9M23 Results 18

31 October 2023

Global ESG

score: 90/100

Disclaimer

The information contained in this presentation has been prepared by Ence Energía y Celulosa, S.A. (hereinafter, "Ence").

This presentation includes data relating to future forecasts. Any data included in this presentation which differ from other data based on historical information, including, in a merely expository manner, those which refer to the financial situation of Ence, its business strategy, estimated investments, management plans, and objectives related to future operations, as well as those which include the words "anticipate", "believe", "estimate", "consider", "expect" and other similar expressions, are data related to future situations and therefore have various inherent risks, both known and unknown, and possess an element of uncertainty, which can lead to the situation and results both of Ence and its sector differing significantly from those expressly or implicitly noted in said data relating to future forecasts.

The aforementioned data relating to future forecasts are based on numerous assumptions regarding the current and future business strategy of Ence and the environment in which it expects to be situated in the future. There is a series of important factors which could cause the situation and results of Ence to differ significantly from what is expounded in the data relating to future forecasts, including fluctuation in the price of wood pulp or wood, seasonal variations in business, regulatory changes to the electricity sector, fluctuation in exchange rates, financial risks, strikes or other kinds of action carried out by the employees of Ence, competition and environmental risks, as well as any other factors described in the document. The data relating to future forecasts solely refer to the date of this presentation without Ence being under any obligation to update or revise any of said data, any of the expectations of Ence, any modification to the conditions or circumstances on which the related data are based, or any other information or data included in this presentation.

The information contained in this document has not been verified by independent experts and, therefore, Ence neither implicitly nor explicitly gives any guarantee on the impartiality, precision, completeness or accuracy of the information, opinions and statements expressed herein.

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The use by ENCE ENERGIA Y CELULOSA, S.A. of any MSCI ESG RESEARCH LLC or its affiliates ("MSCI") data, and the use of MSCI logos, trademarks, service marks or index names herein, do not constitute a sponsorship, endorsement, recommendation, or promotion of ENCE ENERGIA Y CELULOSA, S.A by MSCI. MSCI Services and data are the property of MSCI or its information providers, and are provided "as-is" and without warranty. MSCI names and logos are trademarks or service marks of MSCI.

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Today's presenters

Ignacio de Colmenares

Chairman & CEO

Ence Energía y Celulosa

Alfredo Avello

CFO and Chief Forestry Officer

Ence Energía y Celulosa

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9M23 Results Summary

1.

9M23 Highlights

  • Pulp prices in Europe bottomed out in 3Q23, following a sharp correction in 9M23
  • 152 €/t cash cost reduction in 3Q23 vs. 1Q23 partially mitigated a 37% net pulp price decline over the same period
  • Our higher margin differentiated products accounted for 25% of our pulp sales in 3Q23
  • We have reinforced our position as the largest private forestry manager in Spain with the acquisition of Sniace forestry assets in 4Q23
  • We closed the period with a low leverage position relative to our average cycle EBITDA and a strong cash balance of €298 m
  • Sustainalytics and Ecovadis confirmed our leadership in sustainability

2. 4Q23 Outlook

  • Pulp prices in Europe will continue their recovery in the 4th Quarter. Main pulp producers have announced several price increases, up to 980 gross USD/t from November
  • Cash cost reductions will continue in the coming quarters. Expected cash cost below 470 €/t in 4Q23
  • Sales of our differentiated products will continue to grow in 4Q23
  • Lower renewable energy output expected in 4Q23 due to extraordinary maintenance works at Huelva 46 MW and Ciudad Real 50 MW power plants

3. Growth & Diversification Opportunities

  • Our unique competitive advantage: >95% of our wood is locally sourced
  • Pulp diversification projects are on track to deliver a >12% ROCE without increasing the consumption of wood
  • 6 biogas projects in their engineering and permitting phase, targeting a ROCE>12%
  • 3 biomass power projects ready to participate in future capacity auctions
  • Opportunity to expand our biomass supply services to serve a growing demand from heating and Green Fuels
  • Working with potential industrial customers in Spain to replace fossil-fuel heating with renewable heating
  • New opportunities to monetize carbon credits and biogenic CO2

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1.

9M23 Highlights

5

9M23 Highlights

1

Pulp prices started to recover in

4Q23 following a sharp correction

in 9M23. The main pulp producers

have announced price increases of

up to 980 gross USD/t from

November

4

We have reinforced our position

as the largest private forestry

manager in Spain with the

acquisition of Sniace forestry

assets in 4Q23

2

152 €/t cash cost reduction in

3

3Q23 vs. 1Q23 partially

mitigated a 37% net pulp price

decline over the same period.

The downward trend will

continue in the coming quarters

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We closed the period with a

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low leverage position relative

to our average cycle EBITDA and a strong cash balance of €298 m

Our differentiated products accounted for 25% of our pulp

sales in 3Q23. They offer a lower environmental footprint and enhanced technical properties at a higher margin

Sustainalytics and Ecovadis confirmed our leadership in

sustainability

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Pulp price recovery started in 4Q23

Cash cost will continue to reduce in the coming quarters

Avg. NET Pulp Price & Cash-Cost (€/t)

900846

800

762

694

700

578

600

477

500

400

300

1H22

2H22

1Q23

2Q23

3Q23

4Q23 E

2024 E

Cash - Cost

Avg. Net Pulp Price

Based on pulp price forecasts from

RISI, HW, TTO and Norexeco

The main pulp producers have announced several price increases of up to 980 GROSS USD/ton from November

Industry specialists are increasing their pulp price forecasts for 2024

Ence's cash cost reduction will continue in the coming quarters

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We expect pulp demand to exceed supply over 2023-27

Wood availability is limiting competitive pulp capacity additions

Market Pulp: Expected Supply and Demand Growth over 2023 - 2027

(Mn tons)

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Expected supply growth includes the following:

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a) Arauco MAPA 1.5 Mt in 1Q23

b) UPM Pasos de los Toros 2.1 Mt in 2Q23

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c) Metsa Fiber Kemi 0.9 Mt in 4Q23

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d) Suzano Cerrado 2.5 Mt in 3Q24

e) Old capacity closures and conversion

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account for -1.5Mt

5

4

3

2

1

0

Expected Supply

Expected Demand

Growth

Growth

Main market pulp demand growth drivers:

  • Growing paper segments (tissue, packaging and specialities) now account for over 80% of market pulp demand
  • Boosted by structural growth trends such as urban population growth, increasing living standards in emerging markets and e-commerce
  • Plastic and synthetic fiber substitution will accelerate pulp demand growth in the coming years
  • Lower recycled fiber availability due to declining P&W paper consumption will increase demand for virgin fiber

Market pulp demand recovered strongly in 2H23, as expected

Market pulp permanent capacity closures announced in 2023 already exceed 1 million tons

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Our differentiated products accounted for 25% of our pulp sales in 3Q23

Lower environmental footprint and enhanced technical properties at a higher margin

High quality pulp

and differentiated

products with lower

environmental footprint and enhanced technical properties

+

+

+

  • Aiming to replace softwood pulp
  • Targeting customers with high sustainability standards
  • Minimizing the energy consumption during the refining process
  • First unbleached hardwood pulp in the market
  • Certified CO2 footprint during the product life cycle
  • Increases tissue softness
  • Low wet-expansion cellulose suitable for decor paper applications
  • Narrow range of porosity
  • Used as a plastic alternative in packaging for food & beverage industry
  • Low porosity material

+ Others such as , , and

We aim at reaching c.50% of our pulp production by 2028 (>500,000 t)

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9M23 Consolidated Results

Driven by lower pulp and energy prices

Group Revenues (€ m)

Group EBITDA (€ m)

Attributable Net Income (€ m)

- 20%

- 70%

787

208

630

64

9M 22

9M 23

9M 22

9M 23

67

-28

9M 22

9M 23

Group Revenues - 20% to €630m

Group EBITDA - 70% to €64m

Group attributable net result: €(28)m

  • -18% net average pulp price and +7% cash cost vs. 9M22
  • 150 €/t cash cost reduction in 3Q23 vs. 1Q23 due to declining raw material and energy costs. This downward trend will continue in the coming quarters
  • The regulatory energy price was updated, from 208 €/MWh in 2022 down to 109 €/MWh in 2023. The accounting (non cash) impact in 2023 will be offset by a higher remuneration for investment cashed annually
  • PV project sales contributed €27m to 9M23 EBITDA

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Ence Energía y Celulosa SA published this content on 31 October 2023 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 31 October 2023 15:13:09 UTC.