Despite record sales in 2022; profitability has declined due to significantly higher raw material and energy prices. In one year, the company's energy costs have increased by 70%, by HUF 17 billion, and raw material prices have also risen. EBITDA thus amounted to HUF 1.44 billion and profit before tax to HUF 100 million in 2022. A year earlier, in 2021, the group achieved an EBITDA of HUF 2.7 billion on revenue of HUF 57 billion. The group produced and sold 12% more products last year than in 2021.

Vajda-Papír Group doubled its turnover, but its profitability decreased due to the surge in energy prices

The Vajda-Papír Group doubled its turnover at both its domestic and Norwegian mills last year. The turnover of Hungary's market-leading tissue paper group has grown tremendously, with a total turnover of more than HUF 80 billion and that of its Norwegian subsidiary close to HUF 20 billion. Despite record sales in 2022; profitability has declined due to significantly higher raw material and energy prices. In one year, the company's energy costs have increased by 70%, by HUF 17 billion, and raw material prices have also risen. EBITDA thus amounted to HUF 1.44 billion and profit before tax to HUF 100 million in 2022. A year earlier, in 2021, the group achieved an EBITDA of HUF 2.7 billion on revenue of HUF 57 billion. The group produced and sold 12% more products last year than in 2021.

According to the report published on the Budapest Stock Exchange, Vajda-Papír Kft.'s net sales revenue rose to over HUF 53 billion from HUF 30 billion in the previous year. Non-staff expenses doubled to over HUF 52 billion, with a loss before tax of HUF 2.58 billion, up from a profit of HUF 524 million in 2021.

Attila Vajda, the company's founding managing director, called last year a challenging year, but said the situation seems to be consolidating in many areas: inflation is slowing, supply chains are no longer constrained, and profitability is expected to improve again this year. Despite the difficult circumstances, Attila Vajda said that the retention of the workforce, the handover of the second phase of the new factory, creating new jobs and ensuring 100% self-sufficiency in the production of raw materials, was a significant achievement.

This year's outlooks are good, with significant revenue growth of 20% also planned for this year, and the main objective for 2023 is to return to previous profitability, so investment intensity is being reduced. The first months of this year have started encouragingly, with the positive impact of efficiency gains and the entry of new capacity already significantly improving profitability. In the first quarter of 2023, Vajda-Papír Ltd.'s net sales amounted to HUF 15.9 billion, up 10% from the previous period.

Attila Vajda also reported on last year's key achievements. "We are proud of the fact that the HUF 16 billion investment has resulted in the expansion of one of the world's most modern hygiene paper mills with a new base paper production hall, a base paper warehouse and a new mill unit including pulp storage and preparation areas. The investment was supported by the government with HUF 5.5 billion. The year 2022 was a major milestone in the life of the company, as we are now able to produce base paper exclusively in a domestic environment. Achieving the highest possible paper conversion rates has been our priority for many years," the CEO said.

The new mill will cover 100% of the company's base paper needs and double the company's production capacity. The production, which started in the third quarter, will really ramp up in 2023, with annual production expected to exceed 150,000 tonnes this year, and the company's activity on the external market will also be strengthened. Thanks also to the investment, the company has retained 600 employees and increased the number of highly qualified colleagues by a further 50.

Vajda-Papír's Managing Director said that the new mill is equipped with the most modern paper machine in Europe, a Toscotec base paper machine capable of producing a 5.6 m wide paper roll with a production capacity of 80,000 tonnes/year, is highly energy efficient and environmentally friendly as it is equipped with a multi-stage energy recovery system. Construction costs were on target with a cost overrun of less than 2%. He also reported that, in addition to the investment in the factory expansion, further investments have been made to increase the production of finished products.

In 2022, Vajda-Papír Kft. launched a new transport business with a modern environment-friendly fleet of machines to guarantee an impeccable and flexible service to its customers, while reducing costs and becoming independent from external transport partners. They also optimise their transport activities both domestically and abroad and provide transport services to third parties. The new business is performing well and the aim is to expand services to their partners in 2023.

In its annual financial report, the company also pointed out that the price of virgin pulp, from which the base paper for sanitary paper is made and cannot be substituted by other raw materials, has risen significantly and the availability of recycled paper pulp is limited. The price increase has slowed down and, even if the price of pulp will not decrease, it may stabilise, which will significantly increase predictability, he added.

He pointed out that Hungary's annual demand for tissue paper products is 90,000 tonnes, while Vajda-Papír Group's annual capacity is 140,000 tonnes. Hungary's supply of sanitary paper products will continue to be assured, "there will be no shortage of toilet paper, tissues or wipes", Attila Vajda stressed. The cellulose storage capacity completed during the mill expansion can store 3 months' supply of buffer paper, and 2 months' supply of base paper.

The CEO said that the rise in energy costs was already spectacular in 2021, and Vajda-Papír's material expenses increased by more than 20%, mainly because of this. In 2022, however, the energy crisis caused by the war in Ukraine threatened to increase the company's energy bills several times over. However, thanks to proactive investments in sustainability in recent years, recent energy saving measures and mild winters, the company managed to reduce its winter energy bill by at least 30% compared to the worst case scenario, but the 70% increase in costs is still very significant. Energy costs are still running into billions of forints per month. They are trying to optimise by increasing efficiency and continuous monitoring," said Attila Vajda. The managing director of Vajda-Papír Ltd. said that the challenges of the past year included the fact that consumers of hygiene paper products were not spared the inflation and price increases in Hungary. Consumers were able to pick up familiar products from store shelves at significantly higher prices than a year earlier. Vajda-Papír's price increases were strategically lower than cost increases, as their main objective was to retain customers in 2022.

Attila Vajda reported that in 2018 and 2022, Vajda-Papír launched the world's most advanced equipment with high energy consumption, which operates with significantly lower energy and water consumption compared to similar paper machines. They have completed an investment that will further reduce water and energy consumption. "We are constantly looking at process improvements and potential rebuilds that will save even more energy, and even newer technologies. Our energy costs also amount to billions of forints per month. We optimise by increasing efficiency and continuous monitoring," he stressed.

As for this year's plans, he said that they expect to increase production by 20%, and the group's total turnover could well exceed HUF 100 billion, and it is very important to do this while improving profitability.

Vajda-Papír was founded 24 years ago as a family business, employing around 650 people at group level. The company has also been present in Norway since 2013 with a subsidiary employing more than 130 people. In 2020 and 2021, the company has completed bond issues totalling more than HUF 20 billion. In addition to sales in Hungary, the company's tissue paper products are shipped to more than 30 countries worldwide, with more than 50% of the Group's total tissue paper production sold in export markets.