2008 brought about significant changes for the paper industry of Europe. During the year we experienced substantial fluctuations in the external circumstances; the changes in the prevalent trend of the paper industry, the global financial crisis and the related recession led to a significant deterioration of profitability in all product groups.

There were hectic fluctuations in the exchange rate of the Hungarian Forint. By the middle of the year, it had strengthened to 230 HUF/EUR, while during the autumn it weakened to around 280 HUF/EUR as a result of the financial crisis.
Using mainly Hungarian base materials, Dunapack Ltd. achieves significant export turnovers, so the company’s export-import balance is positive. Therefore, the weakening of the Hungarian Forint has a positive effect on profits, but the fluctuations in the exchange rate have led to unpredictability in business management and caused substantial exchange losses as well.

Expecting an increase in demand, by the end of 2007 European paper manufacturers had stockpiled significant inventories that later proved to be unmarketable. As a result of the weakness of the US dollar, Chinese and American imports have also arrived in Europe, which further increased the supply. The financial-economic crisis that emerged during the final quarter of the year further decreased the demand. As a result, paper prices continuously declined during the year, falling by over EUR 100/t – 25% – by the end of the year.

Our recycling activity has also experienced shrinking volumes and prices. As a result of the slowdown of economic growth and the occasional hectic changes in the exchange rates, the demand for corrugated products has decreased as well. The decrease in the prices of corrugated products was lower than the decrease in the prices of paper products, therefore the increase of coverage was, for the most part, able to compensate for the loss of profits due to lesser volumes. The activity of Eurobox Polska Ltd. was a favourable exception. Thanks to the company’s excellent market work, both the sales volume and the sales prices have surpassed the planned level.

Despite the deteriorating economic environment, during the year the company performed substantial rationalisation, organisation and acquisition activities.

• In April, the Nyíregyháza and Zsidacsev plants of the sack product group were sold. This transaction led to a purely corrugate product line at the recycling units.
• The PM7 paper-making machine investment was continued; within the framework of this assets were brought in to Hamburger Hungária Ltd.
• Preparations have started for the discontinuation of paper manufacturing at the Csepel site.