Navigator S A informs about 1st Half Report of 2024

PERFORMANCE IN 1ST HALF 2024

The 1st half of the year was marked by all-time highs in the pulp reference price and a positive trend in the paper reference price, underpinned by buoyant demand for pulp and paper and significant supply restrictions, namely low stocks at the start of the year, restrictions in the Red Sea, as well as supply pressures in Canada, Scandinavia, Latin America and Asia due to production unavailability, maintenance stoppages, capacity closures and other logistical constraints.

Navigator has a unique competitive position in Europe in terms of the efficiency with which it manages its business mix. It has consistently shown flexibility in adapting to different market dynamics, focussing on results and protecting margins, as was once again the case this quarter.

Navigator remains committed to sustainable investment, business diversification and innovation in all the segments in which it operates. As part of its diversification and growth strategy, during the 2nd quarter Navigator successfully completed the acquisition of Accrol Holdings Plc (Accrol), a leading player in the UK tissue market (4th in the ranking). We are also continuing to focus on diversifying our packaging business, with the innovative integrated production unit for moulded eucalyptus pulp products, intended to replace single-use plastic packaging in the food service and food packaging markets, expected to start up in the 2nd half of 2024. Commissioning of the plant has already begun, and commercial production is expected to begin at the end of the 3rd quarter of 2024, under the gKraft™ Bioshield brand.

It is worth highlighting the recognition, this July, in the annual assessment by the Sustainalytics rating agency, which once again rated Navigator as a low-risk company for investors, placing Navigator in the 1st position of the list of companies with the lowest ESG risk, more precisely on the lower fringe of the 'low' risk level, with the vast majority of issues presenting negligible risk.

Analysis 2nd Quarter (vs. Q1 2024 and vs. Q2 2023)

• Navigator recorded turnover of € 529 million (down 1% on Q1 2024; up 11% on Q2 2023);
• EBITDA stood at € 165 million (up 24% on Q1; up 35% on Q2 2023), reflected in an EBITDA margin of 31.2% (up 6.4 pp on Q1; up 5.7 pp on Q2 2023);
• Net income totalled € 95 million (up 48% on Q1; up 44% on Q2 2023);
• Paper and packaging sales totalled approximately 319 thousand tons (down 10% on Q1; up 23% on Q2 2023) whilst the value of sales was down by 9% on the previous quarter and up 12% YoY;
• Pulp sales totalled 71 thousand tons (down 35% on Q1; down 43% on Q2 2023), with the value of sales down by 20% on the previous quarter and 14% YoY; in a quarter with less pulp available for the market and maintenance stoppages;
• Tissue sales totalled 56 thousand tons (up 48% on Q1; up 50% on Q2 2023), driven by dynamic demand and the new capacity at Accrol, now called Navigator Tissue UK; the value of sales grew by 51% over the previous quarter and by 41% over the same period in 2023;
• Order books in the packaging segment continued to grow, due essentially to: (i) improving demand and (ii) development of new product ranges in flexible packaging, enabling Navigator to diversify its business and achieve growth in its client base and markets, which reflects the growing acceptance of Navigator's innovative products based on Eucalyptus fibre. The packaging segment recorded a 90% growth in sales volume this half year compared to the 1st half of 2023.

Analysis 1st Half 2024 vs. 1st Half 2023

• Turnover stood at € 1,066 million (up 9% on H1 2023);
• EBITDA stood at € 299 million (up 18% on H1 2023), reflected in an EBITDA margin of 28% (up 2.2 pp on H1
  2023);
• Net income totalled € 159 million (up 16% on H1 2023);
• Net debt of € 665 million (excluding IFRS16), impacted by acquisition of Accrol (payment of € 153 million and consolidation of additional debt), distribution of € 150 million in dividends and capex level; Net Debt / EBITDA ratio of 1.21x;
• New long-term finance was contracted - with maturities of 5, 6 and 7 years, totalling € 300 million. The financial terms are indexed to three indicators envisaged in the Sustainability Agenda of the company, and also aligned with the United Nations Sustainable Development Goals.

LEADING INDICATORS

1. Operating profits + depreciation + provisions;
2. Variation net debt + dividends + purchase of own shares l Q2 2024 impacted by Accrol's acquisition payment of € 153 million and consolidation of additional debt)
3. Interest-bearingliabilities - liquid assets (not including effect of IFRS 16)
4. ROCE = Annualised operating income / Average Capital invested (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 of 1.42; Net Debt / EBITDA (H1 2023) of 0.99;
8. Variation in figures not rounded up/down

ANALYSIS OF RESULTS

The focus on efficiency and cost management, with a significant reduction in cash costs of between 6% and 14% in all pulp and paper segments (printing and writing, tissue and packaging) in the 1st half of the year compared to the same period last year, the positive evolution of demand and sales growth, along with the commercial strategy and diversification of products and markets, led to the strong results recorded in the 1st half.

The printing and writing papers industry

Demand performed positively over the 1st half of 2024 (May), driven essentially by restocking along the distribution chain, especially in Europe.

Global Demand for Printing and Writing Papers

Source: PPPC, May (2024 vs. 2023)

Globally, apparent demand grew in the 1st half (YtD May) by 1.3% across all segments, with demand for UWF paper strongest, up 1.6%, and CWF papers growing by 0.6%, whilst papers with mechanical fibre experienced growth in demand of 1%.

In Europe, apparent demand for UWF paper grew by 14.8% over the 1st half (YtD June), with the folio segment as the top performer, at 20.6%, followed by cutsize office paper (up 14.8%) and reels (up 10.1%). Navigator recorded an increase in market share in Europe this half year compared to the same period last year.

In the United States, demand declined by 2.6% (YTD May). Despite the drop in market demand, Navigator's sales in the United States grew again, as did its market share. Apparent UWF consumption in other world regions grew by 0.5% (YTD May), with China recording an impressive 7.1% (YtD May), compared to the trend of the last 5 years (CAGR 2.9% 19-23).

The benchmark index for office paper prices in Europe - PIX A4 B-copy - stood at 1,112 €/ton at the end of June (vs. 1,105 €/ton at the end of March). Since the start of the year, office paper prices have increased by approximately 2%. Significantly, from November - when prices in Europe and in overseas markets started to move upwards again

• to June, Navigator's UWF price increased by around 4% in Europe, 12% in overseas markets and 8% for the total sales mix. Implementation of the last announced price rise, which start in July, is expected to be concluded during the 3rd quarter.

Capacity utilisation rates in the European industry (output/capacity) averaged 87% in the 1st half, with Navigator operating at above the industry average, at 92%. It should also be noted that we ended the 1st half with an appropriate level of stocks, enabling us to face the market conditions anticipated in the 3rd quarter, when the seasonal effects are expected to be felt more sharply than in previous years.

Navigator's paper and packaging sales totalled 673 thousand tons in the 1st half, up by 26% on the same period in the previous year. The value of sales grew by 11%. Mill brands represented close to 77% of sales in the 1st half (vs. an average of 67% over the period 2012-2023), again pointing to the resilience of the company's branding strategy. The proportion of premium products remained high in relation to 2023, at 59% (compared to an average of 53% in the period 2012-2023).

Of particular note is Navigator's robust business model based on differentiation, premium products and strong own brands in the different markets where we operate, which has allowed us to increase the price premium, as a result of the higher level of our value proposition, reiterating the resilience of the paper and printing and writing business model. When market conditions are more difficult, mill brands and segments with greater value added offer an additional safeguard for Navigator's results.

Pulp Market

The benchmark index for hardwood pulp in Europe - PIX BHKP in dollars - rose to record levels in the 2nd quarter (1,440 USD/ton), and pulp prices have risen by approximately 41% since the start of the year. Prices in China mirrored the developments in Europe, reaching 741 USD/ton at the end of the quarter, up 14% since the start of 2024.

The dynamics of supply and demand were crucial in sending prices upwards in the early months of the year. On the demand side, in Europe, the market of end consumers of cellulose pulp presented strong performance, especially in the printing and writing paper industry, where order books grew substantially, in contrast to the same period in 2023 (up 10.7%), but also for tissue (up 7.1% YTD April). In China, the strong demand for pulp in late 2023

continued into the 1st half of 2024 due to the new paper capacity installed. On the supply side, logistical restrictions in the Red Sea, as well as pressures on supply in Canada, Finland, Latin America and Asia, as a result of production unavailability, maintenance stoppages, capacity closures and logistical constraints, have sustained current price levels.

It should be noted, however, that at the end of the 1st half of the year, demand for short fibre in China slowed down and, with the constraints observed during the first few months of the year being overcome, there was an increase in pulp availability, especially in Europe and the Mediterranean. Nevertheless, demand has been strong, and stocks are still below the historical average of the last 5 years.

In May, stocks at European ports stood at 1.3 million tons, below the historic average for the past 5 years (1.5Mt). In China, pulp stocks stood at 1.7 million tons in June 2024, also below the historical average for the past 5 years (1.8Mt).

In this context, global demand grew in the 1st half by 3.9% YoY in bleached chemical pulp (BCP), 6.3% in hardwood pulp (HW), and 10.3% in eucalyptus pulp (EUCA), most significantly in Europe (+13.6% BCP, +17.8% HW, +16.8% EUCA) and in China (-0.6% BCP, +3.7% HW, +11.2% EUCA).

Global Demand for Pulp

Source: PPPC, May (2024 vs. 2023)

Pulp sales accordingly stood at 181 thousand tons, down by 16% on the same period in 2023, due to the smaller volume of pulp available for sale and the value of sales was down by 8% year-on-year, due to the positive price evolution.

Growth and strong performance in Tissue business

Demand for Tissue paper remained buoyant, with growth of 3.5% since the start of the year in Western Europe (Numera April). Positive effects have been felt from the recovery of household spending power (namely by lower inflation), accompanied by growth in region's tourism sector, boosting the away-from-home segment.

Navigator recorded 1st half tissue sales of 94 thousand tons, up 54% year-on-year, with growth in the value of sales of approximately 41%, as a result of integration of Accrol on 1 May 2024 and of Navigator Tissue Ejea in the 2nd quarter of 2023.

The decision to acquire Accrol, now called Navigator Tissue UK, is in line with the Group's strategy of diversification. By acquiring a leading company in the tissue converting sector, with competitive advantages and values aligned with our own, Navigator has made its first move into the British market.

International sales therefore accounted for 76% of turnover in Tissue business in the 1st half of 2024. The Spanish market took the largest share, with 35% of sales, followed by the UK, with 20%, and France, which accounted for 18% of sales. Sales broke down into 95% finished products and 5% reels, representing an improvement in the mix of 3pp when compared with the same period in 2023.

In terms of client segments, At Home or Consumer (retail) business has grown in importance, currently accounting for 78% of sales, whilst Away-from-home and wholesalers account for the remaining 22%. Attention is drawn to the Group's balanced and diversified customer portfolio, with 6% growth in the number of customers year-on-year (11% considering the integration of Navigator Tissue UK), with the largest client accounting for approximately 11% of total sales.

Tissue Sales 1 2 H1 2024 (vs. H1 2023)

1 ton 2 Q2 2023 and H1 2024 includes Tissue Ejea l May e June 2024 includes Tissue UK 3 Finished Goods and Reels

Navigator's focus on innovation and differentiation continues to be welcomed by customers, with sales of mill brands growing by 29% YoY in the 1st half of 2024.

A strong contribution to this growth in mill brand sales has come from sales of innovative products (notably Multiusos Super Absorvente and Higiénico Aloe Vera) which again recorded excellent growth, up 16%. The portfolio of Tissue products has benefited significantly from integration of the industrial units in the UK, and now includes wet wipes, moist toilet tissue and facials.

Packaging - From Fossil to Forest - investment in sustainability, innovation and transformation

Demand levels in 2024 had pointed to recovery and a return to normal for the packaging market. After a promising 1st quarter, the 2nd quarter confirmed the tendency for recovery, with robust and consistent demand. European deliveries of Kraft MF papers (white and brown) reported by CEPI (YTD May) were up by 25% on the same period in 2023.

The packaging segment of Navigator recorded a 90% growth in sales volume this half year compared to the 1st half of 2023. In this context, Navigator implemented price increases in all its markets, justified by the rise in production costs and by improved market performance.

This strong performance is firmly supported by the move into several new segments, above all in the area of Flexible Packaging, where the company launched products in the early months of the year and is now seeing more significant sales volumes. The 1st half of the year also saw a reduction in the dependency on the paper bag segment, with the tilt towards flexible packaging segments. Navigator has continued to broaden its customer base, which already numbers close to 300 clients in a sales operation 100% based on its own brand - gKraft™.

Navigator has based its offering of packaging papers on three gKraft™ macro-segments: BAG, FLEX and BOX, which subdivide into 12 segments for different applications. The innovative introduction of the properties of eucalyptus fibre has been crucial in securing the wide acceptance and recognition that these products already enjoy in the market.

As part of the diversification of the packaging business, the project for the integrated production of eucalyptus moulded cellulose products, intended to replace single-use plastic packaging in the food service and food packaging market, continues to progress as planned, with the commissioning of the plant having already begun and commercial production starting at the end of the 3rd quarter of 2024, under the gKraft™ Bioshield brand. The plant will have a production capacity of around 100 million units a year, making it one of the largest in the world and the first integrated plant in Europe using eucalyptus fibre, entering a market with high potential and growth.

The launch will be based around 7 products for the food sector: a 22cm plate, a 17cm plate (dessert), a 500ml bowl, 1 litre take-away packaging, a laminated tray for raw protein (beef, pork and chicken), a fruit basket and an espresso coffee cup. These 7 products offer production flexibility and scalability for exploiting the various opportunities opening up for substituting plastics. Alongside this, work has proceeded on developing new products, in partnership with national and international clients, and on developing new sustainable barrier property solutions, as well as trials of commercial products.