FULLTEXT DEL 3 AV 3
Årsredovisning 2023
Management Board’s Report 2023 Arctic Paper S.A. 30
The decrease in profit on sales in 2023 compared to 2022 was primarily due to a decrease in sales volumes of both p aper and
pulp due to reduced market demand.
In 2023, the selling and distribution costs amounted to PLN 340,973 thousand, down 23.4% on 2022. The selling and distributio n
costs comprise particularly transportation costs.
In 2023, administrative expenses reached PLN 124,077 thousand, compared to PLN 138,766 thousand in 2022, a decrease of
10.6%. The main reasons for the decrease were lower costs related to the provision of external consultancy services to the Gr oup
and lower employee benefit costs.
Other o perating income and expenses
Other operating income in 2023 amounted to PLN 129,397 thousand, an increase of PLN 43,619 thousand compared with the
previous year.
Other operating expenses in 2023, reached PLN 52,963 thousand, down by PLN 16,630 thousand on the previous year.
A major part of the other operating income and expenses includes revenues and costs of sales of sold energy and other
materials. In addition, the subsidy granted to the Kostrzyn plant of PLN 31.2 million contributed to the increase in other operating
income in 2023. This subsidy applied to energy -intensive companies and was intended to offset the increase in the price of
emission rights in 2022.
Financial income and financial expenses
In 2023, financial income amounted to PLN 15,069 tho usand, down by PLN 77.698 thousand compared to the revenues generated
in 2022, mainly due to a lower result on forward energy contracts at RROS.
Financial expenses in 2023 amounted to PLN 31,220 thousand compared to PLN 8,169 thousand incurred in 2022. The higher
financial expenses in 2023 were primarily due to the value of FX losses.
Income tax
Income tax in 2023 was PLN -68,528 thousand PLN -170,756 thousand in 2022. The effective tax rate to gross profit in 2023 was
20% (2022: 18%).
Profitability analys is
The Company uses alternative performance measurements when describing the Group’s financial position. In the opinion of the
Management Board, these selected indicators provide valuable information on the financial and operational situation (in addit ion
to the data provided by the Company in its financial statements), as well as facilitating the analysis and evaluation of the Group’s
financial results over the individual reporting periods.
The Company presents alternative performance measurements as they represent standard measures and ratios commonly used
in financial analysis, however, these ratios may be calculated and presented differently by different companies. Therefore, t he
Issuer provides the exact definitions used by the Group in its reporting p rocess. The selection of alternative performance
measures was preceded by a thorough analysis of their usefulness in terms of providing shareholders, analysts and investors
with useful information on financial position and financial efficiency, which the C ompany believes allows for an optimal
assessment of its financial results.
The ratios presented by the Company were calculated according to the formulas described at the beginning of this report in th e
“Definitions and explanations of abbreviations” secti on.
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Management Board’s Report 2023 Arctic Paper S.A. 31
EBITDA in 2023 was PLN 475,304 thousand, while in 2022 it was PLN 973,973 thousand. The decrease in EBITDA in 2023 is
primarily due to lower paper and pulp sales volumes, partly offset by lower production costs. In the reporting period, the EB ITDA
mar gin was 13.39% versus 19.90% in 2022.
Operating profit for 2023 amounted to PLN 357,068 thousand and for 2022 to PLN 842,979 thousand. The operational profit
margin in 2023 was +10.06% versus +17.22% in 2022. The lower operating profit in 2023 was due to l ower EBITDA.
Net profit in 2023 was PLN 272,388 thousand, while in 2022 it was PLN 756,822 thousand. Net profit margin in 2023 amounted to
+7.67% as compared to +15.46% in 2022.
PLN ‘000 2023 2022
Change %
2023/2022
Profit/(loss) on sales 745 684 1 410 757 (47.1)
% of sales revenues 21.01 28.82 (7.8) p.p.
EBITDA 475 304 973 973 (51.2)
% of sales revenues 13.39 19.90 (6.5) p.p.
EBIT 357 068 842 979 (57.6)
% of sales revenues 10.06 17.22 (7.2) p.p.
Net profit/(loss) 272 388 756 822 (64.0)
% of sales revenues 7.67 15.46 (7.8) p.p.
Return on equity / ROE (%) 15.1 36.9 (21.8) p.p.
Return on assets / ROA (%) 10.0 23.3 (13.3) p.p.
In 2023, return on equity was +15.10%, while in 2022 it was +36.9%.
In 2023, return on assets was +10.0%, while in 2022 it was +23.3%.
The decrease in return on equity and return on assets in 2023 was mainly due to the decrease in net profit achieved in 2023
compared to 2022.
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Management Board’s Report 2023 Arctic Paper S.A. 32
Selected items of the consolidated statement of financial position
PLN ‘000
31 December
2023
31 December
2022
Change
31.12.2023
-31.12.2022
Fixed assets 1 292 262 1 371 867 (79 606)
Inventories 444 930 601 205 (156 275)
Receivables 416 268 504 024 (87 756)
trade receivables 415 421 503 391 (87 970)
Other current assets 68 968 295 459 (226 491)
Cash and cash equivalents 500 449 481 930 18 520
Total assets 2 722 877 3 254 485 (531 608)
Equity 1 801 508 2 052 182 (250 675)
Short -term liabilities 641 616 806 906 (165 289)
of which:
trade and other payables 447 917 551 211 (103 294)
interest -bearing debt 48 742 43 443 5 299
other non -financial liabilities 144 958 212 252 (67 294)
Long -term liabilities 279 753 395 397 (115 644)
of which:
interest -bearing debt 104 198 162 324 (58 126)
other non -financial liabilities 175 555 233 072 (57 517)
Total equity and liabilities 2 722 877 3 254 485 (531 608)
As at 31 December 2023, total assets amounted to PLN 2,722,877 thousand as compared to PLN 3,254 .485 thousand at the end
of 2022.
Fixed assets
At the end of December 2023, fixed assets amounted to PLN 1,292,26 2 thousand and accounted for 47.5% of total assets,
compared to PLN 1,371 .867 thousand at the end of 2022 (42.2% of total assets).
The decrease in the value of fixed assets was mainly due to a decrease in the positive valuation of power purchase forwards.
Current assets
As at the end of December 2023, current assets amounted to PLN 1,430 .616 thousand as compared to PLN 1,882 .618 thousand
at the end of December 2022. W ithin current assets, inventories decreased by PLN 156,275 thousand, receivables decreased by
PLN 87,756 thousand, other current assets decreased by PLN 226,491 thousand, and cash and cash equivalents increased by
PLN 18,520 thousand. Current assets represented 52.5% of total assets as at the end of December 2023 (57.8% as at the end of
2022) an d included inventories – 16.3% (18.5% as at the end of 2022), receivables – 15.3% (15.5% as at the end of 2022), other
current assets – 2.5% (9.1% as at the end of 2022) and cash and cash equivalents – 18.4% (14.8% as at the end of 2022). The
decrease in o ther current assets was mainly due to a decrease in the positive valuation of forwards mainly for the purchase of
electricity. The increase in cash was mainly due to positive cash flows from operating activities.
Equity
As at the end of 2023, the equity amounted to PLN 1,801 .508 thousand as compared to PLN 2,052 .182 thousand at the end of
2022. As at the end of December 2023, equity accounted for 66.2% of total equity and liabilities (63.1% as at 31 December 202 2).
The decrease in equity was primarily du e to a reduction in the positive valuation of financial instruments treated as hedges of
future cash flows and the payment of dividends to other shareholders by Rottneros AB, offset in part by net profit for 2023.
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Management Board’s Report 2023 Arctic Paper S.A. 33
Short -term liabilities
As at the end of De cember 2023, short -term liabilities amounted to PLN 641,61 6 thousand (23.6% of the balance sheet total),
compared to PLN 806,907 thousand (24.8% of the balance sheet total) at the end of 2022.
Short -term liabilities decreased by PLN 165,289 thousand in 20 23 mainly due to a decrease in trade and other payables,
employee liabilities and income tax liabilities offset in part by an increase in mainly short -term loans.
Long -term liabilities
As at the end of December 2023, long -term liabilities amounted to PLN 279,75 3 thousand (10.3% of the balance sheet total),
compared to PLN 395,397 thousand (12.1% of the balance sheet total) at the end of 2022. In the year under review, there was a
decrease in long -term liabilities by PLN 115,644 thousand.
The decrease in l ong -term liabilities was mainly due to a decrease in provisions for employee benefits and the repayment of
loans.
Debt analysis
2023 2022
Change %
2023/2022
Debt to equity ratio (%) 51.1 58.6 (7.4) p.p.
Equity to fixed assets ratio (%) 139.4 149.6 (10.2) p.p.
Interest -bearing debt -to-equity ratio (%)
8.5 10.0 (1.5) p.p.
Net debt to EBITDA ratio for the last 12 months (x) (0.73) (0.28) (0.45)
EBITDA to interest coverage ratio (x) 75.6 146.6 (70.9)
As at the end of December 2023, the equity debt ratio was 51.1% and was lower by 7.4 p.p. versus the end of December 2022.
The decrease in the ratio was mainly due to an increase in equity.
The ratio of fixed assets to equity stood at 139.4% at the end of 2023, 10.2 p.p. lower than at the end of December 2022 as a
result of higher decline in equity than in fixed assets.
The interest -bearing d ebt to equity ratio was 8.5% at the end of 2023 and was by 1.5 p.p. lower versus the ratio calculated at the
end of December 2022, both due to a decrease of interest -bearing debt than a decrease in equity.
The net debt to EBITDA ratio for the last 12 month s of 2023 was -0.73, 0.45 lower than the ratio for 2022 due to both a larger
decrease in net debt calculated as interest -bearing liabilities less cash than a decrease in EBITDA.
The EBITDA to net interest expense ratio for the 12 last months of 2023 was 7 5.6 and it was lower by 70.9 versus the level of the
ratio for 2022 as a result of a decrease of EBITDA.
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Management Board’s Report 2023 Arctic Paper S.A. 34
Liquidity analysis
2023 2022
Change %
2023/2022
Current ratio 2.2x 2.3 (0,1)
Quick ratio 1,5x 1,6 (0,1)
Cash solvency ratio 0,8x 0,6 0,2
DSI (days) 57,1 62,1 (5,0)
DSO (days) 42,1 37,0 5,1
DPO (days) 57,5 57,0 0,6
Operating cycle (days) 99,3 99,2 0,1
Cash conversion cycle (days) 41,8 42,2 (0,4)
The current and quick liquidity ratios were 2.2 and 1.5, respectively, at the end of December 2023 and decreased by 0.1 and 0 .1
compared to 31 December 2022 mainly due to a higher growth rate of current assets than short -term liabilities.
The cash solvency ratio was 0.8 at the end of December 2023, higher than the level of this ratio at the end of December 2022 (by
0.2) mainly due to the increase in cash.
The cash conversion cycle for 2023 (48.8 days) shortened by 0.4 days compared to 2022 (42.2 days) mainly as a result of a
reduction in inventory turnover while receivables turnover increased.
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Management Board’s Report 2023 Arctic Paper S.A. 35
Selected items of the consoli dated cash flow statement
PLN ‘000 2023 2022
Change %
2023/2022
Cash flows from operating activities 471 204 607 383 (22,4)
of which:
Gross profit/(loss) 340 917 927 577 (63,2)
Depreciation/amortisation and impairment allowances (reversal) 118 237 130 994 (9,7)
Changes to working capital 52 740 (289 303) (118,2)
Other adjustments (40 691) (161 884) (74,9)
Cash flows from investing activities (146 720) (155 879) (5,9)
Cash flows from financing activities (288 934) (124 588) 131,9
Total cash flows 35 550 326 916 (89,1)
Cash flows from operating activities
Net cash flows from operating activities reached PLN 471,20 4 thousand in 2023, compared with PLN 607,381 thousand in 2022.
The lower cash flows from operating activities in 2023 was the result of a decrease in gross profit.
Cash flows from investing activities
In 2023, cash flows from investing activities amounted to PLN -146,7 20 thousand compared with PLN -155,879 thousand in 2022
and mainly comprised expenditure on the acquisition of property, plant and equipment.
Cash flows from financing activities
Cash flows from financing activitie s in 2023 reached PLN -288,93 4 thousand compared with PLN -124,587 thousand in 2022. The
increase in negative cash flows from financing activities in 2023 was primarily due to dividend payments and loan repayments.
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Management Board’s Report 2023 Arctic Paper S.A. 36
Relevant information and factors affecting the financial results and
the assessment of the financial standing
Key factors affecting the performance results
The Group’s operating activities have been and will continue to be historically influenced by the following key factors:
— macroeconomic and other economic factors,
— demand growth for products based on natural fibres,
— reduced demand for certain paper types,
— fluctuations of paper prices,
— pulp price fluctuations for Paper Mills, timber for Pulp Mills and energy prices,
— FX rates fluctuation.
Macroeconomic and other economic factors
W e believe that a number of macro -economic and other economic factors have a ma terial impact on the demand for high -quality
paper, and they may also influence the demand for the Group’s products and the Group’s operating results. Those factors
include:
— GDP growth,
— net income – as a metric of income and affluence of the population,
— pr oduction capacity – the surplus of supply in the high quality paper segment over demand and decreasing sales margins on
paper,
— paper consumption,
— technology development.
Demand growth for products based on natural fibres
The trend observed in developed societies concerning a reduction of man’s adverse impact on the environment, in particular
reduction of use of disposable, plastic packaging that may not be recycled, offers new opportunities for the development of t he
pulp & paper sector. In many companie s, work has been under way to develop new methods of packaging and production of
packaging with natural materials, including pulp, so that it can be recycled. Arctic Paper is also involved in such research. In the
near future, the product segment is expect ed to increase its percentage share in the volumes and revenues of the Arctic Paper
Group.
Reduced demand for certain paper types
Development of new technologies, in particular in the areas of information and communication, results in decreasing demand fo r
certain paper types – in particular, this affects newsprint and to a lesser extent – graphic papers. However, despite the increasing
popularity of e -books, the volume of book paper produced and sold by Arctic Paper has been stable in the recent years, le ss
sensitive to changing market conditions. Nevertheless, in its strategy Arctic Paper has set a direction of activity so that w ithin
several years, the segment of non -graphic papers (that is technical or packaging paper) accounts for 1/5 of its consolidat ed
revenues.
Paper prices
Paper prices undergo cyclic changes and fluctuations, they depend on global changes in demand and overall macroeconomic and
other economic factors such as indicated above. Prices of paper are also influenced by a number of factors related to the supply,
primarily changes in production capacities at the worldwide and European level.
Costs of raw materials, energy and transportation
The main elements of the Group’s operating expenses include raw materials, energy and transportation. The costs of raw
materials include mainly the costs of pulp for Paper Mills, timber for Pulp Mills and chemical agents used for paper and pulp
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Management Board’s Report 2023 Arctic Paper S.A. 37
production. Our energy costs historically include mostly the costs of electricity, gas and rights to CO2 emission s. The costs of
transportation include the costs of transportation services provided to the Group mainly by external entities.
Taking into account the share of those costs in total operating expenses of the Group and the limited possibility of controll ing
these costs by the Group Companies, their fluctuations may have a major impact on the Group’s profitability.
A part of pulp supplies to our Paper Mills is made from our own Pulp Mills. The remaining part of pulp manufactured at our Pu lp
Mills is sold to e xternal customers.
Currency rate fluctuations
The Group’s operating results are significantly influenced by currency rate fluctuations. In particular, the Group’s revenues and
costs are expressed in different foreign currencies and are not matched, therefo re, the appreciation of the currencies in which we
incur costs towards the currencies in which we generate revenues, will have an adverse effect on the Group’s results. Our
products are primarily sold to euro zone countries, Scandinavia, Poland and the UK, thus our revenues are largely denominated
in EUR, GBP, SEK and PLN while revenues from the pulp mills are primarily denominated in USD. The Group’s operating
expenses are primarily expressed in USD (pulp costs for Paper Mills), EUR (costs related to pulp for Paper Mills, energy,
transportation, chemicals), PLN (the majority of other costs incurred by the Paper Mill in Kostrzyn nad Odrą) and SEK (the
majority of other costs incurred by the Munkedal and Grycksbo Paper Mills as well as the Rottneros and Vallv ik Pulp Mills).
Exchange rates also have an important impact on results reported in our financial statements because of changes in exchange
rates of the currencies in which we generate revenues and incur costs, and the currency in which we report our financial results
(PLN).
Unusual events and factors
In 2023 the Kostrzyn plant was granted with the subsidy of PLN 31.2. This subsidy applied to energy -intensive companies and
was intended to offset the increase in the price of emission rights in 2022.
Imp act of changes in Arctic Paper Group’s structure on the financial result
In 2023, there were no material changes in the Arctic Paper Group’s structure that would have material influence on the finan cial
result generated.
Other material information
Joint investment by Arctic Paper and Rottneros – conclusion of joint venture agreement
On 17 February 2023, Arctic Paper S.A. and Rottneros AB (“Rottneros”) entered into a joint venture agreement (the “Joint -
Venture Agreement”) and a joint venture agreemen t under the name Kostrzyn Packaging Sp. z o.o.
The initial share capital of the Joint -Venture will amount to PLN 460,000.00 and will be divided into 46 equal and indivisible
shares with a nominal value of PLN 10,000.00 each. The company and Rottneros will each hold 50% of its share capital.
The object of the Joint -Venture will be: (i) manufacturing moulded cellulose fibre packaging, (ii) sale of finished packaging, (iii)
development research and technical analysis of manufactured products.
The source of fu nding for the Joint -Venture’s operations will be shareholders’ own contributions and bank loans.
Joint -Venture, under the decision of the Minister of Transport and Development, will benefit from support in the form of income
tax exemption up to the amount of PLN 97.2 million of eligible costs under the Polish Investment Zone programme.
The conditions for the income tax exemption to be granted are the minimum value of the investment (PLN 97.2 million), the
creation and maintenance of an adequate number of jo bs in the production facility and the timing of the investment – no later than
31 December 2025.
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Management Board’s Report 2023 Arctic Paper S.A. 38
The Joint -Venture is also obliged to incur eligible costs of a certain minimum value during the implementation of the investment
and to meet qualitative crite ria (among others, the criterion of economic and social sustainability) within a period of 5 years from
the date of completion of the investment.
The aim of the Joint -Venture is to build a moulded cellulose fibre packaging plant in Kostrzyn nad Odrą, Polan d, which is planned
to be operational by the end of 2023. The estimated value of the investment will be PLN 100 million, of which the Issuer’s sh are
will be 50%. According to the Issuer’s estimates, the investment will generate annual revenue of around PLN 60 million.
The joint venture between the Company and Rottneros AB will allow the synergy of Rottneros Packaging AB’s know -how in the
commercialisation of biodegradable packaging technology, existing operational experience and the favourable location of the
Joint -Venture in Kostrzyn nad Odrą. The expansion of the Arctic Paper Group’s product portfolio will help strengthen its position
in the fast -growing green packaging market and is an important part of the implementation of the Arctic Paper 4P strategy.
Conclusion of an amendment agreement to a significant financing agreement for the Issuer Group
On 8 November 2023, the Company, as borrower, and its selected subsidiaries, as guarantors, concluded an agreement with a
syndicate of banks consisting of: Bank Polska Kasa Opieki S.A., BNP Paribas Bank Polska S.A. and Santander Bank Polska S.A.
an amending agreement to the term and revolving loan agreement of 2 April 2021 pursuant to which the Lenders granted an
additional term loan on the terms and conditions d escribed in current report no. 14/2023 of 9 August 2023 up to a total amount of
EUR 20,000.000 of additional loan to finance the construction costs of the biomass drying and pellet production facility to b e
located in Grycksbo on the property owned by Arct ic Paper Grycksbo AB, and extended the repayment date of the revolving loan
under the Loan Agreement to 31 March 2026 as the so -called “RCF Repayment Term Extension”.
The Additional Loan, representing 67.5% of the amount of the Additional Loan disbursed, w ill be repaid in semi -annual
instalments starting from May 2026. The remaining amount of the Additional Loan will be repaid on the final repayment date of
the Additional Loan. Disbursement of the Additional Loan and the RCF Term Extension will be made subj ect to the satisfaction of
the standard conditions precedent provided for in the Amending Agreement. The terms and conditions of the Additional Loan
agreement do not differ from those commonly used for this type of agreement.
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Management Board’s Report 2023 Arctic Paper S.A. 39
Factors influencing the development of the Arctic Paper Group
Information on market trends
Supplies of fine paper
In Q4 2023 the Arctic Paper Group recorded an increased level of orders versus Q3 2023 by 4.5% and an increase of orders
versus the same period of 2022 by 3.5%.
Sou rce of data: Analysis by Arctic Paper
Paper prices
At the end of Q4 2023, average prices for high -grade papers were lower by respectively: 9.8% for UW F papers and by 12.2% for
CW F papers compared to the corresponding prices at the end of 2022.
In the peri od from October to December 2023, the prices of uncoated wood -free paper (UW F) and coated wood -free paper (CW F)
for selected markets: Germany, France, Spain, Italy and the UK expressed in EUR and GBP remained unchanged for both UW F
and CW F papers.
The aver age prices invoiced by Arctic Paper in EUR for comparable products in the segment of uncoated wood -free paper (UW F)
at the end of 2023 dropped by 20.8% versus the end of 2022 while in the segment of coated wood - free paper (CW F) the prices
dropped by 16.8% .
Source: For market data – RISI, price changes for selected markets in Germany, France, Spain, Italy and the UK in local
currencies for graphic papers similar to the product portfolio of the Arctic Paper Group. The prices are expressed without
considering specific rebates for individual customers and they include neither additions nor price reductions in relation to the
publicly available price lists. The estimated prices for each month reflect orders placed in the month while the deliveries m ay take
place in the future. Because of that, RISI price estimates for a particular month do not reflect the actual prices at which deliver ies
are performed but only express ordering prices. For Arctic Paper products, the average invoiced sales prices for all served
markets in EUR.
Pulp prices
At the end of Q4 2023, the pulp prices were as follows: NBSK 1,244 USD/tonne and BHKP 1,001 USD/tonne. The average NBSK
price in Q4 2023 was 18.6% lower than in the same period last year, while BHKP was 34.2% lower. The average pu lp price in Q4
2023 was higher by 1.4% for NBSK and higher by 8.8% for BHKP as compared to Q3 2023.
The average cost of pulp per ton of produced paper as calculated for the AP Group, expressed in PLN, in Q4 2023 decreased by
13.8% versus Q3 2023 and decrea sed by 44.1% versus Q4 2022. The share of pulp costs in cost of paper sales in Q4 of the
current year amounted to 49% and decreased compared to the level recorded in Q4 2022 (61%).
In the four quarters of 2023, the AP Group used pulp in the production pro cess in the following structure: BHKP 75%, NBSK 20%
and other 5%.
Source of data: www.foex.fi Arctic Paper analysis
Currency exchange rates
The EUR/PLN exchange rate at the end of Q4 2023 amounted to 4.3480 and was lower by 6.2% than at the end of Q3 2023 and
lower by 7.3% than at the end of Q4 2022. The average exchange rate in Q4 2023 was lower by 1.8% than in Q3 2023 and
amounted to 4.4193 versus 4.4995. The average exchange rate in Q4 2023 was by 6.6% lower than in Q4 2022.
The EUR/SEK exchange rate at the end of December 2023 stood at 11.0947 against 11.4942 at the end of Q3 2023 and 11.1320
at the end of Q4 2022, representing an appreciation of the SEK against the EUR of 3.5% and 0.3% respectively.
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Management Board’s Report 2023 Arctic Paper S.A. 40
For this pair, the mean exchange rate in Q4 was by 2 .5% lower compared to Q3 2023. The mean exchange rate in Q4 2023 was
by 4.9% higher than in the corresponding period of 2022.
The changes mean an appreciation of SEK vis -a-vis EUR in Q4 2023 versus Q3 2023 which had an unfavourable impact on the
Group’s f inancial results, primarily with reference to the sales revenues generated by the Swedish factories that rely on prices in
EUR.
At the end of Q4 2023, the USD/PLN rate recorded a decrease by 9.9% versus the end of Q3 2023 and amounted to 3.9350. The
averag e rate in Q4 2023 was 4.1113, compared to 4.1360 in Q3 2023 and 4.6397 in Q4 2022. This represents an appreciation of
the PLN against the USD of 0.6% q/q and a strong appreciation of 11.4% y/y.
At the end of Q4 2023, the USD/SEK rate amounted to 10.0408 an d was by 7.3% lower than at the end of Q3 2023. The average
rate in Q4 2023 was 10.6757, 0.5% lower than the average rate in Q4 2022.
The average annual change in the USD/SEK exchange rate (+4.9%) adversely affected the costs realised in USD by the Swedish
paper mills, in particular pulp costs. W ith regard to the Kostrzyn paper mill, changes in the average annual USD/PLN exchange
rate ( -5.8%) had a favourable impact on costs realised in USD, in particular pulp costs.
At the end of December 2023, the EUR/USD rate amounted to 1.1050 compared to 1.0609 at the end of Q3 2022 and to 1.0655 at
the end of December 2022. In terms of percentage, that means an appreciation of EUR to USD by 4.2% versus Q3 2023 and an
appreciation of the currency by 3.7% versus the equi valent period of the previous year. In Q4 2023, the mean exchange rate of
the pair amounted to 1.0755 compared to 1.0884 in Q3 2023 ( -1.2%).
The appreciation of the EUR against the SEK on an average annual basis (+8% y/y) adversely affected the Group’s fi nancial
results, mainly due to a reduction in sales revenue generated in EUR and expressed in SEK. The strengthening of the PLN
against the USD in the corresponding period had a positive impact on the purchase prices of raw material at the Kostrzyn mill .
The SEK weakening against the USD y/y had a negative impact on the above costs at the Swedish paper mills
Factors influencing the financial results in the perspective of the next year
The material factors that have an impact on the financial results over the next quarter, include:
Shaping demand for high -grade paper in Europe at a time of a tense geopolitical situation, high energy prices and elevated
inflation, as well as an expected economic slowdown. Over the recent years there has been a major decrease of demand for
fine paper in Europe (level of executed orders). Further negative developments in the market may adversely affect order
levels to our Paper Mills. The intensification of remote working may have the additional effect of reducing demand for high -
quality graphic papers and therefore negatively affect the Group’s financial performance.
Price changes of fine paper. In particular, the possibility to maintain the prices of Arctic Paper products in local currenci es in
view of the declin ing supply/demand in Europe and in the context exchange rates fluctuations, will have a material influence
on the financial results. Paper prices are going to be of particular importance for the Paper Mill of Grycksbo which – in
connection with the market changes – experiences the greatest adverse impact of drop of sales volumes, prices as well as of
exchange rate fluctuations.
Price fluctuations of raw materials, including pulp for Paper Mills and electricity for all operational entities. In particul ar,
financial results of Paper Mills may be negatively influenced by increasing pulp prices, particularly BHKP. On the other hand,
dropping NBSK pulp prices may negatively affect the financial results of Pulp Mills. Fluctuations of electricity prices in
Sweden may also have a material impact on the results generated by the Group. In the future, such market changes may
translate into changes of sales profitability in Paper Mills of AP Munkedals and AP Grycksbo as well as in Pulp Mills of
Rottneros and Vallvik.
Changes in currency rates, in particular, the appreciation of PLN and SEK in relation to EUR and GBP, the appreciation of
PLN in relation to SEK, and the depreciation of PLN and SEK in relation to USD, may have an adverse effect on the financial
results. H owever, the Group’s Pulp Mills may benefit from the appreciation of USD in relation to SEK.
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Management Board’s Report 2023 Arctic Paper S.A. 41
Risk factors
Risk factors related to the environment in which the Group operates
The sequence in which the risk factors are presented below does not reflect the li kelihood of occurrence, extent or materiality of
the risks.
The risk related to intensifying competition in the paper market in Europe
Our Group operates in a very competitive market. The achievement of the strategic objectives assumed by the Group may be
made difficult by operations of competitors, particularly integrated paper producers operating on a larger scale than our Gro up.
Any more intensified competition resulting from a potential growth of production capacity of our competitors and thus an
increa sed supply of paper to the market, may adversely affect the achievement of the planned revenues and thus the ability to
achieve the underlying financial and operational assumptions.
Risk of changing legal regulations
Our Group operates in a legal environm ent characterised with a high level of uncertainty. The regulations affecting our business
have been frequently amended and often there are no consistent interpretations which generates a risk of violating the existi ng
regulations and the resultant consequ ences even if such breach was unintentional. Additionally, amendments to regulations
relating to environmental protection and other regulations may generate the need to incur material expenditures to ensure
compliance, inter alia, more restrictive regulati ons or stricter implementation of the existing regulations concerning the protection
of surface waters, soil waters, soil and atmospheric air.
FX risk
Revenues, expenses and results of the Group are exposed to currency risk, in particular relating to excha nge rates of PLN and
SEK to EUR, GBP and other currencies. Our Group exports a majority of its produced paper to European markets, generating a
material part of its sales revenues in EUR, GBP, PLN and SEK. Sales revenues of pulp in the Pulp Mills are subje ct to USD fix
risk. The purchase costs of materials for paper production, in particular pulp for paper mills are paid primarily in USD and EUR.
Additionally, we hold loan liabilities mainly in PLN, EUR and SEK. PLN is the currency used in our financial sta tements and
therefore our revenues, expenses and results generated by the subsidiaries domiciled abroad are subject to FX rate fluctuatio ns.
Thus currency exchange rate fluctuations may have a strong adverse effect on the results, financial conditions and prospects of
the Group.
Interest rate risk
The Group is exposed to interest rate risk in view of the existing interest -bearing debt. The risk results from fluctuations of such
interest rates as W IBOR for debt in PLN, EURIBOR for debt in EUR and STIBOR for debt in SEK. Unfavourable changes of
interest rates may adversely affect the results, financial condition and prospects of the Group.
Risk related to increasing importance of alternative media
Trends in advertising, electronic data transmission and storage and in the Internet have adverse impact on traditional printed
media and thus on the products of the Group and its customers. Continuation of such changes may adversely affect the results,
financial condition and prospects of the Group.
The objectives an d methods of financial risk management in the Group along with hedging methods of major transactions are
detailed in note 34 to the consolidated financial statements.
Risk factors relating to the business of the Group
The sequence in which the risk factors are presented below does not reflect the likelihood of occurrence, extent or materiality of
the risks.
Risk related to relatively low operational margins
Historically, the operational results of the Group are characterised by relatively high volatility an d low profit margins on
operations. Reduced revenues resulting e.g. from changes to production capacity, output, pricing policies or increased operat ing
===== SIDA 153 =====
Management Board’s Report 2023 Arctic Paper S.A. 42
expenses that primarily comprise costs of raw materials (mainly pulp for Paper Mills) and energy, may m ean the Group’s losses in
earning capacity. Material adverse changes to profitability may result in reduced prices of our stock and reduced capacity to
generate working capital thus adversely affecting our business and deteriorating our prospects.
Risk of price changes to raw materials, energy and products
W e are exposed to the risk of price changes of raw materials and energy, primarily related to price fluctuations of pulp, gas and
electricity. Paper Mills buy pulp under frame agreements or in one -off tra nsactions and do not hedge against fluctuations of pulp
prices. A part of pulp is supplied to our Paper Mills from the Pulp Mills of the Rottneros Group. The risk of changing prices of raw
materials is related primarily to changing prices of paper and pulp in the markets to which we sell our products. A material growth
of prices of one or more raw materials and energy may adversely affect the operating results and financial condition of the G roup.
Risk of disruption to production processes
Our Group holds three Paper Mills operating jointly seven production lines with total annual production capacity of over 700,000
tonnes of paper and two Pulp Mills with a total production capacity of 400,000 tonnes of pulp. Long -lasting disruption to the
production proces s may result from a number of factors, including a breakdown, human error, unavailability of raw materials,
natural catastrophes and other that are beyond our control. Each such disruption, even relatively short, may have material im pact
on our production and profitability and result in material costs for repairs, liabilities to buyers whose orders we are not able to
satisfy and other expenses.
Risk related to our investments
Investments by the Group aimed at expanding the production capacity of the Group r equire material capital outlays and a
relatively long time to complete. As a result, the market conditions under which we operate may be materially changed in the
period between our decision to incur investment outlays to expand production capacity and the completion time. Changes of
market conditions may result in a volatile demand for our products which may be too low in the context of additional producti on
capacities. Differences between demand and investments in new production capacities may result in f ailure to utilise the
expanded production capacity to the full extent. This may have adverse effect on the operating results and financial conditio n of
the Group.
Risk factors relating to the debt of the Group
Our Group mainly has debt under a loan agreem ent with a consortium of banks (Pekao SA, Santander Bank S.A. and BNP
Paribas SA) of 2 April 2021, loan debt with Danske Bank, Nordea Bank and under leasing agreements.
Failure by the Group to comply with its obligations, including the agreed levels of fi nancial ratios (covenants) resulting from the
agreements, will result in default under those agreements. Events of default may in particular result in demand for repayment of
our debt, banks taking control over important assets like Paper Mills or Pulp Mil ls and loss of other assets which serve as
collateral, deterioration of creditworthiness and lost access to external funding which will be converted into lost liquidity and
which in turn may materially adversely affect our business and development prospect s and our stock prices.
Risk related to insurance limits
In the context of deteriorating situation in paper industry and the results of the Arctic Paper Group, our suppliers, in part icular
suppliers of such raw materials as pulp, may have problems with ac quiring insurance limits (sale on credit) and thus they may
lose the possibility of offering deferred payment terms to the Arctic Paper Group. Such situation may result in deteriorated
financial situation and loss of financial liquidity of operating units and as a result this may adversely affect the situation in the
entire Group.
Risk of restricted supplies of natural gas
Polskie Górnictwo Naftowe i Gazownictwo S.A (PGNiG) is the sole supplier of natural gas used by AP Kostrzyn to generate heat
and electr ical energy for paper production (PGNiG). In this context, the business and costs of paper production at AP Kostrzyn is
materially affected by availability and price of natural gas. Potential disruptions of supplies of natural gas to the Paper M ill in
Kost rzyn nad Odrą may have adverse effect on production, results on operations and financial condition of the Group.
===== SIDA 154 =====
Management Board’s Report 2023 Arctic Paper S.A. 43
Risk related to consolidation and liquidity of key customers
Consolidation trends among our existing and potential customers may result in a m ore concentrated customer base covering a
few large buyers. Such buyers may rely on their improved bargaining position in negotiating terms of paper purchases or decid e
to change the supplier and acquire products from our competitors. Additionally, in the context of the deteriorating condition in
printing industry, such customers as paper distributors, printing houses or publishers may not be able to obtain insurance li mits
(sale on credit) or have problems with financial liquidity which may result in their bankruptcy and adversely affect our financial
results. The above factors may have adverse impact on the operational results and financial condition of the Group.
Risk related to compliance with regulations on environmental protection and adverse impact of the production process
on the environment
The Group meets the requirements related to environmental protection; however, no certainty exists that it will always be abl e to
comply with its obligations and that in the future it will avoid material expenses or that it will not incur material obligations related
to the requirements or that it will be able to obtain all permits, approvals and other consents to carry on its business as p lanned.
Similarly, considering that paper and pulp production is related to potential hazards relating to waste generated in Paper Mills
and Pulp Mills and contamination with chemicals, no certainty exists that in the future the Group is not charged with liabili ty for
environmental pollution or that no event that may underlie the liability of the Group has not already occurred. Thus the Group may
be required to incur major expenses in connection with the need to remove contamination and land reclamation.
Risk related to CO2 emissions
Our Paper Mills and Pulp Mills are provided wit h free carbon dioxide emission rights for each period. The emission rights are
awarded within the EU Emission Trading Scheme. Should such free carbon dioxide emission rights be cancelled and replaced
with a system of paid emission rights, our costs of ener gy generation will grow accordingly. Additionally, we may be forced to
incur other unpredictable expenses in connection with the emission rights or changing legal regulations and the resultant
requirements. Due to the above we may be forced to reduce the q uantity of generated energy or to increase the production costs
which may adversely affect our business, financial condition, operational results or development prospects.
Risk related to dividend distribution
The Issuer is a holding company and therefore its capacity to pay dividend is subject to the level of potential disbursements from
its subsidiaries involved in operational activity, and the level of cash balances. Certain subsidiaries of the Group involved in
operational activity may be subject to cer tain restrictions concerning disbursements to the Issuer. No certainty exists that such
restrictions will have no material impact on the business, results on operations and capacity of the Group to distribute divi dend.
In connection with the term and revol ving loan agreements, and the agreement between creditors signed on 2 April 2021, the
Company’s ability to pay dividends is subject to the Group meeting certain financial ratios in the period prior to payment (a s that
term is defined in the term and revolv ing loan agreement) and there being no event of default (as that term is defined in the term
and revolving loan agreement).
===== SIDA 155 =====
Management Board’s Report 2023 Arctic Paper S.A. 44
Supplementary information
The Management Board position on the possibility to achieve the projected financial results
published earlier
The Management Board of Arctic Paper S.A. did not publish projections of financial results for 2023 and has not published and
does not intend to publish projections of financial resul ts for 2024.
Principles for the preparation of annual consolidated financial statements
The Group’s consolidated financial statements for the period from 1 January 2023 to 31 December 2023 have been prepared on
the basis of International Financial Reportin g Standards and related interpretations promulgated as regulations of the European
Commission. The financial statements have been prepared on a going concern basis for the foreseeable future. As at the date of
the financial statements, there are no circums tances indicating a threat to the Group’s and the Issuer’s going concern. Details of
the preparation of the standalone and consolidated financial statements are discussed in note 9 to the 2023 Consolidated
Financial Statements.
Dividend information
On 15 February 2024 , the Management Board of the Company, taking into account the preliminary financial results of the
Company and the Arctic Paper S.A. Group for 202 3, decided to recommend to the Annual General Meeting of the Company the
payment of a dividend from the Company’s net pr ofit for the financial year 2023 , in the total amount of PLN 69,287,783.00, i.e.
PLN 1.0 0 gross per share. The Management Board's recommendation will be reviewed by the Supervisory Board and will b e
submitted to the Ordinary General Meeting for adoption of a resolution. The final decision on the distribution of the Company 's
profit for 2023 and the payment of dividend will be made by the Ordinary General Meeting.
Changes to the bodies of Arctic Pap er S.A.
As at 31 December 2023, the Company’s Supervisory Board was composed of:
— Per Lundeen – Chairman of the Supervisory Board appointed on 22 September 2016 (appointed to the Supervisory Board on
14 September 2016);
— Roger Mattsson – Deputy Chairman of t he Supervisory Board appointed on 22 September 2016 (appointed as a Member of the
Supervisory Board on 14 September 2014);
— Thomas Onstad – Member of the Supervisory Board appointed on 22 October 2008;
— Zofia Dzik – Member of the Supervisory Board appointed on 22 June 2021;
— Anna Jakubowski – Member of the Supervisory Board appointed on 22 June 2021.
Until the date hereof, there were no changes to the composition of the Supervisory Board of the Parent Entity.
The M anagement Board of the Parent Entity as at the publication hereof was composed as follows:
- Mr Michał Jarczyński – Pr esident of the Management Board
- Ms Katarzyna W ojtkowiak – Member of the Management Board
- Mr Tom Fabian Langenskiöld – Member of the Management Board
On 9 May 2023, Mr Göran Eklund resigned as a Member of the Company’s Management Board and CFO of the Compan y with
effect from 29 May 2023.
The Supervisory Board, by resolution of 9 May 2023, appointed Ms Katarzyna W ojtkowi ak as a member of the Company’s
Management Board with effect from 29 May 2023. Ms Katarzyna W ojtkowiak also holds the position of the CFO of the Company.
===== SIDA 156 =====
Management Board’s Report 2023 Arctic Paper S.A. 45
The Supervisory Board, by resolution of 9 August 2023, appointed Mr Tom Fabian Langenskiöld as a membe r of the Company’s
Management Board with effect from 14 August 2023. Mr Fabian Langenskiöld also holds the position of Executive Vice -Pr esident
for Sales and Marketing.
Until the date hereof, there were no changes to the composition of the Management Board of the Parent Entity.
Changes to the share capital of Arctic Paper S.A.
In 2023 there were no changes to the Company’s share capital.
Remuneration paid to Members of the Management Board and the Supervisory Board
The table below presents information on the total amount of remuneration and other benefits paid or payable to members of the
Management Board and of the Supervisory Board of the Parent Entity in the period from 1 January 2023 to 31 December 2023
(data in PLN).
Managing and supervising
persons
Remuneration for functions
performed at Arctic Paper
S.A. Retirement plan Others Total
Management Board
Jarczyński Michał
1 026 511
477 765 1 504 276
Wojtkowiak Katarzyna*
416 679
416 679
Langendskiöld Fabian**
463 559 141 930
605 489
Göran Eklund*** 963 157 122 896 1 086 053
3 612 497
Supervisory Board
Per Lundeen
353 167
353 167
Roger Mattsson
247 417
247 417
Thomas Onstad
176 583
176 583
Zofia Dzik
216 121
216 121
Anna Jakubowski 180 946 180 946
* for the period 29.05.2023-31.12.2023
** for the period 14.08.2023-31.12.2023
*** for the period 01.01.2023-29.05.2023
The above remuneration includes costs incurred by the Company for senior management services provided to the subsidiary
amounting to PLN 1,427 thousand.
Agreements with Members of the Management Board guaranteeing financial compensation
As at 31 December 2023 and as at the approval date of this annual report, Members of the Management Board are entitled to
compensation in case of their resignation or dismissal from their respective positions with no valid reason or when they are
dismissed or their employment is terminated as a result of a merger of the Issuer by take -ove r. The amount of such compensation
will correspond to their remuneration for 6 to 24 months.
===== SIDA 157 =====
Management Board’s Report 2023 Arctic Paper S.A. 46
Changes in holdings of the Issuer’s shares or rights to shares by persons managing and
supervising Arctic Paper S.A.
Managing and supervising
persons
Number of
shares
or rights
as at
04.04.2024
Number of
shares
or rights to
shares
as at
31.12.2023
Number of
shares
or rights to
shares
as at
07.11.2023 Change
Management Board
Michał Jarczyński 5 572 5 572 5 572 -
Katarzyna W ojtkowiak - - - -
Tom Fabian Langenskiöld 900 900 n/a -
Supervisory Board
Per Lundeen 34 760 34 760 34 760 -
Thomas Onstad* 5 623 658 5 623 658 6 223 658 -
Roger Mattsson - - - -
Zofia Dzik - - - -
Anna Jakubowski - - - -
*only direct shareholding
Management of financial resources
As of the date hereof, the Company held sufficient funds and creditworthiness to ensure financial liquidity of the Arctic Paper S.A.
Group.
Capital investments
In 2023, the Group used short -term deposits with a maturity of up to six months.
Information on financial instruments
Information on financial instruments on:
a) the risks of: price changes, credit, material disruption of cash flows and loss of liquidity to which the Group is exposed ; and
b) the entity’s financial risk management objectives and policies, including its methods of hedging significant types of for ecast
transactions for which hedge accounting is used, are disclosed in the consolidated financial statements in notes 34 and 35.
Information of sureties, guarantees and pledges
As at 31 December 2023, the Capital Group reported:
— a bank guarantee in favou r of Skatteverket Ludvika in the amount of SEK 135 thousand;
— a contingent liability of Arctic Paper Munkedals AB related to a surety for the obligations of Kalltorp Kraft HB in the amoun t of
SEK 428 thousand;
— a pledge on properties held by Munkedals Kraft AB as required by loan agreements with Nordea Bank for SEK 80,000
thousand (related to the investment in the hydro power plant;
— pledges on shares in subsidiary companies in the Rottneros Group for SEK 284,730 thousand under loan agreements
concluded with Danske Bank.
In connection with the amendment agreement to the term and revolving loan agreements concluded on 2 April 2021, signed on 8
November 2023, on 16 November 2023 the Company signed annexes to the original collateral agreements (of 11 May 20 21) and
declarations according to which the above receivables and other claims were secured in favour of Bank Santander Bank Polska
S.A., acting as Collateral Agent, i.e.
===== SIDA 158 =====
Management Board’s Report 2023 Arctic Paper S.A. 47
1. . under Polish law – Collateral Documents establishing the following Collateral:
› financial and registered pledges on all shares held by Arctic Paper S.A. and the Guarantors (Arctic Paper Kostrzyn SA,
Arctic Paper Munkedals AB, Arctic Paper Grycksbo AB) that are registered in Poland and belong to companies in the
Company’s group (except Rottneros AB, Arctic Paper Mochenwangen GmbH, Arctic Paper Investment GmbH and Munkedals
Kraft AB), with the exception of Arctic Paper S.A. shares; the security includes the right to exercise voting rights attached to
the pledged shares;
› mortgages on all real properties located in Poland and owned by the Guarantors;
› registered pledges on all material rights and movable assets owned by Arctic Paper S.A. and the Guarantors, constituting an
organised part of enterprise, located in Poland (with the exception o f the assets listed in the Loan Agreement);
› assignment of (existing and future) insurance policies covering the assets of Arctic Paper S.A. and the Guarantors (with the
exception of insurance policies listed in the Loan Agreement);
› declaration by Arctic Paper S.A. and the Guarantors on voluntary submission to enforcement, in the form of a notary deed;
› financial pledges and registered pledges on Arctic Paper S.A. and the Guarantors’ bank accounts registered in Poland (the
pledges relate to current and futu re bank accounts; in the event of an event of default, in the event that the pledged
receivable or part thereof becomes due, Arctic Paper S.A. may not draw funds from the pledged receivable, nor may it
instruct the bank maintaining the account to disburse the funds);
› powers of attorney to Polish bank accounts of Arctic Paper S.A. and the Guarantors, registered in Poland;
› civil surety for liabilities granted by Arctic Paper S.A., Arctic Paper Kostrzyn S.A., Arctic Paper Munkedals AB, Arctic Pape r
Grycksbo AB
2. under Swedish law – Collateral Documents establishing the following Collateral:
› pledges on all shares held by Arctic Paper S.A. and the Guarantors, registered in Poland, belonging to the companies of the
group, with the exception of Arctic Paper S.A . shares
› mortgages on all real properties located in Sweden and owned by Arctic Paper S.A. and the Guarantors as long as such
collateral covers solely the existing mortgage deeds;
› corporate mortgage loans granted by the Guarantors registered in Sweden as long as such collateral covers solely the
existing mortgage deeds;
› assignment of (existing and future) insurance policies covering the assets of Arctic Paper S.A. and the Guarantors (with the
exception of insurance policies listed in the Loan Agreement);
› pledges on Swedish bank accounts of Arctic Paper S.A. and the Guarantors as long as such collateral is without prejudice to
free management of funds deposited on bank accounts until an event of default specified in the Loan Agreement.
Material off -balance sheet items
The information regarding off -balance sheet items is disclosed in note 31 to the consolidated financial statements.
Assessment of the feasibility of investment plans
In view of the improved financial results and subject to accomplishment of th e current financial objectives, the Company plans to
carry out the investments in line with its financial plan. The core objective of the investments is to develop new products,
minimise production costs, including the costs of electricity, and to improve the effectiveness of the production process. The
Group intends to finance its investment plan for 2023 with its own funds and external funding sources.
Information on significant court and arbitration proceedings and proceedings pending
before public admin istrative authorities
In the period covered by this report, Arctic Paper S.A. and its subsidiaries were not a party to any material proceedings pen ding
before a court, a competent authority for arbitration proceedings or a public administration authority.
===== SIDA 159 =====
Management Board’s Report 2023 Arctic Paper S.A. 48
Information on transactions with related entities executed on non -market terms and
conditions
During the period under report, Arctic Paper S.A. and its subsidiaries did not execute any material transactions with related
entities on non -market terms and conditions.
Information on agreements resulting in changes to the proportions of share holdings
Otherwise than stated herein, the Issuer is not aware of any agreements that may in the future generate changes to the
proportions of shareholdings by the exist ing shareholders and bond holders.
Information on purchase of treasury shares
The Parent Entity did not purchase any treasury shares in 2023.
Information on remuneration of the entity authorised to audit the financial statements
On 22 February 2023, the Company’s Supervisory Board, based on the Audit Committee’s recommendation on the selection of an
auditor, decided to select PricewaterhouseCoopers Polska Spółka z ograniczoną odpowiedzialnością Audyt Sp.k. as the auditor o f
the Co mpany and the Arctic Paper S.A. Group to audit the financial statements for 2023 and 2024. The recommendation of the
Audit Committee was issued as a result of the selection procedure in compliance with the “Policy and procedure for the select ion
of the aud it firm for the statutory and voluntary audit of the consolidated and standalone financial statements of Arctic Paper S.A.
with its registered office in Kostrzyn nad Odrą”.
On 14 July 2023, Arctic Paper S.A. contracted with PricewaterhouseCoopers Polska sp ółka z ograniczoną odpowiedzialnością
Audyt sp.k. to review the Company’s interim standalone consolidated financial statements and the Group’s interim consolidated
financial statements for the periods from 1 January 2023 to 30 June 2023 and from 1 January 2024 to 30 June 2024, and to audit
the Company’s stand -alone financial statements and the Group’s consolidated financial statements for the financial periods from
1 January 2023 to 31 December 2023 and for the financial periods from 1 January 2024 to 31 De cember 2024. The contract was
concluded for the time required to perform the above services.
Other information on the auditor, including information on the audit firm’s fees paid or payable for 2023 and 2022, is includ ed in
note 33 to the consolidated fin ancial statements.
Headcount
Information on the headcount is provided in note 37 to the consolidated financial statements.
Information on the preparation of a separate group report on non -financial information
The Company has prepared the non -financial in formation referred to in Article 49b(2) to (8) of the Accounting Act in the form of a
separate document entitled “Sustainability Report 2023”, in accordance with the requirements set out in the said Act. This
document, once published, together with the Ann ual Report and the Consolidated Annual Report for 2023, will be posted on the
Company’s website in accordance with Article 49b(6) of the aforementioned Act”.
===== SIDA 160 =====
Management Board’s Report 2023 Arctic Paper S.A. 49
Statement on the application of the Corporate Governance Rules
Corporate governance rules
On 29 March 2021, the Supervisory Board of the W arsaw Stock Exchange (Giełda Papierów W artościowych w W arszawie S.A.) by
Resolution No. 13/1834/2021 adopted corporate govern ance rules for companies listed on the W SE Main Market – “Best Practice
of GPW Listed Companies (Best Practice 2021, DPSN2021).
Best Practice 2021 came into force on 1 July 2021.
Application by companies of the corporate governance rules contained in the Best Practice is voluntary, but reporting on their
application is an obligation of every listed company, enshrined in the Regulations of the W SE. Companies had to publish their
reports on the application of DPSN2021 by 31 July 2021.
The text of the “Best Practice of W SE Listed Companies 2021” is available on the websites of the Stock Exchange S.A. and the
Company:
https://www.gpw.pl/pub/GPW /files/PDF/dobre_praktyki/DPS N21_BROSZURA.pdf
https://www.arcticpapergroup.pl/globalassets/arcticpapergroup.com/02 -about/04 -corporate -
governance/dpsn21_broszura_wersja_do_druku.pdf
Information on the extent the Issuer waived the provisions of the corporate governance
rules
Arctic Paper S.A. was striving at applying corporate governance rules as set forth in the document “Best Practice of GPW List ed
Companies 2021”. In 2023, Arctic Paper S.A. did not apply the following rules:
Best practice – information policy, communication with investors
Rule 1.3.2
“The company also includes ESG topics in its business strategy, in particular covering:
social and labour matters, concerning, inter alia, measures taken and planned to ensure gender equality, sou nd working
conditions, respect for employees’ rights, dialogue with local communities, customer relations.”
Explanation: A detailed development of ESG issues covering the entire capital group is presented by the Company in the CSR
reports published each y ear. CSR reports take into account environmental, social, employee and sustainable development issues,
including, among others, measures and established goals, description of undertaken and planned actions in the ESG area.
Rule 1.4.2
“In order to ensure p roper communication with stakeholders regarding the business strategy adopted, the company publishes on
its website information on the assumptions of its strategy, measurable objectives, including in particular long -term objectives,
planned activities and progress in its implementation, defined by means of metrics, financial and non -financial. Information on
ESG strategies should, among other things:
provide the value of the pay equity ratio paid to its employees, calculated as a percentage of the differenc e between average
monthly pay (including bonuses, prizes and other allowances) of women and men for the last year, and provide information on
actions taken to eliminate possible inequalities in this respect, together with a presentation of the risks involv ed and the time
horizon over which equality is planned to be achieved.
Explanation: A detailed development of ESG issues covering the entire capital group is presented by the Company in the CSR
reports published each year. CSR reports take into account en vironmental, social, employee and sustainable development issues,
including, among others, measures and established goals, description of undertaken and planned actions in the ESG area.
===== SIDA 161 =====
Management Board’s Report 2023 Arctic Paper S.A. 50
Best practice – systems and internal functions
Rule 3.3
“A company included in the W IG20, mW IG40 or sW IG80 index shall appoint an internal auditor heading the internal audit function,
who shall act in accordance with internationally recognised standards of professional practice for internal auditing. In othe r
companies w here no internal auditor meeting the aforementioned requirements has been appointed, the audit committee (or the
supervisory board if it performs the functions of an audit committee) shall annually assess whether there is a need to appoin t
such a person.”
Explanation:
Given the size of the Company and the structure and nature of its business, the appointment of an internal auditor is not jus tified
by the assessments carried out by the Management Board and the Supervisory Board. Audit functions responsible for auditing the
various divisions of the operating companies have been established in the Company’s group entities.
Rule 3.10
“At least every five years, a company included in the W IG20, mW IG40 or sW IG80 index shall have its internal audit function
revie wed by an independent auditor selected with the participation of the audit committee.”
Explanation:
Given the size of the Company and the structure and nature of its business, the Management Board, the Supervisory Board and
the Audit Committee acting with in it will consider the need for an independent audit in the future.
Best practice – General Meeting and relations with shareholders
Rule 4.1
“The company should enable shareholders to participate in a general meeting using electronic means of communicat ion (e -
meeting) if this is justified by the expectations of shareholders communicated to the company, as long as it is able to provi de the
technical infrastructure necessary for holding such a general meeting.”
Explanation:
Given the need for many techni cal and organisational steps and the associated costs and legal risks, the Company has not
decided to hold an electronic general meeting at this time.
Rule 4.3
“The company shall provide a publicly available real -time broadcast of the general meeting.”
Explanation:
Taking into account the costs and legal risks, the Company has not decided at this time to carry out a general broadcast of t he
General Meeting. The Company will consider this possibility in the future.
Internal control and risk management systems with reference to the development processes
of financial statements
The Management Board of Arctic Paper S.A. is responsible for the internal control system in the Company and in the Group and
for its efficiency in the development process of conso lidated financial statements and interim reports, prepared and published in
compliance with the rules of the Regulation of the Minister of Finance on current and periodical disclosure by issuers of sec urities
and conditions to recognise as equivalent the i nformation that is required by the law in Non -Member States of 29 March 2018.
The Company’s financial division headed by the CFO is responsible for the preparation of the Group’s consolidated financial
statements and interim reports. The Company prepares i ts financial statements and periodic reports on the basis of the
procedures of making and publishing periodic reports and consolidated reports, in force at Arctic Paper S.A. The financial da ta
underlying the Group’s consolidated financial statements comes from monthly reporting packages and extended quarterly
packages sent to the Issuer by Group member companies. After closing of the books for each calendar month, top management
===== SIDA 162 =====
Management Board’s Report 2023 Arctic Paper S.A. 51
of the Group member companies analyse the financial results of the companies co mpared to their budgets and the results
generated in the previous reporting period.
The Group performs an annual review of its strategy and development prospects. The budgeting process is supported by medium -
and top -level management of the Group member c ompanies. The budget drafted for the next year is accepted by the Company’s
Management Board and approved by the Supervisory Board. During the year, the Company’s Management Board compares the
generated financial results to the adopted budget.
The Company ’s Management Board systematically assesses the quality of internal control and risk management systems with
reference to the preparation process of consolidated financial statements. On the basis of such review, the Company’s
Management Board found that a s at 31 December 2023 there were no weaknesses that could materially affect the effectiveness
of internal control with respect to financial reporting.
Shareholders that directly or indirectly hold significant packages of shares
Information on the sharehol ders that directly or indirectly hold large packages of shares is presented in the table below – the
table presents the situation as at the date of approval of this report.
as at 31.12.2023
Shareholder Number of
shares
Share in the
share capital Number of
votes
Share in the total
number of votes
[%] [%]
Thomas Onstad 47 205 107 68,13% 47 205 107 68,13%
- indirectly via 41 581 449 60,01% 41 581 449 60,01%
Nemus Holding
AB 40 981 449 59,15% 40 981 449 59,15%
other entity 600 000 0,87% 600 000 0,87%
- directly 5 623 658 8,12% 5 623 658 8,12%
Other 22 082 676 31,87% 22 082 676 31,87%
Total 69 287 783 100,00% 69 287 783 100,00%
Treasury shares - 0,00% - 0,00%
Total 69 287 783 100,00% 69 287 783 100,00%
Securities with special control rights
There are no securities in the Company with special control rights – in particular, no shares in the Company are privileged.
Information on major restrictions on transfer of title to the Issuer’s securities and a ll
restrictions concerning the exercising of voting rights
The Company’s Articles of Association do not provide for any restrictions concerning transfer of title to the Issuer’s securi ties.
With the exception of restrictions on the transfer and acquisitio n of the Company’s shares that arise under common law, there are
no restrictions on the transfer of ownership of the Company’s securities.
The Company’s Articles of Association do not provide for any restrictions on the exercise of voting rights on Arctic Paper S.A.
shares.
===== SIDA 163 =====
Management Board’s Report 2023 Arctic Paper S.A. 52
Description of the principles of amending the Issuer’s Articles of Association
Changes to the Company’s Articles of Association fall within the sole competences of the General Meeting.
Unless the Code of Commercial Companies or the Articles of Association of the Company provide otherwise, resolutions of the
General Meeting require an absolute majority of votes .
Description of the functioning of the General Meeting
The rules of procedure of the General Me eting and its core competences result straight from applicable laws and are partly
incorporated in the Company’s Articles of Association.
The Company’s Articles of Association are available at:
https://www.arcticpapergroup.pl/globalassets/arcticpapergrou p.com/02 -about/04 -corporate -governance/corporate -
documents/pl/arctic_paper_statut_tekst_jednolity_aktualny_2019_pl.pdf
General Meetings are held in accordance with the following basic rules:
— General Meetings are held in the Company’s offices or in W arsaw ;
— General Meetings may be ordinary or extraordinary;
— Ordinary General Meetings shall be held within six months after the end of the financial year;
— General Meetings are opened by the Chairperson of the Supervisory Board or a person designated by him/her which is
followed by election of the Chairperson of the General Meeting;
— Voting shall be open unless a Shareholder demands a secret ballot or a secret ballot is required by the provisions of the
Code of Commercial Companies;
— Unless the Code of Commercial C ompanies or the Articles of Association of the Company provide otherwise, resolutions of
the General Meeting require an absolute majority of votes;
— In compliance with the Company’s Articles of Association, the following matters fall within the exclusive co mpetences of the
General Meeting:
› review and approval of the Management Board’s report from operations of the Company and financial statements of the
Company for the previous financial year;
› granting a vote of approval to members of the Management Board an d members of the Supervisory Board for the
performance of their duties;
› decisions concerning distribution of profit or coverage of losses;
› changes to the business objects of the Company;
› changes to the Articles of Association of the Company;
› increase or de crease in the Company’s share capital;
› merger of the Company with another company or other companies, split of the Company or transformation of the Company;
› dissolution and liquidation of the Company;
› issues of convertible bonds or pre -emption bonds and issues of subscription warrants;
› purchase and sale of real properties ;
› disposal and lease of the entire enterprise or an organised part thereof or establishment of limited rights in rem thereon;
› all other issues for which these Articles of Association or the Code of Commercial Companies require a resolution of the
General Meeting.
General Meetings may approve resolutions in the attendance of minimum one half of the Company’s share capital.
General Meetings approve resolutions with an absolute majority of votes unless the Articles of Association or applicable
regulations require a qualified majority.
===== SIDA 164 =====
Management Board’s Report 2023 Arctic Paper S.A. 53
The shareholders’ rights and the way to enforce them result explicitly from law that has been partly incorporated in the
Company’s Articles of Association.
Operation of the Issuer’s managing and supervising bodies and its committees as well as
information on the composition of those bodies
Management Board
Composition of the Management Board
— The Management Board is composed of one to five members, including President of the Management Board;
— The Management Board is appointed and dismissed by the Supervisory Board for a joint term of office;
— The term of office of members of the Management Board is 3 (three) years;
— When the Management Board is composed of more than one person, the Supervisory Board – upon a proposal by the
President – may appoint up to three Vice -Presidents from among members of the Management Board. Vice -Presidents may
be dismissed subject to a resolution of the Supervisory Board;
— A member of the Management Board may be dismissed by the Supervisory Board at any time;
— A member of the Management Board may be dismissed or suspended in their duties at any time by the General Meeting.
Core competences of the Management Board
— The Management Board directs the affairs of the Company and represents the Company;
— If the Management Board is composed of more than one person, declarations of intent on the Company’s behalf shall be
made by the President of the Management Board individually or two Members of the Management Board acting jointly or a
Member of the Management Board acting jointly with a Proxy;
— The Management Board is obliged to exercise their duties with due diligence and comply with law, the Company’s Articles of
Association, approved regulatio ns and resolutions of the Company’s bodies; decisions shall be taken in line with reasonable
economic risk with a view to the interests of the Company and its shareholders;
— The Management Board is obliged to manage the assets and business of the Company an d perform its duties subject to due
diligence required in business operations and subject to strict compliance with applicable laws, provisions of the Articles o f
Association and internal regulations as well as resolutions approved by the General Meeting a nd the Supervisory Board;
— The Company’s Management Board shall not be entitled to take decisions on share issues and redemption;
— Each member of the Management Board shall be liable for any damage inflicted upon the Company as a result of their
actions or o missions breaching the provisions of law or the Company’s Articles of Association;
— The responsibilities of the Management Board include – in compliance with the Code of Commercial Companies – all affairs
of the Company not reserved to the General Meeting o f the Supervisory Board;
— Guided with the interests of the Company, the Management Board defines the strategy and core objectives of the Company’s
business;
— The Management Board shall comply with the regulations relating to confidential information within t he meaning of the Act
on Trading and to comply with all the duties resulting therefrom.
Otherwise, the individual members of the Management Board shall be responsible for their running of the affairs of the Compan y
as resulting from the internal delegation of duties and functions approved by a decision of the Management Board.
The Management Board may approve resolutions at meetings or outside meetings in writing or with the use of direct means of
remote telecommunications. The Management Board a pproves resolutions with a majority of votes cast. Resolutions shall be valid
if minimum one half of members of the Management Board are present at the meeting. In case of equal number of votes, the
President of the Management Board shall have the casting vote.
The detailed mode of operation of the Management Board is set forth in the Regulations of the Management Board with its
updated version available at:
https://www.arcticpapergroup.pl/globalassets/arcticpapergroup.com/02 -about/04 -corporate -governance/corporate -
documents/pl/regulamin -zarzadu -ap-sa.pdf
===== SIDA 165 =====
Management Board’s Report 2023 Arctic Paper S.A. 54
The Management Board of the Company as at the publication hereof was composed as follows:
— Michał Jarczyński – President of the Management Board appointed on 1 February 2019;
— Katarzyna W ojtkowiak – Member of the Management Board appointed with effect from 9 May 2023;
— Tom Fabian Langenskiöld – Member of the Management Board appointed with effect from 14 August 2023.
Supervisory Board
Composition and organisation of the Supervisory Board
— The Supervisory Board is composed of 5 (five) to 7 (seven) members elected by the General Meeting for a joint three -year
term of office. A member of the Supervisory Board may be dismissed at any time;
— The Supervisory Board is composed of the Chairperson, Deputy Chairpersons and other members. The Chairperson of the
Supervisory Board and Deputy Chairperson ar e elected by the Supervisory Board from among its members at the first
meeting and – if so required – during the term of office in by -elections;
— Since the General Meeting approved resolutions on the first public issue of shares and having them listed, two members of
the Supervisory Board have to be independent;
— When an independent member of the Supervisory Board is nominated, resolutions on the following matters require consent
of minimum one independent member of the Supervisory Board:
› any benefits to be p rovided by the Company and any entity related to the Company for members of the Management Board;
› consent to the Company or its subsidiary to enter into a material agreement with a member of the Supervisory Board or the
Management Board and with their rela ted entities, other than agreements concluded in the normal course of the Company’s
business subject to normal terms and conditions applied by the Company;
› election of auditor to perform audits of the Company’s financial statements;
— For the avoidance of do ubt, it is assumed that loss of the independent status by a member of the Supervisory Board and
failure to appoint an independent member of the Supervisory Board shall not invalidate the decisions approved by the
Supervisory Board. Loss by an Independent M ember of their independent status during the performance of their function of a
member of the Supervisory Board shall not affect the validity or expiry of their mandate;
— In case of expiry of the mandate of a Member of the Supervisory Board before the term of office, the other Members of the
Supervisory Board shall be entitled to co -opt a new Member of the Supervisory Board is such vacated position by way of a
resolution approved with an absolute majority of the other Members of the Supervisory Board. The ma ndate of such co -opted
Member of the Supervisory Board shall expire if the first Ordinary General Meeting to be held after such Member has been
co-opted, fails to approve such Member. At any time, only two persons elected as Members of the Supervisory Boar d in the
co-option procedure and who were not approved as candidates by the Ordinary General Meeting, may act as Members of the
Supervisory Board. Expiry of the mandate of a co -opted Member of the Supervisory Board as a result of failure to approve
such ca ndidate by the Ordinary General Meeting may not be treated as finding any resolution approved with the participation
of such Member as invalid or ineffective.
— Chairperson and Deputy Chairperson of the Supervisory Board:
› maintain contact with the Company’s Management Board;
› manage the operations of the Supervisory Board;
› represent the Supervisory Board in external contacts and in contacts with the other bodies of the Company, including in
contacts with members of the Company’s Management Board;
› approve the p resentation of initiatives and proposals submitted for meetings of the Supervisory Board;
› take other actions as specified in the Company’s Regulations and Articles of Association;
› Members of the Supervisory Board should not resign from their function durin g the term of office if that could prevent the
operation of the Supervisory Board, in particular prevent timely approval of major resolutions;
› Members of the Supervisory Board shall be loyal to the Company. Should a conflict of interests arise, members of the
Supervisory Board shall report it to other members of the Supervisory Board and refrain from participating in discussions and
from voting on the issue to which the conflict of interests is related;
› Members of the Supervisory Board shall comply with law , the Company’s Articles of Association and Regulations of the
Supervisory Board.
===== SIDA 166 =====
Management Board’s Report 2023 Arctic Paper S.A. 55
Competences of the Supervisory Board
— The Supervisory Board performs overall supervision over the business of the Company in all areas of its operation;
— The Supervisory Board approves resolutions, issues recommendations and opinions and submits proposals to the General
Meeting;
— The Supervisory Board may not issue binding instructions to the Management Board concerning the management of the
Company’s affairs;
— Disputes between t he Supervisory Board and the Management Board shall be resolved by the General Meeting;
— In order to exercise their rights, the Supervisory Board may review the business of the Company in any respect, request the
presentation of any documents, reports and c larification from the Management Board and issue opinions on issues related to
the Company and submit proposals and initiatives to the Management Board;
— Apart from other issues specified in law or in the Company’s Articles of Association, the competences of the Supervisory
Board include, inter alia:
› review of the financial statements of the Company;
› review of the Management Board’s report from operations of the Company and proposals of the Management Board
concerning profit distribution and coverage of los ses;
› submission to the General Meeting of an annual report from results of the above reviews;
› appointment and dismissal of members of the Management Board, including the President and Vice -Presidents, and setting
the remuneration of members of the Manageme nt Board;
› appointment of the auditor of the Company;
› suspension of Members of the Management Board in their functions for valid reasons;
› approval of annual financial plans for the capital group of which the Company and its subsidiaries are members;
› approva l of terms and conditions of bond issues by the Company (other than convertible bonds or bonds with priority rights,
referred to in Article 393.5 of the Code of Commercial Companies) and issues of other debt securities, provision of consent
to contract fin ancial liabilities or taking actions resulting in contracting any financial liabilities, such as borrowings, loans,
overdraft facilities, conclusion of factoring, forfaiting, lease contracts and other generating liabilities in excess of PLN
10,000,000;
› app roval of the principles and amounts of remuneration of members of the Management Board and other persons in key
management functions in the Company as well as approval of any incentive programme, including incentive programmes for
members of the Management Board, persons in key management functions in the Company or any persons cooperating with
or related to the Company, including incentive programmes for employees of the Company;
— Annually the Supervisory Board submits to the General Meeting a brief assessment of the Company’s condition ensuring that
it is made available to all shareholders at a time that they are able to review it before the Ordinary General Meeting;
— The Supervisory Board concludes contracts with members of the Management Board on be half of the Company and
represents the Company in disputes with members of the Management Board. The Supervisory Board may authorise by way
of a resolution one or more of its members to perform such legal actions.
The Supervisory Board may approve resolut ions in writing or with the use of direct means of remote telecommunications.
Resolutions approved as specified above shall be valid if all members of the Supervisory Board were notified of the content o f the
draft resolution. The approval date of the reso lution approved as above shall be equivalent to the date of signing by the last
member of the Supervisory Board;
Resolutions of the Supervisory Board may be approved when all members have been notified by registered letter, fax or e -mail
message, sent min imum 15 days in advance and the meeting is attended by a majority of members of the Supervisory Board.
Resolutions may be approved without formal convening a meeting when all members of the Supervisory Board agreed to vote on
the specific issue or to the c ontent of the resolution to be approved;
Resolutions of the Supervisory Board require a simple majority of votes; in case of equal votes, the Chairperson of the
Supervisory Board shall have the casting vote .
===== SIDA 167 =====
Management Board’s Report 2023 Arctic Paper S.A. 56
The detailed mode of operation of the Supervis ory Board is set forth in the Regulations of the Supervisory Board with its updated
version available at:
https://www.arcticpapergroup.pl/globalassets/arcticpapergroup.com/02 -about/04 -corporate -governance/corporate -
documents/pl/1_11_2016_appendix -pl_ap -sa ---regulamin -rady -nadzorczej_fin.pdf
The Supervisory Board of the Company as at the publication hereof was composed as follows:
— Per Lundeen – Chairman of the Supervisory Board appointed on 14 September 2016;
— Roger Mattsson – Deputy Chairman of the Supervi sory Board appointed on 16 September 2014;
— Thomas Onstad – Member of the Supervisory Board appointed on 22 October 2008;
— Zofia Dzik – Member of the Supervisory Board appointed on 22 June 2021 (independent member);
— Anna Jakubowski – Member of the Supervisory Board appointed on 22 June 2021 (independent member).
In 2023, the Supervisory Board held meetings on: 18 January, 22 February, 9 May, 9 August, 17 October and 12 December.
Audit Committee
Composition and organisation of the Audit Committee
— The Audit Committee is composed of minimum three members of the Supervisory Board, including the Chairperson of the
Committee, elected by the Supervisory Board from among its members in compliance with the Articles of Association and
Regulations of the Supe rvisory Board.
— Members of the Audit Committee shall be appointed for three -year terms of office, however no longer than the term of office
of the Supervisory Board;
— A majority of the members of the Audit Committee, including the Chairman of the Audit Commi ttee, must be independent
members;
— The Audit Committee operates on the basis of the Act on Statutory Auditors, Best Practice of GPW Listed Companies,
Regulations of the Supervisory Board and the Regulations of the Audit Committee;
— The Audit Committee perfo rms advisory and consulting functions, operates as a collective body within the Company’s
Supervisory Board;
— The Audit Committee carries out its tasks by providing the Supervisory Board with its proposals, opinions and reports on its
scope in the form of r esolutions;
— At least one member of the audit committee shall have knowledge and skills in terms of accounting or auditing financial
statements. The Supervisory Board is of the opinion that the requirement of competences in the sphere accounting and
financi al audit is recognised as satisfied if a member of the Audit Committee has a major experience in financial
management in commercial partnerships, internal audit or audit of financial statements, and additionally:
› has the title of a certified auditor or equ ivalent international certificate, or
› has an academic degree in the field of accounting or financial audit, or
› has long -term experience as a financial director in public companies or in working in an audit committee of such companies;
— Members of the Audit Committee shall have knowledge and skills relating to the industry in which the Issuer operates. This
condition is recognised as satisfied if at least one member of the Audit Committee has knowledge and skills relating to that
industry or individual member s within specific scopes have knowledge and skills relating to the scope of that industry. The
Supervisory Board is of the opinion that the requirement of competences relating to the industry is recognised as satisfied i f
a member of the Audit Committee ha s information on the characteristics of the sector, that allows him to obtain a complete
picture of the sector’s complexity or has knowledge on part of the chain of activities carried out by the Company.
Competences of the audit committee
— The basic task o f the Audit Committee is advisory to the Supervisory Board on issues of proper implementation and control
of the financial reporting processes in the Company, effectiveness of the internal control and risk management systems and
cooperation with statutory auditors;
— The tasks of the Audit Committee resulting from supervising the Company’s financial reporting process, ensuring the
effectiveness of the Company’s internal control systems and monitoring of internal audit operations, include in particular:
===== SIDA 168 =====
Management Board’s Report 2023 Arctic Paper S.A. 57
› control if the financial information provided by the Company is correct, including the accuracy and consistency of the
accounting principles applied in the Company and its Capital Group as well as the consolidation principles of financial
statements;
› asse ssment minimum once a year of the internal control and management systems in the Company and its Capital Group in
order to ensure adequate recognition and management of the Company;
› ensuring the effective functioning of internal control, in particular by providing recommendations to the Supervisory Board
with respect to:
› strategic and operational internal audit plans and material modifications to such plans;
› internal audit policies, strategy and procedures, developed in compliance with the approved inter nal audit standards;
› audits of specific areas of the Company’s operations;
— The tasks of the Audit Committee resulting from monitoring the independence of the statutory auditor and the entity
authorised to audit financial statements, include in particular :
› issuing recommendations to the Supervisory Board relating to the election, appointment and re -appointment and dismissal of
the entity acting as the statutory auditor;
› control of independence and impartiality of the statutory auditor, in particular with a view to replacing the statutory auditor,
the level of its remuneration and other relationships with the Company;
› verification of the effectiveness of the works performed by the statutory auditor;
› review of reasons of resignation by the statutory audit or;
— The Audit Committee may resort to advisory services and assistance by external legal, accounting or other advisers if it find s
it necessary to perform its duties;
— The Audit Committee is obliged to file annual reports from its operations to the Supervis ory Board by 30 September in each
calendar year.
Meetings of the Audit Committee shall be held minimum twice a year.
In 2023, the Audit Committee held meetings on: 20 February, 28 March, 9 August and 11 December.
As of 5 August 2021, the Audit Committee is composed of the following persons:
— Anna Jakubowski – Chairperson of the Audit Committee. Member meeting the criteria for independence. According to the
declaration submitted by Ms Anna Jakubowski, she meets the condition of knowledge and skills in accou nting or auditing. Ms
Anna Jakubowski has several years of experience as a member of the Audit Committee of financial institut ions, including
Bank Millennium;
— Zofia Dzik – Member of the Audit Committee meeting the independence criteria. According to the de claration submitted by
Ms Zofia Dzik, she meets the condition of knowledge and skills in accounting or auditing. Ms Zofia Dzik has several years of
experience working for Arthur Andersen and Andersen Business Consulting, where she was responsible, among ot hers, for
the area of auditing financial statements and consulting in the area o f finance;
— Roger Mattsson – Member of the Audit Committee – due to his long -standing experience as the financial controller of the
Arctic Paper Group and his participation in t he Audit Committee for more than three years, Mr Roger Mattsson fulfils the
condition for the Audit Committee member to have knowledge and skills in the Company’s business. Additionally, he has
knowledge and skills in the sphere of accounting o r auditing f inancial statements.
The detailed mode of operation of the Audit Committee is set forth in the Regulations of the Audit Committee.
Core assumptions underlying the policy of selecting an audit firm to conduct audits
— According to the regulations applicable to the Company, the Company’s Supervisory Board shall select – by way of a
resolution and acting under a recommendation of the Audit Committee – the auditor authorised to carry out the audit;
— The selection is made taking into account the princip les of impartiality and independence of the audit firm and the analysis of
the audit firm’s work carried out in the Company which falls beyond the scope of the audit of financial statements, in order to
avoid any conflict of interest (observance of imparti ality and independence);
— A request for proposals concerning the selection of an audit firm for statutory audit of the Company’s financial statements i s
developed by the Audit Committee in cooperation with the Company’s Chief Financial Officer (CFO) ;
===== SIDA 169 =====
Management Board’s Report 2023 Arctic Paper S.A. 58
— After analysing the submitted offers, the Audit Committee shall develop a recommendation with conclusions from the
selection procedure to be approved by the Audit Committee and shall submit a recommendation on the selection of the audit
firm to the Supervisory B oard within such time that will support a resolution on audit firm selection;
— The Supervisory Board shall select the audit firm on the basis of the submitted offers and after becoming acquainted with the
Audit Committee’s opinion and recommendation;
— If the Supervisory Board’s decision differs from the recommendation of the Audit Committee, the Supervisory Board shall
justify the reasons for its failure to comply with the Audit Committee’s recommendation and shall submit such justification t o
the body appr oving the financial statements;
— The Company’s Management Board shall enter into a contract with the selected audit firm for the audit of finan cial
statements of the Company;
— The first contract is concluded for minimum 2 years and it may be extended for anoth er two or three years. The duration of
the cooperation shall be counted from the first financial year covered by the audit contract, in which the authorised auditor
was appointed for the first time to carry out the consecutive statutory audits of the Compa ny;
— After expiry of the maximum period of the cooperation, the authorised auditor or, where applicable, any member of its
network, may not undertake a statutory audit of the Company’s financial statements for further 4 years;
— The key statutory auditor may not perform a statutory audit in the Company for a period longer than 5 years. The key
statutory auditor may conduct a statutory audit again after the expiry of 3 years.
— The maximum period of uninterrupted performance of statutory audits by the same audit firm or an audit firm related to that
audit firm or any member of the network operating in the European Union of which the audit firms are members, may not
exceed 10 years.
Core assumptions underlying the policy of the provision of permitted services other than audit services by the audit firm
performing the audit, by entities related to the audit firm and by a member of the audit firm’s network;
— The Audit Committee of Arctic Paper S.A. shall be responsible for the policy covering the provision of perm itted services
other than audit services by the audit firm performing the audit, by entities related to the audit firm and by a member of th e
audit firm’s network;
— The Audit Committee of Arctic Paper S.A. controls and monitors the independence of the audit or and the audit firm, in
particular if the audit firm provides other services than audit of statutory financial statements to Arctic Paper S.A.
— The Audit Committee of Arctic Paper S.A., when so requested by a competent body or person, approves the provisi on of
permitted services by the auditor that are not an audit of Arctic Paper S.A.
— The prohibited services do not include:
› carrying out due diligence procedures for economic and financial condition,
› issue of letters of support,
› attestation services related to pro forma financial information, forecast of results, or estimation of results, contained in the
issue prospectus of the audited entity;
› review of historic financial information for projects referred to in the Commission Regulation (EC) No 809/2004 of 29 April
2004 implementing Directive 2003/71/EC of the European Parliament and of the Council as regards information contained in
prospectuses as well as the format, incorporation by reference and publication of such prospectuses and dissemination of
adver tisement;
› verifying consolidation packages;
› confirming the fulfilment of terms and conditions of concluded loan agreements on the basis of the analysis of financial
information from the financial statements audited by the audit firm;
› attestation services r elated to reporting on corporate governance, risk management, and corporate social responsibility;
› services consisting in assessing the conformity of information disclosed by financial institutions and investment firms with
requirements for disclosure of information on capital adequacy and variable remuneration components;
› certifying financial statements or other financial information intended for supervisory authorities, supervisory board or oth er
supervisory body of the Company or owners, which falls bey ond the scope of statutory audit and helps these bodies to fulfil
their statutory obligations.
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Management Board’s Report 2023 Arctic Paper S.A. 59
— Provision of the above services is possible solely to the extent not related to the entity’s tax policies after a review by t he
Audit Committee of hazards and mi tigants of the audit firm’s independence as referred to in Article 69 -73 of the Act on
Certified Auditors, Audit Firms and Public Supervision.
On 22 February 2023, the Company’s Supervisory Board, based on the Audit Committee’s recommendation on the selec tion of an
auditor, decided to select PricewaterhouseCoopers Polska Spółka z ograniczoną odpowiedzialnością Audyt Sp.k. as the auditor o f
the Company and the Arctic Paper S.A. Group to audit the financial statements for 2023 and 2024. The recommendation of the
Audit Committee was issued as a result of the selection procedure in compliance with the “Policy and procedure for the select ion
of the audit firm for the statutory and voluntary audit of the consolidated and standalone financial statements of Arctic Paper S.A.
with its registered office in Kostrzyn nad Odrą”. The audit firm and members of its team performing the audit comply with the
requirements to make an impartial and independent report from the audit of the annual consolidated and standalone finan cial
statements of the Arctic Paper Group and of the Company in compliance with the applicable regulations, professional standards
and the rules of professional ethics.
Remuneration Committee
Composition and organisation of the Remuneration Committee
— The Remuneration Committee is composed of minimum two members of the Supervisory Board, including the Chairperson of
the Committee, elected by the Supervisory Board from among its members in compliance with the Articles of Association and
Regulations of the Su pervisory Board;
— Members of the Remuneration Committee shall be appointed for three -year terms of office, however no longer than the term
of office of the Supervisory Board;
— The Chairperson of the Remuneration Committee shall be elected with a majority of votes of its members;
— The Remuneration Committee operates pursuant to the Regulations of the Supervisory Board and the Regulations of the
Remuneration Committee;
— The Remuneration Committee performs advisory and consulting functions, operates as a collecti ve body within the
Company’s Supervisory Board;
— The Remuneration Committee carries out its tasks by providing the Supervisory Board with its proposals, opinions and
reports in the form of resolutions.
Competences of the Remuneration Committee
— The basic ta sk of the Remuneration Committee is advisory support to the Supervisory Board on issues related to
remuneration policy, bonus policy and other issues related to the remuneration of the employees, members of the
Company’s authorities and the authorities of Capital Group companies;
— The tasks of the Remuneration Committee resulting from supervision over the Company’s remuneration policy and ensuring
the effective functioning of the Company’s remuneration policy, is to provide recommendations to the Supervisory Board in
particular with respect to:
› approval and changes to the remuneration principles of members of the Company’s bodies;
› the amount of total remuneration to members of the Company’s Management Board;
› legal disputes between the Company and Members of the Management Board with respect to the tasks of the Committee;
› proposing remuneration and approving additional benefits to individual members of the Company’s bodies, in particular
under management option plans (convertible into shares of the Company);
› strategy of the Company’s remuneration and bonus policies and HR policies;
— The Remuneration Committee may resort to advisory services and assistance by external legal or other advisers if it finds it
necessary to perform its duties;
— The Remuneration Committ ee is obliged to file annual reports from its operations to the Supervisory Board by 30 September
in each calendar year.
===== SIDA 171 =====
Management Board’s Report 2023 Arctic Paper S.A. 60
On 31 August 2020, the General Meeting of the Company, bearing in mind Article 90d(1) in connection with Article 90c(2)(1) of
the Act of 29 July 2005 on public offerings and conditions for the introduction of financial instruments into the organised trading
system and on public companies (i.e. Journal of Laws of 2019, item 623 as amended) adopted the “Remuneration Policy for
Members of t he Management Board and Members of the Supervisory Board of Arctic Paper SA”. Under the above -mentioned Acts
of public companies, including the Company, were obliged to adopt, by resolution, the Remuneration Policy of Management Board
and Supervisory Board Members, which is the rules for determining the remuneration of Members of the Management Board and
Supervisory Board, by the General Meeting of Shareholders, and to publish a remuneration report. The Company shall pay
remuneration to the Members of the M anagement Board and the Supervisory Board solely in compliance with the adopted Policy.
The policy prepared by the Company was drawn up in accordance with the principles set out in the above -mentioned Act and
refers to the required elements related to remu neration and other terms of employment for Members of the Management Board
and Members of the Supervisory Board. The policy received an opinion from the Remuneration Committee operating at the
Supervisory Board, as well as by the Supervisory Board.
On 6 Ju ne 2023, the General Meeting of the Company gave a positive opinion on the remuneration report for 2023 prepared by
the Supervisory Board. The resolution of the General Meeting on the aforementioned issue is advisory in nature. The report wa s
reviewed by t he auditor. The independent auditor’s report on the performance of a service providing reasonable assurance on the
assessment of the remuneration report was attached as Appendix 2 to current report No. 9/2023 – “Resolutions adopted by the
Annual General Me eting of A rctic Paper S.A. on 6 June 2023” .
Remuneration Committee meetings were held on: 2 February, 8 February, 21 March, 5 April, 8 May, 11 December.
Since 9 February 2017 the Remuneration Committee has been operating in the following composition:
— Per Lundeen – Chairman of the Remuneration Committee
— Thomas Onstad – Member of the Remuneration Committee
— Roger Mattsson – Member of the Remuneration Committee
The detailed mode of operation of the Remuneration Committee is set forth in the Regulations of the Remuneration Committee.
Risk Committee
Composition and organisation of the Risk Committee
— The Risk Committee is composed of minimum three members of the Supervisory Board, including the Chairperson of the
Committee, elected by the Supervisory Boar d from among its members. Minimum one member of the Risk Committee shall
be independent and hold qualifications and experience in the sphere of finances;
— Members of the Risk Committee shall be appointed for three -year terms of office, however no longer than the term of office
of the Supervisory Board;
— The Chairperson of the Risk Committee shall be elected with a majority of votes of its members;
— The Risk Committee operates on the basis of commonly accepted corporate risk management models (e.g. COSO -ERM) ;
— The Risk Committee performs advisory and consulting functions, operates as a collective body within the Company’s
Supervisory Board;
— The Risk Committee carries out its tasks by providing the Supervisory Board with its proposals, opinions and rep orts in t he
form of resolutions.
Competences of the Risk Committee
— The basic task of the Risk Committee is advisory support to the Supervisory Board on issues related to the proper
identification, assessment and control of potential risks, i.e. opportunities and t hreats to realization of the Company’s
strategic goals, with particular consideration for financial risk, related to both external factors (such as volatility of FX rates,
interest rates, general international economic condition) and internal factors (such as cash flows, liquidity management,
variation of budget and financial forecasts);
— The tasks of the Risk Committee resulting from the supervision over the risk management process, include in particular:
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Management Board’s Report 2023 Arctic Paper S.A. 61
› Supervision over correct identification, analysis a nd assigning priority to types of risk inherent in the operational strategy
and business pursued;
› Confirmation to the identified risk appetite of the Company;
› Verification if actions used to mitigate risk are planned and implemented so that the risk is mi tigated to a level acceptable by
the Company;
› Monitoring verifying correct risk assessment by the Management Board and the effectiveness of control tools;
› Supervision over correct notification of stakeholders on the risks, risk strategies and control tool s.
— The Risk Committee may resort to advisory services and assistance by external advisers if it finds it necessary to perform its
duties.
Since 5 August 2021 the Risk Committee has been operating in the following composition:
— Per Lundeen – Chairman of the Risk Committee
— Zofia Dzik – Independent Member of the Risk Committee
— Roger Mattsson – Member of the Risk Committee
The Risk Committee held a meeting on 12 December 2023.
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Management Board’s Report 2023 Arctic Paper S.A. 62
Information compliant with the
requirements of Swedish regulations
concerning corporate governance.
Arctic Paper S.A. is a company registered in Poland which stock has been admitted to trading at the W arsaw Stock Exchange and
at NASDAQ in Stockholm. The Company’s primary market is in W arsaw with a parallel market in Stockholm. Compa nies not
registered in Sweden which shares have been admitted to trading at NASDAQ in Stockholm are obliged to comply with:
— the corporate governance rules in force in the country of their registration , or
— the corporate governance rules in force in the cou ntry where they have their primary trading market, or
— the Swedish corporate governance code (hereinafter the “Swedish Code”).
Arctic Paper S.A. follows the principles set forth in the “Best Practice of GPW Listed Companies 2021” (hereinafter the “Best
Practice”) that may be applied by companies listed at the W arsaw Stock Exchange and not the Swedish Code. As a result, the
conduct of Arctic Paper S.A. is different from the one set forth in the Swedish Code in the following material aspects.
General Meet ing of Shareholders
The core documents related to General Meetings of Shareholders, such as notices, reports and approved resolutions, are made i n
Polish and in English instead of Swedish.
Appointment of governing bodies of the company
The Polish corpora te governance model provides for a two -tier system of the Company’s bodies which is composed of the
Management Board being the executive body appointed by the Management Board which in turns supervises the Company’s
operations and is appointed by the Gener al Meeting of Shareholders. Auditors are selected by the Supervisory Board.
Neither the Best practice, nor any other Polish regulations require the establishment of a commission in the Company to elect
candidates and therefore such commission does not exi st among the bodies of the Company. Each shareholder may propose
candidates to the Supervisory Board. Appropriate information on candidates proposed to the Supervisory Board is published on
the Company’s website with appropriate advance so that all shareho lders could take an informed decision when voting on the
resolution appointing a new member of the Supervisory Board.
Tasks of the bodies of the Company
In compliance with the two -tier system of the Company’s bodies, the tasks usually performed by the ma nagement of Swedish -
registered companies are performed by the Management Board or the Supervisory Board of companies subject to Polish law.
In accordance with the Polish applicable regulations, members of the Management Board, including its General Direct or who is
the President of the Management Board, may not get involved in competitive activities outside the Company. Pursuing of other
business outside the Company is not regulated either in the Best Practice or other Polish regulations; however, certain
restrictions are usually incorporated in individual employment contracts.
Size and composition of the Company’s bodies
The composition of the Supervisory Board should reflect the independence criteria, just like those specified in the Swedish C ode.
However, the Management Board being the executive body is composed of persons in executive positions at Arctic Paper S.A.,
and these members may not be treated as independent of the Company. The terms of office of members of the Management
Board – just lik e the members of the Supervisory Board – lasts three years.
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Management Board’s Report 2023 Arctic Paper S.A. 63
Chairpersons of the bodies of the Company
It is the Supervisory Board and not the General Meeting that elects the chairperson and the deputy chairperson from its membe rs.
Procedures of the bod ies of the Company
The Regulations of the Management Board are approved by the Supervisory Board, and the Regulations of the Supervisory Board
are approved by the Supervisory Board. The Regulations are not reviewed each year – they are reviewed and modifie d as need
arises. The same principles apply to regulations of committees operating within the Supervisory Board that are approved by th e
Supervisory Board. The operation of the General Director is not regulated separately since he/she also acts as the pres ident of
the Management Board.
Remuneration of members of the bodies of the Company and management staff
The Company shall pay remuneration to the Members of the Management Board and the Supervisory Board solely in compliance
with the Remuneration Polic y adopted by the General Meeting.
Information on corporate governance
The Polish corporate governance rules do not require the same detail as to the disclosed information as required by the Swedi sh
Code. However, information on members of the Company’s bo dies, company’s Articles of Association, internal regulations and a
summary of material differences between the Swedish and Polish approach to corporate governance and shareholders’ rights is
published on the Company’s website.
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Management Board’s Report 2023 Arctic Paper S.A. 64
Information by the Management Board of Arctic Paper S.A. on
selection of the audit firm
On the basis of a statement made by the Supervisory Board of Arctic Paper S.A. on the selection of the auditing firm to audit the
annual consolidated financial statements of the Arctic Paper Group and the annual standalone financial statements of the
Company for the financial year ended 31 December 2023 in accordance with the regulat ions and based on the statement received
from PricewaterhouseCoopers Polska spółka z ograniczoną odpowiedzialnością Audyt sp.k.
The Management Board of the Company informs that the selection of the auditing firm by the Supervisory Board took place in
acco rdance with the regulations and the “Policy and procedure for the selection of the audit firm for the statutory and voluntary
audit of the consolidated and standalone financial statements of Arctic Paper S.A. with its registered office in Kostrzyn nad Odrą ”.
The audit firm and members of the audit team complied with the criteria to issue an impartial and independent report on the a udit
of the annual consolidated financial statements of the Company for the financial year ended on 31 December 2023, in compli ance
with the applicable laws, professional standards, and the principles of professional conduct.
The Management Board of the Company also informs that the applicable laws with regard to a change of the audit firm and the
key statutory auditor, as well as mandatory periods of grace have been complied with. The Arctic Paper Group has a policy
relating to the selection of the auditing company and a policy of the provision of services that are not an audit by the audi t firm,
entities related to the audit firm or a member of its group, including services that are not covered with the ban on being provided
by audit firms.
Signatures of the Members of the Management Board
Position First and last name Date Signature
President of the Management
Board
CEO
Michał Jarczyński 4 April 2024 signed with a qualified electronic
signature
Member of the Management
Board
CFO
Katarzyna W ojtkowiak 4 April 2024 signed with a qualified electronic
signature
Member of the Management
Board
Vice -President for Sales and
Marketing
Fabian Langenskiöld
4 April 2024 signed with a qualified electronic
signature
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Management Board’s Report 2023 Arctic Paper S.A. 65
Statements of the Management Board
Accuracy and reliability of the presented reports
Members of the Management Board of Arctic Paper S.A. represent that to the best of their knowledge:
— The consolidated financial statements of the Arctic Paper Capital Group for the year ended on 31 December 2023 and the
comparable data were prepared in compliance with the applicable accounting principles and they reflect the economic and
financial condition of the Capital Group and its financial result for 2023 in a true, reliable and clear manner.
— The Management Board’s Report from oper ations of the Arctic Paper Capital Group in 2023 contains a true image of the
development, achievements and condition of the Arctic Paper Capital Group, including a description of core hazards and risks.
Signatures of the Members of the Management Board
Position First and last name Date Signature
President of the Management
Board
Chief Executive Officer
Michał Jarczyński 4 April 2024 signed with a qualified electronic
signature
Member of the Management
Board
Chief Finance Officer
Katarzyna W ojtkowiak 4 April 2024 signed with a qualified electronic
signature
Member of the Management
Board
Executive Vice -President for
Sales and Marketing
Fabian Langenskiöld
4 April 2024 signed with a qualified electronic
signature