<a id="bm-comp-79a08508-3203-4a04-a678-9a46614d4838" name="bm-comp-79a08508-3203-4a04-a678-9a46614d4838" class="BMCustomAnchor"></a><table><tr><td bm-component-id="79a08508-3203-4a04-a678-9a46614d4838" style="vertical-align: top; width:100.000000%;"><ul><li>Q2 challenging, same trends expected for Q3</li><li>Paper — better demand, more supply cuts, higher prices</li><li>Fair value range of SEK 40-80</li></ul></td></tr></table><a id="bm-comp-0ac059d2-8a10-4a2e-a697-c5d37b5944a3" name="bm-comp-0ac059d2-8a10-4a2e-a697-c5d37b5944a3" class="BMCustomAnchor"></a><table><tr><td bm-component-id="0ac059d2-8a10-4a2e-a697-c5d37b5944a3" style="vertical-align: top; width:100.000000%;"><h3 class="bm-h3">Q2 challenging, same trends expected for Q3</h3><p>Q2 was another challenging quarter, as <font color="#212529">group EBITDA came in at PLN 71m (ABGSCe PLN 90m). Paper EBITDA was PLN 45m (ABGSCe PLN 59m). The miss was mainly driven by higher costs and slower-than-expected demand recovery. Note that Rottneros's weak report also weighed on the result. Paper EBIT was PLN 27m (ABGSCe PLN 38m), while group EBIT came in at PLN 42m (ABGSCe PLN 58m). The CEO stated that the recovery may take time and that they “expect the current market situation to persist in Q3”. We expect Q3 Paper EBIT of ~PLN 45m, driven by slightly higher prices. Arctic Paper also announced a modernisation programme for its paper sales and customer service organisation, which will provide annual savings of PLN 15m (full effect '25).</font></p><h3 class="bm-h3">Paper — better demand, more supply cuts, higher prices</h3><p style="text-align:left;">Higher input costs push output prices higher, and there is now a long list of price hikes for most products. The paper markets seem to be recovering, with more capacity cuts and better demand pointing to an improving market in '24e vs. '23. Announced capacity cuts are now ~15% in '24e-'25e (~3.8mt) vs. ~12% previously and 3% in '23. Combined with the improved demand suggested by our demand model (+4%), the utilisation rate could reach 81-82% in '24e (68% in '23). However, if the demand increase of ~8% seen YTD persists throughout the year, the utilisation rate could reach +85%. Arctic Paper is well-positioned, as it is a leading premium design/book paper player with a decent overall position on the cash cost curve.</p><h3 class="bm-h3">Fair value range of SEK 40-80</h3><p>The company is trading at an EV/CE multiple of ~1.0x and a '24e EV/EBIT of ~6.0x. We apply three valuation methodologies, and we arrive at a fair value range of SEK 40-80. The fair value range implies an EV/CE range of 0.7x-1.5x, or a '24e EV/EBIT of 3x-6x.</p></td></tr></table>