Earnings Call: Q3 2020

Oct 29, 2020

Welcome to the Navigators Company Conference Call and Webcast of the 3rd Quarter 9 Months of 2020 Results. Participating in the call today are the following members of the Board, Antonio Frondou, Adrian Silvara, Jean Wei, Le, Ron Paul Divayra, Fernando de Roux and Nuno Sanchez. As usual, we will start with a brief presentation of the main highlights of the period and we will have a Q and 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. Antonio will start with a comment on the main figures recorded in this period. Antonio, please? Good afternoon and thank you for joining us here today in Lisbon in a 20 1 Degrees sunny afternoon. I will start by making an overview on Q3 2020 on Slide 4, 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, and 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. And up until now, we have around we have had around 20 confirmed cases of COVID-nineteen within the company. Fortunately, none of them serious. And 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. So after an estimated contraction of the European and Kotlin 3 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, minus 19% versus minus 31% in Q2. There are 2 important aspects that I would like to emphasize. First, the recovery in demand for incremental fee has been gradual and constant since the lows registered in May. Actually, September registered a fall of just 7%. Secondly, the recovery in the total fee 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 other info evolution in the past months. In terms of formats, the rail businesses, which is more versatile in terms of hand coding free application, has proven to be more resilient. Contrary to the conventional wisdom, sheeted 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. But we actually made a significant destocking and managed to increase volumes by 15% versus Q3 2019 and registered only 5% less volumes than in Q2. Prices, as you know, remained at 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 ANKOLO-three average prices throughout the quarter, even though in a much more contained way. The tissue business raised a solid performance with strong volumes and stable prices. In the context of well 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 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 €56,000,000 So overall, we continue to present a very solid financial situation. So if you go now to Slide 5, we have an overview performance of the 1st 9 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 a more extremely adverse period as what we experienced, Navigator was able to deliver a profit margin over 20%. 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 $170,000,000 of free cash flow at the end of September and using each and all of the possible levers, we have delivered $45,000,000 more than in the same period of 2019. We have maintained a strong balance sheet with net debt standing at $644,000,000 and now our net debt to EBITDA ratio remains at 2.28 times. If we take a look in more detail at the performance evolution of the last 5 quarters on Slide 6, we can see clearly the impact of COVID-nineteen pandemic on Q2 and the rebound initiatives on Q3 2020. Enco to do free volumes recovered 45%, and we were able to record a significant improvement in turnover. Volumes in the pulp and tissue business remained strong. Overall performance is improving in spite of a significant deterioration in pulp and nCo2O3 prices. Paper price declined about 8% against Q3 2019 and over 2% against Q2 2020. Coal prices fell 19% year on year and 6% versus Q2 2020. Even in this backdrop, EBITDA totaled $70,000,000 and operational cash flow approximately $66,000,000 I will now ask Fernando to comment on the EBITDA evolution year on year on Slide 7. Aurelio? Antonio, EBITDA in Q3 was negatively impacted by a decline in pulp and paper prices. Our net pulp prices were affected by the West Sea euro exchange rate evolution over the quarter and better price reflects market pressure as well 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've registered a significant row in and contribute free volumes more than 20 45%, while pulp volume stood slightly below Q2 when we achieved the maximum ROAN sold since 2,009 and tissue increased 5%. As you can see, the positive impact of increase in volume doubled the effect of declining price. Costs evolved positively over the quarter, namely variable costs, wood, chemicals and packaging. This reduction was essentially due to specific consumption optimization and the renunciation of raw materials. When comparing Q2 EBITDA year on year in Slide 8, decline in price is the main negative impact on EBITDA. All of our products suffered a price decline year on year, especially pulp, as we have already mentioned. Paper prices was more resilient, but 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 rates also impact negatively on paper prices. We have to take into consideration that the comparison is hampered by several prices increase in encoderwood free market achieved during 2019, which was actually the highest price since 2003. Tissue price adjusts slightly. In terms of volume, ENCO2O3 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 resistant in function cost. Now looking at the results for the 1st 9 months on Slide 9. EBITDA totaled BRL210 1,000,000 versus BRL300 1,000,000 for the same period last year. In Q1, we reached 88,000,000 in Q2, 52,000,000 and in the Q3, as I stated previously, reached €70,000,000 with a good recovery in terms of volumes, but still feeling the negative impact of low prices. For the 9 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. The decline in prices were partially offset by the sales volume growth in pulp and tissue and also by cost saving. The main factors optimizing variable costs were the cost of external fiber, thanks to falling price for long and shorter fiber and to reduction in specific consumption. In spending on wood, doing particular to lower specific consumption in the beer as well in lower cost 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 the renunciation contracts of raw materials and subsidiary materials. On the fixed cost front, we managed to achieve a reduction of nearly $30,000,000 below the level recorded in the same period in 2019, nearly half of it in corporate functions with positive evolution in personnel costs and function running costs. I will now ask Nuno Sench to give us a few words on the market conditions. Nuno? Thank you, Fernando, and good afternoon. On Slide 11, we have an overview of pulp and paper price evolution over the last 6 years for the main price indexes in Europe, A4B copy and hardwood craft pulp in euros. With market discounts increasing in recent years, prices are probably as low as in the start of the century and in 2,009. Recently, we did devaluation of the U. S. Dollar versus the euro, 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. So, going over to slide 12, we have a brief overview of the pulp market. Up until now over the 1st 8 months of 2020, worldwide post 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 5 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 levels estimated at around 1.7 to 1 point 1,900,000 tons. So indicating that inventories have shifted from producers to buyers. The benchmark of bleached hardwood kraft pulp in dollars per ton remains stable at $6.80 per ton during Q3 the Q3 in Europe, but fell 25% year on year. As I just referred with the recent devaluation of the U. S. Dollar versus euro, prices in euros have declined almost 6 percent during the Q3 versus the Q2, with many pulp producers selling now below marginal costs. During the month of August, softwood pulp traded in Shanghai Futures rallied 10% using a bid afterwards. The softwood price has now increased $30 to $40 per tonne in China. Hardwood is expected to follow 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 and we have already witnessed a number of relevant producers announcing prices 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 dollars per ton favoring softwood substitution. Finally, on the supply side, the pandemic situation has led to maintenance postponements from Q2 to the second half of this year. After some maintenance stoppages in the 3rd quarter, more scheduled stoppages are expecting now in the 4th quarter, impacting around 420,000 tons in Latin America. I will now ask Joao to comment on the paper market. Thank you, Rune. Going to Slide 13 and looking at the plan, performing better than other products, with demand in falling 16% year to date August. This compares with the decline of 19% in coated woodfree and with 22% in mechanical paints. So in Europe, the estimated accumulated reduction of uncoated wood free is 14% year to date August, and in the United States, the figure points to a drop of 21%. But we have seen a gradual and consistent recovery of uncoated woodfree demand during Q3. After the loads 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 USA 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 and Coated Wood Free, some 0,800,000 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 1st 9 months of 2020 fell by roughly 7% versus the same period in 2019, falling around 2% from Q2 to Q3 in 2020. If we turn to Slide 15, it is clear the performance of uncoated woodfree versus other printing and writing grades. Uncoated wood free 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 4 weeks, we have seen that order inflow improved to 96%, once again performing better than other grades. Let's go over to Slide 15 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, plus 45% versus Q2 to 336,000 tons with the 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. This significant sales effort 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 growth in market share against its European competitors up to 2 points versus 2019. With its machine running at full capacity since July, the company managed carefully its stock and ended the Q3 with a level much the same as in previous year, representing around half the stock of its European rivals. Paper turned in Q3 stood at €238,000,000 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 peaks and that the average price outside Europe was brought down by exchange rate trends and the sharp downturn in prices in those markets. So now to comment on the pulp performance, I hand over to Nudu again. Thank you, Joe. Our market sales volume year to date September reached 297,000 tons. And this was actually the highest level since 2010, after we started the 4th paper machine in Stobo and the site became fully integrated into paper. In the Q3, even after we started operations in all of our paper machines, so with less available pulp for the market, we managed to sell 104,000 tons of pulp, destocking and taking advantage of market opportunities in tissue and packaging. Sales towards Novo reached €117,500,000 in the 1st 9 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 1st 9 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-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 to a large extent at the ORECA channels, 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. 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 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 9 months last year, 44% in 2019 2020 versus 35% in 2019. The group recorded an increase in tissue turnover of approximately 5% to €106,700,000 The sales mix improved in relation to the same period in 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 the Avero and Villas Veladero mills and we managed to improve reduce our fixed costs. We are pleased to acknowledge that 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 sustainably. I will now hand over to Adriano, who will comment on the CapEx side. Thank you, On Slide 17, we have an overview of the CapEx in the 1st 9 months. As previously announced, Navigator decides on a substantial review of its CapEx plan for 2020. From investments initially estimated at 158,000,000 dollars to approximately $70,000,000 Considered on a cash flow basis, this figure was further revised down to approximately €55,000,000 It should be noted that the CapEx that we will report on the accounting basis is expected to stand at approximately 19 As a result, capital expenditure report that this 1st 9 months was at 70,000,000. The comparable amount in the same period in 2019 was R119 $1,000,000 This amount includes a figure of around R47 million dollars in maintenance, efficiency improvements and asset replacement and $23,000,000 dollars in several environmental projects. More than 80% of investment spending in 2020 is related to maintenance and projects that start in previous years. That we could not stop. On the major investment that starts in the previous year is our biomass water at Sierra de Fosse included in environmental projects. I will ask Joaolet to do the next comments including these biomass boiler projects. Thank you, Adrian. 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 2,035. This project, which represents a global CapEx of €55,000,000 will allow to reduce CO2 emissions by 20% for Navigator as a whole and the Figueredo de Forged 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 2,035 was launched last year and has 4 main goals. First, to reduce use of fossil fuel emissions with the implementation of clearer technologies. Second, to reduce the reduction of specific energy consumption less 10% from 2015 until 2025 3rd, achieve 100 percent of electrical energy production from renewable sources and 4th, carbon offsetting of unavoidable carbon emissions. Energy and climate is one of the 9 material topics defined by Navigator in the sustainability agenda for the period 2025. I will ask Fernando to make the next comments. Fernando, please. Thank you, Joao. On Slide 19, we have an overview of the free cash flow evolution, which was particularly strong in the period and reached €170,000,000 This compares to a free cash flow of €125,000,000 in the 1st 9 months of 20 €125,000,000 in the 1st 9 months of 2019. It should be recalled that the year starts with free cash flow generation of EUR15 1,000,000 in the Q1 and the strong growth was recorded after the early impact of the P and L, EUR99 1,000,000 in the 2nd quarter $56,000,000 in the 3rd quarter. 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 payments periods was coordinated with the provision of financial solutions to support the liquidity of our partners. There was also a reduction in stocks in regards 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. And as you can see on Slide 20, at the end of September, net debt totaled €644,000,000 excluding the impact of IFRS 16, representing a decline of around €70,000,000 over year end 2019 €132,000,000 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 profile is referred to on the next slide. Our short term liquidity was increased to EUR 345,000,000 by the end of September. We have already repaid some of the short term lines contracted in March in April and during the Q3. The group contracts several warring 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 date of the existing debt lowering costs and financial costs. This increase and prolongs the group's liquidity situation has been appropriated in present context. Our average cost of debt remains very competitive at 1.62% and most of our debt at a fixed rate. We believe that Navigator maintains a strong financial spending. I will now hand back to Antonio, who will wrap up. Thank you, Florent. Thank you very much. So going to Slide 33, we have an overview of the main developments occurring in Q3. With the reopening of economies and the gradual recovery in demand for ancotiltripepper, Navigator experienced a significant improvement in its business during the Q3. By quickly adapting to market changes and consequently setting 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 loose action to control costs. Unfortunately, both pulp and paper prices remained under pressure and continue to impact negatively on our margins. Still, we recorded a significant improvement results over the previous quarter, increasing EBITDA by 36% and continue 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-nineteen pandemic. As mentioned in the beginning, 1st 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. Also, 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 4 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 €345,000,000 in cash and cash equivalents and have additional unused credit facilities of €95,000,000 We have already started to renegotiate the debt maturing in 2021, almost 80% of our structural debt, and we have managed to do that with while gaining flexibility as the new facilities are coordinated with 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 €55,000,000 The CapEx that will be reported on an accounting basis is expected to stand at approximately €90,000,000 Of this amount, we registered almost €70,000,000 of CapEx in the 1st 9 months, but over 80% those refers to maintenance and projects began in the previous years. We have also achieved a significant reduction in fixed costs of circa $30,000,000 versus the 1st 9 months of last year, proving that we are committed to strong cost optimization. We also achieved a very meaningful reduction in our variable costs of around $44,000,000 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 subsidy materials. Finally, a few words on the outlook for the rest of the year. We saw a progressive recovery in Gamecoder 3 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 organic 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, but 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 and 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 US150 dollars per ton may lead to positive pressure on short fiber prices and also 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 improvement in both prices in the short term. In the tissue business, after positive performance in the 1st 9 months, there is some concern about the possible contraction in the end, especially in the away from home segment. For the Q4, some days of maintenance stoppages are scheduled in the pulp mills 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 Zenco 2 to 3 product mix continues to present a strong versatility and a high resilience when compared to other printing and writing rights. Thank you. And the first question we have from the phone lines comes from Joel Pinto of JV Capital. Sir, 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? And what can we expect on this front in the short term? The second one, this difference that you mentioned between CapEx 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 first question, regarding UWS paper prices in Europe, And do you expect them to fall more, to correct more in the near future? Or you believe we are reaching support levels? And finally, if I may extend this question to pulp prices. We understand that the spread is high versus long fibers. However, what are triggers that could leave pulp prices upwards in the short run-in your view? Thank you. Joao, thank you very much for your questions. So because there were a number questions, I will just go over them to see if we have everything taking if we have a new note of everything. So the first question is regarding dividends. The second would be around the CapEx and the cash the possible cash outflow for CapEx at the beginning of 2021 or for 2021. The accounting and cash flow CapEx in 2020. Yes. Okay. And so the third one is regarding the uncoated woodfree prices and whether or not we see still a downward trend in Q4? Yes. Correct? Yes. And the last one is regarding pulp prices in what would be possible lever for increasing prices in the short term? Yes, pulp triggers that could lead to higher pulp prices. Okay. Thank you. I will now hand over to Antonio. Thank you, Juan, for your questions. I will give you some insight for the first question, then Fernando will answer the second, Juan Pablo III and Nuno IV, and if necessary, I will wrap up again. So regarding dividend, you probably remember from our previous discussions that amidst the COVID-nineteen pandemic, we have suspended our dividends distribution in May for the sake of prudence and then also after we use the layoff measures associated with the production stoppage of some of our paper machines. However, we have said that we have said previously that even under the most adverse scenarios regarding the impact of the pandemic, the company should maintain the ability to distribute reserves. After these 9 months of activity, and as you can saw from the Q3 results just published, Navigator confirms that he is in a comfortable financial position to adequately remunerate its shareholders. An initial distribution of results 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 on 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. And what concerns the CapEx? The answer is easy. 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 prices in uncoated woodfree prices in Europe, we don't expect the prices to go down more. So there was even an announcement last week of a price increase by a company. So regarding pulp prices, we see several factors that should help lead to a recovery in the hardwood pulp prices. So first, on the demand side, as you know, the Chinese economy is growing and recovering strongly. And 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 dollars Historically, it's been around $90, $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 first half of the year. Also still on the supply side, prices are, in fact, too low and some pulp producers are operating with negative cash margins. So sooner or later, they will stop producing with negative crush margins or prices will go up. And last, the U. S. Dollar devaluation over the last few months will also push for a correction in prices. So 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 UWS order prices. The price hike that you mentioned, can you say the amount? Is that in Europe? Thank you. Thank you. No, we cannot explain the amount, but we can say it was significant. And as it was mentioned, it was very mild. We are comparing the end of Q2, beginning of Q3 with September was very, very mild in Europe, but was significant outside Europe. But no, we cannot make specific comments on the quantities, on the amounts. Thank you. The next question comes from Carlos Jesus of Saisobanca. 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's easy to understand, what we have done these 1st 9 months of the year was extremely tough on costs. Obviously, in some way helped by the full environment that we have around us. So we are going to fight to make sure that the 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. Unable to accept visits. And I must say that we were recognized to be the very first European papermaker on the street from early June visiting customers. But obviously, we want to 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 Celadas from ASI Independence Research. So I have three questions. First one is also related with fixed costs. I think that year to date, you saved €30,000,000 as far as you mentioned on the presentation. But I think that the target was higher than this, so €40,000,000, €45,000,000 So if you can elaborate on this. And in this case, fixed costs, should we understand as permanent or it should be included in traveling costs, as you mentioned? So just to know if this kind of fixed costs will be the reduction will be permanent or not. The second question is related with capital spending for next year. If you can share with us what are your intentions? And the last question is related with something that everyone is talking about, the permanent decrease on the uncoated wood free demand. So you mentioned that 7% minus 17% demand in September. So if you can share with us if this 7% is something that will be a reference levels or if you believe that the figures could be even lower than this one or higher, so 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. So 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. So yes, indeed, we have fixed a very, very, very ambitious target for the full year, And we are not yet there in spite of the €30,000,000 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. And we have used and 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. So we took as well a significant amount of variable cost out of the equation in the 1st 9 months of the year for 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 40 €4,000,000 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, and 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. So some of the costs that I gave the example of travel and accommodation for our sales team, 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. Florent, do you want to add something? The first thing is our goal, EUR46 1,000,000 for the year. This means that at the end of Q3, we have EUR30 1,000,000 and we are ahead EUR10 1,000,000 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 beginning, we know that the Q4 will be the challenge one. Nevertheless, we are 10,000,000 a year 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. 1, it's we have applied for layoff. On the layoff, we have some savings that we will 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 that this will be much lower than the entire year. There are some amounts that we cannot maintain and fortunately because that will demonstrate that the company is in good path and we are having much more higher EBITDA than this. On CapEx or if you will postponement of CapEx programs that we consider to develop. As was expressed in the presentation, the CapEx in accounting terms, it will be around 90,000,000 dollars 80% of that over 80% of that refers to CapEx initiatives in the previous years. So we are now revising our CapEx plan for next year and the following years. You probably remember, we had a CapEx of over €150,000,000 between €150,000,000 160,000,000 dollars in 2019, which actually was originally our CapEx plan for 2020 as well. So the CapEx 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 because we believe that the market will be relatively better, but still relatively difficult in the near future. But obviously, we need to do more than what we did this year. So it will be somewhere in between what we are going to accomplish this year and the level that we have been using in the last 2 years or actually 2019 and well for 2020. Regarding your third question on the decrease on L'Oreal 2Q3 demand, it's extremely hard to give you a precise answer, namely today and what the news that we are hearing by the minute regarding the situation in France, in Belgium, in Germany with the lock downs or semi lock downs. It's very difficult to anticipate. But what we expect still in Europe this year is that by the end of the year, the decrease will be around 10%, in USA, a bit more than 10%, but in the world significantly lower than 10%. We do believe that, for instance, in China, the production is minus 0.9 percent or -1 percent, but the balance in between imports and exports make an apparent consumption that is probably 3% or 4% positive. So the world is a bit uneven in terms of evolution of an opportunity demand. For next year, according to the sources that we typically use the analysts the market analysts of this sector, we are considering that at least in Europe we might see an increase in demand of 3% to 4%, so compensating the partially compensating the 10% decrease that we have this year. But again, I'm just sharing public figures that everybody can have access to. And it's very, 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, and I will read them over and we'll try to answer them 1 by 1. So the first question from Jaume Reis from GAEESSCO 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 Ghislain. Thank you. I would say this is a little bit early to answer to that, so 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. Thank you, Joao. So the next question is from Laurent Favio. There are two questions. Why not find some synergies and bigger size via merger with NCE? Those companies are small companies in our area. Would make a bigger company and more profitable company for investors to look at. I will ask Antonio to answer. Andre. Thank you very much for your question, Jorge. As you can easily understand, we obviously don't comment or give any sort of guidance on any theoretical possible type of 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, but okay. So I'm not sure. It's difficult because we are not sure about what paper grade you are referring to. But if we are referring to and go to in Brazil is 4x bigger than the population in Iberia. And within Iberia, we have several different and complementary players, and each of them very different from each other. What we can tell is that Navigator sits very comfortably with its main assets on the 1st quartile of the cash cost curve of MCO2 Free Paper landed in Europe, including the Brazilian paper that arrives into Europe. Thank you, Antonio. We have the next question also from Raisco. 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 shutdown in Europe this year in uncoated wood free paper. Okay. Thank you, Jean Paul. The next question comes from Triumph Capital. Why has uncoated wood free paper recovered faster than the other grades? Was this because it fell further at first or is there another reason? This 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 m coated woodfree paper and the other grades. And coated woodfree dropped in the world about 20%. And Coated Mechanical dropped about 20%. Coated Mechanical dropped over 26%. So why mCo2O3 dropped much less than that? We do believe this is mainly due to the versatility used of Enco 2. Enco 2 is not only office paper, it's 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 memory statements. So the first it can be used for books, for school books, for paint books, for exercise books. So the versatility of ANCO-twenty three is actually its greatest protection against the decreasing demand because all the other grades are typically much more focused on one single application, which is not the case of Ancoto 2.3. Thank you, Antonio. So we have a question from a couple of questions from the group Petercam. One is related to fixed costs, and I believe it has been already answered. The second question is related with working capital. So net working capital was positively impacted in it 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. Q3. Okay. Peter Chen had another question regarding the uses of Vanco to Dupuy, which I believe Antonio has already answered. Finally, another question also from the group. To what extent have the discounts applied by Navigator hurt the competition? 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 this very tough moments that we are leaving. Once again, the fact that we have a mill branded premium based business proves to show our resilience. Our premium sales continue to represent a far larger majority of our sales and our mill brands still represent circa 70% of our sales. So 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. And yes, because of that, some discounts have been granted, but we are now actually beyond that. Okay. This was the last questions we had on the platform. So thank you very much, ladies and gentlemen. This ends our session for today. Thank you.