The Navigator Company, one of Portugal’s largest eucalyptus producers for use in its pulp factories, lost €650 million in less than two hours today as a US trade battle over anti-dumping tariffs is expected to cost shareholders 20% of the company’s 2018 profits.
Shares in the Portuguese paper company suffered in brisk trading in Lisbon today after a paper sales tax was levied by the US.
"The decision will have a very negative impact on the results," admitted the company, but analysts remain divided as to the impact.
Navigator’s board announced the bad news last Friday, August 10th, after the United States Department of Commerce imposed a sales tax of 37.34% on Navigator’s products.
"Navigator is convinced that it will be able to demonstrate ... that this rate ... is totally unjustified and, consequently, cause the Commerce Department to reverse this administrative measure, which has an estimated impact of €66 million in EBITDA and €45 million in net profits for the current year," read the company’s statement.
There remains doubt as to the end result as the case is now going to court but the market’s reaction led to an 18% fall in share value, wiping €650 million from Navigator's market value in less than two hours. The shares started the day at €4.81, falling to €4.08 and recovering to €4.48 by mid-afternoon.
Losses later eased and its shares were only 10% down at 11:30 p.m., giving the company a market valuation of €3.1 billion.
Navigator’s parent company, 'Semapa Sociedade de Investimento e Gestao SGPS SA,' which controls 70% of Navigator’s stock, saw its own shares drop by 6.59%.
Despite an injunction filed by Navigator in the US courts, the new import tax will be applied on all sales after the date of publication of the decision of the Department of Commerce, which is expected to happen by the end of the current week.
Navigator is the third largest Portuguese exporter, according to data from 2017, representing 2.4% of national exports. The American market represents 10% of the sales of the company that also operates directly in the United States.
The company uses eucalyptus as the prime raw material for the production of pulp and its printing and writing paper. Navigator is Europe's largest producer of bleached eucalyptus kraft pulp and in Portugal has mills at Setúbal, Figueira da Foz and Cacia.
The company has 120,000 hectares of woodland in Portugal, 74% of this is planted with eucalyptus, somewhat topical at the moment, especially in the Monchique area.
This land is managed in accordance with the principles set out in the group's Forestry Policy and the company has “a well-equipped private fire department to prevent fires within its forests.”