Good morning. We welcome you to the Altri f ull year 2023 results conference call. During the presentation, all participants will be on a listen-only mode. There will be an opportunity to ask questions after the presentation. If you wish to ask a question during the Q&A session, you may do so by pressing the star key followed by five on your telephone keypad. If you're experiencing any difficulty in hearing the conference at any time, please make sure you have your headset fully plugged in, or alternatively, please try calling from a different device. And now, hand the conference over to Mr. Rui Cesário, Head of IR of the Altri Group. Please go ahead, sir.
Good morning. Thank you for attending today's conference call of Altri's 2023 results. My name is Rui Cesário, Altri's Investor Relations, and we have with us today, Mr. José Pina, the CEO of the group, and Mr. Miguel Silva, the group CFO. Mr. José Pina and Mr. Miguel Silva will give you a brief overview of the results, and afterwards, the floor will be open for Q&A. So, I'll hand over to Mr. José Pina.
Good morning and thank you for attending today's conference call on Altri's 2023 results. We're always pleased to host this call with investors and analysts to share Altri's results and talk about the outlook and challenges ahead. If you turn to slide number two , we comment on some of the main highlights of 2023. As you all know, we have seen a slowdown in global pulp demand during the first half of 2023, partially due to a material restocking effect in the pulp and paper industry, leading to a rapid reduction in pulp prices across all regions. This was a cycle where prices declined more rapidly in more than a decade. Motivated by lower prices, the situation in China started to improve since May 2023.
That strength in demand gained momentum into the third quarter of the year and ended up having influence in Europe, with prices starting to recover from September and into the fourth quarter of 2023. As demand continues to improve also in Europe and other regions of the globe besides China, pulp prices have continued to move upwards in the beginning of 2024, but we'll talk more about this at the end of the presentation. We have continued to focus much of our work during 2023 on the cost side. Cash costs per ton have declined for three consecutive quarters, with an accumulated decrease in 2023 of 11% comparing to the last quarter of 2022, slightly ahead of what we mentioned in previous results.
If you look at the level of cash costs in the fourth quarter of 2023, we are now 28% below the cash costs registered in the fourth quarter of 2022. Nonetheless, this was not enough to prevent the EBITDA margin to decrease to 17.4% in 2023 from 28.3% in 2022. Overall, EBITDA reached EUR 137 million in 2023, a 54% decrease when comparing to 2022. If we look on a quarterly basis, the profitability started to improve in the fourth quarter of 2023, with higher pulp prices and stronger demand. We should continue to see an improvement in profitability into the first quarter of 2024. Altri's sustainability agenda continues to be a top priority for the group.
Caima, one of our three industrial units, has become the only plant in the sector in Iberia and amongst the few in Europe to be 100% fossil-fuel-free after the installation of a new biomass boiler, which ramped up towards the end of last year. We have revamped the wastewater treatment plant at Celbi, with the goal to improve the water consumption numbers as well as improve the efficiency and effluent quality. We have an additional investment underway for the recovery and the valuing of sulfuric and acetic acids from renewable sources in Caima, increasing even more the circularity of our plants. On the Gama project, our commitment remains the same, but we want to make a final investment decision only when all the conditions are met.
Meanwhile, we're working on more diversification projects at our industrial units, as the sulfuric and acetic acids already mentioned, to be concluded in 2025 and an increasing focus on dissolving pulps. Moving to slide number three, we share with you the numbers of global pulp demand during 2023. Talking only about hardwoods, and after being negative in the first 5 months of 2023, the situation started to improve rapidly after May, with China accelerating to the end of the year with 29%, leading to an accumulated number for global pulp demand of almost 9%. Although with some improvement near the end of the year, Europe declined more than 50% as an effect of a slower economic environment, significant value chain restocking, but also due to a soft printing and writing segment.
In slide four, we can see the evolution in 2023 of the demand for dissolving pulp, more related with the textile value chain. Demand was up 6.5% in 2023 and was mostly steady around that figure during the full year. Asia, which accounts for 86% of dissolving pulp demand, has grown even more, led by China. In slide five, we see inventories at European ports decreasing significantly during the fourth quarter of 2023 after peak levels above the historic average during the first half of the same year. Since Europe was not the industry's growth engine during 2023, it was only normal to see some pulp being redirected to the markets, with highest demand namely China. With pulp prices in Europe at a premium to China's and a better market environment, it's likely to see inventories more in line with what we think are historical averages.
In slide number six, you can see the evolution of hardwood pulp prices in Europe. Average PIX prices were 19% lower in 2023 versus 2022. On a quarterly basis, we saw a recovery of approximately 9% in prices given the mentioned improvement in the global demand environment. After a year-low of $800 per ton in mid-August of last year, pulp prices ended the year at approximately $1,000 per ton. Looking at slide number seven , we share the evolution of dissolving pulp prices. These prices are net and sourced from China, so not fully comparable to the European BHKP prices that include commercial discount. It is worth noting the low volatility of this segment during the last four quarters when compared with bleached hardwood kraft pulps. In slide number eight, we present the production and sales volumes in the quarter.
The level of production decreased 4% year-on-year and 7% above the previous quarter, while sales volume increased by 11% year-on-year and declined 5%, quarter-on-quarter. This is a result of the group's commitment in maximizing commercial results while making an optimization of our inventory levels. In slide number nine, and looking at the full year, production decreased by 8% while sales volume dropped by 2%, being explained by the program downtime at Celbi during the first quarter of 2023, but also by a restocking process in the industry affecting the level of demand and optimization of the inventory level. Turning to slide number 10, we present our sales breakdown per end use and per region. Given the restocking effect seen during 2023, there was an important impact, especially in the printing and writing segment.
From around 25% of sales, we are now at 19%, with most of the other segments at similar levels. On a regional basis, we continue to focus on markets of proximity like Europe and Near Middle East. Nonetheless, and given the weaker demand in Europe throughout last year, we have looked for other destinations where demand or price could be an opportunity for us. With that in mind, we have increased the weight from sales to the Middle East to 25%, usually in the 15%-20% range, and Asia to 14%, usually around 10%. I will now pass to Miguel Silva, the Group CFO, who will comment to me on the main financial highlights of 2023.
Thank you, José. In slide 11, we start by making some comments on the revenues and the EBITDA levels achieved in this fourth quarter of 2023. Altri reached revenues of EUR 187 million in the fourth quarter, a decrease of 28% versus the fourth quarter of 2022. The main reasons for the decrease in total revenues were fully attributed to lower pulp prices, which decreased 34% in U.S. dollars and 38% in euros. EBITDA reached EUR 40 million in the fourth quarter of 2023, 49% less than last year's fourth quarter, but 144% higher than the third quarter of 2023. Our successful results in lowering the cash costs and a better pricing environment were the main drivers for the EBITDA improvement versus the previous quarter.
In slide 12, the 2023 numbers show total revenues decreasing by 26% year-on-year to EUR 788 million, while EBITDA reached EUR 107.37 million in 2023, 54% less than in 2022. Looking at slide 13, we can see a significant improvement in the EBITDA margin to 21.3% in the fourth quarter from 9.3% in the third quarter but still compares negatively with last year's fourth quarter of 30%. In slides 14 and 15, one can see the level of net profit and EBIT in the fourth quarter and 2023. As a consequence of the fast decline in pulp prices, the operating profitability went to break even in the third quarter but improved significantly in the fourth quarter. As said before, this is a consequence of some improvements in pulp prices but also positive results from our cost control policies.
On slide 16, we highlight the fact that we have been able to make a significant reduction in cash costs in the last three quarters. Looking forward, we see a stabilization of some of the main cost items and even some inflationary pressure of others. On the energy front, we have been selling the excess energy produced to the national grid at market prices. However, since electricity prices have continued to decrease, we have moved back in February 2024 to the regulated regime, selling to the grid at the regulated prices. On the wood side, prices have stabilized during the fourth quarter of 2023. Prices of chemicals have also stabilized during the last quarter after a relevant decrease in the previous nine months. In slide 17, we share the evolution of net debt during the fourth quarter.
Altri Group's net debt reached EUR 357 million at the end of 2023, a quarterly improvement of EUR 34 million. A recovery in EBITDA coupled with an optimization in inventories we have been focusing during 2023 were the main causes of the positive cash performance. In slide 18, we present the net debt evolution during 2023. Altri net debt, of EUR 357 million at the end of 2023 implies an increase of EUR 31 million when comparing with December 2022. This was the year where we distributed dividends worth around EUR 52 million, excluding the dividend in-kind of Greenvolt shares. CapEx increased by 34%, and corporate taxes advance payments were made based on 2022 much higher results. I will now pass back the word to José.
Thank you, Miguel. If you turn to slide 19, we mention Altri's ROC level at 9% in 2023, which we consider acceptable for a downcycle year such as 2023. And if you consider the average over the past seven years, it came to an estimated 17%. In the following slide 20, we have some developments on the sustainability front during the quarter. Altri Group has joined the United Nations in the appeal to government to fight corruption and encourage best governance models. During the quarter, Altri issued EUR 50 million in green bonds, which have financed the new biomass boiler at Caima, making it the first cellulose fiber unit in Iberia, one of the few in Europe to operate fossil fuel-free. Finally, in slide 21, we wanted to share with you our views going forward.
The overall demand in the pulp sector seems positive in the first months of 2024, with Europe and North America rebounding from a negative year and China, which seems to be holding up well after a very strong 2023. Pulp prices in Europe continue to increase in the first three months of 2024, with net prices in Europe now at a premium versus China. After three monthly consecutive increases of $80 per ton each and a more recent increase announced yesterday by the largest operator in the industry, the list price in March is at $1,300 per ton, which was already implemented. We should see this to be reflected in the PIX index in the at some point in mid-April. On the cash cost front, and after four consecutive quarters of cost deflation, the situation seems to be stabilizing or even some upward pressure going forward.
Altri will continue to work to maintain the cash cost level and the control. On Gama, we need all the conditions to be in place to be able to make a final investment decision. Additionally, we continue to work on other diversification projects, namely the recovery and valorization of acetic acid and sulfuric acid from renewable sources at Caima to be concluded in 2025 and increasing the level of dissolving pulp focus. I will now turn the call back.
The floor is now open to Q&A.
Thank you. Ladies and gentlemen, the Q&A session starts now. As a reminder, if you wish to ask a question, please press star followed by five on your telephone keypad. Our first question comes from Enrique Parrondo from JB Capital. Please go ahead, sir.
Hi. Good morning. Thank you for taking my questions. I have three, if I may. The first one is related to price increases. So a few months ago, we thought that the 1,220 level could be a ceiling. But since then, as you've stated, we've seen cumulative $160 per ton hikes, right? The S&D demand is performing well, and inventories in the chain remain low. But could you maybe give us more color on what incremental sector tailwinds are there for that drive the latest price increases? Second one, on cash costs. Very strong performance in fourth quarter. So to what extent are these levels sustainable? So I assume that you were commenting that with pulp price increases, negotiations with customers probably toughen.
So what sort of decline can we expect for this year? And the final one would be on CapEx. Last year, you guided for close to EUR 70 million. In the end, it came a bit below this. So could we expect, the difference to fall to this year, and what kind of CapEx levels can we assume for full year 2024? Many thanks.
Thank you, Enrique. Well, starting with price increases, it's always hard, as we look forward to determine specifically to which level it gets. You know, right now, as I've mentioned, we're at $1,300 per ton. There was another increase announced last night by a key industry competitor of, in particular, looking at Europe of an additional $80 per ton, which would take us to $1,380, if you recall, was the same level we had two years ago. And in fact, the upwards dynamics on prices have been, I think, justified from two, three perspectives. One, on the supply side, inventories are relatively low. They're below historical levels. They're expected to remain somewhat below historical levels for some time, at least for the next few months. So I wouldn't expect that pressure necessarily to decrease.
There is the market absorbed, let's say, the additional supply that came last year. This year, it won't be until the second half of the year when we'll start seeing new supply coming to market and even partially this year and the rest of it reflected into next year. So I'll say for the next few months, the market will remain relatively stable and balanced. If anything else, perhaps slightly short because of what I mentioned. So is the current level going to be continuously under upwards pressure, at least in the short term? It leads me to the third point, which is if you look at it purely from a demand standpoint, it's been fairly healthy in a segment especially where last year we saw a significant decrease, the printing and writing. But also in other segments, tissue has been strong as well.
But printing and writing last year suffered, as you know, from significant destocking. And usually, those effects tend to be overstated, whether it's the overstocking that happened through 2022 or the significant destocking last year. So we see what's going on, at least in terms of the growth of that segment: a normalization of the segment, but also somewhat a return to a more healthier level of stocks within the chain. And if you think of what's happened in the Red Sea, and all the limitations in terms of supply chain, that has not helped. Europe tends to import about 10% of its paper needs from China. And a lot of that has been impacted over the past few months. So that again puts additional pressure in terms of limited supply.
So if you look at all those, I think the current level is perfectly justifiable. If I look forward, I think the announcement, as I mentioned, that was made by another, an important supplier yesterday, which we also intend to follow because we see the conditions are right for the market to continue to rebalance in terms of what we see as additional demand. On our on our end and in terms of our own orders, our order books are full. I don't expect that to change anytime soon. Actually, we've had a lot more order requests than we can supply. And we continue to maintain discipline in terms of our working capital. So we'll continue to maintain relatively low stock levels, which obviously, I think it speaks to some prudence, especially looking at what may happen in the second half of the year.
Thinking about cash costs, in fact, fourth quarter, I would say, there was a lot of things that came together. But fourth, I wouldn't take that necessarily as a straightforward level that we would maintain for this year. But when we look at it year-on-year, if you recall last year, we started by indicating a high single digit. Ultimately, it ended up low single double digit, which is what we've achieved through the year-on-year. But quarter-on-quarter, we've had a reduction of 28%. I would say this year, if you look at it year-on-year, we'll probably continue to see some level of reduction, which I would characterize perhaps in the mid- to single digits. With respect to your third question on CapEx, effectively, last year, we came below what was our initial budget.
There were a few things that led to that, in particular. And you're right. There were a few items that passed on to this year, but somewhat limited. But we also took action to manage our own cash flow. And therefore, there were some reductions that we also operated. So looking at this year and I think we've mentioned that in the last call, our targets for this year would be somewhat in the mid-40s, which is a significant reduction versus last year, but still higher than what would be our historical average purely if you think of maintenance CapEx. And that's mainly because of investment projects that we continue to undertake, especially the new biorefinery acetic and sulfuric acid project in Caima. Thank you for the question, Enrique.
Thank you very much.
The next question comes from the line of Bruno Bessa from CaixaBank. Please go ahead.
Yes. Good morning. Thank you very much for taking my questions. I have three, if I may, and then I will go back to the queue, if I have more questions for the end. But the first one, just trying to get here a bit of a clarification on the cash cost evolution in Q4. So, I saw that you booked a positive non-cash equity impact from the change in the fair value of biological assets. I saw that you booked this both in Q4 2023 and also in Q4 2022. My question here is, how recurrent is this? And what is the reason for this revaluation? So this will be the first question.
The second question, more focused on the demand dynamics in China. I understand that the dynamics in Europe are very strong, but just trying to understand the rationale for Suzano raising prices also in China, considering that the company has already announced, if I remember correctly, two hikes since the beginning of the year, which have not been apparently passed through or at least are not reflected on the PIX. Just trying to understand how do you see the demand dynamics in China today? And if you could share with us how much demand increased on a year-on-year basis year to date globally, it will be interesting to know that.
And lastly, on dividends, considering that, well, it distributed around EUR 50 million dividends in 2022 and 2023, what could we expect for 2024 if you could keep this level of dividends or if you are kept by the EUR 43 million net profit that you delivered in 2023? Here, I'm just trying to understand what will be your dividend policy, considering that the pulp prices are under a very strong momentum in Europe. So this will be my three questions. Thank you very much.
Thank you, Bruno, for your questions. Actually, on the first, I'm going to pass it to Miguel, specifically on the revaluation of biological assets.
Yes. Thank you. Thank you for the question regarding the variation in biological assets. We really don't consider that as a non-recurrent item as it is something we do every year. And usually, we do it only at the last quarter of the year. This is something that depends on multiple factors like the wood we get in the year, the growth rate of the wood that we have, the interest rate that we use for discounts. So this year, it was a positive delta of around EUR 6 million. But last year, it was around EUR 3 million. So it's hard to predict what will be the impact of these biological assets every year. So we really don't see it as a non-recurrent because it is something that we have to do every year.
Sorry. Just as a follow-up, would you expect a similar revaluation again in 2024, or is it still too soon to make a projection on that front?
It is still too soon because, as I said, it depends on multiple factors that we don't know at this time and that we will only know at the end of the year.
Okay. That's fair enough. Thank you very much.
Thanks.
Okay. Following up on the other questions, Bruno, in terms of the demand dynamics specifically in China, and what can be extracted from the, in terms of support for the announced price increases, effectively, if I recall, there were two, one in January for $10 a ton and one in March for $30 a ton, and now another one for April for $30 a ton. What I would say is I think the market has positively surprised everyone, the market in China. And that comes on a very strong growth already last year. So the numbers that we have, the official numbers, are only as of January from the Pulp and Paper Products Council. And if you look at it on a global basis, hardwood sulfate pulp increased by 9.9%. We've seen increases in Europe of 3.1%, but China continues to grow very aggressively at 18.6%.
Effectively, this week, we've had Shanghai Pulp Week, and the first comment that we, we've actually gotten from that meeting, if you recall, last year, that was one of the triggers actually to the downside, at the end of January. But the first comments we get from that meeting is that everyone was asking for more pulp volume, not for lower prices. So I think it's indicative of some momentum, at least, or at or, or if nothing else, a support in terms of what we currently see in China. We don't expect there will be any significant weakness, at least in the short term, in the next few months. Regarding your question on dividends, as you know, we don't give any guidance on dividends. What we do say and maintain is we've had, I would say, a, a good track record of shareholder remuneration.
We continue to have that in mind. We will announce specifically early April - that's usually when we do - what, what are our plans for, for any dividend distribution. But I think, we tend to be relatively consistent. And right now, I don't see why, ultimately, you would see anything different or whether you would have any surprises from us. But as I said, specific announcements, will come from a decision we'll take earlier. Thank you, Bruno.
Thank you very much.
Our next question comes from the line of Luis de Toledo from ODDO. Please go ahead.
Hey. Good morning. Yeah. I have four questions. The first one would be referring to volumes. The other segment represents 12%. I don't know if you could elaborate on what is behind this growth and which segments are and if there is any correlation with the increase in sales in the Middle East and Africa. The second question would be regarding Greenvolt. I don't know if you're assuming any potential change in the agreements with this company resulting in the potential change in control. And the final question would refer to the volatility, increasing volatility in taxes and financial cost, if you could provide any guidance for next year. Thanks.
Luis, may I, apologies. May I ask you to repeat your first and second question? The volume came through.
Sure.
Very low, if you don't.
Sorry for that. Okay. First question would refer to volumes, and the other segment, if you could clarify what's behind the growth. It now represents 12%. And if there is any relation, correlation with the increase in Middle East and Africa in deliveries. And the second question would refer to Greenvolt and if you will, if we should expect any change in the agreements with this company resulting in the potential change in the shareholder structure.
Yep. Thank you. So on the first question, I think you were referring primarily to DP, if I understood you correctly, in terms of the strength in volumes and growth. And if that's the case, I mean, the market has been relatively consistent. But I would say in the last six months, six-plus months, we've seen the main segments for DP, which is textile fibers, coming back very significantly. And part of that one is the dynamics with other types of fibers, namely cotton. But also, similar to other markets, there's been a significant destocking that happened in 2022 and into 2023. So part of that is some rebounding in terms of the value chain stock. The only other comment that I would make is, as you know, in dissolving pulp, you have hardwood as well as softwood.
There is still a differential in terms of price between the two grades, being that most of the softwood plants are relatively older plants. Therefore, I think continued growth of hardwood is something that we'll expect in the near term. Regarding your second question on Greenvolt, and the change in controls, what I would say is we don't expect any significant impacts. Today, Greenvolt is a completely separate public company. We do have agreements, namely on acquired biomass and also on O&M of their biomass units that reside within our perimeter . Those are in place. They're long-term contracts, and those remain in force until further notice. So I, at least from what has been publicly announced, I don't I don't expect really any impact on that. Regarding third question, I'll pass it on to Miguel for the comments first.
Yeah. Thank you for the question. If I understood the question, I think it was regarding some volatility in finance costs. I would say that our finance costs, if we do the breakdown, there's a part that I think it's more or less easy to predict, which is related to interest rates regarding our debt. And of course, interest rates now are much higher than they were, mainly in 2022. So, we will have, of course, higher costs on that side, even if we have an important part of our debt, around one-third, with a fixed interest rate or some swaps to hedge.
And then there's the other part of the finance costs, which I think it's the one that causes this volatility that is mainly regarding the hedge of the FX, mainly the dollars. And in that part, it's really hard to predict. Even the euro-dollar in the last quarters, I think it has been quite volatile. So usually, if the dollar gets weaker, we have better financial results. But we have worse operational results and also the opposite. So I think volatility comes from that situation. So on the interest part, as I said, we don't see much volatility here. But on the other side, it will pretty much depend on the euro-dollar evolution.
Thank you.
Ladies and gentlemen, please be reminded that in order to ask the question, you must press star one on your telephone keypad. Our next question comes from the line of Jaime Escribano from Banco Santander. Please go ahead.
Hi. Good morning. So a few questions from my side. And sorry because I joined late to the call. So maybe if you have already answered, I can follow up later. The first one is if you could provide us some guidance on the commercial discount for 2024, or at least tell us a little bit the dynamics, whether the hardwood pulp discount is going up or no, or is more or less stable. Second question, guidance also in terms of volume.
So what volume should we model for 2024? And following up on the answer on FX, have you done FX hedges for this year? What amount and what would be the collar just for modeling purposes? And a final question on the Gama project. So, if the Project Gama does not go through, what would be the Plan B? What do you have in mind? Thank you very much.
Thank you, Jaime. So starting with your question on commercial discount, there have been, as has been, historic tradition on the market, that there have been, increases or continuous increases in terms of commercial discounts. We would estimate, on average, for the industry in hardwood for 2024, the estimate would have the, the discount, the commercial discount should be in the range of about 40%. So it's a few percentage points versus what it has been last year. But as you know, commercial discount is, it's one, factor impacting the overall, net prices for us. But at the end of the day, where prices are, it's obviously a much more significant, element. And, I wouldn't, disagree with the point that I've heard in the past that, the fact that you have some of these discounts, commercial discount inflation, it actually, incentivizes suppliers, to push for, price increases.
And I think that's been a little bit of some of the calculation that was made earlier in the year. Regarding your second question in terms of guidance on volumes, we are currently operating very efficiently. When we look at this year, especially this first semester, we are very focused on maximizing our existing capacity, although we do have a maintenance stoppage in Celbi in May, June of this year. But that will not impact, obviously, ourselves. We are already planning for that. But I would say in terms of volumes this year, you should probably be looking for something around 5% versus last year. 5% increase, I'm sorry, versus last year. On the topic I'll get onto the topic of Gama. And perhaps then I pass it on to Miguel regarding the hedges that we have in place.
But on Gama, so as we've commented before, we need to have all of the conditions in place, namely the financing. The project is currently in the public comment period. There's been a lot of, I would say, activity around that public comment period as was to be expected. We continue to be very focused on taking that through. The project is very mature right now. So we're not necessarily looking at plan B. What, what, what I would comment is we were always working on other growth projects for our existing units and beyond. So, in due time, if that was the case, we could, obviously, comment on other alternatives. But clearly, there are alternatives. If that was the case, but it's obviously not the time to, to comment on that. So I'll pass it on to, to Miguel on the hedging question.
Yes. Thank you, José. Thank you for the question. Regarding FX, as we do every year, yes, we have some hedging done for 2024. We do not do it for the whole amount of dollars that we need. We do it usually for around 40%-50%. I would not like to go directly in numbers in terms of collar. But I would say that maybe the current level of euro-dollar is not very far from the midpoint, maybe closer to the floor.
Okay. Thank you. And one final question, if I may, José. It's regarding clients' margins. So, it's just to get qualitatively how they feel with these price increases. Are they accepting it? Are they being able to pass it to their final clients? Are they starting feeling uncomfortable or having some margin squeeze or not at all? And they are, like, accepting pulp prices increases? And they are okay with that? Just to understand a little bit the one-on-one dynamics. Thank you.
Sure. Sure. So, Jaime, what we have seen, first of all, in terms of price implementation, we've had no resistance whatsoever. Prices have been going through, as I said, currently for this month. We are already at $1,300. And in fact, what we see is customers asking for more volumes than we can supply. We have been running, continue to run, on low-stock inventories. And that, that's just the way we're gonna be continuing to run, for the remaining of the year, in order to manage our working capital. But with that said, we, we're fulfilling all of the contracts and even somewhat beyond, the contracts that we have, upon request. But we've seen from customers, no resistance whatsoever in terms of the price increases. Well, will that have an impact in terms of their margins?
I think they've also have been doing a very good job at managing their costs. Energy is not an an issue, as you know, right now, which was one of the biggest challenges in 2022. At the same time, if you consider last year, the inverse happened, because last year, there was a significant drop in terms of magnitude and in terms of the short time it took. That obviously helped significantly in terms of the margins because the prices on end product did not change significantly. So I would say today, what we look at, at least in terms of the current levels of pricing, is probably a more normal level or back back to more normal level of profitability.
Okay. Thank you.
Yep. Thank you. Thank you, Jaime.
The next question comes from the line of António Seladas from AS Independent Research. Please go ahead.
Hi. Good morning. Thank you for taking thank you for the presentation. Thank you for taking my, my questions. Basically, most of the questions were already answered. So I have two or three follow-up questions. The first one is on cost, cash costs. So just to clarify, if I understood well, you point to, in 2024, -5% on cash costs, if you can confirm, please. Second one is related with COGS and wood costs.
Gross margin, over the fourth quarter, remain under pressure. So should we assume that, the main contribution for cash costs, coming down in 2024 are wood? So can you share with us, what are your thoughts on, on wood prices? And, finally, about discounts, commercial discounts. You already mentioned about, 40% average for the year. Should we assume that now discounts are higher or lower than the 40%? Thank you very much.
Thank you, António. So starting with your first question on cash costs, currently, what we see, just to confirm, yes, we're looking at mid-single digits for a reduction versus year-on-year. Regarding wood costs, wood costs are always the biggest component that we have in terms of our variable costs, as you would expect. And what we see is there have been this year, we have a significant reduction in terms of our imports from Latin America. Part of it has been because of higher productivity in our national market and also in our own self-supply, so in our own forest. So we've been able to complement that, as we've done already or started to do already last year. But I would say that's the most significant impact. But inflation, even though it has come down, it's still there.
Continued pressure for wood sourcing, it's still there. So in an environment where you see pulp prices potentially higher, there is a clear potential for wood price inflation to happen. But I would say prices right now are relatively stable. But clearly, we could see some inflation happening there. In terms of your commercial discounts, the 40% today, that's what's being practiced. So it's not a higher or lower. That's our estimate in terms of what has been. We've seen that from our own contracts. Some of it, it's actually a bit lower. Some of it is a bit higher. Some of the contracts were done in a way that there is actually a bracket depending where pulp prices are and, as always, depending on the price points. So thank you, António.
Okay. Just okay. So sorry. So despite the pressure on wood prices, you are still comfortable with the cash costs coming down in 2024?
Yes. So year-on-year, year-on-year.
Of course.
That's what we're pointing to. You will see further reductions when you compare full year 2024, or you expect to see when you compare full year 2024 with full year 2023.
Okay. Thank you very much.
Yep. Sure.
There is a follow-up question from the line of Bruno Bessa from CaixaBank BPI. Please go ahead.
Yes. Thank you very much. And sorry for coming back to the line. But just two questions. The first, on working capital, we saw relevant investments in working capital over the last couple of years. What should we think about working capital during this year? What are your expectations today? And second, well, making very back-of-the-envelope calculations and quick calculations, would you feel comfortable with an EBITDA around EUR 250 million for this year? These would be my questions. Thank you very much.
Okay. Let me, let me pass it on to Miguel on the first question. I'll come back on the second.
Thank you, José. Well, regarding working capital, as you said, I think we have been optimizing a lot in the past quarters. So we think we've reached already very efficient levels, namely regarding inventories. We will look at that in detail for the next quarters. But we don't expect to have an improvement like the one we had in 2023. So we think we are already at very efficient levels. And it's not, and there will not be a big reduction even if we are managing very closely this item.
Thank you, Miguel. Regarding your back-of-the-envelope calculation, Bruno, I like your bullishness. When we look at the market, obviously, we are in an upward movement in terms of prices. That's positive. We're likely to have an upgrade in terms of volumes, which is positive. But I would say we still remain relatively prudent on the second half of the year. As you know, there's new capacity coming onto the market. And even though there is momentum going into the summer, the second half is still somewhat of an unknown. If we continue to see this trend in terms of demand growth from China, I think that gives a lot of support to a stronger market through the remainder of this year.
I think Europe, once you have this normalizing effect that we've seen currently, I think that's going to stabilize unless you have, again, supply chain constraints like we've had in 2020, late 2021 but certainly in 2022. So, with all those unknowns and uncertainties, we're clearly a little bit more or we remain, as I would say, a little bit more prudent on the second half of this year until we have greater visibility. I'm sure in the next quarters, you'll start to see a little bit more of where we may point towards. But, I think at least on your back-of-the-envelope calculation, I think that I would classify that as a bullish estimate at this point.
Okay. Thank you very much.
Sure.
There are no further questions. I will hand over the session to Mr. José Pina, Altri CEO, for the final remarks.
Very good. Well, thank you very much. Thanks for attending. Thanks for the questions. We look forward to our next conference call, and our next set of results, in the upcoming quarters. Thank you very much. Have a good day.
This concludes today's event. We thank you all for your presence. Ladies and gentlemen, you may now disconnect your lines.