FacePalm - Negative Surprise for European Containerboard (Boxes) - New Supply

Research evidence excerpt

FacePalm - Negative Surprise for European Containerboard (Boxes) - New Supply

Paper & Packaging

Equity Research

July 19, 2026

Overall, if the conversion is able to ramp up to 90% and sells its paper at spot prices (not lower

export prices which is more likely) then we estimate Palm's 700kT (UK) conversion could deliver

8-14% ROCE (EBIT / capex) and modest 3-7% post tax and financing assuming everything goes

well. The priced for perfection the "excel" scenario can make it work. Particularly if the required

ROCE return threshold is lower than the 12-15% demanded by listed peers.

Below we illustrate three scenarios and our key assumptions. We re-iterate this is illustrative

positive scenario after year 4-5 using spot pricing & costs:

Investment capex of €150-250m for the conversion of the 400kT newsprint machine to a•

700kT recycled containerboard machine.

European spot prices (Jul-26) for recycled containerboard prices net of 20% discounts/rebates•

or approx €460-470/t. Which we believe might be optimistic given the mill will need to export

and receive lower export prices.

Cash costs based on Fastmarkets RISI mill intelligence for the median mill in Europe (2nd cost•

quartile) with JEFe adjustments for €45MWh gas and €125/t waste paper (OCC) costs - Costs

are likely underestimated given mill location in UK and fact that they are based on assumption

of 100% operating rates.

Operating rates' scenario of 90% (balanced), which is not realistic, given industry operating•

rates are 84-86% and the challenges we see for Palm to place vols.

Overheads of €10-20m pa often underappreciated but very real cash costs for these mills that•

are not taken into account in the cash costs.

Exhibit 5 - Illustrative ROCE Scenario Analysis: Palm 700kT conversion bull case scenario (ramped up to