Earnings Call: H2 2020

Jan 28, 2021

Ladies and gentlemen, welcome to Navigators Company Conference Call and Webcast for the 4th Quarter and Full Year 2020 Results. We are sorry that we have a few minutes we are on a few minutes late because we had a question with a password. I expect that everybody has been able to join now. Thank you. So today, participating in the call, we have the following members of the Board, Antonio Rodon, Adrian Silveira, Jean Le, Jean Paulo Livaayra, Fernandra Rouge and Moon Sanch. As usual, we will start with a brief presentation of the main highlights for the period and we will have Q and A session at the end. The presentation is accessible through the links available on the website, and you can also address written questions through the webcast platform. I will ask Antonio now to start with a few comments on the figures for the period. Antonio, please? Thank you, Joanna. Good afternoon and thank you for joining us today. I will start by going to Slide 4 please and make a global overview on Q4 2020. We continue to register signs of improvement in demand for nCo2D3 products throughout the quarter, especially in Europe, but also in the Middle East, North African region, albeit the partial lockdowns implemented. We maintained good operating and commercial performance in the pulp and tissue businesses. We kept our efforts to contain costs, both fixed and variable, and ended the year delivering significant amounts of savings versus 2019. All of this in an extremely difficult market environment in terms of pricing that finally started to improve towards year end, namely in pot. So going over some specific figures for the 1st 2 months of the quarter, I would say that the uncontrolled free market continued to perform better than other grades, falling 8% globally versus 9% in coated and a decrease of 18% in mechanical papers. Demand for einkotool free in Europe fell 7% in Q4, which compares to a 10% fall in Q3 and a 28% transaction in Q2. Demand in the rest of the world fell also 7% in October November, with a steeper decline in the USA, minus 13% in the 2 months As previously observed, sheet business recorded the largest drop in consumption and office was by no means worse than graphic, whilst the real business was more resilient. All of Navigator's machines have been operating since July without any commercial stoppage. We have been controlling our stock levels and managing our order books. Our encoated free sales totaled 343,000 tonnes, up by 2% in relation to Q3 and 6% lower than Q4 last year. Sales performance remained slightly more positive in Europe than in other markets. In terms of price, the benchmark for an uncontrolled free paper remained under pressure over the period, dropping 2.3% versus Q3 and 8.5% versus Q4 2019. Navigator's average sale price followed this trend, reflecting also, 1st, the pressure from non European markets secondly, the change in the format's quality mix, increasing proportion of real and economic products third, the incotems mix and 4, the weakness of the U. S. Dollar and other European currencies against the euro. Still, I would like to point out that in the 4th quarter, Navigator implemented price increases in international markets of more than 40 dollars per ton in sales denominated in dollars. Sales in euros in international markets evolved even more positively. But even though these increases in euros and dollars in sale price allowed to recover part of the erosion in that prices, this was not fully reflected in the final price in euros in view of the unfavorable costs of the U. S. Dollar euro exchange rate and the sales mix per currency. In terms of pulp, the quarter was a solid quarter for volumes, even though we have less available pulp to sell due to the increase in paper integration and the low stock level. Pulp sales volume totaled 97,000 tons, down 7% in relation to the Q3 and down 3% year on year. In terms of prices, even though still at very low levels, we registered improvement in our average sales price in last quarter versus the previous one. The tissue business registered solid performance with strong volumes and stable prices. In the quarter, that was marked by maintenance stoppages in Avelo and Villa Velo travel mills, as we previously announced. In this context of low pulp and paper prices, we continue to work on our cost structure, acting on fixed costs, but also on variable costs. We were able to record important savings due to a remarkable teamwork in improving specific consumption as well as price negotiations of raw materials like fibers, chemicals, packaging and energy. Our turnover stood at €341,000,000 and the EBITDA ratio in the quarter was €75,000,000 improving 7% versus Q3 and 5% versus Q4 2019, reaching a margin EBITDA sales of 22%. After paying an additional $99,000,000 in dividends, net debt stood at €680,000,000 and net debt to EBITDA at 2.38x. Our free cash flow will evolve positively to €63,000,000 from 56 registered in Q3. So if you now go please to Slide 5, we have an overview of the performance of the full year 2020. I would like to stress once more that in an extremely troubled year in which demand for our products was hit hard by the pandemic and prices fell sharply, Navigator's business model proved to be both flexible and resilient, and we were able to adjust swiftly to changes in the market, taking significant action improve sales on tissue and pulp as well as significant reduced fixed and variable costs. When compared to 2019, the impact of the pandemic remains evident. Overall turnover declined 18% year on year and EBITDA 23%. Still, even among an extremely adverse period as what we experienced, Navigator was able to deliver a profitability margin of 21% in the year. One of the aspects worth mentioning is the high generation of cash flow, which the group once more has proven to be capable of. We reached €134,000,000 of free cash flow at the end of December using each unknown of the possible levers, delivering €47,000,000 more than in 2019. If we take a look in more detail at the performance evolution over the last 5 quarters on Slide 6, we can see clearly the impact of the COVID-nineteen pandemic on Q2 and the rebound initiated in Q3 and continued in Q4 2020. After a strong start of the year, we had to adjust the decline in uncoated sales ratios in Q2, reducing paper output and increasingly significantly our sales of pulp to the market and our tissue products as well. In 2020, we sold 394,000 tons of market pulp, the highest level since 2009 after we started up the M4, our latest machine in Surtrubo and the site became fully integrated into an Ecozo Free paper. At the time, we decided to maintain our drying capacity and this has proven to be a sound decision in the context of a worse market for pain. And we have then the flexibility to increase our market pulp sales. Tissue volumes also performed quite well and reached an all time high of 106,000 tonnes, even with the decline of the away from home market. So in Q4, Enco to the 3 volumes recovered 148% from the lows in Q2, getting very close to pre COVID level. This was achieved in the midst of low pulp and paper prices, as I've already mentioned, which we tried to offset by containing costs, and we were able to achieve consecutive improvement in EBITDA and operating cash flow since Q2. I will now ask Fernando to comment on the EBITDA dilution on the next slide. Fernando, please? Thank you, Antonio. EBITDA in Q4 was negatively impacted by a decline in paper and in average tissue prices, the latter impact by a product mix that favored reels and a steeper decline on their prices. Our net pulp price evolved positively and grew 80% over Q3. In terms of volume, increasing paper allowed to more than offset declining volumes of pulp due to higher integration into paper and the very low level of stocks and slightly in volumes of tissue. When compared to Q3, the global cost impact is negative due to increasing human resources costs as the company decides to attribute the bonus at the end of the year. The rest of the fixed costs evolved positively in terms of variable costs, although persisting the efforts to optimize specific consumption, the rate of improvement is now stabilizing due to the pickup in production speed. Others include a positive impact of $16,700,000 from the log geologic assets revaluation related to our Nusa Mikfon. As stated in our results release, we have started good harvesting operations on Porto San Luis Obiques Plantations in Manica for export through the Port of Beira and 3 shiploads are currently planned for delivery in 2021, representing approximately 100,000 tons cubic meters of wood. In view of these developments, the group revised the assumption concerning the Eucalyptse wood market in Sandvik, failing the forests in Manica and Zambia by approximately DKK16.7 million, a value impact via logic assets and a reversal from the systematic movement done in the recent past years. Let me add that given the remaining uncertainties, the group maintains its exposure to Musa Bigh assets fully provided. If we go to Slide 8, with the cooperation of EBITDA between Q4 2020 and Q4 2019, the impact of these adjustments is negligible as we registered a positive impact in realized weak assets in 2019 as well. When comparing Q4 2020 to Q4 2019, EBITDA evolved February by 4%, mainly as a result of cost reduction on both variable and fixed costs, namely function costs as pricing and volumes evolve negatively. Looking at the EBITDA evolution for the full year on Slide 9, the main negative drivers were prices for pulp, paper and tissue, even though the 2 later present higher resilience. Volumes also negatively impact 2020 EBITDA, namely the reduction in paper volumes, hampered by the COVID crisis, which was still rebalanced by strong increase in pulp and tissue volumes already mentioned. The positive impact of cost is also very clear in the graph. We achieved a significant reduction of E170,000,000 and this figure includes euros 60,000,000 in variable costs, namely external fibers, wood, chemicals and packaging, as well DKK47 million in fixed costs, 15% reduction versus 2019 achieving human resources, personnel, dollars 11,000,000 23 percent maintenance, dollars $7,000,015 and function costs, dollars 39,000,000 Thank you, Fernando. Good afternoon to all. On Slide 11, we have an overview of pulp and paper price evolution over the last years for the main price indexes in Europe, A4B copy and BHKP in euros, hardwood kraft pulp. Net pulp prices in 2020 reached a very low point, which is actually the lowest point since the 2,009 crisis, a consequence of the strong supply, decrease in demand from China, which led to excess stocks in the value chain and the devaluation of the dollar versus the euro, which significantly impacted European pulp producers' margins. Paper prices, although more resilient, are also under pressure and are down 7.4% year on year, declining 8.3% from January until December 2020. So going over to Slide 12, we have a brief overview of the pulp market. The global pulp market held up well against the adverse environment of an economic downturn caused by the pandemic. World demand for hardwood is estimated to have risen 8% year on year, year to date November, driven by China, where demand actually surged by around 16%. Stocks of short fiber manufacturers have come down over the year, currently standing at around 37 days, below the average level of 41 days for the period 2,009 to 2019 over the last 10 years. Hardwood pulp has been supported by robust demand for end products, in particular in China, where tissue uncoated wood free and packaging grew in excess of estimates, especially in the second half of twenty twenty. Demand for hardwood pulp also benefit from the effect of substitution of softwood fiber due to the wide price gap Finally, due to the low price of virgin hardwood fiber and to the growing scarcity of high quality recycled fiber, which diminished availability due to the pandemic, there was a substitution effect between recycled fiber for virgin fiber pulp, which was another important factor supporting increased demand for pulp in 2020. At the same time, the supply of pulp was constrained in the Q4 by planned maintenance shutdowns in hardwood and softwood at a larger number of manufacturers. These stoppages proved longer than normal as a result of the safety restrictions required by the pandemic. Net pulp prices continued on a downward trajectory over the year, reaching a low point in this price cycle during the summer. Over the course of 2020, the growth benchmark lists for hardwood kraftpots in Europe in dollars stayed at $6.80 per ton, which is 20% lower than the average price of $8.55 per tonne in 2019. The price of hardwood pulp in euros also dropped by 22% to €5.97 per tonne versus the €7.62 per ton. And the recent weakness of the dollar against the euro during the second half penalized the PIKS Index in euros, thereby hitting the profitability of European pulp manufacturers. However, in the second half of the year, prices on international markets started to recover with substantial price increases being announced in various geographical regions for both short and long fiber, including in Europe as from Q1 2021. Oil price in China started improving in Q3 with an increase of $115 for softwood during the 2nd semester and $50 for hardwood during the Q4. In Europe, softwood also increased $40 throughout Q4 2020. This further widened the price gap between hardwood and softwood, thus favoring softwood substitution and putting positive price pressure on hardware. Major softwood producers announced price increases for Q1 2021 of $9.60 for January and up to $10.30 for February in Europe and to $690 around $700 for January and $800 for February in China. Also for hardwood, there were announcements of $7.50 for January $2,029.20 for February in Europe and to 5 $30 for January $5.80 for February in China. Ourselves at Navigator, we have already closed February sales in Europe at $8.20 In the USA, there are already announcements of $1300 for February for softwood, after $11.80 for January. I will now ask Juan Paolo to comment on the paper Thank you, Nuno. Going now to Slide 13 and looking at demand, estimates point to a global reduction of approximately 16% in printing and writing with uncoated wood free performing better than other grades, falling by around 13% year to date November. This reduction is smaller than in other printing and writing paper segments. Demand for coated paper is estimated to have dropped 17% and mechanical paper 21%. In Europe, estimated accumulated reduction is 12%. And in the United States, the figures point to a drop of close to 19%. After the sharp slump in April May, demand for paper recovered gradually from June onwards, and this trend was confirmed over the 3rd and 4th quarters with the reopening of the economies, especially in the European markets. Although noticeable signs of improvement were also weakness in Middle East and North Africa throughout Q4. All uncoated woodfree formats showed signs of recovery, with sales of reels proving the most resilient since the start of the pandemic. On the supply side, we have also seen announcements of permanent capacity closures. In Encoded Wood Free, some 0,800,000 tons will exit the North American market And in Asia, namely Japan, Thailand and Indonesia, an additional 800,000 tons is being reduced. Also, several producers in Europe have announced closures and conversions in printing and writing, mainly in coated and newsprint. On the other hand, there were approximately 0,800,000 tons of new capacity starting in China at the end of the year. At the end of the year, analysts estimated lower stocks of cut size at European Distributors. The year on year trend in sales prices reflect the adjustment that started in the second half of twenty nineteen and continued throughout the first half of twenty twenty under pressure from the pandemic and the low level of pulp prices. The benchmark index for A four showed a downward adjustment of 2.3% between Q3 and Q4, falling 7% year on year. The benchmark price dropped 8.3% from January to December. On Slide 14, looking at the year on year evolution of the order entry for European mills for fine papers and mainly for uncoated woodfree and coated woodfree, we can draw several conclusions. 1st, a better performance from uncoated versus coated throughout the year. 2nd, considering 2 COVID waves, the first in Q2 and the second in Q4, the impact of these two waves was completely different as the second wave had a less severe reflection on order inflow than the first one. Actually, the recovery of uncoated woodfree continued throughout Q4 and demand in December was just minus 5% year on year. The comparison is actually a difficult one as Q4 2019 had a strong order inflow. With the increase in COVID-nineteen infection rate in several countries in Europe, current environment is uncertain. Still, during the 1st weeks of 2021, the order inflow from European clients to European mills has been the highest of the last 4 years. Let's go over to Slide 15 with the group paper and pulp performance. The gradual recovery in the market, coupled with a significant effort at the commercial front, was translated into a significant increase in sales output in Q3 and Q4 was 148% in Q4 versus Q2 to 343,000 tons with a strong performance recorded in Europe. Uncoated woodfree sales for the year totaled 1,276,000 tons, down by approximately 12% on previous year. The sales value in the group's uncoated woodfree business was also hit by falling paper prices and the sales dropped in value by around 21% to €945,000,000 The reduction in the group sales price was in line with peaks, and the average price outside Europe was brought down by exchange rate trends, mix of currencies and evolution of the product favoring reels and market mix. During the Q2, Navigator adopted a large package of innovative measures to support its distributors and their sales teams in different parts of Europe and around the world. This was successful in achieving a significant increase in the order book at the end of December. The group registered orders equivalent to 30 days output in line with the levels recorded in previous years and 8% above competitors. These intensive sales efforts also allowed Navigator to boost its market share in Europe, up 1.2 percentage points versus 2019. When comparing the first and second half of twenty twenty, this gain among European competitors widens an impressive 2.6 percentage points. Navigator inventories reduced throughout the second half of twenty twenty to reach the end of the year with a lower level than the average 2019 in days of sales and represented less than half of European competitors' inventories. Stocks in the pipeline are estimated to be below normal. So to comment on the pulp performance, I will hand over to Nuno again. Nuno, please. Thank you, Jean Paul. As Antonio already stated, Navigator succeeded to record a volume of 394,000 tons of pulp sold to the market in 2020, 25% higher than in 2019, making this the best period since 2,009 in terms of volumes. This growth was made possible by the increased diversification of sales to destinations outside Europe by sizing opportunities in the tissue and packaging segments and by taking advantage of the greater availability of market pulp as a result of reduced paper production in the Q2. Sales turnover reached €156,000,000 in the full year, declining 6% from 2019 amidst the context of low price environment as we have just seen. Let's take a look at the tissue performance on Slide 16. Demand for tissue products proved very resilient and presented a slight growth, even in the context of an economic slowdown and the pandemic situation. As a result, in 2020, demand for tissue grew by 1.8% in Europe, although this was lower in Iberia, despite the overall decline across the away from home segment. Global sales volumes stood at 106,000 tonnes in 2020, reflecting a 7% increase from 2019. The group's tissue business was able to react positively to the opportunity offered by the peak in demand triggered by the COVID-nineteen for products in the at home segment. But it should also be noted that the away from home segment was quite affected by the COVID-nineteen situation, as these products are aimed at a large extent at Orecchannels, hotel, restaurants and cafes, and at companies, which were severely affected by the lockdown measures implemented from mid March onwards. This was particularly devastating in Iberia, home of our main away from home sale, where tourism represents a significant part of the economy and brings a very significant number of new tissue customers to the region every year. Still, the group made a significant effort both industrially and commercially to adjust its production to market needs and to the growing demand for the at home products. Several new products were launched throughout the year in a strong commercial effort to come lead our at home product portfolio. The group accordingly recorded an increase in tissue turnover of approximately 7% to €141,000,000 Finished products represented 76% of our sales in 2020. In terms of industrial activity, we had a good performance in the period in both the Avero and in Villa Verde Dorado Mills, and we managed to improve our fixed costs. Overall, we are pleased to acknowledge that the EBITDA margin for the tissue business has improved significantly over the previous year and is now clearly closer to what we believe we can achieve in this business. I'd like to stress that a significant part of this margin improvement is related to the overall reduction in costs, both variable and fixed. For example, fixed costs were reduced by 12% versus 2019, while tissue prices were kept relatively stable. For example, we reduced 1% the prices from 2019 in finished goods. And also we were able to sell more volume of finished goods. We increased 7.5% versus last year. I will now hand over to Adriano, who will comment on the CapEx side. Thank you, Onono. On Slide 17, we have an overview of the CapEx in the full year of 2020. As previously announced, Navigator has decided a substantial agreement of its CapEx plan for 2020. From investment initiative, estimated $148,000,000 to approximately 80,000,000 dollars As a result, capital expenditure in 2020 totaled H1 million as compared to $158,000,000 in 2019. This sum includes mostly projects aimed to maintain production capacity and the CV efficiency gains. It also includes €25,000,000 for environmental project, namely the new biomass boiler in the Regalia Force, €22,000,000 for this project and around €17,000,000 on projects to recondition assets, in particular, to projects undertaken at the Avelo mill, new ship pile and the revamping of the wet pulp section in the pulp machine of the drying machine. Both projects are part of the road map for decarbonization and modernization of the group. Our investment plan has been reassessed, and our main focus will be on the efficiency increase, modernization and digitalization of the operations while continuing with the decarbonization plan. As part of this strategy, some capacity increase in the pulp business will be bolstered by small evoked metrics. 1 of the major investments that started in the previous year is our new biomass policy in Fagerca Fos that will allow for a reduction in our CO2 emissions by 32%. I will hand over to Jean Marie to comment on this project. Joao, please. Thank you, Adriano. If we turn to Slide 18, we have a few details on that project. As you know, this is the most relevant step that the group is taking towards the goal of achieving carbon neutrality of its industrial facilities by 2,035 in a €55,000,000,000 investment. This new unit will be will enable the company to reduce its emissions of fossil carbon dioxide at the Firdapse site by between 150,000 200 1,000 tons a year, cutting the group's emissions by 30% in 2021, representing already slightly more than a third of the goal the company has set itself to accomplish 14 years from now. This capital project was part of the company's decarbonization strategy, reflecting the decision taken in 2019 to meet the European targets 15 years ahead of schedule in 2,035 and so achieve carbon neutrality at all its industrial complexes, entailing a reduction of 86% in its CO2 emissions. And so achieving this will involve a total investment of €154,000,000 Approximately Approximately 400,000 tons of biomass will be used each year to pull the new unit. All of this will come from internal waste produced in the Barking eucalyptus wood, Barking sawdust, joined by a further 200,000 tons of external forestry waste produced in forestry and countryside management operations. The new boiler will use this twice forestry biomass to generate thermal energy for the company's production processes, resulting in much greater efficiencies in generating energy, combined generation of heat and electricity. And the new facility will have increased capacity and meet tougher standards of environmental performance as a result of the Navigatas company's commitment in using the best technology available today for this purpose. I will ask Fernando to make the next comments. Fernando, please? Thank you, Joao. On Slide 19, It should be recalled that the year starts with free cash flow generation of €15,000,000 in the first quarter, and the strong growth was recorded after the year impact of the pandemic, €90,000,000 in the second quarter, €56,000,000 in the 3rd and €633,000,000 on the 4th quarter. In the last quarter, free cash flow was positively impacted by significant reductions in inventories, namely of wood, a reduction in client receivables and reimbursement of approximately €14,000,000 from the antidumping process received in Q4. On Slide 20, we have an overview of free cash flow for the full year of 2020, where we obtained an impressive figure of €234,000,000 comparing very favorably to the free cash flow of €196,000,000 reached in 2019. Free cash flow in 2020 was positively impacted by an overall reduction in inventories of wood and pulp, client receipts once again and state reimbursements related to corporate income tax. Free cash flow was also positively impacted by around €80,000,000 from the anti dumping process received during 2020, the same $40,000,000 for our POR1 in Q4 measured visible and in addition, dollars 3,600,000 from POR2 in June 2020. This strong free cash flow generation allow for a reduction in net debt over the year of 35,000,000 dollars after being paid a total amount of $198,000,000 of dividends in the year, as you can see on Slide 21. Thus, at the end of December, net debt totaled €680,000,000 excluding the impact of IFRS 16 and the net debt to EBITDA ratio stood at a conservative level of 38x, excluding the impact of IFRS 16 once again. Let's go now to the next slide with a quick overview of our financial activity over 2020. We took a highly active approach to finance activities this year. Three phases may be identified over the course of the year. First, our main concern was to secure sufficient liquidity to face the great uncertainty about the impact of the pandemic on the group's business. To this end, the company contracts a number of short term facilities around €210,000,000 Once it said guaranteed liquidity is needed, the group turned its attention in the second half of the year to refinancing a series of operations maturing in 2021, ensuring long term debt totaling EUR 222,000,000 This operation did not involve any immediate cash injection, cash in, instead providing for use of the funds as and when needed in accordance with the projections. This planning approach, geared to stay 1 step ahead of the developments, formed to the basis of the Group's long established financial policy. Lastly, in the final quarter, the group partially restructured a loan maturing in 2023, buying back the bonds and simultaneously issuing fresh bonds totaling R75 million maturing in 2026. With these operations, the group extends the average maturity of its 1,000,000 long term debt to approximately 3.7 years. Our average cost of debt remains very competitive at 1.5% at year end and most of our debt has a fixed rate. We believe that Navigator maintains a strong financial stance. I will now hand back to Antonio for the rough one. Thank you, Fernando. So if we please can go to Slide 24. We have a recap of the main developments occurring in Q4. The recovery in Encode III demand in Europe continued during Q4, as mentioned before, in spite of the implementation of partial lockdowns. We have all our machines up and running since mid July. We have improved and controlled results and registered strong volumes for both pulp and tissue. Paper prices continue to press during the quarter, but pulp prices started to improve at year end. We continued our cost contention efforts during Q4 and managed to achieve strong operational figures and generate a high level of free cash flow, while paying an additional €99,000,000 in dividends. Then, we kept our net debt under control and net debt at EBITDA levels 2, as mentioned by Fernando, under 2.4 times. Before going to our outlook for 2021, I'd like to say a few words on the anti dumping product. If we can please move to Slide 25. This anti dumping process has been impacting our in vitro sales in USA for the last 5 years. As you may recall, since August 2015, U. S. Authorities have been conducting extensive reviews of all Navigators' U. S. And Portuguese health and costs, following their own guidelines and their own comparison criteria. From this analysis, a technical dumping margin has been applied to the company's U. S. Exports even if the company believes no commercial dumping exists. Given high preliminary dumping grade supplies, which were effectively revised downwards after due process, Excess amounts deposited in these initial deals are now being refunded to Navigator with interest when interest is due. So far, the Cambria has received all excess deposits for the period of review 2 or POR 2 and almost all excess deposits for period review 1 or POR 1. As such, we received total amounts for both periods in 2020 of approximately €80,000,000 and a further €6,000,000 is expected in 2021, actually partially already received. On January 19, 2021, the Department of Commerce, the ZOC, confirmed the final rate to apply to the 3rd period and the review, POR 3. The final rate and change versus preliminary rate is 6.75%. The confirmed rate is in line with the Canada's estimates and means that the estimated duty paid when importing to the U. S. Will now be 6.75 percent until the final results of POR 4. Going now to our outlook on Slide 26, The worsening of the pandemic situation and the additional restrictions on economic activity that are occurring in many European countries will probably impact performance during Q1. Nevertheless, the current market context is quite positive as the early weeks of January have started quite well, not only in ordinary flow terms, but also with a recovery in pulp prices with a number of producers and you announcing price increases for N. C. O. 3 as well. In pulp, the recent price increases for both long and short fiber in China and Europe have been successful and have started to be reflected in the fixed price index. Producer stocks are close or below normal levels, namely in short fiber, as it is our case. The increase in pulp prices provided support to raising paper prices, and Navigator announced a 4% to 6% increase in mCo2 Free products for Europe for February and many other producers have followed. I do remember that we did announce in December an increase of another $50 for international markets that we are actually implementing as well. In tissue as well, as soon as pulp prices increase takes effect, it is highly likely that prices will rise in the tissue market, possibly around 4% to 5%, so as not to undermine the profitability of the different manufacturers. A significant increase in the price of issue rills is expected for reels imported to Europe, not only due to the increase in pulp, but also due to the inflation in logistics. This impact quite significantly this will impact quite significantly non integrated tissue producers. In our case, we were actually able to implement already a 5% increase for rolls, tissue rolls in Q1 2021. Finally, let's go to Slide 27 with a few words on our CapEx and costs estimate for 2021. As you've seen, CapEx for 2020 stood at €81,000,000 after being revised down from 158,000,000 and for 2021, we estimate the CapEx will stand somewhere between €100,000,000 120,000,000 This amount will be mainly geared at maintaining our production capacity and reconditioning our assets as well as for environmental projects. In terms of costs, after delivering a very significant reduction of €107,000,000 in overall variable and fixed costs, €6,000,000 in variable €47,000,000 in fixed. Our goal is to continue focus on cost control and consolidate the reductions achieved in 2020 over 2019. Although some of the reductions were leveraged by the pandemic, we expect to retain some of the efficiency in specific consumptions achieved in variable costs and in fixed costs, retain around 80% of the reduction achieved in functioning and maintenance costs. Thank you. Thank you, Antonio. This ends our comments for now. So we will now be open for the Q and A session. Thank We have an audio question on the line from Joao Pinto from JB Capital. Please go ahead, Joao. Joao. I have four questions, if I may. The first one on Mozambique. Can you tell us what kind of financial impact can we expect from the shiploads that are planned to deliver in 2021? Second one on dividends. What would be a reasonable assumption for the dividend proposal this year? A 100% payout would make sense? Or could it be more given the amount of dividends paid in the recent past? My first question regarding EBITDA margins. Can you give us some color on the margin range that you expect next year? Is it reasonable to expect stable margins versus 2020? And lastly, you mentioned in the outlook in the full year release that use of the WAF capacity closures in the U. S. And Asia for 2021 can support balance in the market? Can you give us some color on the amount of tons that will exit the market? Thank you. Thank you, Joao. I will address some of the questions and then I will pass, if necessary, to my comments to further comments. So starting with Mozambique shiploads. As mentioned before, we started operations, we started harvesting in 2020, And we expect to bring rolls into port, so rolls of wood, not chips, into Portugal, in 3 vessels, so around about 200,000 cubic liters. Our expectation is that the total cost of the operation will be competitive with other extra Iberia imports we do for Portugal. Joao, can you comment a bit further, please? Yes, Antonio, of course. So well, this is an operation that will be conducted this year. As Antonio previously said, we started the harvesting process in the end of December or in the middle of December last year. And this will bring us round wood from Manica province and will be also extended to another vessel in 2022. So that's it for now. Regarding your second question about the dividends, at this moment, we have no decision in this particular chapter. And the Board of Directors will obviously do in the right moment. And obviously, we'll do it within the legal limits to distribute dividends. Fernand, do you want to add some? No, I would say that on the time of decision, that will be in the Q2. We'll take into consideration the results of the prior months as well the pandemic. This makes sense on our views for the moment, but it's something to be decided in March. Regarding your third question about the EBITDA margin range for 2021, And we actually are working, expect and are working a slight improvement on our EBITDA margin. As mentioned before, we are seeing a good price momentum, at least in the 1st part of the year, in the 1st months of the year. We do expect pulp prices to be strong at least until the summer, most likely all the year, but at least until the summer, while no new capacity is going to start up. And this will obviously put pressure on the favorable margins of end potency producers and as we mentioned before, also on the margins of tissue producers. So we expect to have a favorable wind on the price dimensions. We also expect to have a more favorable win on the demand for Enco 2 Food Free. And as explained, we intend to keep on working on our cost base. So altogether, this will we are going to fight for an improvement on the EBITDA margin in 2020 1. Regarding your last question about the possible operating rate for 2021, There are different scenarios, so I'm not going to comment on the different scenarios. Obviously, we are not going to be yet the 90%, which is typically the average OR for the European industry in the last few years except this year. But we also believe we are going to be significantly better than this year. So we expect a more favorable OR in 2021. Thank you. Thank you very much. We have a question from Antonio Saladas at AES Independent Research. Please go ahead, Antonio. Hi, good afternoon. Thank you for your presentation. I don't know if you can add more color in Mozambique projects, mainly the exports. If you can mention what is the amount in euros of what you are going to export in volumes in 2021, in this year. What are the estimates or what we can what we expect for the coming year in terms of exports? If the if all we would have export is for Portugal or if you can export for China. So I don't know if you can add more color on this project in Mozambique. And secondly, I think that you mentioned that you could evaluate the assets by about €17,000,000 However, I think that you also mentioned that all the asset base is provisioned. So if you can explain what is the difference between the assets in Mozambique TADP provision and the revaluation? And the third question is related with your order book. You mentioned that your order book at the end of the year was about 30 days. And taking consideration in your presentation, your environment that you described very, very well, at least in terms of prices, strong. We can assume that your other group currently is also at 30 days? Thank you. Okay. Thank you for your questions, Antonio. I will give you some comments in each one of them. Joao Le will further comment on the Mozambique project and then Fernando will comment as well on the Mozambique assets. But I must say that the question regarding Mozambique assets was not very clear. So if you are as well, very clear because of the sound. So if you are so kind to repeat it, I will share. Sure. So I think that you revalued the assets by $17,000,000 by the end of the year, more or less, the Mozambique assets. But I think that in the practical years, you also mentioned that the assets are that you kept the assets provision on your press release. So it's just I think I don't understand. You pay value the assets, but at some time, you also mentioned at least on the press release that the assets are provisioning. Okay. It's very clear. Fernando will comment that shortly. Regarding the Mozambique project, obviously, we cannot give guidance of the specific cost of wood and the specific amount of export. But as mentioned, the price at which these rules will arrive to Portugal, ballpark figure is competitive vis a vis our imports from outside Iberia, so from Latin America. And the other question that is implicit in your initial question is regarding what we are going to do. We need to understand this is a first commercial pilot, okay? We need to make sure that we know a couple of things already about Mozambique. We know that the growth at very nice rates, equal to probably the best we have in Brazil or above the average that we have in Brazil. So from the point of view of the forestry, we are quite happy. We know that we are able to harvest efficiently, but we need to prove that we are able to put it in the port, export it to a vessel and arrive in Portugal. So this is a commercial pilot with 3 vessels. If this commercial pilot is successful, we do believe that we have conditions to continue, and Joao already alluded to this, to continue to export rolls, so wood rolls in the coming years into Portugal. And exporting to other regions of the world at this moment might be more complicated because the typical wood market is the wood export market is based in ships, not in wood rolls. So as you probably know, one of the ideas possible ideas of development of Mozambique in the future is exactly to prepare exports of ships. We are not yet at that stage, a commercial pilot, 3 vessels with a continuation in 2022. And if successful, we will have a capability during the next few years to do some export of those. Joao, do you want to shed some light on this, please? Thank you, Antonio. I think you said most of it. So this is in fact, this is our first trial in terms of volumes involved. This is very significant, in fact. So the intention is to go through all the logistics process, the certification process, the loading in the vessels, the use of the part of where the facilities. So this is, most of all, an important test for all of us to improve and to create conditions to develop the project in the long run. Okay. So the first thing that you need to recall is, in fact, that in the past, after 2014, we have 2 kinds of assets in our balance sheet related with the Mozambique project. While it's a fixed asset, it's regarding the preparation of the land. This means what we have to do with the machines to be able to plant the Eucalyptus seeds. And that was recorded as a fixed asset. In addition to that, we have the biologic assets. In 2016 2017, we have impaired both values. This means the balance sheet was with a zero impact. This means that we have netted the asset side of the balance sheet with these two type of assets. In 2018, we have, I would say, a negative perspective on the project. This means we are not sure that we'll be able to proceed with the projects in the future, depending on some conditions that should be fulfilled by the local government, and we were not very convinced that will happen in the future. Nowadays and during last year, we saw a slight improvement in the project. And that's why in 2018, we have provided a figure if you want to close down the activities, we need to pay to our employees at the time, we need to have certain expenses and that was provided in the balance sheet in 2018. This means at the end of 2018, we have a passive we have a liability in our asset, only a liability in our balance sheet. Now regarding some developments and some commitments that the local government and some private investors have made that they will proceed with the Macours project board. We believe that there are strong commitments that in 2024, we'll have a port in Macouse. This means now we are not so negative. And because we have some assets that we could recover and buy back to Porcelain, we have reversed the impairment, but only in what's concerned biolergic assets. And we have reversed EUR16,700,000. In the same at the same time, we still have a provision in our balance sheet with a similar amount. That's why we say that in net thirds, Musa Bic is 0 in our accounts. I hope that I will not Okay. Thank you very much. It's the best I can do to explain. So That was very comprehensive. Thank you very much. I didn't okay, I didn't know that you're you well, okay, that's okay. I understood. Okay. So probably what you can extract from our words regarding Mozambique, I will jump to the first question in the second, is that we are very committed. We are more optimistic than we were before, but we are extremely cautious at the same time. Order book, we ended the year with 30 days order book. It was commented by Juan Pablo. The order inflow in the 1st 3 weeks of January was actually very good, was actually the best of the last 4 years, but we are leaving times of great uncertainty. So the volatility on the order books has been quite big, like we saw when we moved from Q1 to Q2 and Q2 to Q3 last year. So as we speak, our order book today is actually 34 days. So above the 30 days we end up the year. So shows well with all the machines up and running, shows well the improvement of the order flow in the 1st 3 weeks of January. But again, I need to underline the volatility and the uncertainty we are all living across the world. Thank you. Okay. Thank you very much for your comprehensive answers. Thank you very much. At this time, we do not have any other questions on the telephone line. Hello. Yes, we do have a question that has a couple of questions have come up through the webcast. I will read them and we will answer it 1 by 1. So first question by Homi Ray from GAEESCU. You have been taking efficiency measures for many years. Do you think there is still room to improve them? Could you quantify the measures you are going to take for this year? I believe we have already did shed some light on that in the last comments from Antonio regarding the 2021 cost, but I will pass him again so he can complete the answer. Well, thank you very much for your question. Probably just before trying to shed a bit of more light or repeat what I said, just a comment. We have been always taking efficiency measures all over the years. This is part of the DNA of this company for many, many decades. And there is always room for improvement. Having said that, I don't remember in the last 33 years that in 1 year the company cut €107,000,000 of costs. So it means that, of course, the challenges going forward is much more that's much more complicated. Having said that, as mentioned before, the whole team, this has been a very large teamwork and that was very deep into The whole team is extremely committed to keep on cost efficiency measures and to further enhance them. And we have registered that into our budget for 2020 in what refers to variable costs. So we keep on working on our variable costs, learning what was done in 2020 in a very specific environment. I would like to believe that 2020 is a new normal for cost and we can still slightly improve, but we need to prove it fully. Anyhow, we are as committed that we have implicitly put that into our 2021 budget. Regarding fixed costs, fixed costs for us, we have 3 main components, is HR costs or personnel costs, is maintenance costs and is sanctioning costs. And we have in 2020, obviously, a very reduced bonus to our people. So we do expect, if the conditions will allow it, that we have a better variable pay in 20 21 regarding 2020. So if this is the case, and we hope it's the case, we are working for that, obviously, this cost will increase. The other two costs, so functioning and maintenance, as I think I've mentioned, we believe that about 80% of what we have cut in 2020 in very tough decisions and very tough measures will be basically retained into the future. Okay. Thank you, Antonio. We have an additional question on the platform. And this is from Lorenzo van der Vahe from Degroof Petercam. Could you shed some light on the net working capital improvements year on year? When it comes to inventories, what are the drivers for the improvement? Is it sustainable? Or should we expect some kind of unwinding in the coming quarters? Okay. I think Fernando will start answering the question. This means that we have made a very good rotation of our assets in inventories and in receivables, in what concerns receivables. We will try to maintain it as we could, but it always depends on the starting point. And on the starting point, this year will be more difficult than the prior year. Nevertheless, our goal is to try to maintain it to the best of our efforts. Okay. So we have an additional question on the platform. I will read it now. Since the amount of dividends and payout will only be known in March, will there be a distribution twice during the year of 2021? This is the first question. The second question is, is the trend of digitalization due to the pandemic, how does it affect sales of A 4 paper? This is from a private shareholder. I will pass to Aponius. Again, it's very soon to give any kind of guidance regarding the first question. We have yet not defined any decision on that aspect. We cannot forget that 2020 was also a very special year. And this has, of course, implied as well the way we have distributed the dividends. And the only thing we can tell is that if there are no reserve distribution, which we don't know yet if there are a lot, it will be only 1 in case there are no reserve distribution. But again, I'm not giving any guidance if we are going to do it or not. Regarding the trend of digitalization due to the pandemic, obviously, this will affect the A four paper sale. We have tried to understand with our distributors and they have performed a small market research to analyze this impact. And again, we didn't took yet any conclusions. Everybody is yet with a very short sight on the real reasons behind what has happened in Q4 paper demand. Having said that, as we have mentioned in previous calls and again in this call, by no means office paper decreased more than graphic paper, which I think is a good indication. Graphic paper decreased, graphic paper is very much related to things like commercial print, and this is very much related with economy. And office paper decrease was of the same magnitude. So I think it's yet too soon to expect that this position trend due to the dynamics will have a higher impact on A-four. Thank you. Okay. Thank you very much. We have no further questions on the platform. So thank you, ladies and gentlemen. This ends our session for today.