Good morning everyone and welcome to Empresas Copec's Second Quarter 2025 Results Conference Call. Today's presentation and the second quarter 2025 earnings release are available on the company's Investor Relations website at investors.empresascopec.cl. Before we begin, I would like to remind you that this presentation may include market outlooks and forward-looking statements which are based on the beliefs and assumptions of Empresas Copec management and on information currently available to the company. They involve risks, uncertainties, and assumptions because they relate to future events and therefore depend on circumstances that may or may not occur in the future. Investors should understand that general economic conditions, industry conditions, and other operating factors could also affect the future results of Empresas Copec and could cause results to differ materially from those expressed in such forward-looking statements. This presentation contains certain performance measures that have been adjusted with respect to IFRS.
Definitions such as EBITDA. In this opportunity, questions will be received in written form. If you have a question, please write it down in the Q&A section. Please be aware that your company name should be visible for a question to be taken. I'll now turn the call over to Mr. Rodrigo Huidobro , Chief Financial Officer of Empresas Copec. Please go ahead, sir.
Okay, good morning everyone and thank you for joining us today in this conference call where we're going to be taking a look at the results for the second quarter 2025 for Empresas Copec. I'm going to flip through the presentation. It's a brief presentation, roughly 20 minutes - 30 minutes long, and then we're going to open it up for the Q&A session. At that point in time, I'm going to be joined by Mr. Gianfranco Truffello and Mr. Cristián Palacios from Arauco and Empresas Copec respectively, and they will be helping us out with any questions you might have at the end of the session. Having said all that, let me begin flipping through the presentation that we have prepared for you.
Let me move towards the first page, which is sort of an executive summary with the main figures and the main developments for the quarter. We recorded an EBITDA of $712 million for the second quarter 2025. This is 7.5% below the comparable quarter 2024, driven essentially by a lower performance in forestry and offset to some extent by a very good performance in energy. Energy in general has been doing very well during the last few quarters. You can see the main factors there year-on-year. We have higher volumes at Copec, very strong commercial performance at Copec. Likewise for Abastible, where we have seen higher volumes basically all across the board. In all geographies, we have seen a growth in volumes with the exception of Chile, in particular for particular reasons here in Chile.
Together with that, we are consolidating the results of the recently acquired company in Europe, Gasib. QoQ, we have a drop with respect to the first quarter 2025, which was an exceptional quarter, actually one of the quarters with the largest EBITDAs in the history of Copec. Compared to that, we had a drop driven by low industrial margins, unfavorable inventory revaluation effects, and also decreased volumes because of seasonality in Chile. Regarding forestry, we had a drop year-on-year and QoQ. Year-on-year, we have lower pulp prices. As you know, pulp prices during this year have been quite low. This was partly offset by a good performance at the wood division. Likewise, QoQ, we have lower pulp volumes, which is also partly offset by this performance in the wood segment. In terms of the main developments of the quarter, we take a look at the progress in Sucuriú.
This is already reaching 13.2%. Good news. Regarding our risk ratings, we were confirmed by Fitch in our BBB international rating and our AA local rating. We have continued to place bonds in the local market once again with a very good issuance recently in the local market. Regarding ESG, we continue to make progress in electric charging services terminals for city buses, this time in Concepción in the south of Chile, a large city in the south of Chile. Copec continues to make progress in its battery energy storage system in northern Chile, linked to its Granja Solar project. Some more detail on all of this to follow. The main figures for the quarter are shown on screen there. The EBITDA, as I said before, $712 million, which is down with respect to both comparable quarters.
The net debt to EBITDA is standing at 2.9, still within the desired ranges and within the expected ranges, with an upward trend because of the investment that we are going ahead with at Sucuriú. CapEx is up to $591 million, out of which most has been devoted to the forestry sector because of the Sucuriú project. Pulp EBITDA is down because of lower pricing scenario. Wood products EBITDA doing quite well at $138 million. Copec and Abastible also performing very well and Mina Justa with a very good quarter as well. If you see the evolution of EBITDA and net income there, you can see EBITDA standing at $712 million. Net income at $228 million. Both figures are pretty much in line with what we had been recording over the last few quarters.
If you take the accumulated EBITDA as of June this year, for the first semester this year we have $1.5 billion approximately, which is in line with the $3 billion figure that we have communicated as a mid cycle figure for the company. Pretty much in line with what we were expecting so far. There are some additional financial figures there. On screen you can see cash holdings at $2.7 billion. Quite significant cash holdings together with that, a good balance of maturities for the years to come. Net debt to EBITDA standing now at 2.9. As we can see there, we have an upward trend because of the investment that is being made in Sucuriú essentially. This is something to be expected, still at very healthy levels and within our desired range and our project range as well.
In terms of debt by company and by type, you can see that the debt is very well distributed among our different subsidiary companies, all of them complying with their respective financial policies. In terms of type of debt, we have bonds, we have bank debt and other kinds of debt as well as usually we like to keep all financing channels open, especially for times of high investments such as the one we're facing now. In terms of financial ratios and returns, you can see EBITDA margins and return on capital employed pretty much in line with what has been the case for the last few quarters. So roughly 10% margin for EBITDA and roughly 9.5% for return on capital employed. Let us dig further into the forestry division. Some further detail on forestry showing on screen there.
Arauco recorded an EBITDA of $355 million for the second quarter 2025, which is down with respect to the comparable quarter 2024, driven of course by the lower pulp price environment, but partially offset by increased pulp volumes with respect to the second quarter 2024 and a good performance as we said before in the wood division, driven by higher volumes and prices for sawn wood. Together with that we are seeing lower unit selling costs basically across the board for the different fibers. Some more detail on pulp there. Pulp has recorded an EBITDA as informed by our subsidiary Arauco, an EBITDA of $259 million, which is pretty much in line with the previous quarter, but of course quite significantly down with respect to the second quarter 2024 because of the lower price scenario.
Regarding selling costs, you can see that year-on-year there's a drop in costs basically all across the different fibers. QoQ we have a drop in bleached softwood and dissolving pulp offset to some extent by a very slight increase in bleached hardwood and more significant increase in unbleached softwood because of the maintenance that took place at our Constitución mill during the quarter. In terms of prices and volumes, you can see there that prices are 12% down with respect to the second quarter 2024. Volumes are up. However, prices are up with respect to the first quarter, but volumes are 12% down with respect to the first quarter 2025. Some comments regarding the situation for pulp during the quarter: we had a quarter basically of low prices mainly in short- fiber.
Long- fiber also trended somewhat down but continued to be way above with a significant gap with respect to short- fiber. In China in general, we have seen an active market with quite a lot of demand, but at the same time a lot of cautiousness from the paper buyers and also a lot of supply coming on stream. The bottom line is that prices have remained weak during the quarter. In Europe, we have seen a slightly different situation with demand that is not strong, and we have also seen lower consumption in nearly all fibers in Europe together with quite a strong presence of supply in the different fibers. In spite of some mill closures, we have seen downward pressure on prices in Europe in general in terms of this falling pulp.
Basically, a lot of uncertainty is stemming from the trade situation around the world and cautiousness on the side of buyers. That has also contributed to downward price pressure. The outlook for prices going forward is that we continue to see a weak environment for prices. However, there are some signals that prices could be reaching a bottom and some potential positive signals in terms of a potential beginning of recovery going forward, with some room for further drops in prices in terms of long- fiber. Local demand in China continues to be active, but buyers continue to be cautious and therefore we witness this general sensation of weakness and cautiousness expected to continue for a while. Some seasonality factors could begin to show some positive effects.
In Europe, we continue to see a weak situation as well with low demand across the board for different fibers and also a lot of supply. In general terms, we continue to see the tariff situation around the world continue to bring uncertainty and therefore to bring some downward pressure on prices. You can see the pulp prices, the net Arauco pulp prices in China standing around $500 or $510 for the last few weeks. That compares to $720 for long fiber and $800 approximately for dissolving pulp. Let me move to the wood products. As we said, we reported a good EBITDA here, $138 million, which is a little bit above the historic levels. In line with historical average, but a little bit above. This has been driven by good performance in terms of volumes and prices.
In general, we can see prices increasing a bit for panels and volumes decreasing year-on-year, but showing stability QoQ, and in terms of volumes for solid wood, increasing QoQ and year-on-year. All in all, a good EBITDA in terms of wood products. Looking at our main markets here, you can see North America, which is 50% of our total sales. In general, uncertainty and cautiousness. Once again, we are seeing for most of our products some oversupply and some price pressures. That's the case for MDF, for example, the case for particle boards as well. In the case of remanufactured products, the markets have been affected by higher interest rates and consequently a lower index of housing starts. However, in the case of plywood, we have seen a strong market which could continue showing stability and strength, solid demand and eventually an upward trend in prices.
Probably in contrast to the North American market, we are seeing a stronger situation. Sorry about that. We are seeing a stronger situation in our main markets. In LatAm, Brazil is showing a stronger market and we could expect that to follow for the next few months. Stability in volumes and also some potential price increases. In the case of Chile, we still see uncertainty in terms of construction and therefore uncertainty in wood products, but we have been able to go ahead with some price hikes. In spite of this uncertainty in demand, some particular product lines, such as particle boards and plywood, are performing well. Argentina shows a very strong potential, but still a lot of uncertainty and demand volatility, which makes it a challenging mode. Let me move on to energy. Energy has been performing quite well over the last few quarters.
You can see the consolidated EBITDA for Copec there standing at CLP 255 billion, which compares well with the CLP 236 billion that we recorded in the second quarter 2024. Of course, it is a drop with respect to the first quarter 2025, where we had an exceptional figure, probably one of the highest figures ever for Copec. QoQ , we see higher volumes in Chile, very strong commercial performance in terms of increasing volumes. This is to some extent offset by unfavorable inventory regulation effects and also a lower industrial mode, but all in all a very good performance at the consolidated level. Some further detail on the commercial figures are shown there on screen. In terms of gas station volumes, they are up by 4.3% year- on- year, which is a very healthy figure.
In the case of the industrial channel volumes, it is up by 13.7% year- on- year and pretty much in line with the also very high figure that we recorded in the first quarter 2025. A very good industrial performance. Let me remind you, this is a volatile segment. It depends on the different bidding processes that we are able to win. In this particular case we have been very active in terms of mining clients and that has brought about this very important growth. With respect to the figures last year, solid performance in general in Copec, very solid positioning in both channels. Likewise in the case of Terpel we continue to see very strong figures. The EBITDA is up to COP 433 billion, which is slightly down with respect to the figure last year which was COP 463 billion, but still at very good levels.
The drop is driven basically by high distribution administration costs and an unfavorable inventory and regulation effect, which as you well know tends to be very volatile. This is offset by a solid commercial performance. Higher volumes essentially driven by Colombia and Peru. Also, what has been a common factor over the last two or three quarters is the very good performance of lubricants. Lubricants is a segment that has performed very strongly following the acquisition of the operations of the Akzo Nobel model that we went ahead with some years ago and that is already maturing and bringing about very good results.
As you can see in the evolution of EBITDA, Terpel has shown over the last eight quarters or so in a row, a very high level of EBITDA generation driven by essentially a very good logistics optimization together with the strong performance of the lubricants segments and in general a very solid commercial performance. There's a higher non-operating income as well in Terpel worth mentioning. In this particular case we had a one-time write-down of the assets that were held for sale in Ecuador last year in the second quarter. That's a one-time negative effect that we had last year which is not there anymore during this quarter. Moving on to Abastible, another company that has shown solid performance across all geographies. In general during the last few quarters we have better volumes basically across all geographies with the exception of Chile because of higher temperatures essentially.
Strong performance in terms of growth of volumes in Peru, Ecuador, and Colombia. Together with that, when comparing with the second quarter 2024, we are seeing for the first year the consolidation of the Gasib operations in Spain and Portugal, which obviously contribute significantly to the consolidated EBITDA. All of that is more than offset by higher taxes, which leads to a lower net income actually during the quarter when compared to second quarter 2024 because of higher taxes driven in this particular case by particular foreign exchange effect. Looking at the operational figures for our team for different geographies, you can see that in general we have been recording very strong volume growth in the different geographies. 9% up, very strong in Colombia, which is basically associated with a very good pricing strategy in the bulk segment.
In the case of Ecuador, we also see a strong 9.9% increase in volumes driven essentially by the bulk segment with the substitution of other types of fuels. In the case of Peru, also a strong growth, 13.6% in this case, 13.6%, very strong. That is driven by growth in the poultry industry, which is a strong industry in Peru, also coupled with substitution of other types of fuels. All of that to a certain extent offset by Chile, where we had a drop in the bottle segment essentially following higher temperatures during the winter. In Spain and Portugal, the Gasib operations have been doing very well actually with higher margins than expected because of regulatory issues and also higher volumes than expected because of both lower temperatures for the season and also higher volumes because of, once again, other substitution of other types of fuels.
We can see the new company performing very well for Abastible. Moving on to other investments. A couple of comments to make here. Sonacol, very stable company, very solid, with a net income that is in line with volumes transported by the pipelines with a slight increase with respect to second quarter 2024. Our fishing division Igemar, hit by lower prices and higher costs for its main products. Metrogas, showing quite a significant decrease in terms of net income recorded for the quarter. That has to do with a one-time effect, a one-time positive effect that we record in second quarter 2024, which had to do with an update or a reference reversal of a provision for a lawsuit that we had with a supplier in Argentina. Dating back to the years of the natural gas supply crisis with Argentina, this lawsuit was finally resolved.
At this point in time, the second quarter 2024, we went ahead with this reversal of the provision which yielded a very strong positive result. That of course is not there in this quarter, quarter 2025. AGESA from Natural Gas, the trading company from natural gas, the wholesale trading company with a very stable net income for the quarter. Mina Justa with a very strong performance in the quarter. EBITDA was $225 million and net income of $139 million for the quarter. This has to do with an increase in physical sales, also with a very strong pricing scenario and also particularly with low cash costs stemming in this particular quarter with a very strong presence of byproduct credits, essentially silver, very strong presence of silver which is credited against the total level of cash costs. That's why you see a low $1.30 per pound cash cost there.
That has to do essentially with this presence of very strong presence of silver during the quarter. Very good performance by Mina Justa. Main developments during the quarter, Arauco has been making progress in Sucuriú. The Sucuriú project is already standing at 13.2% progress as of June. A good figure of progress for Sucuriú. 4,800 workers on site already out of a total of more than 14,000 employees that are expected during the construction phase and around 6,000 workers when fully operational. For the project, works have begun at what is called the balance of plant, which have to do with the associated infrastructure for the auxiliary infrastructure for the mill, basically pipe racks and chimneys. Also, work has begun on the water and effluent treatment plants.
Regarding plantations, still making progress and already secured more than 70% of the required total forestry land that's already in place and the wood supply for the first few years of operations is already secured as well. Finally, both the authorization is in place, the regulatory authorization and an agreement designed with a logistics operator for transporting the pulp by railway to the Santos port. All in all, good progress for Sucuriú. Another piece of good news here, Fitch confirmed the ratings for Empresas Copec, the risk ratings for Empresas Copec, BBB International and AA locally, both with a negative outlook and highlighting the robust credit profile of Empresas Copec and its subsidiaries. Good news here.
In line with that, we have continued to issue in the local market, this time with a $54 million bond that was placed with a maturity of 21 years, a rate of 3.4% on top of the UF, which is the inflation-linked currency in Chile. This means a spread of 85 basis points on the base rate, which is one of the lowest corporate spreads that has been achieved during the year. This is basically to refinance liabilities in our subsidiaries. Moving on to ESG, we have continued to make progress in terms of our positioning in electromobility. One of the pillars here is being the most important actor in the supply of electricity for city buses. That's exactly what we've done with the inauguration of a new terminal, this time in Concepción, which is a large city in the south of Chile.
The first electric terminal for public transportation in Concepción has been carried forward by Copec, which is also supplied in terms of the electric power supplied by EMOAC, which is also a subsidiary of Copec. Arauco has joined an international task force here to go ahead with a standard for the valuation of natural assets. What is being done here is a pilot plan which seeks to come ahead with a framework for a standard for measuring and reporting the value of natural assets. This is being done in conjunction with Capitals Coalition and also with TNFD, which stands for Taskforce on Nature-related Financial Disclosures.
It's a very serious effort by Arauco and other institutions in order to be able to quantify, in a standard form, the benefits provided by forests, which, as you well know, are many environmental benefits such as carbon sequestration, carbon capture, biodiversity conservation, water regulation, timber production, and so on and so forth. Interesting initiative here for standards of valuation. Copec continues to make progress in its positioning in the electrical power generation segment. This is a battery energy storage system that is carried forward together with Transelec. It is 64% complete already and it is linked to the Granja Solar asset that Copec acquired last year. This will allow Copec to inject in a steady and stable form a total capacity of 105 MW. This is expected to start in 2025. Finally, an invitation here for the investment community.
All investors are more than welcome to the new edition of our Investor Day. We have already set the date for the 19th of November. This is going to take place at Club 50. Club 50, which is right next to our corporate headquarters here in Santiago. Please save the date and all the investors are more than welcome to attend this new edition of our Investor Day. Having said all that, let me open up the floor for Q&A session. let me ask Cristián and Gianfranco to please join me. Thank you.
Thank you. We'll now start the Q&A. If you have a question, please write it down in the Q&A section. Please remember that your company name should be visible for a question to be taken. Please wait while we pull for questions.
Okay. Hello everyone. Thank you for attending this webcast. I'm going to start reading the questions here. I have Emerson Vieira, Goldman Sachs. This goes to Gianfranco . Can you please comment on the lower pulp volumes recorded in the second quarter and what was the production due to the stoppages at Constitución?
We had about 11% lower sales volume in the second quarter and that was basically because of market conditions. There was a softer market during the second quarter and we were more, let's say, advanced selling in the first quarter. That's why the volumes sold were lower. The production levels were similar, as you can see, at about 1.1 million tons. Basically, the market increased inventories a little bit. We started selling more normal volume at the end of the quarter. In terms of Constitución, there was a normal annual program stoppage for the mill. Normally, the stoppages are focused on 20, 21 days. It's a normal stoppage of production. We have a program that lost production because of an annual stoppage. No big impact in our plans or in our target production for Constitución.
Can you comment on urban sales land if you are planning to have another move like that going forward? What measures are you considering because of the increased leverage in this high CapEx space because of Sucuriú?
Normally, we are selling land that has a higher value for urban uses. In this case, it was in Brazil, in Curitiba. We used to have a particle board mill, Curitiba original, that we bought that was closed many years ago. We had some land that was very attractive for other uses, and we sold that. I think it was like $20 million with a profit of $15 million. It's a small amount, but it's a lot of value creation by other uses of that land. It was inside the urban perimeter of Curitiba, so nothing to do with forestry or whatever. In terms of alternatives for decreasing leverage, of course, we are always analyzing what type of divestitures we can do to decrease leverage. We did last year a big divestment of land and forest.
We are not planning to sell more land in big amounts, but we could do some selling of forestry assets, biomass, standing trees with a contract to repurchase probably in the future in order to decrease leverage. We are thinking about that. We haven't done anything yet, but that could be done in case necessary to increase liquidity and decrease leverage.
Thank you, Gianfranco. We have Tathiane Candini, she's asking about the bulk market. Some players are planning to and announce some price increases for this month. Is Arauco, [willing] to share this view on a better market and if we're going to announce also follow a price hike?
We heard that one competitor in the market has announced, I think, it's like a $20 increase in the HKP price. We haven't taken a decision yet. We are already a little bit above the price of the competitor. We were at $510, I think, the last price. I'm not aware of the negotiations of prices that are happening at this moment, so I cannot comment on that. It's good news that the competitors are trying to increase prices. The volumes, the demand is good. As long as prices can start increasing, it's good news, but haven't decided anything yet.
The second question about the Sucuriú project, Arauco should have an additional CapEx of around $1 billion because of logistics. We have an agreement already with the project.
No, I mean the logistics part is lower than that. Probably you are adding all the forest and everything that we have been doing for all these years. Our intention is to share the CapEx of the logistics part. We are in the process of looking for a partner for a potential JV to hold the logistics assets, which are basically the terminal in Port of Santos and the rolling stock, the wagons and locomotives associated with the transportation of pulp from the mill to the port. We are in the process of that and our intention is not to invest the whole amount ourselves but to share the investment because we want to concentrate on the construction of the mill and we think that we will find a good partner. Sharing the risk of the logistics part will be beneficial for both of us.
We are in that process and probably we'll have some news at t he end of the year.
Okay, I don't see more questions at this moment.
So.
Okay, this does conclude the Q&A section. At this time I would like to turn the floor back to Mr. Rodrigo Huidobro for any closing remarks. Please go ahead, sir.
Okay, thank you all very much for attending today and we'll see you again at some point around mid-November to take a look at the results of the third quarter. Thank you very much, have a good day. Bye. Thank you.
This does conclude today's presentation. You may disconnect now and have a wonderful day.