Good morning and welcome to the H1 2022 Altri results call. My name is Brika, and I'll be your event specialist operating today's event. During the presentation, you will have the opportunity to ask a question by pressing star followed by one on your telephone keypads. Please press star two if you change your mind at any time, and star zero if you need operator assistance at any point. I now have the pleasure of handing the call over to our host, Rui Cesário. Rui, please go ahead when you're ready.
Hi. Good morning. Thank you for attending today's conference call of Altri's Q2 results. My name is Rui Cesário, and I'm Investor Relations at Altri. We have with us today Mr. José Soares de Pina, the Group CEO, and Mr. Miguel Silva, the Group CFO. Mr. José Soares de Pina and Mr. Miguel Silva will make a brief description of the Q2 results, and the floor will then be open for Q&A. I'll pass it to Mr. José Soares de Pina.
Good morning to everyone, and thank you for attending today's conference call of Altri's Q2 2022 results. We're pleased to host this call with investors and analysts, and hopefully we can give you a clear picture to everyone how the Q2 went for Altri and also talk about the outlook ahead. If you turn to slide two, we present the main highlights of the quarter. We're quite pleased to report that Altri achieved an EBITDA of nearly EUR 70 million in the Q2, which represents a 6% increase comparing to last year's Q2. While looking at the H1 of 2022, EBITDA increased by 33% to EUR 130.8 million.
At the end of June, our net debt reached nearly EUR 360 million, an increase of EUR 54 million versus March, given the EUR 79.1 million dividend related cash outflow and leaving our net debt to EBITDA ratio at 1.4 x, a comfortable level to develop our strategy. We also wanted to highlight that during the month of May, Altri has distributed nearly EUR 400 million to our shareholders, of which EUR 49 million in cash dividends and the rest in the form of Greenvolt shares. We believe it was an operation that was very well received by the market. Altri was able to achieve a return on capital employed of 23%, reaffirming its solid position as a reference in the sector and such an important KPI for our management.
Moving to slide number three, we highlighted the tight situation of the pulp market in Europe with the level of inventories at the European ports in June at near historic low levels after reaching in April a recent low level in years. The increase seen in May seems to be related with accumulation of vessels at the port in the last days of the month, which was mostly corrected in June. Turning to slide number four, we present the recent evolution of hardwood pulp prices in Europe after recovery in prices during the H1 of 2021, where we saw stabilization during the H2.
Prices started to increase again during the Q1 of 2022 and continued during the Q2 of 2022 with three consecutive price increases of $50 per ton from April to June, and in the quarter we released prices in Europe at $1,350 per ton. For July, there was an additional announcement of a $30 per ton price increase, placing per ton price in Europe at $1,380 per ton. Looking at slide five, we present the production and sales volumes in the quarter. Sales were flat when comparing to last year's Q2, despite a slightly lower production when compared with last year's Q2 due to a scheduled maintenance stoppage at our Biotek facility.
In slide number six, we show our sales breakdown per region, confirming our strategic focus in markets of proximity, namely Europe and near Middle East, with more than 90% sales. Sales to Asia are all attributable to our dissolving wood pulp production. Turning to slide seven, we can see the sales breakdown for end use. Tissue and print and writing are our main segments which actually increase their weight in the H1 versus 2021, given the strength of these segments in the European market. I would now like to pass the word to Miguel Silva, the group CFO, that will comment the main highlights of Altri during the Q2 and 2022.
Thank you, José. In slide eight, we comment on revenues and the EBITDA achieved in the quarter. Altri reached total revenues of EUR 273 million in the Q2 of 2022, an increase of 38% versus the Q2 of 2021 and +9% comparing to the previous quarter. EBITDA reached EUR 70 million in the Q2, 6% more than last year's Q2 and 14% higher than the Q1 of 2022. EBITDA margin stood at 25.6% in the Q2. In slide nine, we look at the H1 of the year numbers.
Revenues increased by 42% to EUR 522 million, while EBITDA grows by 33% to EUR 131 million, which translates in a margin of 35.1%. Turning to slide 10, and despite all the challenges at the cost level, operating result increases by 8% and net profit grows by 24% in the Q2 compared with last year's Q2. In slide 11, we focus now on H1 of 2022 numbers, with operating results increasing by 47% to EUR 98 million, and net profit with an increase of 57% to EUR 70 million. Turning to slide 12, we have some comments related with the cost inflation theme. Inflation continued to impact our cash cost base during the Q2, despite our efforts to minimize the impact.
The increase in natural gas prices has more than offset some positive effects on electricity. We are working on solutions to minimize the consumption of natural gas that will be implemented during the H2 of the year. On the wood side, we continue to need a higher level of imports versus historical numbers, an expense that has also been penalized by rising logistics costs and stronger U.S. dollar. Chemicals has also been a relevant component in increase of variable costs with a significant impact during 2022.
In slide 13, we present the evolution of net debt during the Q2. Altri's net debt by the end of June of 2022 was at EUR 357 million, an increase versus the Q1 given the dividend related cash outflow of EUR 79.1 million. Net debt to EBITDA of the last twelve months ended the quarter at 1.4x . José Soares de Pina will now continue.
Thank you, Miguel. Turning to slide number 14, we're pleased to present one of the best return on capital employed levels of the industry at 23%, which compares with an 18% average for the past five years. If we turn to the next slide, 15, we wanted to share with you that Science Based Targets initiative, the global partnership between CDP and United Nations Global Compact, validated the reduction targets of greenhouse gas emissions set by the Altri Group. Starting in 2020, those targets point to Scope one and two greenhouse emissions reductions of 51% per ton produced until 2030. Finally, in slide 16, we wanted to share our views looking forward. We continue to see a tight European market with a solid order book.
Pulp availability remains an issue, confirmed by the low inventory levels at European ports at the end of the Q2. After a very positive quarter with three consecutive price increases of $50 per ton each to $1,350 per ton, we have seen an additional announcement of $30 per ton for July to $1,380 per ton. We also wanted to point out that a significant part of these price increases has been to cover the additional inflation of many of the variable cost expenses. We continue quite motivated, enthusiastic with our project in Galicia, Project Gamma, and the opportunity we see ahead. We're moving the final investment decision deadline for the H1 of 2023 in order to be able to have all needed information for a proper decision.
The separation of the pulp business from Greenvolt occurred during May, with the distribution in-kind of a 43.3% stake in Greenvolt shares to Altri shareholders. After the conclusion of the operation, Altri ended up with a 19.1% stake in Greenvolt, which was diluted to 16.6% after the recent Greenvolt capital increase. The floor is now open to a 30-minute Q&A, and I pass the call back to our investor relations, who will start.
Yeah. Please, floor is open to Q&A. Please, can start questions.
Thank you. If you would like to ask a question, please press star followed by one on your telephone keypads. We have the first question on the line from João Pinto of JB Capital. Your line is open.
Hi. Good morning, everyone. Three questions if I may. The first two regarding cash costs. Where do you see cash costs going, increasing on a full year basis? I mean, with the information available today, of course, and in terms of comparison versus 2021. Related to this, do you see the Q2 as a peak in cash costs? Should we assume them to fall in the H2 and what would be the drivers for that? If you could comment on the wood market would be great. Finally, if you could elaborate on how you see market dynamics evolving, namely supply, that we have some capacity projects coming online next year. If you are seeing. How do we are seeing the strength of the market to absorb those new capacity? Thank you.
Thank you, João. Well, going back to the comments we made regarding cash cost, and in particular what we saw in the Q2, and here, perhaps I address both your first and second questions jointly. We did see a significant or a continued significant cost inflation pressure from the key items. Mainly, we talk about energy, and energy, specifically, natural gas, followed by wood prices, particularly due to imports and processing chemicals. Those were really the three key elements. We did see, nevertheless, despite the increases, we did see what we would perhaps call a deceleration of some of those costs, with the exception perhaps of natural gas, as we all know.
When we look at it now on a full year-on-year, and considering what we've experienced in Q2 and looking now into Q3, given that we already have July essentially under our belt. Year-on-year, we're looking at cost inflation, possibly in the range of approximately 30%. That should give you an indication in terms of what we're seeing, which will be, again, looking at Q2, in line with Q2. In terms of market dynamics and in particular around supply, obviously the market continues to be extremely tight. That's been really, I think, exemplified by the stock levels at European ports, which are very much in line with what they were in April, which was in and of itself already low.
Order books remain relatively robust for our clients, in particular around paper, print and writing and tissue. On the supply side, looking at the projects that were coming on stream, it's really I would say the major trend has been delays of those projects. You've had obviously Bracell come on stream earlier in the year. In essence, it's been a switch onto dissolving wood pulp. We haven't seen any implications, at least as far as Europe is concerned. The other projects, MAPA, the UPM project, et cetera, you're really looking at the H1 of next year, according to the latest information. Is that going to create or drive significant availability of market pulp remains to be seen.
Most of it is primarily directed at Asia. We would need to see Asia picking up a bit more given the softness that we've experienced this year. There's no reason, at least that we can see at this point, why that may not be the case. That would absorb a significant portion of that additional demand, that additional supply. Europe continuing to look at the constraints around logistics that we've seen, not expecting that to ease at any point through the end of this year, perhaps even into early next year. We don't expect, at least at this point, that those projects will have a significant impact on supply/demand balance.
Thank you very much.
Thank you. The next question comes from Jaime Escribano of Banco Santander. Please go ahead when you're ready, Jaime.
Yes. Hi, good morning. My questions are regarding the commercial discount. My calculations is that it came at 33% blend with dissolving. Same calculation for Q1 was 35%. Just to understand why is this dropping or what could be behind this dynamic? A second question would be regarding the Gamma project. My question would be, we are seeing Ence with some water problems or water shortage in their Pontevedra plant. The site that you have selected, how do you think that this could be an issue in the future? Finally on Greenvolt, the potential second dividend in kind, when could we expect to be paid? Thank you very much.
Thank you. Hi, Jaime. Going back to your first question, I think it's really down to product mix. As you know, if you look at the total value, the total level of presumed discounts, it includes as well dissolving wood pulp, which is not necessarily a like for like comparison, because most prices there are net, contrary to traditional hardwood pulp in the European market. It's primarily due to product mix. There hasn't been any significant changes, certainly to our commercial conditions, which remain the same.
Perhaps we've done a little bit more, or we've taken a little bit more advantage of some of the spot markets, and the spot markets. It's net prices, so that tends to also change some of the dynamics. If you look also at our presence in markets like Turkey, which again, net market, and without discounts. That may explain what you're seeing at some of the changes there. With respect to the situation in Galicia, and particularly, obviously I can't comment on the news by you know regarding the recent cutting operations of an existing facility in Galicia. There are significant droughts going on through Europe.
The location that we have picked, we continue to monitor the flow, particularly of the river, in this case is River Ulla, which sits on a reservoir. There's actually a couple of reservoirs down the river. The water levels are a little bit lower, but nevertheless, they're still, even at this stage, they're still in line with what we saw during our historical analysis. We don't see it as an issue at this point. What it does drive is, I think, an overall trend that we have been working on. As you know, we've talked about this in the past, we use state-of-the-art technology to recycle part of our discharge water back into the process.
We've done that for a number of years, and one of our units, Biotek is currently, for example, recycling up to 20% of its discharge water, and that reduces the actual freshwater needs that these plants use. They're designed specifically for this plant in Galicia, this new facility has that in mind, and actually incorporated even to a higher level. That's always been part of our approach and our design strategy for that project. With respect to the remaining share of Greenvolt, we haven't yet announced any specific decision of when that would be made. We'll do that in due course, but at this point, at least we don't anticipate that will happen this year. It's likely that we're looking at next year, and that's primarily, again, due to legal reserve ratios and the need for us to have that in mind during the disbursement.
Okay. Thank you. Maybe a follow-up question on market. Now that you mentioned about Turkey, how are the price dynamics there? What is the price right now? Because usually it's a leading indicator, no? If the price in Turkey is going up, it's usually a leading indicator of some tightness in supply demand. We'd like to know how about that dynamic?
If you think of it, as I mentioned, the Turkish market is usually a market that is primarily a net market. There is a big demand related to tissue. Europe is becoming a significant producer of tissue products that obviously they export part of it to Western Europe, part of it to some of the Middle Eastern markets. That's likely to continue. If you look in terms of the price levels, just so that you have reference, they tend to be, because being net prices, a lot closer to Chinese or follow at least what you've seen in the Chinese markets. Currently those on a net basis are above $1,000 per ton. It should give you an indication of where that market is.
Okay. Just a final question, if I may. Do you see the further, or in your intuition, do you think that the LatAm players are going to increase the hardwood price in Europe any further? Do you think that we are at an optimal level where there is no further room for price increases?
From everything that we're seeing right now and looking at the remaining of the Q3, I think there is still upside risk in terms of the pricing.
Okay. Thank you very much.
You're welcome.
Thank you. We now have a question from the webcast from José Antonio Suárez from CaixaBank, and his question is regarding the change of cogeneration plants to self-consumption. Do you believe that this will more than compensate for the increase in the cost of natural gas suggest by futures?
Perhaps I'll pass it to Miguel, who's been very obviously very focused on adjusting some of our position. Just as a side comment, we believe that moving on to self-consumption is something that is clearly going to be a significant compensation in terms of hedging on natural gas. I'll let Miguel comment a bit further.
Yes. What we are planning to do, and that will be from August onwards probably is effectively to change our main plant, Celbi, to self-consumption in terms of power. This will lead us to a better situation. As José said, it will have a positive impact, and it can compensate one part of the gas increase. Maybe not all, but a part, yes.
Thank you. We now have another question on the phone lines from António Seladas of AS Independent Research. Your line is open.
Hi. Good morning. Thank you for taking my questions. Both questions are issues that were already discussed. First one is related with your Galicia project. If I ask you that, if you are now more comfortable or are you less comfortable with the project now than one or two quarters ago? Well, are you more comfortable or are you less comfortable with the project now than one or two quarters ago? If you can ask this, you can answer this question.
First one. Second one, just to clarify, when you mentioned now that you are going to move to self-consumption at Celbi, I didn't understand what will be the month. I think just to clarify if it will be August. I understood it was August, but just to clarify if it was August. What kind of impact in terms of cost we should see, when you move to self-consumption in Celbi, at Celbi? Thank you very much.
Yeah. Thank you, António. Starting with your second question, just for clarification, what Miguel mentioned was it's likely to be August. That's what we're currently targeting. The impact, in essence, instead of purchasing everything in market, selling everything as market, we will be selling the excess balance energy. So you're talking about roughly on a yearly basis, considering sale is about 200 GWh. The prices are pretty much in line with what you see currently in the Iberian Peninsula. As you know, there is a change with the pricing cap on natural gas used for electricity generation. That impacts the actual market prices. Those will be that excess energy would go to market.
We'll be looking to possibly it could be anywhere between EUR 1 million-EUR 2 million on a monthly basis, at least. In terms of your first question regarding Galicia, at this point, we have actually no reason to be less comfortable with the project. On the contrary, the more specific we get about the project, the more comfortable we actually are getting about the project, because we're looking to answer the various questions as we move through it. We have currently the environmental impact assessment underway. We have basic moving on to detailed engineering underway. We have the economic feasibility of the project underway. A lot of those are actually moving in the right direction. As you gain more detailed specificity in terms of how the project looks like, it gives us actually greater comfort of where we're going.
Okay. Thank you very much.
You're welcome, António.
Thank you very much. We have no further questions, so I would like to hand it back to Mr. José Soares de Pina for some closing remarks.
Well, thank you very much for attending the conference call today. Hopefully, we've given you a good indication of where we are and the outlook for the upcoming quarters. We're pleased that you were able to make it to join us and to have the opportunity to give you more detail on our current operations. Thank you very much and have a good day.
Thank you all for joining. That does conclude today's call. You may now disconnect your line.