StepChange Consulting has published the latest B3NCH FY-2024 financial report, providing insights into the performance of approximately 100 companies operating within the pulp, paper, packaging, and tissue sectors. The industry’s overall performance has stabilized yet remains below 2023 levels, with persistent overcapacity across multiple segments. Despite limited profitability rebound, most companies sustained a positive EBITDA, with only a few reporting negative net profits.
There was a decline in net profits for the packaging sector (-5.9%), an improvement of 12% in EBIT for graphic papers, and mixed performance within the pulp sector, particularly among Latin American players affected by unfavorable foreign exchange rates. Conversely, the tissue segment demonstrated strong improvements across key financial metrics.
Sector-by-Sector Insights
Packaging: The packaging industry experienced modest revenue growth of 0.8% in 2024. However, profitability and operational indicators deteriorated, with company-wide EBIT declining by 4.9% and segment-only EBIT decreasing by 6.8%. Net profit fell by 5.9%, while operating cash flow (OCF) dropped by 31.9%, indicating operational challenges. Working capital grew by 18.6%, adding financial pressure. Smurfit Westrock’s first annual report post-merger indicated many KPIs deteriorating compared to standalone results of Smurfit Kappa from previous periods.
Pulp: The pulp sector showed significant recovery in operational earnings, with average EBITDA reaching 27% and segment-only EBIT at 17.7%—a 78.5% increase compared to 2023. Despite this, net profit tumbled by 77.4% to an average level of 2.2%, largely driven by FX developments affecting Latin American peers. Working capital remained the highest among all peer groups, placing ongoing financial strain on companies. This peer group has exhibited volatility in profitability over the past three years.
Tissue: The tissue segment remained resilient, supported by stable demand and lower input costs resulting in significantly improved outcomes such as a 28.5% increase in net profits. Despite higher debt levels for some companies and increased working capital from low levels, the segment continues to outperform others in overall profitability. Kimberly-Clark led the segment, surpassing peers in most metrics.
Flexibles: The flexible packaging peer group remained stable but declined in most financial metrics. While net profit fell by 19.4% and NiROCE decreased by 21.8%, the sector maintains long-term resilience due to consistent demand and pricing strategies. Working capital decreased by 18.5%, falling from a low 4.2% to 3.5%.
Wood Products: The wood products sector saw recovery in 2024, with company-wide EBITDA increasing by 10.4% and EBIT surging by 56.6%. Net profits rose from 1.4% in 2023 to 2.3% in 2024, although still below pre-2023 levels. Enviva’s bankruptcy filing remains a major lowlight.
Graphic Paper: The graphic paper sector continued to decline with revenue decreasing by 1.3%. Nonetheless, segment EBIT improved by 12%, though operating cash flow (OCF) dropped significantly by 36.4%, straining cash flows further. Net-investment ratios decreased by 5.4%.
Overall: The B3NCH FY-2024 report highlights a mixed financial landscape. Tissue and wood products have shown improvements, while packaging, pulp, graphic paper, and flexibles continue to underperform relative to historical results. Profitability pressures and rising working capital requirements pose challenges, especially during times of high interest rates. Tissue remains the strongest performer, benefiting from stable demand and cost advantages. Pulp encountered the steepest decline in net profit, emphasizing volatility in this segment. Packaging companies must navigate increasing costs and efficiency challenges for sustained profitability. Moving forward, financial stability, disciplined investment, and operational efficiency will be crucial as companies approach the first half of 2025.
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