Empresas CMPC S.A. (CMPC) Earnings Call Transcript & Summary

Thank you, and welcome, everyone, to our Second Quarter Results Conference Call. Starting on Slide #3 of the presentation. Results for the second quarter reflect an improvement on a quarter-on-quarter basis which comes mainly from the reduction in costs and expenses throughout the quarter. This is partly the result of the depreciation of local currencies, some seasonal effects and better operational performance of our mills. We ended the quarter in a solid financial position, maintaining a high level of liquidity while decreasing our total debt. This was supported by a positive free cash flow generation during the quarter, which is in line with our plan to control CapEx and expenses in the current challenging scenario. Now turning to Slide #4. Pulp prices remained weak during the quarter, even though we saw a slight quarter-on-quarter increase. Pulp production was strong, but we decreased our pulp sales volumes in order to increase our inventory level ahead of the Guaiba II and Pacifico downtimes. Therefore, sales decreased 8% on a quarter-on-quarter basis. The Softys division saw a decline in the tissue paper sales volumes as a result of a higher comparison base comparing with the last quarter, which benefit from a big increase in demand related to the COVID-19. Biopackaging volumes saw a seasonal decline as a result of the end of the fruit season in Chile, but maintain a strong EBITDA figure as a result of a lower cost and expenses. Due to that, the company's second quarter EBITDA reached $257 million, 16% higher quarter-on-quarter, but 21% lower year-on-year. Net income was positive $18 million, mainly explained by the lower deferred taxes provision and the higher EBITDA generation. The net debt-to-EBITDA ratio reached 3.2x, stable compared with the last quarter and within our corporate policy. I would like to turn the call over to Colomba Henriquez, our Head of Investor Relations, who will provide more details on our results. Colomba, please go ahead.

Thank you, Ignacio, and good morning, everyone. Please turn to Slide 5 of our presentation where we can see more color on consolidated operating costs and other operating expenses for the second quarter of 2020. Cost of goods sold reached $804 million, a 14% decrease compared to the previous quarter and a 13% decrease compared to the previous year. Consolidated operating costs represented 65% of total revenue, lower than the 69% of 1Q '20 and slightly higher than the 64% of 2Q '19. This 14% sequential decrease was primarily due to lower volumes and lower operating cost in the pulp division related to lower cash costs, fire protection costs and maintenance costs as well as the positive effect of the depreciation of local currencies. The Biopackaging division also posted lower operating costs as a result of higher efficiencies in the boxboard and corrugated paper segments. The year-over-year result is primarily due to lower unit costs in all divisions, supported by lower fiber costs, higher efficiencies and the positive effect related to local currency depreciation. Consolidated other operating expenses reached $178 million for the quarter, a 6% decrease in both quarter-on-quarter and year-on-year, representing 14% of total revenue, stable compared to 1Q '20 and above the 13% reported in 2Q '19. This quarter-over-quarter decrease is due to lower administrative expenses in Softys and Biopackaging and the positive effect of local currency devaluation. The year-over-year decrease is related to lower administrative expenses in Biopackaging and lower marketing expenses in Softys as well as the positive effect of local currency depreciation. It's also important to mention that during the second quarter, we registered an increase in expenses related to COVID-19 prevention and protection measures. Moving to Slide 6 now. We will take a closer look into the pulp business result. Pulp production reached 1,067,000 tons, increasing 14% quarter-on-quarter and decreasing 1% year-over-year. Pulp production was strong as there were no maintenance downtimes during the quarter and our mills operated at full capacity. Pulp prices during the second quarter of 2020 reached $560 per ton for softwood and $469 per ton for hardwood, both increasing 1% since the first quarter of 2020. Total market pulp sales volumes decreased by 8% quarter-over-quarter and by 6% year-over-year. As Ignacio mentioned, this is because we increased our level of inventory ahead of the Guaíba II and the Pacifico scheduled maintenance. Looking at our quarter-over-quarter performance, we saw a 15% decrease in softwood sales, explained by lower shipments to Asia; while hardwood sales decreased 6%, explained by lower shipments to Asia and Europe. For the year-over-year comparison, sale volumes decreased 11% for softwood as a result of lower shipments to Asia; and 5% for hardwood, with lower exports to U.S., China and Latin America. Third-party forestry sales volumes decreased by 4% quarter-over-quarter due to lower volumes of pulpwood and plywood. This was partially offset by higher sawn wood exports to Asia, excluding China, as well as higher millwork exports to the U.S. Year-over-year, forestry sales volumes for third parties declined by 14%. During the quarter, we saw a significant decrease in pulpwood and sawing logs, as well as lower sawn wood exports to Asia excluding China, Middle East and Europe. This was partly compensated by a 22% increase in plywood sales volumes as a result of higher exports to all markets. Due to the previous effects, revenues for our forestry and pulp business decreased by 6% sequentially and 23% compared to 2Q 19. EBITDA, on the other hand, increased 38% sequentially but decreased 40% compared to 2Q '19. Breaking down the quarter-over-quarter EBITDA increase, we can see that it was primarily due to lower operating costs related to lower cash cost, forest protection costs, maintenance costs and the positive effect of depreciation of the Brazilian reals. This was partly offset by lower sale volumes of pulp and forestry products. In the year-over-year comparison, the decrease resulted largely from lower pulp prices, which decreased 11% for softwood and 25% for hardwood and lower pulp sale volumes. This was partly compensated by the positive effect in cost and expenses of the depreciation of the BRL and the COP during the quarter. Moving to Slide 7. Here, we can take a closer look at the Softys business. Softys revenues decreased by 9% quarter-over-quarter and by 3% year-over-year, reaching $495 million. Tissue paper sale volumes decreased by 5% compared to the previous quarter and increased 18% compared to 2Q '19. Quarter-over-quarter, we registered lower sale volumes in Brazil, Chile and Colombia. Year-over-year, the increase was mainly a result of higher sales volumes in Brazil, driven by the consolidation of SEPAC. It is also worth noting the increase in sales volumes in Argentina, both quarter-over-quarter and year-on-year, as a result of the startup of the new tissue machine at the Zarate mill. Personal care sales volumes grew by 7% compared to 1Q '20 and 22% compared to 2Q '19. The quarter-over-quarter increase was driven by higher diaper sales in Argentina and Brazil as well as higher wet wipes sales in Mexico and Chile. In the year-over-year comparison, personal care sale volumes benefited by higher volumes in all categories, with significant increases in diaper volumes as well as wet wipes in most countries where we operate. Average sales prices measured in dollars were down 7% for tissue paper and 8% for personal care products compared to 1Q '20. The decline in prices is related to the depreciation of local currencies and a change in the product mix, partly compensated by price increases in local currencies. Softys EBITDA reached $76 million during the quarter compared to $86 million in 1Q '20 and $46 million in 2Q '19. EBITDA margin reached 15.4%. The quarter-over-quarter decrease relates to lower sales volumes of tissue paper, mainly in the away-from-home segment, and lower prices measured in U.S. dollars. Also, there were higher expenses related to COVID-19, a higher fiber cost as a result of the lower availability of recycled paper. This was partly compensated by higher volumes of personal care products and lower SG&A. The year-over-year increase is related to the significantly higher volumes of tissue paper and personal care products as well as higher prices in local currencies. Also, there were lower operating costs related to lower [ starter ] costs and lower administrative expenses. These effects, both quarter-over-quarter and year-over-year were compensated by the negative effect of the local currency depreciation. It is also worth mentioning that we registered $6 million in results during the quarter related to tax credits in our Brazilian subsidiary. Let's now move to Slide 8 to see further details on the Biopackaging results. Sale volumes to third parties decreased by 12% quarter-over-quarter as a result of the seasonally lower volumes of corrugated boxes, lower boxboard exports to Latin America and Asia and lower paper sack sales in Peru. Year-over-year, volumes were stable, and this is explained by higher corrugated paper sales in Chile and boxboard exports to the U.S., offset by lower paper sack sales in Peru and apple trays and industrial boxes in Chile. Average sale prices increased by 1% sequentially, but decreased 10% annually. As a result, revenues decreased by 11% quarter-over-quarter and 10% year-over-year, reaching $198 million. The packaging business EBITDA reached $27 million compared to $25 million in 1Q '20 and $17 million in 2Q '19. EBITDA margin reached 13.5%. The sequential increase in EBITDA is mainly related to lower operating costs due to lower raw material cost in boxboard and higher efficiencies in corrugated paper. Also, there were lower administrative expenses during the quarter. This was partly offset by lower sales volumes. The annual increase is mainly from lower cost as a result of lower pulp and oil prices as well as lower SG&A. Also, there was a decrease in operating costs resulting from the better operational performance of the boxboard and the corrugated paper business. This was partly compensated by lower average prices. Now I will turn the call over to Ignacio to cover our financial position. Thank you.

Thank you, Colomba. Please turn to Slide #9. Free cash flow was positive $155 million during the second quarter. This is a result of a tax refund we received during the quarter as well as a higher EBITDA generation. CapEx reached $69 million, which includes the Samcarsa acquisition we made in early June. With this acquisition, we added a capacity of 60 million paper sacks per year to our Mexican paper sack operation. I would like to mention that the [ tissue ] machine ramp-up has been advancing according to our expectations. We repaid a portion of the short-term debt we took last quarter, and therefore, our total debt decreased 6% quarter-on-quarter, reaching $4.3 billion. Our cash position continues to be solid at $1.1 billion by the end of the quarter, supported by the positive free cash flow generation. This way, our net debt decreased by 4% compared to the previous quarter, and our net debt-to-EBITDA ratio stood at 3.2x, stable compared with the previous quarter. Moving to Page #10. For the second half of the year, we'll maintain our commitment to take care of our people, ensure operational continuity of our business units, execute initiatives to help others and maintain a strong liquidity position. We think that this is essential to continue operating normally and supporting our workers and neighbors during these challenging times. We will continue working on the operational efficiency and productivity initiatives we have been implementing over the past years. They have already contributed to improving our operational results, but we know that we have room to continue improving. We remain fully committed to execution of our long-term strategy and also to maintaining a conservative financial structure and our investment-grade rating. We know that this is the right way to look towards the future, understanding that we are facing a volatile environment. I would like now to mention that Mr. Francisco Ruiz-Tagle, CMPC's CEO; Mr. Raimundo Varela, our Pulp Commercial Director; and Mr. Felipe Arancibia, Softys, CEO -- CFO, are also joining the conference call. They will be available to answer any questions you may have. Operator, please open the floor for questions.

[Operator Instructions] And our first question is from Isabella Vasconcelos of Bradesco BBI.

Can you hear me well? Hello?

Yes, we can.

Okay. Good. Yes. I hope you're all doing well. I have 2 questions. The first, on the pulp market. It would be interesting if you could comment on the pulp market trends in China, and in particular, the differences between hardwood and softwood pulp currently. And my second question, still on pulp. You had a very solid cost performance this quarter. I was wondering if you could provide some guidance on your expectations towards the second half. These are my two questions.

This is Raimundo Varela. I can take the first question regarding the pulp market in China. The market has found stability during this quarter, particularly in July. I think the demand has been better than expected in the last 4 to 5 weeks. And we see that the market is stable now. Prices for eucalyptus pulp between 440 and even [ some basis ] of 450. And the long fiber, on the other hand, our Radiata fiber 540, 5-- yes, 540 average, I would say. So -- and we see very good demand at those levels. So we think, and we're talking to many of our customers, and plus, our people on the ground. And the market has found stability at those levels. And we see little risk of the prices to drop more for the time being. We also see that the paper production in China has been improving in a different rate, stable in tissue, but some of the other grades were very depressed, like printing writing, and some of the -- all of the packagings have been improving. In that sense, I think we are relatively pleased with that part. No doubt that the prices are still very low, but at least, the demand is good and the prices have found stability. In regard to the spread between the 2 fibers, I think the spread will remain at this kind of level, $100. Because in the long fiber, there has been more effects on the supply side. So the long fiber is tighter than the short fiber. So I think the $100 spread, it could even get a little bit bigger. And I have the impression that the long fiber will help to push the short fiber in the next month.

Okay. This is Francisco Ruiz-Tagle. Regarding the second part of your question connected with costs. I can say that we are running in a very regular basis. The mills have been doing okay in the second quarter. And we do not expect something different for the second semester, except that we postponed some maintenance of the -- [ a couple of ] mills. In the case of Guaíba, for instance, and Pacifico, we are doing this maintenance during the third quarter. So probably, it will have some impact in costs. On the other side, we also have a semester, the next -- this new semester without fire expenses since those are mainly expended during the first quarter of the year. So we will have, in that sense, a better cost. And of course, we also have the impact of the exchange rate, the devaluation of the local currencies, in some way, impacted positively these costs. And of course, the situation with this aspect will depend on the exchange rate for the second semester. But in general terms, we are seeing kind of a normal semester with a regular operation and with a good condition for costs.

Our next question comes from Marcio Farid of JPM.

I have a couple of questions. Can you, maybe Ignacio or Raimundo, you do have a couple of maintenance downtimes in the second half of the year. But you did mention in the beginning that you increased inventories in the second quarter ahead of the maintenance downtime schedule. So I was just wondering from a sales perspective, should we expect kind of a normal second half, and you can finish maybe selling close to 3.5 million ton that we expect for the year, similar to last year as well. And then Ignacio, on the CapEx side, actually, it has been running at quite relatively low levels for the past quarters. I'm just wondering what we can expect for 2020, 2021 in terms of CapEx side. And maybe one last question to Raimundo. Raimundo, any update on the situation of the pulp market in Europe, please? You did mention that China market is doing better from a demand perspective. But can you just give us some color on the European side?

Okay. Ignacio, you want, I can start, and then I pass you on. I think that our sales, in general, we have a very large part of our sales around the contract. So we tend to be quite stable throughout the year. But of course, when we have maintenance, we have to increase inventory just ahead of the maintenance so that we can maintain the shipment. So the invoicing in a month, no, in a quarter, might change. But overall, in general, we are quite stable. We're very diversified by geographical region, by end use segment. So our plan is to maintain the sales that we have for this year. I don't see no reason why that should change. In terms of the annual volume, I don't expect any real disturbance in that sense. And then I'll take the last part of the pulp market in Europe. No doubt that Europe has been the most affected continent in terms of the pulp and paper demand. And I think we saw May and June being very weak. Very, very weak across several segments. I mean, the tissue one that was very, very strong all the way until May 16, I would say, then second half of May and June started also to weaken, particularly away from home. And I mean, July was better, slightly better. But still, Europe remains under pressure. And many of our customers are still having downtime because the demand is not there. I think -- I mean, week after week, we see a little bit of improvement. Orders have started to recover. But no doubt that Europe still remains the one -- the continent most affected. I think they -- [ customers in Europe ] expect a better period between September and December, which traditionally is much better everywhere. But in particular, in Europe, that really should be stronger. I mean, the economies have been opening, and that will also no doubt help as well.

Marcio, Ignacio speaking. Regarding the CapEx, we maintained the guidance we already provide. That means in the range of $400 million for this year, considering that we postpone some small projects that should be executed during the second half of the year. Looking forward, for the next year, we still -- we're working on that. We don't have a guidance at the moment.

Okay. Can I follow-up with Raimundo, please? Raimundo, do you see some of the conditions in place for a price hike at the moment? Or do we need to wait for more visibility?

I think August will be flat, I think, compared with July. And September, we are seeing already some signs of -- that could allow us to maybe increase prices a little bit. But September would be [ fairly ] small. I do think that in Q4, so October, November, there is a good chance that prices will improve. I mean, you have to remember that we are at very, very low level. These levels are really not sustainable. I mean there's several other producers that are below their cost. So that's one reason. And the other reason is that demand is actually improving. And the September to December period is usually strong, and I don't think this year will be different. This year, we do expect a strong September to December. So I think Q4, we see good chances of price improvement in both fibers.

Our next question comes from Thiago Ojea of Goldman Sachs.

My first question comes on the cost side. So we saw that the cash cost declined 15% quarter-over-quarter for hardwood, a little bit lower than that for softwood. Of course, there is a big impact from FX, but can you provide a little bit more color? Do you see the cost component to stabilize around those levels for the coming quarters? And on my second point is on Softys, we saw lower volumes despite tissue consumption overall increasing across the globe and also of course in Brazil and Chile. So any specific here why the tissue quarter-over-quarter declined?

Thiago, Colomba here. So I'm going to take the first question about pulp cash costs. As Francisco said, the reason why cash costs decreased this quarter were mainly because we didn't have any maintenance downtime and the good operational results of our mill and the depreciation of especially the Brazilian real. So for the second half of the year, of course, it will depend on exactly the same factors. Our mills are running good. So from that perspective, we should continue that trend going forward. But of course, currency movements and for maintenance will affect for the second half of the year.

Thanks, Thiago, for your question. This is Felipe Arancibia speaking. Related to your question, your volume about Softys. And during this quarter, in tissue -- in consumer Tissue and personal care segment, after a sharp increase in sales in March 2020 as a result of a [ spike in demand ], as you well know, among consumers and distributors, we observed a normalized level of demand during Q2. So this is the reason why we just increased partially in tissue, but also in, let's say, a strong decline in away-from-home during the -- all the quarantines reduced travels, fewer restaurants visit and less activity in the health system. So when you combine both in total, the tissue segment has been slightly decreased. But I would say that in consumer, tissue has been increasing; however, in away-from-home has declined.

Got it. If I just can come back quickly on the cash cost, Colomba. I understand that you're going to have the stoppages now. Do you have any guidance on what could be the impact of these stoppages on the cash cost per ton?

Thiago, we don't give guidance on the impact of the maintenance downtime. Sorry for that.

Our next question comes from Carlos de Alba of Morgan Stanley.

So just following on the expenses, cost. There was an improvement quarter-on-quarter and year-on-year on other operating expenses. But I wonder if there is more to come in the coming quarters, how do you see that trending? And as -- also related to that, the COVID expenses on a monthly basis, I think it was said, it's around $5 million. How do you see those continuing in the third quarter and perhaps in the fourth quarter? And then finally, perhaps a little bit more medium to long term. Given what you have experienced with the pandemic and how it has impacted your different markets and maybe probably tissue more importantly, has the company started to think about changes in terms of the end markets and products where CMPC focuses on? I read, I think, in the press release that the company has been running at lower capacity utilization in some of the markets, or some of the away-from-home markets, and maybe starting to produce a little bit more of the stay at home. Is this something that you believe will be a more permanent change? Or are there any other thoughts that you have in that regard?

Carlos, this is Francisco. Regarding first question, on costs. Basically, we are seeing a very stable second semester compared with the last quarter in terms of costs and what is [Audio Gap] and actually, since the mills, every mill is running very normal and regularly, we are seeing a kind of efficient operation. So basically, we are seeing a more -- really stable operation. In the case of pulp, for your second question, and other businesses like packaging, of course, we are very much involved in the markets. And for instance, we have been seeing some important reduction in printing and writing papers in the external markets. On the other side, we are seeing more opportunities in the tissue markets in Asia and in Europe. So in that sense, we are putting our efforts in moving our production to the market that are more demanding today. And same thing in our Biopackaging business. We're actually responding and trying to create some other products in order to solve packaging opportunities for several industries. In the case of Softys, probably, you can mention something.

Yes. So this is Felipe speaking. Related to your question about the volumes of away from home. We are working on that. So we are trying to adapt this line in order to produce consumer tissue, but also will identify some innovation opportunity that can provide this excess of capacity that we already have in away-from-home lines. So we are working on that in order to have a better utilization of these assets. But we will see in the coming quarters, how are you going to use at the end.

And Francisco, just a clarification Francisco. The comments on cost that you made also apply to expenses, other operating expenses? Hello?

Yes, my answer is yes to your question. It's considering that.

Our next question comes from Barbara Angerstein of Itau BBA.

But my question was already answered. I wanted to ask about the CapEx. And maybe you can give me a little bit more guidance about what projects have been postponed. And what are you looking at in that direction?

Hi, Barbara, are you hearing me okay?

Yes, I do.

Okay, great. So well we only -- well CapEx for this year was already a small figure. And we pushed some products -- some projects forward, but those are mainly very small projects all across the business divisions. So nothing relevant or no big project was included. So only small things.

Our next question comes from Leopoldo Silva of LarrainVial.

So I have 2 questions. My first question is regarding the margins on Softys. You mentioned what improved. But I would like to ask about the -- what role does the geographical mix does it play on those margins? We saw Argentina and Uruguay increasing strongly, different from all the other countries, Chile and Brazil and Colombia. Should we -- am I correct if I assume that in those countries, you have better margins than on the ones that go low? And second is regarding costs on Softys and packaging. So for Softys, I would like to ask what role does the product mix play on reducing your costs. I saw that your cost, your unitary cost, came down strongly. And I would like to ask what role does the 2 thing -- the mix toward the at home rather than away from home, place on this. And for packaging, I would like to ask, thus, the -- what are you seeing on paper for recycling during the quarter? Because I remember, it has been kind of a shortage in the previous years in Chile and Mexico. And I would like to ask you if you're seeing good costs for paper for recycling? And have you seen on this month, maybe some spike on costs due to maybe a shortage of this wastepaper of quality coming from offices, from schools, et cetera?

[Foreign Language]

Okay. This is Felipe speaking. Related to your question about cost, I would say the -- as you have seen, our cost has been, let's say, less than the previous quarter and also [ than ] the previous year during the quarter, mainly due to the less pulp price, less recycling paper as well but mainly due to more efficiency in our paper machine. So because we have a strong, disciplined process inside of each of our plants in order to gain efficiency in all of them. So I would say you can combine these 2 effects. Number one is commodity, as you will know; but the other one, I would say that is a huge -- that has a huge impact in our direct cost. This is number one. And number two, all of our countries has been improving related to year-over-year. So I would say that most of our operation has doing quite well. Again, not just because of the pulp price, but also and mainly due to our efficiency program that we have in place that affect on the one side indirect costs, but also in terms of the cost and other expenses.

Okay. So regarding the Biopackaging side. They're somewhat similar to what Felipe just said of Softys. So we have a combination of low fibers -- low fiber costs, and we also have improved efficiencies, especially from the corrugated paper side and also from the boxboard side. And of course, that creates a decrease in the unit cash costs. I would say that's the most important thing.

Okay. And regarding the away-from-home and at home in Softys, does that play an important role? Or is your costs or maybe raw material costs for each of those similar?

It's pretty similar. Because just for you know, roughly speaking, 40% of our direct cost is related to pulp or recycled paper. So effect similar in both business.

Our next question comes from Chelsea Colón of Aegon Asset Management.

All my questions have been answered, thanks.

Our next question comes from Martin Perez of SMBC Chile. And our next question comes from Chris Liang of Ninety One.

Can you hear me?

Yes, perfectly.

Perfect. I just had one question. If you might be able to -- I think this question was asked earlier, but just if you might be able to elaborate on the -- your expectations for demand, both in China and Europe in your specific segments. If you might be able to put a couple of numbers on them for the next couple of quarters. And then just perhaps a brief outlook for 2021, that would be very helpful.

So the question was -- sorry, I'm not sure whether I got it. Our expectations for pulp demand in the remainder of the year?

Yes. Yes. So sorry. Just to elaborate, just your expectations for sales volumes for -- in your 3 segments, Pulp, Softys and Biopackaging, for the next couple of quarters. If you might be able to put a number on growth figures and then perhaps a brief overview of your outlook for 2021.

Okay. You want -- Ignacio can talk a little bit about Pulp. This is Raimundo. In pulp, we expect the second half of the year to be -- or the period between September and December to be stronger. I think Q3 will be weaker in terms of demand, which traditionally is the weakest, in particularly in this year because of the -- all what has happened with COVID that has affected cost/demand. As I said before, we are seeing already some signs of recovery. Still nothing huge, but it's better. The situation is better now than what it was a month ago. As we approach September and October, I think things will improve a little bit more. So in terms of demand, this is traditionally -- September to December, it's traditionally a good period, and we definitely expect that. And we are already seeing some impact. 2021, I think the pulp demand, we would see a recovery, no doubt. The market will recover a lot of what we lost this year. I think we're expecting at the end of '21, the demand will be more or less will be the same that it was at the end of '19. So whatever was lost in this period because of COVID, I think we believe that it will be recovered. And at the end of '21, we will be more or less at the same level that we were at the end of '19.

Our next question comes from Ishan Jain of HSBC. Our next question comes from Nick Caffarate of Ashmore. Nick, your line is open. Are you muted on your end? Our next question will come from [ Oriana Covaut ] of AllianceBernstein. Our next question comes from Arthur Biscuola of UBS. Our next question comes from Alfonso Salazar of Scotiabank.

One question on -- let me go back to costs. Just want to confirm if, in the pulp division, there were not any costs that were related to COVID, that -- a reduction in costs related to COVID will not sustain in the future. So the base of cost will be -- of cost going forward will be depending on the FX rate and the efficiencies and maintenance that you would expect. And also, if you can give us some color on growth on the tissue business.

Colomba here. So yes, we do have some costs related to COVID-19 in all business divisions, and those are in the range of $5 million per month, which, of course, once this situation or the current situation passes, some of it or most of it should fade out. But of course, some of them may be for a little longer. But yes, those are roughly $15 million per quarter that we have in our expenses side.

Our next question comes from Luis Eduardo Sánchez of Morgan Stanley. Our next question comes from Sebastián Ramírez of Banco Chile (sic) [ Banchile ]

I've got 2 questions. One comes on the side of pulp. A lot has been asked in terms of cash cost. And when we go to the comments on your results, you pointed out that good cost play some role within the decrease in cash costs within the quarter, given a lower purchase to third parties. So I wanted to understand if that is something more of a planning for this quarter or this year? Or is it more structural? And if you can -- given that there is a lot of moving parts in -- if you can give us some sense of how much of this drop quarter-on-quarter in pulp cost was due to the not being expensing in the fire contention. How much was for the maintenance? And how much was for this lower purchase of wood? Just to have a sense because the drop was very meaningful. And the second question comes in regard of tissue. That -- lots have been discussed that this new implementation of producing that is reducing cost. And when we look -- I wanted to understand how much of those savings are related to lower commercial expenses. When we go to the P&L of that division, it seems that all this consignment has implied a lower expense within that division and would be like a marketing expense. And that would be very interesting to understand if, going back to normality, how much should be the ramp-up of that line? And maybe you're finding new ways to operate without that much marketing spend. And lastly, in regards of the packaging business, when we look at the raw materials consumed in that division, the drop was almost $40 million quarter-on-quarter in raw materials and fuels, and with a very small decrease in volumes. So I would like to understand what was behind that very drop -- very meaningful drop because that explains virtually a bulk of the margin improvement in that division. That will be all from my side.

Okay. So starting with your cash cost question of pulp and the decrease in pulp wood related to lower third-party sales or purchases. And this is mainly because of the, I would say, lower production we had during the first quarter. And we had a little higher stocks of pulp wood in our mills. Therefore, we purchased a lot less from third parties. That, of course, is related to this quarter specifically -- maybe something for the next months, but it should be mostly in the second quarter. And I will take the Biopackaging question right away. In Biopackaging, yes, we did have a big decrease from the raw material side. And as I said before, that is mainly because of the better operational performance we've had in boxboard and also in the corrugated paper side. And of course, there are also oil prices, take a big part as well. And oil prices have decreased, and that impacts their cash cost as well.

Related to your question about Softys, our marketing expenses. So first of all, the main driver of the good results during the quarter is, let's say, on a higher price volumes and less cost. Having said that, the marketing expenses is not that relevant in order -- to the overall results. Having said that, I would say that we shift some investment from above the line to below the line. So we are spending more in the execution in the tray rather than media. So overall, we are spending pretty much the same. So I would say that our main focus during this pandemic has been in the operational side. And then we are going to continue to invest, or let's say, over-invest in our brands, in below the line and above the line. So as you will know, probably, our commercial strategy is based on 4 pillars. Strong brand equity that we are building now from the trade rather than from the media, is number one. Number two is how we can gain [ nominal ] distribution in the traditional trade that has been more relevant during the pandemic. Third, better execution into the point-of-sale that we are focusing on. And definitely last is the long-term relationship with other customers. So all in all, we -- marketing spend is pretty much the same rather than previous quarter. And the only thing different is we shift the intensity of the media from -- to the trade.

Got it. It's super clear. And the VAT -- the taxes refunded in the tissue division went directly to the bottom line. So we should extract that from the recurring EBITDA for the division?

Yes, indeed.

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