Empresas CMPC SA
SGO:CMPC
Empresas CMPC SA
In the lush landscapes of Chile, where forests weave their green tapestry, Empresas CMPC SA carves a notable place in the global pulp and paper industry. Founded in 1920, this venerable company has grown from its roots, deeply entrenched in the rich Chilean woodlands, to an influential player on the international stage. CMPC’s core business revolves around the production of pulp, paper, tissue, and packaging products, drawing strength from its sustainably managed forest plantations. By harnessing one of the world’s most renewable resources, wood, CMPC creates a seamless supply chain—from forest to finished product—ensuring both environmental and economic sustainability. The company's vertically integrated operations not only allow for control over quality and cost but also pave the way for diverse offerings that support sectors from hygiene to industrial packaging solutions.
Central to Empresas CMPC’s business model is its commitment to sustainable practices, which breathes life into its operations and brand. The company capitalizes on a closed-loop system to minimize waste and leverage the by-products of one process as raw materials for another, embodying efficient resource utilization with a conscience. This holistic approach feeds directly into its profitability, as CMPC serves markets across the Americas, Europe, and Asia, responding to varying demands for high-quality cellulose, paper, and tissue products. Furthermore, through continuous innovation and investment in technology, CMPC enhances its production efficiencies and expands its product portfolio, solidifying its position in an ever-competitive market. The company's dedication to sustainability not only resonates with environmentally conscious consumers but also aligns with global trends, fueling its business growth and reinforcing its stature as a steward of green manufacturing.
Earnings Calls
In the fourth quarter of 2024, CMPC reported sales of $1.9 billion, a 3% decline from the previous quarter. EBITDA fell by 27% to $332 million, driven by lower pulp prices and weaker consumption trends in the Softys business, which suffered a 20% revenue drop year-over-year. Despite these challenges, the Pulp segment increased production by 23% year-over-year. Management anticipates maintaining a free cash flow focus, despite a net cash outflow of $109 million this quarter. Looking ahead, CMPC aims for an EBITDA margin of 15% in Softys and expects increased pulp prices in 2025, following recent uptrends in both Chinese and European markets.
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Hello, everyone. I'm Fernando Hasenberg, CFO of CMPC, and I would like to welcome you to our fourth quarter 2024 earnings webinar. Joining me today, I have Francisco Ruiz-Tagle, CEO of CMPC; and Claudia Cavada, our Investor Relations Officer.
Please note that the statements made today during the presentation and Q&A may include forward-looking statements to assist you in understanding our expectations for future performance. These statements are subject to some risks and could cause actual results and events to differ materially.
In the fourth quarter 2024, sales amounted $1.9 billion. EBITDA was $332 million, and net income was $10 million. The Pulp business generated an EBITDA of $230 million with an EBITDA margin of 27.6%. EBITDA decreased by 27% quarter-over-quarter, primarily due to a lower average pulp price.
The Softys business show an EBITDA of $104 million, decreasing 5% quarter-over-quarter with an EBITDA margin of 13.1%. These figures reflect unfavorable exchange rate fluctuation in some markets of the region and weaker macro consumption trends.
Biopackaging generated an EBITDA of $19 million during the period with a margin of 6.6%. This represents a 27% decrease quarter-over-quarter driven by higher production costs and operational expenses. Year-over-year, EBITDA remained stable, reflecting a higher recovery in sales volumes, offset by increased costs.
In the fourth quarter, the composition of our sales was $833 million from the Pulp business, $797 million from the Softys and $288 million from Biopackaging. Therefore, consolidated sales totaled $1.9 billion with a 3% decline quarter-over-quarter and a 2% decline year-over-year.
Quarter-over-quarter, the decrease was due to a combination of lower sales in Pulp and Softys, partly offset by higher Biopackaging sales. For Pulp, in the quarter, there were lower selling prices, which were partially offset by higher volumes. Softys faced a challenging scenario on the FX side and consumption trends, which resulted in lower sales. In the Biopackaging business, revenues increased due to higher sales volumes.
Compared to the fourth quarter of last year, revenues decreased as a result of lower sales in Softys for the same reason behind the quarterly comparison. At the same time, Pulp grew on higher volumes, and Biopackaging saw improvements in both volumes and prices.
Operating costs reached $1.257 billion, reflecting a 2% increase quarter-over-quarter and a decrease of 10% year-over-year. This represents 65% of total revenues in the fourth quarter of 2024, which compares to 62% in the third quarter of 2024 and 71% in the fourth quarter of 2023. The year-over-year improvement is in part the result of the implementation of our competitiveness strategic pillar.
Other operating expenses, account that comprises distribution cost, administration expenses and other expenses by function, amounted to $330 million in the fourth quarter, increasing 3% quarter-over-quarter and stable year-over-year. Compared to the fourth quarter of 2023, administrative expenses decreased in Softys and increased in Pulp and Biopackaging.
The ratio in other operating expenses to revenues was 17.2% in the fourth quarter of 2024 compared to 16.1% in the third quarter of 2024 and 16.8% in the fourth quarter of 2023. Given the aforementioned effect, on a consolidated basis, the company's fourth quarter EBITDA was $332 million, where the contribution of the Pulp segment was 65%, Softys was 30% and Biopackaging was 5%.
Net income totaled $10 million during the period, a decrease from the $147 million in the previous quarter and $35 million in the fourth quarter of 2023. The quarter-over-quarter decline was due to a lower EBITDA. In the year-over-year comparison, the decline was due to variation of nonoperational figures such as deferred taxes and adjustment units.
Now I would like to turn the presentation over to Claudia, who will provide more details on our results by businesses.
Thank you, Fernando, and good morning, everyone. I'll start with the Pulp business. Pulp production was 1,075,000 tons, increasing 2% quarter-over-quarter and 23% year-over-year. The year-over-year increase reflects the entry into operations of our BioCMPC project in Guaíba.
Hardwood production was 883,000 tons, up 5% quarter-over-quarter and 26% year-over-year. The quarterly variation is explained by reduced maintenance downtime at Guaíba mills. Softwood production was 192,000 tons, decreasing 9% quarter-over-quarter and up by 10% year-over-year. The quarter-over-quarter decline reflects downtime at Pacifico mill according to maintenance schedule.
Regarding Pulp sales volume, they increased by 10% quarter-over-quarter and 30% year-over-year, reflecting a higher dynamism in our markets. Hardwood volume was driven by higher exports to China and the rest of Asia. In the case of softwood, the increase is a result of a combination of higher exports to China and the rest of Asia, partly offset by lower exports to Latin America.
Pulp prices during the fourth quarter of the year were in average $749 per ton for softwood and $577 per ton for hardwood. This is a quarter-over-quarter decrease of 2% for softwood and 16% for hardwood. Compared to the fourth quarter of last year, prices were higher by 6% for softwood and 1% for hardwood. As a result, revenues for the Pulp business totaled $667 million, decreasing 3% quarter-over-quarter and increasing 25% year-over-year.
Regarding the Forestry business, sales volume was 861,000 cubic meters, down 6% quarter-over-quarter as a result of lower sawn timber, pulpwood and other product sales. Additionally, volumes of plywood, sawlogs and millwork increased. Year-over-year, a 5% decrease is a reflect of lower sawlogs, sawn timber and other products, which was combined with stronger pulpwood, millwork and plywood. With this, revenues for our Pulp and Forestry business totaled $833 million, down 3% quarter-over-quarter and increasing 21% year-over-year.
For hardwood, cash cost risk reached $227 per ton in the fourth Q, decreasing 6% quarter-over-quarter and 21% year-over-year. The Q-on-Q decrease was driven by lower energy costs. Additionally, there were decreases in materials, labor and wood costs, while chemicals cost increased. For softwood, cash cost reached $358 per ton in the fourth Q, stable from the third Q '24 and decreasing 9% year-over-year. Compared to the previous quarter, higher material costs were offset by lower wood and labor costs.
Year-over-year, cash costs decreased across all categories with the most significant reductions in energy and wood and smaller decreases in labor, materials and chemicals. EBITDA for the Pulp business decreased 27% quarter-over-quarter and increased 215% year-over-year, recording $230 million with an EBITDA margin of 27.6%. The quarter-over-quarter decline was driven by a lower sales price, while the year-over-year improvement is primarily driven by higher volumes and lower cash costs.
And now moving to Softys. During the period, the main currencies in the business experienced significant depreciation against the dollar, leading to lower sales and results for Softys in comparison to previous periods. Revenues totaled $796 million, reflecting a 6% decrease compared to the third Q and a 20% decrease compared to the fourth quarter of 2023.
In the quarterly comparison, while volumes were stable for Tissue and 2% higher for Personal Care, currency erosion drove revenues in U.S. dollar terms to fall 6% and 7%, respectively. In the year-over-year comparison, volumes were down 4% for Tissue and stable for Personal Care. And given the currency depreciation, revenues in U.S. dollar terms were down 22% and 18% in each case.
Softys EBITDA for the fourth quarter reached $104 million with a margin of 13.1%. EBITDA decreased 5% quarter-over-quarter and 32% year-over-year. In both cases, the variation was mainly due to currency depreciation in Chile, Brazil and Argentina, plus soft volumes year-over-year, given challenging conditions for consumption in the markets of the region.
Now going to Biopackaging business. Quarter-over-quarter, sales volumes to third parties increased 4%, mainly due to higher sales in corrugated boxes and other papers, along with a recovery in corrugated papers and paper sacks. This was partially offset by lower sales of boxboard and molded pulp trays. Year-over-year, sales volume increased 3%, driven by boxboard, molded pulp trays, corrugated boxes and other papers, offset by declines in paper sacks and corrugated paper.
Revenues amounted $288 million, representing a 4% increase both quarter-over-quarter and year-over-year, driven by higher sales volumes despite a still challenging environment across different industries. As a result, in the fourth Q '24, EBITDA decreased by 27% Q-on-Q, driven by higher cost and operating expenses; and year-over-year, EBITDA remained stable, reflecting a recovery in sales volumes, which was offset by increased costs. The EBITDA margin was 6.6% in the fourth Q '24, down from the 9.4% in the third Q and 6.9% recorded in the fourth Q '23.
Thank you very much, Claudia. Capital expenditures in the fourth quarter totaled $261 million, which compares with the $194 million reported in the third quarter of 2024 and $220 million recorded in the fourth quarter of 2023. The quarter-over-quarter comparison is explained by higher maintenance expenses.
Regarding free cash flow during the period, there was a net outflow of $109 million compared to an inflow of $61 million in the third quarter of 2024 and $144 million outflow in the fourth quarter of 2023. When comparing quarter-over-quarter, the lower free cash flow is attributed to lower EBITDA and higher investments in the fourth quarter of 2024. Year-over-year, the increase in free cash flow is primarily explained by higher EBITDA generation and a greater reduction in working capital.
We closed the fourth quarter of the year with $4.857 billion in net debt. Gross debt was $5.6 billion. Cash and cash equivalents, including financial investment with short-term maturities, were $697 million, almost $700 million. The net debt-to-EBITDA ratio closed the quarter at 3.15x, lower than the 3.3x in the last quarter and 3.46x in December 2023. Regarding our debt profile, the average rate is 4.79% and the average maturity is 5.66 years.
Now I would like to share an update on the '24/'25 fire season. On January 20, in the context of a large forestry fire at Los Sauces, 3 forest firefighters of one of our contractors, SERFONAC, lost their lives while combating the flames at the fire in CMPC forest. We are sad and the whole CMPC team deeply regrets this loss.
In terms of the impacts of fires on the company's plantations, during the current season, approximately 1,400 hectares have been affected compared to the 100 hectares affected in the same period last year. The average in the last 5 years for the same time period has been 1,600 hectares. The company has made important efforts to increase and optimize its firefighting resources and thus provide an early response to fire outbreaks. To date, the company has 140 fire brigades and more than 1,000 firefighters, supported by 10 helicopters, 11 air tankers and 3 coordination aircrafts.
Now I would like also to highlight some important events that occurred during the fourth quarter. In November 2024, CMPC was recognized for the second consecutive year as the World's Most Sustainable Company by the Dow Jones Sustainability Index ranking for the paper and forest product sector. This recognition is aligned with the company's strategy in 2030, which has sustainability as a central component, and with the work that has been done since 2017 on the environmental front to combat climate change.
Additionally, the School of Economics and Business of the Universidad de Chile recognized Luis Felipe Gazitúa, Chairman of CMPC; and Francisco Ruiz-Tagle, the company's CEO, for their outstanding professional careers. Gazitúa received the 90-Year Lifetime Achievement Award for his more than 3 decades of contribution in the telecom and forest sectors, especially in sustainability initiatives. Ruiz-Tagle was inducted into the FEN 2024 Circle of Honor in the Economy category, highlighting his significant contribution to the country's development and his commitment to the community.
Finally, in December, at the Board's Director Summit Chile 2024, CMPC received the Board of Directors of the Year 2024 Award. On this occasion, 164 companies were evaluated. The objective of this organization was to recognize the boards that have demonstrated exemplary leadership in overcoming the challenges of implementing the Financial Market Commission Rule 461.
Now I will turn the mic to Claudia for the Q&A section.
[Operator Instructions] We have already the first question that comes from Rafael Barcellos, Bradesco.
So my first question is related to your pulp costs. So I mean, your pulp costs have fallen significantly in recent quarters, right? But the company is still not generating a reasonable level of free cash flow, right, with prices at around mid-$500. So I just wanted to understand, I mean, how do you see your pulp costs evolve in the coming quarters? Or if we really need to see pulp prices at the higher levels in order to see a more reasonable level of cash flow generation, okay? That's the first question.
And then my second question is about the Natureza Project. I mean, could you please provide an update on how the project is evolving and, of course, whether you will submit the Board -- the project to the Board this year, right, in 2025?
Thanks, Rafael, for your question. I'm going to take the first part. Regarding our cost, as part of our strategy, we have been working significantly on improving our cost structure. That's our competitiveness pillar of the strategy. We believe we have been very successful on that, but there's still plenty of room to improve. Particularly during this quarter, we had some specific events that affect our costs.
For instance, we have a 45-day stoppage on the Guaíba I mill that is significantly longer than a regular year maintenance stoppage, and that was related to the revamp of the Guaíba I mill. During the year, we also had some operational issues in Santa Fe, in Guaíba as well that affected our overall cost performance. But we have been advancing the specific consumption on most of our main chemicals, and other raw materials is improving. So we should see better results in the coming quarters.
Francisco, maybe you can...
Well, in connection -- thank you, Rafael, for your question. In connection with the Natureza Project, well, I have to say we continue advancing, I would say, in a regular way. We are now in a process of getting environmental permits. We are starting and in connection -- and a very well connection in the sense that we have been working and attending the requirements for having the normal approvals, environmental approvals and advancing without any issue. And of course, we are also in the process of preparing the engineering and all the first part of this kind of a project. We don't see, at this moment, the approval of this project in the Board of the CMPC during this year. It will be most probably mid next year.
Okay. Great. Very clear. Just as a quick follow-up, Fernando, I mean on the cost side, I mean, could you please be more specific on the potential for a cost reduction that you see on your Pulp division?
Yes. It's hard to be more specific, Rafael. We have plenty of initiatives that are underway. But no, we cannot disclose how much we can improve, but there is room for improvement.
Yes. I can probably add some here, Rafael. We have a very strong initiative, competitive initiative that is always analyzing the opportunities we have. And probably a couple of things that we can mention regarding your concern is that in the wood, for instance, we have the opportunity of improving the, in some of the Chilean plants, the specific consumption of wood. And because we had some -- not problem, but we didn't get the best specific consumption in some of the mills, so we are already solving that. This is marginal, but it's important.
And also in energy, we -- because of some instability of some of the mills, like Santa Fe in some part of the year or, for instance, in Guaíba when we had the big climate issues in last May, also we had some energy instability. And so -- and I'm giving you 2 examples where we have opportunities, for instance.
Now we have a question coming from Eugenia Cavalheiro, Morgan Stanley.
I just wanted to check with you, what are your view on the trajectory of pulp prices? And how do you see market dynamics given the recent events that we had in the sector? So just trying to understand what do you see for the year on pulp prices?
Thanks, Eugenia. Regarding pulp prices, as it has been announced by many players, prices have increased in January, about $20 in China and about $50 to $60 net in Europe as well. In softwood, the market is still more tight than in hardwood. So we also were able to increase prices in about $20. Going forward, it's still hard to tell. There is a chance that during February, we will be able to increase again prices, but there's still a lot of discussions going on.
For the rest of the year, we expect higher prices because we believe this is -- we are very near the floor, especially in hardwood. But we cannot anticipate yet what's going to happen, specifically because there's a lot of uncertainty in some market dynamics. Demand is still weak in some markets. Paper prices have not been able to adjust, and margins at papermakers are still very tight in some markets.
The next question comes from Bank of America, Guilherme Rosito.
So my first one is on Natureza. I'm just wondering, as you guys get ready to show the project to the Board, how are you guys thinking about financing of the project and the options on the table? I mean, how are you evaluating doing 100% on debt or maybe to raising some cash via other mechanisms? Just wanted to get your thoughts on that.
And my second question is on Softys. I'd like to know what kind of margins are you guys targeting for the year just considering the competitive landscape in Brazil and the currency depreciation you've seen?
Thanks, Guilherme, for the question. As Francisco mentioned, the approval of the project Natureza will not happen during this year, and it's probably going to happen by the first semester of next year. Therefore, it's very -- it's too early to announce the financing strategy. As we have said before, what is more important is that CMPC has always had a commitment for having a strong balance sheet, and that's something we will maintain.
And in connection with Softys, your question connected with Softys, well, my answer is that we have -- we believe we have an important and strong position in the market in Latin America. And what it is true is that because of the devaluation of the currencies in several of our markets, of our main markets where we have more presence, our margins were affected especially during the last quarter of this year.
But Softys has a very strong plan and have been working in the domestic prices in every market where we participate. So we are still expecting EBITDA margin in the range of 15% and up. This is our target there. But we understand we have been living a very competitive situation in some of the markets, for instance, like in Brazil, one of that.
We have a next question coming from JPMorgan, Tathiane Candini.
So my first question is regarding the pulp prices. So you're mentioning a little bit, and this is the dynamic that we have been seeing in the market, that the spreads between hardwood and softwood have been widening and not decreasing. And we see a lot of shutdowns. So the softwood market is the challenging one. My first question for you guys is, do you like having any conversations or could have any plans on increasing capacity on the softwood market since we have some good prices at this moment?
And my second question goes to the cost on the packaging side. So the margins in the quarter has been a little bit lower than our expectations. And we know that you have been working a lot, especially, as you just mentioned, in the Pulp segment. So is there any space for you guys to do the same type of working that you're doing in the Pulp segment also in the packaging one?
Okay. Tathiane, thank you very much for your question. The first question, you know what, the project, the future we plan is -- I mean we plan the future of the company, of course, in the long term. And we are not seeing too much opportunities for growing softwood. Actually, we are basically planning to keep the capacity we have. And it is true that, that market is tight today, and you see an important difference between the 2 fibers. But we're more concentrated in the future in short fiber. And this is -- it has to be with our Natureza Project. Not seeing now any -- for now, any increase in softwood.
In connection with the packaging, your question, yes, we have -- we are doing the same strategy we are having for pulp. We are developing that in packaging in the sense that we have a lot of competitive contracts, internal competitive contract with the different units we have in packaging like boxboard, corrugated paper and boxes, sack kraft. And so we are starting -- we're actually working on improving our, of course, our margin there also.
What is happening today in Biopackaging is that we faced during the '24 an important decrease in the market of construction market. And on that sense, it was affected, the sack kraft especially business. And the reduction in some of the -- in the consumption of some of the countries where we are participating affected also the packaging. So this is why we probably didn't have the better results in boxboard or in corrugated boxes.
But answering your question, we have very specific initiatives, of course, today working on that for improving our margin and always improving our margin because we think that we have an opportunity to be one of the best players at least in the region in those products.
First of all, maybe just to complement on that and related to what Francisco mentioned about the market, the construction market, but also the demand for boxboard. In general, in Biopackaging, volumes were lower. And because of that, the dilution of some fixed costs is tougher. We have been stopping some machines, especially conversion machines in the paper sack business. But it's not that easy and it takes longer to adjust the cost structure. But as far as Francisco mentioned, the competitiveness strategy also push us to improve our cost in the Biopackaging business, and you will see results.
We have a next question coming from Itaú, Marcelo Furlan.
My first question is just a follow-up on Eugenia's questions regarding China. So do you guys have any view regarding how our papermakers' inventories? I know that you guys already discussed a little bit regarding papermakers' margins. So if you could also provide more details on margins specifically for your clients in China, it would be helpful.
And my second question is related to capital allocation. So could you guys provide a little bit more color on CapEx for this year regarding growth and maintenance CapEx? In terms of growth, what would be the main avenues that you guys are expecting for this year to allocate CapEx? So these are my 2 questions.
Thanks, Marcelo, for your question. Yes, as I previously mentioned, and it's part of your question, you know that there is excess of capacity in China that compresses margins and, of course, put a lot of pressure on the pulp demand as a consequence of that. We have seen some stoppages and -- but it's tough to see the discipline we will expect under these circumstances with some papermakers, especially in China. Different is the case of Europe where we have -- you have the higher-cost players reducing their capacity when their margin shrinks. So yes, but that's a reality we have to live with.
Regarding your second question, can you repeat that one, please?
Yes, sure. Sure. Just an update regarding the capital allocation for this year in terms of CapEx, growth CapEx and maintenance.
Yes, we -- of course, we have our budgeting process. We approved our operational budget, but also our CapEx budget. And we are working with our CapEx for next year between $600 million and $700 million. About half of that is plantations or CapEx related to our forest asset, and we also have some maintenance CapEx there.
Now comes the next question with Goldman Sachs, Henrique Marques.
So just 2 follow-ups on the Natureza Project. First one, regarding timing. During the last call, you mentioned that you were expecting to get environmental permits by first quarter 2025. Just wanted to check on how is the timing on that. Are you guys going to be able to get it on the first quarter or not?
And then second question, a follow-up. I know you mentioned it's too early to comment about the financing of the project, but I just wanted to know if there's a possibility that you could cut dividends to be able to focus on the project's CapEx. Is that a possibility? Is that something you guys are thinking about or, no, dividend policy will not be changed by any means because of the project?
Thank you, Henrique. Well, as I mentioned before, we have been running in a very regular way our environmental permits. Yes, during the first quarter, the first half of the year, I would say we should be resuming the approval for the previous approval, licencia previa. And then we -- then for building the project, you need the licencia de instalacion, installment permit. And we are totally under the normal timing. So we're not seeing any problem in this.
We also created a very formal team in the state where we're working with specialists, the authorities, ministério público or FEPAM authorities, the environmental authorities and the company working on all the requirements, the environmental requirements and working, I would say, without any issue, any problem in that. So this is my answer for the environmental permits.
And probably you can mention some about the financing and what we are thinking.
Yes. Thanks, Henrique. Regarding dividend policy, in the last general shareholders' assembly meeting, a 30% dividend policy was approved. Unfortunately, in Chile, the law require companies to pay at least 30%. The only way to reduce that percentage is to have 100% of the shareholders' approval, which, for a company like CMPC, it's not possible. You will have to bring all 100% shareholders to a meeting to approve this. So that's not something we can work as a reality or a real alternative. Because -- so the most reasonable way to think about our future's dividend policy is maintaining this 30% we have today.
And we have another question coming from Juraj Domic, LarrainVial.
I was wondering if you could provide us more comments on the increase on the maintenance CapEx for the quarter. I know that you mentioned some incidents at the beginning of the session. So I don't know if it's related to that. And just that's my question.
No, the most important one, and it was part of the Guaíba I revamp, that was a very significant project for us and for the future of Guaíba I line. It was a 14 -- 45-days stoppage. So that increased our cost. But also, we had other year maintenance during the quarter like Pacifico. So that's mainly what explained the deviation on maintenance cost.
Just to clarify, the cost of the maintenance of the -- every program, maintenance of mills were under -- was very much what we budgeted. We are spending in terms of the budget, what is the -- we are spending what we program for every of this maintenance period.
And just to clarify, the línea I in Guaíba, that was the one that took more time. It was also a program revamp of the line, and so it was a program period. That line represents 20% of the total production in Guaíba. So it is not the most important part of our production, but it created -- it was harder to start with the line after this long -- several days of maintenance was harder compared with what we budgeted in that line. And it created some extra cost, but I wouldn't say that is the most important thing in terms of maintenance for the company.
We don't have more questions. So I think that's all for today. Maybe anyone wants to make a question, we'll still have a minute. No?
Well, thank you very much, everybody, for the meeting today.
Thank you. Have a good day.