The Company is on the path to a return to profits after reducing losses at its pulp production facility in Huelva
3rd November, 2014.- The competitiveness recovery plan presented last May by Ence to overcome the impact of the Electrical Reform begins to produce results and clears the way for the Company to return to profits. After the Huelva pulp production shutdown, Ence increased its annual EBITDA to 120 million €, 75% of the 156 million € EBITDA goal forecast by the Company for 2016 and equal to the pre-Reform EBITDA level.
With real 3Q 2014 costs and at current pulp prices, the Navia and Pontevedra pulp plants generate annual EBITDA of 80 million €.
The agreement for the closure of pulp production in Huelva, signed recently with employees, was fully implemented in October and will mean annual savings of 40 million €. As part of this restructuring, the biomass generation plant which was integrated in the pulp plant will restart operations this November and will contribute annual EBITDA of close to 20 million €, with which the independent generation plants now contribute 44 million €/year to Ence´s EBITDA.
Ignacio de Colmenares, Vice President and CEO of Ence, stated that “the Huelva pulp plant shutdown and the savings achieved with the efficiency measures adopted, show that we are fulfilling our goal of returning, by 2016, to the profit we registered before the Electrical Reform was introduced. Ence will return to profit quickly.”
Along with the transformation of Ence´s activity in Huelva, the recovery plan is based on investment driven efficiency improvements in the Navia and Pontevedra pulp plants, as well as through intense cost reductions. During the first nine months of 2014, Ence quickly progressed in carrying out investments that drive efficiency improvements, which rose to 16 million €. These investments will generate annual savings of 10.2 million €, equal to 12€/t in cash cost.
Furthermore, the company´s cash cost continued to show a downward trend, in the 3rd quarter, reaching 356€/t, a reduction of 35€/tonne as of the end of 2013.
Gradual improvements in results
With regards to results, the Company achieved an important improvement in its adjusted quarterly EBITDA, which in 3Q shows a 30% increase over the prior quarter, reaching 15.7 million euros, 60 million euros annually. Recurring profit also showed a gradual improvement, rising from -16 million in the first quarter to -1 million € in the 3rd.
The company reached adjusted EBITDA of 40.3 million € in the first nine months of the year, a 70% reduction due, primarily, to the impact of regulatory changes. The result for the period showed a net loss of 139.7 million € compared to the net profit of 35 million € obtained in the first nine months of 2013.
The results include a non-recurring impact of 163 million € for deterioration in energy crops, as well as for the stoppage of pulp and cogeneration activities in Huelva due to the Electrical Reform, although the impact forecast on treasury will be 42 million €.
Despite the impact of the Reform, Ence maintains a solid financial situation, with a strong liquidity position – at 199 million € – and without significant debt maturity dates until 2020. Net corporate financial debt was 147 million €. The leverage rate, excluding non-recourse debt, was 3.0x (calculated over adjusted EBITDA for the last 12 months) and is 1.2 times current EBITDA.