1
Arctic Paper Capital Group
Management Boards Report
2022
Management Board’s Report 2022 Arctic Paper S.A. 2
Translatorʼs Explanatory Note: the following document is a free translation of the report of the above-mentioned Company. In the event
of any discrepancy in interpreting the terminology in Polish version is binding.
Table of contents
Letter from the President of the Management Board of Arctic Paper S.A. .......................................................... 4
INTRODUCTION................................ ................................................................................................................... 5
Information on the report.................................................................................................................................... 6
Definitions and abbreviations ............................................................................................................................. 7
Forward looking statements ................................................................ ............................................................. 12
Forward looking statements relating to risk factors ................................................................ ......................... 12
Selected consolidated financial data ................................ ................................................................................ 14
REPORT OF THE MANAGEMENT BOARD ................................ .......................................................................... 15
Description of the business of the the Arctic Paper S.A. Group ................................ ..................................... 16
General information ................................ ................................................................ ................................ ................................ 16
Capital Group structure ................................................................ ................................................................ .......................... 18
Changes in the capital structure of the Arctic Paper Group ................................ ................................................................ ....... 18
Modifications to the core management principles ................................ ..................................................................................... 18
Shareholding structure ................................ ................................ ................................................................ ........................... 18
Market environment ................................ ................................................................ ................................ ................................ 19
Development directions and strategy ................................ ....................................................................................................... 21
Sales structure ................................ ................................................................ ................................................................ ....... 22
Sales markets ................................................................................................................................................................ ........ 22
Buyers ................................................................................................ ................................................................ ................... 22
Vendors & Suppliers ................................................................ ................................................................ ............................... 23
Information on the seasonal or cyclical nature of business ................................................................ ....................................... 24
Research and development................................ ..................................................................................................................... 24
Labour matters ................................ ................................ ................................................................ ....................................... 24
Environment........................................................................................................................................................................... 24
Summary of consolidated financial results ................................ ...................................................................... 28
Selected items of the consolidated profit and loss statement ................................................................ .................................... 28
Selected items of the consolidated statement of financial position ................................ ............................................................ 31
Selected items of the consolidated cash flow statement ................................ ........................................................................... 34
Relevant information and factors affecting the financial results and the assessment of the financial standing
................................................................ .......................................................................................................... 35
Key factors affecting the performance results .......................................................................................................................... 35
Unusual events and factors ................................ ................................ ................................................................ .................... 36
Impact of changes in Arctic Paper Groups structure on the financial result ............................................................................... 36
Other material information ...................................................................................................................................................... 36
Factors influencing the development of the Arctic Paper Group ...................................................................... 38
Information on market trends ................................ ................................................................ .................................................. 38
Factors influencing the financial results in the perspective of the next year ............................................................................... 39
Management Board’s Report 2022 Arctic Paper S.A. 3
Risk factors ................................ ........................................................................................................................................... 40
Supplementary information .............................................................................................................................. 43
The Management Board position on the possibility to achieve the projected financial results published earlier ........................... 43
Principles of preparation of annual consolidated financial statements ....................................................................................... 43
Dividend information .............................................................................................................................................................. 43
Changes to the bodies of Arctic Paper S.A. ................................................................ ............................................................. 43
Changes to the share capital of Arctic Paper S.A. ................................ .................................................................................... 44
Remuneration paid to Members of the Management Board and the Supervisory Board .............................................................. 44
Agreements with Members of the Management Board guaranteeing financial compensation ...................................................... 44
Changes in holdings of the Issuers shares or rights to shares by persons managing and supervising Arctic Paper S.A. ............. 44
Management of financial resources ................................ ................................................................ ................................ ......... 45
Capital investments ................................ ................................................................ ................................ ................................ 45
Information on financial instruments ........................................................................................................................................ 45
Information of sureties, guarantees and pledges ...................................................................................................................... 45
Material off-balance sheet items ................................ ................................................................ ................................ ............. 46
Assessment of the feasibility of investment plans .................................................................................................................... 46
Information on material court and arbitration proceedings and proceedings pending before public administrative authorities ....... 46
Information on transactions with related parties executed on non-market terms and conditions .................................................. 46
Information on agreements resulting in changes to the proportions of share holdings ................................ ................................ 46
Information on purchase of treasury shares ............................................................................................................................. 46
Information on remuneration of the entity authorised to audit the financial statements ............................................................... 46
Headcount ................................................................ ................................................................ ................................ ............. 47
Statement on the application of the Corporate Governance Rules ................................ ................................... 48
Corporate Governance Rules ................................ ................................ ................................................................ .................. 48
Information on the extent the Issuer waived the provisions of the Corporate Governance Rules ................................................. 48
Internal control and risk management systems with reference to the development processes of financial statements .................. 49
Shareholders that directly or indirectly hold significant packages of shares ............................................................................... 50
Securities with special control rights ................................................................................................................................ ....... 50
Information on major restrictions on transfer of title to the Issuers securities and al l restrictions concerning the exercising of
voting rights ................................................................................................................................................................ ........... 50
Description of the functioning of the General Meeting .............................................................................................................. 51
Operation of the Issuers managing and supervising bodies and its committees as well as information on the composition of
those bodies ................................................................................................................................................................ .......... 52
Information compliant with the requirements of Swedish regulations con cerning corporate governance. ...... 61
General Meeting of Shareholders ................................ ................................ ............................................................................ 61
Appointment of governing bodies of the company .................................................................................................................... 61
Tasks of the bodies of the Company ................................ ................................ ....................................................................... 61
Size and composition of the Companys bodies ................................................................ ................................ ....................... 61
Chairpersons of the bodies of the Company ............................................................................................................................ 62
Procedures of the bodies of the Company ................................ ................................ ............................................................... 62
Remuneration of members of the bodies of the Company and management staff ................................................................ ....... 62
Information on corporate governance ...................................................................................................................................... 62
Information by the Management Board of Arctic Paper S.A. on selection of the audit firm .............................. 63
Statements of the Management Board ................................................................ .............................................. 64
Accuracy and reliability of the presented reports ................................ ...................................................................................... 64
Management Board’s Report 2022 Arctic Paper S.A. 4
Letter from the President of the Management Board of Arctic
Paper S.A.
Dear Sirs,
I am pleased to report that last year was another year in which the Arctic Paper group achieved very good results. It was a t ime
of very dynamic change, with many factors having a significant impact on our business. We have modified our activities on an
ongoing basis to suit the business environment.
The war in Ukraine has affected our activities to some extent. We have ceased trade with countries involved in this conflict. We
were forced to find new sources of supply of raw materials. In previous years, w e sold less than 1.5% of our total paper volume to
these countries. The high demand in Europe allowed us to redirect this volume to other countries in Western Europe. On the
humanitarian aspect, we joined in helping Ukrainian children by donating funds to buy medicine, clothing and food. As a paper
manufacturer, we have donated more than 150,000 notebooks to Ukrainian schools.
The post-pandemic recovery in the European economy has favoured an increase in our sales. We have experienced high demand
for all our products. At the same time, there were inflationary factors, which increased production costs. This was particularly
noticeable in the energy market, but cost increases also extended to other components such as services and transport. The
prosperity of the paper industry has allowed us to successfully implement successive price increases on finished products to
compensate for rising production costs. It is worth emphasising that our strategy is based on achieving our profitability tar gets
and not on maximising the tonnage of paper sold. As a result, we performed very well throughout the year.
Throughout the year, we recorded high demand for pulp. The strong market momentum associated with the recovery of the global
economy after the pandemic, as well as th e continued trend of replacing plastic packaging with products made from natural raw
materials, such as cellulose, enabled increased revenues in this segment.
The European energy market was very jittery and concerns about energy availability caused ver y high price fluctuations. Thanks
to solutions already introduced in the past, such as generating some energy directly in factories or purchasing energy based on
multi-annual contracts, we were less exposed to drastic increases in energy prices. We are pur suing investment projects to
significantly increase energy self-sufficiency both in the paper and pulp segments.
The consistent implementation of the 4P strategy and the results achieved as a result confirm that Arctic Paper is a reliable and
solid partner for its customers and meets the expectations of its shareholders.
I would like to thank the entire Arctic Paper Group team for their consistency in achieving the tasks set before them.
Sincerely yours,
Michał Jarczyński
President of the Management Board of Arctic Paper S.A.