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Altri SGPS Interim / Quarterly Report 2020
1914_iss_2020-09-10_4fa0f4e6-60e9-4970-938b-cf0a65239d99.pdf
Interim / Quarterly Report
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Informação financeira 2012
ALTRI, SGPS, S.A. Public Company
Financial Information – 1 st Half 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 6 |
| 3. | INVESTMENTS 10 |
| 4. | DEBT 10 |
| 5. | SUSTAINABILITY 12 |
| 6. | PULP MARKET 14 |
| 7. | ALTRI – Business Profile 15 |
| 8. | FUTURE PERSPECTIVES 16 |
1. HIGHLIGHTS
1.1. COVID-19
Since the beginning of the pandemic, the Altri Group implemented a set of measures for the prevention, control and surveillance, with prevention / contingency plans being developed that cover the entire organisation, from the operational areas to the central structures, in all the Group's businesses.
During the second quarter, Altri Group maintained its process of monitorisation and assessing of the implemented measures, in order to give answers 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, which has always been and will continue to be a priority for Altri. The Group implemented a series of increased preventive actions to protect the health and safety of its Employees, based on the recommendations of the Portuguese Health Authority to face the pandemic. The human resources department, based on the recommendations of the Portuguese Health Authority, proceeded with the elaboration of a Group's Contingency Plan COVID-19. This plan has been continuously adjusted considering the evolution of the pandemic, being essential for the purpose of containing the impacts of the pandemic between our employees and the local community.
As a result of the various measures implemented by the Group, on June 30, 2020, a negative impact on the income statement is estimated in the amount of approximately 650 thousand Euro (including personnel expenses, namely extra shifts and hours, as well as travel expenses, donations, protective equipment, expenses with hiring companies specialised in disinfecting spaces, among others).
Altri Group proceeded cautiously with an internal review and evaluation process on the investments it had planned for the 2020 financial year, reassessing the cost-benefit of these portfolio projects, as well as their feasibility, considering the current reality. From this review, it was decided to reschedule the understanding of some projects in the amount of approximately 9 million Euro.
With regard to 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 June 30, 2020, the amount of consolidated loans1 maturing in the next 12 months is approximately 160 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 88 million Euro. Additionally, the Group's cash and cash equivalents reaches roughly 176 million Euro, representing approximately 53% of its current liabilities.
1.2. Altri Group's Second Quarter Activity Summary
- ✓ Pulp production amounts to 270 thousand tonnes
- ✓ Pulp sales amounts to 283 thousand tonnes
- ✓ Exports reach 108 million Euro
- ✓ EBITDA of 29.9 million Euro (22.1 million Euro in the Pulp segment and 7.8 million Euro in the Energy segment)
- ✓ Dividends paid of approx. 62 million Euro
- ✓ Nominal remunerated net debt 2 of 532.3 million Euro
During the second quarter of 2020, the programmed maintenance stoppage occurred, which implied a lower level of production and a level of costs higher than normal.
In terms of sales price of BHKP pulp, the price maintained the 680 USD/tad (in line with the first quarter of this year, but 25% lower than the average market price recorded in the second quarter of 2019).
During the quarter under analysis, the industrial units of the Group produced around 269.5 thousand tons of pulp, which corresponds to a 5% decrease over the same period of the previous year and a 4.5% decrease over the previous quarter. On the other hand, pulp sales recorded a different trend, with a 4% increase compared to the same period of the previous year and a 1.4% decrease over the first quarter of 2020.
It should also be noted that the production of renewable electric energy through forest biomass, in the period under analysis, reached about 182.1 GWh, which corresponds to a 68% growth compared to the second quarter of 2019 and a slightly decrease of 1% compared to the first quarter of 2020. This was essentially due to the entry into operation of the second renewable
1 Consolidated loans: Bank loans + Other loans + Reimbursable government grants + Lease liabilities.
2 Nominal remunerated net debt: Other loans (nominal values) + Bank loans (nominal values) – Cash and cash equivalents.
energy production unit in Figueira da Foz (Sociedade Bioelétrica do Mondego, S.A.), in the second half of 2019.
2. FINANCIAL REVIEW
2.1. 2Q2020 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).
| 2Q 20 / 2Q 19 | 2Q 20 / 1Q 20 | ||||
|---|---|---|---|---|---|
| thousand Euro | 2Q 2020 | 2Q 2019 | Var% | 1Q 2020 | Var% |
| Total revenues (a) | 162,363 | 199,980 | -18.8% | 165,660 | -2.0% |
| Cost of sales | 80,738 | 73,583 | 9.7% | 81,037 | -0.4% |
| External supplies and services | 40,446 | 47,286 | -14.5% | 42,948 | -5.8% |
| Payroll expenses | 10,424 | 9,742 | 7.0% | 9,193 | 13.4% |
| Other expenses | 1,048 | 1,772 | -40.8% | 1,193 | -12.1% |
| Provisions and impairment losses | -153 | -159 | - | -1,857 | - |
| Fair value changes in biological assets | 0 | - | - | 0 | - |
| Total expenses | 132,503 | 132,224 | 0.2% | 132,514 | 0.0% |
| EBITDA (b) | 29,860 | 67,756 | -55.9% | 33,146 | -9.9% |
| EBITDA margin (c) | 18.4% | 33.9% | -15.5 pp | 20.0% | -1.6 pp |
| Amortisation and depreciation | -19,775 | -18,229 | 8.5% | -19,766 | 0.0% |
| EBIT (d) | 10,085 | 49,527 | -79.6% | 13,380 | -24.6% |
| EBIT margin (e) | 6.2% | 24.8% | -18.6 pp | 8.1% | -1.9 pp |
| Results related to investments | -68 | 25 | - | 120 | -157.1% |
| Financial expenses | -7,191 | -7,460 | -3.6% | -5,806 | 23.9% |
| Financial income | 385 | 594 | -35.2% | 1,277 | -69.9% |
| Financial results | -6,875 | -6,841 | 0.5% | -4,409 | 55.9% |
| Profit before income tax | 3,210 | 42,686 | -92.5% | 8,971 | -64.2% |
| Income tax | -794 | -11,549 | -93.1% | -2,156 | -63.2% |
| Consolidated net profit for the period | |||||
| Attributable to: | |||||
| Shareholders of the parent company Non-controlling interest |
2,416 0 |
31,137 - |
-92.2% - |
6,815 0 |
-64.5% - |
2Q2020 Income Statement
(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 second quarter of 2020, similarly to the previous quarter, was characterised by a market context that was closely linked to the COVID-19 pandemic. Thus, the demand from producers of tissue paper (raw material for the production of paper products for households' domestic use, hygiene and protection) continued to be in high levels, however, it was recorded a significant decrease in demand from graphic paper manufactures, namely printing and writing.
| tons | 2Q 2020 | 2Q 2019 | 2Q 20 / 2Q 19 Var% |
1Q 2020 | 2Q 20 / 1Q 20 Var% |
|---|---|---|---|---|---|
| BHKP pulp production | 245,667 | 256,934 | -4.4% | 259,748 | -5.4% |
| DWP pulp production | 23,850 | 26,721 | -10.7% | 22,584 | 5.6% |
| Total pulp production | 269,517 | 283,655 | -5.0% | 282,332 | -4.5% |
| BHKP pulp sales | 257,363 | 247,612 | 3.9% | 254,286 | 1.2% |
| DWP pulp sales | 25,727 | 24,414 | 5.4% | 32,897 | -21.8% |
| Total pulp sales | 283,090 | 272,025 | 4.1% | 287,183 | -1.4% |
Production
During the second quarter, Altri produced 269.5 thousand tonnes of pulp, of which 245.7 thousand tonnes were paper pulp (BHKP) and about 23.9 thousand tonnes were dissolving wood pulp (DWP). In terms of sales, 283.1 thousand tonnes were sold, of which 25.7 thousand tonnes were of DWP.
During the quarter under analysis, Altri's total revenues reached 162.4 million Euro, corresponding to a decrease of about 18% compared to the same period from the previous year and a decrease of 2% compared to the first quarter of 2020. Total revenues associated with pulp production units amounted approximately 140.7 million Euro.
The average market pulp price (BHKP) during the second quarter of 2020 was €619/ton, which corresponds to a decrease of 26.0% compared to the average price registered in the same period of 2019.
Total revenues associated with the units of energy production through forest biomass amounted to approximately 21.6 million Euro, which corresponds to an increase of 64% compared to the second quarter of 2019 and to a slightly decrease of 1% compared to the previous quarter.
In the second quarter of 2020, Altri Group exported 245.1 thousand tonnes of pulp, which corresponds to 87% of its total pulp sales. In monetary terms, quarterly exports amounted to 107.6 million Euro.
Total expenses amounted to 132.5 million Euro, in line with the two previous quarters. However, it should be noted, as mentioned, that in the quarter under analysis there was a programmed maintenance stoppage at Celbi's industrial unit, which negatively affected the quarter's level of costs.
It should be noted that, at the operational level, a series of measures have been implemented to consolidate the competitive position of the industrial units that comprise the Altri Group, namely Celtejo and Celbi, being the latter, currently, the most competitive industrial unit in Europe.
Total EBITDA reached 29.9 million Euro, a decrease of around 55.9% compared to the EBITDA recorded in the same period last year and 9.9% compared to the first quarter of 2020. In terms of segments, the EBITDA of the pulp production units and others amounted to 22.1 million Euro and the EBITDA generated by the forest biomass energy production units amounted to 7.8 million Euro.
EBIT amounted to 10.1 million Euro. Altri Group's consolidated net profit reached 2.4 million Euro.
2.2. 1H2020 Results
| thousand Euro | 1H 2020 | 1H 2019 | 1H 20 / 1H 19 Var% |
|---|---|---|---|
| Total revenues (a) | 328,023 | 407,334 | -19.5% |
| Cost of sales | 161,776 | 151,050 | 7.1% |
| External supplies and services | 83,393 | 91,371 | -8.7% |
| Payroll expenses | 19,616 | 19,011 | 3.2% |
| Other expenses | 2,241 | 3,607 | -37.9% |
| Provisions and impairment losses | -2,010 | 0 | - |
| Total expenses | 265,016 | 265,040 | 0.0% |
| EBITDA (b) | 63,007 | 142,294 | -55.7% |
| EBITDA margin (c) | 19.2% | 34.9% | -18.1 pp |
| Amortisation and depreciation | -39,541 | -37,155 | 6.4% |
| EBIT (d) | 23,466 | 105,139 | -77.7% |
| EBIT margin (e) | 7.2% | 25.8% | -8.7 pp |
| Results related to investments | 51 | 27 | 91.7% |
| Financial expenses | -12,997 | -13,649 | -4.8% |
| Financial income | 1,661 | 1,987 | -16.4% |
| Financial results | -11,285 | -11,636 | -3.0% |
| Profit before income tax | 12,181 | 93,503 | -87.0% |
| Income tax | -2,950 | -25,642 | -88.5% |
| Consolidated net profit for the period Attributable to: Shareholders of the parent company |
9,232 | 67,861 | -86.4% |
| Non-controlling interest | 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 half, total revenues for the first half of 2020 amounted to 328 million Euro, which corresponds to a 19.5% decrease. In terms of EBITDA, it was verified a 55.7% decrease to 63 million Euro. The consolidated net profit for the first six months of the year achieved to 9.2 million Euro.
3. INVESTMENTS
The total net investment3 made during the first six months of 2020 by the Group's units amounted to approximately 15 million Euro. Quarterly, the second quarter contributed approximately with 5.3 million Euro.
4. DEBT
Altri's nominal remunerated net debt on June 30, 2020 amounted to 532.3 million Euro. It should be noted that during the second quarter of 2020 Altri paid dividends, which amounted to approximately 61.5 million Euro.
Debt maturity profile
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 | 30.06.2020 | 31.12.2019 | Var% |
|---|---|---|---|
| Biological assets | 104,783 | 104,491 | 0% |
| Property, plant and equipment | 532,988 | 555,289 | -4% |
| Right-of-use assets | 68,630 | 69,601 | -1% |
| Goodw ill |
265,631 | 265,631 | 0% |
| Investments in associated companies | 777 | 725 | 7% |
| Others | 86,879 | 89,108 | -3% |
| Non-current assets | 1,059,687 | 1,084,846 | -2% |
| Inventories | 95,178 | 85,966 | 11% |
| Trade receivables | 93,634 | 83,739 | 12% |
| Cash and cash equivalents | 175,881 | 181,344 | -3% |
| Others | 35,282 | 46,557 | -24% |
| Current assets | 399,975 | 397,605 | 1% |
| Total assets | 1,459,662 | 1,482,451 | -2% |
| Equity and non-controlling interests | 414,480 | 466,043 | -11% |
| Bank loans | 27,500 | 27,500 | 0% |
| Other loans | 533,618 | 558,765 | -5% |
| Reimbursable government grants | 3,195 | 2,942 | 9% |
| Lease liabilities | 71,686 | 70,392 | 2% |
| Others | 79,725 | 82,337 | -3% |
| Non-current liabilities | 715,725 | 741,936 | -4% |
| Bank loans | 159 | 6,203 | -97% |
| Other loans | 148,038 | 102,651 | 44% |
| Reimbursable government grants | 2,594 | 3,026 | -14% |
| Lease liabilities | 9,601 | 9,316 | 3% |
| Trade payables | 120,983 | 102,378 | 18% |
| Others | 48,081 | 50,898 | -6% |
| Current liabilities | 329,456 | 274,471 | 20% |
| Total liabilities and equity | 1,459,662 | 1,482,451 | -2% |
5. SUSTAINABILITY
During the second quarter of 2020, Altri Group published its Sustainability Report on its 2019 performance, which reflects the alignment of its strategic objectives with the sustainable development objectives of the United Nations Agenda 2030.
Following its commitment to mitigate climate change, Altri Group joined the Carbon Disclosure Project (CDP), reporting in a transparent and objective way how it manages this topic.
At the same time, Altri Group continued its policy of efficient resource management, namely in reducing water and energy consumption per tonne of pulp produced. It should be noted that the consumption of water per tonne of pulp of the Altri Group (21 m3 /tpsa) is a reference value for the sector, whereas in the case of the Celbi industrial unit this consumption (16 m3 /tpsa) is a reference worldwide.
During the first quarter, Altri Group structured and refined the carbon footprint calculation, in order to improve its alignment with several frameworks and international benchmarks, such as the GHG Protocol, CDP Climate Change and the CEPI Framework for Carbon Footprints for Paper and Board Products. On the other hand, Altri has committed to calculate its emissions according to the Science Based Target Initiative (SBT) methodology, a platform that supports companies to establish emission reduction targets, in line with the Paris Agreement commitment, to limit the global warming below 1.5ºC.
FOREST BIODIVERSITY
Altri Group has been investing in recent years, and will continue to invest in the future, through its subsidiary Altri Florestal, S.A., in the development of biodiversity valorisation and recovery initiatives (namely the Altri Diversity Program) in protected areas that are under its management.
During the implementation of the Biodiversity Strategy - Altri Diversity, an application of Altri Florestal was approved for the Environmental Fund (Biodiversity Management and Strengthening of Natural Capital). This project aims to develop restoration and recovery actions and investments in areas with high conservation value of the properties Cabeço Santo (Águeda – Serra do Caramulo), Galisteu (Parque Natural Tejo Internacional) and Palmeiro (Parque Natural da Serra de São Mamede).
6. PULP MARKET
According to data from the Pulp and Paper Products Council (PPPC), World Chemical Market Pulp Global 100 Report, June 2020, the cumulative total demand for the first six months of 2020 for hardwood pulp increased by 15.1% compared to the same period of 2019. The inventory days on hand at hardwood pulp producers were 41 days at the end of June 2020, which corresponds to a decrease of 24 days compared to the level of inventories that occurred a year ago.
Geographically, it is verified that consumption of hardwood pulp in Europe (Western Europe and Eastern Europe) decreased by 2.2% and the demand from China increased by 14.4%.
In terms of sales price, benchmark is stable at 680 USD/tad in Europe since November 2019. However, exchanging the price to EUR, the average price in the second quarter was 610 EUR/tad, the last price recorded (September 1st, 2020) was 575 EUR/tad and the average price recorded in the first quarter of 2020 was 616 EUR/tad.
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®) 4 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:
Informação financeira 1S20
8. FUTURE PERSPECTIVES
The current context continues to be characterised by a high level of uncertainty, both in terms of demand and in terms of the evolution of the pulp sales prices, in addition to a depreciation of USD against the EUR.
Hence, the focus of the Altri Group is centered on the competitiveness of its production units, designing and implementing projects that seek to continuously reinforce the positioning of the Altri Group as the lowest cost European producer.
Generically, industrial projects have been based on digital transformation associated with continuous improvement. In concrete terms, in the case of Celtejo, the stoppage scheduled for the fourth quarter aims at consolidating the investment project that started about two years ago. On the other hand, Caima's intervention will focus on washing and bleaching lines.
The schedule for programmed maintenance stoppages is as follows:
Celtejo: October 2020 – 10 days Caima: October 2020 – 10 days
Oporto, September 10, 2020
