Empresas Copec S.A. (COPEC) Earnings Call Transcript & Summary

Good morning, everyone, and welcome to Empresas Copec's Fourth Quarter 2025 Results Conference Call. Today's presentation and the fourth quarter 2025 earnings release are available on the company's Investor Relations website, investor.empresascopec.cl. Before we begin, I would like to remind you that this presentation may include market outlooks and forward-looking statements, which are based on the beliefs and assumptions of Empresas Copec's management and on information currently available to the company. They involve risks, uncertainties and assumptions because they relate to future events and therefore, depend on circumstances that may or may not occur in the future. Investors should understand that general economic conditions, industry conditions and other operating factors could also affect the future results of Empresas Copec and could cause results to differ materially from those expressed in such forward-looking statements. This presentation contains certain performance measures that have been adjusted with respect to IFRS definitions, such as EBITDA. [Operator Instructions] I will turn now the call over to Mr. Rodrigo Huidobro, Chief Financial Officer of Empresas Copec. Please go ahead, sir.

Hello, everyone, and thank you for joining us today in this webcast where we will be taking a look at the results of the fourth quarter 2025 for Empresas Copec. We are going to go through a brief presentation where we are showing the main results, figures and developments of the quarter. And after that, as usual, we are going to open it up for a Q&A session, at which point, I will be joined by Mr. Cristian Palacios from our Investor Relations Department; and Mr. Gianfranco Truffello, CFO of Arauco. They will both be helping us out to address any questions you might have by the end of the presentation. Please feel free to post your questions right away along the presentation through the platform that is present in the Zoom platform via the chat that is present in the Zoom platform as from now on. So having said all that, once again, welcome, and let us begin with the most important highlights of the quarter. The company recorded an EBITDA of $599 million, which is 7% down with respect to year 2024, the fourth quarter year 2024 on the back especially of a lower performance in forestry as was the tone during the year, specifically because of lower prices in pulp. That was offset partially by an increase in energy. So in energy, we had a higher EBITDA with higher volumes year-on-year for Copec and Abastible, very robust, very strong performance of these 2 companies all throughout the year. And in particular, in the fourth quarter, we had higher volumes and favorable industrial margins in Copec and higher volumes across the different geographies for Abastible. Q-on-Q, slightly increased costs in Copec, which is quite frequent by the end of the year. In the case of forestry, we had a lower result year-on-year, which is basically explained by lower prices of volume as we had seen in the previous quarters as well. In the fourth quarter and compared to the third quarter, we had lower prices again, but this time offset by higher volumes to a certain extent and mixed results in general in panels, in the panels division, but with stable results overall as we will see going ahead. In terms of the main developments of the quarter, we continue to make progress in our Sucuriú project in Brazil, already standing at 43% progress by the end of the year. We're also carrying forward 2 different expansions in our panel division, one in Chile and one in Mexico, both of them approaching a 75% progress by the end of the year. And as another important highlight, we are presenting here the fact that Marcobre, which is the company that owns Mina Justa, issues its first international bond amounting to $400 million and allowing it to refinance its existing liabilities. Let us move to some more important -- some other important figures for the quarter. EBITDA, as I said before, is $599 million, which is 7% down year-on-year and 7% down as well Q-on-Q. Energy, however -- before that, let me just highlight the figure for the adjusted EBITDA. We have presented this figure for many years already in our press release. We are now wanting to highlight it and emphasize it more basically on the back of the fact that results coming from our nonconsolidated companies such as Mina Justa have gained a lot of importance in our business portfolio. And therefore, this adjusted EBITDA figure is more representative of the cash generated by the company in a particular quarter. So we will be presenting those figures. But at this point in time, giving a little bit more importance than before to the adjusted EBITDA, which amounts to $714 million for the quarter. So quite significant, precisely because of the contribution of Mina Justa in this particular quarter. In the case of energy, it's up to $322 million, which is 30% up year-on-year and minus 8% down Q-on-Q, which, as I said before, is quite usual by the end of the year to see a slight increase in expenses in general for the energy division. Forestry is down 30% year-on-year and 2.5% Q-on-Q, basically on account of lower pulp prices. Mina Justa is also presented there with a record -- a historical record number for the EBITDA of $394 million. Just to make it totally clear, this figure includes an impairment reverse onetime, of course, of mining assets for $82 million. So -- but anyhow, it is a figure that is above $300 million for the quarter, so quite impressive the EBITDA generated by Mina Justa. In terms of our debt metrics, net financial debt to EBITDA is up to 3.58, which is up with respect to the preceding quarters, of course, because basically, we are undergoing this huge investment in Brazil. When you measure it according to adjusted EBITDA, it goes down to 3.26. It makes a lot of sense from a rating agency perspective to use the adjusted EBITDA figure, which includes cash generated by the nonconsolidated companies. CapEx, pretty much in line with our budget is up to $955 million. Most of that, of course, devoted to the project in Brazil. You can see our figures there in a historical context, $599 million, so lower than last year and lower than the immediate preceding quarter as well. The net income, however, is up with respect to both the preceding quarter and the comparable quarter last year, essentially because of the contribution of the copper division in Mina Justa. In terms of our finance metrics, you can see there that our maturities are very well balanced going forward. In terms of net financial debt to EBITDA, we are up to almost 3.6% and 3.2% when measured on an adjusted EBITDA basis. All of this, of course, we were expecting it because of the progress in the Sucuriú new construction in Brazil. And as you can see in this historical context, we have been there before in other expansion cycles, we have hit this kind of figures or these levels of indebtedness and even above this. So this is totally expected, and we expect to be deleveraging quite quickly as soon as Sucuriú continues to -- as soon as Sucuriú starts operations. Well-balanced debt in terms of maturities, in terms of allocation among the different companies and also in terms of type of debt. All currencies matched to the functional currencies of each different company. And in terms of returns and EBITDA margins, of course, trending a bit down during the year because of the drop in pulp prices. But during the last month of the year, we will begin to reflect a better pricing scenario and therefore, better financial ratios as well. Digging deeper into the forestry division, you can see here that Arauco ended the quarter with a net income of $51 million for the fourth quarter '25 compared with $105 million for the fourth quarter '24. EBITDA is $288 million as reported by Arauco compared with $408 million for the comparable quarter '24. And this is basically caused by lower pulp prices and volumes, also towards the end of the year, a decrease in wood products volumes. And all of this is partially offset by higher panels prices and also lower unit selling costs for some of our fibers. You can see a detail on the behavior of our selling costs for the different fibers, a mixed performance in general during the last quarter compared to last year and also Q-on-Q. Overall, however, during the year, we saw a positive performance or a favorable performance of selling costs in terms of the costs trending down all across the board for the different fibers for the year as a whole. Mixed behavior though for the last quarter. You can see the EBITDA for pulp there standing at $223 million, which is above the third quarter '25, but still below the levels that we were recording towards the end of 2024. All of that, of course, on account of the lower pricing scenario. Overall, good sales volumes by the end of the year. A little bit of context on what we saw towards the end of the quarter. A stable market in general, we were able as well as other producers, were able to implement some price increases in both softwood and hardwood. Inventories declined by the end of the year and are now standing at reasonable levels in terms of their history, as you can see in the graph there. In China, we saw stable demand and increase for some particular fibers such as unbleached because of some restrictions on the internal market, stable market coming from printing and writing. And as I said before, prices in softwood and hardwood increasing during the quarter from Arauco and also from other players in the market. In Europe, we, in general, saw a challenging year as a whole. The fourth quarter continued to be challenging because of a weak demand and a weak economy. However, Arauco was able to implement some price increases in softwood, a challenge, as I said before, a challenged printing and writing industry and tissue definitely more stable. In terms of dissolving pulp, we saw stable textile pulp market as we saw throughout the year. However, the lyocell portion of the market was more challenging towards the end of the year. As you can see there, prices have been trending upwards during the last month of the year. You can see Arauco's price net in China in the graph that is there on the bottom left hand -- left corner of the screen. You can see that hardwood is trending towards $590 and softwood is $710, whereas dissolving pulp is at $780. So a positive trend towards the end of the year with subsequent price increases implemented in the last weeks and months of the year 2025. In terms of the outlook, the industry is expecting a lower production during the year, especially during the first quarter because of closures in some mills, because of disruptions related to weather, strikes in different parts of the world and in general, reduced operating rates. Some restrictions in Indonesia also could make it more difficult for local Asian producers to continue with a stable production throughout the quarter. So that could also put some upward pressure on the markets. In China, Arauco has seen and the industry in general has seen stable demand, expected to continue that way with the possible exception of the Chinese New Year. As usual, steady levels of operation for paper mills and a good, in general, quite positive environment for hardwood, apparently a little better than softwood because of the import supply of softwood and also lower chip prices for softwood. Producers in the industry continue to announce increases in prices, and there's already some increases announced for March. Stable demand expected in Europe. Some mills -- some paper mills are anticipating their orders. And therefore, we are seeing high rates in the utilization of paper machines, but it's still a challenging market. Moving on to wood products. You can see the EBITDA recorded during the fourth quarter '25, which is $122 million, a little bit above the third quarter '25 and below the fourth quarter '24. There's essentially a mixed performance in terms of prices and sales volumes for the different products within this division. But overall, also a mixed performance in terms of the different geographies as we will see on the next slide. But overall, this is a division that is, of course, much more stable than pulp. And during the year, it presented a performance that is very much in line with its historical levels. The outlook is mixed once again. North America, which is almost half of our sales is a little more challenging than our LatAm markets. MDF is -- looks a challenging market with demand, some oversupply. Same thing for particleboards, a difficult market with also some oversupply and some low demand. We manufactured products doing a little better because of the supply from Brazil impacted by higher tariffs and plywood where stability is expected in general. For our LatAm market, which are approximately 40% of our total sales, we are seeing a potential positive situation in Brazil where the market could rebound during the first quarter, strong particleboard demand and rising MDF prices. Likewise, in Chile, we are seeing strong demand for some products, in particular, particleboard and melamine. In Argentina, and as we have seen over the last few quarters already, a positive trend potentially to continue at the beginning of the year for panels in the Argentinian market. So all in all, as I said before, a mixed outlook for the different geographies and the different products. But on the aggregated level, we are seeing stability for our woods and panels division, and we ended up the year '25 with a figure -- an EBITDA figure, which is around $500 million, which is pretty much in line with the historical average for that division. Moving on to Energy, a very good year for Energy. We saw Copec ending up the year with an EBITDA of CLP 215 billion, which compares well with the fourth quarter '24. It's an increase compared to the fourth quarter '24. And likewise, in terms of net income, we had a significant increase in the bottom line with respect to the comparable quarter last year. So performance continues to be good. We see -- in Chile, in particular, we see higher operating income and EBITDA stemming from higher volumes, a very positive industrial margin and a very good performance in lubricants, which has been taking place throughout the whole year. A robust competitive position, a very good customer perception, a very efficient network from our fuels division and all in all, a very good year. The volumes are flattish compared to the last year to the year 2024 to the fourth quarter of 2024 and are up by almost 5% compared to the third quarter '25 in the gas station segment and is strongly up year-on-year, 16% and 6% up Q-on-Q for the industrial channel. The industrial channel has been one of the highlights of the year because of the very good performance of Copec in this particular segment. Moving on to Terpel, an EBITDA that amounts to COP 415 billion, which is slightly down with respect to the figure for the fourth quarter '24, but anyhow at very healthy levels. Likewise, for the net income, COP 128 billion, healthy levels. And in this case, a little above the fourth quarter 2024. The reason for the decline in terms -- in operating terms is basically decrease in volumes in some particular geographies, an unfavorable inventory revaluation effect in this quarter in particular. All of this offset by the very good performance, as we've commented in previous quarters, in the lubricants division, which is something that has been a driver of the good performance in fuels in general throughout the whole year. Abastible, which is shown now on the screen, recorded an EBITDA of CLP 73 billion, significantly up with respect to the fourth quarter '24. Net income as well is significantly up with respect to the comparable quarter last -- in the previous year. And this is on the back of, of course, of the incorporation of Gasib, which is the new affiliate in Spain and Portugal, which has been consolidated for the first time during the year 2025. But on top of that, a very good performance of the previously existing divisions in Chile, Colombia, Peru and Ecuador, all of which have increased their volumes quite strongly. So in general, a very good performance of Abastible throughout the year. You can see some more operational detail on screen here. Volumes in general, increasing quite strongly across the different geographies with some things to highlight here. In general, a good performance of the bottled segment, and some particular milestones that have marked the behavior of the pulp segment in the different countries. In the case of Colombia, a recovery in general of the production across different sectors of the economy. In Ecuador, higher demand of liquid gas as a substitute for other sources of energy. In the case of Peru, a very strong performance of demand coming from the poultry and fishing industries, which are very important industries within the country. And in the case of Chile, also an increased demand from fishing -- from the fishing industry as well as a driver that has been relevant and quite recurrent over the last few quarters, which is the substitution of other sources of energy in Chile as well. So all in all, a very strong performance of Abastible, a very good EBITDA generation. And in the case of Gasib, which operates in Spain and Portugal and which we incorporated at the beginning of year '25, we continue to see a very strong EBITDA generation, strong volumes, flattish with respect to the fourth quarter 2024. But in general, throughout the year, a very good performance in terms of volumes and margins. Moving on to our other investments. Cumbres Andinas, which is the company that owns Marcobre and Mina Justa. We've seen, as I commented at the beginning, a record EBITDA generation, $394 million in EBITDA for the quarter, which once again includes a onetime effect related to the reversion of an impairment of mining properties that we had recorded before. So there's $82 million that is onetime, but anyhow, an EBITDA of more than $300 million for the quarter, which is very, very significant. In line with that, a net income of $246 million. You can see there, of course, a very important reason underlying this very good performance is the evolution of copper prices. You can see in the graph there for the prices taken from the London Metal Exchange, which is already up to $6 per pound. And together with that, very important increase in prices and offsetting the performance partially, we saw lower volumes and higher cash costs, high cash cost of $1.8 for this particular quarter. Other smaller companies shown on screen there, Sonacol, very stable, but also with a good performance in this particular quarter with a net income that goes up, good results on the back of favorable volumes in general. Our fishing division, Igemar came out with a loss. However, a positive trend when compared to the performance in the fourth quarter of 2024. And in the case of our LNG companies, Metrogas and AGESA, stability and in general, an improvement and a sustained good performance, very stable business in this particular case. Brief words about the main developments of the quarter, of course, an update on the Sucuriú project. It is making progress according to expectations and according to plan and even a little bit above what had been planned. So 43% progress as of December 2025, a good figure and in line with the plan. And as I said before, a little bit above what was planned. Good evolution of the civil construction, which reached 58% progress, a very strong execution across some key streams that supported the transition into the mechanical assembly phase, which is the next phase to take place in the mill. A very important progress in the boilers, the evaporation plant, lime kiln, the fiber line and the drying areas, all of them achieving good progress throughout the quarter. And as a major milestone, the railway construction began. There's an agreement here for building a railway line with 26 locomotives and more than 700 railcars and a capacity of approximately 10,000 tons per day. This is a railway line that will be joining the plant, the mill site with the existing railway line that goes all the way up to the port. So a very important part of the logistics here is already under construction. On another piece of news here regarding the panel mills that are also under construction, we have 2, one in Mexico and one in Chile, both of them attaining 75% progress approx at this point in time. So also a very good progress in these 2 panel mills that are very well into their last phase of construction, one in Chile, one in Mexico. We also wanted to comment on Marcobre, which is the company that owns Mina Justa. As you have seen over time, this is a company that has been generated very solid results. So credit metrics are very good. And therefore, it was able to tackle and hit the public markets for the first time and issued the first international public bond for $400 million in very good financing conditions. So 10-year maturity, a bullet, of course, and 5.75% as an interest rate. So very important operation here. Together with that, Marcobre had just closed syndicated refinancing for its existing debt. So both operations, the syndicated loan and the bond issuance will allow it to refinance its existing debt with a better maturity schedule and under better conditions as well. So very significant financial milestone here for Marcobre, the owner of Mina Justa. Empresas Copec held the Investor Day by the end of November last year. Thanks to all of you that attended that event. And of course, we were able to communicate once again the main drivers of our business strategy, highlighting, of course, the focus of the company on natural resources and energy. And as we have said many times, the active management of the portfolio of business, including being very active in divestments of assets as we have shown many times here in order to make value more transparent for the market and for our shareholders. Some -- we saw some presentations by different executives from the different divisions. We saw the performance of the different new businesses of Copec, the progress made in Sucuriú, the development of Abastible 's new investment in Europe and also some highlights of the Mina Justa expansion. In general, Empresas Copec once again communicated its commitment to a long-term value creation strategy, which basically means, especially for the years to come, which are going to be challenging because of the building of Sucuriú. It means focusing very strongly on profitability across the different divisions, a flawless execution of the project that is under construction and as has been our character for many years, a prudent financial management. A very important recognitions here that we always like to highlight is this award La Voz del Mercado, which Empresas Copec was awarded for the seventh year in a row together with other companies in Chile. This is granted by EY, the Santiago Stock Exchange and the Institute of Directors and is awarded to companies that stand out for corporate governance and sound management and is awarded on the basis of a poll and the opinions and perceptions of directors, investors, analysts and the market in general. So a very important award here for the company once again. Several awards and recognitions in terms of the financial management and divisions. So a brief thank you note here for all your support for -- during the year 2025 when we were awarded several recognitions in different rankings, Alas20 for Investor Relations, the Extell awards, also Institutional Investor recognitions in several categories, Best CEO, Best CFO, IR program, IR team and IR events, also Best CFO prize in Marcas Ciudadanas awarded by Cadem. And Arauco also received the Development Finance Institution-Backed Deal of the Year by LatinFinance. So very important awards and recognitions here for the work we do. Very thankful of your support here. In terms of ESG, we always highlight some developments in terms of ESG and some important milestones during the quarter are shown here on the screen. Copec continues to expand its electromobility charging network and is -- has gone above 90 fast charging stations nationwide from the north, from the further -- from the southern most -- northernmost point to the southern most point of Chile, consolidating one of the most important networks in LatAm for high-power charging. And of course, the plan here is to continue expanding this network in 2026. Arauco took part in the COP30 event in Brazil in Belem Do Para, where it presented different developments in terms of its strategy in reconciling development, economic progress and also biodiversity protection, a very important pillar of the long-term strategy of Arauco. Together with that, a presentation of the main drivers in terms of carbon neutrality, which has also been a landmark of Arauco strategy throughout the years. And finally, Terpel, which is doing in Colombia, moving along the same lines that Copec has been moving in Chile, which means basically preparing for a gradual transition, from a gradual energy transition by going into the provision of some other sources of energy, in this particular case, energy power generation. So this particular initiative has to do with Parque Solar Planeta Rica it is called, which is a power generation photovoltaic project of 26 megawatts. And by doing this, then Terpel as Copec is doing in Chile is preparing in Colombia for the energy transition scenario that is gradually taking place. So that is the information we have prepared for you as the main highlights of the quarter. We will be happy to open it up for the Q&A session. Please post your questions through the chat that is in the Zoom platform. And I will ask Cristian and Gianfranco to please join me for this part of the presentation and for opening the Q&A session. Thank you very much.

[Operator Instructions]. [Audio Gap]

Okay. Hello. We're going to start this Q&A section. Thank you all for attending this webcast. I'm going to start with Henrique Marques from Goldman Sachs. Two questions. The first one is -- both are in forestry. Gianfranco, land needed for Sucuriú is already at 80%. Any chance you already had expected cash cost or at least average ratios for the project in terms of the forest supply?

Well, yes, it's true we have already 330,000 hectares of land, of which we have planted and also acquired [ standing timber ] for 260,000 hectares. So we are in a good path to get all the plantation needed for the start of the mill. The average rate is what we have expected, about 90, 95 kilometers from the mill. That's the average. So up to now, we're holding for the expectation that we had on the cash cost for the mill. It should be a very competitive mill, very comparable with the best ones in Mato Grosso do Su. So we are holding the expectations that we gave at the beginning. That is probably about -- at the mill, probably $140 per ton cash cost. And then to the market, could be about $250, something like that. So we will know for sure once the mill starts running and depending on exchange rate and the cost of chemicals and all of that. But we are in the numbers that we projected when we analyzed the budget.

And the second is, what is the total company's CapEx expected for 2026? Do you think current cash position will be enough to cover the maturity in debt for this year, given the high CapEx disbursement expected? Or if you're planning to issue more debt?

Well, yes, we have a plan of CapEx that could be something between a little bit less than $3 billion, up to probably $3.4 billion depending on circumstances. And for that, Sucuriú is between $2 billion to $2.5 billion, more or less. The rest is planting that we do in Chile and also in Brazil and other business as usual projects that we do maintenance in our mills and also 2 projects that we are finalizing in Chile, which is the one project in Chile [ is one of ] the OSB project and one project in Mexico, the Zitácuaro mill. So that could be between $3 billion, $3.4 billion. Regarding cash, we had enough cash we think. We ended the year with $1.3 billion, and we have disbursed another part of the line of the $2.2 billion credit line that we had for the financing of Sucuriú. And then we have the capital injection of Copec that is still to be disbursed. And we probably will do some refinancing basically to take care of the amortizations that are due in 2027 and then '29 and '30. So most probably we'll do some refinancing. It's something we do every year. But with the cash that we have, the generation plus the available credit lines, I think we're in a good shape for the total of this year.

Next one is from [ Lucas Minissa ]. Basically, if you can comment your thoughts on market outlook for pulp and wood products this year and especially regarding prices.

Yes. Well, prices have been going up. The start of the year, we have been able to increase prices $30. Now the last increase in prices was for February that we increased $10 in short fiber. We had unchanged prices for long fiber, and we were able to increase a little bit the dissolving pulp. So we are in a good trend, but there's -- the Chinese New Year was recently, so -- and now we have the meeting of the pulp week in Shanghai. So there's probably going to be some conversation about pricing over there in China. One competitor of us has already announced increase in prices for March. So we will see if that goes on. Compared to last year, of course, we had a very volatile year last year. We started with good pricing, similar to the ones that we have now. But then on May, we had the Liberation Day news and prices went down very quickly. So -- and then they start recovering afterwards. From the bottom of the market that was probably June last year, we have been able to recover about $100 pricing. So that's good. A price of $600, which we have now for hardwood, I think is an average price. It's a relatively good price, but we need to see how things develop in the market, especially because of the recent things that have happened in Iran and especially the pricing of paper in China. That's the most important thing, which is the margins of paper producers in China that need to recover a little bit in order to support increases in pricing of pulp. In wood products, I think it's more stable on a total portfolio basis. We have weaker results from the United States and Canada, but better results in Latin America, Brazil, Argentina and Chile. So those things tend to balance, and I think we're going to have a similar year from last year in terms of total EBITDA, but with different results in other markets. In North America, rates are still high. The mortgage rates have been going down, but still the affordability of housing is difficult. So there has been some slowing in construction and also the continuous changes in tariff has been putting some cautiousness on the buyers in the United States. But we hope that these things get resolved and as rates goes down, we can see more activity in construction and remodeling in the United States. That's more or less the view.

Thank you, Gianfranco. I have Alfonso Salazar at Scotiabank with 2 questions. First one, can you comment on the implications of the ongoing situation in Iran to your fuels division? That's one. And two, how do you expect the energy transition to evolve in your key markets over the rest of this decade? When do you think ongoing increase on fuels and gas demand may slow down and what could drive further demand growth beyond 2030?

Okay. Thank you, Cristian, and thank you, Alfonso. Well, probably too soon to tell. As you all know, events are unfolding right now in the case of the war in the Middle East. In previous episodes, we have -- like this, we have seen increases in oil prices in general. And the way that impacts our business is twofold, I would say. First of all, an increase in prices usually means a positive revaluation of inventories, which is a short-term effect. But longer term, it definitely means and if it stays -- if the increase is significant and if it stays there for long, it usually means a decrease in demand and a decrease in activity as a whole and economic activity as a whole, which is, of course, damaging for the company and also damaging to consumers. So let's hope that this will be solved pretty quickly. In terms of energy transition and the timing of that, well, projections are also very volatile on that. We get -- permanently get elements that lead us to think that it will be quicker than initially expected, and then we get other news on adoption and rates of adoption and new developments on technology that lead us to think that it will be slower than initially thought. Currently, we're thinking of a period of 5 to 10 years of continued growth in our traditional business. After that, of course, we reach a plateau and then we begin to see a slight decrease in the conventional fuels business. So it's still a long-term threat, but it's transformational and it's structural. So as we've commented before, we have adopted a strategy of opening up options. So you've seen Copec taking several steps in different directions. One of them is to position itself as a leader in electromobility. You've seen our [ recount ] there after all of the initiatives we have taken in that respect. We are now one of the leading and one of the largest networks in LatAm in terms of charging. Together with that, we have adopted a strategy of entering into new energy areas, taking advantage of our very good positioning in terms of our customers, in terms of our brand. So we are beginning to offer new energy products such as power generation, for example, and trading of electricity, and that has done very well so far. Thirdly, we have a venture capital initiative, whereby we look at new technologies and new business models that may fit in well with what we have and complement our existing activities. And fourth, we have also invested in some assets that are a little bit different from what we've traditionally done, but which have very significant synergies with our existing assets, Blue Express, for example, which is last mile logistics and which has been doing very well. So with that 4-pillar strategy, what we are trying to do is to prepare ourselves in the best way possible for any potential scenario in terms of energy transition. The good thing about the strategy is that we can either speed it up or slow it down depending on the evidence we see as to how energy transition is doing. So that's the strategy. We believe we are in a good position, and we will be still looking at what happens in the markets and keeping you posted on that.

Thank you, Rodrigo. Tathiane Candini, JPMorgan with a couple of questions. The first one was about pulp prices. It was already answered. So I'm going with the second one. Gianfranco, about the recent conflicts, what should be the impact on the forestry industry? If you can comment a little bit on how your freight contracts work? That's the first one.

Well, as Rodrigo said, it's too soon to tell, but we don't sell a lot to the Middle East. I mean, basically, it's wood and very little -- very low margins there. So it's not very important. And pulp, we sell basically to China, the rest of Asia and Europe. So we don't have an impact on the product. Freight could be, but we don't have a lot of routes coming from the Strait of Hormuz. So that shouldn't impact directly. Of course, when these things happens, there's a distortion of all the freight industry. But we have long-term contracts basically on containers. So we don't expect any short-term impact in freight cost for us and neither in the demand for our products. But this thing is just starting and probably depending on the developing of the coming weeks, the situation could be different. But right now, we don't see any direct meaningful impact.

And then on Sucuriú, what are the next milestones for the project? Is this level of pulp price enough for the project? Or could we expect some divestments to support the financing?

Well, the project is advancing very quickly. We are 43% advanced and this year is very important in terms of the amount of people that are going to be working on the site. We're going to reach the peak of 15,000 people working there. We are currently in the mechanical erection, which is very important in doing the recovery boiler, the power boiler and other aspects. So it's very important right now. The level of currently price, I think it's good. It's around the average we assume for the projection of cash flow, let's say. Last year was below our budget, I would say, and we hope that next year will be above budget, but we are prepared to do some selling of timber and other things in order to counterbalance the different of average pricing that we saw last year. So -- but we still need to see how the price develops through the year. But we are in a better shape than we were last year, but we are prepared in order to do some divestments in order to keep the debt contained.

And also on Sucuriú, Rodrigo Godoy from CrediCorp Capital. You mentioned last year that the efforts are going to be in advancing all you can to have a buffer for this year given the strong CapEx phase. So how far ahead are you related to the construction schedule?

Yes. We have been able to maintain the advance. We were about 5% or 6% above budget, and we continue to have that advantage that is very important to have it as a saving account because things could happen and our idea is to -- and we're maintaining the date where the mill will start. But we're keeping this buffer in order to -- for any project that could happen. But right now, we are in a very good shape in terms of advance, and we continue to maintain that 5%, 6% above -- ahead of schedule.

Thank you, Gianfranco. We don't have more questions. So I'll turn it back to the operator, please.

This concludes the question-and-answer section. At this time, I would like to turn the floor back to Mr. Rodrigo Huidobro for any closing remarks.

Okay. Thank you very much. Thanks, Cristian and Gianfranco for joining us today, and thanks to all the audience for attending. And we hope to see you at some time at the beginning of May to take a look at the results of the first quarter 2026. And of course, lines remain open for any additional question you might have. You can contact our Investor Relations department. Thanks a lot for attending, and see you in May. Bye-bye.

Thank you. This concludes today's presentation. You may disconnect now, and have a nice day.