Ence will exceed pre-energy reform profits in 2015
- The major savings achieved, the closure of Huelva, the commitment to biomass, and the avourable performance of pulp prices and the dollar will enable Ence to exceed 2015 EBITDA levels prior to the electrical reform, one year ahead of expectations.
27 Februar 2015.- Ence –
Energía y Celulosa has concluded the restructuring plan implemented after the electrical reform one year ahead of schedule, enabling the company to return to profits as of last November and increase its annualised EBITDA to nearly EUR 115 million. Thus, Ence concludes a difficult year in which it closed the mill in Huelva and regulatory reforms required provisions of EUR 172 million, resulting in profits of EUR -140.9 million in 2014.
As Ignacio de Colmenares, Vice Chairman and CEO of Ence, affirms, “Our company is experiencing rapid recovery following the impact of the electrical reform, thanks to the successful execution of the restructuring plan.” Key milestones in the plan’s implementation include the cessation of pulp production and cogeneration at Ence’s industrial complex in Huelva, which will boost the EBITDA by EUR 40 million, and the smooth progress of efficiency improvement programmes at the Navia and Pontevedra plants, that are generating savings of EUR 10 million/year, equating to cash cost reductions (unit cost of production)
of €11/tonne.
These improvement factors are compounded by the rebound of pulp prices –with consolidated levels of $749/t and hikes of $770/t announced– and the appreciation of the dollar which effects an increase in the company’s EBITDA equal to EUR 20 million for every 5% of appreciation in the US currency, in which much of the pulp industry’s operations are transacted.
The gradual implementation of efficiency plans has enabled Ence to cut the cash cost of its Navia and Pontevedra plants from €390/t, as of Q4 2013, to €370/t in the same period of 2014, adjusted by the Huelva closure, with further reductions expected from the consolidation of investments undertaken and those planned for 2015.
Pulp sales totalled EUR 502 million, falling 18% as a result of the closure of the Huelva mill. Electricity sales reached EUR 171.9 million annually, down 26% year-on-year due to the 9% drop in average revenue per MWh sold and an 18% reduction in volumes from the previous period given the impact of regulatory changes.
Adjusted EBITDA reached EUR 60.5 million (-62%) as a result of decreased production and lower sales of pulp and electricity, while results from the period amounted to a net loss of EUR -140.9 million versus a net profit of EUR 9 million in 2013.
These losses include the negative impact of EUR 6.1 million for retroactive adjustments to 2013 electricity sales and EUR 36.8 million for provisions owing primarily to the deterioration of energy crops resulting from regulatory changes (non-recurring). They also include EUR 109 million in provisions resulting from the cessation of pulp production and cogeneration in Huelva.
Despite negative profits, it is worth noting that the cash flow generated from operations reached EUR 39 million. Subsequently, in late 2014, Ence held a strong liquidity position, with liquid assets of EUR 82 million if we factor in financial investments. In terms of liquidity, in addition to the company’s cash position, it has a credit facility with a EUR 90 million limit, which had not been drawn down at the end of this period.
At the end of 2014, recourse debt amounted to EUR 178 million. There are no significant debt maturities until February 2020, at which time the EUR 250 million bond issued in February 2013 will mature.
