ENCE Energía y Celulosa (ENC) Q4 2024 earnings summary

Executive summary

• Pulp prices bottomed in Q4 2024, rebounding with multiple price increases for 2025, driven by tight supply-demand and a major Chinese producer's bankruptcy.

• Advanced pulp products accounted for 23% of 2024 sales, with targets of 30% in 2025 and 50% by 2028, and 16% YoY production growth in Pontevedra.

• Strategic investments in fluff pulp, renewable packaging, and decarbonization projects are underway, with strong expected returns and market interest.

• Diversification into biofertilizer, biomethane, and renewable thermal energy platforms is progressing, targeting significant EBITDA contributions by 2030.

• Maintained low leverage with €321m net debt and €287m cash at year-end, after €34m dividend payments (5% yield).

Financial highlights

• Pulp business EBITDA tripled to EUR 138 million in 2024, driven by higher prices and lower cash costs; group EBITDA rose 85% to EUR 165 million, and net income reached EUR 32 million.

• Group revenue rose by EUR 47 million YoY to EUR 876 million; pulp sales volume slightly decreased by 1% YoY to 968 Kt, with a 29 Kt inventory increase.

• Biomass energy EBITDA rose 50% to EUR 32 million, with electricity sales up 23%, despite 11% lower average revenue per MWh.

• Free cash flow before working capital and growth CapEx reached EUR 101 million; €66m working capital outflow mainly from higher inventories and remuneration in Renewables.

Outlook and guidance

• Further pulp price increases expected in the short term, with industry forecasts above $1,450/ton by 2027 and price increases up to USD 1,220/t gross announced from March 2025.

• Cash cost for pulp expected to fall below EUR 485/ton for 2025, with normalization of temporary cost factors.

• Higher energy generation and improved contribution from new renewable businesses anticipated in 2025.

• Fluff pulp line and packaging solutions to be commissioned in 2025, with significant margin improvements; new 125 Kt Fluff pulp line to be commissioned in 4Q25.

• Biofertilizer/biomethane platform aims for 1 TWh production and >€60m EBITDA by 2030; thermal energy business targets 2 TWh and >€40m EBITDA.