Earnings call transcript: ENCE reports Q2 2025 loss, stock dips 0.35%

Ence’s second-quarter 2025 earnings revealed a net loss and revenue shortfall, resulting in a slight dip in stock price. The company reported an earnings per share (EPS) of -0.015, missing the forecast of 0. Meanwhile, revenue came in at 192.65 million euros, below the anticipated 205 million euros. Following the earnings announcement, Ence’s stock price decreased by 0.35%, closing at 2.874 euros. According to InvestingPro data, the company maintains a solid financial health score of GOOD, with a market capitalization of approximately 819 million USD.

Key Takeaways

• Ence reported a net loss of 9 million euros, compared to a 2 million euro profit in the previous quarter.
• Revenue fell short of expectations, contributing to a decline in stock price.
• The company is launching a new fluff pulp line and renewable packaging solutions.
• Tariff uncertainties are impacting market recovery and pricing.

Company Performance

Ence’s performance in Q2 2025 was marked by a decline in profitability, with the company posting a net loss of 9 million euros. This was a significant downturn from the 2 million euro profit recorded in the first quarter. Despite a 12% increase in pulp sales volumes to 243,000 tons, the company faced challenges in revenue generation, partly due to falling pulp prices and tariff uncertainties.

Financial Highlights

• Revenue: 192.65 million euros, down from the forecast of 205 million euros.
• Earnings per share: -0.015, missing the forecast of 0.
• EBITDA: 24 million euros, down from 34 million euros in Q1.
• Pulp sales volumes grew by 12% quarter-over-quarter.

Earnings vs. Forecast

Ence missed its revenue forecast by 6.02%, reporting 192.65 million euros against an expected 205 million euros. The EPS also fell short, coming in at -0.015 compared to the forecast of 0. This marks a deviation from previous quarters where the company had met or exceeded expectations.

Market Reaction

Following the earnings release, Ence’s stock experienced a 0.35% decline, closing at 2.874 euros. This movement reflects investor concerns over the missed earnings and revenue targets. The stock remains within its 52-week range, with a high of 3.576 euros and a low of 2.684 euros. InvestingPro analysis indicates the stock is currently trading near its 52-week low, with a notable dividend yield of 3.93%. For deeper insights into Ence’s valuation and more exclusive ProTips, subscribers can access the comprehensive Pro Research Report, part of InvestingPro’s coverage of over 1,400 stocks.

Outlook & Guidance

Looking ahead, Ence plans to launch a 125,000-ton fluff pulp line in Q4 2025 and is developing renewable packaging solutions set for late 2025. The company remains optimistic about a recovery in pulp prices once tariff uncertainties are resolved. Ence aims to maintain its full-year cash cost target at 485 euros per ton. InvestingPro data shows promising fundamentals, with revenue growth of 9.27% and strong free cash flow yield. The company’s low P/E ratio relative to near-term earnings growth suggests potential upside opportunity for investors.

Executive Commentary

Ignacio Cominares, Executive Chairman, highlighted the impact of current market conditions, stating, "Current BHP prices are below the marginal cost of part of the industry." He also noted the effects of tariff disputes, saying, "We see the market very affected by this tariff war." CFO Alfredo Avelio emphasized financial prudence, stating, "Our CapEx expenditure will be fully matching the cash flow generation."

Risks and Challenges

• Tariff uncertainties continue to disrupt market recovery and pricing.
• Falling pulp prices could pressure margins further.
• Global market dynamics and wood cost trends present ongoing challenges.
• The company’s reliance on local biomass sourcing may face supply chain disruptions.

Q&A

During the earnings call, analysts focused on the company’s energy certificate savings model, wood cost trends, and the potential impacts of Brazil-US tariff uncertainties. Ence’s CapEx strategy and its alignment with cash flow generation were also key points of discussion.

Full transcript - ENCE (ENC) Q2 2025:

Conference Moderator: Morning, ladies and gentlemen. Welcome to the NCE First Quarter twenty twenty five Results Presentation. I will now hand over to Mr. Ignacio Cominares, Executive Chairman and Alfredo Avelio, CFO. Gentlemen, please go ahead.

Ignacio Cominares, Executive Chairman, Ence: Good morning, ladies and gentlemen. Thank you for joining us today. I wish to take you through our second quarter results for 2025. Our company is based on local routes and also local biomass. Our production of advanced pulp products continues to grow, substituting for the more expensive BSKT products.

We continue to generate diversified non commercial renewable energy. We are doing this prudently and our focus is on profit, strength and sustainability. Our CFO, Alfredo Abello and our Head of IR, Ines Alvarez are also connected to this call. I’ll begin with the main strategic highlights of the quarter and the operational backbone of our businesses. Alfredo will then present our detailed financial performance.

I would like to start with the main highlights of the second quarter in Slide four. We continued our disciplined delivery in cash cost reduction during the quarter and made steady progress within a complex global situation. We successfully reduced our pulp cost to €488 a €22 improvement from first quarter, underpinned by our operational efficiency and energy optimization initiatives. Our strategic diversification program is also advancing firmly. Enphase advanced pulp sales now account for 32% of total sales, underscoring our continuing shift toward higher added value advanced pulp grades with resilient demand.

The first fluff pipeline remains on track for commissioning in fourth quarter. Our targets are the growing but resilient end use sectors such as hygiene and healthcare. Both ranges of products substitute more expensive BSKP. We have initiated the decarbonization project at our Navia facility and continue progressing with our diversified renewable energy platform, including incremental biomethane output at La Galera and the construction of a new renewable industrial heating project. Together, these steps form part of a coherent strategy focused on margin quality, business diversification and operational resilience.

As always, our investment approach remains disciplined, prioritizing long value term creation, cost effectiveness and alignment with European sustainability goals. Following pulp prices in Slide six, we think that the pulp market is at a transitional moment. In July, prices in Europe dropped to $10.60 gross per ton, effectively close to marginal cost of part of the industry, impacted by U. S. Tariff uncertainties.

Historically, this low price level should signal a potential future recovery. Solid wood pulp continues to command a gross premium of over $200 net per ton. This reinforced demand for hardwood grades during the first semester. However, tariff related disruptions, particularly between The US, Brazil, and China, have interrupted the recovery of prices that began during the first quarter. Continuing with the current global situation in Slide seven, one of ANSET’s greatest strengths is our roots in Europe.

100 of our biomass and nearly all pulp inputs are locally sourced. We are not only energy self sufficient, but we also produce a surplus that is sold to the grid. And our sales are virtually all with the European Atlantic and Mediterranean markets. This situation should give us cost reliability in the current geopolitical climate. However, we have to be cautious and follow its development closely.

Although we think that there will be no significant impact on trade flows in the very short term, there could be some impact in the medium term. Moving to slide eight, let’s talk about currency volatility, which is a significant risk for any non U. S. Producer. In view of this risk, we hedged nearly half of our 2025 pulp sales with an average cap at $1.09 per euro.

Our top line is partially protected from these movements. Potential positive liquidations from these hedges should result in an inflow of approximately €9,000,000 during the second semester, at a eurodollar exchange rate of 1.18. In slide nine, our Enceladag Advanced portfolio, which now accounts for 32% of our pulp sales, is the clearest indication of our value uplift. These products yield a higher operating profit, higher by around 30 Euro per ton. The advanced product range substitutes BSKP.

By 2028, we expect over 62% of our pulp sales to come from these grades, including our pulp production. It’s a story of higher margins and long term differentiation from the traditional BHKP market. Continuing with our product portfolio in Slide 10, our 125,000 tons plus pipeline set to launch in the fourth quarter opens new avenues for growth. This pulp is used for personal hygiene, medical and absorbent products, stable, high barrier and ESG cautious segments. It will deliver an estimated €60 per ton uplift in margins and grow to 12% on sales by 2028.

Most importantly, this is a value added niche where Enphase will be the one and only European flask manufacturer with BHKP sourcing. As you know, more than 90% of flask pulp is BSKP. Now turning to Slide 11, let’s talk about the global cost curve at Else. In view of the 62% Elfe Advanced Products and Flap mix anticipated for 2028, we are seeing a strategic repositioning of the company within the cost curve. At the current €488 per ton, ENSE sits firmly in the top quartile of global producers for this 62% of its product mix, where we are better positioned than any of our North American, Asian or Nordic peers.

Let me update you in slide 12 about the energy efficiency credits, the so called CAIS. By means of officially verified and registered efficiency projects, which imply annual energy savings equivalent to two fifty one GWh, we generated another €10,000,000 in energy saving certificates in the second quarter. Together with the €30,000,000 already cashed in the first quarter, this will account for €40,000,000 in the first half of the year, and we expect an additional €4,000,000 by the end of the year. Let’s talk now about our renewable platform in Slide 13. La Galera, which is our conventional biomethane plant, has increased its quarterly output by 2.2 times since its acquisition by Ence on December.

This increase has been achieved without any additional CapEx. We achieved it simply by our team revisiting the operational process and by applying our best industrial practices to these assets. We will continue to increase its output up to the 50 gigawatt hour design in future quarters, whilst at the same time, we began to produce compost and biofertilizers. Others will be fully eliminated by September 30. We can review our biomethane growth project in slide 14.

La Galera is only the first step. We now have 37 projects with location and feasibility studies completed. 17 of these plants are at the late permitting phase, and biomass is already secured. The project will carry a ROCE of over 12% and we aim to deliver over one terawatt hour by 02/1930. This should yield over 60,000,000 in incremental EBITDA.

Looking at Renewable Industrial Heating in Slide 15, our biomass heat solutions offer a contracted, stable revenue base. In addition to the operation of our first boiler in a brewery in Northwest Spain, which we started in 2024, we have begun our Mau San Miguel project with the construction of two boilers. The production target is 85 GWh annually over a fifteen year contract and with a ROCE in excess of 11%. Lastly, we have recently reached a final agreement for another two contracts for over 80 GWh per year with a major international delivery company. In Slide 16, and as with our biomethane business, we aim to expand our renewable industrial heating business up to two terawatt hours by 02/1930, contributing over $40,000,000 EBITDA.

This should produce a stable income in the long term with controlled CapEx and strong corporate alignment. I now invite Alfredo to present our detailed financial performance.

Alfredo Avelio, CFO, Ence: Thank you, Ignacio. The second quarter marked a challenging yet resilient performance despite external headwinds, particularly trade uncertainties and price pressure. Let me unpack this in detail in slide 18 for our pulp operations. Although net sales price decreased by 3%, pulp sales volumes grew by 12% quarter over quarter, reaching 243,000 tons, a recovery driven by return to full capacity after the Navia annual plant shutdown in Q1. Crucially, we achieved a €22 per ton reduction in cash cost, down to €488 marking a foreseeable progress in cost optimization and realignment with our full year guidance of four eighty five.

Notably, temporary cost headwinds from Q1, such as a turbine setup at Navia, have now fully dissipated. Regarding this, full impact of the Navios turbine in the first half has been EUR 10,000,000, of which EUR 3,300,000.0 were incurred in the second quarter. However, EBITDA fell to $20,000,000 down from 29,000,000 in Q1, mainly related to the energy efficiency certificates. We have sold a total of €40,000,000 in cars during the first half of the year, representing energy savings for two fifty one gigawatts hour. Of this, 30 were registered in the first quarter, and just 10 in the second one.

As also said in the previous quarterly presentation, these transactions are registered in the other operating revenue line of our P and L, following the interpretation of the current accounting regulation in the absence of a specific rule, and pending a consultation from the Institute of Accounting, an auditing not yet answered. Turning to Slide 19, let’s review our biomass to renewable electricity business. Energy volumes rose by 9% to three zero three gigawatts hour, recovering from Q1’s extensive maintenance stoppage. Biomass to renewable electricity cash costs were reduced by €14 per megawatt hour, thanks to lower biomass prices and improved operating leverage. However, energy revenues declined by EUR 25 per megawatt hour, reflecting softer energy prices, leading to an EBITDA for the quarter of EUR 4,000,000 versus EUR 5,000,000 in Q1.

This includes a EUR 1,000,000 negative EBITDA from the rest of the platform businesses in their ramp up phase. While margin compresses in the biomass and electricity business, we are laying the foundations for a stable long term value in a diversified renewables platform, including renewable industrial heating, biomethane, renewable fuels having the biomass sourcing and trading vertical as solid common backbone. Slide 20 summarizes our group wide financials. Group revenues increased up to EUR 192,000,000 compared to the first quarter, with growth in pulp offsetting lower energy revenues. EBITDA declined to EUR 24,000,000, down from EUR 34,000,000 in Q1, mainly as a consequence of the effect of the different level of CAIs registered in each quarter and the pulp price pressure, ending in a bottom line showing a net loss of $9,000,000 compared to $2,000,000 of profit in Q1.

We’re managing through this with caution, aligning operational expenditure, investment guidance and cost discipline ahead of the potential market cycle term. Slide 21 represents our cash flow dynamics. Free cash flow before growth CapEx was minus €3,000,000 impacted by a €12,000,000 working capital outflow in the pulp business due to the higher wood inventories and receivables, notably the ones linked to the recent €10,000,000 sale of CAIS that will be cashed in, in the third quarter. $19,000,000 in growth and sustainability CapEx were deployed across the eight projects, including the FLAF pipeline, Navias decarbonization initiative, engineering for Poncevera Avanza, development of biomethane and renewable thermal projects. All of these stays with available resources, ensuring that we continue investing in value while safeguarding our balance sheet.

Now, Slide 22 highlights our solid financial position. Consolidated net debt stood at €362,000,000 supported by strong €283,000,000 cash position. Importantly, both our pulp and revolve business have fully available revolving credit facilities for a total amount of €150,000,000 and our pulp segment is covenant free. This high liquidity position ensures the strength of the company along the different cycles. Maturities are well distributed across several years and we benefit from a flexible capital structure that provide us with financial optionality and growth headroom.

Let me now highlight Slide 23, which showcases Enthus’ leadership in sustainability, a core pillar of our profitable long term strategy. We are rated as platinum top 1% by ECOVADIS, confirming core position at the forefront of industrial sustainability. Key milestones include our accident rates remained four times lower than the industry average, and we completed the Navia shutdown incident free. Navia recorded zero order minutes in the first half of the year. 100% of our sites are Zero Waste certified.

32% of our pulp sales now come from special products with higher margins and a clear path to 62% by 2028. Natur Cell Zero, our carbon neutral pulp product, and our forestry operations include 2,100 hectares with CO2 sinking rights officially registered in the OECC voluntary, as well as improved plant material adapted to climate change. We’re also strengthening our supply chain oversight with over 1,000 suppliers reviewed and full alignment with the AU deforestation regulation. On the social side, we’ve launched a new Pontevedra social plan, and continue promoting internal talent. 38% of hires were internal, and over 30% of women in managerial positions.

Profitability, sustainability is clearly embedded in our operations and helps differentiate ENSE commercially and reproductionally. Let me please now hand back the presentation to our Chief Executive Chairman for his closing remarks.

Ignacio Cominares, Executive Chairman, Ence: Thank you, Alfredo. May I conclude with these closing remarks? Prices are now below marginal cost levels of part of the industry. This should lead to a potential start of price recovery in a few months, provided that the tariff war has ended. Our first 125,000 tons fluff pulp line in Navia will be commissioned in fourth quarter twenty twenty five.

The operating margin is expected to be approximately €60 per ton higher than our standard pulp, as we compete against BSKP. Special pulp sales are expected to exceed 62% of total sales by 2028. This is significantly repositioning Ence in the top quartile of the global cash cost curve. We expect to start the production of our renewable packaging solution in late twenty twenty five. Cash cost has been reduced by €22 per ton in the quarter, in line with our target of below $4.85 for the full year.

We are building a large biomethane platform in Spain, which aims to produce over one TWh by 2030 and to contribute over $60,000,000 to EBITDA. Our Renewable Industrial Heating business aims to produce two terawatt hour by 2030 and to contribute over $40,000,000 to EBITDA. Reaching these goals should allow us to more than triple the Ronin Bauer business EBITDA over the next five years, whilst the transformation of Ense into a producer of special pulp will significantly improve the business operating margin by over 20,000,000 per year. The execution of these projects will be adapted and aligned to our cash flow generation to maintain a prudent leverage and an attractive remuneration for shareholders. Thank you for your attention.

We will be pleased to hear any questions you may have.

Conference Moderator: Thank you. Ladies and gentlemen, the Q and A session starts now. You will have the opportunity to ask all the questions that you may have. We kindly ask you to ask only one question at a time to our speakers instead of asking multiple questions at the beginning. Thank you.

Your first question comes from the line of Manuel Laurenti Ortega from Santander. Please go ahead.

Manuel Laurenti Ortega, Analyst, Santander: Yes. Hello. Good morning. So my first question probably is on the energy certificate savings. We have been talking a lot on the recent past regarding power dynamics or even your diversification strategy in renewables, but we I believe that we lack of information regarding how these energy certificates are created.

This is a sustainable business model for you. This, let’s say, €45,000,000 positive contribution It’s a round rate for the future. I don’t know. Any more color regarding this issue is more than welcome because it looks like it’s having and it might have a relevant impact going forward.

Ignacio Cominares, Executive Chairman, Ence: Thank you very much for your question, Male. Unfortunately, not. I think it’s several one offs this year. The law has been modified. And then from next year, we will get also CAS, but on a lower amount, and we will need to invest for having them, to invest more than what we did.

Then any figure between 0 and 10 millions per year, is going to be possible on the next years, but not on the amount of this year, and always related to CapEx.

Manuel Laurenti Ortega, Analyst, Santander: Okay. Understood. So, let’s return to the basics then. And and you were mentioning, Ignacio, yeah, you have more or less, I don’t know, some positive thoughts regarding poll prices by the second half of the year. It will be very much appreciated if you can elaborate a little bit on those thoughts regarding the, I don’t know, the news flow that we are receiving on weakening demand in Europe, cheap availability of wood in China, overall FX headwinds, looks like we might be lower for longer on the current, let’s say, low pulse cycle.

Ignacio Cominares, Executive Chairman, Ence: Yeah. Well, I have to insist in what I said previously. Yeah. Current BHP prices are below the marginal cost of part of the industry at the price of today, 1,060 per ton gross, which is equivalent, for instance, to $500 net in China. At current price levels, integrated cost producers in China, despite there is more wood, are already replacing the production for market pulp.

Market pulp demand is increasing and will continue increasing. Demand in Europe is not so strong than last year, but it is good, and fundamentals are strong. On the other hand, the BHKP price gap versus, BSKP is above $200 favoring short fiber market share again. Yeah. A lot of customers are switching from standard BHKP to standard BHKP, and that is improving the demand of BHKP, and it will continue with this gap.

And as I said before, historically, when reaching these levels, a restocking process occurs, driving prices up. Common sense lead us to consider that once the tariff uncertainty disappears, prices should bounce back.

Manuel Laurenti Ortega, Analyst, Santander: Okay. Thank you, guys.

Ignacio Cominares, Executive Chairman, Ence: Thank you very much.

Conference Moderator: Thank you. And your next question comes from the line of Cole Hathorn from Jefferies. Please go ahead.

Cole Hathorn, Analyst, Jefferies: Good afternoon. Thanks for taking my question. The first one is on wood costs. I’d just like to understand what you can do to improve the wood costs position over time. I know you’ve guided to $485,000,000 for this year and you will get the benefit of some of your projects.

Could you just remind us of the project benefits that you should get to lower your production costs in 2026, 2027 at a high level? And then also, are there any structural reasons why wood costs in Iberia could go down? I mean, if we look back versus history, wood costs are up in Iberia and they’re up globally. So I’m just wondering, could there be a shift or a trend change to lower Iberian wood costs going forward? Thank you.

Ignacio Cominares, Executive Chairman, Ence: Yeah, thank you for your question. Yeah, we have a, let’s say, totally different view. We think that wood cost worldwide will continue to increase. The main two drivers are the part demand increasing by between one and two million tons per year, which equals to four to 7,000,000 tons of wood per year. In the other hand, all the new biofuels who are going to be made in Brazil are going to consume a lot of wood.

In third hand, the green steel, also in Brazil, will consume a lot of wood. That’s why we think that globally, the price of the wood based the eucalyptus wood is going to be higher year on year. If now we go to the Northern Hemisphere, well, the plantations in Canada, the the the forest in Northern part of Europe is suffering of disease, drought, and it seems it is starting to be structural. Then we strongly believe there is going to be less availability of softwood over the next years. By all those reasons, we see globally prices of the wood going up.

Going now to your question on Spain, we see the wood stable. We don’t see it would be possible to reduce the price of the wood in Spain, or maybe by €1, but that is €3 per ton of pulp. From a structural point of view, we see a strong demand, but have to go and have to refer to our strong network buying wood. As you know, one third of the wood is sourced, purchasing it directly to the forest producers, and the size, the average size in the Northwestern Spain of each plantation is half a hectare. And we are very, very close, extremely close to the market.

We have and it is in our cash cost. We have over 100 persons being in contact with this market, purchasing, and the other third is purchased to small forest companies we have developed. We are financing. It is on our assets, and we are supporting them. They buy very few quantities every month, but this capillarity is extremely important to protect our market share.

And we only buy one third of our needs to something around 20 big trading companies of wood. Then as a resume, we see on the next five to ten years, strong prices of the wood going up, we see scarcity of wood, and we strongly believe ENSE has a very strong competitive advantage with our capillarity and our network buying almost directly to the market in Northwestern Spain. Thank you.

Cole Hathorn, Analyst, Jefferies: Thank you. And then maybe just some comments on demand. You’ve been very clear that you’re positioning your portfolio to target more into advanced, and you’ll start ramping up fluff pulp. You get a margin premium trying to kind of compete with softwood. But I’d like to hear your thoughts around the current demand trends on the standard hardwood as well as what you’re seeing on those niche products.

We’ve seen shipments into China higher, but it’s also against very easy comps. So the comp base is easier, whereas Europe and North America has been a bit softer. And I’m just wondering, is it the situation where people are destocking a little bit on expectations that pulp prices are declining? So is some of the lower demand statistics in Europe, North America just because your customers are destocking? Any kind of customer feedback or thoughts from the tissue or graphic paper producers into the second half of the year would be very helpful.

Ignacio Cominares, Executive Chairman, Ence: Yes. Thank you. Well, I don’t think I can give you more information than the one you have. What what we see is that the apparent demand is very much affected by the the so called tariff war. Then what we see is a destocking of important customers.

That’s what we see in in June. In June, the first 15 of June, it was terrible. It was impossible to sell a single ton of pulp anywhere in Europe, in Northern Africa, in Middle East, in Far East. Then prices went down a lot. At prices close to $500 then the market restarted to buy.

We see the market buying in Far East and Middle East at those prices. And we see that the European customers are waiting and see. I think the market and the purchasing decisions of our customers are very affected by all these tariff wars. Nobody knows, if in August 1, Brazil, we have 50% of tariffs on these, on the regular export to US. They export something close to 2,400,000 tons per year.

China has 30% tariff on their exports. They are not exporting a lot of paper. They are. And then we see, the market very, very affected by this, tariff war. And it’s very difficult to see really what is happening.

Our vision is that the final demand, the demand from houses, the demand from the industry, from the end users is stable, both in Europe and in China. We are pretty sure about that. And what we see is customers not taking decision of purchase because of the uncertainties due to the tariff war.

Cole Hathorn, Analyst, Jefferies: And then maybe just following on from the Brazil point you mentioned. I know it’s very difficult to comment, but if there is a tariff on Brazil, how do you think the market plays out here? Do you think that will be the trigger for some of the larger Brazilian preyers to take commercial downtime and kind of manage supply to demand? And how long does it take to reroute shipments from maybe The U. S.

To Europe? I think logistically, it’s probably a lot more challenging than people imagine

Ignacio Cominares, Executive Chairman, Ence: Yes, move that help you are right. This market is not flexible at all. We see we saw that on COVID. What happened in COVID is a good example and is a good comparison of what is happening today. Then our colleagues in Brazil, if they have these 50% tariffs on August 1, well, they cannot switch to Europe from one day to the other because what they have contracted is vessels for transporting the parts to The States, not to Europe, and these vessels have to come back with other goods who are already contracted.

Then it is not flexible at all. It can take several months, many months to to to change and to switch those traffics. What we see, and I don’t know what Brazil is going to do, we have to ask them that to them. What we know at ENC is that despite all these uncertainties and these very distortion market we have today, well, we see opportunities for us. We see that The US is exporting to Europe today 1,000,000 tons of fluff pulp.

Well, if we really go to a tariff war, well, it would be much easier for us to sell our new 125,000 tons of pulp in Europe. We see The U. S. Also exporting 1,000,000 tons of flask pulp to China. And the same, we see a lot of interest of Chinese customers to buy flask pulp from us.

Our target is Europe because we are a small player with only 125,000 tons, but maybe at the beginning of the ramp up of the project, can ease things if we can sell a bit to China. But regarding what Brazil is going to do, what I know is from a logistical point of view, it’s it’s very difficult to switch, but you have to ask to them what are they going to do. Thank you.

Cole Hathorn, Analyst, Jefferies: And then just finally, a question for Alfredo on CapEx. Is there a guidance that you can give for 2025? Because I imagine most of your projects are planned and you know the number for 2025. And then into 2026, you’ve always said that you would adapt your projects depending on cash flow. And if pulp recovers strongly, you’ll have more cash flow to put into your project.

But how do you think about CapEx where we are now into 2026? And, you know, which would be the projects that you would say, you know, this is our our focus area. And the other ones, if demand improves and cash generation improves, you know, we we accelerate. You know, will it be kind of more focused on Ponte Vedra, more focused on kind of the renewables business? How do you think about that CapEx into 2026?

Thank you.

Alfredo Avelio, CFO, Ence: Thank you. As we said from the I mean, was always said regarding our CapEx policy, it’s fully linked to our cash flow generation. At this moment, as our Chairman has said, we are in a kind of uncertainty situation regarding these tariffs and so on and so forth.

Ignacio Cominares, Executive Chairman, Ence: But be sure that we’ll

Alfredo Avelio, CFO, Ence: be conservative and we’ll be facing our CapEx expenditure for next year depending on what we see. Right now, might be, as you may understand, too early to talk about ’26. But this morning, I will tell you that we’ll be fully matching the cash flow generation that we’ll have for next year. There’s two things here. One is regarding the pulp.

The other is regarding the renewables. Using the guidance of our renewable business and how we are growing in in in in biomethane and in industrial heating, the same. It will be adapted to whatever we we see. Regarding ’25, we maintain the same view that we were saying previously of about 75 in the bulk and around 50 in the in the in the renewal business, including those those growth projects or those inorganic projects.

Luis de Toledo, Analyst, ODDO BHF: Thank you.

Conference Moderator: Thank you. Your next question comes from the line of Luis de Toledo from ODDO BHF. Please go ahead.

Luis de Toledo, Analyst, ODDO BHF: Good afternoon. My first question refers to the global cash cost curve in Slide 11. I was surprised to see Indonesia taking over Brazil as CASCO’s leader. I don’t know if you can elaborate on the reasons and potentially the impact that this can have on world trade flows, listing prices. I assume that Brazilian producers maintain their price condition.

But I would like to know if considering lower logistic costs in China, if this can be a threat to prices? And I would also like to see your relative position on the sector, if it is something material advantage of Indonesia over Brazilian producers.

Ignacio Cominares, Executive Chairman, Ence: Yes. Thank you very much for your question. I think you can have a look to our presentation on Slide number 11. You have the market pulp production cost by regions. You have in light green BHKP and in dark green, the BSKP.

Then, what we would like to highlight is that we are at the middle of the curve, as you see Iberia, $553 per ton. That’s what we have, and that’s what we have really. Then, if you compare us with the people who are on dark green at our right, yeah, well, you have 23,000 tons in dark and you have further 5,000 tons more in light green, have a higher cost than us. Then, if you analyze and you compare Enfay as a pure BHKP player, well, it is true that our position is not excellent. Indonesia and Brazil and Chile are better positioned than us, but now we sell 32% of special products, not competing with Indonesia, Brazil, or Chile on BHKP, but competing against the Scandinavians the Canadians in BSKP.

And our target is by 2028, the mix has to be over 62% with the, NSAID Advanced pulp products and the flash pulp. Then, more than 50% of our revenues will come from products where we are competing with BSKP. Therefore, if you analyze again with this view where we are in terms of competition, well, we are very well positioned to win this game and to have good yield from our status.

Luis de Toledo, Analyst, ODDO BHF: Thank you. But I mean, you’re not concerned about the Indonesia cost advantage becoming wider?

Ignacio Cominares, Executive Chairman, Ence: Well, because we don’t compete against Indonesia. Indonesia is selling Well, they are a significant player. They, like Brazil, they mark the price on BHCP, but in 2028, that will be below, 40% of our sales. Over 62% of our sales, we will compete as we are doing today on 32% of our sales, one third already, against Canadians, Scandinavians and other people buying selfhood.

Luis de Toledo, Analyst, ODDO BHF: Understood. The second question would refer to commercial discounts, 48. In the current context and I mean, assuming that prices rebound once uncertainties on tariffs disappear. I mean, do you expect also the the commercial discount to decrease or you would tend to believe that this reference is the adequate one for the next semesters?

Ignacio Cominares, Executive Chairman, Ence: Well, yeah, the problem is that we don’t know when the prices are going to bottom out. You know, I think that the, today, by by fundamentals, the prices should should have already start to bottom out, but they haven’t. And they haven’t not because a problem related to demand of parts, but related to these tariff uncertainty. Then, I don’t know what is going to happen on on three months time. Now in in in the July, well, it would have to do a spot price, let’s say, in Turkey or in Egypt, to sell, well, it will be below the normal discount because the peak price today is 1,060.

1,060 is gross price is equivalent to a net price of 570. And today, if you want to sell on those countries, you have to sell close to 500, you know, then the discount will be higher. It depends on how many times you are forced to sell at these low prices and and how long does it take, you know, before the prices recover.

Luis de Toledo, Analyst, ODDO BHF: Thank you very much.

Ignacio Cominares, Executive Chairman, Ence: Understood. Thank you.

Conference Moderator: Thank you. That ends our question and answer session. Ladies and gentlemen, this concludes today’s call. Thank you for participating. You may all disconnect.

Ignacio Cominares, Executive Chairman, Ence: Thank you very much, gentlemen.

Alfredo Avelio, CFO, Ence: Thank you.

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