Good afternoon. We welcome you to The Navigator Company full-year results 2024 presentation. During the presentation, all participants will be on a listen-only mode. There will be an opportunity to ask questions after the presentation. If you wish to ask a question during the Q&A session, you may do so by pressing the star followed by five on your telephone keypad. And now, hand the conference over to Ana Canha. Please go ahead.
Ladies and gentlemen, welcome to The Navigator Company conference call and webcast for the fourth quarter and full-year results. Joining us today are the following directors: António Redondo, Fernando Araújo, Nuno Santos, João Lé, Dorival Almeida, and António Quirino Soares. As usual, we will start with a short presentation followed by the Q&A session. You can access the presentation through the links on our website, and you can also send your questions via the webcast platform. António will begin by presenting the main highlights for the year. I will now hand over to António.
Thank you for joining us today. I'm very pleased to be here once again and to share with you our fourth quarter and full-year results. As you'll see in today's presentation, 2024 was rich in initiatives and achievements that reflect our commitment to growth and diversification. Navigator has once again proved to be in a unique competitive position in Europe in terms of the efficiency with which it manages its mix of businesses and within each business, its product, market, and customer mix. Navigator has consistently shown flexibility in adapting to different market dynamics, focusing on value creation, growth, and diversification, as once again was the case this year. I will start with slide four for an overview of the year. Pulp prices saw a sharp increase in H1, followed by a severe correction in H2, contrasting with the stable paper prices.
Orders for uncoated wood-free print, paper and packaging improved, especially in the first half and the end of the year. Tissue paper remained strong throughout the year. Navigator ended 2024 with a total turnover of around EUR 2.09 billion, up 7% year-on-year, the company's second-best results ever, with the new businesses tissue and packaging already contributing 26%. EBITDA totaled EUR 547 million, with an EBITDA margin of 26.2%. Again, the company's second-best result ever in both cases, turnover, and EBITDA, even when not including the two recent acquisitions in the tissue segment in Spain and in the United Kingdom. Thanks to leading price increases, volume growth in most businesses, and proactive management of mixes, product, brand, customer, and geography, as well as a continuous focus on cash cost management, in fact, cash costs were again significantly reduced, with 2024 presenting an accumulated year-on-year reduction of between 2% and 10%, depending on the business segment.
We continue to deliver our diversification plan. Following the successful integration of Tissue Ejea concluded last year, we acquired Accrol in the UK during the second quarter. We also continue to diversify the packaging business by doubling the volumes and expanding our customer base through existing and new applications, in particular in the flexible packaging segment. These new products for new final applications were launched during 2023 in an extensive program of customer presentations and trials and are now generating more significant sales volumes. In the packaging segment, Navigator has also started production at its new industrial unit for molded fiber packaging in Aveiro. This is not only the largest operation in Europe but also the first in the world to produce this type of packaging in a vertically integrated unit using recycled fiber. A few days ago, we achieved another very relevant milestone.
We are now the first molded fiber producer in the world, compliant with BfR XXXVI and the EU 1935/2004 for food contact applications. All this while sticking to conservative financial quality. The net debt-to-EBITDA ratio stood at 1.13, further consolidating the financial strength displayed by the group. Turning to slide five, we can clearly see the resilience of Navigator's business model. In fact, Navigator has shown exceptional stability in delivering results even in a highly volatile market. Navigator leverages its unrivaled size, cost efficiency, and strategic focus on premium and new branded sales, which is strong and sustained results. Business diversification into high-quality tissue papers and innovative packaging solutions, together with investment across all mills in efficiency and environmental improvement, ensure long-term profitability. This robust positioning enables Navigator to consistently outperform its peers even in challenging market conditions, underscoring its resilience and competitiveness. Turning to slide six, please.
You can see a hallmark of Navigator's strength that lies in its ability to generate substantial cash flows driven by its vertically integrated model and leadership in pulp and uncoated wood-free paper production. These cash flows have been strategically reinvested to grow and diversify the business while continuously paying shareholders a robust dividend. Navigator's business results have been boosted by the recent international expansion and diversification of its asset portfolio. New businesses in packaging already accounting for 26% of the turnover. This business diversification stems from Navigator's growth. Navigator's turnover and EBITDA continues to grow with a compound annual growth rate of approximately 3.5% and 4.4% respectively from 2017 to 2024.
Underlying turnover remains stable from 2017- 2024, while we managed to significantly improve underlying margins and, in addition, with less underlying volumes but better margins, we have added pulp sales that we didn't integrate with benchmark margin levels for a European-based hardwood producer. I will now hand over to Araújo, who will provide more details on responsibility.
Thank you, António. Turning to slide seven, please. As António commented, responsible investment for climate and nature and for society with a positive impact on the profitability of our business, securing our long-term growth while we build a sustainable future for everyone. Navigator's decarbonization roadmap is ambitious and requires action in a huge number of locations and processes across the company, involving around 23 initiatives, of which 17 are supported by the Recovery and Resilience Plan and run by the Innovation Fund, European Union Fund for Climate Policy, focused in particular on energy and manufacturing. We are also working on water efficiency with investment of more than EUR 25 million to cut water in use and promote water recirculation. Since 2019, specific use of water in operations has fallen by around 13%, a significant step towards achieving the target of a 33% reduction by 2030.
Navigator is likewise committed to investing strategically in digital technology and cybersecurity, ensuring its operations are resilient, efficient, and innovative, evolving to face the challenges ahead in its business and with competitive advantage when promoting sustainable development. In the past two years, the company has worked on more than 30 digital projects using artificial intelligence, machine learning, and artificial vision in different business areas and segments, bringing rewards in terms of lower production costs, optimization of processes, customer satisfaction, and workforce productivity. Our commitment to health and safety remains firm. We continue focused on our Mission Zero strategy. This year, we achieved the lowest-ever accident rate, down by 40% since 2020. We see this as a historic milestone, reflecting the progress we have made in the company's stronger safety culture.
Aware of the need to manage natural resources responsibly, Navigator has made remarkable strides in its contribution to the management of Portugal's forests, namely by setting up the Forestry Producers Club. Since November 2023, the club has grown to more than 385 members, representing a combined turnover of more than EUR 600 million and accounting for more than 3,100 direct jobs. This club is a pioneering and unique program for strengthening relations with our partners and making an important contribution to a significant increase in Portugal's forestry yields and wood output by disseminating sustainable and active management practices in the country's woodlands. We seek to reinforce our strategy and our ability to conduct our operations successfully and sustainably by building partnerships with different stakeholders and cooperating with organizations that share our values, creating a positive impact on society, the climate, and nature. António will comment on financial highlights. António, please.
Turning to slide eight. Moving on to the financial highlights. Net profit stood at EUR 287 million, up 4%, also the second-best-ever result achieved. CapEx totaled EUR 241 million, half of which classified as value-added sustainability investment, making a strong contribution to reduce future costs. Net assets increased by EUR 128 million in relation to year-end 2023 after significant outflows, namely the payment of EUR 153 million for Accrol's acquisition, the distribution of EUR 150 million, and a strong level of CapEx. Value-added CapEx, as Araújo also mentioned, while maintaining a strong financial position with a net EBITDA ratio nearly 1.1. Turning to slide nine, we can take a closer look at the main impacts on EBITDA in a year-on-year comparison. Although still below last year's level, market prices in uncoated wood-free tissue show a net positive, comparing second half of 2024 versus second half of 2023, reflecting price resilience.
In terms of volume sold, we saw an increased volume of printing and packaging paper sales, up 8%, thanks to the faster pace of new orders up to May and again at year-end, as I've mentioned before. Drop in volume of pulp sales, down 16%, due to increased incorporation in paper products, was offset in part by higher prices year-on-year, up 13%, and an increase in tissue sales, up 55%, driven by growth in sales of finished products and by the additional capacity provided by our Ejea tissue mill, as from the second quarter of 2023, and by the UK tissue operations, as from the first of May last year. As it was mentioned, there was again a significant reduction in cash costs between 2% and 10% in all pulp and paper segments: printing and writing, tissue, and packaging.
Total fixed costs ended up higher than in the same period last year due to the inclusion of both Ejea and UK unit and employee profit sharing, as well as higher redundancy costs and the workforce preservation program and non-recurring costs related to the Accrol acquisition. However, when the new acquisitions are excluded, fixed costs, not including personnel costs, rose by well under the rate of inflation for the year. A comment on the fourth quarter result: the results were brought down by the longer-than-planned annual maintenance shutdown at one of the mills and by a series of one-off events in our energy assets, namely problems identified in the course of a plant shutdown of our largest power generation turbine, a breakdown in the fuel oil supply transformer interrupting our supply to the national grid, and planned shutdowns of two biomass boilers.
This sequence of events relating to situations which have since been solved resulted in a significant reduction in power sales and increased purchases of natural gas and electricity during a period close to peak prices for this community. In addition, the drop in pulp price, together with higher prices for chemicals, also energy-related, had as well a relevant impact on results for the business. Turning to slide 10, we can look to our financial position and specifically our debt maturity profile. Over the year, Navigator repaid debt of nearly EUR 100 million and, at the same time, took on a significant volume of new long-term financing of more than EUR 330 million.
As a result, Navigator continues to enjoy ample liquidity above EUR 500 million, an appropriate level of average debt maturity with rationally staggered repayment and approximately 60% of the total debt tied to sustainability versus 40% last year, and with nearly 90% of total debt issued on a fixed-rate basis, enabling us to maintain low financing costs. It should be noted that, despite the new facilities contracted, incorporating higher market interest rates, our average cost of financing by the end of the year remained low at approximately 2.4%. I will now hand over to my colleagues for a brief commentary on each of the business segments, starting with Quirino with a comment on the price. Quirino, please.
Thank you, António. Moving, please, to slide 12. We have the evolution of pulp and paper products. After the first half of 2024, marked by the strength of the benchmark index for hardwood pulp price in Europe in dollars, which rose to record levels in early July to $1,440 per tonne, the second half brought a severe correction in prices in China, ending the year in China at $545 per tonne. This slump in prices confirmed the 2024 downward cycle as the fastest and sharpest in recent years. As a consequence, prices also adjusted downwards in Europe in the second half of the year, most markedly in the fourth quarter, ending the year at $1,000 per tonne. This volatility in the pulp price contrasted markedly with the resilience in benchmark prices for printing and writing paper, which were very stable during the year, as António mentioned in the beginning.
The benchmark index for office paper in Europe stood at EUR 1,096 per tonne at the end of December, up slightly from its level at the start of the year, which was EUR 1,092, pointing again to the resilience of paper price in Europe. It should be noted that the index closed the year of 2024 at an average price of EUR 1,107 per tonne, representing an increase of 31% over pre-pandemic levels, which was EUR 845 per tonne between 2015 and 2021. If we move now to slide 13, we have summarized the main developments in uncoated wood-free paper products. Apparent global demand for printing and writing paper grew by 0.5% across all segments, with demand for uncoated wood-free papers up by 0.3%, coated papers growing by 0.5%, whilst mechanical papers experienced growth in demand of 1.2%.
In Europe, apparent demand for uncoated wood-free printing and writing papers grew by 8% year-on-year, with the strongest growth in paper for printing industry, 10%, followed by office paper, 8%, and reels for the paper processing industry growing by 5%. In the United States, demand dipped by just 0.2%, while in China recorded a growth of 2% up until November 2024. Significantly, uncoated wood-free has remained the most resilient segment for years, especially due to its versatile end uses. Unlike other grades, where demand has slumped since 2020, uncoated wood-free has been practically flat, declining 0.58% a year as compared to a drop of 4.1% in coated wood-free and 6.9% in papers made from mechanical pulp. All of this during the period of 2020 to 2024. It should be noted that in challenging markets, own brands and high-value segments provide extra protection for Navigator's results.
In fact, premium product sales increased their share of our ongoing business this year, while mill- branded products kept their record high share. In fact, premium products boost margins by up to 80% more in relation to economy products. Now I will hand over to Nuno, who will give you some market context on pulp.
Thank you, Quirino. Turning to slide 14, as Quirino just mentioned, the second half of 2024 brought a strong price correction in China and in Europe. On the demand side in Europe, pulp consumers performed well this year, especially in printing and writing and packaging paper industries. With uncoated wood-free up 8% year-on-year, as Quirino just mentioned, and tissue up 7% year-on-year. On the supply side, new capacity in Chile and Uruguay, which started in 2023, and the startup of new production capacity in 2024 in Latin America and China both led to a gradual increase in supply, especially over this period, putting downward pressure on prices. Global demand fell by 2% for bleached chemical pulp. World demand for hardwood pulp fell 1%, with eucalyptus pulp growing by 1%.
It is worth noting that worldwide, eucalyptus pulp represents almost half of all pulp in the market and nearly 8% of hardwood pulp. Eucalyptus Kraft Market Pulp was an innovation introduced by The Navigator Company in the 1950s that became a world standard in hardwood pulps. Looking at tissue performance on slide 15, demand for tissue paper remained strong, up 5.4% in Western Europe, boosted essentially by the recovery of the away-from-home segment and growing household spending power. Navigator's tissue sales were up by 55% year-on-year, driven by the additional capacity provided by Navigator Tissue Ejea, as from the second quarter of 2023, and by Navigator Tissue UK from the 1st May, 2024. Sales outside Portugal in our tissue business accounted for 79%. Sales broke down into 97% finished products and 3% rolls, representing an improvement in the mix of 3 percentage points year-on-year.
In terms of client segments, at-home or consumer retail has grown, currently accounting for around 80% of our sales, while away-from-home and wholesalers account for the remaining 20%. Navigator also differentiates itself through high-quality tissue papers and cutting-edge innovation. Our tissue papers have received awards and market recognition. The Five Stars Award, for the fourth year running, Amoos has won the Five Stars Award, ending up in the napkins category with its 40x40 product in the Naturally Soft range. This award shows that Portuguese consumers are interested in a more sustainable, high-quality solution featuring softness, in the case of napkins, provided by our Naturally Soft Fiber technology. The Naturally Soft range is made up of dermatologically tested products made from 100% virgin fiber, free of chemical bleaching agents, making more efficient use of certain resources such as wood, energy, and water.
Consumer's Choice 2025, number one in toilet paper. For the first time, the Amoos brand also won the title number one brand in the 2025 Consumer's Choice in the toilet paper category. Finally, Product of the Year awards in the U.K. In 2024, we launched a multi-purpose kitchen roll range in the United Kingdom under the iconic Flash cleaning brand. Made from paper, which is 100% FSC certified, Flash kitchen roll combines strength and absorption, providing consistent and reliable cleaning power. In 2025, Flash kitchen roll was voted Product of the Year in the domestic papers category of the Product of the Year awards, the largest consumer survey in the United Kingdom and on product innovation. Our tissue paper provides a higher profit margin than our competitors. Dorival will now comment on the main development in packaging.
Thank you, Nuno. Now turning to slide 16. After a strong stock correction during 2023, kraft paper markets posted a growth in Europe in 2024, reaching the peak volumes of 2022. Navigator sales volume more than doubled year-on-year, as António mentioned, with 70% of our sales in Europe mainly in Iberia, France, Italy, and Germany, and the remaining 30% in overseas markets, where Turkey and North Africa are our leading markets. This performance has been supported by investment in innovation and market trials into several new applications, above all in the flexible packaging segment. These products were launched during 2023. Indeed, looking at the breakdown of sales by segment since 2023, we have successfully reduced the segment dependency on bags, strategically increasing sales in the flexible packaging and boxboard packaging segments.
This change has enabled us to diversify our portfolio and position ourselves more strongly on the growing flexible packaging market. Navigator has therefore continued to broaden its customer base, which already numbers close to 300 clients in a sales operation 100% based on its own brand, gKRAFT. Let's turn to slide 17 to move on to the molded fiber product. Last year, the new industrial unit in Aveiro for molded fiber packaging started production. The first line was commissioned in Q4 2024, and the remaining three lines in Q1 2025. With seven products for single-use applications in the food sector, which are fully recyclable and/or compostable, tableware such as plates, bowls, and cups, takeaway such as takeaway packaging for the food retail and HoReCa channel, and food packaging such as laminated pouch for meat and red meals, boxes for fruit and vegetables.
These products offer production flexibility and scalability for exploiting the various opportunities opening up for replacing single-use plastics and aluminum. Alongside this, work has proceeded on developing new molded products in partnership with national and international clients and on researching and developing new sustainable barrier-proper solutions, as well as trials of commercial products. In an important breakthrough, already this year, gKRAFT BioShield molded fiber products achieved compliance certification for food contact under not only European regulations but also with the BfR XXXVI recommendation issued by ISEGA. gKRAFT BioShield is the first molded fiber product globally compliant with this recommendation. This certification enables us to market products for the food segment for contact with fatty, moisty, and dry foods, applying to our entire tableware and takeaway line.
This new avenue for growth falls within our responsible business strategy, through which we are seeking to contribute to a more decarbonized society, rehearsing the crucial role of well-managed planted forests in the transition from a linear fossil model with no future to a circular bioeconomy model, which is carbon neutral and eco-friendly. I now hand over to António for a wrap-up of the full-year results.
Thank you, Dorival. Let's turn to slide 18, please. 2024 reported once again strong performance. By focusing on efficiency and cost management, we achieved a significant reduction in cash costs across wood, pulp, and paper segments, printing and writing, tissue, and packaging, by 10%-10% year-on-year and by 10%-14% from the peak levels of late 2022, although they persist higher than pre-pandemic levels.
We continue focused on the core business as well as on business transformation and innovation, as can be seen in our valuated CapEx that reached EUR 141 million. One of Navigator's key strengths is its capacity to produce significant cash flows, thanks to its vertically integrated model and its leadership in pulp and uncoated wood-free paper production. These cash flows have been strategically reinvested to diversify the business, particularly in the tissue segment, where Navigator also differentiated itself through high-quality tissue papers and cutting-edge innovation. This year, we successfully went ahead with the acquisition and integration of Navigator Tissue in France. Additionally, the cash flows support investment in the new and innovative packaging business, and our packaging segment continues to evolve in new developments on paper products. Sales volume more than doubled, boosted by 2023's flexible packaging launch.
We started up an innovative unit for integrated production of molded fiber bags, designed to replace single-use plastic packaging and aluminum in the food service and food packaging industry, as well as investing in operational and environmental efficiency improvement and the decarbonization of all our industrial processes. These investments in efficiency and environmental improvement aim to ensure the longevity and continued exceptional margin generation of our world-class state-of-the-art paper and tissue rolls. This transition reflects a commitment to leveraging our created value while expanding into adjacent markets with high growth potential. Navigator's workforce today is stronger and more diverse, with 4,000 employees, 40 different nationalities, 10 production plants in three countries, Portugal, Spain, and the U.K., and a forest project in Mozambique. Let's move on to slide 20 with a few words from Navigator.
After two years in which Navigator surpassed initial expectations, 2025 again presents challenging and anticipated scenarios, driven by ongoing conflicts, economic volatility, and shifting global trade policy. In the pulp sector, prices in China and Europe are anticipated to reverse a trend that has already begun. On the supply side, the ramp-up projects in 2024 and 2025 will increase the availability of pulp on the market and so influence the market volume. However, on the demand side, levels of pulp consumption in China and Europe should increase year-on-year. Market analysts are forecasting 3.2%-6.1% growth. We remain positive for the medium term, with a very limited number of pulp projects set to start in 2026 and 2027, in parallel with new cost inflation in many geographies and a very clear scarcity anticipated in Asia in the coming years.
In the paper segment, the pace of new orders is expected to accelerate, as it's already been said. On the supply side, there is potential for further reductions in capacity. Already in Q1 2025, close to 7% of European capacity has been taken off the market, and in the U.S., approximately 1.7 million tons per year of coated capacity close to 6.6% of U.S. capacity has been taken off the market due to the fulfillment of IP's Georgetown m ill. These changes, combined with the level of cash costs still higher than the pre-pandemic levels, will continue to sustain prices above those levels. In China, new capacity is expected, but given the low capacity utilization rates in the Chinese industry and rising oil prices, the possibility of further streamlining of supply cannot be ruled out. In the tissue segment, demand continues at a very interesting level.
In this segment, Navigator continues to leverage synergies driven by business growth, particularly in the acquisition of Accrol and with the new acquisition of Gomà-Camps Consumer . Business manifestations through tissue and packaging, operational flexibility between paper and pulp, and within different types of paper, the dynamic management of different mixes within each segment, production adjustments, and an efficient commercial strategy combined with rigorous programs to control costs, as well as the company's strong financial position, have enabled us to deliver consistently strong and stable results in challenging market contexts. It's worth pointing out that we are now a quite different company from what we were. We host Europe's top uncoated business, which has continuously shown very distinct demand dynamics from other printing and writing areas. We have proven we can sell our pulp at lower discounts with solid margins.
Our integrated tissue business model outperforms competitors with much longer market experience, and we are building a diversified, innovative, and growing packaging business. By combining deep industrial expertise with a forward-looking approach, Navigator continues to pioneer sustainable practices that align with global trends and consumer demand. These diversified portfolios, rooted in a tradition of excellence and innovation, position The Navigator Company as a leader in sustainability-driven growth and value creation. Let's move to slide 21 with a few words on dividends. Considering Navigator's performance in 2024, the Board of Directors will propose to the General Meeting of Shareholders a distribution of dividends of EUR 175 million, corresponding to EUR 0.2466 per share, or 24.66%. The Board of Directors will also propose employee profit sharing for the period of up to EUR 19 million.
The proposed distribution of dividends will result in an initial dividend of EUR 75 million after the EUR 100 million distributed in advance on the 14th of January 2024, a proposal of employee profit sharing of up to EUR 16 million after the EUR 3 million distributed in advance in December. Thank you.
Thank you, António. This ends our presentation. We are now open for the Q&A session.
Thank you. Ladies and gentlemen, we will now begin the Q&A session. If you'd like to ask a question, please press star five on the telephone keypad. If you change your mind, please press star five again. Please ensure that your device is unmuted locally before proceeding with your question. And our first question comes from the line of Alberto Espelosín from JB Capital. Please go ahead.
Hi, good afternoon, and thank you for taking my questions. I have three, if I might. First is on office paper, how do you see demand after that small recovery you guide to in the first quarter, and how should we think of office paper prices throughout the year 2025? The second one would be on everyday margins, considering that fourth quarter was impacted by some one-offs related mainly to energy assets, but also taking into account lower prices year- over- year. What are your current expectations for margins in the full year 2025? And the last one would be on capital allocation. Should we still expect CapEx in 2025 close to EUR 200 million, and are you still considering inorganic growth opportunities in tissue and packaging? If you could please elaborate on this, it would be great. Thank you.
Okay. Just for the sake of clarity, I'll try to repeat the questions you've raised. The first question is about office paper demand and how do we see demand going forward, a reflection of demand 2024, and how do we see it going forward in 2025. The second question is about guidance, net EBITDA margins for 2025. The third question is about CapEx 2025 and what expectations we have for CapEx. And the last question is about new opportunities on tissue. Is this right?
Exactly. Thank you.
Okay. I'm going to give some elements of response in each question, except the second because we don't give guidance on future EBITDA margins, and my colleagues will follow suit, so regarding office paper, actually, the demand in 2024 was quite interesting, and as we said in previous calls, office paper has not been derived with the lowest performance within the different product space: graphic papers, cut sizes, and growth. Having said that, it's extremely difficult under the present volatility to give very, very precise indications on where demand is going to stay. The best we can tell you is what we see in the beginning of the year, and it's rather poor. I'll ask Quirino to fill in with some more details.
Yes, I fully agree, António, so last year, as I mentioned, office paper grew 8% in Europe. It was actually, I'd say, around the average of uncoated industry. The graphical industry folio size has increased a little bit more than this in Europe, 10%, and then news a little bit less, but still with a growth of 5%. We saw a little bit of a decline in Q4 of last year, but the beginning of this year has been particularly better in terms of orders intake and particularly in cut size, so we see the beginning of the year more robust in terms of demand, particularly in cut size.
Okay. Moving to the second question. As I said before, we don't give guidance for future EPA margins. We can speak about the past. In the last 14 years, our EBITDA margin has been 25%, with a minimum of 21%, a maximum of 30%, and a standard deviation of about 3%. So this is a good indication of what is the range in which companies typically move. Moving to the third question about CapEx 2025, CapEx 2025 will be ballpark similar to 2024, slightly below 2024. I would like to remember that during 2023, 2024, and 2025, we had a significant increase in our CapEx in several areas of the region, but mainly on decarbonization and also on packaging, taking advantage of the resilience plan of Europe, so the EU Next Generation fund.
According to what we have shared in previous conference calls, we have some leading projects that will be not far from EUR 250 million for those projects. Out of this EUR 250 million , we expect to receive grants of around 40%, so around EUR 100 million . We will conclude the large majority of those projects during 2025. 2025 will not deviate much from 2024 and 2023. From 2026 onwards, we plan to go to more normalized levels, and I do like to remember that normalized levels were typically for the previous perimeter around EUR 120 million . We have a new enlarged perimeter, so most likely we'll be slightly low. It will not deviate much from this ballpark figure. Regarding your last question about new opportunities in tissue, I will make an introductory comment. I will pass to Nuno to further develop the idea.
As we said before, the acquisition that we had in the U.K. is a converter, a converter that buys mills in the marketplace, both in Europe and outside Europe. The capacity of the installation that we have in the U.K. is more or less equal to the capacity of two tissue mills, two double-width tissue mills. So our, I would say, more obvious next move that we are, of course, already studying and preparing is a decision to install a tissue machine to feed half of the needs of our U.K. operation. Nevertheless, I would like also to point out that our capacity in Spain, we have also more converting capacity than paper capacity, so we have the capability to integrate more.
Of course, we will look to all opportunities that make sense to us, but the priority is very clear: the integration of the U.K. into our existing business and the developing of a new tissue mill.
I think that's very logical. We are always very, very much obsessed with performance improvement and with growth. But also only value-creating growth. We don't set actually targets for specific growth movements. We only make them when we're very comfortable with value creation that is associated with that growth movement. And I think, as António mentioned, currently we want to grow our current operations and possibly grow our paper-making and paper production operations as well. So always obsessed with performance improvement and value-creating growth. That's the story so far over the last 10 years.
The next question comes from the line of Bruno Bessa from CaixaBank. Please go ahead.
Yes, good afternoon. So thank you for taking my questions. The first one, just looking to the numbers released, we see a relevant increase in terms of depreciation, amortization, and impairment losses in non-financial assets, more than EUR 30 million year- on- year. Just trying to understand here if this is all explained by the change in the perimeter of the company or if there is any kind of one-off here and whether this figure of around EUR 165 million or EUR 170 million could be a good reference for 2025. So this will be the first question. The second question, related with the one-off costs that you saw in the energy business, so if you could try, if you could quantify those one-off costs and give some color on that, would be very useful.
The third question on the evolution of paper prices since December, and particularly during the month of January: the relevant decline that we are seeing at the time when the shutdown of capacities is already or should at least already have started to have an impact in the industry. Trying to understand your view on why paper prices have been going down this fast. Is there any kind of lack of discipline in the market, something that we were not used to see over the recent years? Trying to have a bit more color from you on the recent paper price evolution. Thank you very much.
Okay. Thank you for your question, Bruno. Let me see if I can rephrase them to make sure you understand. The first one, you'd like to add some insight about the increased depreciation you saw on our 2024 accounts. The second one is about if you are able to quantify our one-off costs for Q4 last year on the energy assets. And your last question is about the evolution of paper prices, shutdown of capacity, and discipline on the market.
That's correct. Thank you very much.
Okay. I will start by question number two, which is probably the easiest one. Yes, of course, we can quantify the one-off costs that we have, but we are not going to share that quantification by all of you. Regarding depreciation of assets, the depreciation of assets is practically all justified by the new enlarged perimeter. Let's not forget that the perimeter has not only new equipment on the existing mills as well as the two new companies that we have acquired, one with one site in Spain and the other one with five different sites in the U.K. Regarding the evolution of paper prices, I will make an introductory comment, and I'll ask Quirino to complement.
I think, unfortunately, the rule of this market, both paper, tissue, packaging, is lack of discipline.
What we had in the last few years was clearly the shift in the European space for Navigator to try to increase market discipline. I think in a very large extent, and you can see that from our own prices, we have managed to implement that. Not everybody has followed, and we saw, I would say, a couple of events. One, the fact that some non-integrated producers took advantage of the reduction of log prices to try to gain temporarily some market share, and they dropped their selling prices. And secondly, much to our surprise, I should say, a significant increase of imports, of cheap imports from overseas. So they had an effect, and I believe the effect will be felt still in the beginning of this year. Let's not forget as well that sometimes we mix up the prices because of mixed effects.
If one company sells more reel, or if one company sells more low-end cut size or folio sheets, this has a direct impact on average paper prices, even if prices of premium and standard grades are kept at a higher level. Quirino, can you fill in some more information?
Yes, this is very much the case in Europe. So the comments so far, and I think the question is more around Europe. We did increase prices twice in last year, in April and then again in July. Mostly our reading is that we were not followed by, so we were applying the price increase, but the rest of the market did not move. And so we witnessed some softening towards the end of the year. And as António highlighted, we also see that most likely during Q1, this impact will be felt still, and it's available in the indexes, which declined a little bit during the beginning of Q1 this year, but now over the last few weeks, more stable.
Indeed, the absolute price level is very interesting in Europe, so it is attracting imports, although logistics is not easy from, let's say, the main regions of import, which is Asia nowadays, so I guess this is the story for Europe. In the U.S., it's a bit different. We see already moves to increase prices over there, so there is already a move in the market to increase prices in the beginning of the year, so it's a different situation over there.
Just to conclude, having said all that, we anticipate that prices will keep significantly higher than the pre-pandemic levels. We should not forget that the cost base of the industry has significantly increased. If you look to wood prices across the world, particularly across Europe, from Iberia to Central Europe and to Scandinavia, wood prices are significantly more expensive now than they were pre-pandemic levels. Energy is more expensive. Chemicals are more expensive. And in spite of what I said about discipline, the market is still, and I believe I cannot be humble here, I believe much because of the work of Navigator, there is still a higher discipline than we had before. So we expect prices, even if we see, like the index showed, slight degradation, we expect prices to be significantly above pre-pandemic levels.
The next question comes from the line of António Seladas from AS Independent Research. Please go ahead.
Hi, good afternoon. Thank you for the presentation and thank you for taking my questions. So I have two, well, three questions. First one is on gross margin that performed quite well. So if you can comment on wood chip prices, on wood prices. So you already mentioned that prices now are higher than pre-pandemic, but regarding the recent path, how wood prices are. The second question is related to you mentioned that you are not going to say what were the levels of extraordinary costs related with energy. But should we expect for the coming quarters that external supplies and services remain around EUR 120 million-EUR 125 million, or not? I don't know if you want to comment on this. And last question. So I understood that the tissue division about mills, the new mills to integrate, should be taken over the coming year, over this year.
So just to confirm it, thank you very much.
Okay. António, thank you for your questions. I'm going to skip them. I'm not sure if I fully understood the second one. But your first question, if I understand correctly, is if you'd like to have a little bit more light regarding wood costs, wood prices.
Yes.
Okay. Your second question, and I think I didn't get it completely, is about the evolution of costs of external service supplies.
Exactly. So should we expect the same kind of figures that we had before this quarter?
Okay, and your last question is if the decision about the new tissue mill we can expect it this year or not?
Exactly. Thank you very much.
Okay. I'm going to give a few elements on the different answers, and I ask my colleagues to complement. Regarding wood prices, we saw an inflation of wood prices across all Europe, from Portugal to Scandinavia, both hardwood and softwood. Quoting by memory, in Portugal, the cost increased from 2016. The figures I have in mind are from 2016 to 2024. They are not far from 40%, 30 %+. But in Central Europe and Scandinavia, the increases are even above that. So I'll ask João to comment in more detail.
Yes, I confirm that those price rises that we've been witnessing with the most recent years in terms of the main markets, European markets in Finland, Sweden, and Poland for hardwoods and also for softwoods, we've been witnessing to price raises that since 2016 up to now are over or reaching 50% increases, and in Portugal, close to 30%. That's a fact that this is not only those prices are not rising only in Portugal. We believe and we know that this is also happening in South America, mainly because of the higher land prices and the cost of the operations. For the time to come, we don't expect to see higher price increases. We believe this will be more or less stable for a while for this coming year.
Okay. Sorry. Please go on.
Thank you. Thank you very much.
Thank you. So just repeating what we said during the call, João, right, we saw mentioned South America, but we also believe that in Asia, the scarcity of wood is going to be even worse. There are a significant number of projects that are now either under development or on paper that we have doubts if those projects will have enough wood or wood at the price that they can operate. Regarding your second question about external supplies of services, I will not comment on specific figures, but I probably can share the following. And I will ask Dorival to help me out and give further details. You know that we pay our direct employees average salaries that are significantly above the Portuguese average salary. A significant number of external supplies are based on, if not minimum wage, close to minimum wage.
As minimum wage is increasing faster than average wage, we can expect to have some pressure on some of these external supplies. At the same time, materials, which is the second big part on external supplies, are significantly more expensive now than they were a couple of years ago. So what we are doing, and I think we have also mentioned that during the conference, that our maintenance and functioning costs are increasing at a level that is lower than inflation. Dorival?
Yeah. Thank you, António. The main impact is, as António mentioned, in our maintenance costs and other services in the mills as well. And we are managing to mitigate these impacts, and we are doing well. But it has been tough to control everything and to keep our costs according to our budgets and targets.
Regarding your last question about the new mill, actually, I have two comments, and I'll ask Nuno to complement this one. We have already decided to commission the pre-engineering phase, so we have already started the pre-engineering phase. This will take us a large number of months, probably somewhere four, five, six months maximum, so after the pre-engineering phase, we will be in a position to take a final investment decision somewhere around summer. Probably Nuno can give a bit more light on this.
Okay. So yes, we have done the first step of the project, which is basically the feasibility, the business case. We're now moving, as António mentioned, to the pre-engineering, with the kickoff happening over the next few days. We hope to get the decision by summer, as António mentioned. Up until now, things are moving well. We're moving to the pre-engineering because the first, let's say, numbers on the business case seem to make sense. But it's obviously too early. We don't even have an PO, up until now. But I mean, let's see if we confirm the numbers and get more confidence on the decision that, as we've said, should ideally happen by summer.
At the same time, following what we said in previous calls, we have submitted to the Portuguese authorities, AICEP, a project concept to see what kind of support AICEP is prepared to give, and we keep our discussions, both in Spain with the local authorities and in the U.K. with the local authorities, because there is not yet a decision, final decision, where the mill will be installed. Although it was not your question, I think we can also add that we have also commissioned recently a study to reconvert PM3 of Setúbal, so the largest of the two smaller mills in Setúbal. We have mentioned already that PM1 is already fully dedicated to packaging, and we have commissioned a study on PM3 to analyze the possibility to make a further investment on this machine, to specialize the machine on low basis weights for flexible packaging.
We are also looking to a final investment decision somewhere in the first half of this year to take a decision if we move or not PM3 into dedicated to flexible packaging. Having said that, with the same concept we did before, we have PM3 as a flexible machine without jeopardizing the possibility to still do some uncoated wood-free. Most likely, by this year, we will have two decisions, one in the tissue area and another one in the packaging area.
Thank you very much.
Ladies and gentlemen, please be reminded that if you wish to ask a question, you may press star five on your telephone keypad. And our next question comes from the line of Luis De Toledo from ODDO. Please go ahead.
Good afternoon. I have a few questions on my side. The first one referring to the softer selling volumes of paper in the last quarter. I don't know if you attribute it mainly to external factors, or there are also reasons behind the maintenance shutdown that you announced, or there are production disruptions in the energy business. I would like to know also if, considering your integration and so on, if the production levels that you achieved two years ago in paper are something that you could expect in the future. Are they relevant, those statistics, for the future, considering your penetration in higher added value segments? The last question would be referring to trade payables. I believe there's been an increase in the fourth quarter.
I don't know if it's something that you attribute to something specific, your new perimeter after the acquisition, or something to monitor for the future. Thanks.
Luis, thank you for your questions. I'm so sorry, but the last one, I think I understood more or less the first two. The last one, I didn't at all. Are you so kind to repeat it or rephrase it if possible?
Sure. Sorry for that. It refers to trade payables that appear to have increased in the fourth quarter. I don't know if there's any reason behind that. Thanks.
I'm sorry.
You can say it in Spanish, Luis.
I'm sorry, Luis, but the connection is not.
Okay. Sorry. In the balance sheet, I witnessed that the accounts payable are significantly higher than those reported historically and those, for example, in the ninth month. It can be any reason, but I mean, it's just that it's something that struck my attention when I saw it. But I assume there's nothing relevant behind it.
Okay. Let me see. So the first question is about the impact of our energy issues in Q4, and you are linking that to softness of volumes, if I understand correctly. The second question is about what we could expect as paper volumes going forward. And the last question is about accounts payable. You notice a higher accounts payable on the balance sheet.
Correct.
Did I got them right?
Absolutely.
Okay, so first one, and I will ask my colleagues to comment individually on the different businesses. The big impact of Q4 was energy and energy-related, not particularly volumes of pulp, well, let's leave pulp in the end, of uncoated paper, packaging, or tissue, because pulp is the resultant, okay? We had a slightly longer shutdown in one of our mills, and this, of course, affects more the pulp availability. But the main impact was on energy, so I will ask Quirino to comment briefly on volumes of paper and packaging in Q4, and Nuno, pulp and tissue in Q4.
Yes. Packaging volumes quite stable. Uncoated paper volumes as well quite stable. So it was not a key factor in Q4.
Okay. In energy, basically, what happened in 2024, we have reduced sales mostly because our Setúbal natural gas cogeneration went into self-consumption. I think, as you know, most of our energy-producing units have feed-in tariffs. While these feed-in tariffs exist and are above our market prices, it's worth selling, of course, into the market. When we actually lose or they end the lives, these feed-in tariffs, we tend to have moved the operation into self-consumption because, of course, we don't want to sell and then buy at the same price while paying grid exit tariffs. So at the end of the day, when the feed-in tariffs lifecycle ends, we tend to turn our power operating units into self-consumption mode. And this is basically what happened in 2024 with our Setúbal natural gas cogeneration. So that's why we have seen some reduction in sales of power, okay?
In terms of pulp, basically, let me look for the numbers exactly. But basically, what we've seen is the result of higher integration into our paper operations. We have reduced the availability of pulp into the market slightly. And so that's basically what happened there.
Okay. Regarding your second question about what we expect as volumes for paper production going forward, you know that we have a capacity, the paper capacity on five paper machines that is about good winder tonnage is about 1.6 million tons. Of course, when you do converted products, you don't have the same capacity because you lose when you do converting products, you lose. And the mix, if you do more foam, you lose more than in cut size. If you do reels, you can lose more or less depending on the type of reel. But this 1.6 million tons is for an average grammage of around 80 grams. So now that we are moving to flexible packaging, the average grammage of flexible packaging is significantly lower than 80 grams. It's almost half, not quite half, but almost half, the average grammage.
So what we expect going forward is that in uncoated wood-free, to have very close again to good volume tonnage to 1.4 million tons of capacity utilization and about 100,000+ tons of flexible packaging. If you look to 100,000 tons of flexible packaging plus, and you deduct the grammage, it means that we expect to be in the next two years not very far from capacity. Regarding your last question, I will ask Nuno Santos or the finance director to give you a precise.
Okay. There are two main issues that justify this evolution in trade payables. The first one is the EUR 100 million dividend that we declared at the end of the year, which was outstanding in December, and that has since been paid in January. The other one pertains to the fact that we are under a heavy investment phase. As a consequence, we have higher trading balances with our suppliers for those CapEx items, but all within the regular paying terms.
Very clear. Thank you very much.
There are no further questions from the conference call at this time. So I hand the conference back to the management team. Thank you.
To end our session, thank you all for your time. As always, we are available for any additional clarifications or usual contact. Have a great evening. You may disconnect.