Ence Energia Y Celulosa Sa · BME:ENC
Ence Energia Y Celulosa Sa — H1 2023 Earnings Presentation
39 slides from Ence Energia Y Celulosa Sa's earnings presentation, Jul 27, 2023
Slide 1: 1H23 Results
1H23 Results 18 27 July 2023 Global ESG score: 90/100
Slide 2: Disclaimer
Disclaimer The information contained in this presentation has been prepared by Ence Energía y Celulosa, S.A. (hereinafter, "Ence"). This presentation includes data relating to future forecasts. Any data included in this presentation which differ from other data based on historical information, inclu
Slide 3: Today's presenters
Today’s presenters Ignacio de Colmenares Alfredo Avello Chairman & CEO CFO and Chief Forestry Officer Ence Energía y Celulosa Ence Energía y Celulosa 3
Slide 4: 1H23 Results Summary
1H23 Results Summary Growth & Diversification 1. Financial Highlights 2. 2023 Outlook 3. Initiatives Update Cash cost improvement to continue in 100 €/t cash cost reduction in 2Q23 vs. 1Q23 First phase of Navia Excelente project the coming quarters. Cash cost partially mitigated a 24% net pulp
Slide 5: 1H23 Financial Highlights
1. 1H23 Financial Highlights 5
Slide 6: 1H23 Financial Highlights
1H23 Financial Highlights 1 100 €/t cash cost reduction in 2Q23 vs. 1Q23, partially mitigated the 24% net pulp price decline during the 2 Accounting (non cash) impact of the updated regulated energy price in 2023 is offset by a higher 3 €140 m dividend payment against 2022 Results, based on strong F
Slide 7: 100 €/t cash cost reduction in 2Q23 vs. 1Q23
100 €/t cash cost reduction in 2Q23 vs. 1Q23 Partially mitigated the 24% decline in net pulp prices during the same quarter Avg. NET Pulp Price & Cash-Cost (€/t) 950 846 850 762 750 694 650 578 624 636 550 535 450 500 350 1H22 2H22 1Q23 2Q23 2H23 E 2024 E Cash - Cost Avg. Net Pulp Price Pulp price i
Slide 8: Pulp price in Europe is expected to bottom out in 3Q23
Pulp price in Europe is expected to bottom out in 3Q23 We expect pulp demand to exceed supply over 2023-27 Market Pulp Expected Supply and Demand Growth over 2023 - 2027 Main market pulp demand growth drivers: (Mn tons) The end of the current destocking in the paper industry 10 Expected supply gro
Slide 9: The regulated energy price applicable from Jan. 2023 was updated in June
The regulated energy price applicable from 1 Jan. 2023 was updated in June Accounting (non cash) impact in 2023 is offset by a higher Ri cashed annually from 2023 Regulatory energy price Annual remuneration for investment (Ri) (€/MWh) for the Group Plants (€m per year) - 48% + 72% 34 71 208 109 20 R
Slide 10: 1H23 Consolidated Results
1H23 Consolidated Results Driven by the pulp price correction and the accounting impact of the regulated energy price update Group Revenues (€ m) Group EBITDA (€ m) Attributable Net Income (€ m) - 17% - 56% 554 €65m accounting (non cash) impact 45 459 from the regulatory 148 €65m accounting energy p
Slide 11: Working capital normalization in 1H23
Working capital normalization in 1H23 Free Cash Flow was positive in 1H23, before the working capital normalization Short Cash Flow Statement 1H23 (€m) 65 (30) (11) (14) (3) 7 (85) (20) (98) EBITDA Capex Net interest Tax payments Cash adjustments Free Cash Flow, Excess Ro Pontevedra´s Free Cash Flow
Slide 12: €140m dividend paid in 1H23, against 2022 Results
€140m dividend paid in 1H23, against 2022 Results Based on strong FCF generation and low leverage Dividend policy Dividend payment against FY2022 results (€m) Amount based on cash 250 0.29 €/sh. available for distribution 200 Ensuring a leverage below: 70 150 0.29 €/sh. Net Debt / EBITDA for the Pul
Slide 13: Low leverage position relative to our average cycle EBITDA
Low leverage position relative to our average cycle EBITDA Solid cash balance of €376m at 30 June 2023 Pulp business net debt as of 30 Jun. 2023 (€ m) Pulp business debt maturity schedule (€ m) €364m of bilateral loans €130m RCF – Fully available 450 1 Lease contracts €47m of public sector financing
Slide 14: 1a. Pulp Business
1a. Pulp Business 14
Slide 15: Differentiated & higher value-added products accounted for 16% of sales
Differentiated & higher value-added products accounted for 16% of sales 461,500 tons Pulp sold in 1H23. Annual maintenance shutdowns at both biomills in 2Q23 Differentiated products Geographical sales breakdown Breakdown by end product % of pulp sales % of pulp sales % of pulp sales 16% 8% Other Eur
Slide 16: Pulp business impacted by lower operating margins over 1H23
Pulp business impacted by lower operating margins over 1H23 And by the €25m accounting (non cash) impact of the regulated energy price update Avg. NET Sales price Pulp Revenues Pulp EBITDA (€/t) (€m) (€m) - 52% - 4% - 12% 71 380 €25m accounting 70 €25m accounting (non cash) impact (non cash) impact
Slide 17: 100 €/t cash cost reduction in 2Q23 vs. 1Q23
100 €/t cash cost reduction in 2Q23 vs. 1Q23 Partially mitigated the decline in pulp prices Cash cost (€/t) 800 636 €/t 700 46 €/t 535 €/t Extra-costs of the repairs to 600 100 €/t 590 €/t the Pontevedra energy turbine, 28 €/t >35 €/t < 500 €/t and the new water recovery 500 507 €/t solution amoun
Slide 18: 1b. Renewables Business
1b.) Renewables Business 18
Slide 19: Renewables results were driven by the regulated energy price update
Renewables results were driven by the regulated energy price update €40m accounting (non cash) impact in 2023 is offset by a higher Ri cashed annually from 2023 Energy sold Renewables Revenues Renewables EBITDA (GWh) (€m) (€m) - 32% - 28% - 60% 71 €40m accounting 175 (non cash) impact 823 126 from t
Slide 20: ENCE's first PV project sale in 1Q23 added €23m to EBITDA
ENCE’s first PV project sale in 1Q23 added €23m to EBITDA Another €27m EBITDA expected from the remaining PV project sales in 2H23-24 Portfolio location Jaen 100 MW Granada 133 MW Land Grid connection √ permit Huelva 40 MW Engineering Land √ Land Grid connection Grid connection permit Sevilla 90 MW
Slide 21: ENCE: industry leader in sustainability
ENCE: industry leader in sustainability Global ESG score: 1H23 Highlights 90/100 Production cost reduction Leadership and differentiation License to operate Risk minimisation Safe & efficient Climate People & Sustainable operations action Values agroforestry Protecting Health and Safety Committed to
Slide 22: 2023 Outlook
2. 2023 Outlook 22
Slide 23: 2023 Outlook
2023 Outlook 1 Cash cost improvement to continue in the coming quarters. Cash cost expected to improve below €500/t over 2H23 2 Pulp production is expected to normalize at close to 1 million tons We expect pulp demand growth to exceed 3 Pulp price in Europe is expected to bottom out in 3Q23, followi
Slide 24: Growth & Diversification Initiatives Update
3. Growth & Diversification Initiatives Update 24
Slide 25: 1st phase of Navia Excelente on track to deliver targeted ROCE >12%
PULP BUSINESS 1st phase of Navia Excelente on track to deliver targeted ROCE1 >12% Continuing to diversify our production towards our differentiated pulp products and Fluff pulp 1st phase 2024 - 25 2nd phase 2026 - 27 DIFFERENTIATED PRODUCTS FLUFF DECARBONIZATION R&D in plastic substitution and in t
Slide 26: As Pontes project
PULP BUSINESS As Pontes project An opportunity for growth and diversification, without increasing the consumption of wood Ence continues to make progress on the project it is studying to launch in the town of As Pontes in Galicia, which has been declared as a project of strategic importance by the
Slide 27: Unique competitive advantage: over 95% of our wood is locally sourced
PULP BUSINESS Unique competitive advantage: over 95% of our wood is locally sourced We benefit from our close access to eucalyptus plantations around our biomills Eucalyptus plantations surface in N.W. Spain Main figures (FY2022): GALICIA Navia CANTABRIA 2.8 million m3 of wood purchased in 2022 40
Slide 28: Ence Biogas: a new business based on the circular bioeconomy
RENEWABLES BUSINESS Ence Biogas: a new business based on the circular bioeconomy 15 projects under development with a targeted ROCE1 >12% Ence has incorporated a new subsidiary in 2022, Ence Biogas, for the development and operation of biomethane plants. Biomethane These plants will recycle loca
Slide 29: Other growth opportunities in Renewables
RENEWABLES BUSINESS Other growth opportunities in Renewables Biomass plants, renewable industrial heating and PV projects Biomass Energy Renewable Industrial Heating PV Projects 100 MW sold in 1Q23 with an €23m Developed 3 projects with a combined Working with potential industrial EBITDA contr
Slide 30: ENCE is the largest private forest manager in Spain
ENCE is the largest private forest manager in Spain Which offers additional growth opportunities in the voluntary CO2 markets >65,000 hectares managed in Spain: Carbon sink: Annual production: 0,4 million m3/year Book value (FY2022): €144m (€84m land + €60m standing timber) >600,000 tons of CO
Slide 31: Closing remarks
Closing remarks Growth & Diversification 1. Financial Highlights 2. 2023 Outlook 3. Initiatives Update 100 €/t cash cost reduction in 2Q23 vs. 1Q23 Cash cost improvement to continue in First phase of Navia Excelente project partially mitigated a 24% net pulp price the coming quarters. Cash cos
Slide 32: Appendix
5. Appendix 32
Slide 33: Group Financial Review: Short P&L
Group Financial Review Short P&L 1H23 1H22 Figures in € m Pulp Renewables Adjustments Consolidated Pulp Renewables Adjustments Consolidated Total revenue 335,1 125,7 (2,0) 458,8 380,0 175,2 (1,5) 553,7 Other income 14,8 3,3 (0,6) 17,5 8,2 3,8 (0,5) 11,4 Foreign exchange hedging operations results (0
Slide 34: Group Financial Review: Short Cash Flow
Group Financial Review Short Cash Flow 1H23 1H22 Figures in € m Pulp Renewables Adjustments Consolidated Pulp Renewables Adjustments Consolidated Consolidated profit/(loss) for the period before tax (11,5) 7,9 0,8 (2,8) 41,7 12,7 1,2 55,7 Depreciation and amortisation 31,3 17,5 (0,8) 48,0 24,4 20,0
Slide 35: Group Financial Review: Short Balance Sheet
Group Financial Review Short Balance Sheet Jun-23 Dic-22 Figures in €Mn Celulosa Renovables Ajustes Consolidado Celulosa Renovables Ajustes Consolidado Intangible assets 16,5 34,4 (12,4) 38,5 15,6 35,0 (12,7) 37,9 Property, plant and equipment 601,4 377,9 (8,0) 971,3 603,4 389,0 (8,5) 983,9 Biologic
Slide 36: Alternative Performance Measures (APMs) Pg.1
Alternative Performance Measures (APMs) Pg.1 Ence presents its results in accordance with generally accepted accounting principles, specifically IFRS. In addition, its quarterly earnings report provides certain other complementary metrics that are not defined or specified in IFRS and are used by man
Slide 37: Alternative Performance Measures (APMs) Pg.2
Alternative Performance Measures (APMs) Pg.2 It provides a comparable measure of the business’s profitability and is measured as the difference between the average sales price per tonne, calculated by dividing revenue from the sale of pulp by the number of tonnes sold, and the cash cost. NET FINANCE
Slide 38: Alternative Performance Measures (APMs) Pg.3
Alternative Performance Measures (APMs) Pg.3 NORMALISED FREE CASH FLOW Normalised FCF is the sum of EBITDA, the change in working capital, maintenance capex, net interest payments and income tax payments. It provides a proxy for the cash generated by the Company's operating activities before collect
Slide 39: Delivering value, delivering commitments
Global ESG score: 90/100 Delivering value Delivering commitments
Ence Energía y Celulosa — H1 2023 Earnings Presentation on 6ix