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

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

Good morning. Thank you for attending today's conference call of Altri's 2023 results. My name is Rui Cesario, Altri's Investor Relations. And we have with us today Mr. José Pina, the CEO of the group; and Mr. Miguel Silva, the Group CFO. Mr. José Pina and Mr. Miguel Silva will give you a brief overview of the results. And afterwards, the floor will be opened for Q&A. So I'll hand over to Mr. José Pina.

Good morning, and thank you for attending today's conference call on Altri's 2023 results. We're always pleased to host this call with investors and analysts to share Altri's results and talk about the outlook and challenges ahead. If you turn to Slide #2, we comment on some of the main highlights of 2023. As you all know, we have seen a slowdown in global pulp demand during the first half of 2023, partially due to a material destocking effect in the pulp and paper industry, leading to a rapid reduction in pulp prices across all regions. This was a cycle where prices declined more rapidly more than a decade. Motivated by lower prices, the situation in China has started to improve since May 2023. That strength in demand gained momentum into the third quarter of the year and ended up having influence in Europe with prices starting to recover from September and into the fourth quarter of 2023. As demand continues to improve also in Europe and other regions of the globe besides China, pulp prices have continued to move upwards in the beginning of 2024, but we'll talk more about this at the end of the presentation. We have continued to focus much of our work during 2023 on the cost side. Cash costs per ton have declined the 3 consecutive quarters with an accumulated decrease in 2023 of 11% comparing to last quarter of 2022 and slightly ahead of what we mentioned in the previous results. If you look at the level of cash cost in the fourth quarter of 2023, we are now 28% below the cash cost registered in the fourth quarter of 2022. Nonetheless, this was not enough to prevent the EBITDA margin to decrease to 17.4% in 2023 from 28.3% in 2022. Overall, EBITDA reached EUR 137 million in 2023, a 54% decrease when comparing to 2022. If we look on a quarterly basis, the profitability started to improve in the fourth quarter of 2023 with the higher pulp prices and stronger demand. We should continue to see an improvement in profitability into the first quarter of 2024. Altri's sustainability agenda continues to be a top priority for the group. Caima, one of Altri industrial units have become the only plant in the sector in Iberia and amongst the few in Europe to be 100% fossil fuel-free after the installation of a new biomass boiler which ramped up towards the end of last year. We have revamped the wastewater treatment plant at Celbi with the goal to improve the water consumption numbers as well as improve efficiency and effluent quality. We have an additional investment underway for the recovery in the valuing of furfural and acetic acid from renewable sources in Caima, increasing even more the circularity at our plants. On the Gama project, our commitment remains the same, but we want to make a final investment decision only when all the conditions are met. Meanwhile, working in more diversification projects at our industrial units as the furfural and acetic acid already mentioned, to be concluded in 2025 and an increasing focus on dissolving pulp. Moving to Slide #3. We share with you the numbers of global pulp demand during 2023. Talking only about hardwood, and after being negative in the first 5 months of 2023, the situation started to improve rapidly after May with China accelerating to the end of the year with 29%, leading to an accumulated number for global pulp demand of almost 9%. Although with some improvement at the end of the year, Europe declined more than 50% as an effect of the slower economic environment, significant value chain destocking but also due to a soft print and writing segment. In Slide #4, we can see the evolution in 2023 of the demand for dissolving pulp, more related with the textile value chain. Demand was up 6.5% in 2023 and was mostly steady around that figure during the full year. Asia, which accounts for 86% of dissolving pulp demand, has grown even more led by China. In Slide #5, we see inventories at the European ports decreasing significantly during the fourth quarter of '23 at the peak levels above the historic average during the first half of the same year. Since the Europe was not the industry's growth engine during 2023, it was only normal to see some pulp being redirected to the market with higher demand, namely China. With pulp prices in Europe at a premium to China's and a better market environment is likely to see inventories more in line with what we think our historical averages. In Slide #6, you can see the evolution of hardwood pulp prices in Europe. Average fixed prices were 19% lower in 2023 versus 2022. On a quarterly basis, we saw a recovery of approximately 9% in prices given the mentioned improvements in the global demand environment. After a year low of $800 per ton in mid-August of last year, pulp prices ended the year at approximately $1,000 per ton. Looking at Slide #7. We share the evolution of dissolving pulp prices. These prices are net and sourced from China so not fully comparable to the European BHKP prices that include commercial discount. It is worth noting the low volatility of this segment during the last 4 quarters when compared with bleached hardwood kraft pulp. In Slide #8, we present the production in sales volumes in the quarter. The level of production decreased 4% year-on-year and 7% above the previous quarter, while sales volume increased by 11% year-on-year and declined 5% quarter-on-quarter. This is a result of the group's commitment in maximizing commercial results, while making an optimization of our inventory levels. In Slide #9, and looking at the full year, production decreased by 8%, while sales volume dropped by 2%, being explained by the program downtime at Celbi during the first quarter 2023, but also by a destocking process in the industry affecting the level of demand and optimization of the inventory level. Turning to Slide #10, we present our sales breakdown per end use and per region. Given the destocking effect seen during 2023, there was an important impact, especially in the print and writing segment. From around 25% of sales, we are now at 19% with most of the other segments at similar levels. On a regional basis, we continue to focus on markets in proximity like Europe and near Middle East, nonetheless and given the weaker demand in Europe throughout last year, we have looked for other destinations where demand or price could be an opportunity for us. With that in mind, we have increased the weight from sales to the Middle East, 25%, usually in the 15% to 20% range, and Asia to 14%, usually around 10%. I would now pass to Miguel Silva, the Group's CFO, who will comment on the main financial highlights of 2023.

Thank you, José. In Slide 11, we start by making some comments on the revenues and the EBITDA level achieved in this fourth quarter of 2023. Altri reached revenues of EUR 187 million in the fourth quarter, a decrease of 28% versus the fourth quarter of 2022. The main reasons for the decrease in total revenues was fully attributed to lower pulp prices, which decreased 34% in U.S. dollars and 38% in euros. EBITDA reached EUR 40 million in the fourth quarter of 2023, 49% less than last year's fourth quarter, but 144% higher than the third quarter of 2023. Our successful results in lowering the cash costs and the better pricing environment were the main drivers for the EBITDA improvement versus the previous quarter. In Slide 12, the 2023 numbers showed total revenues decreasing by 26% year-on-year to EUR 788 million, while EBITDA reached EUR 137 million in 2023, 54% less than in 2022. Looking at Slide 13, we can see significant improvement in the EBITDA margin to 28 -- to 21.3% in the fourth quarter from 9.3% in the third quarter, but still compares negatively with last year's fourth quarter of 30%. In Slide 14 and Slide 15, one can see the level of net profit and EBIT in the fourth quarter and 2023. As a consequence of the fast decline in pulp prices, the operating profitability went to breakeven in the third quarter, but improved significantly in the fourth quarter. As said before, this is a consequence of some improvements in pulp prices, but also positive results from our cost control policies. On Slide 16, we highlight the fact that we have been able to make a significant reduction in cash costs in the last 3 quarters. Looking forward, we see a stabilization on some of the main cost items and even some inflationary pressure of others. On the energy front, we have been selling the excess energy produced to the national grid at market prices. However, since electricity prices have continued to decrease, we have moved back in February 2024 to the regulated regime, selling to the grid at the regulated prices. On the wood side, prices have stabilized during the fourth quarter of 2023. Prices of chemicals have also stabilized during the last quarter after a relevant decrease in the previous 9 months. In Slide 17, we share the evolution of net debt during the fourth quarter. Altri Group's net debt reached EUR 357 million at the end of 2023, a quarterly improvement of EUR 34 million. The recovery in EBITDA coupled with an optimization inventories we have been focusing during 2023 were the main causes of the positive cash performance. In Slide 18, we present the net debt evolution during 2023. Altri's net debt of EUR 357 million at the end of 2023 implies an increase of EUR 31 million when comparing with December 2022. This was the year where we distribute the dividends worth around EUR 52 million, excluding the dividend in kind of Greenvolt shares. CapEx increased by 34% and corporate taxes advanced payments were made based on 2022 much higher results. I would now pass back the word to José.

Thank you, Miguel. If you turn to Slide #19, we mentioned Altri's ROCE level at 9% in 2023, which we consider acceptable for a down cycle year such as 2023. And if you consider the average over the past 7 years, it came to an estimated 17%. In the following Slide #20, we have some developments on the sustainability front during the quarter. Altri Group has joined the United Nations in the appeal for government to fight corruption and encourage best governance models. During the quarter, Altri issued EUR 50 million in green bonds, which have financed the new biomass boiler at Caima, making it the first [ textile ] fiber unit in Iberia, one of the few in Europe to operate fossil fuel-free. Finally, in Slide 21, we wanted to share with you our views going forward. The overall demand in the pulp sector seems positive in the first month of 2024 with Europe and North America rebounding from a negative year, and China, which seems to be holding up well after a very strong 2023. Pulp prices in Europe continued to increase in the first 3 months of 2024 with net prices in Europe now at a premium versus China. After 3 monthly consecutive increases of $80 per ton each and the more recent seems have announced yesterday by the largest operator in the industry, the least price in March is at $1,300 per ton, which was already implemented. We should see this to be reflected in the fixed index in the -- at the point in mid-April. On the cash cost front, and after 4 consecutive quarters of cost deflation, the situation seems to be stabilizing or even some upward pressure going forward. Altri will continue to work to maintain the cash cost level and the control. On Gama, we need all the conditions to be in place to be able to make a final investment decision. Additionally, we continue to work on other diversification projects, namely the recovery and valorization of acetic acid and furfural from renewable sources at Caima, to be concluded in 2025 and increasing the level of dissolving pulp focus. I will now turn the call back to Rui.

The floor is now open to Q&A.

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

I have three, if I may. The first one is related to price increases. So a few months ago, we thought that $1,220 level could be a ceiling. But since then, as you stated, we've seen cumulative $150 per ton hikes, right? So demand is performing well and inventories in the China remained low, but could you maybe give us more color on what incremental sector tailwinds are there for the drive the latest price increases? Second one, on cash costs. Very strong performance in the fourth quarter. So to what extent are these levels sustainable? So I assume that you were commenting with price -- pulp price increases negotiations with customers probably toughened so what sort of decline can we expect for this year? And the final one would be on CapEx. Last year, you guided for close to EUR 70 million. In the end, it came a bit below this. So could we expect the difference to this year? And what kind of CapEx levels can we assume for full year '24?

Well, starting with price increases, it's always hard as we look forward to determine specifically which level it gets. Right now, as I mentioned, were at $1,300 per ton. There was another increase announced last night by a key industry competitor, particularly looking at Europe an additional $80 per ton, which would take us to $1,380, if you recall, was the same level we had 2 years ago. And in fact, the upward dynamics on prices have been, I think, justified from three perspectives, one on the supply side, inventories are relatively low, below historical level. They're expected to remain somewhat below historical levels for us sometime at least in the next few months. So I wouldn't expect that, that pressure necessarily to decrease. There is -- the market absorbed, let's say, the additional supply that came last year. This year, it won't be -- the second half of the year when we'll start seeing new supply coming to market and even partially this year and the rest of it reflected into next year. So I'll say for the next few months, the market will remain relatively stable and balanced, if anything else, perhaps slightly short because of what I mentioned. So is the current level going to be continuously under upwards pressure within the short term, it leads me to the third point, which is if you look at it purely from a demand standpoint, it's been fairly healthy in a segment, especially where last year, we saw a significant decrease in the print and writing, but also in other segments. Tissue has been strong as well, but print and writing last year suffered as you know, from significant destocking. And usually, those effects tend to be overstated, whether it's on the overstocking that happened through 2022 or the significant destocking last year. So we see what's going on at least in terms of the growth of that segment. One, the normalization of the segment, but also somewhat return to a more healthier level of stocks within the chain. And if you think of what's happened in the Red Sea and all the limitations in terms of supply chain, that has not helped. Europe tends to import about 10% of its need from -- paper need from China and a lot of that has been impacted over the past few months. So that, again, puts additional pressure in terms of limited -- when there is limited supply. So if you look at all those, I think the current level is perfectly justifiable. If I look forward, I think the announcement, as I mentioned, that was made by another -- an important supplier yesterday, which we also intend to follow because we see the conditions are right to the market to continue to rebuild in terms of what we see as additional demand. On our end, and in terms of our own orders, our order books are full. I don't expect that to change anytime soon. Actually, we've had a lot more order requests than we can supply. And we continue to maintain discipline in terms of our working capital, so we'll continue to maintain relatively low stock levels, which obviously, I think, it speaks to some prudence, especially looking at what may happen in the second half of the year. Thinking about cash costs, in fact, fourth quarter, I would say, there was a lot of things that came together. But fourth -- I wouldn't take that necessarily as a straightforward level that we would maintain for this year. But when we look at it year-on-year, if you recall last year, we started by indicating a high single digits, ultimately, ended up low double digits, which is what we achieved through the year-on-year. But quarter-on-quarter, we had a reduction of 28%. I would say this year, if you look at it year-on-year, we'll probably continue to see some level of reduction of which I would characterize perhaps in the mid-single digits. With respect to your third question on CapEx, effectively, last year, we came below what was our initial budget. There were a few things that led to that, in particular. And you're right, there were a few items that passed on to this year, but somewhat limited, but we also took action to manage our own cash flow. And therefore, there were some reductions that we also operated. So looking at this year, and I think we've mentioned that in the last call, our target for this year will be somewhat in the mid-40s, which is a significant reduction versus last year, but still higher than what will be our historical average purely, if you think of maintenance CapEx. And that's mainly because of investment projects that we continue to undertake, especially the new biorefinery acetic and furfural project in Caima. Thank you for the question, Enrique.

The next question comes from the line of Bruno Bessa from CaixaBank.

And I have three, if I may, and then I'll go back to the queue if I have more questions for the end. But the first one, just trying to get here a bit of a clarification on the cash cost evolution in Q4. So I saw that you booked a positive noncash EBIT impact from the change in the fair value of biological assets. And I saw that you booked this both in Q4 2023 and also in Q4 2022. My question here is how recurrent is this? And what is the reason for this revaluation? So this will be the first question. And the second question, more focused on the demand dynamics in China. I understand that the dynamics in Europe are very, very strong. But just trying to understand the direction [ fossil ] and raising prices also in China, considering that the company has already announced, if I remember correctly, two hikes since the beginning of the year, which have not been -- apparently have not been passed through or at least are not slightly on the peak. Just trying to understand how do you see the demand dynamics in China today? And if you could share with us how much demand increased on a year-on-year basis year-to-date globally? It will be interesting to know that. And lastly, on dividends, considering that -- well, we distributed around EUR 50 million dividends in '22 and '23. What could we expect for 2024, if you could keep this level of dividends or if you are kept by the EUR 43 million net profit that you delivered in 2023? Here, I'm just trying to understand what should be your dividend policy considering that pulp prices are under a very strong momentum in Europe. So this will be my three questions.

Thank you, Bruno, for your questions. And actually, on the first, I'm going to pass it to Miguel specifically on the revaluation of the biological assets.

Yes. Thank you for the question. Regarding the variation in biological assets, we really don't consider that as a nonrecurring item, as it is something we do every year. And usually, we do it only at the last quarter of the year. This is something that depends on multiple factors like the wood we get in the year, the growth rate of the wood that we have, the interest rate that we use for discounts. So this year, it was a positive delta of around EUR 6 million. But last year, it was around EUR 3 million. So it's hard to predict what will be the impact of this biological assets every year. So we really don't see it as a nonrecurring because it is something that we have to do every year...

Sorry, just as a follow-up, would you expect a similar revaluation again in 2024? Or is it still too soon to make a projection on that front?

It is still too soon because, as I said, it depends on multiple factors that we don't know at this time and that we will only know at the end of the year.

Okay. Following up on the other questions, Bruno. In terms of the demand dynamics, specifically in China, and what could be extracted from the -- in terms of support for the announced price increases, effectively, if I recall, there were two, one in January for $10 per ton and one in March for $30 per ton and now another one for April for $30 per ton. What I would say is I think the market has positively surprised everyone, the market in China, and that comes on a very strong growth already last year. So the numbers that we have, the official numbers, are only as of January from the Pulp and Paper Products Council. And if you look at it on a global basis, hardwood suphate pulp increased by 9.9%. We've seen increases in Europe of 3.1%, but China continues to grow very aggressively at 18.6%. And effectively, this week, we have Shanghai Pulp Week. And the first comment that we've actually gotten from them -- and, if you recall, last year, there was one of the triggers actually to the downside at the end of January. But the first comments we get from that meeting is that everyone was asking for more pulp volume, not for lower prices. So I think it's indicative of some momentum, at least or if nothing else, that supports in terms of what we currently see in China. We don't expect there will be any significant weakness at least in the short term in the next few months. Regarding your question on dividends, as you know, we don't give any guidance on dividends, what we do say and maintain. We've had, I would say, a good track record of shareholder remuneration. We continue to have that in mind. We will announce specifically early April, that's usually one we do, what are our plans for any dividend distribution. But I think we tend to be relatively consistent. And right now, I don't see why, ultimately, you would see anything different or whether you have any surprises from us. But as I said, specific announcements will go from a decision [indiscernible].

Our next question comes from the line of Luis de Toledo from ODDO.

We have four questions. First one would be referring to volumes. The other segment represents 12%. I don't know if you could elaborate on -- what is behind this growth? And which segments are? And if there is any correlation with increasing the sales in Middle East and Africa. The second question would be regarding Greenvolt. I don't know if you're assuming any potential change in the agreements with this company resulting potential change in control. And the final question would refer to the volatility -- increase volatility in taxes and financial costs, if you could provide any guidance for next year?

Luis, may I -- apologies, may I ask you to repeat your first and second question. The volume came through very low, if you don't mind...

Okay. First question would refer to volumes and the other segment if you could clarify what's behind the growth. It now represents 12%. And if there is any relation -- correlation with the increase in Middle East and Africa in deliveries? And the second question would refer to Greenvolt and if you -- if we should expect any change in the agreements with this company, resulting the potential change in the shareholder structure?

Thank you. So on the first question, I think you were referring primarily to DP, if I understood it correctly, in terms of the strength in volumes and growth. And if that's the case, I mean, the market has been relatively consistent, but I would say in the last 6 months -- 6-plus months, we've seen the main segments for DP, which is textile fibers coming back very significantly. And part of that, one is the dynamics with other pulp subscribers, namely cotton, but also similar to other market, there's been a significant destocking that happened in 2022 and into 2023. So a part of that is some rebalancing in terms of the value chain to pulp. The only other comment that I would make is, as you know, in dissolving pulp, you have hardwood as well as softwood, and there is still a differential in terms of price between the two grades, being that most of the softwood plants are relatively older plants. And therefore, I think continued growth of hardwood is something that we'll expect in the near term. Regarding your second question on Greenvolt and the change in control, what I would say is we don't expect any significant impact. Today, Greenvolt is a completely separate public company. We do have agreements mainly on supply, finance and also on OEM of their biomass units that reside within our industrial vendor. Those are in place. They're long-term contracts, and those remain in force until further notice. So I -- at least from what has been publicly announced, I don't expect really any impact on that. Regarding third question, I'll pass it on to Miguel to comment.

Yes. Thank you for the question. If I understood the question, I think it was regarding some volatility in finance costs. I would say that our finance costs, if we do the breakdown, there's a part that I think it's more or less easy to predict, which is related to interest rates regarding our debt. And of course, interest rates now are much higher than they were in -- mainly in 2022. So we will have, of course, higher cost on that side, even if we have an important part of our debt, around 1/3 with a fixed interest rates of some swaps to hedge. And then there's the other part of the finance costs, which I think is the one that causes this volatility. That is mainly regarding the hedge of the FX, mainly the dollar. And in that part, it's really hard to predict even the euro-dollar in the last quarters, I think, it has been quite volatile. So usually, if the dollar gets weaker, we are better in the financial results, but we have worse operational results and also the opposite. So I think volatility comes from that situation. So on the interest part, as I said, we don't see much volatility here. But on the hedge side, it will pretty much depend on the euro-dollar evolution.

[Operator Instructions] Our next question comes from the line of Jaime Escribano from Banco Santander.

So a few questions from my side. I'm sorry, because I joined late to the call, so maybe you have already answered, I can follow up later. The first one is if you could provide us some guidance on the commercial discount for 2024 or at least tell us a little bit the dynamics whether the hardwood pulp discount is going up or no, or is more or less stable? Second question, guidance also in terms of volumes. So what volume should we model for '24? And following up on the answer on FX, have you done hedges for this year? What amount? And what would be the color just for support modeling purposes? And a final question on the Gama project. So if the Gama project does not go through, what would be the Plan B? What do you have in mind?

Thank you, Jaime. So starting with your question on commercial discount. There have been -- has been historic tradition on the market that there have been increases or continuous increases in terms of special discounts. We would estimate on average for the industry in hardwood for 2024, the estimate would be -- the discount -- the commercial discount should be in the range of about 40%. So it's a few percentage points versus where it has been last year. But as you know, commercial discount is -- it's one factor impacting the overall net prices for us. But at the end of the day, where prices are [indiscernible] element. And I wouldn't disagree with the point that I've heard in the past that the fact that you have some of the discount -- commercial discount inflation. It actually incentivize the suppliers to push for price increases. And I think that's been a little bit of some of the calculation that was made earlier in the year. Regarding your second question in terms of guidance on volumes, we are currently operating very efficiently. When we look at this year, especially the first semester, we are very focused on maximizing our existing capacity, although we do have a maintenance stoppage in Saudi in May, June of this year, but that will not impact obviously ourselves. We are already planning for that. But I would say in terms of volumes this year, you should probably be looking for something around 5% versus last year -- 5% increase, I'm sorry, versus last year. On the topic -- I'll get on to the topic of Gama and perhaps then I'd pass it on to Miguel regarding the hedges that we have in place. But on Gama, so as we've commented before, we need to have all of the conditions in place, namely the financing. The project is currently in the public comment period. And there's been a lot of, I would say, activity around that public comment period as was to be expected. We continue to be very focused on taking that through. The project is very mature right now. So we're not necessarily looking at Plan B. What I would comment is we were always working on other growth projects for our existing units and beyond. So in due time, if that was the case, we could obviously comment on other alternatives. But clearly, there are alternatives and -- if that was the case, but it's obviously not the time to comment on this. I'll pass it on to Miguel on the hedge question.

Thank you for the question. Regarding FX, as we do every year, yes, we have some hedging done for 2024. We do not do it for the old amount of dollars that we need. We do it usually for around 40%, 50%. I would not like to go directly in numbers in terms of dollars, but I would say that maybe the current level of euro-dollar is not very far for -- from the midpoint, maybe closer to the floor.

Okay. And one final question, if I may, to be more for José. Regarding client margins. So just to get qualitatively how they feel with these price increases? Are they accepting it? Are they being able to pass it to their final clients? Are they starting -- feeling uncomfortable or having some margin squeeze or not at all, and they are like accepting pulp prices increases and they are okay with that? Just to understand a little bit the one-on-one dynamics.

Sure. Sure. So Jaime, what we have seen, first of all, in terms of price implementation, we've had no resistance whatsoever. Prices have been going through, as I said. Currently for this month, we are already at 1,300. And in fact, what we see is customers asking for more volumes than we can supply. We have been running -- continue to run on low stock inventories, and that's just the way we're going to continue to run for the remaining of the year in order to manage our working capital. But with that said, we're fulfilling all of the contracts and even somewhat beyond the contract that we have on -- upon request that we've seen from customers. No resistance whatsoever in terms of the price increases. Will that have an impact in terms of their margins? I think they've -- also have been doing a very good job at managing their cost. Energy is not an issue, as you know, right now, which was one of the biggest challenges in 2022. And at the same if you consider last year, the inverse happened because last year, there was a significant drop in terms of magnitude and in terms of short time it took. And that obviously helps significantly in terms of the margins because the prices on end products did not change significantly. So I would say today, what we look, at least in terms of the current levels of pricing is probably a more normal level or back on a normal level profitability.

The next question comes from the line of António Seladas from A|S Independent Research.

Basically, most of the questions were already answered. So I have 2 or 3 follow-up questions. The first one is on cost -- cash costs. So just to clarify, if I understood well, you point to in 2024, minus 5% on cash costs, if you can confirm, please. Second one is related with COGS and good costs. Gross margin over the fourth quarter remain under pressure. So should we assume that the main contribution for cash costs coming down in 2024 are wood? So can you share with us what are your thoughts on wood prices? And finally, about discount -- commercial discounts, you already mentioned about 40% average for the year. So should we assume that now discounts are higher or lower than the 40%?

Thank you, António. So starting with your first question on cash costs. Currently, what we see, just to confirm, yes, we're looking at mid-single digits for a reduction versus year-on-year. Regarding wood costs, wood costs are always the biggest component that we have in terms of our variable costs that you would expect. And what we see is there have been -- this year, we have a significant -- I would say, significant reduction in terms of our imports from Latin America. Part of it has been because of higher productivity in our national market and also in our own self-supply, so in our own forest. We've been able to complement that, as we've done already or started to do already last year. But I would say that's the most significant impact. But inflation, even though it has come down, it's still there and continued pressure for wood sourcing is still there. So in an environment where you see pulp prices potentially higher, there is a clear potential for wood price inflation to happen. But I would say prices right now are relatively stable. But clearly, there could be -- we could see some inflation happening there. In terms of your commercial discounts, the 40% today, that's what's been practiced. So it's not higher or lower. That's our estimate in terms of what has been. We've seen that from our own contract. Some of it is actually a bit lower. Some of it is a bit higher. Some of the contracts we've done in a way that there is actually a bracket depending where pulp prices are and as always, depending on the [indiscernible].

Okay. Just -- okay, so sorry -- so despite the pressure on wood prices, you are still comfortable with the cash costs coming down in 2024?

Yes. So year-on-year, that's what we're pointing to. You will see further reductions when you compare full year 2024 -- we expect to see when you compare full year 2024 with full year 2023.

There is a follow-up question from the line of Bruno Bessa from CaixaBank BPI.

Just two questions. The first on working capital, we saw relevant investments in working capital over the last couple of years. What should we think about working capital during this year? What are your expectations today? And second, well, making a very back of the envelope calculations and quick calculations, would you feel comfortable with an EBITDA around EUR 250 million for this year? This was my questions.

Okay. Let me pass it on to Miguel on the first question. I'll come back on the second.

Thank you, José. Well, regarding the working capital, as you said, I think we have been optimizing a lot in the past quarters. So we think we've reached already very efficient levels, namely -- regarding inventories. And we will look at that in detail for the next quarters, but we don't expect to have an improvement like the one we have in 2023. So we think we are already at very efficient levels and it's not -- and there will not be a big reduction, even if we are managing very closely this item.

Thank you, Miguel. Regarding your back of the envelope calculation, Bruno, I like your bullishness. When we look at the market, obviously, we are in a network in terms of prices, that's positive. We're likely to have an upgrade in terms of volumes, which is positive. But I would say we still remain relatively prudent on the second half of the year. As you know, there is new capacity coming on to the market. And even though there is a momentum going into the summer, the second half is still somewhat of an unknown. If we continue to see this strength in terms of demand growth from China, I think that gives a lot of support to a stronger market through the remainder of this year. I think Europe, whilst you can have this normalizing effect that we've seen currently, I think that's going to stabilize unless you have, again, supply chain constraints like we've had in late 2021 but certainly in 2022. So with all those unknowns and uncertainties, we're clearly a little bit more -- or we remain, as I would say, a little bit more prudent on the second half of this year until we have better visibility. And I'm sure in the next quarters, you'll start to see a little bit more of where we may point towards. But I think -- at least on your back of the envelope calculation, I think that I would classify that as a bullish estimate at this point.

There are no further questions. I will hand over the session to Mr. José Pina, Altri CEO for the final remarks.

Very good. Well, thank you very much. Thanks for attending. Thanks for the questions. And we look forward to our next conference call and the next set of results in the upcoming quarters. So thank you very much. Have a good day.

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