Empresas CMPC SA

SGO:CMPC

Earnings Call Transcript

[Operator]

Hello, everyone, and welcome to Empresas CMPC 2017 Fourth Quarter and Full Year Earnings Results Conference Call.

On the call with us today is Ignacio Goldsack, Chief Financial Officer; and Colomba Henríquez, Head of Investor Relations. [Operator Instructions]

As a reminder, this conference is being recorded.

Please note that 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. And I'll refer you to the company's press release and regulatory filings for discussions of those risks.

In addition, statements during this call, including statements relating to the conditions in global pulp, personal care, forest products and paper markets, are based on management's views as of today, and is anticipated that future developments may cause these views to change. Please consider the information presented in this light.

The company may, at some point, elect to update the forward-looking statements made today, but specifically disclaims any obligation to do so, except where required by law.

It is my pleasure to turn the call over to Mr. Ignacio Goldsack, Chief Financial Officer. Mr. Goldsack, you may proceed.

[Ignacio Trebilcock, executive]

Thank you, operator. I would like to welcome everyone on the line to this conference call to discuss our 2017 fourth quarter and full year results. As we normally do in these occasions, we will start with a brief presentation, so I will start on Slide #3.

2017 was a challenging year for us, as we started the year with the worst forest fire season in Chile of the last year, and also with the unexpected downtime at Guaíba II mill. Despite this, we were able to end the year in a very good shape, with EBITDA increasing 11% compared to 2016, and net income around $100 million after having a negative result the past 2 years.

We also drove the year with a strong liquidity position and positive free cash flow of more than $400 million, which allowed the ratio of net debt-to-EBITDA to decline every quarter of the year and then -- at 3x in line with our internal policy. We're happy to say that the Guaíba II mill started operations on November 6, 1 week ahead of the schedule, and is now operating normally. Also, we're very pleased with the execution of our CapEx plan, highlighting the successful ramp-up of the Cañete mill.

The results for the year were possible not only because of the positive pulp market, but also because we pursued a disciplined execution of our strategic plan, increasing the diversification and the value-added content of our revenue base, working capital management, CapEx flexibility, and efficiency in productivity initiatives we are still implementing.

If we now turn to Page 4 of the presentation, we can see that positive market pulp fundamentals, with price increases on both hardwood and softwood, continued to drive revenues. Unfortunately, as we mentioned, the stoppage in Guaíba II impacted sales volumes in around 240,000 tons and prevent us to fully capture these pricing conditions. Market pulp volumes reached 713,000 tons, with reduction of minus 5% sequentially, and minus 20% year-on-year. Tissue volumes showed a 4% decrease over the previous quarter and were stable year-on-year.

Consolidated revenues were down 2% quarter-on-quarter, but up 5% (sic) [3%] year-on-year, reaching over $1.3 billion. We continue to have a very close control in operating expenses, and despite some one-off maintained satisfactory performance.

EBITDA reached $256 million, and was down 21% quarter-on-quarter, during the strong comparison base. The year-on-year comparison shows 15% expansion. EBITDA margin stood at 19.5% or a drop of almost 300 basis points sequentially, but 150 basis points gain over the previous year. Moreover, we maintained the trend of cash generation, with a disciplined management of working capital and CapEx program. As I mentioned, net-debt-to-EBITDA ratio improved, once again, on a sequential basis, reaching 3x.

I would like now to ask Colomba Henríquez, Head of Investor Relations, to cover our results in more detail. Please, Colomba, go ahead.

[Colomba Benavente, executive]

Thank you, Ignacio. Good morning to everyone participating in our call. I will now discuss Slide 5 of our presentation.

In the fourth quarter of 2017, cost of goods sold totaled $874 million, up 5% from the previous quarter on the back of higher maintenance cost in pulp, partially compensated by lower direct costs as pulp volumes were down. Year-on-year, cost of goods sold were up 1%, also affected by higher maintenance in pulp, and higher direct costs in tissue as well. Again, they were partially mitigated by lower direct costs from lower pulp volumes.

Cost of the goods sold represented 67% of revenues in this quarter, above the 62% from the previous quarter, but still lower than the 68% level we had in 4Q '16. The $182 million accumulated in 4Q '17, in other operational expenses was a 1% increase both sequentially and year-on-year, demonstrating that our cost control process are working. Once again, other operating expenses were fairly stable when measured as a percentage of revenue at 14% in 4Q '17, as compared to 13% in 3Q '17 and 14% in 4Q '16. The sequential increase is explained by higher administrative expenses that were partially offset by lower pulp distribution costs. The year-on-year increase reflects the higher administrative expenses in pulp, and higher SG&A expenses in the Tissue division.

Turning now to Slide 6 of the presentation, where we have more details on the business line. Pulp prices enjoyed positive trends throughout 2017. Hardwood prices increased 13% quarter-on-quarter and 45% year-on-year, reaching $694 per ton. Softwood prices increased 18% quarter-on-quarter and 31% year-over-year, reaching $742 per ton. As we mentioned before, due to the stoppage of Guaíba II, we were not able to reap all the benefits of the better pricing environment. Total pulp sales volumes were down 5%, sequentially, and 20% year-over-year. The sequential decrease affected both grades more or less equally, with lower softwood exports to China, and lower hardwood exports across all markets. The year-over-year drop was, of course, mostly in hardwood. The 25% decrease affected exports to all markets.

Meanwhile, in softwood, we had a small 1% increase between European and Asian markets. Pulp production increased significantly by 21% quarter-over-quarter, after the restart of Guaíba II in November 6. Overall, it was still 12% below last year.

Forestry sales volumes to third party continue to decline, as we have seen throughout 2017, with lower volumes in all products. Forestry average sale price has decreased 11% sequentially, from a high comparable level, but are still up 12% year-over-year, with positive changes in the product mix. Considering the difficulties brought by the Guaíba II stoppage, we start to work at this factory, as higher pulp prices compensated for lower sales volumes.

Revenues in our Pulp and Forestry business show increases of 3% over 3Q '17 and 7% compared to 4Q '16. EBITDA was 10% lower sequentially, but 46% higher year-over-year.

Turning to Slide 7, we will have a look at our Tissue business. Well, we believe that long-term fundamentals are very supportive. This is a market where we see seasonal volume variations, especially during the summer season. As such, tissue sales volumes decreased 4% sequentially, affecting all markets with the exception of Brazil and Chile, and were stable on a yearly basis, but with very different performance across different markets.

Sanitary products had lower sequential and yearly sales volume. Lower diaper and feminine care products accounted for the 6% drop quarter-over-quarter. Year-over-year, volumes decreased by 5%, with lower feminine care product sales in Peru, Brazil and Ecuador, as well as lower wet wipes volume.

Our investment in strong brands allow us to better face currency fluctuations and the impact they have on prices. Average sale price, as measured in U.S. dollars, were down 1% quarter-over-quarter for tissue paper, and 6% quarter-over-quarter for sanitary products. Given the seasonality and market dynamics of the quarter, revenues fell 6% sequentially and saw a 4% year-over-year increase. Lower volumes and prices combined with higher direct costs related to higher pulp prices in SG&A, resulted in EBITDA that was down 43% quarter-on-quarter and 31% (sic) [32%] year-over-year.

Now to the Paper business on Slide 8. Sales volumes to third parties were down 9% both quarter-over-quarter, with lower boxboard and molded pulp trays, as well as year-on-year. Also on lower boxboard volumes, and less significantly, corrugated papers. The quarter-over-quarter and year-over-year comparisons were affected by the stoppage of Maule mill to carry out the last stage of its efficiency and productivity project, which resulted in lower production and higher costs during the fourth quarter. Average sale price had increased by 2%, both quarter-on-quarter and on a year-over-year basis, but were not sufficient to compensate for the lower volumes, resulting in 4Q '16 revenues falling 7% quarter-over-quarter and by 8% year-over-year. EBITDA comparisons show more significant decreases, 50% sequentially, due to lower boxboard volumes and higher direct costs, and 45% year-over-year, again due to lower boxboard volume and the higher operating costs.

Please turn to Slide 9. 2017 was a positive year for pulp market demand, with growth of 2.2 million tons or 3.8% over the previous year. The positive environment was a constant throughout the year. Hardwood was the fastest-growing grade, with demand increasing 4.9% or 1.6 billion tons during the year. Softwood market pulp demand also grew at a healthy 2.5% rate, increasing around 620,000 tons. Chinese demand, which continues growing at a strong 8% at least over 2016, was the main driver in the market. Growth rates for demand from Japan and other Asia were also high, but those are smaller markets. Latin America and Western Europe were the only markets that were down for the year.

Finally, we ended the year at similar levels of global pulp market production stocks that we had at the end of 4Q '16, during the 8 days for softwood and 37 days for its hardwood, indicating a healthy market at this point.

I would like now to turn the call back to Ignacio for a review of our financial position. Mr. Ignacio, go ahead.

[Ignacio Trebilcock, executive]

Thank you, Colomba. Please go to Slide 10. We have stressed at every opportunity that our main financial focus is maintaining the strong execution discipline in the working capital and capacity expansion programs, always targeting free cash flow generation. In the fourth quarter of 2017, we generated $18 million in free cash flow. This is a decrease of 90% quarter-on-quarter and 70% year-on-year, mainly due to a lower EBITDA generation, working capital variation and higher finance -- net financial expenses. The $833 million in cash position was 38% (sic) [39%] lower, sequentially, but 40% above the year, above level, on the back of strong cash generation during the year. Strong cash positive gave us the ability to execute our CapEx program without compromising our liquidity ratios. As such, CapEx bridge $153 million in the quarter, which includes the repairs on the Guaíba II recovery boiler.

Finally, I'm happy to say that we ended 2017 with a net debt-to-EBITDA ratio of 3x, which complies with our internal policies. This is a major accomplishment and important quarter target. I would also like to stress the evolution of the ratio in every quarter of 2017, showing a consistent trend on strength of the financial management process.

Finally, turning to Slide 11. We faced some strong headwinds, and had to deal with unexpected challenges. We are satisfied how CMPC responded to those challenges. We chose that we're able to adapt and overcome difficulties, and come out stronger on the other side.

We believe that the result confirms that our strategic goals and our diversification strategy execution are on track. Much remains to be done in addition to the significant operational efficiencies and cost controls that we have already accomplished. We were competitive, we must do more and be better all the time, and that is a strong commitment as well.

We have also reached significant targets in the reinforcement of our capital structure, with significant leadership positions in important Latin American markets, competitive production capacity, strong regional brands, a knowledge of consumers in the region. We're ready to deploy capital, if and when market conditions are attractive. We are prepared to make the best of the growth opportunities that we encounter, obtaining attractive returns on a sustainable basis, always taking a prudent approach in compliance with our internal financial policies, and our commitment to maintain our investment rating.

Before starting the Q&A, I would like to mention that Mr. Guillermo Mullins, CMPC's Pulp Commercial Director; and Mr. Hernán Rodríguez, CMPC's CEO are also joining the conference call. They will be available to answer any questions you may have. Operator, please open the conference for questions. Thank you.

[Operator]

[Operator Instructions] Our first question comes from the line of Thiago Lofiego with Bradesco.

[Thiago Lofiego, analyst]

Two questions on my end. First one on the pulp market. We've seen a lot of different speeches out there, and different tones in terms of what can happen in the short term. Fibria yesterday announced a price hike for all regions for April, but most producers actually maintained price over March flat, and we haven't seen any other announcements for April. So if you could give us some color on what your view is on the short-term trends? We think that long-term trends are definitely positive, they seem to be positive. But short term, it's a bit more cloudy. If you could give some more color on that, that would be great, especially in China.

And the second question is on M&A. As far as we understand, CMPC wasn't willing or is not willing to gain more exposure to the pulp market. The strategy, as far as I understand, has been continued to grow from tissue and then maybe some other paper packaging projects. But more recently, we also saw some news that CMPC would be interested on taking a role, and the confirmation of this happening with you or that's maybe about to happen. So if you could also give us some color on that, it would be great.

[Guillermo Mullins, executive]

Fine. This is Guillermo Mullins. Maybe I take the first question? Do you hear me well?

[Colomba Benavente, executive]

Yes, sure.

[Thiago Lofiego, analyst]

Yes.

[Guillermo Mullins, executive]

Yes. Okay. Fine. I -- the pulp market surprise us every time. We all thought that the market would definitely deteriorate in -- maybe now in the end of February or March, and it hasn't happened yet. It could happen, but nobody knows. I'm just arriving Shanghai this week. So the next week is going to be very important, because normally when you have this sort of markets that are in balance and you have a big conference, like the Shanghai conference, the psychology at the end of the conference that's a lot to either strengthen the market or weaken the market. However, things have changed. Basically, what has happened is that customers all over the world have been able to raise some of their prices for paper. That didn't happen in the past. The old normal was that the prices of pulp would go up, the prices of paper would stay, and then you will face an impossible situation. So prices of pulp were temporary, because their customers couldn't bear the difference in costs in this situation. .

However, in this price rise, starting with the Chinese but continuing with people in U.S. and people in Europe, they have been able to put prices up. And that is very important for them because now than the -- they are still going on, price rises, and that -- and nobody wants this price to be eroded. Therefore, you're finding that customers are all wanting to keep the price steady at least until they go through with the price rises. So today, we have a situation that none of our customers is expressing for lower prices. They want to -- because they know with lower prices, the prices of paper will come down. No, the stocks are also completely under control. Nobody of all our customers across the world has said, "Look, I'm going to take less this month." Actually, everyone is saying, "I need a little bit more."

So the market today is stable, in the case of China, because we have had 3 months of unchanged prices in China basically. And in Europe, prices are going up because there's a big -- there's a difference between China and Europe, they're still catching up. But today, it's difficult to say. We will have to wait to what happens next week, but there is a possibility. Before, I saw very clearly that the prices need to have -- would have a big correction now. Thiago, anything is possible. The prices could have a smaller correction or could eventually be -- having a new normal that would mean, sort of, stable prices of pulp at the higher end, with good prices of paper and with good economic performance in the world. So I'm sorry that I didn't really answer the question completely, but I'm unsure what's going to happen until at least a week after the pulp week in China.

[Thiago Lofiego, analyst]

That's very clear, Guillermo. And if I may, just looking a bit further out, maybe 6 months to 12 months out, when the market apparently will be a little bit more tighter, there won't be more supply coming on stream or very few, and then demand continues to be strong. What, in your view, would be limitation for further price hikes, thinking farther out, maybe 6 or even 12 months? Do you think paper makers' margins or the paper makers can really accept more through -- hikes from here, or not really?

[Guillermo Mullins, executive]

I think they have to try. The paper producers have been very weak in the past, increasing prices. Because of competition between themselves, prices were not really increased. They didn't try hard. I think now what's going to happen is, with less supply, the market is going to get tighter. And I think what you say is true. The margins are the ones that we will be -- if they are not able to put the prices up as much as required, then some producers will stop producing, and those going to be

[Audio Gap]

[Ignacio Trebilcock, executive]

Thiago, I will take the -- your question regarding M&A. Obviously, as probably everyone in the industry... What happened?

[Thiago Lofiego, analyst]

I can hear you well.

[Ignacio Trebilcock, executive]

Sorry. There is -- we have noise in the -- on the line.

[Technical Difficulty]

[Ignacio Trebilcock, executive]

I don't know what's happening on the line. What we'll do, Colomba? Are we okay now?

[Colomba Benavente, executive]

Yes, we're okay.

[Thiago Lofiego, analyst]

Yes, I can hear you. Yes.

[Ignacio Trebilcock, executive]

We are looking what's happening in Brazil, that's probably everyone in the industry because it's an interesting case to analyze. And I -- just to let you know, we are not participating in this transaction at all. And regarding possible M&A transactions, as always, we will look very carefully for any opportunity that may arise in the product lines that we participate. That's my answer.

[Thiago Lofiego, analyst]

But is it fair to say that pulp is not in your plans? Or not really? You would consider -- I'm not necessarily talking about the deal that is going on right now with Fibria, but I don't know. Eventually, if you find opportunities to grow on pulp through M&A, whatever those opportunities are, would you be considering? Or that's not really part of the company strategy?

[Ignacio Trebilcock, executive]

So my answer is the one that I already said. We are -- look -- if any opportunity arise or may arise in any of the product lines that we participate, we will look it very closely, of course.

[Guillermo Mullins, executive]

Okay, I'm Guillermo Mullins, I'm back without my Chinese friend now.

[Operator]

Our next question comes from the line of Carlos De Alba with Morgan Stanley.

[Carlos de Alba, analyst]

I have several questions. The first one, it has to do with sales volumes. Wood sales volumes and tissue volumes seem to be weaker, both quarter-on-quarter and year-on-year, so if you could comment as to what are you seeing in those markets, and what do you expect going forward, that would be useful. I understand maybe in some of the woods, particularly, pulpwood, there may be more intercompany transactions than we have seen in the past. But in tissue, Brazil and Argentina were down year-on-year, which is a little bit surprising given that those economies are recovering.

And then would -- could you please comment on any cost pressures that you may be seeing above and beyond what you will consider normal? Clearly, the annual performance on cost in 2017 and in the fourth quarter were good. But just so -- we understand that caustic soda is going up, and so we just want to check if there is any particular pressures or moves -- movements that you would like to highlight and what are you doing to offset those?

[Colomba Benavente, executive]

Carlos, so I'm going to take the question about the volume. So if you remember last quarter, in the third quarter of '17, we had a problem in our solid wood product business, mainly because of the SAP implementation. During the fourth quarter, we had very high inventories that we were planning to sell, but we had a port strike, right? At the middle of the quarter. Therefore, we couldn't ship all the things we had in the ports. Therefore, our inventories increased considerably, and of course, our sales decreased. This situation, of course, should be solved in the next couple of quarters, partly in the first quarter of this year and partly in the second quarter. But, of course, it's a slow process.

In the Tissue business, usually the fourth quarter has a low seasonality. In summer season, usually people use less tissue paper. Therefore, volumes decreased quarter-on-quarter and were mostly stable year-on-year. I would say that, yes, Argentina has been a little more complicated, mainly because of the environment in the Argentina market, or as you said, the Argentinian market is -- or the economy is going a little better, but it's still not very good. We see a very big depreciation, which of course affects pricing measured in dollars, and of course, at the end, it affects demand. And in Brazil, something similar happened.

[Ignacio Trebilcock, executive]

The only thing that I will add regarding Argentina is that it was a lot of pressure, especially in the last quarter, in shifting demand from retail to more of a hard discount stores. But the supermarket sales were low compared to the previous quarter and a year ago.

[Guillermo Mullins, executive]

Regarding cash cost, Carlos, during this fourth quarter, we -- it was affected because of the downtime in Guaíba II line. And also, we got to carry out the 3 scheduled maintenance downtimes in Laja Santa Fe I and Guaíba I mill for around 15 days each.

[Colomba Benavente, executive]

And also, complementing to that, of course, the Tissue and the Paper business have a very high cost pressure because of the increased pulp prices, which affects directly their cost base. And of course, that should continue as pulp prices stay at this levels or if they continue to increase.

[Operator]

Our next question comes from the line of Marcio Farid with UBS.

[Marcio Farid, analyst]

I have 2 questions. So the first one, maybe to Guillermo Mullins. Guillermo, I just wanted to understand, how are clients' reception, when you came back to the market to offer the extra Guaíba volumes, when you start up the mill in November last year? Were they in high demand? Or they were skeptical about production sustainability? And how should we think about Guaíba sales for 2018, considering the inventory that you might have to recover from last year as well?

And the second one, just on the CapEx side. Just wanted to understand, maybe from Ignacio, what's the guidance for 2018? Is it going to be just maintenance CapEx? Or should we still expect some project -- growth projects as well?

[Guillermo Mullins, executive]

Marcio, regarding Guaíba customers, we were very lucky, first of all, because I think we did a very good job. Being very honest and open with customers throughout the Guaíba stoppage. We did go to them, told them the whole truth. However, we also pointed out that we have been in the market for many, many years. And that we have had other problems like the earthquake, whatever, and every time we've been very reliable. So the customers gave us a pass here. And as a result, I would say that we lost no customer even with the problems of Guaíba, and they all retook the positions they had before with Guaíba, with no big problem.

So basically, commercially, our Guaíba problem did not have a big impact because it was one-off, I think, in our history. If it happens again, then it would be a big problem. But I think that we were very lucky, and also, we did things very professionally and well. And the -- and result was very good. Does that answer your question?

[Marcio Farid, analyst]

Sure. Just in terms of volumes expectation for 2018, do you still have to recover some inventories from last year? Or would you expect Guaíba to produce the 1.3 million ton?

[Guillermo Mullins, executive]

Yes, we will -- in sales side, we will have to recover stocks. Because what we did last year, in order to try and support the customers, we used all our stocks. So basically, there be -- it is going to be between 150,000 to 200,000 tons that we will have to recover throughout the year, and that we will not be able to sell because that we sold before. And -- but that was expected.

[Ignacio Trebilcock, executive]

Marcio, Ignacio, here. The guidance -- the CapEx guidance for this year should be around $500 million. Basically, maintenance should be around $200 million. We have also around $50 million related to the final stages of existing projects, mainly in Laja, and the new corporate building in Los Angeles. And the remaining is expected to be concentrated in the Tissue business in automation, new conversion lines, and new projects that are in the final stages of approval and analysis.

And you know that the Tissue business will be the main focus of growth for the coming years. So after the completion of Cañete, we expect to continue growing, especially in Brazil, Argentina and Mexico for the coming years.

[Operator]

[Operator Instructions] Our next question comes from the line of Bill Garnett with Scotiabank.

[Bill Garnett, analyst]

I just had a couple of follow-ups. So just on the solid wood side in forestry, I appreciate that the port strike is going to result in lower shipments, kind of, through Q1 and Q2. How do you expect -- sort of, as that normalizes and you guys, your inventory has come down as you're able to ship again. Do you, kind of, expect some of the pricing weakness that we're seeing here in Q4 to persist through the first half of '18?

[Colomba Benavente, executive]

Bill, again, during the first quarter of this year and the second quarter, we should start increasing sales as we decrease inventories. So the situation should be mostly normalized by the end of the second quarter of this year.

[Bill Garnett, analyst]

Right. But as you decrease inventories, do you expect that to weigh on pricing?

[Colomba Benavente, executive]

No, it shouldn't. Prices, at least, up to now, aren't going up for the solid wood product, especially in plywood. So we shouldn't see any pressure in terms of any preference.

[Bill Garnett, analyst]

Okay. Great. And then turning to Pulp. It looks like you guys were able to build some inventory in Q4. And now you're talking about 150,000 to 200,000 tons of additional inventory build in 2018. Do you expect that to kind of be more front-end loaded? Or will that inventory build, kind of, take place over the course of the year?

[Guillermo Mullins, executive]

The inventory will be -- take course across the year, because obviously, we have a lot of commitments with customers and we can't just build the inventory in the beginning. Of course, we could -- what we're trying to do is to build as we go. And this inventory, basically, is inventory of stocks we have in different parts of the world, in order to service our customers in Europe, in the U.S., wherever. So we are doing as much as we can to try and do it in phases as the customers need it, basically. But it's not going to be all at once, we can't. Then we would have a problem to supply our customers having market that is very, very, sort of, tight today.

[Bill Garnett, analyst]

So of the 240,000 tons in volumes that were, kind of, forgone in Q4, I guess we should look at you guys being able to make up probably almost 200,000 of that in Q1?

[Guillermo Mullins, executive]

Yes, in Q1, we will have normal sales. Of course, not necessarily, we're going to pick up all those volume. It's going to take longer, maybe 6 months. But we are -- basically, inventories are a very tricky thing. We are selling today. We have a demand that allows us to sell all we produce. And the big problems for us and the challenge have been to get to the markets in time. And so it's very difficult to say. We are trying to do as much as we can, get to the market in time, and be able to sell to our customers. So we're going to pick up as much as we can, but I can't really tell you how much, because it depends so much on shipments, on boats, on all that sort of stuff. But we'll pick it up in the first 6 months, I think.

[Operator]

Our next question comes from the line of Carlos Sotto with Citi.

[Carlos Sotto, analyst]

I would like to ask you about the Pulp business. You had good volumes and prices in the Pulp division, but lower EBITDA margin. I will appreciate if you could comment on that beyond the maintenance costs that were incurred during the period? Also, pulp prices were up. Your earnings that you have mentioned is 30% for hardwood and 80% softwood. For softwood, that's pretty much in line with the market. But I would like to understand how the prices, which were up just 30% in China and 80% in Europe. So I'm wondering if you negotiated the discount terms, or if you allocated more volume at the end of the period with higher prices on [average]. So how was the hardwood price on agenda managed to allow for that increase of 30% in hardwood prices? And also, if you would comment on the level on, how your hardwood inventory is right now?

[Guillermo Mullins, executive]

Look, prices, we follow the prices of the market. So we didn't do any special deals or whatever at different prices. The prices in hardwood in the last 3 or 4 months in China, in Asia in general have been flat. But in Europe, there's been a -- there was a big difference between China and Europe, and they've been picking up. And we have been -- we have not been playing with the market. We have gone out, and because of what we're discussing before, sold to our customers. And mostly, customers have accepted all the price increases. So -- and our stocks are quite tight like everyone else, I would say, especially because of our inventory building. But we have tight inventories, but on the other hand, we are -- we have our customers with the volumes contracted that are quite in line with what we are trying to do, maybe a little bit lower in the beginning of the year and going up as we build inventory. But prices, we have followed the market and implemented all our price rises, basically in Europe and others in South America and the U.S., not so much in Asia, because there's not been price rises in hardwood in the last 3 to 4 months.

[Carlos Sotto, analyst]

Perfect. And what about the volumes and pricing in the pulpwood and about lower EBITDA margin, is that attributed to higher maintenance costs or something else?

[Colomba Benavente, executive]

Yes, sure. I can answer the last part. Yes, of course, maintenance costs play a big part in that equation because of the maintenance cost per se, but also because of the higher cash costs that we have to incur when we restart after maintenance. So little higher energy costs, all sorts of higher -- maybe some chemicals. And I would say also the lower solid wood product volumes or sales, also entering to that equation, since you are seeing the complete EBITDA margin for the business.

[Operator]

Our next question comes from the line of Sebastián Ramírez with Toesca Asset Management.

[Sebastián Ramírez, analyst]

It's only 2. In the Tissue division, we've seen the pricing very stable quarter-on-quarter, with a big pressure of -- on the cost side for pulp. What should we expect going forward? And also, if you can just make any comment in terms of the profitability in the different region -- in the different countries? You always have talked that in the countries where you have much higher market share, profitability has been much higher than the rest. I want to understand if with the current trends, Argentina has left that group or not?

And the second question is in terms of the Paper division. Do you have any calculation of how much can we assign in terms of our one-off for the stoppage of the Maule plant in terms of quantifying the effect on EBITDA on that? Just trying to understand how much is recurring of the Paper division results, and how much is transitory due to the expansion and the final completion of that?

[Ignacio Trebilcock, executive]

Well, basically, I will take the -- your question, Sebastián. Regarding the Tissue prices, you mentioned that, which is correct, that were sort of stable quarter-on-quarter. Consumer products prices do not move vis-à-vis the commodities that we use to produce them. The prices are very much stable, and you move them all the time, but not on a significant basis. So you see any consumer prices, they tend to move with inflation basically.

Regarding profitability in the different countries, Argentina has not left that profitable position as you ask. They're still quite profitable, Argentina. And regarding the Paper division, the one-off extra cost that could be considered regarding the expansion in Maule, during the year, it's in the range of $40 million to $50 million.

[Sebastián Ramírez, analyst]

That takes in account only the cost of the higher cash-plus that will be considered, or also the decrease in volumes?

[Ignacio Trebilcock, executive]

No, no, it's a loss of volume due to the longer stoppage. We need to stop the mill for quite long in order to go ahead with the project. So that's considering the loss of production, considering the learning curve cost since you have high cost during the learning curve, et cetera.

[Sebastián Ramírez, analyst]

Perfect. And if I may take only one -- another question. It's just, seeing the trend that we're observing in many tissue producers that this increase in cost is impacting results. Are you seeing this as an opportunity to accelerate your inorganic and organic acquisitions in that area in tissue?

[Ignacio Trebilcock, executive]

As I was -- well, the first questions that we answered regarding that -- obviously, we will look very closely if there is any opportunity in the M&A side.

[Operator]

Thank you. Ladies and gentlemen, we have come to the end of our time allowed for questions. I'll turn the floor back over to Mr. Goldsack for any final comments.

[Ignacio Trebilcock, executive]

Thank you very much for attending this conference call.

[Operator]

Thank you. This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation.