Release Date: August 02, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Empresas CMPC SA (XSGO:CMPC, Financial) reported a 30% quarter-over-quarter increase in EBITDA, driven by higher average sales prices and lower cash costs.
- The Pulp business achieved an EBITDA margin of 33.5%, with a significant 61% year-over-year increase in EBITDA.
- Operating costs decreased by 3% quarter-over-quarter and 14% year-over-year, indicating improved cost management.
- The company has made progress in reducing its net debt-to-EBITDA ratio from 4.03 times to 3.75 times, with expectations for further improvement.
- Empresas CMPC SA (XSGO:CMPC) has been conservative in capital expenditures, preparing its balance sheet for future projects like the Natureza Project.
Negative Points
- Net income decreased to $125 million from $209 million in the previous quarter, indicating a decline in profitability.
- Softys business experienced a 20% quarter-over-quarter decrease in EBITDA, affected by rising pulp prices and currency depreciation in key markets.
- Biopackaging saw a 27% quarter-over-quarter decline in EBITDA, attributed to reduced sales and higher raw material costs.
- Pulp sales volume decreased by 10% quarter-over-quarter and 21% year-over-year, impacted by logistical issues and weaker demand in some markets.
- The company's net debt remains high at $4.761 billion, with a net debt-to-EBITDA ratio still above its internal policy range.
Q & A Highlights
Q: Recently, hardwood pulp prices in China have dropped to around $650 per ton. Have pulp buyers returned to the market, or do prices need to drop further to increase buying activity? Also, how do you see leverage evolving, and how might it affect the Natureza Project?
A: (Francisco Ruiz-Tagle Edwards, CEO) Chinese activity has been slow but is now picking up. Orders have come through at the indicated price, with softwood demand stronger than hardwood. Global inventories are below historical levels, suggesting price stability. (Fernando Hasenberg Larios, CFO) Our net debt-to-EBITDA ratio has improved to 3.75, and we expect it to be within our policy range by year-end. We are preparing our balance sheet for the Natureza Project, being conservative with CapEx and capital allocation.
Q: Regarding the Natureza Project, what are your expectations for land and forestry CapEx, and are you considering other products like dissolving pulp?
A: (Raimundo Varela Labbee, CEO of CMPC Celulosa) We are progressing well with the Natureza Project, having received terms of reference approval. We are 60% through fulfilling forestry needs. The project is expected to go to the Board in 2026, with the base case being regular pulp production.
Q: How do you see the competitive environment in Mexico for the Tissue segment?
A: (Guilherme Viesi, Chief Commercial Officer - Pulp) The competitive environment in Mexico is significant, but our recent results were more affected by a drought at one of our mills than by competition. We are not a major tissue producer in Mexico, but we are competing well and improving margins.
Q: How do you see the shift in pulp volumes from Asia to Europe, and what is the outlook for tissue and pulp volumes in the second half of the year?
A: (Guilherme Viesi, Chief Commercial Officer - Pulp) Tissue volumes have been affected by competition, particularly in Brazil. We expect some volume recovery in Mexico but not a strong recovery overall. (Raimundo Varela Labbee, CEO of CMPC Celulosa) Pulp volumes were lower due to logistical issues from flooding, but these are resolved. We have a heavy maintenance schedule in the second half, so volumes will normalize.
Q: With rising competition in Brazil, can you maintain a 15-20% EBITDA margin in the Tissue business? Also, is the Rio Grande do Sul situation resolved?
A: (Fernando Hasenberg Larios, CFO) We focus on profitability in Softys, aiming to maintain a 15% EBITDA margin despite cost pressures from pulp prices and currency devaluation. (Raimundo Varela Labbee, CEO of CMPC Celulosa) The Rio Grande do Sul situation is improving, with operations normalizing and logistics back to regular function.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
