Navigator : S.A. informs on results for Q3 2022

CONTENTS

1. PERFORMANCE IN 3rd QUARTER AND FIRST 9 MONTHS OF 2022
2. LEADING INDICATORS
3. ANALYSIS OF RESULTS
4. OPERATING DATA
5. COMMITMENT TO SUSTAINABILITY
6. OUTLOOK
7. FINANCIAL STATEMENTS

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1. PERFORMANCE IN 3rd QUARTER 2022 AND FIRST 9 MONTHS OF 2022

The rapid changes in the macroeconomic and geopolitical situation in Europe triggered by Russia's invasion of Ukraine led to increased global uncertainty and insecurity over the first nine months of 2022. Energy, logistics and commodities costs, which were already at all-time high levels at the beginning of 2022, given the cost inflation verified since the second half of 2021, substantially increased.

In the third quarter, the energy crisis grew more acute. Interruptions to the supply of Russian gas to Europe, together with the warm, dry summer, led to a sharp rise in natural gas prices in Europe, taking the relevant benchmark index to all-time highs in August. At the same time, intervention by the Central Banks confirmed their intention to keep interest rates on an upwards course as to contain high levels of inflation, rocking confidence across the economy.

In this context, Navigator, as an integrated Forestry, Pulp, Paper, Tissue, Packaging and Energy producer, was able to exploit the flexibility of its business model, supported by the rapid response and expertise of all Navigator teams, who successfully anticipated the sharp rise in costs. In particular, implemented measures to ensure the reduction of fixed and variable costs, stepped up programmes to manage energy and boost the efficiency of its operations. This took the form of a significant reduction in specific consumption in several industrial areas: in Pulp production, with a reduction in specific consumption of natural gas, in paper production, with a reduction in specific consumption of fibre, and in Tissue production, with a reduction in specific consumption of electricity. Thanks to a responsible policy of price adjustment and an effective differentiation strategy, based on boosting sales of premium products and its own prestigious and internationally respected brands, the Company succeeded in decisively offsetting the verified increase in its costs.

These differentiation factors enabled Navigator to record strong performance in this environment of intense turbulence on the markets.

Analysis: 3rd Quarter 2022 vs. 2nd Quarter 2022 and vs. 3rd Quarter 2021

• The dynamics of the paper market over the third quarter were again impacted by the continued war in Europe and the consequent growth of uncertainty and fears of disruption in the various supply chains upstream and downstream of our business;
• The 3rd quarter again saw growth in pulp prices, with the benchmark index rising 20% in USD and 41% in Euros in relation to average prices in the 3rd quarter of 2021, and up 9% in USD and 16% in Euros in relation to the 2nd quarter of 2022;
• Leveraged by the pulp price index, the higher costs across the board for energy, logistics and commodities, and also a continuing mismatch between supply and demand, the index for paper prices in Europe rose sharply in the 3rd quarter of 2022, in comparison with both the average price in the 3rd quarter of 2021 (up +52%), and also in the previous quarter (up +7%);
• The volume of paper sales was close to 400 thousand tons, down by close to 2% in relation to the second quarter and up by 5% on the same period in the previous year;
• The volume of pulp sales totalled 53 thousand tons, down by 26% on the 2nd quarter, and by 3% vs 3rd quarter of 2021, essentially because of the need to replenish pulp stocks to minimum service levels and also increased incorporation of pulp into paper, above all in the previous quarter;
• The volume of Tissue sales stood at approximately 27 thousand tons, up by close to 8% in relation to the preceding quarter, benefiting from an upturn in tourism and the seasonal effect of strong summer sales, and up by 3% on the same quarter in 2021;

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• EBITDA stood at € 207.4 million (down 7% on the 2nd quarter and up 117% on the 3rd quarter of 2021) and the EBITDA/sales margin at 30.5% (down 3.8 p.p. on the 2nd quarter and up 6.9 p.p. on the 3rd quarter of 2021);
• Free Cash Flow for the quarter was € 148.2 million (compared to € 97.3 million in the previous quarter and € 61.2 million in the 3rd quarter of 2021);
• Net income totalled € 108.6 million, as compared to € 111.3 million in the previous quarter and €
  49.8 million in the same quarter last year;
• Also in this quarter, Navigator recently received the approval from the Science Based Targets Initiative (SBTi) of its targets for reducing greenhouse gas (GHG) emissions.

Analysis of first 9 months 2022 vs. first 9 months 2021

• Turnover totalled € 1,822.5 million, up 62.8% on the same quarter in 2021, on the strength of favourable price increases;
• It should be noted that 95% of the sales volume in tons of UWF was on foreign markets; nonetheless, sales on the home market were up by around 8%, in response to the paper shortage experienced in the country, although price rises were more contained;
• The Company achieved EBITDA of € 551.9 million, as compared to € 246.0 million in the same period in the previous year, and a margin over sales of 30.3% (up 8.3 p.p. on the same period in 2021), benefiting from improved efficiency and favourable evolution of sales prices on international markets;
• Net income in the period totalled € 270.5 million, as compared with € 114.2 million recorded in the same period in 2021;
• Net debt has fallen significantly in relation to year-end 2021, despite the payment of € 100 million in dividends during the first half, improving the Net Debt / EBITDA ratio to 0.56 x.
  2. LEADING INDICATORS

	9M	9M	9M 22/ 9M 21 (8)
Million euros	2022	2021
Total Sales	1,822.5	1,119.7	62.8%
EBITDA (1)	551.9	246.0	124.4%
Operating Profits (EBIT)	437.9	156.8	179.3%
Financial Results	-60.1	-12.7	-371.9%
Net Earnings	270.5	114.2	136.7%
Cash Flow	384.5	203.5	181.0
Free Cash Flow (2)	322.4	182.7	139.7
Capex	64.6	51.8	12.8
Net Debt (3)	372.5	596.9	- 224.4
EBITDA/Sales	30.3%	22.0%	8.3 pp
ROS	14.8%	10.2%	4.6 pp
ROCE (4)	35.8%	12.5%	23.3 pp
ROE (5)	31.4%	14.8%	16.6 pp
Equity Ratio	43.3%	42.0%	1.4 pp
Net Debt/EBITDA (6)(7)	0.56	1.86	-1.30

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							Q3	Q2	Q3 22/Q2 22	(8)	Q3	Q3 22/ Q3 21	(8)
Million euros				2022	2022		2021
Total sales			680.4	649.8	4.7%		404.9	68.0%
EBITDA	(1)			207.4	223.0	-7.0%		95.5	117.1%
Operating profits		165.0	183.6	-10.1%		66.1	149.6%
Financial results		- 15.1	- 40.4	62.7%		- 2.6	-475.4%
Net earnings			108.6	111.3	-2.4%		49.8	117.9%
Cash flow			150.9	150.7	0.2		79.3	71.7
Free Cash Flow	(2)		148.2	97.3	50.9		61.2	87.0
Capex						30.3	19.6	10.7		19.0	11.3
Net Debt	(3)			372.5	520.6	- 148.2		596.9	- 224.4
											0.0
EBITDA/Sales (%)	30.5%	34.3%	-3.8 pp		23.6%	6.9 pp
ROS							16.0%	17.1%	-1.2 pp		12.3%	3.7 pp
ROCE	(4)					40.4%	44.5%	-4.1 pp		15.8%	24.6 pp
ROE	(5)					37.8%	40.8%	-2.9 pp		19.3%	18.5 pp
Equity ratio			43.3%	40.6%	2.8 pp		42.0%	1.4 pp
Net Debt/EBITDA	(6)(7)	0.56	0.95	-0.38		1.86	-1.30

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
7. Impact of IFRS 16: Net Debt / EBITDA at 30/09/2022 of 0.83; Net Debt / EBITDA at 30/09/2021: 2.02;
8. Variation in figures not rounded up/down

3. ANALYSIS OF RESULTS

Navigator recorded a turnover in the period of € 1,822.5 million, with paper sales accounting for around 73% of the total (in line with the previous period), pulp sales 9% (vs. 10%), tissue sales 8% (vs. 9%) and energy sales 10% (vs. 8%).

Pulp prices at historically high levels

The benchmark index for hardwood pulp in Europe - PIX BHKP in euros - was up by 42% in September in relation to the start of the year, at 1,428 €/ton, with an increase of approximately 45% in average prices in the first 9 months of 2022 vs. 9 months of 2021, an all-time high level. It may also be noted that the increase in the pulp price was more significant in euros than in dollars, due to the strong appreciation of the dollar against the euro over the period. The benchmark index in China for hardwood pulp rose by 50% from the start of the year to the end of September, to the historically high level of 862 USD/t, in line with the peak prices recorded in 2010.

This surge in prices has continued to be driven by a severe mismatch between Supply and Demand. Several factors are contributing to this imbalance: in Northern Europe, the prolonged strike over the first four months of the year removed more than half a million tons from the pulp market; delays in the ramp- up of pulp investments in Latin America; Russia's invasion of Ukraine and the consequent embargo on wood imports from Russia has drastically reduced the availability of imported birch in Northern Europe (this is estimated to affect around 1 million tons of annual output of birch pulp); at the same time, persistent logistical constraints continue to hamper the availability of market pulp.

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