Good day and thank you for standing by. Welcome to the Sappi First Quarter 2026 Financial Results Conference Call. At this time, all participants are in listen-only mode. After the speaker's presentation, there will be the question-and-answer session. To ask a question during the session, you need to press star one one on your telephone keypad. If you want to hear an automatic message advising, your hand is raised. To withdraw a question, please press star one one again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to our speaker today, Steve Binnie. CEO, please go ahead.
Thank you very much, and good day to everybody. Thank you for joining us. I will move through our investor presentation and, as always, call out the page numbers as I go. Just starting on page two, I'd draw attention to the disclosure on forward-looking statements for you. Moving to slide three and looking at the overall numbers for our Q1, it's fair to say that these were challenging market conditions with a number of headwinds which had an adverse impact on our earnings. Just highlighting a few of these which have the most material impact. Firstly, dissolving pulp prices down $160 compared to a year ago, a very material impact. Then we've seen this shift in exchange rates linked to a stronger dollar, sorry, a stronger rand, or maybe even more relevant is a weaker dollar, which once again has a major impact on our earnings.
On top of that, we've seen, as we've gone live with our Somerset Mill PM2 project, we've come to market at a time when paper bulk markets are weak in North America, which has meant that our ramp-up has been a bit slower than anticipated. We did have some production issues in North America. These were once-off events, mainly linked to our utilities, and they caused the mills, the two mills, to go down at different points in time during the quarter. We did have the schedule maintenance shut in Somerset. That, as guided, was about $17 million. That shut went very well, and we were pleased with the outcome. Offsetting these significant headwinds, we continued to focus on what we can control. There were a number of cost-saving initiatives across the group.
On top of that, we did get some energy refunds in Europe, which offset the higher energy costs that do occur during the year. Moving to slide four, which is the earnings bridge, comparing last year quarter 1 to this year. Obviously, this year, we had $90 million EBITDA, which is lower than we would like it to be as a result of the headwinds that I mentioned. If you reflect on this page overall, you can see that pricing is the main story. It's across all segments, but in particular, DWP. It's had a major impact. The volumes actually held up pretty well, and we'll talk about that in a little bit more detail. We did get savings on costs, variable costs. That's in spite of what's included in that is the exchange rate impact on higher costs coming through.
A number of our costs, as you know, are denominated in euros and rands, and when you convert that to dollars, it does have a negative impact. Under fixed costs, we did have the Somerset shut in the quarter coming through, and then you have your annual increases as well on labor. So all in all, a substantially lower level than last year due to the headwinds that I described. Moving to slide five, specifically on the major variable costs, the main categories. And I'm not going to talk to all quarters, but in more recent times, you can see that energy and wood costs have been rising, chemical relatively stable and lower, and pulp prices, as you know, lower. So that has helped us a little bit.
But unfortunately, because of the translation of these costs from foreign currencies into dollars, it does have an adverse impact on the overall cost of the group, and that's reflected inside these numbers. Turning to slide six, our net debt to adjusted EBITDA development. Because of the lower earnings and the impact of the currencies on our euro debt, it has meant that our ratio has increased to 5x. In absolute terms, our net debt is at $1,951 million. You can see, in spite of the difficult quarters that we're currently experiencing, you can see that we have managed to keep our net debt levels relatively stable over the last two quarters. Moving to slide seven, the maturity profile of our debt. Just to call out a few key elements. Firstly, under short-term debt, you can see we've got EUR 183 million reflected there in Europe.
I'm very pleased to say that after quarter end, we did finalise and sign, and ultimately the cash has flowed, a new EUR 200 million five-year term loan to replace that. Very pleased with that, and we got the support of the banks. We did swap that to dollars. Obviously, with the U.S. dollar weakness at the moment, we felt it was appropriate to swap that into dollars. We've done that. Another milestone at the same time has been the renegotiation of our RCF facility. Our drawings on that are reflected here under the 2027 box, the 117. As I say, pleased to say that we've signed a new facility, increased from EUR 515 million- EUR 550 million. We've got two additional banks, part of our syndicate. Very pleased with that. I think it reflects strong support from our banking partners as we move forward.
We did negotiate higher covenants with that, and that maintains our flexibility as we move through these challenging times. Moving to slide eight, the cash flow and CapEx. Well, firstly, on the cash flow, and it's really reiterating the point that I made earlier, that in spite of all the challenges, our net cash utilisation was only $3 million despite what we've faced. And then on CapEx, we've taken a very close look at all our CapEx expenditure as part of our Back to Basics initiative. We've removed any expansionary CapEx and fully focused on what is required for maintenance and regulatory purposes. And we've brought our estimate down for 2026 to $260 million. Moving to slide nine, and I've touched on a number of these themes. But just to reiterate a few points, as you know, we have a covenant linked to our leverage ratio.
The math on that is slightly different to the published balance sheet numbers that you have. So overall, the ratio came in at 4.9x for the quarter. As I say, that's within the revised covenants that we've negotiated. From a liquidity perspective, very pleased to say that we do have $143 million on hand. We've got RCF facilities that are undrawn of $680 million. So we believe that gives us adequate liquidity. And as always, and I think that's emphasized by our achievement to negotiate with the banks. We have very good relationships with our banks. They're longstanding. They understand our business. They know the cyclicality. They know where we are with the current macro challenges. And we stay close to them. We ensure that we've got maximum flexibility during this difficult period. The middle block here is what I've already talked about, so I don't intend repeating that.
On the right-hand side, you see a strong focus on Back to Basics, evidenced by our reduction in CapEx that I've talked about, substantially lower than it was last year, obviously, and we've removed any non-essential CapEx. Same time, we've got a number of cost-saving initiatives across the group, and we're targeting $120 million for the year. A lot of that's in Europe, but it is across each of the regions. Moving to slide 10, I don't intend going through. This is our Thrive strategy. The pillars are still relevant, and we continue to work across all of them. But it's fair to say that at this point in time, we're laser-focused on Back to Basics and getting through these difficult market conditions and ultimately resuming our reduction in debt. And there's a strong focus to reducing debt in the years ahead.
Slide 11 is a slide that we did include last quarter, just some of the strategic initiatives in Europe to rationalize the business and cut costs. Those initiatives are on track. Specifically, the consultation processes are now complete where labor has been impacted. At Alfeld, we have completed PM1 and PM4 closure, and similarly at Kirkniemi PM2. Those have been completed now, and the benefits from those will start flowing from Q2 onwards. Slide 12 has the joint venture with UPM. Back in December, we did announce this. I don't intend repeating everything I said on the results call that we had for this, other than just to reemphasize that we're very excited by this transaction. We think it represents a tremendous opportunity and ultimately will lead to reducing our exposure to graphic paper in Europe. We think there are substantial synergy opportunities, and it will help reduce debt.
So things are on track, and that probably leads into slide 13. Things are ongoing, and ultimately, we're working through finalizing definitive agreements. We're targeting to do that in the first half of 2026, secure and finalize the financing. And thereafter, we will take that to shareholders. There'll be a circular, and we'll vote on that. But generally, everything on track. The transaction's obviously subject to a number of suspensive conditions, the biggest one being the approval from competition authorities. We've been engaging with them. It's progressing as expected so far. It's early days, but we have teams working on that, and we'll update you when we do have progress. We're targeting completing the transaction by the end of 2026. Moving to the segmental. And firstly, on pulp, underlying volumes and demand for Sappi's Verve DWP continue to be good and solid.
I'm pleased to say that stability in South Africa's production has been good. Production at Saiccor, best it's been since we completed that expansion project a number of years ago. Operations are stable, and we're very pleased with that as all the work that's been done there. Similarly, North America volumes up. The big challenge, and I'm repeating what I've said earlier, it's the lower DWP prices, which is driven by overall pulp markets globally being at relatively low levels. You can see it's $160 lower than it was a year ago DWP. And then the exchange rates coming through. So those are the major impacts which impacted on the volumes. Packaging on slide 16. Volumes generally okay, albeit that North America, the ramp-up on PM2 is a little bit slower than we would like it to be. But generally, volumes is not the issue.
Global packaging markets are under pressure, which has affected selling prices in each of our businesses. That's the main issue at the moment. Specifically in North America, we had the shutdown, so that would impact on profitability in the quarter. As I said earlier, there was a couple of once-off utility power-related incidents at the two mills in the U.S., which impacted on our efficiencies and our usage of raw materials in the mills. Moving to slide 17, graphics. I don't think there was any surprises in terms of the market declines in graphics. It was about 8% in both Europe and North America, and that was expected. Specifically to our North American business, we obviously converted PM2, so that took our capacity out, and we had some production issues that I referred to earlier.
So that meant that overall, it did have an impact on margins in the North America region. Europe, volumes as expected, but pricing in that market has been under pressure linked to the excess capacity. I should have mentioned earlier that pricing in North America has been healthy with the tight market conditions following our conversion. Then moving to slide 18. There's a lot of numbers on this page. Just very briefly, just talking about each of the regions. Europe, as I said earlier, volume's holding up reasonably okay. It's a pricing issue linked to the excess capacity across both graphics and packaging. In North America, we had the shutdown in the quarter, which impacted on volumes coming out of Somerset, and there's one-off events that I referred to coming through, which overall impacted profitability. Selling prices down, that's not a graphics.
That's both the dissolving pulp and the packaging grades. And then in South Africa, very good volumes, but DWP selling prices dwarfs that performance. And you can see that selling prices overall 12% down on a year ago. On slide 19, just some of our ESG issues, a few to call out. Firstly, on the CDP, very pleased with our scores. We've seen an improvement on climate change, an improvement on forests. We're very proud of that. And also very proud of the awards that we or the recognition that we received from Forbes in terms of being globally one of the world's best employers and top companies to work for women. The annual report and the sustainability reports have all been completed, and they're all online for you to have a look at. Moving to the outlook on page 11, just to repeat, DWP volumes are okay and robust.
So demand is good, but it's a pricing challenge that we currently face. We're doing a lot of work on costs to take costs out of the business to help mitigate some of that impact. And then moving across to slide 22, strong focus on efficiencies in our Back to Basics and optimizing working capital with a longer-term focus, obviously, of reducing debt. So taking everything into account, our guidance for 2026 with the exchange rates where they're at at the moment and the DWP prices one thing I should have called out. DWP prices have increased in the last couple of weeks a little bit, but it is moving in the right direction. I do think exchange rates is playing a major role in that because, obviously, DWP prices are priced in U.S. dollars. So I think the fact that the U.S. dollar is weaker should help us as well.
But taking all of that into account, we anticipate that the adjusted EBITDA for the second quarter will be lower than what we've just reported for the first quarter. So, operator, I've gone through the presentation. I'm going to now hand it back to you for questions.
Thank you so much, dear participants. As a reminder, if you wish to ask a question, please press star one one on your telephone keypad and wait for a name to be announced. To withdraw a question, please press star one and one again. Please stand by. We'll compile the Q&A roster. This will take a few moments. And now we're going to take our first question, and it comes from Sean Ungerer from Chronux Research. Your line is open. Please ask your question.
Good afternoon, Steve. Can you hear me?
Yes, Sean.
Excellent. Great. See, just in terms of a couple of points around guidance, if you don't mind. So obviously, there's a $120 million cost-savings program flagged, I think, with $60 million in Europe, roughly. Can you just give it a little bit of color on the split for the balance? And then I guess just in terms of cadence across the regions, how would you think about that for the rest of the year? I'll start off with that. Thanks.
Sorry. Your second question, what across the regions?
$120 million cost-saving programs at a group level. I think you flagged $60 million for Europe specifically already. I'm just trying to get a bit of color on the balance, sort of how that split may be across North America and S.A.. I know, for example, headcount was done in S.A. in Q4, fixed costs down about 4%. And then just obviously, in addition to the split, just to understand the rollout of those fixed cost savings, how we should sort of think about it maybe quarter by quarter for the rest of the year.
Yeah. Thanks, Sean. I'll let Glen give you the split approximately across the regions. In terms of the split across the year, there was about $30 million in Q1, Glen, right?
Right.
The balance for the rest of the year is roughly even, roughly?
Even over the remaining three quarters here.
Yeah. Maybe the first question, you can talk about the regional split.
In terms of the regional split, so as you rightly pointed out, Sean, the bulk of that is in Europe. It's about a 60/40 split, 60%, 40% split as far as fixed to variable. And as I say, the bulk of that is coming out of Europe. There are variable cost usage variances, improvements in both North America and in South Africa. But that would be the split.
Yeah. But the split between it's more of us North America than South Africa.
Yeah. So it's about.
Of the balance.
Yes.
Okay. Great. Thanks, Steve and Glenn. Just to bring you on to the next question, just to understand sort of the defensiveness of the S.A. business, if the bulk of those cost savings are sort of more Europe and North America. I'm just trying to get a better feel of how S.A. business I think around 60% of volumes or capacity is dissolving wood pulp, right? And sort of if we're sitting at $805 for DP, 16 to the rand, I understand you obviously have quite a bit of volume ramp-up in Q1. I think volume's up about 37,000 tons year-on-year, which is great. I mean, you've obviously got some maintenance still coming up for two more quarters for the rest of the year. Is the incremental volume going to be enough to offset that? I mean, how should we be thinking about that?
Yeah. Look, Sean, I guess I'm repeating what I said earlier. Clearly, these exchange rates and these dissolving pulp prices are South African profits, are under pressure. We are targeting savings and costs, and Glen's quoted the numbers. On top of that, we do have initiatives underway which are not in those numbers for further opportunities which may help us further. So in summary, yes, the pressure will be on our South African business, our margins at these levels. That's fair to say. Glen, I don't know if there's anything you want to add.
Yeah. Obviously, proportionally, we have a very big exposure on both the exchange rate and the DP price. The combination puts it under enormous pressure. I think the biggest opportunity for us is in the operational efficiencies side. We have been steadily improving our productivity, but I think there's still more that can be done there. And that doesn't only give us additional volumes to sell, but I think can substantially reduce our variable cost of tons. And that's what we're working on, and that has the most significant leverage. But in the short term, very hard to offset that big move in the rand.
Brilliant. Thanks, Glen. And then I've got quite a few more, but I'll just ask one relating to, I guess, Europe and the JV. It says value. I mean, we've seen that industry's going to sort of sit and wait until, hopefully, the JV closes out, which I'm assuming means there's sort of limited pricing pressure on maybe a six to 12-month view. I don't know if you sort of agree with that. And then I guess secondly, linked to that, I mean, obviously, best-case scenario is that the deal does go ahead. But if it doesn't go ahead, I guess the question is, what sort of gearing levels are you happy to have on the balance sheet? And I guess what would be the solution around reducing gearing if the JV doesn't go ahead?
Yeah. Yeah. Yeah. Look, on pricing in Europe, as you know, selling prices have come under pressure in recent quarters. Yeah. I mean, our focus is obviously to protect those prices and ultimately look for price increases as we move forward. That's something we're trying to evaluate on an ongoing basis. Marco, anything you want to add on that?
No. This is now a period of time that has been lost for 18 months. So I think what we're trying to do is, besides the cost reduction Steve spoke about, the capacity reduction or readjustment towards growing areas is to maintain our margins. You're right, Steve. And whether that's through further reduction of variable cost and pressure on some of our cost categories or price improvement through bottom-slicing, plain price increases, or optimization of our portfolio, that is all a part of the game. But it's certainly currently not to be expected that it comes from a dramatically better market situation than what we're seeing right now and for the coming quarter.
Thanks, Marco. To your second question, if Europe doesn't happen, sorry, if our project with UPM doesn't happen, we need to look at all options. There's two aspects to your question. Firstly, on Europe itself, we would need to look at options to reduce our exposure to graphics in time. And we would need to look at our asset base. We would need to see if there were other alternatives for exiting some of that capacity. More specifically to your question on gearing, yeah, again, once again, those are options that I'm referring to. We'd have to consider ones where we could monetize and try to look at alternatives that can generate cash for us to reduce our debt. So that would be our focus. What I would say is you're assuming it wouldn't happen at all.
Clearly, there are scenarios in the middle that you want an outright approval, but there could be scenarios where there's approval with conditions. And those would be more likely than an outright rejection. And we would need to evaluate that at that point in time.
Okay. Awesome. Thanks, Steve.
Thank you so much. Now we're going to take our next question. The question comes from the line of Brian Morgan from RMB Morgan Stanley. Your line is open. Please ask your question.
Thanks very much. If I can just ask a question about balance sheet and stress testing and all of that sort of stuff. If we're in a scenario where in 12 months' time, the rand's still at 16 and DWP's still at $805, how does your liquidity situation look? Maybe, Glen, would we need a capital raise at that stage?
Yeah. I'll start, and then I'll let Glen come in. Once again, I'll point you towards the increased covenant levels that we've negotiated with the banks and the flexibility around that and the strong relationships that we have. So that gives us significant flexibility as we move through this, specifically to the capital raising.
So, Brian, we've got long-term relationships with our banks. And you've highlighted an issue there in terms of how volatile it is at the moment. What we're doing is we've got an open dialogue with them. We're keeping them abreast of what our forecasts are, and we're discussing with them what the progress is. So it's just an ongoing dialogue, and we're constantly updating it.
Yeah. So, Brian, what we're really saying is that we're not contemplating any capital raising at this point in time.
Okay. Asset sales, are they possible? I mean, you've spoken about the JV, but any additional asset sales outside of that?
Yeah. It's not something we're looking at immediately, but I guess you're talking worst-case scenarios. Obviously, we would have options there, but it's not something that we're looking at at the moment. We're focused on improving what we can control internally and working closely with our banks to ensure we've got maximum flexibility as we move through these challenging times.
Thanks. Last question, if I may, about $1.9 billion of gross debt. I'm trying to unpack from the numbers, and I'm struggling to do so, just how much of that is subject to covenants? Could you give us a ballpark?
Brian, our RCF is a pari passu with our bonds. So it's all linked to the covenants.
Sorry. What does that mean?
Our RCF is pari passu with our bonds, and our bonds are all linked to the long-term loans you referred to. So the covenants are linked to the full amount.
The RCF is with the banks.
All of it.
But because the banks are pari passu with the bonds, it would all fall to us.
Okay. That's perfect. Thank you.
Brian, that's normal. That's standard stuff.
Okay. That's perfect. Thank you.
Thank you so much. Now we're going to take our next question. The question comes from the line of James Twyman from Prescient. Your line is open. Please ask your question.
Thank you very much. So I've got two follow-ups and then one of my own. In terms of the covenants that we've got here, could you just talk around what the new covenant levels are with the banks and how long they are before the covenants go back to maybe the 4x net debt EBITDA that you're originally on? And then on the cost savings, so you've talked quite a bit about the $60 million of cost savings that you're getting from these big five projects you're doing in Europe. But I think it's a big positive surprise that there's another $60 million that you're now talking about that's coming from elsewhere. It would be great to get some more color on what projects these are because it's another very, very big number.
And then the third question, if I may, is these energy credits you're getting in Europe are becoming increasingly important. How much visibility do you have on where this goes in future years? I mean, is there a clear method that the E.U. uses to calculate them? And yeah, how much confidence do we have that this is something that is sustainable because it's obviously risen quite substantially? Thanks.
Yeah. On the covenant level, we don't give the specific number. But in terms of the levels, there is quite a bit of headroom above where our current debt levels are at. And we've negotiated in terms of the new covenant. Once again, we don't give the specific levels, but we've elevated it for a significant period of time. It's not just for a couple of quarters. It's for a significant period of time. Glen, do you want to take the cost savings in the other two regions for the remaining 60%? Yeah.
Sorry. Just in terms of the 60% on the.
Sorry. The $60 million other savings on cost savings that are part of the $120 million.
It's all linked to your variable costs and your fixed costs. So as I said, I've split that between the 60% variable costs and 60% fixed costs and 40% variable costs. The bulk of that is in Europe. And then going into the bulk of that 60% on the fixed costs comes out of the capacity reductions that we have in Europe.
But the portion that's not Europe is there are fixed cost savings there. So there are headcount reductions, and there's operational efficiency improvements. We've had some negative usage variances. And then on the procurement side, we've been able to target some new initiatives to save on raw material costs. And when Glen talks about the 60/40, the fixed cost is obviously predominantly headcount, and the variable cost is on the usage and the raw material costs. And then your third question, the energy credit—look, it's a good question. It's not just Sappi. A number of industry players have been getting these credits. And really, what they're for is you incur higher energy costs during the year, and the various countries in Europe recognize that, and they give you refunds. It's been ongoing for some time, and by all accounts, it's expected to increase—sorry, to continue.
We believe it will be there in the years ahead. There's no signal otherwise, James.
Okay. Thank you very much.
Thank you, dear participants. As a reminder, if you wish to ask a question, please press star 11 on your telephone keypad and wait for a name to be announced. Now we're going to take our next question. It comes from the line of Brent Madel from Absa. Your line is open. Please ask your question.
Yeah. Thanks very much. If I could maybe just ask a question around the UPM or the proposed UPM transaction? Are you able to give us an update as to where we are in the process with regards to the JV sourcing funding to complete the transaction? Are you able to give us an update on that?
There's nothing new to say other than it's an ongoing process. It's working in parallel. Ultimately, we've appointed lead banks, and we've got strong commitment letters, well, we've got strong letters of support from them. We're busy finalizing the agreements with UPM. As part of that, sharing our numbers with them, and they're doing their assessments. So it's progressing as planned, and it's something that we expect to finalize at the time of signing the agreements with UPM.
All right. Thanks very much.
Thank you. Now we're going to take our next question. And the question comes from the line of Detlef Winckelmann from JP Morgan. Your line is open. Please ask your question.
Hi, guys. Just a very quick one on consumer board. Obviously, trying to ramp up Somerset into what is quite a weak and oversupplied market right now. And I did pick up that you're looking to, well, that you ramped up a bit slower than what you expected. Seemingly, it doesn't look like the oversupply is correcting in any way. So I'm just trying to work out, I suppose, one, how you envisage that ramp-up going in the next, I don't know, year, year and a half while this oversupply persists. And then secondly, we have seen some price cuts more recently on SBS. I understand that SBS pricing's a little bit more closer to some of the other substitutable grades. But are we seeing any price pressure in those substitutable grades yet that kind of erodes that benefit for SBS? Thank you very much.
Thanks, Detlef. Yeah. In terms of the ramp-up on PM2, there's a number of dimensions which we can talk about. And I'll hand over to Mike just now. But just firstly, we are ramping upwards. Interestingly, we did have a couple of existing customers that had their own challenges, and they actually had less volumes in the quarter. In terms of signing up new customers, we are seeing positive progress, not quite at the levels that we originally anticipated, but it's better than the underlying overall volumes appear because those other two existing customers had some challenges. As we look forward to the year, there's a lot of good positive news coming out in terms of signing up customers and the volumes increasing. It's not at the levels that we originally anticipated, but we are anticipating substantial improvements. Mike?
The only thing that I'd kind of add to that is some of the new products have taken a bit longer with qualifications at the customer's plants. That's specifically when it's some of the smaller customers. We are not seeing erosion in some of the competitive products as of yet. You asked that question. The other thing that we have been doing is expanding geographies, and that has been working pretty well for us. There's a number of new opportunities. It's been a qualification along with the kind of bit of a challenging demand. We also are making graphic grades on PM1, as that machine can swing. As that market can absorb volume, we're also using that tool.
Thank you. And then if I can do one more follow-up. I mean, obviously, with your ramp-ups still ongoing, you mentioned maybe some qualification delays but not necessarily bad demand for your products. I'm curious as to whether the pricing discipline has been maintained or whether you managed to get these new contracts just by undercutting the market? Just curious on that. Thank you.
I'll offer what I can. You're asking me a specific pricing question. That's not something we typically get into the detail on. The price decline in the market happened before PM2 even became had a commercial product to offer. That has been a bit of the challenge. The other thing that I'd offer is that there has been some dynamics around imports as imports make up about 500,000 tons in the SBS or board grades into the U.S. That's been kind of a bit of an on-again, off-again kind of thing based on tariffs and other things that are happening. There's been other price pressures. I think that's the best I can offer you there.
Yep. Thanks very much.
Okay. Detlef.
Thank you. Now we're going to take our next question. Just give us a moment. The next question comes from the line of Andrew Jones from UBS. Your line is open. Please ask your question.
Hi, Jens. Thanks for the chance. Actually, I think Detlef beat me to that question, but I'd just like to just dig on that a little bit more. Can you just give us some numbers around your utilization on the mill and how it evolved through the 2025 period at Somerset? And I mean, give us some numbers around your expectations for the speed of a ramp going forward. And also just a bit of a follow-up. I mean, the sort of customers that you're selling into, I mean, I guess, are they buying from European suppliers? Have you seen any impact from tariffs or currency moves, etc., in terms of those suppliers being pushed out or any change in the import dynamics that you could talk to?
Yeah. Let me take the second part of your question first. There's no doubt that the tariffs that have been placed on the European importers into the U.S. has helped. So although overall market conditions are generally difficult, the fact that those have been introduced is creating opportunity with potential customers for us. That is a support for us. In terms of the ramp-up, as you know, we talked earlier on earlier calls like this that by the time we got to the end of Q4 next year, we'll be close to full-on the machine. It's fair to say, because of what we've described, we're tracking behind those levels. I can't give you a specific number, but the machine is still, by the time we get to Q4, is going to be significantly fuller than it is currently.
It might not be 100, but it will be at substantially higher levels than current levels.
The only thing I'd add to that is when you're starting up a new machine, there's an expected ramp rate that's less than full capacity. And the ramp in our CapEx was expected to take over three years. The OEMs of the machine are moving forward really well, and the quality off the machine is moving forward really well. Part of our offering into the market is more of a long game with relationships and product attributes that because of the equipment we have, we can bring consistency and other attributes that aren't necessarily engineered into the other competitors' assets. So lots of work going on. I'd say that tariffs at times have opened doors for us. That was the other question that you asked.
Thanks, Andrew.
Thank you. Now we're going to take our next question. It comes to the line of Shubham Agrawal from BlackRock. Your line is open. Please ask your question.
Hey, hi. Can you hear me?
Yes, we can hear you. Thank you.
Yeah. So I have a couple of questions. So to start with, first, on RCF, can you help us remind, is the RCF availability full, or do you have some leverage covenant on that?
Sorry, was that the RCF?
Yes.
Yeah. I think you're asking how much have we utilized. I think it was about $100 million. That's right. It's just over $130 million. Yeah. And we have available $600 million net at the end of the quarter. I think that's what you were asking, but maybe I'm wrong.
Is the RCF fully available, or do you have any leverage covenants on that?
It's fully available.
Do you have any restriction?
It's fully available.
Okay. Okay. Okay. The second question that I have on the unplanned disruption that you have seen in the quarter, can you give us some additional detail on that? I understand you have already said on that, but yeah, any additional color would be really helpful.
Sorry. I'm sorry.
Disruptions in the quarter.
Oh, it's the disruptions in the, oh, more color. Okay. I'll let Mike. We don't want to go into too much detail, but we had two specific one-off incidents which impacted on our utilities. As I said, they're behind us. But Mike, do you want to share a little bit more on that?
Certainly. So the two big mills, Somerset and Cloquet, each of the mills ended up with a utilities event in summer that it was a steam supply issue that ended up running close to two weeks that impacted machine performance and costs while we were repairing that. In Cloquet, we had a disruption of the power supply into the mill right at the Christmas time where we ended up with over a week of downtime there as we were bringing the utilities back online and getting everything back up and running. That whole event was exacerbated by really cold temperatures. Everything's back up and running now, and we put corrective actions in place to prevent reoccurrence.
Okay. Okay. Yep. Thank you.
Thank you. Now we're going to take our next question. The question comes to the line of Saul Casadio from M&G plc. Your line is open. Please ask your question.
Yes. Hi. Thanks for taking my question. I just have a couple of really brief ones. Can you give us the spot price of DWP? I don't have the pricing data anymore, so I was wondering whether you can provide that.
Yeah. Today, as we speak, it's $805 a tonne.
Okay. Okay. Thank you. The other question is just a clarification because you said the RCF is pari passu with the bonds, which is normally senior versus the bonds. So I was wondering whether there's something specific in the structure whereby the RCF is pari passu with the bonds. So try to better understand this if you can clarify this point.
Just to clarify that, there are actually cross-default provisions on that. So the covenants themselves only apply to the RCF and an OeKB loan. But in the event that there is a default, then the bonds then share in pari passu on any default, if that clarifies it.
Why is that the case? Because normally, banks would try and get a super-senior position with the RCF. Why not in this case?
Sorry. Could you just repeat that, please?
I mean, what I'm saying is it is a bit unusual. Normally, the RCF is senior, has a priority in case of, let's say, default, it gets repaid first. But this doesn't seem to be the case in your capital structure. I wasn't aware of this. And yeah, I'm just trying to clarify. Normally, the banks can take security ahead of the bonds. They normally do that.
No, it's as I described it. Yeah. And I guess if there's more clarification, we can take that offline.
Okay. Okay. Thank you.
Thank you. Now we're going to take our next question. The next question comes to the line of Yandisa Peters from Mthombo Wealth. Your line is open. Please ask your question.
Hi. Thanks for taking my question. Just a few. First one, you've had a bit of working capital releases the last two quarters. Just your expectations for the rest of the year in terms of absorbing or releasing from here. And then secondly, in terms of those one-off events in the U.S., you quantify the hit in terms of the call it the maintenance closure you had. Could you maybe take just the order of magnitude step in terms of what the potential one-off hit was there in EBITDA terms? Thank you.
All right. In terms of the working capital, you're right. There was a release in the current quarter. For the year, we anticipate a release as well for the full year.
Yeah. On the second one, a lot of the impact, as I mentioned when I was going through the deck, aside from the lost production, is you have inefficiencies and negative usage on the mills. The approximate impact of these is about $10 million.
Thanks so much. Much appreciated.
Thank you. And now we're going to take our final question for today. And it comes to the line of Raphaël Parienté from Montpensier Finance. Your line is open. Please ask your question.
Hey. Thanks. Do you hear me?
Yes.
So a couple of questions from me. The first one, I just want to understand. So you lowered your CapEx guidance from $290- $260 for the full year 2026. I wanted to know to what extent it could be lowered and what are your mandate CapEx and what is the level you could not go lower for this year. The second question is for the hardwood DWP prices. It seems that for a certain time in 2023, I think that the prices were also around the 700s-800s, and then it rebounded. So I wanted to know if we should see the $700-$800 prices for DWP as a low level that can only maybe go up. And the last one is I want to understand what changed because you so basically, your guidance was for Q1, so the plantation fair value adjustment to be positive.
In the end, it was negative. So I think that it means that there was a much higher decline in wood prices in South Africa than what you expected. And just maybe what you're seeing about that.
Yeah. All right. Firstly, on CapEx, yeah, we've taken a very close look at our CapEx levels. And as I say, we've eliminated anything that we regard as non-essential. You're asking, can it go down further? I don't think so. I think that's our best estimate of what the CapEx will be for the year 2016. The DWP, you are right. Back a couple of years ago, the dissolving pulp price was at those lower levels, but there's very different other macro factors. The dollar was worth a lot more than it is today. And a lot of the producers, with the currency shifts, it's put them under more pressure. So all of us have a desire to increase selling prices. And I think that's what's given a little bit of traction in the last couple of weeks. The conversations and I'll let Mohamed chat a little bit about it.
But all the pricing discussions are around currencies and its impact on currencies. And that's the focus of attention in China at the moment. Mohamed, maybe you just want to elaborate further.
Yeah. Steve, just on the currencies, you mentioned that the supply-side currencies, in terms of the real, the Chilean peso, and of course, the rand, is all strengthened. So there's a desire across the board to get the dollar price up. But on the buying side as well, we've seen a strong appreciation in the renminbi. So that makes affordability by the buyers for higher U.S. dollar prices easier. And if you just look at where the renminbi price of dissolving wood pulp has moved over the last year, it's gone from about 7,000-7,500 CNY early last year to today, around 5,500 CNY, just purely because of exchange rate. So that is definitely, I think, providing support and incentive for higher U.S. dollar prices.
Yep. And then I think your last question, you were asking about the plantation fair value adjustment. There was a further negative impact in the quarter. As we move forward for the rest of the year, Glen?
We're anticipating for the rest of the year, it's going to be, there are going to be further negative adjustments. That's because it's a rolling four-quarter valuation, and you've still got the lower pricing coming through in our fair value adjustment. You should see further negative adjustments coming through.
Perfect. Thanks.
Thank you. That's all for the questions for today. I would now like to hand the conference over to our speaker, Steve Binnie, for any closing remarks.
Once again, I'd just like to say thank you to everybody for joining us, and we look forward to discussing our results with you in three months' time. Thank you very much.
This concludes today's conference call. Thank you for participating. You may now all disconnect. Have a nice day.