Good afternoon, ladies and gentlemen. Welcome to The Navigator Company Q2 and first half 2018 earnings conference call. We will start as usual with a presentation on our results. Our CEO, Diogo da Silveira, will make some brief remarks on the main achievements of the period, and will be followed by pulp and paper market comments from António Redondo. The main financial figures will be addressed by Fernando Araújo, and we will finish with a Q&A session where the audience can ask questions to the executive committee present here today. The presentation can be accessed through the links available on the website, and questions may also be addressed through the webcast platform. I will now hand over to Diogo. Please.
Good afternoon, and thank you for joining us today. I am very happy to have the opportunity to share with you some key messages regarding our results. Let's start with the presentation and go over to slide number three. The company's results for the first half of 2018 reflect the considerable improvement in pulp and paper sales prices, which were partially offset by a reduction in sales volume. The reduction in volume sold was due to production stoppages, mainly in pulp, which did not occur in the first half of 2017. This happened throughout the first semester, impacting both the first and the second quarter. Specifically regarding the second quarter, maintenance stoppages occurred at the Figueira da Foz mill in April, which was prolonged to complete work on the capacity expansion project underway at that time.
The length of these stoppages and the need to build up stocks in the previous months had quite a severe limiting effect on the quantities of pulp available for sale by the group during the first half. Paper volumes were also impacted by some production stoppages, mainly in the Figueira da Foz mill. Despite these operational issues, the group achieved a record EBITDA figure of EUR 226 million for this first half, and also a record EUR 150 million EBITDA level in the quarter. Even considering the adjusted EBITDA figures net of the impact coming from the sale of the pellets business, those figures are record figures. Another key aspect I would like to highlight is that alongside the improvement of pulp and paper prices, the group continued with its cost reduction and efficiency improvement program.
In the context of increased costs of raw materials, mainly chemicals and fibers, both short and long, as well as transportation, we developed new initiatives that did tackle those issues as well as many others, and therefore achieved an estimated positive impact in EBITDA through this program of EUR 9.2 million in this first half. This attitude of constantly looking for areas to improve and become more efficient is even more relevant in the context of growth as the one we are currently experiencing with the pulp expansion project starting up and the new tissue mill almost concluded. As we mentioned during the last conference call, we started to operate the first converting line in Cacia last May, and expect to be producing tissue rolls by the end of August.
These development projects represent, of course, a significant amount of CapEx, actually around EUR 36 million in this quarter, but also increased overhead and consequently, additional personal costs. We need to permanently address efficiency measures throughout the entire group in a systematic and coordinated way. Finally, a word on the EUR 200 million dividend payment made to our shareholders in June. After this payment, our net debt to EBITDA ratio remained well below two times, actually standing at 1.7. The return on capital employed, our ROCE, at the end of the quarter was at 17.9%, quite an improvement over the previous first quarter. I will now ask António to comment on the pulp and paper market. António, please.
Thank you, Diogo. Going to slide four, we can see that continuing the upwards trend initiated at the end of 2016, prices for our pulp increased an impressive 39% in U.S. dollars and 25% in EUR in the first half of the year when compared with the same period of 2017. As a result, hardwood pulp prices in Europe in the first half of 2018 were on average USD 290 higher than in H1 last year, and USD 117 above the second half of last year. At the end of the semester, list price for hardwood pulp in Europe was USD 1,050, actually flat for the last six to seven weeks, without parallel since 2010. Moving now to slide number five, we have a view of the estimated supply-demand balance in the pulp market for 2018. We have seen throughout the semester conditions that support this view.
During the first five months of 2018, the global hardwood market pulp demand grew 4.3% year-on-year, driven mainly by eucalyptus with +4.5% year-on-year. China demand for hardwood, representing more than one third of global demand for this fiber, increased close to 8% year to date May. Worth notice as well, the very good development of hardwood demand in Europe during the same period. Softwood pulp demand levels were similar to the same period in 2017 with +0.1% year-on-year, despite showing a recent positive trend with BSKP growing close to 2% in May. During the first semester, we estimate that more than 1.2 million tons of hardwood production was lost due either to planned or unplanned downtime. Of this, we believe circa 300,000 tons was due to a trucker strike in Latin America, which nearly paralyzed one of the leading countries.
Producers were obliged to slow or stop their pulp lines at the end of May as a consequence of the strike. In softwood, the amount of downtime was, we estimate, up to 500,000 tons in the first half of the year. If estimated downtimes are deducted from the practical maximum capacity of pulp lines, both hardwood and softwood pulp producers operated at 93% of available capacity, a similar rate than in 2017. Going now please to slide number six, when speaking about paper, figures from PPPC show that uncoated woodfree papers continue to be the best performing printing and writing grade globally, even though with a worse than usual negative trend of -1% evolution on demand year to date May on a year-on-year basis. Still, it's the lowest percentage decline among printing and writing grades.
If we now can move to slide seven, we summarize what we believe are the specific conditions of the uncoated woodfree market. We can say the global market conditions are improving, even though with some differences among regions. Europe, our main regional market, experienced some cool down in demand for office papers during the first six months of the year, which we attribute mainly to some cautious stocking from buyers and also less working days than in the same period last year. However, figures from June already show a clear improvement. Despite this apparent consumption decline, mills operated at high levels, 93% in H1 and actually 97% in June, and carried the highest order book since the peak in 2010, only second to the same period in 2017.
As you can see on slide eight, producers managed to pass on price increases during H1 in the beginning of 2018. Again in late March and early April, which allow for a year-on-year price rise of 6%. PIX improved 49 EUR per ton during the first half of 2018 when comparing to the first half of 2017. Back to you, Diogo.
Thank you. Following on António's words, I would like to go to slide nine, where we have a long trend for pulp and paper prices, maybe for the last 10 years, where there's a couple of thoughts I would like to share regarding these trends. The graphic shows first the high volatility of pulp versus the stability of paper over the past 10 years. This is true for upward movements with steep increases in pulp not followed with the same amplitude by paper prices, as well as for downward movements where sharp drops in pulp prices do not have a corresponding match in paper. Currently, pulp prices are clearly above past trends, while paper prices remain below. This amplifies the profitability differential between pulp and paper. It's very clear when looking at the current uncoated woodfree and hardwood pulp reference market price differential.
For the first time ever, pulp reference price is above the uncoated woodfree reference price. This is something that we have never seen before in the industry and seems difficult to sustain. We want to reiterate that we believe in the paper business, in our integrated paper business model, which always adds value. Always protects our returns from the volatility of market pulp. Going over to slide 10, with the figures for the paper business. We sold 756,000 tons of paper in this first half, recording a 2% year-on-year decline on volume. As said before, this was mainly due to operational stoppages as we had in our paper mills, which translated into roughly two additional lost days of production when compared to the first half of 2017.
Still, we managed to improve our product mix with a higher share of premium products, gaining seven percentage points year-on-year, as well as new brands with an additional eight percentage points versus 2017. We also led three price increases in Europe, as well as several increases in international markets and in the U.S. These actions translated into a net increase of our paper price of 6% year-on-year, even considering the negative impact that the exchange rates, and specifically the US dollar versus the EUR, had on our profitability. Our pulp business on slide 11 had a more considerable impact of the production stoppages that did occur during the first and second quarter. Our pulp mills lost a significant amount of days due to the maintenance downtime and the expansion project at Figueira da Foz, which actually corresponded to less 19 days of production and roughly 68,000 tons sold.
That means 38% volume decrease year-on-year, the first semester of 2017, having been our record semester for pulp. This reduction in volume was partially offset by the sales price increase, with Navigator's average sales price improving 27% year-on-year. Our pulp sales were focused on our regular clients and a greater weight of sales directed at the higher contribution segments such as decor and special papers who moved from 52% to 80%. Going now to the tissue business on slide 12, where we managed to increase global volume sold by 2% year-on-year, with a growth of 17% in sales of converted products. The reduced weight of reels and the increased therefore percentage of finished products allowed for an improvement in our average selling price. That, together with the price rise we did also implement, translated into a growth of 7.6% in the average tissue price.
Nevertheless, the higher average tissue price is still not enough to absorb the significant increase in production costs and especially the price of pulp, as said before, both hardwood and softwood, as well as chemicals. As for the new tissue mill, we saw the startup of the first new converting line in Cacia in May. Actually a couple of weeks ahead of schedule. We now expect to have the reels production line finished and to start production in roughly one month, late August. We have made a significant commercial effort in the last months to place the new tissue production and have been increasing our presence in Spain and in other European countries. We have also significantly increased the weight of the away-from-home segment, where we are traditionally stronger.
In this context, our EBITDA in the first half for the entire group totaled EUR 226 million, comparing to EUR 198 million in the first half of 2017, as you can see on slide 13. This increase was due mainly to the significant price improvement of pulp and paper prices. There was also a positive impact of the sale of the pellets business referred previously that net of costs and adjustments totaled EUR 13 million. You should note that this represents a positive adjustment in relation to the figure of EUR 9.4 million reported at the end of the first quarter. That figure over assessed costs, some of which happily failed to materialize. First half EBITDA without this pellets effect would have been EUR 213 million. Therefore, the EBITDA over sales margins stood at 27.7%. If looked at net of the pellets business, 26%, which compare to 24% in 2017.
Volumes and costs had a negative impact on EBITDA. Cost of chemicals and softwood have continued to increase, with logistics also evolving negatively due clearly to higher Brent prices. On the positive side, a better mix in terms of origins has allowed us to register an improvement in wood costs. In fixed costs, payroll continued to show the upward trend observed in the first quarter as a clear result of our workforce expansion, thanks to the new tissue project in Cacia. The rejuvenation program underway and the increase in performance bonuses related to the improved results registered by the group. We experienced an increase in these cost items that would have had a greater negative impact if we hadn't been working on the cost reduction program that we explain on the next slide.
As you know by now, our cost reduction program is called M Squared, and the program achieved a positive impact of approximately EUR 9.2 million on EBITDA year-on-year. Roughly 118 new initiatives have been launched throughout the company since the start of the year to cut costs, with around 85 of those achieving a positive impact. To give you some examples, one of the most impactful initiative is centered on cutting specific consumption of softwood in our Figueira da Foz industrial complex with an impact of around EUR 1 million, involving a system that had improved control of fiber consumption per type of product. Another initiative with also an impact of around EUR 1 million has to do with optimization of our logistics in sea transport to Europe and international markets.
We launched a project for greater efficiency in the paper machine production and planning, improving the technical specifications of end products and therefore reducing unit production costs. Besides this program, as you know, we've been renegotiating as every year the power and the natural gas contracts. This year, those resulted in avoided costs versus market prices of around EUR 40 million. I will now ask Fernando to comment on the next slides.
Thank you, Diogo. Going to slide 15, we have some detail on the evolution of our free cash flow, which stood at EUR 153 million, a very strong figure for the first half. Free cash flow was positively impacted by a strong operation cash flow, as well as an inflow from the sale of the pellets business, nearly EUR 70 million. On the other way, negatively affected by capital expenditure over the period of EUR 77 million. With regard to the working capital, the group record a moderate reduction in the amount invest during the first half. Crucial to this was the very favorable performance in balance received payable to the state as a result of substantial VAT reimbursements obtained during the period.
This evolution had a very favorable impact, nearly EUR 50 million in the period, which more than offset the combined effect of increasing inventories, stocks of finished goods above all, and of client and supplier accounts. At the end of quarter two 2018, as you can see on slide 16, the group net debt stood at EUR 740 million at a similar level of debt recorded a year ago at the end of Q2 2017. As we have just seen, the substantial amount of free cash flow generated in the period has allowed the group to pay dividends of EUR 200 million in June while pursuing its expansion plan of growing in pulp and tissue and investing EUR 77 million in CapEx. Net debt to EBITDA stands at 1.7, which we believe represents a peak for this year and that we should be able to reverse it by year-end.
Going now to slide 17. Navigator record a finance loss of EUR 11.4 million, up from a loss of EUR 8.3 million. This increase was due essentially to a non-recurrent factor associated with the disposal of the pellets business of EUR 3.3 million. Related to the difference between the nominal value and the present value of the outstanding receivable amount regarding the sale of the telecom business. We registered a positive impact of currency hedging and exchange rate that was offset by the negative impact of liquidity mentioned. Finally, our CapEx is detailed on slide 18. The group record capital expenditure of EUR 77 million in the first half, with EUR 49 million in the second quarter versus EUR 39 million in the first quarter. The tissue project in Cacia represents an investment of EUR 36.5 million and capacity expansion in Figueira da Foz, a figure of around EUR 9.3 million.
Capital expenditure into regular pulp and paper business totaling around EUR 30.8 million. The CapEx in the next semester should accelerate, mainly associated with the Figueira da Foz and Cacia tissue project, as we maintain our guidance of approximately EUR 190 million overall CapEx for 2018. Back to you, Diogo.
Thank you, Fernando. Maybe to finish, just a few words on our outlook for 2018 as per slide 19. The outlook for the pulp sector remains positive over the course of this first half of 2018. We've still upwards pressures on prices throughout the period, and we believe this trend should continue in the near future. However, with the current high pulp price level, new expansion projects may accelerate. As we have just seen today with the announcement restart of the MAPA project from Arauco, which will bring a new 1.5 million of BHKP line in Chile, planned to start operating in 2021. In the tissue markets, producers also remain under strong pressure from high pulp prices.
Despite the upward trend in tissue prices over the period, manufacturers as a whole have not yet managed to reflect the entire increase of the pulp cost factor in the end price of their products. Navigator will implement further price rises. In parallel, production of reels is planned to start up in Cacia during the third quarter, allowing us to double our production capacity over time. Strong sales performance in recent months allow us to look forward to the new output as being successfully accepted by our clients. In the uncoated woodfree paper business, the order book is full, and the group took the lead during the first half with several price increases in Europe, in the U.S. market, and in international markets.
Navigator announced to its clients in May a price rise, mainly in Europe, taking effect in July 1st, and mentioned that a further hike of a similar size is foreseen for October. Externally, the potential consequences of increased trading tensions and the impact on exchange rates remain a cause of concern. Our main challenge at Navigator will be to normalize volumes and to manage the startup of the tissue reel line at Cacia. On slide 20, we have a very brief update on that project. Just to again state that the converting line had started production in May, two weeks ahead of schedule. That reel's production almost moved already in July and will start up in August. As said, we've been working quite actively on the commercial front, reinforcing our teams and progressing successfully in our client book building.
We're expanding new clients, not only in Portugal and Spain, but as well in France and in the U.K. mainly. Finally, on slide 21, just the completion and startup of our P03 project in Figueira da Foz that has been achieved. I would like to stress that besides increasing capacity, this project also entailed a series of important environmental improvements with quite an impact on our Figueira da Foz industrial complex. Very relevant, of course, total CapEx, which was kept on budget at EUR 81.5 million and time for completion was April. Thank you.
Thank you, Diogo. This concludes our comments on results. We are now ready for the Q&A session.
Ladies and gentlemen, the Q&A session starts now. If you wish to ask a question, please dial 01 on your telephone keypad or use the webcast platform for written questions. There will be a short silence while questions are being registered. Thank you. The first question comes from João Pinto from JB Capital Markets. Please go ahead.
Hi, everyone. Thanks for taking my question. Three, if I might. The first one on pulp volumes. Do you believe that you'll be able to accelerate pulp production and meet last year's level? My second question is on tissue prices. You managed to implement a price increase. Do you feel that the industry is starting to be successful in passing pulp cost pressures to retailers? My last question is on pulp prices outlook. We know that prices are mostly driven by supply. Still, the recent depreciation of yuan versus USD can be a cause of concern for pulp producers. Given the importance of China for global pulp demand, such a Forex movement could impact their purchasing power or demand is too inelastic to react to that movement. That's all. Thank you.
António Redondo will address the two questions on pulp. The volumes you initially mentioned were your first question, as well as the last one on the prices outlook. Then I'll take the question on tissue. Maybe I can start with the tissue so that António gets ready for the pulp volume and prices. One of the big differences between tissue and uncoated from a price pressure viewpoint is the following. All tissue producers are non-pulp integrated. Therefore, the pressure due to the pulp prices is even higher in tissue than it is in uncoated woodfree, where maybe 30% only are not integrated. That is a very positive factor for feeling obliged to pass on price increases. On the contrary, on the negative side, let's say, roughly 70% of the market is a consumer market.
That's to say, goes through the very large retailing stores such as Carrefour, Mercadona, or Continente here in Portugal, who have such a power that price increases are very tough to obtain. We don't have yet many years in this market to be able to derive rules on this. What we can say is that it took us longer in tissue to pass on price increases, but we are now succeeding. We intend to pass on more because we are actually so far also non-integrated. As you know, in our Vila Real and Ourense plants, we do acquire the pulp from the pulp producers. It will be very different when we will be supplying out of this year, but currently we feel that pressure. It takes more time to be successful in a nutshell, but we have also been able to manage and to do so.
I hand over now to António for the pulp volume and price outlook questions.
Thank you for your question. Starting with the pulp volume. Indeed, we expect on the second half of the year to be at the level of last year, the second half of last year, which implies a recovery from the first half of this year. This is because we see a quite strong demand for pulp. We see a very healthy demand both in Europe and outside Europe. This links to your second question. Besides supply and demand, obviously as you know, exchange rate plays a very important role on price definition. The evolution of yuan or Forex might have an impact on the evolution.
However, we still see the market quite tight, and the level of interest we are seeing even outside Europe for our own pulp is a good indicator that most likely supply and demand balance will be more relevant than exchange rate evolution going forward.
Thank you. That was very clear.
Thank you. The next question comes from Nuno Estácio from Haitong Bank. Go ahead.
Hi. Good afternoon, everyone. Couple of questions. The first one is, you told us about the Figueira da Foz investments. Can you now give us an idea of what level of cash costs do you think you have been able to reduce, like in percentage terms or something, following this investment? The second question would be, in terms of the paper prices in the uncoated woodfree, you have been announcing several price increases in the last few months. My question is, how much of these increases are yet to be reflected in the prices that we saw in second quarter 2018? Because this takes time and the price increases are not immediate, how much are we still going to see from price increases that were already announced? Third question would be in terms of future price increases.
What would be the reaction from clients, and how are non-integrated paper producers feeling this open price environment? Is it going to be more paper price increases? Do you think this is something that is going to happen, yes or yes? You are saying that the elasticity of demand is proving difficult to increase prices more? The final question related to what João was asking. In terms of the pulp prices, you have always had probably a more cautious approach to pulp prices. With these limitations on recovered paper in China and lack of new supply, there really seems to be a very strong imbalance between demand and supply. How high do you think pulp prices can go until there is an effect in demand? What is your opinion about that? Thank you.
Okay. Prices questions, both paper, how much is going to be still reflected and opportunities for further price increases and the view on the imbalance on the hardwood pulp will be addressed by António. On the cash cost impact of the investments we made in pulp, I understand that was your first question. There is not a tremendous impact on cash costs. This investment was mainly to, one, increase capacity, and two, improve environmental impacts. Of course, in that sense it was marginal. It does not move in a significant way, to be fair, our cash cost position. On top, the marginal wood we have to supply is also at a marginal cost, which in this case is negative marginal cost, in the sense that we have mostly to import, as you know.
Given that today there's already not enough wood in Portugal to supply all our needs. No significant impact on cash costs, I would say. I hand over to António for the price issues.
On the paper and pulp paper prices, actually, your question needs to be split in several different questions. First of all, regarding what has happened so far and the speed of reaction on the price increases. If we look to our pure price increase, our pure price increase was 9%-10% year-on-year. The issue is that the exchange rate obviously takes a good part of that price increases. The second comment I'd like to make is regarding what we see and what market indexes reflect. We see a much quicker evolution of prices in our accounts than what market indexes reflect. Market indexes typically have a lag vis-à-vis reality. Our policy is very simple. Whenever we set a price increase, we set the dates, and all prices from that date onwards, with no exceptions, are changed.
The last comment that you were referring to is about elasticity of demand and capability to absorption of further paper prices. It's obviously very difficult to answer quantitatively. As higher we go, more difficulties to pass new price increases. Having said that, we need to look to prices in a very long-term perspective. If we look in a very long-term perspective, and we go back to 2007, 2006, 2004, and we update prices with inflation until today, we still see that today, no matter those price increases and uncoated woodfree prices in Europe are still in real terms, much more competitive than if they were increased by inflation year-on-year.
My perception, both based on price evolution and on demand, is that yes, the market will be ready to accept new paper price increases, and this will be very much dependent not only on supply and demand, but also on the pulp costs. Now I will move to your comment on pulp costs. I think we share the same view that you have inferred in your question. Until 2021, as per yesterday, until end of first half of 2021, second quarter, there is no new greenfield pulp capacity. The market demands pulp each and every year. There is a continuous growth for pulp demand that actually we don't see slowing down. We see increasing this year better than last year. Very easily, by the time of the startup of the new greenfield project announced yesterday, the increased demand will be accumulated clearly above 3 million tons.
There is no supply to match this increased demand by 2021. I think we can share your view that we believe that the market is going to be very tight. Already now it's very tight, but will go further. The tightness will further increase until 2021 at best. Let's not forget that by the time the new project, I'm referring to starts up, this project will be less than half of the actual greater demand during this three years period.
Do you think that, okay, if pulp prices keep going up by $100 or $150 a ton per year, at a certain point, this puts such a huge pressure that either all the paper prices go up, the tissue and all that, or there's a huge squeeze in the companies in terms of the margins that are not integrated, especially in China. Is the market able to keep growing in terms of the demand for pulp at 1 million ton or 1.2 million tons and 1.5 million tons a year if prices increase that way? Or that's the million-dollar question you also have no clue?
It would be very difficult to add more to what I've just said. Obviously with the pressure on margins that we see in Q3 and were expressed by Diogo on tissue, is more than likely that paper prices need to keep on increasing to absorb at least part of the already increased pulp prices.
It's highly unlikely that there will be a significant elasticity, especially in the tissue?
Can you repeat the last question on the tissue, please?
The logic is, will these price increases that will end up affecting the consumer affect the global volume sold of tissue? Will this block the increase that we are seeing in terms of demand for tissue? Obviously, in Europe and U.S., I don't think, but more in emerging markets.
No, we don't think the consumer has any impact on making it more difficult. Price increases, which are minimum. No, not at all. The issue here has been much more the retailers. They put pressure, as you know, on this category of product, like in others, compared to themselves. That you go to them, they say, "Oh, I'll increase my price when I'll see the other retailer increase his price." Everybody says that. It's complex. We don't anticipate consumer demand to be impacted by those small price variations. If we would be talking double-digit numbers, maybe. At this level, we don't anticipate that, no.
Okay. Thank you.
Thank you. The next question comes from José Rito from CaixaBank. Please go ahead.
Yes, good afternoon. Two quick questions on when on the net debt evolution. Net debt remained flat year-on-year in H1. How do you see this evolving until the year end? What is your expectation for net debt year-on-year for this year? The second question on new projects. Navigator just announced a new development for Mozambique, but this is more towards the midterm. Could we see a period of strong cash flow post 2019 onwards with no major project? Or is the company looking at new investment cycle? Thank you.
Let's see if we understood your question. You would like to understand 2019 from both an investment perspective and a net debt perspective. Is that correct?
In 2018, how do you see the net debt for this year compared with last year? You mentioned in the release, I think that you had a kind of cash inflow in terms of working capital. Outflow, sorry. Just to understand if you expect a reduction on net debt for this year. That will be the first question. The second is, well, we have these projects for 2018, sorry, but post 2018 or from 2019 onwards, we have no new projects. My question is the company working a new investment cycle, new projects? Or if you'd expect eventually, basically, cash flow being paid through dividends.
Okay, very clear. First question, net debt to EBITDA at the end of the year, we anticipate to be quite lower than it is today. As we see the EBITDA with an interesting evolution, and therefore the cash flow generation as well. I would say maybe below 1.3. We expect it to be below 1.3. On the new projects for 2019, we currently don't have anything planned on the expansion front.
We will certainly have investments, namely to face regulatory evolutions. We are namely considering a couple of our equipment, which we will have to either revamp or substitute, and that could amount to several tens of millions of EUR. We have not yet finished the plan, so I cannot yet share it with you because it's not finished. You are right, from an operational viewpoint, even though we are considering the several opportunities and trying to understand what we could do from 2019 onwards, we have not yet finalized that work. Currently, we don't anticipate any major investment besides those coming from regulation.
Okay. Thank you.
Thank you. Ladies and gentlemen, just a reminder, in order to ask a question, please press zero one on your telephone keypad. Thank you. The next question comes from António Silva from Intermoney. Please go ahead.
Hi. Good afternoon. My question is related with your energy business. The government has been saying on the press that it's going to reduce the cost from the system. I'll like to know if your business will be impact by the measures or is it impact already? Impact, namely in terms of prices or related with the interruptibility mechanism. Okay. Thank you.
Look, we don't anticipate any major impact on our energy unit besides what is already anticipated. As you know, we are biomass-based, we are a bit different from others. At the timing of being awarded the licenses to operate, as you know, we have a specific price for a couple of years. The next time we will have a revision downwards of some of our prices is 2020. Currently, I confirm that biomass-based energy, discussion on that is not on the table. We don't anticipate any impact.
Okay. Thank you very much.
Thank you. The next question comes from Nuno Estácio from Haitong Bank. Please go ahead.
Hi. Just a follow-up on this last risk mentioned by you about the theme of trade war. Do you think there could be some sort of ban or an extra tariff for the European paper sold in the U.S.? Will there be enough capacity in the States to supply their own market? Do you see this as a likely risk or as a possible risk, or effectively there won't be this possibility? Thank you.
I will ask António then to give a more specific answer, but I'll make two introductory comments. First, one could argue that these trade war tensions are already, in a way, impacting a bit the business because, in some cases, people, mainly in Asia, are already maybe delaying some decisions in a preemptive way, anticipating potential trade war. This is just like the financial markets that you certainly know much better than I do. People anticipate everything. I could argue that some impact we can already feel. The second question is that I will say it is quite difficult to anticipate those types of movements in countries such as the U.S., and with the current president, it seems to be even tougher to anticipate. After those introductions, I hand over to António.
Well, I think your question actually is also two different questions. The situation in the U.S., as far as we understand, is also relatively tight in terms of operating rate for the industry, and also as you know, further capacity has been already announced to be taken down in the coming months until early 2019. It's not impossible that even new capacity will be taken out or, I mean, taken on converted to other grades, namely to packaging grades. It's possible that the occupation rate of the industry in the U.S. is becoming even higher than it is today. Regarding your first question about the specific duties into the U.S., I'm not a legal expert, but I doubt if on top of the existing duties on the countries that have been affected, new duties can be imposed.
Obviously, not all countries have been affected by those duties, and they can be extended to other countries in Europe or outside Europe. On the countries that, namely Portugal, that was already affected, I doubt if new duties can be in force during this period.
Okay. Thank you.
Thank you. Ladies and gentlemen, there are no further questions. I now give back the floor to the company. Thank you.
Thank you very much. This ends our conference call for today.