United States, demand declined by 13% YTD August. Apparent UWF consumption in other world regions decreased by 2%, with China growing 1% in UWF consumption compared with 2022.

The office paper benchmark in Europe at the end of September stood at 1 127 Eur/t (vs. 1 204 Eur/t at the end of June). Despite the downward trend over the first 9 months of 2023, the benchmark index for UWF prices has been resilient, with the average price in the first 9 months of 2023 persistently 6% above that in the same period last year. Significantly, the reduction in the index since the start of the year has been 16%, while the pulp index has dropped by more than 40%.

Navigator's UWF sales totalled 809 thousand tonnes in the first 9 months of the year, down 29% on the same period last year. However, in the 3rd quarter, there was a 6% increase compared to sales in the previous quarter, which reflects the current context in which stock levels across the distribution chain that were abnormally high in the 1st half are beginning to normalise. In turn, revenue in the first nine months was 31% down on the same period last year. It should be noted that mill brands accounted for 80% of sales since the start of the year (vs. an average of 65% in the period 2012-2021). The share of premium products also remains high at 58% (vs. the historical average of 53% recorded in the period 2012-2021).

Packaging paper

The Packaging Paper segment experienced a sharp slowdown in demand in 2023 compared to previous years, when there were extraordinarily high levels of demand that resulted in an abnormal increase in stocks at converters and end customers. The normalisation of such conditions in an environment of macroeconomic slowdown and high inflation has been slow, which largely justifies the cooling down of demand. Furthermore, the new forms of undifferentiated taxation of packaging products, ignoring the sustainability of the products and treating paper products of natural, renewable, biodegradable and compostable origin in the same way as other packaging products made from products of fossil and/or finite origin have impacted the consumption of packaging and bags in retail. Notwithstanding, in recent months recovery has been promising, with the packaging segment hinting at very positive future development for Navigator.

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IM REPORT | 9M 2023

The recognition of the quality of our products from eucalyptus globulus fibre, and consequently that of the gKraftTM brand, serving high exposure brands in fashion, retail food, e-commerce, industry and agriculture, among other sectors, has resulted in an ever-larger and more diversified customer base of more than 250 active customers in 33 countries since the brand took off in 2021.

Navigator therefore remains committed to packaging papers, essentially in the paper bags (retail), flexible packaging and Food & Beverage packaging markets, where its innovative introduction of the quality offered by eucalyptus fibre has proved enormously popular.

Among the various supply expansion projects underway, Navigator has been developing new product ranges since the beginning of 2023, aimed at all sorts of industrial uses and a wide range of consumption goods, which are currently being tested and marketed, and will soon open its doors to other high value-added segments.

The project for the integrated production of eucalyptus-based moulded cellulose components, intended to replace single-use plastic packaging in the food service and food packaging market, is well on track: 75% of the project has been completed and production is set to start in the 1st half of 2024.

Pulp

The benchmark index for short fibre (hardwood) pulp in Europe PIX BHKP in dollars rose to record levels in 2022 (1 380 USD/t), and started to adjust downwards in the 1st quarter of 2023, falling more sharply in the 2nd and 3rd quarter to 820 USD/t at the end of September, representing a drop of 13% from the end of June 2023. Average prices in the quarter were 40% lower than those in the same period in 2022. The benchmark index in China for hardwood pulp rose 9% in relation to the end of June, standing at 553 USD/t at the end of September. It should be noted that prices in China fell to their lowest level in May (475 USD/t), down by 45% from the level of 866 USD/t recorded in September 2022, and in Europe, in August (800 USD/t), they dropped by 42% from the peak of 1 380 USD/t recorded in January 2023.

This variation was due to: (i) lower global demand, in particular in Europe; (ii) growing stock levels across the supply chain during the close of 2022 and the start of 2023; (iii) lifting of logistical constraints encountered in 2022; (iv) and the increase in the supply, due to the entrance in operation of new capacity namely in Latin America: one of the projects started in December last (1.3 Mt net) and another in the 2nd quarter of 2023 (2.2 Mt).

In the 3rd quarter of 2023, world demand for eucalyptus pulp (euca) is showing a better performance compared to the first half of the year (where growth was practically null), having resumed growth this quarter. China is the main driver of this recovery, as stocks were replenished after prices hit a low in May, showing a 20% increase in euca demand compared to the same period in August. The excellent performance of the Chinese market more than made up for weak demand in Europe, which was 19% down on the same period last year, both in total demand for short fibre and in demand for eucalyptus pulp.

This very positive turn in the pulp market was driven by the restocking effect in China after prices in May dropped to an all time low (as mentioned) and also by an apparent significant increase in the production of printing and packaging paper and tissue in China (August was the second best month in the last 3 years in terms of virgin fibre paper and tissue production), surprising analysts and market agents. As a result prices for November in China rose to 630 USD/t (+33% vs. May) and in Europe to 980 USD/t (PIX 24/Oct at 847 USD).

Over the course of the year, Navigator has had a larger quantity of pulp available for sale, as a result of less being incorporated into paper. Accumulated sales in 2023 thus stood at 370 thousand tonnes, up 83% YoY, with revenue (in Euro) being conditioned by the current price level, hinting at growth of around 30% YoY.

Tissue

The tissue paper segment continues to perform well; sales of finished products sustained growth in the first 9 months of 2023. Such growth was achieved in a context of stable market demand in Iberia (Spain grew by 0.2 % in the first 7 months of 2023), while Western Europe contracted by 2.4 %.

Tissue sales volume amounted to 102 thousand tonnes in the first nine months, 32% more than in the same period last year. Positive price trends brought revenue up by around 51%. The increase benefited from the integration of the new

8

IM REPORT | 9M 2023

plant at the beginning of the second quarter, now called Navigator Tissue Ejea. In addition to boosting sales growth, this acquisition also contributes to the diversification of the customer base and to significant gains in integration synergies.

Sales through the At Home channel grew the most, driven by new customers and the reinforcement of the position in the pre-existing customer base, and the increase in sales volumes to France and Spain.

The focus on product innovation and differentiation continues to help Navigator to strengthen its presence with customers, especially through the use of the manufacturer's brand, which in the first 9 months accounted for 24% of total sales of finished products, the result of a 26% increase in sales volume year on year.

Energy

In the first nine months, revenue from electrical energy totalled approximately 130 million euros, which represents a year-on-year decrease of approximately 33%.

The reduction is essentially due to the fact that in the first half of the year, the average price for the Portuguese area of OMIE, which serves as a benchmark for sales in this period, was 90.4 Eur/MWh, as opposed to 205.8 Eur/MWh in 2022. For the period under review, Navigator's total sales volume remained in line with the previous year.

It should be emphasised that Navigator's renewable cogeneration plants switched to the special remuneration regime last June, as opposed to sales at market price.

The take off in the construction of the new self-consumption photovoltaic plants at the Figueira da Foz, Aveiro and Vila Velha de Rodão industrial sites is worthy of note, since it will triple the installed capacity at Navigator's sites from the current 12 MW to around 38 MW.

EBITDA

Variable costs were brought down in the first nine months, with a reduction in unit cash costs in all segments. The resilience of paper prices, especially in segments with higher value added, has offered additional protection to profits, in a context where volumes of paper sales have dwindled. These factors, combined with a sales strategy of product and market diversification, made it possible to achieve EBITDA of 377 million euros. EBITDA margin stood at 25.8% (-4.5 p.p. in relation to the same period in 2022).

The positive trend in unit cash costs had already been seen throughout the first half of the year, and became more significant in the third quarter. Comparing cash costs with those recorded in the first half of the year, we see a reduction of 12% to 15% in the pulp and paper segment and a reduction of more than 9% in tissue paper.

Comparing the 3rd quarter with the same quarter in 2022, costs in all segments drop, with a reduction between 16% and 18% in the pulp and paper segments and close to 12% in the tissue segment.

Total fixed costs year on year were a positive 1%, due to the reduction in personnel costs and the evolution of operating and maintenance costs, which increased below inflation.

Navigator remains focused not only on managing variable costs, but also on maximising efficiency in the consumption of raw and subsidiary materials by reducing specific consumption, particularly in pulp, paper and tissue production, while also maintaining its efforts to contain fixed costs.

The financial results amounted to -15.7 million euros (vs. -60.1 million euros over the same period in the previous year). It should be noted that in the same period in the previous year, financial results were hit by one-off impacts (non-cash) of approximately -40 million euros, resulting essentially from the recognition of accumulated unfavourable exchange differences in the 2022 income statement connected with the reimbursement of shareholder loans granted to the subsidiary Portucel Mozambique.

If non-recurrent items are excluded, Navigator can point to an improvement YoY of 4.4 million euros. One contributing factor to this result was the rise in interest rates which enabled us to optimise management of cash surpluses, resulting in a positive result of 3.6 million euros. Another factor was the policy on hedging interest rate risk which, despite the

9