ENCE Energía y Celulosa (ENC) Q2 2024 earnings summary

Executive summary

• Consolidated EBITDA grew over fivefold year-over-year in Q2 2024, reaching €66 million, driven by pulp price recovery, strong demand, and cost reductions.

• Attributable net income improved by €40 million year-over-year to €23 million in Q2 2024, reversing a loss in Q2 2023.

• Interim dividend of €26 million (€0.107/share) declared for August, with a 3.4% yield and a second dividend decision expected in October.

• New regulation for biomass plants aligns cash flow with EBITDA, improving 2024 cash generation by over €60 million.

• Ence Advanced products grew to 28% of pulp sales in Q2 2024, targeting 50% by 2028, reflecting a shift to higher-margin offerings.

Financial highlights

• Group revenues rose 23% year-over-year to €245 million in Q2 2024, with pulp business contributing €43 million of the €45 million increase.

• Pulp business EBITDA grew sevenfold year-over-year to €61 million, supported by a 26% increase in average sales price and a €60/ton cash cost reduction.

• Renewables EBITDA increased 10% year-over-year to nearly €5 million, driven by 24% higher energy output and 20% lower operating costs.

• Free cash flow was €24 million in Q2 2024, after €12 million working capital outflow and €10 million CapEx.

• Net debt reduced to €279 million at June 2024, with a cash balance of €281 million.

Outlook and guidance

• Expectation to maintain strong operating margin and cash flow in Q3 2024, with pulp prices stabilizing at high levels and cash costs steady despite scheduled maintenance.

• New regulatory methodology for biomass plant remuneration is expected to boost 2024 cash generation by over €60 million.

• Pulp production for 2024 expected to exceed 1 million tons; cash costs to stabilize around €475–480/ton in H2.

• Ongoing investments in advanced pulp and renewable energy projects to support long-term growth and margin expansion.

• Energy output projected at over 300 GWh per quarter, with volumes in Q3 and Q4 similar or slightly higher than Q2.