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Altri SGPS Interim / Quarterly Report 2020
1914_iss_2020-11-19_8e72c0a2-908f-4885-a606-ac5a3bad7fb7.pdf
Interim / Quarterly Report
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Informação financeira 2012
ALTRI, SGPS, S.A. Public Company
Financial Information – 3 rd Quarter of 2020 (Unaudited)
This document is a translation of a document originally issued in Portuguese, prepared using accounting policies consistent with the International Financial Reporting Standards and in accordance with the International Accounting Standard 34 – Interim Financial Reporting, some of which may not conform or be required by generally accepted accounting principles in other countries. In the event of discrepancies, the Portuguese language version prevails.
1
Head Office: Rua Manuel Pinto de Azevedo, 818 – Oporto Fiscal Number 507 172 086 Share Capital: 25,641,459 Euro
| 1. | HIGHLIGHTS 3 |
|---|---|
| 2. | FINANCIAL REVIEW 5 |
| 3. | INVESTMENTS 9 |
| 4. | DEBT 9 |
| 5. | SUSTAINABILITY 11 |
| 6. | PULP MARKET 12 |
| 7. | ALTRI – Business Profile 13 |
| 8. | FUTURE PERSPECTIVES 14 |
1. HIGHLIGHTS
1.1. COVID-19
Since the beginning of the pandemic, Altri Group implemented a set of measures for the prevention, control and surveillance, in order to respond to the demands arising from the COVID-19 pandemic and, in particular, to ensure the permanent well-being of all Employees, their families and the community. Thus, the Group implemented a series of preventive actions and proceeded with the elaboration of the COVID-19 Contingency Plan, to protect the health and safety of its Employees, based on the recommendations of the Portuguese Health Authority to face the pandemic. These measures have been continuously monitored and revised by the Group, whenever necessary, considering the evolution of the pandemic.
As a result of the various measures implemented by the Group, on September 30, 2020, an impact on the income statement is estimated in the amount of approximately 966.8 thousand Euro (including personnel expenses, namely extra shifts and overtime, as well as travel expenses, donations, protective equipment, expenses with hiring companies specialised in disinfecting spaces, among others).
Regarding liquidity risk management, the Group maintained a liquidity reserve in the form of credit lines with its relationship banks, in order to ensure the ability to meet its commitments, without having to refinance in unfavorable conditions. As of September 30, 2020, the amount of consolidated loans1 maturing in the next 12 months is approximately 150 million Euro. On the same date, the Group has consolidated credit lines available (namely bank overdrafts, pledged current accounts and not used commercial paper programs) in the amount of approximately 148 million Euro. Additionally, the Group's cash and cash equivalents reaches roughly 194 million Euro, representing approximately 63% of its current liabilities.
1 Consolidated loans: Bank loans + Other loans + Reimbursable government grants + Lease liabilities.
1.2. Altri Group's Third Quarter Activity Summary
- ✓ Pulp production amounts to 277 thousand tonnes;
- ✓ Pulp sales amount to 256 thousand tonnes;
- ✓ Exports reach 89 million Euro;
- ✓ EBITDA of 32.4 million Euro:
- o 23.8 million Euro in the Pulp segment;
- o 8.6 million Euro in the Energy segment.
- ✓ Nominal remunerated debt2 of 504.2 million Euro;
- ✓ Quarterly decrease of the nominal remunerated debt amounted to 28.1 million Euro;
- ✓ Accumulated Free Cash Flow3 of the first nine months reached 71 million Euro (dividends paid of 62 million Euro and net debt reduction of 9 million Euro).
The third quarter of 2020 was characterised, mainly, by three factors: (1) the Dollar depreciation against the Euro, which lead to a decrease of the sales price in Euro; (2) a lower total amount of sales, when compared with the first two quarters of the year, due to seasonal markets issues. Nonetheless, these two factors were offset by a third one (3), an operational efficiency achieved by a reduction of the unitary production costs, which allowed to a higher EBITDA when compared with the second quarter of 2020.
During the third quarter of 2020, BHKP sales price remained at 680 USD/ton, being stable at this amount since the beginning of November 2019. However, due to the depreciation of the USD against the EUR in the third quarter of 2020, the average sales price was 582.6 EUR/ton, which corresponds to a decrease of approximately 6% over the previous quarter of this year.
During the quarter under analysis, the industrial units of the Group produced around 277.1 thousand tonnes of pulp, which corresponds to a 2.9% decrease over the same period of the previous year and a 2.8% increase over the previous quarter. On the other hand, pulp sales recorded a 1.5% decrease compared to the same period of 2019 and a 9.5% decrease over the second quarter of 2020, which had been a record quarter in terms of sales.
It should also be noted that the production of renewable electric energy through forest biomass, in the period under analysis, reached about 189.9 GWh, which corresponds to a 21% and 4% increase compared to the third quarter of 2019 and to the second quarter of 2020, respectively.
2 Nominal remunerated net debt: Bank loans (nominal values) + Other loans (nominal values) – Cash and cash equivalents.
3 Free Cash Flow: Change in net debt since 31.12.2019 + Dividends paid.
2. FINANCIAL REVIEW
2.1. 3Q2020 Results
The financial information was prepared in accordance with the recognition and measurement principles of the International Financial Reporting Standards, as adopted by the European Union (IFRS-EU).
3Q2020 Income Statement
| thousand Euro | 3Q2020 | 3Q2019 | 3Q20/3Q19 Var% |
2Q2020 | 3Q20/2Q20 Var% |
|---|---|---|---|---|---|
| Total revenues (a) | 141,523 | 174,790 | -19.0% | 162,363 | -12.8% |
| Cost of sales | 59,059 | 62,986 | -6.2% | 80,738 | -26.9% |
| External supplies and services | 37,582 | 44,415 | -15.4% | 40,446 | -7.1% |
| Payroll expenses | 9,909 | 9,323 | 6.3% | 10,424 | -4.9% |
| Other expenses | 1,715 | 2,385 | -28.1% | 1,048 | 63.6% |
| Provisions and impairment losses | 900 | 1,181 | -23.8% | -153 | - |
| Total expenses | 109,165 | 120,290 | -9.2% | 132,503 | -17.6% |
| EBITDA (b) | 32,358 | 54,500 | -40.6% | 29,860 | 8.4% |
| EBITDA margin (c) | 22.9% | 31.2% | -8.3 pp | 18.4% | +4.5 pp |
| Amortisation and depreciation | -19,553 | -19,035 | 2.7% | -19,775 | -1.1% |
| EBIT (d) | 12,805 | 35,465 | -63.9% | 10,085 | 27.0% |
| EBIT margin (e) | 9.0% | 20.3% | -11.2 pp | 6.2% | +2.8 pp |
| Results related to investments | -1 | 101 | - | -68 | -98.4% |
| Financial expenses | -7,023 | -7,047 | -0.3% | -7,191 | -2.3% |
| Financial income | 965 | 1,621 | -40.5% | 385 | 150.9% |
| Financial results | -6,060 | -5,325 | 13.8% | -6,875 | -11.9% |
| Profit before income tax | 6,745 | 30,140 | -77.6% | 3,210 | 110.1% |
| Income tax | 8,306 | -7,295 | - | -794 | - |
| Consolidated net profit for the period Attributable to: |
|||||
| Shareholders of the parent company | 15,051 | 22,845 | -34.1% | 2,416 | - |
| Non-controlling interest | 0 | -4 | - | - | - |
(a) Total revenues = Sales + Services rendered + Other income
(b) EBITDA = Profit before income tax - Results related to investments + Financial expenses - Financial income + Amortisation and depreciation
(c) EBITDA margin = EBITDA / Total revenues
(d) EBIT = EBITDA + Amortisation and depreciation
(e) EBIT margin = EBIT / Total revenues
The third quarter of 2020, although a seasonally less intense quarter, was characterised by a normalization of demand at European level, which translated into a lower growth rate of demand by tissue paper producers than the recorded in the previous quarter. This trend is related to the high demand for this type of paper during the lockdown period (which occurred during the second quarter). On the other hand, there was a quarterly growth in demand for printing and writing papers compared to the second quarter of the current year. It should be noted, however, that the current demand for this type of paper is significantly lower than the level recorded in the previous year.
| tons | 3Q2020 | 3Q2019 | 3Q20/3Q19 Var% |
2Q2020 | 3Q20/2Q20 Var% |
|---|---|---|---|---|---|
| BHKP pulp production | 253,557 | 258,734 | -2.0% | 245,667 | 3.2% |
| DWP pulp production | 23,505 | 26,602 | -11.6% | 23,850 | -1.4% |
| Total pulp production | 277,062 | 285,336 | -2.9% | 269,517 | 2.8% |
| BHKP pulp sales | 231,254 | 237,754 | -2.7% | 257,363 | -10.1% |
| DWP pulp sales | 24,980 | 22,316 | 11.9% | 25,727 | -2.9% |
| Total pulp sales | 256,235 | 260,070 | -1.5% | 283,090 | -9.5% |
Production
During the third quarter, Altri produced 277.1 thousand tonnes of pulp, of which 253.6 thousand tonnes were paper pulp (BHKP) and about 23.5 thousand tonnes were dissolving wood pulp (DWP). In terms of sales, 256.2 thousand tonnes were sold, of which approximately 25 thousand tonnes were of DWP.
Therefore, Altri's total revenues, during the quarter under analysis, reached 141.5 million Euro, corresponding to a decrease of about 19% compared to the same period from the previous year and a decrease of 13% compared to the second quarter of 2020. Total revenues associated with pulp production units amounted to approximately 119.0 million Euro, which corresponds to a 24% and 15% decrease, over the same quarter of 2019 and to the second quarter of 2020, respectively.
Total revenues associated with the units of energy production through forest biomass amounted to approximately 22.5 million Euro, which corresponds to an increase of 22% compared to the third quarter of 2019 and to an increase of 4% compared to the previous quarter.
The average market pulp price (BHKP) during the third quarter of 2020 was €582.6/ton, which corresponds to a decrease of 20% compared to the average price registered in the same period of 2019 and a 6% decrease over the average price recorded in the previous quarter of the current year.
In the third quarter of 2020, Altri Group exported 220.5 thousand tonnes of pulp, which corresponds to 86% of its total pulp sales. In monetary terms, quarterly exports amounted to 89.0 million Euro.
Total expenses amounted to 109.2 million Euro, which corresponds to a 9% decrease over the same quarter of 2019 and a 17.6% decrease when compared to the second quarter of 2020.
It should be noted that, at the operational level, a series of measures have been implemented to systematically reinforce the competitive position of all the production units that comprise the Altri Group.
So, Altri Group's EBITDA reached 32.4 million Euro, in the quarter under analysis, an increase of around 40.6% compared to the EBITDA recorded in the same period last year and 8.4% increase compared to the second quarter of 2020.
In terms of segments, EBITDA of the pulp production units amounted to 23.8 million Euro and the EBITDA generated by the forest biomass energy production units amounted to 8.6 million Euro.
EBIT amounted to 12.8 million Euro, which constitutes a decrease of 64% when compared to the same period of 2019 and a 27% increase over the EBIT recorded in the second quarter of 2020.
Altri Group's consolidated net profit reached 15.1 million Euro.
2.2. 9M2020 Results
| 9M 2020 | 9M 2019 | 9M20/9M19 | |
|---|---|---|---|
| thousand Euro | Var% | ||
| Total revenues (a) | 469,546 | 582,124 | -19.3% |
| Cost of sales | 220,835 | 214,037 | 3.2% |
| External supplies and services | 120,975 | 135,786 | -10.9% |
| Payroll expenses | 29,525 | 28,335 | 4.2% |
| Other expenses | 3,957 | 5,992 | -34.0% |
| Provisions and impairment losses | -1,110 | 1,181 | - |
| Total expenses | 374,181 | 385,330 | -2.9% |
| EBITDA (b) | 95,365 | 196,794 | -51.5% |
| EBITDA margin (c) | 20.3% | 33.8% | -13.5 pp |
| Amortisation and depreciation | -59,094 | -56,191 | 5.2% |
| EBIT (d) | 36,271 | 140,603 | -74.2% |
| EBIT margin (e) | 7.7% | 24.2% | -16.4 pp |
| Results related to investments | 50 | 128 | -60.6% |
| Financial expenses | -20,020 | -20,696 | -3.3% |
| Financial income | 2,626 | 3,608 | -27.2% |
| Financial results | -17,344 | -16,960 | 2.3% |
| Profit before income tax | 18,927 | 123,643 | -84.7% |
| Income tax | 5,356 | -32,937 | -116.3% |
| Consolidated net profit for the period | |||
| Attributable to: | |||
| Shareholders of the parent company | 24,283 | 90,706 | -73.2% |
| Non-controlling interest | -5 | 0 | - |
(a) Total revenues = Sales + Services rendered + Other income
(b) EBITDA = Profit before income tax - Results related to investments + Financial expenses - Financial income + Amortisation and depreciation
(c) EBITDA margin = EBITDA / Total revenues
(d) EBIT = EBITDA + Amortisation and depreciation
(e) EBIT margin = EBIT / Total revenues
In the first nine months of the year, total revenues amounted to 469.5 million Euro, which corresponds to a 19.3% decrease. In terms of EBITDA, there was a 51.5% decrease to 95 million Euro. The consolidated net profit achieved to 24.3 million Euro.
3. INVESTMENTS
The total net investment4 made during the first nine months of 2020 by the Group's units amounted to approximately 27 million Euro. In quarterly terms, the third quarter contributed approximately with 12 million Euro.
4. DEBT
Altri's nominal remunerated net debt on September 30, 2020 amounted to 504.2 million Euro, which corresponds to a quarterly decrease of 28.1 million Euro.
Debt maturity profile (million Euro)
Total net investment: Payments in the period related to the acquisition of property, plant and equipment related to the operational activity of the Pulp and Energy segments.
Key balance sheet indicators
| thousand Euro | 30.09.2020 | 31.12.2019 | Var% |
|---|---|---|---|
| Biological assets | 106,059 | 104,491 | 2% |
| Property, plant and equipment | 529,749 | 555,289 | -5% |
| Right-of-use assets | 66,972 | 69,601 | -4% |
| Goodw ill |
265,631 | 265,631 | 0% |
| Investments in associated companies | 776 | 725 | 7% |
| Others | 86,853 | 89,108 | -3% |
| Non-current assets | 1,056,039 | 1,084,846 | -3% |
| Inventories | 91,509 | 85,966 | 6% |
| Trade receivables | 77,618 | 83,739 | -7% |
| Cash and cash equivalents | 193,725 | 181,344 | 7% |
| Others | 37,444 | 46,557 | -20% |
| Current assets | 400,296 | 397,605 | 1% |
| Total assets | 1,456,335 | 1,482,451 | -2% |
| Equity and non-controlling interests | 431,352 | 466,043 | -7% |
| Bank loans | 27,500 | 27,500 | 0% |
| Other loans | 533,546 | 558,765 | -5% |
| Reimbursable government grants | 2,942 | 2,942 | 0% |
| Lease liabilities | 71,694 | 70,392 | 2% |
| Others | 79,856 | 82,337 | -3% |
| Non-current liabilities | 715,539 | 741,936 | -4% |
| Bank loans | 36 | 6,203 | -99% |
| Other loans | 137,295 | 102,651 | 34% |
| Reimbursable government grants | 2,847 | 3,026 | -6% |
| Lease liabilities | 9,538 | 9,316 | 2% |
| Trade payables | 107,336 | 102,378 | 5% |
| Others | 52,392 | 50,898 | 3% |
| Current liabilities | 309,444 | 274,471 | 13% |
| Total liabilities and equity | 1,456,335 | 1,482,451 | -2% |
5. SUSTAINABILITY
Altri Group reinforced its strong commitment to an efficient water management strategy. This strategy is based on an action plan with two axes: the first aims to reduce the specific use of water, with the adoption of internal measures; and the second involves reusing treated wastewater in industrial units.
Thus, during the third quarter of 2020, Celtejo industrial unit organised the event "Celtejo de Portas Abertas", an event that registered the presence of several stakeholders, namely mayors, environmental associations and various media. This event took place following the consolidation of the various investments implemented in the recent past, in this Altri Group's subsidiary. The main theme of this meeting focused on the presentation of the work developed by this unit in the field of reducing water consumption.
The examples presented at the event above are a sample of the scope and complexity of the various measures implemented by the Altri Group related to the circular economy and aligned with the United Nations' sustainable development goals (SDGs).
The consolidation of Altri Group's sustainability roadmap is also underway, through the alignment of its strategic business objectives with the sustainable development goals of the United Nations 2030 Agenda for Sustainable Development.
With the ambitious goal of reaching the target of "zero accidents" in its units, Altri Group has been implementing programs to induce responsible behaviour in order to approach this value.
6. PULP MARKET
According to data from the Pulp and Paper Products Council (PPPC), World Chemical Market Pulp Global 100 Report, September 2020, the cumulative total demand for the first nine months of 2020 for hardwood pulp increased by 8.8% compared to the same period of 2019. The inventory days on hand at hardwood pulp producers were 41 days at the end of September 2020, which corresponds to a decrease of 20 days compared to the level of inventories that occurred a year ago.
Geographically (cumulative September 2020 vs cumulative September 2019), it is verified that consumption of hardwood pulp in Europe (Western Europe and Eastern Europe) decreased by 1.6%, while the demand from China increased by 17.5%.
In terms of sales price, benchmark is stable at 680USD/ton in Europe since November 2019. However, converting the price to EUR, the average price in the third quarter was 583 EUR/ton, the average price recorded in the second quarter of 2020 was 619 EUR/ton and the average price recorded in the third quarter of 2019 was 731 EUR/ton.
7. ALTRI – Business Profile
Altri is a reference in European eucalyptus pulp producers. In addition to pulp production, the Group is also present in the renewable power production business from forest base sources, namely industrial cogeneration through black liquor and biomass. The forestry strategy is based on the full use of all the components provided by the forest: pulp, black liquor and forest wastes.
Currently, Altri manages around 83.5 thousand hectares of forest in Portugal, entirely certified by the Forest Stewardship Council® (FSC®) 5 and for the Programme for the Endorsement of Forest CertificationTM (PEFCTM), two of the most worldwide acknowledged certification entities.
Currently, Altri has three pulp mills in Portugal, with an installed capacity that in 2019 reached more than 1 million tonnes/year of eucalyptus pulp.
Altri's current organic structure can be represented as follows:
8. FUTURE PERSPECTIVES
The current context continues to be characterised by a high level of uncertainty, due to the current pandemic situation, mainly, in Europe and in the United States of America.
Consequently, the entire organization that constitutes the Altri Group is focussed on the importance that constituted the competitiveness of its production units.
Thus, it has been designing and implementing projects that seek to continuously reinforce the positioning of Altri Group as the most efficient European producer. Generically, industrial projects have been based on digital transformation associated with continuous improvement, aimed at a sustained reduction in production costs, as well as in the field of sustainability.
In concrete terms, in the case of Celtejo, the stoppage occurred in October 2020 aimed to consolidate the investment project that started about two years ago. While in the case of Caima, the intervention focused on washing and bleaching lines.
In terms of the evolution of the sale price of the DWP pulp, it is worth noting the implementation, already in the fourth quarter, of two price increases, totalling 80 USD/ton. Currently, the reference price for DWP (hardwood) is 690 USD/ton.
Oporto, November 19, 2020
