* Q3 paper EBIT of PLN -14m
* Pulp prices down, while paper remains challenging
* Fair value range of SEK 14-50
Q3 paper EBIT of PLN -14m
Paper EBIT was PLN -14m (ABGSCe PLN -15m), with paper sales broadly in line at PLN 522m and up 2% q-o-q. Group EBIT was PLN -29m vs. ABGSCe PLN -13m. The results were hit by subdued demand and higher input costs from the Middle East conflict, while the price hikes meant to offset these fell short from price competition. Paper EBITDA was PLN 10m (ABGSCe PLN 8m) and group EBITDA PLN 10m. Pulp benefited from FX and lower pulpwood costs, partly offset by higher energy costs. Arctic Paper’s new US sales office is supporting growth, targeting 5-10% of paper sales from North America within the next few years. A new workforce reduction programme targets PLN 18m in annual savings in ’27-’28. Capex will remain reduced, focused on completing ongoing projects. Lower pulpwood prices should further support profitability (lag into P&L), but with demand soft and visibility limited. Due to ~PLN 34m in energy refunds we forecast Q4 paper EBIT of PLN 28m.
Pulp prices down, while paper remains challenging
Pulp looks to have peaked for now: Chinese integrated capacity caps the upside once prices clear cash cost (USD 605/t), and Asian HW is up 16% vs. H2'25 (USD 585/t). European pulp prices have fallen since June, following Chinese pulp futures (HW -7%, SW -2%). Wood prices are falling across Scandinavia (-15-30%). This effect comes with a lag into the P&L. Paper markets are helped by 4-7% supply cuts, but slow demand leaves utilisation at 77%. We need +3mt more in cuts to reach the historical average of ~89%. Note that the UPM JV with Sappi could fix the paper market balance.
Fair value range of SEK 14-50
The company is trading at an EV/CE multiple of ~0.41x, which is ~50% below its historical average. We have applied three valuation methodologies (see p. 3), and arrive at a fair value range of SEK 14-50.