Release Date: February 18, 2025

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• The Navigator Co SA (FRA:PO9) achieved a total turnover of approximately 2.09 billion in 2024, marking a 7% increase year-on-year, making it the company's second-best result ever.
• The company's EBITDA totaled 547 million with a margin of 26.2%, also the second-best result ever, driven by price increases, volume growth, and proactive management.
• Navigator successfully integrated new acquisitions in the tissue segment in Spain and the UK, contributing to business diversification.
• The company launched new products for flexible packaging, which are now generating significant sales, and started production at a new industrial unit for molded fiber packaging.
• Navigator maintained a strong financial position with a net debt to EBITDA ratio of 1.13, showcasing financial strength and stability.

Negative Points

• The fourth quarter results were negatively impacted by longer-than-planned maintenance shutdowns and one-off events in energy assets, leading to reduced power sales and increased energy costs.
• There was a significant drop in pulp prices in the second half of 2024, particularly in China, which affected overall market dynamics.
• The company faced challenges with increased imports of cheap paper products from overseas, impacting market prices and competitiveness.
• Navigator experienced higher costs due to the inclusion of new acquisitions, employee profit sharing, and redundancy costs.
• The company anticipates continued volatility in pulp prices and market conditions, with potential challenges in maintaining price stability.

Q & A Highlights

• Warning! GuruFocus has detected 3 Warning Sign with FRA:PO9.

Q: How do you see demand for office paper after the small recovery in the first quarter, and what are your expectations for office paper prices throughout 2025? A: Antonio Gundo, CEO: The demand for office paper in 2024 was impressive, with office paper being one of the more resilient segments. However, it's challenging to predict future demand precisely due to current market volatility. We observed a decline in Q4 of last year, but the beginning of this year has shown more robust demand, particularly in certain sizes.

Q: What are your expectations for EBITDA margins in 2025, considering the one-offs in Q4 and lower prices year over year? A: Antonio Gundo, CEO: We do not provide specific guidance on future EBITDA margins. Historically, our margins have ranged between 21% and 30%, with a standard deviation of about 3%. This range provides a good indication of where our margins typically fall.

Q: Can you elaborate on your capital allocation plans for 2025, including CapEx expectations and potential inorganic growth opportunities in tissue and packaging? A: Antonio Gundo, CEO: CapEx for 2025 is expected to be similar to 2024, slightly below. We are focusing on decarbonization and packaging, supported by the EU Next Generation fund. We are also considering installing a tissue machine to support our UK operations and exploring other opportunities that align with our strategic goals.

Q: Can you explain the increase in depreciation and amortization, and impairment losses in non-financial assets in 2024? Is this due to changes in the company's perimeter, or are there one-offs involved? A: Antonio Gundo, CEO: The increase in depreciation and amortization is primarily due to the expanded perimeter, including new equipment and acquisitions in Spain and the UK. There are no significant one-offs involved in this increase.

Q: What is your view on the recent evolution of paper prices, especially considering the shutdown of capacities and market discipline? A: Antonio Gundo, CEO: The market has seen some lack of discipline, with non-integrated producers taking advantage of reduced pulp prices to gain market share. Additionally, there has been an unexpected increase in cheap imports. Despite these factors, we anticipate prices will remain significantly higher than pre-pandemic levels due to increased industry costs.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.