The agency Moody’s has decided to maintain the credit rating of Ence in Ba2, with a stable outlook, in its latest update report. The agency has valued Ence’s leadership position in a growing sector, such as eucalyptus pulp production in Europe, as well as its strength in the renewable energy business.
In its report, the agency also highlights other factors that it has taken into account to maintain this rating. Thus, it emphasizes the liquidity available to the company, as well as the cost reductions carried out in recent years and its low debt ratio.
Another of Ence’s main strengths, according to this agency, is the high global demand for pulp (especially “tissue”, its main market) and the increasing weight in its portfolio of renewable energy, more predictable and stable, It is a regulated business.
Sustainability, Ence’s strategic priority
The report also refers to the governance and the social and environmental point of view of the company, which, as the agency points out, belongs to a sector characterized by its high consumption of water and energy in its production processes. However, Moody’s emphasizes that this type of risk is “widely manageable” in the case of Ence, since sustainability is one of the strategic priorities of the company.
In this sense, the document states that “the company plans to invest up to 140 million euros to reduce the carbon footprint, minimize water consumption in production processes and promote the circular economy” in its Strategic Plan to 2023. It also highlights the forest certification with which 84% of the surface managed by the company counts.
Regarding the main obstacles, the agency highlights, mainly, the volatility of pulp prices. All in all, they expect to remain high for the next two years and, in fact, they will live a recovery already in the second half of 2019. According to Moody’s, this should help Ence maintain its solid credit indicators.
Among the risks is also mentioned the uncertainty that introduces the situation of the Ence biofactory in Pontevedra. The doubts that hover over this concession are weighing the stock price of its stock. In spite of this, the Moody’s agency has decided to keep stable its rating of the company, taking into account how all the factors that affect Ence and the foreseeable future of them are compensated.
