The performance of the European business improved from the low of the prior quarter as sales volumes increased. Year-on-year cost savings were achieved, and the region also benefited from a once-off government energy-related subsidy of EUR17 million. Good progress was made in the strategic restructuring programme within the region as the closure of the Stockstadt Mill was successfully completed during the quarter. The Lanaken Mill consultation process was concluded and production at the mill ceased late in December 2023.

Graphic papers sales volumes increased 9% quarter-on-quarter as downstream inventory levels slowly normalised. However, underlying demand in Europe remained weak with sales volumes 12% below the prior year. Selling prices came under pressure and were 5% down on the prior quarter.

Market conditions for the packaging and speciality papers segment remained challenging driven by substantially reduced demand for consumer goods in the European region. The packaging categories in particular were impacted by overcapacity and weak demand in board markets which exerted downward pressure on selling prices. Sales volumes for the segment were 18% below last year.

Variable costs declined by 20% compared to the prior year due to substantial reduction in prices across all major input cost categories. Fixed costs declined 4% year-on-year primarily due to initial personnel savings associated with the closure of Stockstadt Mill.

Within the context of tough market conditions, the North American business delivered another solid set of results, notwithstanding the scheduled maintenance shutdown at the Cloquet Mill. Demand in paper markets continued to slowly recover.

In the graphic papers segment, sales volumes decreased 5% compared to the prior quarter, aligning with typical seasonal trends. Although downstream inventories began normalising during the quarter, underlying demand for graphic papers remained weak particularly in the magazine and catalogue categories. Selling prices were resilient and stable quarter-on-quarter despite the challenging market conditions.

The packaging and speciality papers segment was impacted by residual destocking in certain product categories, but overall market conditions showed signs of improvement. Sales volumes increased 6% compared to the prior quarter and order activity accelerated towards the end of the quarter, which will boost capacity utilisation in the next quarter.

Underlying demand within the pulp segment remained robust. However, sales volumes were affected by the scheduled maintenance shutdown at the Cloquet Mill. Selling prices for DP remained flat and increased for BCTMP compared to the prior quarter but were substantially below the elevated levels of the previous year.

Variable costs were 6% below the previous year as input costs reduced across all major categories. Fixed costs were well controlled and 2% below last year due to lower maintenance costs.

The South African business delivered a good performance for the quarter taking into account the negative impact of the planned maintenance shutdowns at the Ngodwana and Saiccor Mills. Profitability was supported by a weaker Rand/US Dollar exchange rate, which benefited the pulp segment, and the inclusion of a positive ZAR484 million plantation fair value price adjustment. The forestry fair value adjustment will in future be included in EBITDA as we recognise that plantations are an integral part of our South African business.

The scheduled maintenance shutdowns at the Ngodwana and Saiccor Mills reduced DP sales volumes which were 5% below last year. However, production of DP was more stable following the challenges of last year. The weaker Rand/US Dollar exchange rate was insufficient to offset the substantial year-on-year reduction in US Dollar selling prices.

Although underlying containerboard demand in local markets remains healthy, elevated downstream inventories suppressed demand and necessitated an increase in containerboard sales to export markets. In addition, the Ngodwana Mill maintenance shutdown also impacted the profitability of the segment, with sales volumes decreasing by 28% compared to the prior quarter. The graphic paper categories struggled in a weak domestic climate.

Variable costs were 3% below last year driven by delivery and chemical savings, offset somewhat by higher energy and wood costs. Fixed costs were 18% above last year primarily related to higher maintenance costs associated with the scheduled shutdowns, which were not included in the comparative period.