Altri, SGPS, S.A. (ALTR) Earnings Call Transcript & Summary

Good morning. We welcome you to the Altri 3 Quarter's 2023 Results Conference Call. [Operator Instructions] I will now hand the conference over to Mr. Rui Cesario, Altri's Head of IR. Please go ahead, sir.

Good morning to everyone, and thank you for attending Altri's third quarter results conference call. We are pleased to host this call with investors and analysts, and hopefully, we can give you a good picture of what was the quarter for Altri and talk about the outlook and some of the challenges ahead. I will pass the floor to Mr. José de Pina, the group's CEO.

Thank you, Roy. Good morning to everyone, and thank you for attending today's conference call on Altri's third quarter 2023 results. We're pleased to host this call with investors and analysts, and hopefully, we can give you a good picture of what was the third quarter 2023 for Altri as well as discuss the outlook and challenges ahead. If you turn to Slide #2, I would like to comment on the main highlights of the third quarter of 2023. As you all know, we have seen a slowdown in global pulp demand, partially due to a material destocking effect in the pulp and paper industry, which led to a rapid reduction in pulp prices across all regions. This was a cycle where prices declined more rapidly in more than a decade. And these were obviously motivated by lower prices, the situation in China, which started to improve since May 2023. That strength in demand gained momentum into the third quarter and effectively influenced Europe with prices starting to recover since September. Although cautious, with what we already know, we should have an improvement for the fourth quarter 2023 and beginning of 2024. We have continued to focus much of our work on the cost side. Cash costs per ton have declined for the third consecutive quarter with a year-on-year decrease of approximately 18%. This was not enough, however, to prevent the EBITDA margin to decrease to 9.3% in the third quarter. Given the improved global demand and pricing environment, we believe we should see improvements in profitability in the coming quarters. We're finishing several projects that we are very proud of at Altri. Time is now the kind of boiler -- biomass boiler is now in the test phase of start-ups. And it will make this mill the first in Iberia and amongst a few in Europe to be 100% fossil fuel free. Besides the obvious environmental positive, there should be an improvement in the group's excess energy balance. The revamp of the wastewater treatment plant at Celbi was also completed in September. We should see even better water consumption numbers as well as improved efficiency and affluent quality in the future. On the Gama project, our commitment continues as in the beginning or probably even stronger. We continue with a significant workload at all fronts and are now reaching conclusions in some of the main crucial areas for the decision-making. Our intention is to take a final investment decision in the short term. Moving to Slide #3. We share with you the numbers of global pulp demand during the first 9 months of 2023. Talking only about hardwood, after being negative by 3% in the first quarter, things started to improve during the second quarter with an accumulated number of plus 3%, and we ended up the 9 months with plus 6.1%. This was mainly attributed to Asia, namely China, that has been growing above 30% during the third quarter of 2023. Europe continues below our expectations as an effect of a slower economic but also due to larger effect in the region of a soft Print & Writing segment. If you turn to Slide #4, we can see the evolution in the 9 months of this year of the demand for dissolving pulp, more related with the textile value chain. Demand is almost up 6% in the 9 months and has been mostly steady in that period. Asia, which accounts for 83% of demand, is growing steadily, led by China. In Slide #5, we see inventories at European ports decreasing materially during the third quarter of 2023 at the peak levels above the historical average during the first half of 2023. As we have seen in previous slides, Europe is not the industry's growth engine, but with logistics normalized, additional pulp is redirected to the markets with highest demand at the moment, namely China. In Slide #6, you can see the evolution of hardwood pulp prices in Europe. Average PIX prices are 39% lower in third quarter of 2023 versus third quarter of 2022, while on a quarterly basis, there was a 24% decrease. Pulp prices started to decline in the past February, ending this quarter at $809 per ton. Looking at Slide #7. We shared the evolution of dissolving pulp prices. These prices are net prices and sourced from China, so not fully comparable to the European BHKP prices that you need to take the commercial discount to obtain an add price. What we wanted to point out from this slide, besides the price level that was at an historic premium to BHKP is also the low volatility of the last 12 months compared to BHKP. In Slide #8, we present the production and sales volumes in the third quarter. The level of production decreased by 10% year-on-year and 7% below the previous quarter while sales volume increased by 4% year-on-year and quarter-on-quarter. This is a result of the group's commitment to finding new commercial destinations as well as an optimization of our inventory levels. In Slide #9 and looking at the 9 months, we continue to see a decrease in production, approximately minus 8% as well as sales volumes approximately minus 6%. The program downtime at Celbi during the first quarter of 2023, a destocking processing in industry affecting the level of demand and some optimization of our inventory levels more in the last quarter were the main reasons for those decreases. Going to Slide #10, we present our sales breakdown for end use as per region. Given the destocking effect occurring during 2023, we have seen an important impact, especially in the Print & Writing segment. From 20% to 25% of sales, we are now at 17%, with most of the other segments at similar levels. On a regional basis, we continue to focus on market proximity like Europe and near Middle East. Nonetheless, and given the weaker demand in Europe during this year, we have looked for other destinations where demand on prices could be an opportunity for us. With that in mind, we have increased the weight from sales to the Middle East to 25%, usually more in the range of 15% to 20% and Asia to 14%, usually in the region of 10%. I would now pass to Miguel Silva, our Group CFO, who will comment on the main financial highlights of the third quarter 2023.

Thank you, Jose. So if we move to Slide 11, we comment on the revenues and EBITDA levels achieved in the third quarter. Altri reached revenues of EUR 174 million in the third quarter, a decrease of 39% versus the third quarter. The main reasons for the decrease in total revenues were fully attributed to lower pulp prices, which decreased 39% in U.S. dollars and 43% in euros. EBITDA reached EUR 16 million in the third quarter, 82% less than last year's third quarter and 48% lower than the previous quarter. Despite successful results in lowering our cash cost levels, it was not enough to offset the rapid decline in prices. If we move now to Slide 12. The 9 months numbers show total revenues decreasing by 25% year-on-year to EUR 601 million, while EBITDA reached EUR 98 million, 56% less than last year's 9 months. In Slide 13, Altri reported an EBITDA margin of 9.3% in the third quarter, which compares negatively with last year and the previous quarter. We believe we will quickly improve this margin due to our continuous cash cost reduction efforts and the recent improvement in prices. In Slide 14 and Slide 15, we can see the level of net profit and EBIT in the third quarter and the 9 months. As a consequence of fast declining pulp prices, we saw our operating profitability going to breakeven in the third quarter. On a positive note, financial results have improved significantly when compared to last year and the previous quarter. Despite higher interest expenses on our debt indexed to variable interest rate, we have gains from currency hedging and exchange differences and more interest earned on our cash position. On Slide 16, we highlight that we continue to deliver on cost reduction. This quarter was the third in a row reducing our cash costs. On the energy front, we have a stable framework selling the excess energy produced to the national grid, which more than offsets our current expenses with natural gas. We continue to see declining wood costs for Altri, not only due to lower prices in Iberia, but also due to reduction in imports. Prices of chemicals have continued to decrease in the third quarter, but the room for further decline is now more limited as prices are near pre-inflation years. In Slide 17, we shared the evolution of net debt during the third quarter. Altri Group's net debt reached EUR 391 million at the end of the third quarter. Despite EUR 16 million of EBITDA in the quarter, a high CapEx level in the quarter of EUR 15 million and the corporate tax payment of approximately EUR 13 million, we managed to lower the net debt level by EUR 10 million as a consequence of working capital optimization measures that we have been implementing in the last few months. I will now pass back the word to Jose Pina.

Thank you, Miguel. If we move to Slide 18, we see Altri's ROCE level at 14% in the 9 months 2023, which we consider an acceptable for a down cycle year such as 2023. In the following Slide #19, we have summed our achievements in the sustainability front during the quarter. We finished revamping the new wastewater treatment unit at Celbi. That will mean lower water consumptions, which we commit to in our 2030 targets and should significantly improve the affluent quality. Altri is also in the final testing phase of start-ups of the new biomass boiler Caima, turning it into the first industrial unit of the sector in Iberia and one of the few in Europe to operate 100% fossil fuel free. Finally, in Slide #20, we wanted to share our views looking forward. The strong demand from the Chinese market is pushing the whole market upwards. Also, we see signs that the European market is now stabilizing, which could also work as a positive factor if we see a deceleration in China. Prices rebounded in China since May, and we have started to see prices recovering in Europe as well since September. We have seen monthly price increases since then, being the latest increase for November to $980 per ton, which we believe will be fully implemented. On a cash cost front, we maintain our commitment to have around 10% reduction for the full year of 2023. We will be working to be able to deliver further reductions for all 3 in the coming quarters. On the Gama project, we continue to make progress on multiple fronts, and we're aiming for a decision that we can achieve in the near term. And now I pass the word back to Rui.

So the floor is now open to Q&A. .

[Operator Instructions] Our first question comes from Enrique Parrondo from JB Capital.

I would like to ask 3, if I may. The first one on the recently concluded London Pulpweek. Could you maybe give us some color on market sentiment with regards to demand and pricing. What would be expectations for fourth quarter and full year '24? The second one is regarding your internal expectations for sales volumes in the fourth quarter, also considering the maintenance stoppages and also expectations for commercial discounts. And the final one on cash costs. So assuming that the third quarter exit rates are close to EUR 430 per ton or something close to that, what can we expect for the fourth quarter? And assuming something slightly below these levels that would be sold around mid-teens year-on-year decline for full year '24. Does that way of thinking makes sense?

Thank you, Enrique. I would say, starting with the first question on London Pulpweek, I think it was a good opportunity to take pulse of the market given where we are at the stage where we are. I have to say I was positively impressed by how the market has been developing, and effectively, we left London on a positive note, one, because prices have effectively recovered somewhat. And certainly, after we've gone through the trough in the summer. So that was obviously a much more positive trend; secondly, because we continue to see our customers with good levels of profitability, which is always a good thing; and third, the outlook they have getting beyond the 2023 when demand was very sluggish for them. And where we saw a significant destocking in the industry. Having that process pretty much behind us, they were looking towards a more normalized, although with, I would say, a cautious approach into next year. But clearly, an improvement versus 2023. So I think overall, the industry -- the sentiment from the industry was clearly more positive. In terms of sales volumes in Q4, we have some stoppages that we had. I think, overall, we're going to be still within sort of our current run rate. We have been focusing, I think, our expectations this year that we saw on volumes was that we were going to be slightly above 5% reduction, but it really depends on the management of our inventories. We have taken a very disciplined approach on inventories, both in terms of raw materials as well as in terms of finished products. And I think you could see that in the free cash flow result that we presented for the quarter. So -- but I would say, in line with our estimates around the 5% or slightly higher, but depending on -- leaving us some flexibility, I would say. We have all of the maintenance shutdowns behind us, the most recent one was Caima at the beginning of November, basically to do all the final connections regarding the biomass boiler. That's completed. That was actually a shorter shutdown than we were originally planning. So things went very well. On the cash cost front, I think overall, if you look at where we are and going forward, I mean, we continue -- we -- I think initially in the year, we pointed towards a reduction year-on-year, a significant reduction in terms of our average cash cost of -- in the high single digits. I think right now, we're pretty confident of a reduction around 10%, as was indicated. That means that our average is going to -- on quarter-on-quarter, is going to continue to decrease. So for us to be able to achieve that, we're obviously going to have to continue to do a significant effort with a continued reduction, and if you look at where we have been, so basically year-on-year, minus 18%, that's been pretty significant. But you should expect to continue to see a reduction, and I'm estimating that will be possibly another EUR 20 to EUR 25 below where we are in Q3. So thank you for your questions, Enrique.

The next question comes from Jaime Escribano from Banco Santander.

So a few questions also from my side, some of them a little bit of a follow-up from previous questions. The first one is, you mentioned that you see full implementation of the $980 per ton price increase. My question would be if you can elaborate a little bit further on how are being the discussions with your customers in Europe? Are they already saying that they are willing to accept that? Are they comfortable with that? And in fact, whether you think that we could see prices above that level given that when we do the math, and when we see the prices in China, it suggests that the prices in Europe should be actually more at $1,000 or actually above. And then also if you can also talk a little bit about the dynamics of your sales in Turkey. So are you keep selling more in Turkey because the price is still comparatively higher than in Western Europe? Or are you now shifting more the sales back to Europe? Or just to you see how you think on that? And then the commercial discount, which came better than expected at around 34%. What could we expect going forward? I assume that there was probably some benefit effect from the sales in Middle East with lower discounts, but just to know on that. And then if you can finally give us some indication of how the net debt could end up this year, and whether this working capital decline, how soon we think about the working capital versus I think said 5% over 2024?

Thank you, Jaime. So starting with your first question regarding the announced increase of $80 for November, which would take prices to $980. So the discussions we've had so far with customers, we expect -- or based on those discussions, we expect the full implementation of the $980. We don't see we have not really seen any significant concerns or pushback. I think it's to be expected. Also, that's been helped, I would say, in terms of the overall dynamics on supply demand in Europe because you've seen a significant decrease in the stocks in Europe from 1.5 million to 1.3 million tons back to historic trends. So I think that's an indication that there's been less supply coming into Europe. And the reason -- the primary reason for that is, one, because of the bullishness of the Chinese market, which has posted significant growth this year and also the fact that you continue to have a significant price gap between Europe and China. So as long as you continue to have that price gap, the same dynamics will clearly play out. And beyond the $980, I think with full implementation and also because there was an increase implemented in China, you still have the same gap. We understand at least from public reports that there's been indication of a potential increase in China again for December, at least of 20-plus. So -- which means that the gap increases. So I would say, overall, there's clearly some -- still some room for further price increases in Europe in the short term. Regarding Turkey, as you're aware, Turkey is one of our key markets. We're a significant player in Turkey, have been historically. So it's an important market for us. Turkey tends to follow a lot of what you've seen in terms of pricing in China. Historically, that's what's happened. So the dynamics there have been very positive. And we have not shifted any significant volumes away from Turkey. On the contrary, we continue to have additional requests for supply that we also need to assess in respect to all of the other requests we have with customers primarily in Europe. But Turkey remains a key market for us, and we expect that to continue. On the commercial discounts, I think this quarter -- this past quarter, you've seen somewhat of a reduction. That's a combination of several things, I'll say, on an upward trend in price. And given that we have some customers on market price, some customers on index PIX, with PIX lagging, when you look at the overall set of discount that tends to decrease somewhat at least an upward movement. The content that the opposite happens usually on downwards movements. So that's been the basic effect that has been observed. But also on top of that, our need to look for alternative commercial channels has been reduced once you start seeing a positive momentum. So, the combination of that has actually led to somewhat of a reduction. But I would say for the year, you'll still continue to look, all in all, at discounts somewhere in the high 30s. In terms of working capital, we have continued to make a significant effort, as I mentioned. You'll probably continue to see some improvements in working capital going into Q4. But on the finished product level, the declined inventories, that's something that we have -- we keep a very close eye on because of the opportunities that could potentially present themselves in the market. So we remain very agile on that front. And on raw materials, obviously, we need to manage given that we're going into the winter. And usually, you have different challenges with rain and cold weather in order to be able to extract some of the fiber. So we're going into the winter prepared with, I would say, a good level of raw material stocks that allows us to operate without any concerns. But overall, that -- the working capital is something that we'll keep a very close eye on. And as I said, to reinforce, we expect to continue to see improvements there.

Very good. And in terms of net debt, what would you say, for the end of the year?

Yes. So in terms of net debt, our expectations is with further improvements on working capital as well. But our expectation is that we will continue to see somewhat of an improvement in net debt towards year-end.

The next question comes from Bruno Bessa from Caixa Bank.

I have 3, if I may. The first one, could you give us an update on your CapEx spend for this year and 2024 as well? The second one on cash costs and particularly on wood costs for next year. So you already mentioned that cash costs will continue going down next year. I was trying to understand here a bit what are the drivers behind it, and if you are expecting the wood costs continuing to go down in 2024, considering the slowdown in terms of activity in sectors like construction, so this will be the second question. . And the third question on the Gama project. So I think you changed a bit the wording on the -- regarding the go or no-go decision? You are now saying that you expect take it in the short term. I believe that before you were suggesting that the decision will be taken this year. And sorry for coming back to this, just to understand what has been -- or what continues to delay the decision in this project?

Thank you, Bruno. Your first question, I apologize, was on our investment level, that...

Yes. So I was trying to understand what are your CapEx plans for 2023 and 2024.

Okay. All right. Thank you. Thank you, Bruno. So on CapEx plans, we have -- so this year has been obviously an unusual year because of the investment, in particular on the biomass boiler and on the water treatment -- the upgrades to the water treatment facility in Celbi. Effectively, if you look at the first 3 months -- 3 quarters of the year, purely on the biomass boiler and the turbine, that represented 55% of our CapEx investment, so very significant. We continue to aim to finish the year where we said, which will be around EUR 70 million to EUR 75 million, but our aim will be sort of within that range. If we look at 2024, I think our range is going to be much more in the range in the area of about EUR 40 million to EUR 45 million. So it will be a net significant reduction, but we still have some investment projects that we're focusing on, but we'll see a reduction in 2024. In terms of cash cost evolution, obviously, quarter-on-quarter, we continue to see reductions. Overall, when we look at year-on-year, we would expect next year to be a lot closer to the 400s versus this year when you look at the overall average. But that's something that we'll continue to work on. Obviously, as the year has gone by, with the changes we've seen on energy, particularly gas, electricity, chemicals as well as raw materials, most of those gains have already been achieved, but there are still some additional gains that we expect now in Q4, and ultimately going into next year. But I would say you'll see clearly a slowdown in terms of the progress we continue to make, although we remain very, very active and very focused in order to improve the overall cash cost efficiency for the group. So you'll see and should expect continued reductions year-on-year going into '22. On the Gama project, so the indication that we have given previously was by the end of this year. Obviously, as you know, it's a very complex project. We have completed the environmental impact assessment. We have completed the raw material availability studies. We have pretty much completed most of the industrial project and technology development. But at the end of the day, to have a firmer number in terms of the overall CapEx that we can include in our business plan, it's important that we have that fully completed. So that's one of the things that ultimately, it's given us a little bit more -- the need for a little bit more time. And then just from public news, you've seen that we obviously continue to have in-depth discussions with both the central and the autonomous region governments regarding the funding for the project. We've made, I think, some significant progress. But until we have those discussions complete, which will impact the overall financing, any decisions that we could take would be incomplete. So I think we want to be prudent in ensuring that when it comes to the overall level of investment and the structure of the financing that we have that fully aligned. And therefore, our expectation as we stated, will be in the in the very near term. I would say, given where we are mid-November and the holiday season upon us, you'll probably be looking at early in 2024. But that's just, I would say, normal in these kinds of very complex, large projects that things are not precise as one would like. But as I said, we're making very significant progress. And the fundamentals in terms of the project remain as they were initially, if not more attractive.

If I may just follow up on Gama. Now that it seems that the political situation in Spain is at least a little bit more -- or have seen a little bit more visibility? Do you expect this process to accelerate? So this will be the first follow-up. And the second on the cash cost for the next year. Just trying to understand what are the drivers behind the reduction that you are expecting. And if this wood in the internal market, if this is a reduction of imports as we saw this year. If this is related to logistics? Just trying to have a little bit more granularity on this will be very good.

Yes. So, I think it's positive that we've had a clarification in terms of the political landscape in Spain. As I mentioned before, we're having very active discussions and positive discussions. So we continue to remain positive on the process. And hopefully, given the level of interactions we've had, we would see that concluding very soon. But it's something that don't necessarily -- doesn't necessarily depend solely on us, as you know. But I think having more visibility and clearly, political stability that's going to be helpful in concluding this process. Regarding the cash costs, when we look at the different components, I think there's several elements to this. One, obviously, on let's call it, domestic wood prices, I think they're fairly stable at the moment. Also when we look at the outlook for fiber prices, [indiscernible] I think they're fairly stable, although in certain instances, there may be some price movements that we don't expect from where they're at or what we're seeing in Q4, much significant changes. What we are seeing is our expectation for next year is to reduce our imports from Latin America in terms of wood. And that's, in essence, being complemented by supply as well from our own forests. So we expect to increase the level of supply from our forests. And we have been actually expecting that for quite some time. But on a sustainable level, we'll probably have a 20% increase next year in terms of wood coming from our own forests because we do -- we are at maturity level on a series of plantations and that will be positive in helping us manage the overall input costs for wood. Beyond that, I don't think we should expect much changes in terms of the energy outlook as we see it today. I think those will be relatively stable. And if you look at future, so that remains. In terms of chemicals -- processing chemicals as well, I don't think we should expect also considering that a number of those depend very directly on energy and hydrocarbon prices, but we wouldn't expect to see much change there. We are making some additional -- or driving some additional efficiency on some of our fixed costs, but it's not going to have a significant, I think, impact overall on cash costs. But on logistics, we also see -- or we also expect to see a slight reduction, not very significant, but substantially a slight reduction versus where we want. And that's the reason why we would continue to see year-on-year decrease in terms of the overall levels.

The next question comes from Luis de Toledo from ODDO BHF.

Yes. I have only one question regarding Gama development and it has been fully addressed. But I mean, considering that you referred to the unstable political situation in Spain, I would like also to know future elections in Portugal. Also -- I mean a cost of concern on your activity?

Can you repeat that question?

I'm sorry, Luis. Could you just repeat, please, a little bit louder. Sorry.

Okay. No, I was wondering about Gama, but I mean you have addressed the question about the delay not referring to the complexity of the project as a whole that you're advancing the different permits and authorizations. I was wondering if the political situation at in Portugal or in Spain, in particular, potentially could affect the development of future investments and specifically those in Gama or there in Spain.

Yes. Clear. Clear. Thank you, Luis. Well, effectively -- so the assessment we make at this point is that the political situation in Portugal with anticipated elections in March essentially will have very little, if any, impact regarding our investments in Portugal. We have our incentive programs contracted. There will be, obviously, new regarding some of the new investments. But we don't expect that to have any significant impact. The budget, as you're probably aware, it's likely going to be approved by the current government as a caretaker. And effectively, within 4 months, we should have a clarification on political situation. But at this point, at least, we don't expect any impact -- any major impact. Thank you.

The next question comes from António Seladas from AS Independent Research.

So most of them are already answered. So I just have one follow-up question in terms of pulp prices. If you can provide some color regarding Printing & Writing demand, so that taking into consideration that was enough sources of weakness and the reason for the excess inventories over the last 12 months, how it is now the demand from Printing & Writing. And second question is about dissolving market. If you can provide some color about the main -- the key points for -- to justify the demand that has been increasing, taking consideration that the economy overall is -- worldwide is weakening. And well, what are the main dynamics. Cotton price, for instance, is very low. So I guess that it should affect dissolving prices. And about new supply coming to the market in terms of dissolving.

Thank you, António. So starting with your first question regarding Print & Writing. Obviously, that has been the weakest point in the market. If you look at -- overall, as most of the papers from newsprint, uncoated, coated. So overall, Print & Writing, you've seen for the first 8 months of the year, so through early September, there was a reduction of approximately 31% according to industry numbers. So that's very, very significant. It doesn't mean that pent-up demand at the consumer or at the customer level was actually as high as that because, as we've mentioned before, and that's been widely documented, there was a significant destocking process happening through that value chain. But clearly, Print & Writing has regained what would be potentially a structural declining path based on just historical trends. I would say, based on the discussions we've had recently with customers, next year, as I mentioned, their expectation is that it will be a better year compared to this year. So they are more positive from a demand standpoint. The destocking process is also finished. So they're feeling quite positive about it. But -- at the same time, they will remain prudent. So I don't think that Print & Writing will go back to the levels prior to 2020 anytime soon. On the contrary, I think there will continue to be some declines, but then they will be in the single digit. So a very different situation from this year. In terms of prices, they have been held fairly well. If you look at the gap between finished paper products and pulp, that has effectively widened where you've had a 40-plus reductions in pulp prices for a lot of the paper products that were anywhere between 15% to 20%. So margins have improved. But nevertheless, demand was significantly lower because -- primarily because of the destocking process. So assuming that prices have somewhat stabilized and now with an upward movement on pulp that also creates, I think, a good opportunity for a floor on those -- on Print and Writing. The major focus, obviously, for our customers going forward is on protecting their overall margin and profitability levels, and we believe that they're well positioned for them. Regarding dissolving, and that's clearly a market with very different dynamics. So purely on supply, you don't have any new significant projects coming to the market. There hasn't been any announced projects and usually it would take 2 to 3 years before those actually happen. But we believe on the supply side, there's not going to be much changes in an industry which is somewhat tight, but the overall dynamics and given that the majority of dissolving goes into textile effectively. As you mentioned, cotton prices have come down. I think viscose prices have been somewhat subdued. But overall, purely from a demand standpoint, there was significant destocking in the textile value chain that happened last year. This year, effectively, we've seen an upsurge in terms of capacity utilization of our customers, which has tightened the market. That's basically the reason why you see the overall pricing levels of dissolving being much more stable. And the gap from dissolving to bleached hardwood pulp, that gap has actually increased this year. But those were primarily the drivers. So a fairly well-balanced supply/demand leaning towards greater tightness that we've seen in the near term, destocking process impact on value chain finishing and effectively utilization rates across the industry actually on the absolute. So that's helped the overall development of pricing. Thank you, António.

[Operator Instructions] The next question comes from Enrique Parrondo from GB Capital.

Just one quick follow-up. So I was looking at your debt maturity profile. Maybe if you could comment what are your plans for the EUR 140 million maturing next year, that would be helpful.

Thank you. Perhaps with Miguel on the line, I'll ask him to give you a clarification.

Okay. Yes. Yes, that's an easy question because all of the debt that is going to be due in 2024 is already renegotiated, so we will have the cash very shortly on our balance sheet to roll over that debt on 4 or 5 years average maturity more or less. So all of the debt in -- that is due in 2024 is already renegotiated. We are now starting to work on the debt that is going to be due in 2025.

The next question comes from Jaime Escribano from Banco Santander.

Just a follow-up on question from Enrique. Could you tell us more on like what is your average cost of debt right now in terms of refinancing, maybe not just the exact number, but just an idea of what is being the new cost of debt refinancing or a bracket or a range.

Jose, if I may, I will continue?

Yes, please, Miguel.

Thank you, Jaime, for the question. What I can say is that, of course, our cost of debt due to increase in interest rates is higher than before. We have around 30% of our debt with fixed interest rates that we have an exposure of about 70% to the market. So of course, we are not immune to the increase in interest rates. But what I can say is that the renegotiation that have been done in the next few months have been with better spreads than the ones that we are replacing. So overall cost is higher, but the spreads are improving, at least what we renegotiate in 2023 regarding 2024.

There are no further questions from the conference call. We will start now with the written questions. Our first question comes from [indiscernible] from Invest GA. In the assessing Gama project's profitability, how do you see the pressure on wood supply worldwide in the project profitability.

Thank you. So overall, the project in terms of its needs from the very beginning, we've stated that the project will be locally sourced. We have -- from the studies that we have done, we have assessed that the project will effectively be supplied the locally sourced wood. Whenever you start looking at the global outlook for demand on wood that has led to an increase -- clearly an increase in the level of pricing globally, whether it's out of Vietnam or South Africa or Latin America or other countries. But within this industry, you can be much more effective, obviously, relying on locally sourced wood. So anything -- if there was any movements, which there always are of wood around the world, they tend to privilege the higher-return project, and that remains to the case. So purely in terms of the assessment, number one, it will be locally sourced. Number two, we don't expect the current movements we've seen globally in terms of an upsurge in prices to have a significant effect on the supply to the project, also because globally, local prices are still relatively lower compared to what we see in the Iberian Peninsula. But once you start factoring in transportation and processing, then it obviously becomes significantly higher. So ultimately, we don't see at least at this point anything any time.

There are no further questions, so I will hand over the session to Mr. José Soares de Pina, Altri's CEO.

So thank you so much for joining the call. As we've stated, we see a positive momentum going into Q4 and into 2024, and we remain very focused on managing our cost base, very prudent in terms of outlook, but still with positive expectations. So thank you very much, again, for joining for your questions and look forward to catching up next quarter.

This concludes today's event. We thank you all for your presence. Ladies and gentlemen, you may now disconnect your line.