Navigator : Consolidated Annual Results 2020

PERFORMANCE 4TH QUARTER AND FULL-YEAR 2020

Over the course of the fourth quarter, in a context of further partial lockdowns in several European countries, the Group returned to its normal levels of output and was able to improve on its results in the preceding quarter. In an extremely troubled year, in which demand for its products was hit hard by the pandemic and prices fell sharply, Navigator's business model proved both flexible and resilient, adjusting swiftly to changes in the market and taking significant action to reduce its fixed and variable costs.

4th Quarter Analysis (vs Q3 2020 and vs Q4 2019)

• Despite the partial lockdowns over the period, European UWF manufacturers continued to move towards a resumption of full production: Navigator operated at full capacity from July onwards, whilst its competitors were at 68% of capacity in Q3 and gradually moved up to 80% in Q4;
• Paper sales stood at 343 ktons (up 2% on the third quarter and down by 6% in relation to the same quarter last year); pulp sales totalled 97 thousand tons, down by 7% in relation to the 3rd quarter and by 3% YoY, in view of the low level of stocks. Tissue sales stood at 26.3 thousand tons, -3.5% vs Q3 2020 and up by 22% vs Q4 2019;
• Turnover totalled € 341 million, down 2% vs. Q3 2020 and down 17% vs. Q4 2019 and EBITDA stood at € 75 million (up 7% vs. Q3 2020 and up 4% vs Q4 2019); strong recovery in EBITDA / Sales margin to 22.0% (vs. 20.2% in Q3 2020 and 17.4% in Q4 2019);
• Free Cash Flow Generation in the quarter of € 63 million (vs. €56 million in Q3 2020 and € 61 million in Q4 2019);
• Net profits stood at € 34 million, up by 9% from the previous quarter and up 64% from Q4 2019.

YoY analysis - Navigator highly resilient to the impact of lockdown on UWF business thanks to pulp and tissue sales, combined with cost reductions

• Paper business affected by pandemic and by lockdowns: UWF sales volume totalled 1 276 thousand tons, down 12% from 2019. Even so, pulp and tissue sales partially offset the drop in paper business: pulp volume grew 25% to 394 thousand tons (the highest level since 2009) and tissue sales increased by 10% to 106 thousand tons, the highest sales figure since the group's move into tissue business;
• The year was marked by a substantial fall in sales prices in comparison to 2019: the BHKP pulp index (in euros) fell 22% and the A4 paper index dropped 7% (average price change); paper index fell 8.3% from January to December 2020;
• Turnover stood at € 1 385 million (down -18%) and EBITDA at € 286 million (down 23%);
• The fall in sales prices was mitigated by intensive efforts to contain costs: fixed costs came down by € 47 (-15% YoY) and variable production costs by approximately € 60 million (- 15% YoY at equivalent production);
• Financial results improved to € -15 million (vs. € -19 million) and taxes improved to € -17 million (vs. € -46 million), resulting in net income of € 109 million (vs. € 168 million);
• The Group continued to demonstrate excellent capacity to generate free cash flow, which totalled € 234 million (vs. €186 million), with capex of approximately € 81 million (vs. € 158 million);

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• A significant reduction in net debt, down by € 35 million to € 680 million, after distributing € 198 million in dividends, with Net Debt / EBITDA ratio kept at a comfortable level of 2.38 X;
• During 2020, Navigator took a highly active approach to its financing activities, ensuring a high level of immediate liquidity, refinancing its short term debt, restructuring its borrowing and extending maturities;
• Completion and start-up of the new biomass boiler in Figueira da Foz, a project representing the most significant step in the roadmap to decarbonisation, insofar as it will permit the
  Group to reduce CO2 emissions by more than 30% in 2021, accounting for one third of the reduction announced in order to achieve carbon neutrality in 2035;
• Navigator has once again been singled out by CDP - Carbon Disclosure Project - for its climate change response, with an "A" rating, achieved by only 3% of the companies assessed in the global survey.

Leading Indicators

			FY	FY			Change (7)
	Million euros		2020	2019		2020 / 2019
	Total Sales		1 385.4	1 687.9		-17.9%
	EBITDA (1)		285.5	372.1		-23.3%
	Operating Profits (EBIT)	140.4	233.6		-39.9%
	Financial Results		- 14.7	- 18.9		-22.3%
	Net Earnings		109.2	168.3		-35.1%
	Cash Flow		254.3	306.8		- 52.5
	Free Cash Flow (2)		233.5	186.2		47.3
	Capex (8)		80.6	158.0		- 77.4
	Net Debt (3)		680.0	715.3		- 35.2
	EBITDA/Sales		20.6%	22.0%			-1.4 pp
	ROS		7.9%	10.0%			-2.1 pp
	ROCE (4)		8.1%	12.9%			-4.8 pp
	ROE (5)		10.6%	15.2%			-4.6 pp
	Equity Ratio		40.2%	40.6%			-0.4 pp
	Net Debt/EBITDA (6)(7)	2.38	1.92		0.46
		Q3	Q2	Change (7)		Q3		Change (7)
in million euros	2020	2020	Q3 20/Q2 20		2019	Q3 20/ Q3 19
Total sales	341,4	348,4	-2,0%			413,6		-17,5%
EBITDA (1)	75,1	70,4	6,7%			71,8		4,5%
Operating profits	40,8	35,9	13,7%			33,8		20,7%
Financial results	- 5,6	- 0,8	na		- 7,5		-25,1%
Net earnings	34,0	31,2	8,8%			20,8		63,6%
Cash flow	68,2	65,7	2,5			58,8		9,4
Free Cash Flow (2)	63,1	56,4	6,6			60,8		2,3
Capex	10,9	21,0	- 10,1			39,1		- 28,2
Net debt (3)	680,0	644,0	36,1			715,3		- 35,2
EBITDA/Sales (%)	22,0%	20,2%	1,8 pp		17,4%		4,6 pp
ROS	9,9%	9,0%	1,0 pp		5,0%		4,9 pp
ROCE (4)	9,5%	8,2%	1,2 pp		7,5%		2,0 pp
ROE (5)	13,2%	11,7%	1,5 pp		7,5%		5,7 pp
Equity ratio	40,2%	41,5%	-1,3 pp		40,6%		-0,4 pp
Net Debt/EBITDA (6)(7)	2,38	2,28	0,10			1,92		0,46

1. Operating profits + depreciation + provisions;
2. Variation net debt + dividends + purchase of own shares
3. Interest-bearingliabilities - liquid assets (not including effect of IFRS 16)
4. ROCE = Annualised operating income / Average Capital employed (N+(N-1))/2
5. ROE = Annualised net income / Average Shareholders' Funds last -1 months
6. (Interest-bearingliabilities - liquid assets) / EBITDA corresponding to last 12 months
   Impact of IFRS 16: Net Debt / EBITDA in 2020 of 2.58; restated 2019 Net Debt / EBITDA of 2.05
7. Variation in figures not rounded up/down

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ANALYSIS OF RESULTS

4th Quarter 2020 vs. 3rd Quarter 2020 vs. 4th Quarter 2019

The fourth quarter of 2020 continued to see the upturn trend in demand for printing and writing paper observed in the previous quarter, albeit less sharply, due to the second wave of Covid-19 infections visible at the end of the year. UWF recovered more strongly than other types of paper, with global demand down 8% in the fourth quarter (October and November), compared to a reduction of 9% in CWF and 18% in mechanical papers.

In geographical terms, demand was uneven in the fourth quarter, falling 7% in Europe (vs. 10% in Q3) and in the rest of the world (Oct-Nov), but 13% in the United States (Oct-Nov) (vs. 19%). As previously observed, sheeted business recorded the largest drop in consumption, whilst reels business was more resilient.

In this context, the Group recorded turnover of € 341 million, down by 2% in relation to the 3rd quarter of 2020 and down by 17% when compared with the same quarter in 2019, due to the sharp reduction in prices.

Navigator operated at full capacity over the quarter, controlling its stock levels and managing its order books. UWF Sales totalled 343 thousand tons, up by 2% in relation to Q3 and 6% lower than in Q4 2019. Performance remained more positive in sales to Europe than to other markets.

The benchmark sales price for UWF paper remained under intense pressure over the period, dropping below its levels in the previous quarter (down 2.3%) and in the same quarter in 2019 (down 8.5%). Navigator's average sale price followed this trend, reflecting also the pressure from non-European markets, the change in the formats/quality mix (increasing proportion of reels and economy products) and the weakness of the US dollar against the Euro.

It should be noted that in the fourth quarter Navigator implemented price increases in international markets of more than 40 USD/ton, in sales denominated in dollars. Sales in euros in international markets evolved even more positively. Even though these increases in euros and dollars in sale price allowed to claw back part of the erosion in net prices, this was not fully reflected in the final price in euros, in view of the unfavourable course of the USD/EUR exchange rate and of the sales mix per currency.

As a result, paper sales in the quarter totalled € 239 million, in line with Q3, and down by 18% vs Q4 2019, due almost exclusively to the price effect.

Pulp sales remained at a high level, but down from the figures recorded in the second and third quarters of 2020, because of the reduced amount of pulp available for sale to the market. The sales volume totalled 97 thousand tons, down 7% in relation to the third quarter and 3% YoY. The Group's average sales price performed strongly in relation to the previous quarter, rising by around 8%, thanks to improved conditions on the pulp market towards the end of the year.

In tissue business, the sales volume stood at 26.3 thousand tons vs. 27.3 thousand tons in Q3 2020 and up 22% in relation to Q4 2019. Finished products represented a proportion of total sales roughly similar to that in the previous quarter, but lower than in the fourth quarter in 2019.

As a result, in a context of a gradual recovery in demand marked by strong pressure on UWF prices, Navigator succeeded in diversifying its business model, while maintaining a series of energetic measures to control fixed and variable costs. This enabled the Group to record EBITDA of € 75 million in the quarter, up by 7% on Q3 2020 (up 4% on Q4 2019). The EBITDA / Sales margin recovered strongly to 22%, up 1.8 pp in relation to Q3 2020 and up 4.6 pp in relation to Q4 2019.

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