Welcome to The Navigator Company conference call and webcast, the Q3 and nine months of 2020 results. Participating in the call today are the following members of the board, António Redondo, Adriano Silveira, João Leite , João Paulo Oliveira, Fernando Araújo, and Nuno Santos. As usual, we will start with a brief presentation of the main highlights of the period, and we will have a Q&A session at the end. The presentation can be accessed through the links available on the website. Questions may be addressed also through the webcast platform. António will start with a comment on the main figures recorded in this period. António, please.
Good afternoon, and thank you for joining us here today in Lisbon in a 21 degrees sunny afternoon. I will start by making an overview on Q3 2020, on slide four, please. A quarter that has initiated the recovery versus the previous quarterly periods. This has been one of the most challenging times in the group's history. I'm glad to say that with the reopening of economies and the gradual recovery in demand of paper, Navigator experienced a significant improvement in its business during this Q3 . Our first priority has been the health and welfare of all our people. Up until now, we have had around 20 confirmed cases of COVID-19 within the company. Fortunately, none of them serious. I'm glad that all of our employees are well and back to work.
We have put in place a contingency plan from the very early stages of the pandemic that has proven very effective with temperature control, hygiene and disinfection measures, mandatory use of masks, and so on. The level of contamination within our mills was extremely low. The commitment of all of our employees was exemplary, and thanks to the hard work and dedication of the entire workforce, it was possible to react swiftly and efficiently. After an estimated contraction of European coated woodfree market of around 5% in Q1 this year and around 28% in Q2, demand in this last quarter fell approximately 10%. The USA also registered a recovery in demand, -19% versus -31% in Q2. There are two important aspects that I would like to emphasize. First, the recovery in demand for uncoated woodfree has been gradual and constant since the lows registered in May.
Actually, September registered a fall of just 7%. The recovery in uncoated woodfree has been much stronger than in all other printing and writing grades. A clear sign of the versatility and resilience of this type of paper. We will see this more in detail further ahead when we look at the ordering for evolution in the past months. In terms of formats, the reel businesses, which is more versatile in terms of uncoated woodfree application, has proven to be more resilient. Contrary to the conventional wisdom, sheet of paper business, particularly for graphic use, was the hardest hit more than office papers, with advertising and commercial printing severely affected by the crisis. In terms of pulp, the quarter was a solid quarter for volumes, even though we had less available pulp to sell due to the increased integration to paper.
We actually made a significant restocking and managed to increase volumes by 16% versus Q3 2019, and registered only 5% less volumes than in Q2. Prices, as you know, remained at the minimums, even though there has been an improvement throughout the quarter. In pulp, we have seen a recovery outside Europe of approximately 7%, and in paper, we have also witnessed a recovery of prices in the overseas markets from June until September. Europe has also shown some positive signs in uncoated woodfree average prices throughout the quarter, even though in a much more contained way. The tissue business registered a solid performance with strong volumes and stable prices. In the context of low pulp and paper prices, we continued to work on our cost structure, acting on fixed costs, but also on variable costs.
We were able to record important savings due to price negotiations of raw materials like fibers, chemicals, packaging, and energy, as well as significant improvements in specific consumption. We registered an increase in revenue of 20% versus Q2 2020, and an improvement in EBITDA of 36%, reaching a margin EBITDA to sales of over 20%. We managed to improve financial ratios during reducing our net debt by EUR 56 million. Overall, we continue to present a very solid financial situation. If you go now to slide five, we have an overview of the performance of the first nine months of 2020. When comparing periods, the impact of the pandemic remains very evident. Overall, turnover declined 18% year-on-year and EBITDA 30%. Still, even among an extremely adverse period as what we have experienced, Navigator was able to deliver a profit margin over 30%.
One of the other aspects worth mentioning is the high generation of cash flow, which the group once more has proven to be capable of. We reached EUR 170 million of free cash flow at the end of September, and using each and all of the possible levers, we have delivered EUR 45 million more than in the same period of 2019. We have maintained a strong balance sheet with net debt standing at EUR 644 million, and our net debt to EBITDA ratio remains at 2.28 times. If you take a look in more detail at the performance evolution of the last five quarters on slide six, we can see clearly the impact of COVID-19 pandemics on Q2 and rebound initiatives on Q3 2020. Uncoated woodfree volumes recovered 45%, and we were able to record a significant improvement in turnover. Volumes in the pulp and tissue business remains strong.
Overall performance is improving, in spite of a significant deterioration in pulp and uncoated woodfree prices. Paper price declines about 8% against Q3 2019, and over 2% against Q2 2020. Pulp prices fell 19% year-on-year and 6% versus Q2 2020. Even in this backdrop, EBITDA totaled EUR 70 million and operational cash flow approximately EUR 66 million. I will now ask Fernando to comment on the EBITDA evolution year-on-year on slide seven. Fernando?
Thank you, Antonio. EBITDA in Q3 was negatively impacted by a decline in pulp and paper prices. Our net pulp prices were affected by the weak key euro exchange rate evolution over the quarter, paper price reflects market pressure as well a product mix change, more low-end products, and the exchange rate fluctuation as well. Our average tissue price evolved positively over the quarter, reflecting an increased rate of converted products in our product mix. On the positive side, we registered a significant growth in uncoated woodfree volumes, more than 45%, while pulp volume stood slightly below Q2, when we achieved the maximum volume sold since 2009. Tissue increased 5%. As you can see, the positive impact of increase in volume double the effect of declining prices. Costs evolved positively over the quarter, namely variable costs, wood, chemicals, and packaging.
This reduction was essentially due to specific consumption optimization and renegotiation of raw materials. When comparing Q2 EBITDA over year-on-year in slide eight, declining prices is main negative impact on EBITDA. All of our products suffered a price decline year-on-year, especially pulp, as we have already mentioned. Nevertheless, registered a reduction of 8% in Europe and was impacted by even lower prices in overseas markets and by product mix as well. Exchange rate also impacts negatively on paper prices. We have to take into consideration that the comparison is hampered by several prices increase in uncoated woodfree market achieved during 2019, which was actually the highest price since 2003. Tissue price adjust slightly. In terms of volume, uncoated woodfree declined 7%, whereas pulp volume increased by 15% and tissue have a moderate variation.
Cost optimization efforts are also clearly visible when comparing Q3 2020 and Q3 2019, both in terms of variable and fixed costs. On the variable cost front, external fiber, wood, and chemicals evolved positively, and on the fixed front, the main achievements were registered in function cost. Looking at the results for the first nine months on slide nine. EBITDA totaled EUR 210 million versus EUR 300 million for the same period last year. In Q1, we reached EUR 88 million, in Q2 EUR 52 million, and in the Q3 , as I've stated previously, reached EUR 70 million, with a good recovery in terms of volumes, but still feeling the negative impact of low prices. For the nine months period, net pulp price remained at a very low level, expressing the current market downward price pressure. Paper and tissue kept showing a higher resiliency, but were still impacted negatively.
With a decline in prices were partially offset by the sales volume growth in pulp and tissue and also by cost savings. The main factors optimizing variable costs were the cost of external fiber, thanks to falling price for long and short fiber, and to reduction in specific consumption. In spending on wood, due in particular to lower specific consumption in the period, as well in lower costs for chemicals, essentially due to lower prices for certain inputs and reduced consumption, namely for bleaching. I would like to stress that a significant work has been done to reduce levels of specific consumption. For instance, taking advantage of the slower path of production, despite instability that these shutdowns and change in operating speed can cause.
We also achieved some gains in renegotiation contracts of raw materials and subsidiary materials. On the fixed cost front, we managed to achieve a reduction of nearly EUR 30 million below the level recorded in the same period in 2019, nearly half of it in corporate functions with positive evolution in personnel cost and function running cost. I will now ask Nuno Santos to give us a few words on the market conditions. Nuno, go ahead.
Thank you, Fernando, and good afternoon. On slide 11, we have an overview of pulp and paper price evolution over the last six years for the main price indexes in Europe, A4 B-Copy and hardwood kraft pulp in EUR. With market discounts increasing in recent years, prices are probably as low as in the start of the century and in 2009. Recently, with the devaluation of the U.S. dollar versus the EUR, European producers have seen further erosion in their margins. Paper prices also more resilient, are also under pressure and are down 7% year-on-year. Going over to slide 12, we have a brief overview of the pulp market.
Until now, over the first eight months of 2020, worldwide pulp demand grew 11% versus same period in 2009, with a strong growth in China up 20%, compensating the slowdown in Europe and Africa and in Asia, excluding China. On the demand side, we have seen producer stocks rebalancing, leading to a decline in short fiber inventories, which stand currently at 38 days below the five-year average of 44 days. Pulp demand was supported by sustained increase in tissue and paper consumption in China, a continuous decline in imports of recycled paper, and by restocking of buyers. Estimates point that port inventories in China stand at high level, estimated at around 1.7 -1.9 million tons. Indicating that inventories have shifted from producers to buyers.
The benchmark of bleached hardwood kraft pulp in dollars per ton remains stable at $680 per ton during Q3, in Europe, but fell 25% year-on-year. As I just referred with the recent devaluation of the US dollar versus euro, prices in euros have declined almost 6% during the Q3 versus the Q2 , with many pulp producers selling now below marginal cost. During the month of August, softwood pulp traded in Shanghai Futures rallied 10%, easing a bit afterwards. The softwood price has now increased $30-$40 per ton in China. Hardwood is expected to follow a positive trend during the Q4 , first in China, which we are now seeing, and then in Europe. I would like to stress that we have already seen some improvements in pulp prices outside Europe during the Q3 .
We believe there is a positive trend. We have already witnessed a number of relevant producers announcing price increases for November. One of the main reasons we believe hardwood price should see some upside is the current gap between hardwood and softwood prices, which stand at a maximum of $150 per ton, favoring softwood substitution. Finally, on the supply side, the pandemic situation has led to maintenance postponements from Q2 to the H2 of this year. After some maintenance stoppages in the Q3 , more scheduled stoppages are expecting now in the Q4 , impacting around 420,000 tons in Latin America. I will now ask João to comment on the paper market.
Thank you, Nuno. Going to slide 13 and looking at demand, estimates point to a reduction of roughly 28% in printing and writing, with uncoated woodfree performing better than other grades, with demand falling 15% year to date August. This compares with a decline of 19% in coated woodfree and 22% in mechanical paper. In Europe, the estimated accumulated reduction of an uncoated woodfree is 14% year to date August, and in the United States, the figure points to a drop of 21%. We have seen a gradual and consistent recovery of uncoated woodfree demand during Q3. After the lows registered in May, there has been a continuous improvement in demand in Europe, with Q3 falling 10%, comparing favorably to the 28% decline in Q2, and with September actually recording a decline of just 7%.
The recovery has also been significant in U.S., with demand falling 19% in Q3 versus 31% in Q2. China actually registered almost flat demand year to date of uncoated woodfree. 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 uncoated woodfree, some 0.8 million tons will exit the North American market, the same in Indonesia, and in Europe, we have seen some closures and conversions announced in printing and writing papers for coated and newsprint. When looking at paper prices, the average benchmark index for the first nine months of 2020 fell by roughly 7% versus the same period in 2019, falling around 2% from Q2 - Q3 in 2020.
If we turn to slide 15, it is clear the performance of uncoated woodfree versus other printing and writing grades. Uncoated woodfree inflow year-to-date has been recovering clearly and consistently from the lows of April and also faster. Order inflow for uncoated woodfree in Q3 stood at 90% of order inflow in 2019, and in the last four weeks, we have seen that order inflow improved to 96%, once again performing better than other grades. Let's go over to slide 16 with the group's paper and pulp performance. The gradual recovery in the market, coupled with a significant effort at the commercial front, has translated into a significant increase in sales output in Q3, +45% versus Q2 to 336,000 tons with a strong performance recorded in Europe.
In recent months, Navigator has adopted a large package of innovative measures to support its distributors and their sales team in different parts in Europe and around the world. This was successful in again achieving a significant increase in the order book. The significant sales efforts resulted in healthy order books over the Q3 , with orders equivalent to 26 days output at the end of September, in line with levels recorded in previous years. This also compares favorably with Navigator's competitors and has enabled it to gain ground in market share against its European competitors, up to two points versus 2019. With its machine running at full capacity since July, the company managed carefully its stocks and ended the Q3 with a level much the same as in previous year, representing around half the stock of its European rivals.
Paper turnover in Q3 stood at EUR 238 million, representing a 36% increase versus Q2. In terms of year-to-date September 2020, paper turnover declined 22% year-on-year. Sales value in the group uncoated woodfree business was hit by the downward trend in paper prices, as we have just seen. It should be noted that the reduction in the group's sales prices in Europe was in line with PIX, and that the average price outside Europe was brought down by exchange rate trends and the sharp downturn in prices in those markets. Now to comment on the pulp performance, I hand over to Nuno again.
Thank you, João. Our market sales volume year-to-date September reached 297,000 tons. This was actually the highest level since 2010, after we started the fourth paper machine in Setúbal. The site became fully integrated into paper. In the Q3 , even after we started operations in all of our paper machines, with less available pulp for the market, we managed to sell 104,000 tons of pulp, restocking and taking advantage of market opportunities in tissue and packaging. Sales turnover reached €117.5 million in the first nine months, declining 3% year on year amidst the context of low- price environment with prices falling 25% versus last year. Let's now take a look at the tissue performance on slide 16. Our sales volume stood at 79,000 tons in the first nine months, reflecting a 7% year on year increase.
The group's tissue business was able to react positively to the opportunity offered by the peak in demand triggered by COVID-19 for products in the at-home segment. It should also be noted that the away from home segment was quite affected by the COVID-19 situation, as these products are aimed to a large extent at the HORECA channel, hotels, restaurants, cafes, and at companies which were severely affected by the lockdown measures implemented from mid-March onwards. During the Q3 , this impact was particularly relevant due to the strong reduction of tourists in the Iberian Peninsula, where the group places most of its sales to this sector. 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 segment, and succeeded in increasing sales of finished products by around 9% to 61,000 tons.
As you can see, the weight of consumer products in our sales for tissue increased significantly versus the same nine months last year, 44% in 2020 versus 35% in 2019. The group recorded an increase in tissue turnover of approximately 5% to 106.7 million EUR. The sales mix improved in relation to the same period the previous year, with the proportion of finished products rising to 77%, as compared to 75% in 2019. In terms of industrial activity, we had a good performance in the period of both Aveiro and Vila Velha de Ródão Mills, and we managed to improve our fixed costs, reduce our fixed costs. 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 sustainable.
I will now hand over to Adriano, who will comment on the CapEx side.
Thank you, Nuno. On slide 17, we have an overview of the CapEx in the first nine months. As previously announced, Navigator decided on a substantial review of its CapEx plan for 2020 from investment initially estimated at EUR 158 million to approximately EUR 70 million. Considered on a cash flow basis, this figure was further revised down to approximately EUR 55 million. It should be noted that the CapEx that will be reported on the accounting basis is expected to stand at approximately EUR 90. As a result, capital expenditure reports at this first nine months stood at EUR 70 million. The comparable amount in the same period in 2019 was EUR 119 million. This amount includes a figure of around EUR 47 million in maintenance, efficiency improvements, and asset replacement, and EUR 23 million in several environmental projects.
More than 80% of investment spending in 2020 is related to maintenance and projects that started in previous years that we could not stop. On the major investment that started in the previous year is our biomass boiler at Figueira da Foz, included in the environmental projects. I will ask João Leite to do the next comments, including this biomass boiler project.
Thank you, Adriano. If we turn to slide 18, we have a few details on that project. As you know, this is the first and most relevant step that the group is taking towards the goal of achieving carbon neutrality of its industrial facilities by 2035. This project, which represents a global CapEx of EUR 55 million, will allow to reduce CO2 emissions by 20% for Navigator as a whole, and the Figueira da Foz mill will have steam and electric energy produced 100% from renewable sources. The project is currently being finalized and has already entered the testing period. We expect the ramp-up to be finalized by Q2 2021, and we estimate that we will be able to achieve significant savings in costs with this new boiler, namely through the reduction in the purchases of natural gas and maintenance costs.
The plan to achieve carbon neutrality by 2035 was launched last year and has four main goals. First, to reduce fossil fuel emissions with the implementation of cleaner technologies. Second, to reduce specific energy consumption, less 10% from 2015 until 2025. Third, achieve 100% of electrical energy production from renewable sources. Fourth, carbon offsetting of unavoidable carbon emissions. Energy and climate is one of the nine material topics defined by Navigator in its sustainability agenda for the period 2025. I will ask Fernando to make the next comments. Fernando, please.
Thank you, João. On slide 19, we have an overview of the free cash flow evolution, which was particularly strong in the period and reached EUR 170 million. This compares to a free cash flow of EUR 125 million in the first nine months of 2019. It should be recalled that the year start with free cash flow generation of EUR 15 million in the Q1 .
The strong growth was recorded after the early impact of the pandemic. EUR 99 million the Q2 , and EUR 56 million in the Q3 . This was achieved through highly effective management of working capital, which combined healthy capacity to collect customers' accounts and continued care in managing suppliers, where extension of certain payment periods was coordinated with the provision of financial solutions to support the liquidity of our partners. There was also a reduction in stocks in regard to beginning of the year and to the end of Q2 . Another decisive factor was the more moderated path in implementing our CapEx plan. This strong free cash flow generation translates into a significant reduction in net debt over the period.
As you can see on slide 20, at the end of September, net debt totaling EUR 644 million, excluding the impact of IFRS 16, representing a decline of around EUR 70 million over year-end 2019, and EUR 132 million year-over-year. The net debt to EBITDA ratio remains at a conservative level of 2.3 times, excluding the impact of IFRS 16 once again. The group debt's profile is referred to on the next slide. Our short-term liquidity was increased to EUR 345 million by the end of September. We have already repaid some of the short-term loans contracted in March and April, and during the Q3 . The group contract several borrowing operations in order to refinance debt maturity in 2021. In line with well-established policy, this operation was planned in advance to the extent considered appropriate and did not entail any immediate funding.
Instead, the new facilities are coordinated with the actual maturity dates of the existing debt, lowering financial costs. This increase and prolongs the group's liquidity situation as deemed appropriate in the present context. Our average cost of debt remains very competitive at 1.62%, and most of our debt has a fixed rate. We believe that Navigator maintains a strong financial standing. I will now hand back to António for the wrap-up.
Thank you, Fernando. Thank you very much. Going to slide 23, we have an overview of the main developments occurring in Q3. With the reopening of economies and a gradual recovery in demand for and cultural paper, Navigator experienced a significant improvement in its business during the Q3 . By quickly adapting to market changes and consequently stepping up our sales efforts, we were able to register a significant improvement in sales volume. We achieved strong operational performance in pulp and tissue businesses and continued our reduced action to control costs. Unfortunately, both pulp and paper prices remained under pressure and continued to impact negatively on our margins. We recorded a significant improvement results over the previous quarter, increasing EBITDA by 36% and continued to generate a strong free cash flow. We have ended the quarter with a strong financial position, as mentioned by Fernando.
Let's go on slide 24 with an update on our measures to mitigate the impact of the COVID-19 pandemic. As mentioned in the beginning, first and foremost, our priority was the health and welfare of all our people, and we are proud to say that the quick actions taken very early proved to be effective, and the level of contamination within our mills was extremely low. The commitment of all our employees was exemplary, and thanks to the hard work and dedication of the entire workforce, it was possible to react swiftly and efficiently. Regarding the four decisive actions we undertook to protect our business, on the supplier side, we continue to provide financial solutions to support the liquidity of our partners. We increased our short-term liquidity to EUR 345 million in cash and cash equivalents and have additional unused credit facilities of EUR 95 million.
We have already started to renegotiate the debt maturing in 2021, almost 80% of our structural debt, and we have managed to do that while gaining flexibility, as the new facilities are coordinated with the actual maturity dates of the existing debt. This increases and prolongs the group's liquidity situation as deemed appropriate in the present context. We have revised our CapEx for 2020 in a very significant manner. We do not expect a cash-out of more than EUR 55 million. The CapEx that will be reported on an accounting basis is expected to stand at approximately EUR 90 million. Of this amount, we registered almost EUR 70 million of CapEx the first nine months, but over 80% of those refers to maintenance and projects began in the previous years.
We have also achieved a significant reduction in fixed costs of circa EUR 30 million versus the first nine months of last year, proving that we are committed to a strong cost optimization. We also achieved a very meaningful reduction in our variable costs of around EUR 45 million in what was a global effort across different areas and through extended teamwork in order to contribute to a significant reduction of specific consumption, taking advantage of the slower pace of production despite the instability that these shutdowns and changes in operating speed can cause. We also made relevant progress in renegotiating contracts for all our raw and subsidiary materials. Finally, a few words on the outlook for the rest of the year. We saw a progressive recovery in the uncoated woodfree business in Q3, and Navigator's performance reflects this market improvement.
Although the risk of a second wave of the pandemic persists, with the extent and impact still difficult to estimate, the group has registered in recent weeks some positive signs. Namely, an even greater dynamism in the ordering flow from the European market, which allow us to predict that the market recovery will continue in the Q4 . The order book at the beginning of October increased to almost 30 days. The entry of orders outside Europe and U.S. is still at a very early stage. In the pulp business, prices remain at very low levels, and in some cases below marginal costs, both in Europe and in China. Certain factors may contribute to an improvement in prices during the Q4 . The group has already witnessed a recovery trend throughout the Q3 in pulp prices outside Europe. In September, namely, standing about 7% above July prices.
Current price gap between long and short fiber at maximum levels close to $150 per ton may lead to positive pressure on short fiber prices. A number of maintenance shutdowns are scheduled, in particular Latin America, having been originally planned for the Q2 , and estimates point to this removing approximately 420,000 tons from the market. We have already seen some hardwood producers announcing price increases for the beginning of November, and we believe we should see an improvement in pulp prices in the short term. In the tissue business, after positive performance in the first nine months, there is some concern about the possible contraction in demand, especially in the away-from-home segment. For the Q4 , some days of maintenance stoppages are scheduled in some of our pulp mills and in some of our paper machines.
The annual maintenance stoppages will also take place in some of our tissue paper machines. We will, of course, continue to work on all aspects that are within our control. We will remain focused on our cost structure control and our capital expenditure. We will maintain a solid financial position. Industrially and commercially, our teams have done an amazing job throughout the year, and we expect to be able to continue to deliver a good performance in the future. With a geographically diversified business, Navigator's uncoated woodfree product mix continues to present a strong versatility and a higher resilience when compared to other printing and writing grades. Thank you.
Thank you, Antonio. This ends our comments for today. We are now open for the Q&A session.
As a reminder, ladies and gentlemen, if you would like to ask any questions today, please remember to press star followed by one on your telephone keypads now. The first question we have from the phone lines comes from João Pinto of JB Capital. Please go ahead. Your line is now open.
Hi. Good morning, everyone. Thanks for taking my questions. I have several. The first one on dividends. You said previously that you expected to arrive at the end of the year in a healthy position to distribute dividends. Do you maintain this view? What can we expect on this front in the short term? The second one, this difference that you mentioned between CapEx in accounting terms versus CapEx in cash flow terms in 2020, should we expect the difference to be a cash outflow in the beginning of 2021? My third question, regarding UWF paper prices in Europe, do you expect them to fall more, to correct more in the near future or you believe we are reaching support levels? Finally, if I may extend this question to pulp prices, we understand that the spread is high versus long fibers.
However, what are the triggers that could lead pulp prices upwards in the short run in your view? Thank you.
João, thank you very much for your questions. Because there were a number of questions, I will just go over them to see if we have due note of everything. The first question is regarding dividends. The second would be around the CapEx and the possible cash outflow for CapEx at the beginning of 2021.
The difference between the accounting and the cash flow CapEx in 2020.
Yes. Okay. The third one is regarding the uncoated woodfree prices and whether or not we see still a downward trend in Q4.
Yes.
Correct?
Yeah.
The last one is regarding pulp prices and what would be a possible level for increasing prices in the short term.
Yeah. About triggers that could lead to higher pulp prices.
Okay. Thank you.
Thank you.
I will now hand over to António.
Thank you, João, for your questions. I will give you some insight for the first question, then Fernando will answer the second, João Paulo, the third, and Nuno the fourth. If necessary, I will wrap up again. Regarding dividend, you probably remember from our previous discussions that amidst the COVID-19 pandemic, we have suspended our dividends distribution in May for the sake of prudence, then also after, we used the layoff measures associated with the production stoppage of some of our paper machines. We have said previously that even under the most adverse scenarios regarding the impact of the pandemics, the company should maintain the ability to distribute reserves. After these nine months of activity, and as you can see from the Q3 results just published, Navigator confirms that it is in a comfortable financial position to adequately remunerate its shareholders.
An initial distribution of reserves on top of what was already distributed in January might be considered until year-end, as long as there is a proposal from the shareholders in that regard. For such distribution to occur, the company needs to organize a general shareholders meeting requested by the chairman of the assembly upon the request of the shareholders. Thank you.
What concerns the CapEx, the answer is easy. It's yes, there is a difference between the accounting and the payment. In cash terms, this will be an outflow in 2021 or at the end of the year.
Regarding uncoated woodfree prices in Europe, we don't expect prices to go down more. There was even an announcement last week of a price increase by a company.
Regarding pulp prices, we see several factors that should help lead to a recovery in the hardwood pulp prices. First, on the demand side, as you know, the Chinese economy is growing and is recovering strongly. This helps, it's one of the most important demand centers for pulp. We also see tissue and printing and writing recovering, and so this also helps on the demand side. Also, as I mentioned earlier, the gap between softwood and hardwood also pushes and increases demand for hardwood. The price gap between softwood and hardwood is now historically very high at EUR 150. Historically, it's been around EUR 90, EUR 100, and so it pushes for substitution. Also, this is on the demand side.
On the supply side, we are expecting some stoppages in some pulp operations, some pulp plants, especially, as I said earlier as well, from some delayed stoppages from the H1 of the year. Still on the supply side, prices are in fact too low, and some pulp producers are operating with negative cash margins. Sooner or later, they will stop producing with negative cash margins or prices will go up. Last, the U.S. dollar devaluation over the last two months will also push for a correction in prices. There's a lot of factors, both on the demand side, on the supply side, that will lead, hopefully, to a gradual recovery of pulp prices in hardwood.
That was very clear. Just one follow-up if I may. Regarding the UWF paper prices, the price hike that you mentioned, can you say the amount? Is that in Europe? Thank you.
Thank you. We cannot explain the amount, but we can say it was significant. As it was mentioned, it was very mild. We are comparing the end of Q2, beginning of Q3, with September. It was very, very mild in Europe, but was significant outside Europe. We cannot make specific comments on the quantities or the amounts.
Thank you.
The next question comes from Carlos Jesus of Caixa Banco . Please go ahead, Carlos. Your line is now open.
Hello. Hi. Good afternoon. Thank you for taking my questions. I had another question concerning dividends, but that was already answered. My next question was concerning costs. Can you know to what extent do you believe that the current cost reduction or the cost reduction that you implemented in the last quarters can be considered permanent going forward? Thank you.
Thank you for your question, Carlos. As it is easy to understand, what we have done these first nine months of the year was extremely tough on costs, obviously, in some way helped by the full environment that we have around us. We are going to fight to make sure that a very good part is going to be largely sustained, but obviously, by no means we can guarantee that all is sustained. I can give you a very easy example. We obviously saved a lot in traveling and accommodation because the majority of our customers were unable to accept the visits. I must say that we were recognized to be the very first European paper maker on the street from early June visiting customers.
Obviously, as soon as this nightmare disappears, we want to go back with all the team on the streets, and of course, travel and accommodation will increase.
Okay. Thank you.
We now have a question from Antonio Seixas from AS Independent Research. Please go ahead, Antonio. Your line is now open.
Thank you very much. Good afternoon. Thank you very much for the presentation. I have three questions. First one is also related with fixed costs. I think that year-to-date, you saved EUR 30 million, as far as you mentioned on presentation. I think that the target was higher than this, EUR 40-EUR 45 million. If you can elaborate on this. In this case, fixed costs, should we understand as permanent or it should be included in traveling costs as you mentioned? Just to know if this kind of fixed costs, the reduction will be permanent or not. The second question is related with capital spending for the next year. If you can share with us what are your intentions. The last question is related with something that everyone is talking about, the permanent decrease on the uncoated woodfree demand.
You mentioned that minus 17% demand in September. If you can share with us if this 7% is something that will be reference levels, or if you believe that the figures could be even lower than this one or higher, minus 5%, minus 3%, minus 2%. Thank you very much.
Thank you, Antonio, for your questions. I'm not sure if I fully understood the question related with fixed costs and how far it is different from the previous question. I'm going to give you some elements of answer, and then Fernando will develop further, mainly if I miss the question that you have raised. Yes, indeed, we have fixed a very ambitious target for the full year. We are not yet there in spite of the €30 million that we have saved so far. We still keep battling to achieve the target by the year-end. It's not impossible, although it's harder, it's not impossible to achieve that target. We are using several levers to go on that direction. On top of the fixed costs, we have done a very big job that continues as well on the variable costs.
We took as well a significant amount of variable cost out of the equation. In the first nine months of the year, if we will consider the same volume of production, which obviously we didn't, but considering the same volume of production to take out the volume effect. We have achieved around EUR 44 million of variable cost decrease, namely by being more efficient using our resources, by changing the recipes of our products, and by renegotiating the contracts with our suppliers. Regarding fixed costs again, I'm trying to go back to the question I've answered before. We do believe that we will fight to make sure that a lot of those costs will be permanently cut, but obviously, it's not possible to permanently cut costs in the same amount that we had this year by the reasons I've explained before.
This year was very specific, and we expect next year to be different from this. Some of the costs that I gave the example of travel and accommodation for our sales team was just as an example. Those are costs that obviously we can't and we don't want to cut in the future because we want our people to be in the street. Fernando, you want to add something?
Yes. The first thing is our goal, EUR 46 million is for the year. This means that at the end of Q3, we have EUR 30 million and we are ahead EUR 10 million of the initial planning that we have made. Normally, the last quarter is heavily imposed by annual contracts, revisions, and things like that. This means since the beginning, we know that the Q4 will be the challenge one. Nevertheless, we are EUR 10 million ahead of our initial expectation for this time. In addition, I want to add three things. These fixed costs are compounded by functional costs, corporate costs, let's say in this way, maintenance and payroll. On the payroll side, we know that we cannot maintain this for the next year, or at least we need to substitute, for instance, for two reasons, two main reasons. One, it's we have applied for layoff.
On the layoff, we have some savings that we'll not expect to have the same savings next year. The second item is what we call the premium. We have announced a premium, or what we call it gratification, for the last months of this year, but it's not compared with the premium that we usually pay to our employees, because we have some EBITDA levels, we have some commitment, and we are below from the EBITDA levels that we want to achieve at the beginning of the year as planned in our budget. This means this will be much lower than employees. Fortunately, because that will demonstrate that the company is in good path, and we are having much more higher EBITDA than this.
Regarding your question number two on CapEx. Again, obviously this year we have a very significant cut on CapEx or, if you will, postponement of the CapEx programs that we consider to develop. As it was expressed in the presentation, the CapEx in accounting terms, it will be around EUR 90 million. Over 80% of that refers to CapEx initiatives in the previous years. We are now revising our CapEx plan for next year and the following years. You probably remember that we had a CapEx of over between EUR 150 million and EUR 160 million in 2019, which actually was originally our CapEx plan for 2020 as well.
The cut that we have performed is quite significant, and we are working under a scenario for next year, for the next few years, that we will not go back to the levels of CapEx that we had in 2019 and originally planned for 2020. We believe that the market will be relatively better, but still relatively difficult in the near future. Obviously we need to do more than what we did this year. It will be somewhere in between what we are going to accomplish this year and the levels that we have been using in the last two years or actually 2019 and planned for 2020.
Regarding your third question on the decrease on uncoated woodfree demand, it is extremely hard to give you a precise answer, namely today under what the news that we are hearing by the minute regarding the situation in France, in Belgium, in Germany with the lockdowns or semi-lockdowns, it's very difficult to anticipate. What we expect still in Europe this year is that by the end of the year, the decrease will be around 10%. In U.S.A., a bit more than 10%. In the world, significantly lower than 10%. We do believe that, for instance, in China, the production is minus 0.9% or minus 1%. The balance in between imports and exports make an apparent consumption that is probably 3% or 4% positive. The world is a bit uneven in terms of evolution of uncoated woodfree demand.
For next year, according to the sources that we typically use, the market analysts of this sector, we are considering that, at least in Europe, we might see an increase in demand of 3%-4%, partially compensating the 10% decrease that we have this year. Again, I am just sharing public figures that everybody can have access to, and it is very difficult to anticipate at this very moment what is going to be the evolution.
Okay. Thank you very much for the answers. Thank you very much.
We have no further questions registered on the line, so I will hand back over to the management team.
Okay. Thank you. We have a few written questions that we received on the platform. I will read them over, and we'll try to answer them one by one. The first question from Jaime Rey from Gaesco is the following: regarding the project in Mozambique, in your results, you said next year you will start to export some wood. Can you provide us with the revenues or the number of tons that you expect for the coming years? I will give the floor to João.
Thank you. I would say this is a little bit early to answer to that. Not yet. As we are still on the process of finalizing both contracts for harvesting and logistics, as well as all the regulatory work, namely in what refers to forest certification, accreditation, chain of custody and EUTR regulations applicable while importing into Europe.
Okay. Thank you, João. The next question is from Laurent Fario. There are two questions. Why not find some synergies and bigger size via merger with Ence? Those companies are small companies in Iberia. Would make a bigger company a more profitable company for investors to look at. I will ask António to answer.
Thank you very much for your question, Laurent. As you can easily understand, we obviously don't comment or give any sort of guidance on any theoretical possible type of M&A activity. Thank you.
Laurent's second question is the following: Does it make sense to make paper in Iberian region when Brazilian is 10 times bigger and far more profitable?
It's a difficult question to answer.
Okay. I'm not sure. It is difficult because we are not sure about what paper grade you are referring to. If you are referring to uncoated woodfree, the installed capacity in Brazil is not 10 times bigger than in Iberia. It is actually relatively equivalent, no matter the population in Brazil is four times bigger than the population in Iberia. Within Iberia, we have several different uncoated woodfree players, and each of them very different from each other. What we can tell you is that Navigator sits very comfortable with its main assets on the first quartile of the cash cost curve of uncoated woodfree paper landed in Europe, including the Brazilian paper that arrives at Europe.
Thank you, Antonio. We have next question also from Gaesco. Regarding the supply paper in Europe, can you provide us with the capacity that has been shut down this year?
There has been no announcement of capacity shut down in Europe this year in uncoated woodfree paper.
Okay. Thank you, João Paulo. The next question comes from Triumph Capital. Why has uncoated woodfree paper recovered faster than the other grades? Was this because it fell further at first, or is there another reason?
That is actually a very good question, and we are very thankful that you have raised that question for us to try to explain the difference in between uncoated woodfree paper and the other grades. Coated woodfree dropped in the world about 20%. Uncoated mechanical dropped about 20%. Coated mechanical dropped over 26%. Why uncoated woodfree dropped much less than that? We do believe this is mainly due to the versatility use of uncoated woodfree. Uncoated woodfree is not only office paper, is clearly beyond office paper. It can be used for printing. It can be used for commercial printing. It can be used for even packaging. It can be used for stationery. It can be used for monthly statements. It can be used for books, for school books, for paint books, for exercise books.
The versatility of uncoated woodfree is actually its greatest protection against the decrease in demand because all the other grades are typically much more focused on one single application, which is not the case of uncoated woodfree.
Thank you, Antonio. We have a couple of questions from Degroof Petercam . One is related to fixed cost, and I believe it has been already answered. The second question is related with working capital. Net working capital was positive in Q2. To what extent is this net working capital inflow normalized over Q3? Should we expect net working capital to unwind in Q4?
Our expectation is to have an improvement in free cash flow in the same level as Q3.
Okay. Peterc am had another question regarding the uses of uncoated woodfree, which I believe Antonio has already answered. Another question also from the group. To what extent have the discounts applied by Navigator hurt the competition? Do you expect to continue gaining market share?
Yes, we do expect to continue to gain market share, but not necessarily because we compete on price. We do expect to gain market share because we compete on value, and obviously we have even, within these very tough moments that we are living, once again, the fact that we have a mill brand of premium-based business proves to show our resilience. Our premium sales continue to represent the far larger majority of our sales, and our mill brands still represent circa 70% of our sales. We do compete on value rather than on price. Obviously, under the specific conditions that we have over these last few months, we thought it was our responsibility to help our distributors to decrease their own stocks, to help our distributors to sell our products into the marketplace. Yes, because of that, some discounts have been granted.
We are now actually beyond that.
Okay. This was the last questions we had on the platform. Thank you very much, ladies and gentlemen. This ends our session for today. Thank you.