ENCE Aktie

Good morning, ladies and gentlemen. Welcome to the Ence First Q 2026 Results Presentation. I'll now hand over to Mr. Ignacio Colmenares, Executive Chairman; and Alfredo Avello, CFO. Gentlemen, please go ahead.

Good morning, good afternoon, and welcome to Ence's First Quarter 2026 Results Presentation. Thank you for joining us. I'm Ignacio Colmenares, Executive Chairman. And today, I'm joined by our CFO, Alfredo Avello; and our Head of IR, Ines Alvarez.

Let me start with the strategic picture and our overall objectives. Our plan remains simple to describe and rests on 4 pillars: growth in higher-margin special pulp substituting BSKP; local wood and biomass sourcing; cash cost efficiency; and EBITDA growth in our Renewables platform, leveraging our position as the largest collector of biomass in the Iberian Peninsula.

Slide 4 summarizes the first quarter of 2026. It shows the progress we continue to make in all pillars of the strategy despite a less-than-brilliant quarter, impacted by several one-off events. Importantly, these events do not change our full year Pulp guidance. We consider that both the market and the company's costs are at an important inflection point that will be visible in future quarters.

The pulp price environment has continued the positive trajectory we saw at the end of 2025. European gross BHKP prices stood at $1,286 per tonne at the end of first quarter '26 compared with $1,100 per tonne at year-end 2025. Major producers have announced further price increases up to $1,430 per ton to be implemented in the short term. Since prices in our contracts are linked to the 2 previous months, we started to benefit from the price increase in the second quarter.

At the same time, we continue to work on the fundamentals of the business, improving our product mix, making progress in our cost reduction initiatives and advancing the Renewables platform.

In our Pulp operations, our pro forma cash cost was EUR 479 per tonne in first quarter with Navia in its planned shutdown and excluding the impact of the Navia strike.

On the product mix, special pulp products, including initial fluff volumes, accounted for 34% of total pulp volumes sold in first quarter '26, plus 13% compared with 2024 -- sorry, compared to 2025 despite the strike. We remain on track to reach 40% for the full year 2026 and to exceed 62% by 2028.

As for our Renewables platform, pro forma energy generation was 303 gigawatt-hour in first quarter '26 compared with 277 gigawatts in first quarter 2025. This figure excludes recent extreme weather conditions in the Iberian Peninsula. This had an impact of 40 gigawatt-hour in production and of around EUR 6 million at EBITDA level. La Galera has completed its odor elimination program and will act as a showcase for our biomethane pipeline developments.

Financially speaking, group consolidated EBITDA was EUR 1 million in first quarter '26. Pulp EBITDA was negative EUR 1 million. Renewables EBITDA was EUR 3 million, including EUR 1 million [ of the rest ] related to new business developments.

Investments amounted to EUR 53 million in the quarter, including machinery leasing of the fluff project and the final payment of EUR 15 million for the 2019 pulp dryer debottlenecking at Navia. Our full year CapEx guidance of EUR 120 million for both businesses remain unchanged.

Net debt stood at EUR 462 million with EUR 209 million in cash. We also continue to act proactively on financing. As a reminder, we registered a new EUR 200 million MARF bond program in January 2026 and completed a first EUR 85 million issuance with a 4-year bullet maturity and a 410 basis points coupon, a clear signal of the reliability of Ence for the investor community. In addition to the EUR 7 million cash already collected in the first quarter, we cashed, in last week, EUR 21 million from the collection of tax losses.

In summary, this was a quarter heavily impacted by one-off events, the Navia strike in Pulp and extreme weather conditions in biomass generation. But none of these changed our full year guidance, nor our strategic trajectory.

Before turning to the pulp market, I would like to address the geopolitical context. On Slide 6, we not only outline why we expect the Iranian conflict to have a limited negative impact on our business, thanks to strategic mitigants in both Pulp and the Renewables platform, but also why the conflict could create opportunities for European pulp players and local energy producers.

In Pulp, our mitigants are structural. We are more than self-sufficient in electricity within our production process with excess energy sold back to the grid, and that excess may benefit from higher pool prices. Our gas exposure will be further reduced in the near term through Navia's efficiency and decarbonization plan, which includes replacing gas consumption in the lime kiln with pulverized biomass and bioethanol captured during the process. This investment will be fully operative by mid-2026. Remember that out of 6 thermal megawatt-hour required per ton of pulp, 5.5 are already self-produced.

We source wood locally with an average radius of less than 110 kilometers. And our commercial focus is in Europe, which accounts for 92% of our pulp sales. In our Renewables platform, we rely on fully local biomass sourcing with an average radius of 145 kilometers. We have an ongoing electricity hedging program for 80% of production and gas hedging for 72% of our needs.

The opportunities are real. In Pulp, the positive pricing momentum favors European players focused on the local market, given the logistics constraints faced by Middle East, Asian and Latin American pulp and paper producers in its exports. In our Renewables platform, we expect an acceleration in our industrial heating pipeline. Biomass is more competitive than gas, and its supply is more reliable, as well as increased revenues from ancillary services due to higher power prices. Biomethane benefits from similar tailwinds.

Let's look at cost competitiveness on Slide 7. Our cash cost trajectory remains on track to meet our full year guidance of around EUR 468 per tonne for 2026. Our competitiveness and efficiency plan aims at cost savings of EUR 30 per tonne: EUR 22 per tonne from headcount reduction, process reengineering and digital and AI-enabled optimization; and EUR 8 per tonne from the Navia cost reduction, decarbonization project.

In terms of progress during the quarter, on the competitiveness and efficiency plan, we captured savings of EUR 6 million on an annualized basis in first quarter. Taken together, these initiatives underpin the EUR 30 per tonne cash cost reduction expected during '26 and '27 with approximately EUR 15 per tonne expected this year in '26, supporting our guidance of around EUR 468 per tonne for the year.

Slide 8 considers the market environment and the continued upward momentum in hardwood pulp pricing. BHKP prices ended first quarter '26 at $1,286 per tonne compared to $1,100 per tonne at the end of '25. Major pulp producers have announced price increases in Europe of up to $1,430, to be implemented in the coming weeks. The expected cost increase in logistics and chemicals, stemming from the Iranian conflict, combined with a tighter paper and board market in Europe, may offer further upside on spreads. We expect a price improvement in the second quarter and third quarter as our pricing structure is indexed to a 2 months trailing reference.

Importantly, BHKP continues to gain share versus softwood. Eucalyptus pulp demand has grown by 1.3% so far in 2026 January and February, in contrast with a 6% decline in BSKP. Fiber-to-fiber substitution, combined with BSKP capacity closures and shifts towards dissolving wood pulp will continue to drive BHKP demand up. Moreover, logistics disruptions linked to the Iranian conflict favor higher prices for regional players such as Ence due to the limited availability of overseas products such as pulp and paper from Asia, Latin America and Middle East.

Overall, the message is clear. The market backdrop supports firmer hardwood pulp pricing in Europe, driven by a combination of favorable demand dynamics, supply constraints and higher fiber costs. That is precisely why our strategy is built around cost, fiber security and growth in special pulp substituting BSKP.

Moving to Slide 9. Our product strategy continues to progress as a key differentiator. Special pulp accounted for 34% of sales volume in first quarter '26 compared with 30% in '25. These products deliver higher margins, approximately EUR 36 per tonne above standard BHKP, since they substitute higher-cost softwood alternatives in multiple applications. We expect this share to increase to 40% in 2026 and to exceed 62% by 2028.

We have a range of special pulp products. Advanced is our solid broad range of BSKP pulp substitutes with different attributes: high strength, unbleached hardwood pulp, low porosity, softness, suitable for diverse applications, including hygiene, decor and packaging. Our '28 target is 500,000 tonnes with an incremental margin of over EUR 30 per tonne versus standard BHKP.

Ence Fluff is another flagship strategic product. Ence is the sole European producer of fluff pulp based on eucalyptus wood competing with more expensive softwood. We are currently in 8 [indiscernible] processes. Our 2028 target is 125,000 tonnes, with an incremental margin of over EUR 60 per tonne. Fluff ramp-up is not just a start-up story. It's a market access story. Qualification takes time. But once approved, volumes tend to be sticky. And the product is anchored in more stable end markets linked to the aging population and improved hygiene habits.

These products are not simply marketing labels. They are an economic lever. When customers use our grades to substitute softwood pulp, they do so for performance reasons. That performance allows pricing discipline, and over time, a structurally higher margin than standard hardwood pulp.

As you can see in Slide 10, our strategic goal is simple. We are not only lowering costs, we are improving what we sell. Together, these moves are designed to reposition Ence as the lowest-cost producer on a BSKP substitute basis. By 2028, more than 62% of Ence's sales will come from BSKP substitute products. Combined with our cash cost reduction programs, this strengthens our relative position on the core in downcycles and increases our operating leverage in upcycles. Due to the effects of both the improved product mix and cost saving initiatives, in 2028, the pulp spread will be EUR 52 per tonne higher than in 2025.

Moving on to Slide 11. Let me now turn to our Renewable Industrial Heating platform in Spain. Our target is to supply 2 terawatt-hour of thermal energy by 2030, contributing around EUR 30 million to EBITDA. We currently have 1 contract in operation, and we are adding 1 more in May and 3 more in the summer, 5 contracts operating at the end of the year. Our pipeline includes 11 projects under negotiation, of which 3 are under advanced negotiation with a required ROCE above 11%.

Continuing with Slide 12, our biomethane platform in Spain continues to advance steadily. Our target is to produce over 1 terawatt-hour of biomethane by 2030 and to contribute more than EUR 60 million to EBITDA with return discipline above 12% ROCE. The pipeline is solid and substantial. Nine plants are expected to reach ready-to-build between '26 and '27, and 25 plants are already in their late permitting phase. In total, we have 41 plants with gas grid connection authorized, feedstock and locations guaranteed.

Slide 13 illustrates the depth and maturity of our biomethane pipeline. Our pipeline has a potential capacity of 4 terawatt-hour, 4x our 2030 current target of 1 terawatt-hour. This underscores the different options open to us and our ability to accelerate or pace development according to market conditions and return discipline.

I'll now ask Alfredo to summarize our financial position.

Thank you, Ignacio, and good afternoon to everyone on the call. I will now walk you through the financial results for the first quarter of 2026 before handing back to our Executive Chairman for the closing remarks and the Q&A session.

Let me start on Slide 15 with an overview of our financial results. As already mentioned, the first quarter of 2026 was, apart from the annual planned shutdown at Navia, marked by 2 one-off events: strike at Navia linked to the ongoing collective dismissal process and the extraordinary spell of extreme weather conditions suffered in the Iberian Peninsula with less rainfall reaching a staggering 2.4x the annual average. In any case, none of these changed our full year guidance given in our last call.

Group consolidated revenues amounted to EUR 154 million in first Q '26 compared to EUR 187 million in first Q '25. In the Pulp business, revenues reached EUR 114 million compared with EUR 135 million in first Q '25. The increase in gross pulp prices was offset by a weaker dollar and by lower sales volumes in the context of the strike. In the Renewables platform, revenues amounted to EUR 41 million compared with EUR 52 million in first Q '25 as a consequence of lower electricity production due to the disruptions caused by the said extraordinary spell of extreme weather conditions.

In the Pulp business, EBITDA amounted to a negative EUR 1 million compared with EUR 29 million in first Q '25, which included EUR 30 million of energy saving certificates, the so-called CAEs. The extra costs from the strike were mostly offset by EUR 7 million of revenues from CAEs, which are not included in our cash cost calculation. In the Renewables business, EBITDA stood at EUR 3 million compared with EUR 6 million in first Q '25 as a result of lower production, lower pool prices, extra costs derived from the extraordinary severe storms, which alone impacted EBITDA by approximately EUR 6 million.

At the bottom line, attributable net income amounted to a loss of EUR 18 million in first Q '26 compared to a positive EUR 2 million in first Q '25. Importantly, as highlighted by our Executive Chairman, these results reflect isolated events and the seasonal planned Navia shutdown.

Looking ahead, the combination of stronger pulp prices, which you need to remember that has a time lag of approximately 2 months prior to flowing into our P&L; the end of the strike in agreement with the unions, and therefore, the permitted execution of our efficiency and competitiveness plan; the start-up of the Navia cost cutting, decarbonization and woodyard debottlenecking project; and the normalization of the devastating weather conditions should drive a significant improvement in the coming quarters.

Turning to the next slide. The quarter ended with a free cash flow cash out of EUR 76 million. Please note that this figure includes EUR 41 million in growth CapEx, a high concentration of carryover CapEx payment in the period, as several strategic projects initiated in previous quarter or years will reach commercial operation by midyear '26.

Let me walk you through the main components of the cash flow, starting from EBITDA. We had EUR 8 million of maintenance CapEx, EUR 7 million of net interest payments and no tax payments during the quarter. This results in a free cash flow before working capital and growth CapEx of approximately a negative EUR 14 million. Working capital absorbed EUR 18 million in the quarter, driven mainly by an increase in Pulp's trade and other receivables and by Renewable Industrial Heating inventories. These are assets that, since we revert to the client at the end of the contract rather than accounting them as assets, are registered as inventories.

Growth and efficiency CapEx amounted up to EUR 41 million in the quarter. This figure includes the final payment of EUR 15 million for the Navia 2019 pulp dryer debottlenecking project, CapEx associated with the Navia cash cost reduction and woodyard debottlenecking project, As Pontes engineering development expenses, and the Renewable Industrial Heating CapEx linked to the Mahou and Lactalis projects. Although first Q '26 is marked by a high concentration tail of CapEx payments, we have a clear target of deleveraging the company and a committed focus in continuing adjusting down our CapEx obligations in the coming quarter. All in all, free cash flow for the quarter stood at negative EUR 76 million.

It is important to stress that the Navia cost reduction, decarbonization and woodyard debottlenecking project, as well as the Mahou and Lactalis Renewable Industrial Heating projects are all expected to enter into operation in the second and third quarter this year and starting to contribute to EBITDA and cash flow in the second half of '26.

In addition, as our Chairman mentioned, we are receiving a positive cash flow -- cash inflow of approximately EUR 30 million in the year, EUR 21 million from the collection of non-applied tax losses already cashed in during the second -- during the first quarter -- sorry, during the second quarter from the Spanish Inland Revenue Service, and the rest from energy saving certificates, the so-called CAEs, of which EUR 6 million have already been collected in the first quarter.

Moving to our financial position on Slide 17. We closed first quarter '26 with a solid and well-structured balance sheet. Consolidated net debt stood at EUR 462 million at the end of March with EUR 209 million in cash across both businesses. Let me break this down by business. In the Pulp business, gross debt amounted to EUR 498 million, including EUR 63 million of IFRS 16 lease contracts, with EUR 158 million in cash, resulting in a net debt of EUR 340 million.

The Pulp business' financial debt remains covenant-free and enjoys some great liquidity, well-diversified financial sources between institutional investors and banks, long-term maturities and no covenants. Maturities are also well spread with no significant concentration in any given year. Also backing our balance sheet, we have fully available EUR 130 million RCF.

As a key highlight, in January 26, we registered the new EUR 200 million MARF bond program and successfully completed a first issuance of EUR 85 million with a 4-year bullet maturity in 2030 and 410 basis points coupon. This transaction extends our average debt maturity, diversifies our funding sources and represents a clear signal of the confidence of the investor community in Ence's credit profile.

In the Renewables business, gross debt stood at EUR 173 million, including EUR 5 million of IFRS 16 lease contracts, with EUR 51 million in cash, resulting in a net debt of EUR 122 million. The financial structure is also well diversified with comfortable long-dated maturities and a fully available EUR 20 million revolving credit facility.

Overall, we have a strong liquidity, long-term maturities and no covenants in the Pulp business, which provide us with the flexibility to execute our deleveraging objectives without any constraints.

Before handing back to our Executive Chairman, let me briefly comment on Slide 18, which summarizes our main sustainability highlights for the first quarter '26. Sustainability is not a side topic at Ence. It is fully embedded in how we operate, and it directly enhances our cost competitiveness, our commercial positioning and our license to operate.

On safe and eco-finance operations -- eco-efficient operations, sorry, our cumulative lost time injury frequency rate stood at 2.54 in the first quarter, the best result across our entire historical series. At Navia, we recorded no odor minutes, maintaining our '25 historic record. And we achieved a new historical low in specific water consumption. 100% of our pulp and energy plants are zero waste certified. And on climate action, direct Scope 1 emissions at Navia were reduced by 10% in '25 -- sorry, by 10% in '25 versus '24.

On byproducts and ecosystem services, we obtained 6 new approvals for specialty pulps under our special -- our Ence special products portfolio. And we have submitted the application for the approval of our fluff pulp under the Nordic Swan and EU Ecolabel schemes. Special pulp products substituting softwood now represent 34% of our sales.

Recycled fiber project at As Pontes has been awarded EUR 25 million under the Industrial Decarbonisation PERTE program, reinforcing our commitment to circularity. We also continue to make progress in forestry bioproducts with a new eucalyptus clone planned for '26 and over 4,300 hectares of CO2 forest sinks registered in the voluntary carbon market schemes.

On responsible supply chain, approximately 88% of the land we manage and 84% of the wood we source are certified. And 100% of our sites are SURE System certified for sustainable biomass.

On positive social impact, 30% of our managerial positions are held by women. 41% of job openings have been filled with internal promotions. We continue to advance in the allocation of EUR 3 million to 240 social and environmental projects under the sixth edition of the Pontevedra Social Plan. And we have launched 4 talent programs across Navia, Pontevedra, Magnon and corporate functions.

Finally, the External Criminal Compliance audit has been completed with results indicating that the level of implementation and operation of our control mechanisms is more than adequate with no nonconformities or observations identified. These achievements are not only reflected in our leading ESG ratings, EcoVadis Platinum, among the top 1% and MSCI ESG rating [indiscernible] excellence and our inclusion in the FTSE4Good Index, but also translate into tangible cost and commercial advantages.

With this, I hand the floor back to our Executive Chairman for the closing remarks.

Thank you, Alfredo. Let's finally look at Slide 20 with the outlook for 2026 and some closing remarks before inviting your questions. It is true that it has not been a great quarter because of the impact of several [ one ] events. However, putting all these together, our strategy remains consistent and disciplined: to increase sales of special pulp substituting BSKP; to strengthen local wood and biomass supply; to reduce cash costs; and to expand our Renewables platform EBITDA, while protecting the balance sheet and maintaining capital allocation discipline.

To summarize the quarter and the outlook for 2026, I wish to highlight 5 key messages. First, the pulp market continues to improve. We have announced $1,430 per tonne from May. The positive outlook is supported by fiber-to-fiber substitution, rising production costs in the context of the Iranian conflict, and scarcity, driven by logistics disruptions on Middle East, Asian and Latin American pulp and paper imports into Europe. We are already benefiting from the better prices in the second quarter.

Second, we have strategic mitigants to absorb geopolitical volatility. In Pulp, we are not only self-sufficient in electricity, we also export energy to the grid. We have local wood sourcing. And we are regionally focused on Europe in Renewables and local biomass sourcing. In both businesses, the conflict may offer opportunities: higher pulp prices and spreads in Europe due to limited overseas supply, energy surplus sold at higher pool prices, the acceleration of the Renewables pipeline, and higher revenue from ancillary services.

Third, the quarter was impacted by one-off events, but our full year guidance is unchanged. Ongoing cash cost initiatives are expected to reduce cash cost by EUR 30 per tonne over the '26 and '27 period. EUR 15 per tonne on savings are targeted in 2026, supporting our cash cost guidance of around EUR 468 per tonne for 2026.

Fourth, our mix upgrade continues. Special pulp substituting BSKP accounted for 34% of sales volumes in first quarter '26 and is expected to reach close to 40% in 2026. By 2028, over 62% of our sales will compete against BSKP, positioning Ence as the lowest-cost producers in the BSKP cash cost curve. Together with Pontevedra Avanza, we expect these initiatives to increase the average across-the-cycle EBITDA by 1.5x from 2028 onwards.

Fifth, the Renewables platform continues to grow and diversify. Leveraging in our solid pipeline potential, we are building the largest Iberian biomass backbone renewable energy platform, combining regulated biomass electricity, renewable industrial heating, biomethane and renewable fuels, and we are on track to almost triple its contribution to EBITDA by 2030. The execution of these projects will be adapted and aligned to our cash flow generation to maintain a prudent across-the-cycle leverage and an attractive shareholder remuneration.

Thank you. We now invite your questions.

[Operator Instructions] We have your first question comes from Inigo Recio with GVC Gaesco.

In the context of significant investments ahead, how do you expect CapEx to evolve? And what deleveraging measures you plan to implement?

Yes. Thank you very much. We ended the quarter, as you know, with EUR 462 million net debt, EUR 340 million in Pulp business and EUR 121 million in the Renewable business. We have a strong liquidity, which amounted to EUR 157 million in the Pulp business and EUR 51 million in the renewable business. And besides, as you know, we have undrawn revolving credit facilities for an amount of EUR 130 million in the Pulp business and EUR 20 million in the Renewable business. Said that, we are conscious that we have to deleverage. We don't have a problem, but we have to deleverage. As you know, in the second quarter, we have cashed already EUR 21 million from tax losses.

Due to its cyclical nature, the Pulp business is financed with covenants-free debt and long-term maturities, as Alfredo has explained before. Our balance sheet and the expected cash flow generation should allow us to reach our growth and diversification goals, whilst maintaining a prudent leverage and an attractive shareholder remuneration. The timing of our investments could be adapted to our cash flow generation through the cycle, as it has been always happening in the past.

Net debt in euros will remain almost flat up to fourth quarter '26 when it should be reduced. The company is fully committed towards deleveraging. No major new investments should occur prior to 2028 to allow the business to consolidate, a stronger cash generation profile on the back of the results of the efficiency and competitiveness plan and Navia decarbonization initiative and the improved product mix in the context of a positive price environment, as we have described. In 2028, once cash generation reaches a run rate level and leverage is normalized, initial works of Pontevedra should start.

The last 12 months' net debt-to-EBITDA ratio is affected by the low pulp prices and strikes in fourth quarter '25 and first quarter '26. Nevertheless, investment discipline, pulp prices and delivery on cash cost saving initiatives are expected to normalize the ratio by the end of the year. We maintain our target average cycle EBITDA ratio of below 2.5x in the Pulp business, below 4.5x in the Renewable business.

Regarding CapEx, we maintain our 2026 guidance of EUR 120 million. CapEx in first quarter '26 amounted to EUR 53 million, and it will go down to EUR 28 million in second quarter '26. In the second half of the year, we expect to invest the remaining EUR 39 million, allocated almost evenly between the 2 quarters. We should note that the majority of cash outflows will take place in the first half of the year due to: first, payments related to growth investments scheduled for competition during the first half such as the industrial heating project and the Navia cost reduction, decarbonization and woodyard debottlenecking projects; two, the $15 million payment related to the 2019 Navia expansion was made in the first quarter; and three, the maintenance shutdown in Navia in first quarter.

In 2026, Pulp business CapEx will be EUR 74 million, of which EUR 23 million are related to annual recurrent maintenance of both factories and forestry activities that are capitalized, whereas the remaining corresponds to investment projects from previous year with significant impact on the group's profitability, as an example, fluff or Navia decarbonization. Navia cost reduction, decarbonization and woodyard debottlenecking, EUR 14 million already paid in first quarter, EUR 3 million to be paid in second quarter. Closing payments of Navia '29 (sic) [ '19 ] pulp dryer debottlenecking project, EUR 15 million already paid. Fluff, EUR 1 million paid in first quarter and EUR 6 million to be paid in second quarter.

Going now to Renewable business, in 2026, EUR 46 million, out of which EUR 17 million are related to 2026 maintenance or new initiatives, very limited, and the remaining are carryover investments from the previous years. Renewable Industrial Heating, EUR 5 million cash-out in first quarter and EUR 14 million expected in second quarter.

In 2027, CapEx should be around half of the 2026 level. The main items will be recurring maintenance of approximately EUR 35 million in total in the full perimeter and no more than -- sorry, EUR 35 million in total and no more than EUR 30 million in renewable packaging and biomethane projects. The pipeline of industrial heat projects should continue to grow, supported by 30 programs, and therefore, with limited equity returns.

Is there any other question?

[Operator Instructions] As of the moment, there are no further questions. Please continue.

Good, gentlemen. If there are no further questions, we will stop now. You know that you can call either Ines, Alfredo or myself [indiscernible] if you have further questions, and we shall meet in 3 months' time with better results on the second quarter. Thank you, and good afternoon.

This concludes today's conference call. Thank you for participating. You may now disconnect.

Good morning, ladies and gentlemen. Welcome to the ENCE's Fourth Quarter 2025 Results Presentation. I will now hand over to Mr. Ignacio Colmenares, Executive Chairman and CEO, and Alfredo Avello, CFO. Gentlemen, please go ahead.

Good morning, good afternoon, and welcome to ENCE's fourth quarter and full year 2025 results presentation. Thank you for joining us. I am Ignacio Colmenares, Executive Chairman. And today, I'm joined by our CFO, Alfredo Avello, and our Head of IR, Ines Alvarez.

Let me start with the strategic picture of our overall objectives. Our plan is simple to describe and rests on four pillars. First, growth in higher-margin Special Pulp substituting BSKP. Second, local wood and biomass sourcing. Third, cash-cost efficiency. And fourth, renewables EBITDA growth, leveraging our position as the largest collector and manager of biomass in the Iberian Peninsula.

Slide 4 summarizes the year 2025 and the fourth quarter. It captures the progress we are making on all pillars of the strategy. The pulp price environment was challenging for much of the year, but we saw a clear turning point at the end of the fourth quarter. At the same time, we kept moving the business forward. We improved our cash cost, increased the share of Special Pulp substituting BSKP and continue to increase the Renewables platform to deliver stronger results.

In our Pulp operations, we delivered cash cost of EUR 477 per tonne in fourth quarter and EUR 483 per tonne in 2025, our lowest cash cost since 2022 despite the impact of the Pontevedra strike. The cash cost improvement reflects structural actions in wood, logistics and harvesting, process optimization and productivity, combined with tighter operational execution and a continuous improvement culture. On product mix, Special Pulp substituting BSKP reached 30% of total volumes sold in 2025, up 7 percentage points year-on-year with a margin uplift of EUR 37 3-7 per tonne versus standard BSKP. The increase in Special Pulp substituting BSKP volumes was a result of targeted customers' programs, product development and qualification work and our ability to tailor fiber properties to end-use requirements. We are positioning ENCE as a solutions provider rather than a standard commodity supplier.

We also took a strategic step into fluff, becoming the only non-BSKP producer in Europe. We started the ramp-up in fourth quarter '25 with 125,000 tonnes of capacity. On Renewables, biomass-to-electricity generation increased by 6% year-on-year to over 1.2 terawatt hour, and renewable industrial heating secured three landmark contracts in 2025. I would also like to highlight that Magnon's’ biomass to regulated electricity business has posted an EBITDA of EUR 10 million for 2 consecutive quarters, third and fourth quarters, leading to an annualized EBITDA of EUR 40 million to be increased by an additional EUR 10 million with the update of the regulatory parameters, which came into force in January 2026.

In Biomethane, La Galera delivered a 27% increase in annual production through operating initiatives and not through CapEx, reinforcing the value of operational know-how and the scalability of this platform with 42 projects in the pipeline, of which, 25 are under permitting phase, late permitting phase.

Financially speaking, the group's consolidated EBITDA was EUR 83 million in 2025 and EUR 13 million in the fourth quarter '25. Pulp EBITDA was EUR 56 million and Renewables EBITDA was EUR 27 million. Magnon's’ alone EUR 32 million. Alfredo will explain this in more detail.

We also acted proactively on financing. We registered a new EUR 200 million MARF bond program in January 2026 and completed a first EUR 85 million issuance with a 4-year bullet maturity and a 410 basis points coupon refinancing all debt maturity in 2026 in the Pulp business. In 2026, we see a more constructive market setup versus mid-2025, supported by firmer price momentum and a more balanced supply response. Operationally, we expect further progress on competitiveness with a structurally improved cash cost profile and guidance of EUR 468 per tonne for 2026 cash cost, alongside continued mix upgrade towards close to 40% of Special Pulp substituting BSKP.

In Renewables, the updated remuneration parameters for 2026-2028 support a higher regulated electricity run rate. We expect several industrial heating projects to reach start-up during 2026 and the biomethane pipeline will continue to advance. Putting it all together, these numbers show why the plant matters, local wood supply, special pulp mix upgrade, cash cost reduction and renewables EBITDA growth executed with capital discipline and balance sheet resilience.

Our priorities for profitable growth are clear: expand ENCE, Special Pulp substituting BSKP, reduce cash costs and convert our renewables pipeline in contracted long-duration cash flows. Slide 6 considers gross pulp prices in Europe and the market context behind the recent move up in hardwood pricing. The market has been tightening since the end of last year. The year-end PIX BHKP benchmark in Europe closed around $1,100 per tonne. The average in 2025 was $1,086 per tonne. Gross prices. Since last December, main producers have announced several price increases of up to $1,330 per tonne gross. Importantly, this pricing momentum is being supported by a solid demand and a supply side that is constrained, particularly in Indonesia. The Indonesian government -- the Indonesian government revoked forestry permits for 22 pulp wood plantations in West and North Samarinda with potential long-term annual losses of 4 million to 8 million tonne of wood chips, equivalent to 1 million to 4 million tons of BHKP.

From an operational standpoint, weather-related disruptions in Indonesia have also reduced short-term pulp availability and made fiber procurement more difficult. These disruptions are not happening in isolation. Analysts estimate that the broader set of disruptions across the value chain could lift demand for market pulp by approximately 650,000 tonnes in 2026. In addition to demand already strengthened by fiber-to-fiber substitution and increased standards of living. At the same time, higher fiber costs are flowing through the system. Wood chip prices in China increased once the extent of the Indonesian damage was assessed and Eucalyptus wood chip prices rebounded in early February to recent November highs after a 21% spike since July due to heavy rains affecting harvesting.

Overall, the message is clear. The market backdrop supports firmer hardwood pulp pricing, driven by a combination of solid demand, supply constraints and higher fiber costs. That is precisely why our strategy is built around cost, cybersecurity and disciplined growth in Special Pulp substituting BSKP.

Continuing with Slide 7, our product strategy is progressing well as a key differentiator. In 2025, Special Pulp substituting BSKP accounted for 30% of sales volume compared with 23% in 2024. These products delivered higher margin, EUR 37, 3-7 per tonne above standard BHKP in 2025 as they substitute higher cost softwood alternatives in multiple applications. These products are not a marketing label. They are an economical lever. When customers use our grades to substitute softwood pulp, they do so for performance reasons. That performance allows pricing discipline and over time, a structurally higher margin than standard hardwood pulp.

We are also achieving our goals on fluff. In the fourth quarter, we started the ramp-up of our first 125,000 tonne Eucalyptus fluff pulp line substituting BSKP fluff. This is strategic because fluff typically trades at a meaningful premium versus standard hardwood pulp, and we expect it to generate even greater margins as volumes ramp. The priority now is product homologation. We are making progress on 8 different processes. Fluff ramp-up is not just a start-up story. It's a market access story. Qualification takes time. But once approved, volumes tend to be sticky and the product can remain in more stable demand end markets linked to the aging population and improved hygiene habits worldwide.

Looking forward, our mix ambitions are clear. We expect Special Pulp substituting BSKP to increase towards close to 40% in 2026 and to exceed 62% by 2028, supporting a structurally higher margin profile. As the Special Pulp substituting BSKP rises, our exposure to pure BHKP pricing decreases. ENCE's position in the global cash cost curve improves and the business becomes more resilient through the cycle.

Let me turn now to cash costs and competitiveness in Slide 8. In 2025, cash cost was EUR 483 or EUR 478 per tonne, excluding the impact of the fourth quarter strike in Pontevedra and improved meaningfully compared to the 2022 PIX. This was the result of tangible actions, local wood sourcing and process optimization as well as operational improvements. We are not stopping there. We are focusing clearly on further reductions. Ongoing initiatives are expected to reduce cash cost by additionally EUR 30 per tonne during 2026 and 2027, with 2026 cash cost guidance at EUR 468 per tonne. This EUR 30 per tonne improvement is mainly based on the combination of our Efficiency & Competitiveness plan that accounts for EUR 22 per tonne and the Navia cost reduction and decarbonization initiative that accounts for the remaining EUR 8 per tonne.

On the Efficiency & Competitive plan, we aim to deliver an average annual saving of around EUR 22 per tonne to be implemented between 2026 and 2027 through process reengineering, operational streamlining and digital and AI-enabled optimization. The work streams are very practical and execution-driven. 15%, 1-5 headcount rationalization, improving yield and consumption ratios across wood, chemicals and energy, rising reliability by cutting unplanned downtime, strengthening procurement and contracting discipline on key inputs and services and simplifying the organization. Specifically, agreements have been reached regarding corrective dismissal procedures. In total, 141 costs will be amortized through voluntary departures, early retirements and reallocation to other growing business units within the group.

On Navia, remember that we are executing a dedicated cost reduction and decarbonization program. The project was launched in first quarter 2025, and we expect commercial operation in second quarter 2026, achieving roughly EUR 8 per tonne of annual savings in the second half of 2026. Taken together, these initiatives underpin the expected EUR 30 per tonne cash cost reduction over 2026 and 2027 with approximately EUR 15 per tonne targeted in 2026, supporting our guidance of around EUR 468 per tonne cash cost.

As you can see in Slide 9, our strategic goal is simple. We are not only lowering costs. We are improving what we sell. Together, these moves are designed to place ENCE as the most competitive producer on a BSKP substitute basis and to improve earnings quality throughout the cycle. Our cash cost reduction programs, not only lower our cash cost base, but also strengthened our relative position on the curve in down cycles and increase our operating leverage in up cycles.

As regards -- monetization in Slide 10, we completed the sale of Energy Saving Certificates, CAEs for a net amount of EUR 40 million in 2025, fully cash in. We also expect to register and cash additional CAEs in 2026, amounting approximately EUR 10 million, of which EUR 6 million are cash in the first quarter of 2026. We treat CAEs as value realization from operational excellence rather than a substitute for the underlying strategy. They support cash generation, but we do not build a business plan around them. Strategy is designed to be repeatable and resilient. One-offs may help in specific years, but the pillars, local wood supply, product mix, cost and diversification drive the long-term trajectory.

Let me now turn to Renewables in Slide 11, which is the second strategic engine of the group. Regulated biomass electricity provides a stable earning base, and we have a regulatory tailwind. Recent updated remuneration parameters starting in January 2026, improved remuneration for biomass-to-electricity and cogeneration. For our portfolio, this translates into an incremental run rate EBITDA of around EUR 10 million, taking the regulated electricity run rate closer to EUR 50 million. Having said that, please note that we experienced extraordinary and constant heavy rains in the Iberian Peninsula in late January and early February 2026. This affected the quality of the biomass and challenged our operations. Everything has come back to normal and is going well now.

Continuing with Slides 12 and 13. Beyond regulated electricity, we are scanning through business verticals. First, renewable industrial heating. Our target is 2 terawatt hour of thermal energy supply by 2030 and the contribution of over EUR 40 million to EBITDA. Today, we have 1 contract in operation, 1 in start-up and 3 projects in construction with a disciplined pipeline and required returns of above 11% ROCE. As a result, we expect 4 industrial heating plants to start operations this year.

Second, biomethane. We continue to build a biomethane platform in Spain, which will produce more than 1 terawatt hour of biomethane by 2030 and contribute over EUR 60 million to EBITDA with return discipline above 12% ROCE. This pipeline is substantial with 25 projects already in the late permitting phase and the total pipeline of 42 projects. Biomethane leverages on long-term BPAs. Over time, this creates an infrastructure-like business vertical with scalability returns. All these are long duration infrastructure-like businesses anchored in local biomass supply chains, precisely where we have solid structural advantages.

I will now ask Alfred to summarize our financial position.

Thank you, Ignacio, and hello, everyone. When looking at 2025, you will see two realities at the same time. First, the headline EBITDA is lower year-on-year because 2024 benefited from a much stronger pulp price environment. Second, the delivery of our strategic targets continued. We increased the weight of our Special Pulp. We launched our first fluff line. We continue to cut cash cost, and we kept building our renewable biomass backbone growth platform.

With that in mind, let's start with the income statement on Slide 15, where you can see the headline figures for the year and for the fourth quarter. At group level, revenues reached EUR 747 million in 2025. Pulp revenues were EUR 544 million and Renewable revenues were EUR 206 million. The variation in revenues year-on-year is explained by the lower net pulp price compared to the previous year, partially offset by higher contribution from our Renewables platform despite its also lower prices year-on-year.

Moving to profitability. Consolidated EBITDA was EUR 83 million in 2025, including EUR 13 million generated in the fourth quarter, 6% higher than that of the fourth quarter '24. To put that in context, 2024 delivered EUR 164 million EBITDA beating the year-on-year delta essentially, the pulp pricing cycle, partially mitigated by our cost and product mix actions and by significant value capture initiatives such as the monetization of energy efficiency certificates. Let me now unpack pulp first because that's where the cycle is most visible.

In Pulp, EBITDA was EUR 56 million in 2025 compared to EUR 138 million in 2024. The main driver is the net pulp price environment, reference price for short fiber pulp averaged USD 186 (sic) [ 1,086] per tonne in 2025 compared to USD 1,236 in 2024. In the fourth quarter, the average was around $1,070 and the European PIX gross price closed the year around EUR 1,100. But the bottom point is not just where the average was, but what the end of the year trajectory is. Producers have already announced price increases into '26, reaching up to USD 1,330, reflecting a tightening supply-demand balance. Now while the price cycle is exogenous, the mix and costs are not, and '25 is a year where we will make clear measurable progress on both.

First, regarding mix, our Special Pulp that substitute more expensive long fiber pulp accounted for 32% of sales in fourth quarter '25 versus 24% in fourth quarter '24. This Special Pulp generates an incremental margin of around EUR 37 per tonne versus standard pulp. Second, in the fourth quarter, we started up with customer qualification processes for our first fluff pulp line with capacity of up to 125,000 tonnes. Third, cash cost in the fourth quarter was EUR 477 per ton versus EUR 521 in the same period last year, including the December Pontevedra price strike. Beyond the EBITDA line, you can see how the cycle flows through the net income. As a result, pulp business recorded a net loss of EUR 42 million in '25, including a provision related to our efficiency and competitiveness plan of EUR 24 million.

On Renewables, in '25, energy sales volumes increased by over 6% to 1.2 gigas and the fourth quarter production rose almost 10% versus the same quarter of last year. Revenue also increased by around 5% up to EUR 206 million for the full year. EBITDA was EUR 27 million in '25, up 4% year-on-year and EUR 10 million in the fourth quarter, including approximately EUR 1 million of development and ramp-up costs for growth platforms, Biomethane and Renewable Industrial Heating. The base biomass into regulated electricity business showed a solid performance, reaching EUR 20 million EBITDA in the second half '25 before increasing its run rate average up to the 40s, and additionally, the recent remuneration updated will increase it up by approximately EUR 10 million per year for a target production of 1.4 gigas. Below EBITDA, Renewables reported a net loss of EUR 15 million for the year, including a specific impairment charge on a PV development project, partially offset by tax credits.

Turning now to Slide 16. Let's enter into cash flow. In 2025, we achieved a positive free cash flow before working capital variation and growth and efficiency CapEx of EUR 12 million, while executing EUR 59 million of growth and efficiency CapEx and maintaining our asset base. Let me walk you through the underlying dynamics. In the Pulp business, operating cash flow was EUR 55 million in '25 versus EUR 87 million in '24, consistent with the lower price environment. In the fourth quarter, operating cash flow was EUR 16 million, up from EUR 9 million in the fourth quarter '24, showing the benefit of improved cash cost and Special Pulp mix.

In the Renewable business, operating cash flow in our accounts was EUR 9 million before the EUR 14 million of CapEx related to the Industrial Heating business that are registered as inventory changes rather than in the CapEx line since the assets will be finally acquired by the customer. Working capital improved in this business by EUR 11 million due to lower IRs level in the set lower price environment. Regarding CapEx, total investment was EUR 114 million versus EUR 125 million guidance and of which EUR 59 million are strategic, namely in the Pulp business, we're including the new fluff line on the Navia cash cost reduction and decarbonization project and the Renewables, the Industrial Heating and the Biomethane development.

Regarding cash flow, importantly, for '26, following the Constitutional Court decision on the limitation of tax loss offset, we expect a cash refund of roughly EUR 23 million related to activated tax losses. This is a tangible cash relevant item expected for first half '26.

Turning now to Slide 17. The message is straightforward: Strong liquidity, long-term maturities, covenant free in the Pulp business and a capital structure that supports strategic execution. At the end of '25, consolidated net debt was EUR 378 million compared with EUR 321 million at December '24, primarily explained by our investment program and by working capital movements. Importantly, we closed the year with EUR 241 million of cash on the balance sheet, which provides optionality. It allows us to proceed with CapEx, absorb working capital swings and still remain in control of the balance sheet. We also actively managed market risk that could otherwise translated into balance sheet volatility. On FX, we maintained rolling hedging policy to reduce the impact of euro-dollar volatility on pulp results. In 2025, that policy delivered EUR 8.4 million of positive settlements.

For 2026, we have hedged a nominal amount of EUR 80 million -- $80 million, sorry, with an average cap around $1.19 and a floor around $1.16 per Euro. On energy price risk inside Renewables, we also use hedges designed to replicate the regulated methodology aiming to stabilize returns. In 2025, hedges cover around 60% of biomass generation and hedge settlements offset the deviation between the market prices and the regulators' estimate. If you look at the maturity schedule on the right of the slide, the key takeaway is that maturities are spread overtime, reducing refinancing cliffs. Together with the fully available EUR 150 million revolving credit facilities, this provides a liquidity buffer that is meaningful relative to the volatility of commodity markets.

Also, at the beginning of 2026, as our Executive Chairman has said, we have registered at the MARF a EUR 200 million 4-year bullet bond program with the aim of continuing with the diversification of our financial sources. Our first issuance was successfully launched, placed and oversubscribed in February, ending at EUR 85 million with a fixed coupon of 110 basis points maturing in 2030 and fully absorbing all the financing needs for the whole year '26. This is a clear signal from the investor community of the reliability and resiliency of our company even in the low part of the cycle.

Now after covering the financial and balance sheet performance, I want to step back and show you how our sustainability leadership reinforces competitiveness and protect returns in Slide 18. ENCEs' view is pragmatic. Sustainability is a tool to be more competitive and to capture returns. Let me make the connection explicit. Each pillar links to value creation and each reduces a category of risk. First, the efficiency operations. This is about operational stability and cost. In 4Q '25, we achieved historic performance of 0 odour minutes reached in Navia, and we also achieved a historical record for the lowest specific water consumption. We maintained 100% zero waste certification across our pulp and energy sites.

In Pontevedra, our water recovery system completed its third year of operating, improving resiliency to drop risk. These are operational KPIs, but they translate into fewer disruption, lower compliance risk and a stronger social license. Second, by products and ecosystem services. This is about top line potential and strategic positioning. You have already seen that 32% of our sales in fourth quarter '25 came from Special Pulp, substituting more expensive BSKP with higher margins and growing demand. In the quarter, we achieved 3 new sustainability certification for fluff pulp, reinforcing market access and customer preference. On forestry byproducts and ecosystem services, we continue to improve plant material, including the development of new Eucalyptus clones better adapted to climate change, and we also expanded the registration of forest carbon sinks over 4,300 hectares. This is about building long-term asset base with increasing optionality and monetization pathways while maintaining biodiversity and responsible management.

Third, responsible supply chain. This is about being the preferred counterparty. 100% of sites certified under the SURE System for sustainable biomass. In 4Q '25, we deployed a new third-party due diligence procedure to reduce risks related to human rights and environmental impacts along the supply chain, and we also obtained PEFC certification for biomass trading. These measures reduce reputational and compliant risk. Fourth, positive social impact is about talent and community stability, which is again a risk and return topic. Our safety performance is well above sector benchmarks, as you can see in the slide.

On talent, 30% of managerial positions are held by women and 41% of jobs opening were fulfilled through internal promotion. This is a sign of organizational strength. On community engagement, we launched a new addition of the Pontevedra social plan, supporting 240 initiatives in the rural communities, we provided more than 950 technical advisory sessions to forest owner and delivered a new addition of forestry machinery training. These actions strengthen the ecosystem in which we operate and reduce long-term operational risk.

As said, ENCE sustainability leadership is not about scoring well on ESG frameworks. It is about increasing returns and lowering risks. Now let me hand back a bit of the presentation to our Executive Chairman for the closing remarks.

Thank you, Alfredo. Let us finally look at Slide 20 with the outlook for 2026 and some closing remarks before inviting your questions.

Putting all of this together, our strategy is consistent and disciplined. One, increase volumes of special pulp substituting BSKP; two, local wood supply; three, reduce cash costs; and four, expand Renewables platform EBITDA while protecting the balance sheet and maintaining capital allocation discipline.

To summarize the year and the setup for 2026, I wish to highlight four messages, each one, part of our strategy. First, the pulp market is improving, but we are not waiting for the cycle. We are positioning ENCE to perform throughout the cycle. Hardwood price momentum strengthened in early 2026. Demand is solid and the supply side is temporarily constrained, including the Indonesian fiber disruption, we discussed. That supports a more constructive pricing environment versus 2025.

Second, our mix upgrade continues. We expect special pulp substituting BSKP to increase volume to close to 40% in 2026. Key priorities will be with the flat ramp-up and continued qualification work. Our objective is to deliver structurally higher margins by substituting softwood pulp. Over 62% of our sales will compete against BSKP by 2028, positioning ENCE as the lowest cost producer in the BSKP cash cost curve.

Third, we are following a clear operational plan for improved competitiveness. We are reducing cash cost to around EUR 468 per tonne for 2026, supported by our Efficiency & Competitiveness plan and the Navia cash cost reduction initiative, and we remain focused on execution.

Fourth, the Renewables platform continues its diversification, pushing for growth, more than tripling its contribution by 2030. The operational improvements in second half of 2025 and the updated regulatory parameters support a higher run rate for the regulated electricity business. We expect 4 industrial heating projects to start up during 2026. Our Biomethane pipeline will continue to advance. Thank you. We now invite your questions.

[Operator Instructions] Your first question comes from the line of Alvaro Bernal from Alantra.

I have a couple. The first one is regarding the Biomethane platform. I've seen you've pushed back targets over a year. If you can give us more color on what problems you're encountering here and what makes you comfortable with meeting your current targets?

And the second one is a quick one, is just about the commercial discounts that have been agreed this year. If you can give us some disclosure regarding this? It would be very helpful.

Yes. Thank you very much. Yes. Regarding our biomethane platform, we have 8 plants who have almost what we call in Spanish, the [Foreign Language]. Everything has been done, everything. Now is the administration has to move. Some are in Catalonia, some are in Aragon, some are in Castilla y León. But the fact is it is not moving. The administration is going very, very slowly. None of these 8 projects have social opposition. We expect them to be ready to build by mid-2026 or on the second half of 2026. And then we will start construction, I would say, one of them, not at the same time, to be prudent. And we think that we will start construction by the end of the year, but not before. That's the vision we have today, and that's what we have reflected on the presentation in Slide 13. If things move quicker, well, we will go faster.

Regarding your other questions, yes, it's interesting to talk about discounts. European gross pulp prices closed the year at $1,100, as you know, and the discounts last year were on the range of 48% to 49%. There were a deficit from the discounts in the negotiations for 2026. Those negotiations were between December and January, and I would say that in general terms, BHKP has been sold by the market at an average discount of 53% to 54%, by two reasons, you will see in our figures a lower discount. This 40% special pulp substituting BSKP we are selling is sold at a higher price and then it diminishes the discount. And secondly, the less standard BSKP pulp we have, the better prices we get because what we are changing is, let's say, the worst customers, the worst destinations with this special pulp. And that is why we think this year, as I told you, we are going to -- we will see between 51% and 52% discount for ENCE.

And your next question comes from the line of Cole Hathorn from Jefferies.

You've got a lot of moving parts impacting your cash flows in 2026. And I was just wondering if you could just remind us all nicely the key moving items? So you've got the benefit from your tax losses, you've got various other items. Would you mind just listing the cash flow impacts and then also giving us some color of how you think about CapEx in 2026?

Yes. Let me give you a rough figure, and then Alfredo can go on more detail. As extraordinary incomes, we have, as you mentioned, the EUR 23 million of taxes. We think we are going to collect that quite soon. As extraordinary outflows, we have redundancies. I estimate we are going to have a cash out of between EUR 12 million and EUR 14 million, EUR 15 million this year. As another extraordinary income, we have CAEs, I think a minimum of EUR 10 million during the year. And then you have the CapEx. Regarding CapEx, Alfredo will go in details. Well, we are talking about EUR 74 million from the Pulp business and EUR 46 million on the Renewable business. And maybe, Alfredo, you can give the breakdown.

Yes. I have to say that most of it comes from things already made or for things that are almost finished, like in the Pulp business, the EUR 74 million that Ignacio was talking about, you include -- remember, the co-generation turbine and Navia we have approved in the past, there's like EUR 5 million there. We have the end payments of the Navia 80 investment that we made also in the past that accounts for EUR 16 million. You have the fluff for around EUR 8 million, and you have the rest of the Navia reduction cost and decarbonization project for around EUR 18 million. So you have all those extraordinary on that part.

Regarding the Renewable, we are including, as Ignacio was saying the starting payments of maybe one of the biomethane plant. We have the biomass trading expansion, and we have the Renewable Industrial Heating. All those projects that Ignacio talked about are all CO2 ones -- sorry, all those projects go in the line of EUR 19 million. And we are also starting the CO2 development. We are expecting a CapEx of around EUR 7 million in this item. So most of it are kind of either growth or expansion projects that will start up in '26 or we're starting to invest in them for future cash flows. But the extraordinary things are the ones that Ignacio has mentioned before.

Yes. What is important is out of the EUR 74 million in Pulp business, EUR 14 million are maintenance. We have to add the EUR 5 million of the repair of the turbine who failed last year at Navia. And as Alfredo was saying, we have outstanding payments of the old project of [ Navia 80 ] who was performed a few years ago. And then we have for growth and for efficiency on the Pulp business, EUR 35 million. And regarding Renewables, well, out of EUR 46 million, EUR 10 million are maintenance and EUR 36 million are for growing.

That's clear. And then if I follow up with the shift to more specialty grades of pulp, moving the product mix to 30% this year and 40% next year, it's a big movement in your mix of pulp sales, and congratulations for doing it so quickly. I'm just trying to understand one of the key benefits for that is when the softwood pulp price is at a substantial premium to hardwood. How do you think about it now that the gap has narrowed with hardwood rising, particularly in China off its lows and kind of narrowing in Europe? Will there be any challenges getting people to switch down to the specialty grades?

No, we don't see this challenged today. Now it's 5 years. We are selling the special pulp. We have problems to keep this, let's say, EUR 36 per tonne extra margin when the gap between softwood and hardwood is lower than EUR 150. When this gap is above EUR 150, well, we share the benefits with the customers and we get this EUR 36 per tonne on average. No, we don't see a problem today. And the vision we have is that, well, the gap will continue this year and on the future, yes. Yes, we see less and less offer in BSKP.

And then maybe just following up on the cash costs initiative. You've been very clear, and it's a helpful slide from the outside in to see the cash cost development down EUR 15 a tonne this year and then EUR 15 a tonne next year. But I suppose there have been some extraordinary impacts from strikes in the fourth quarter, a little bit of strikes in Q1, and now that's all resolved and behind you. Are you comfortable with delivering those cash cost numbers? Or are you confident on that delivery and there's upside?

Yes, absolutely. We have checked the number once the strike was finished and before preparing for this conference. And the impact of the strike in Navia between January and February has been EUR 5 million. very similar to the strike we had in Pontevedra, another EUR 5 million. EUR 5 million of Pontevedra Avanza in 2025. The EUR 5 million of Navia is on the first -- will be on the first quarter of 2026. And when we say EUR 468 is included all the extra costs we have during the strike.

That's clear. And then that's all your own internal help actions that are delivering that. I'm just wondering if there's also any benefit from lower wood costs? I mean we're seeing some slightly lower wood costs in the Nordics -- well, not slightly lower. We're seeing lower wood costs in the Nordics. And I'm just wondering if there are any -- there's any downward pressure on wood costs in the Iberian Peninsula?

No, unfortunately not. We -- in this decrease of EUR 15 per tonne for this year, we see a slight reduction on the cost of the wood, not on the price of the wood. We will continue doing what we did last year is to reduce the cost of the transport and to reduce the cost of the harvesting. But at the end, we will keep the prices we are paying to the forest owners. We are reducing logistics. We are reducing harvesting, and we are keeping the price of the wood. Then there is a very slight reduction coming from the sites in the [indiscernible].

There are no further questions at this time. I will now hand the call back to Mr. Ignacio Colmenares for any closing remarks.

Well, thank you very much, all of you, for your attention and your questions. We are in contact. Any doubt you have, you can contact Ines, Alfredo or myself, and we will meet soon at the end of first quarter. Thank you very much, and good afternoon and good evening.

Thank you. Bye-bye.

This concludes today's call. Thank you for participating. You may all disconnect.

Good afternoon, ladies and gentlemen. Welcome to the ENCE Q3 2025 Results Presentation. I will now hand over to Mr. Ignacio Colmenares, Executive Chairman and CEO; and Alfredo Avello, CFO. Gentlemen, please go ahead.

Good afternoon, everyone, and thank you for joining ENCE's Third Quarter 2025 Results Presentation. Let me please start this presentation pointing out that, firstly, ENCE's Pulp division is firmly evolving towards a higher-margin Special Pulp Centered business, substituting more expensive BSKP alternatives based on local wood sourcing and proximity service.

And secondly, our local biomass backboned renewable energy platform continues its development, transforming the biomass nearby collected into a diversified range of energies, including regulated renewable electricity, industrial renewable fitting, biomethane and renewable fuels with solid recurrent EBITDA and tangible pipelines under execution.

Today, I'm joined by our CFO, Alfredo Avello; and our IR Director, Ines Alvarez. I will begin with a brief overview of the quarter and our strategic process. Alfredo will then take you through the financials, and I'll return with the closing remarks. On Page 4, you can find the main highlights of the quarter. BHKP prices hit lows in third quarter. Since then, price increase announcements were made by the main producers for a total gross of $130 per tonne in Europe, of which $60 per tonne are already recognized in the PIX.

In third quarter, we continued our discipline in cash cost reduction with an improvement of EUR 29 per tonne quarter-on-quarter. Cash cost savings were mainly driven by operational efficiencies and the positive contribution from the energy revenues after the successful ramp-up of Navia's turbine in June. Reinforcing our commitment towards efficiency and competitiveness, ENCE has launched an efficiency and competitiveness plan based on 2 main pillars.

Firstly, process reengineering and AI initiatives; and secondly, streamline of the operations through an orderly reduction of FTEs. The full plan will generate potential annual savings of EUR 22 per tonne at cash cost level and will require a cash-out of approximately EUR 23 million, resulting in a net present value of EUR 200 million. The plan will be implemented in the next 24 months.

The Navia decarbonization plan and Pontevedra Avanza will continue in parallel. ENCE's higher-margin special pulp products accounted for 29% of the sales volumes year-to-date, 30% higher than in the first 9 months of 2024, delivering an incremental margin of EUR 32 per tonne over the remaining 51% of standard BHKP.

Despite low pulp prices, free cash flow before growth CapEx amounted to EUR 12 million compared to a cash consumption of EUR 13 million in the previous quarter, solidly supported by the optimization of the working capital that has fully neutralized the increase of the first half of the year.

Our investment approach remains disciplined, prioritizing long-term value creation and cost effectiveness, implementing a clear strategy for both businesses in this new growth phase. By 2028, ENCE aims to increase its across-the-cycle EBITDA by 50% in pulp on the back of higher-margin special products, operational efficiency and cash cost focus, Pontevedra Avanza, As Pontes projects and renewable packaging solutions.

And by 2030, our diversified renewable energy biomass backboned platform is on track to more than triple its recurring EBITDA, growing in renewable industrial heating and biomethane businesses prior to entering the renewable fuel business. Moving to Slide 6, you can see that gross BHKP prices bottomed at $1,000 per tonne in August.

Since then, 2 price increase announcements were made for a total of gross $130 per tonne in Europe, of which $60 are already reflected in the fixed pulp as well as $30 tonne net in China. The demand backdrop remains supportive with global demand 7% up to August and a widening gap versus softwood pulp. The recent U.S. tariff redemptions for pulp imports and the planned maintenance shutdowns among large Latin American producers in fourth quarter should consolidate the positive price trend into year-end.

Continuing with our FX policy in Slide 7, we've hedged nearly half of our 2025 pulp sales with an average cap at $1.09 per euro. In this quarter, FX hedging has resulted in a positive inflow of EUR 4 million and should add another EUR 3 million in the fourth quarter, assuming a euro-dollar exchange rate of 1.16. Turning to Slide 8; I would like to review with you the Efficiency & Competitiveness plan launched in third quarter.

It is a 24 -- sorry, 24 months program to streamline our operations based on process reengineering and AI-enabled initiatives across procurement, maintenance, industrial operations, safety and quality. The plan targets approximately EUR 22 per tonne of cash cost savings by the end of 2027, with a cash out of around EUR 23 million to be deployed in the same 2 years, yielding an estimated net present value of EUR 200 million and 1-year payback.

Projects have been launched in both businesses and negotiations with Labor representatives are on track. The ultimate goal is to strengthen ENCE's competitive positioning while securing a stable and constructive employment relations framework. Turning to Slide 9; our higher-margin ENCE Advanced portfolio continues to expand. In the first 9 months, special products represented 29% of pulp volumes, an increase of 30% compared to the first 9 months of 2024 and delivering EUR 33 per tonne operating margin premium versus the remaining 61% standard BHKP.

The improvement of the mix is central to our strategy of substituting higher cost softwood grades in targeted applications. Continuing with our higher-margin product portfolio in Slide 10, our first 125,000 tonnes fluff line has started its production in the fourth quarter and is already in product homologation phase. As a reminder, fluff is a value-added niche with a gross price gap of around $900 per tonne versus standard BHKP, where ENCE will be the one and only European fluff manufacturer with cheaper hardwood sourcing.

Just for your information, as of today, more than 90% of worldwide fluff pulp is softwood. Our fluff pulp should account for more than 12% of sales volume by 2028. and we expect a structural extra margin of roughly EUR 60 per tonne versus standard BHKP at across-the-cycle prices. This is on top of the 50% of the higher margin ENCE Advanced product sales. Special pulp will account to 62% of total sales by 2028.

Moving to Slide 11; let's look at the global cost curve and ENCE's positioning. Leveraging on the 62% ENCE higher-margin special pulp mix forecasted for 2028, we are repositioning the company within the cash cost curve. At the second half '25 cash cost guidance of EUR 466 per tonne equivalent to $545 per tonne, ENCE stands as a top quartile producer compared to global BSKP ones that deliver an average cash cost of $678 per tonne.

Continuing with the Energy Saving Certificates on Slide 12, we have cashed in the EUR 10 million recorded in the second quarter of the year. To-date, in 2025, we have sold Energy Certificates for a total amount of EUR 40 million, fully cashed in. Also, we are working on generating additional certificates for approximately EUR 4 million that should be recorded by year-end.

Let's move now to our local biomass backboned renewable energy platform in Slide 13, talking about La Galera, our Tarragona biomethane plant. As you know, we acquired the plant in December '24. Well, La Galera is now on track to increase its annual production by 20% without CapEx, just by applying ENCE industrial standards. On top of that, others will be completely eliminated by year-end.

As guided, we will continue upgrading the plant to increase its annual biomethane output up to 50-gigawatt hour, and we'll launch our first biofertilizer production unit in 2026. These initiatives should be fully completed by 2027. Turning the page to Slide 14. We would like to update you on our solid and tangible biomethane pipeline. We have 38 projects with locations secured and feasibility studies completed.

18 of these projects are already at a late permitting phase and its biomass is secured. The projects will carry a ROCE of over 12%, and we aim to deliver over 1 terawatt hour by 2030. This should yield over EUR 60 million in incremental EBITDA. Nobody in Spain has ENCE experience in biomass procurement, small rural projects development and digestion know-how. Continuing with our Renewable Industrial Heating Solutions in Page 15. We will reach 2-terawatt hour of thermal energy with EUR 40 million incremental EBITDA contribution also by 2030. To achieve this target, we already have 1 plant in operation since 2024, 1 contract in its start-up phase and 3 projects under construction.

On top of that, we are currently negotiating 10 projects, and we expect to close at least one of them during the fourth quarter, having another project ready to build before year-end. Continuing with Renewable Industrial Heating business, I would like to explain to you its key achievements of the quarter on Slide 16. On top of the ongoing plant construction at Mahou facilities, we have started the construction of 2 plants for a well-known French Dairy group located in Andalucia and Castilla La Mancha.

These 15-year term projects will start its operations during the second quarter of 2026 and will have an estimated combined production of approximately 85-gigawatt hour. In addition, we have gained another O&M contract for 8-megawatt ready-to-operate plant for a Food and Beverage company located in España Rural that is in ramp-up phase and should be fully operational within fourth quarter 2025. Alfredo?

Thank you, Ignacio. Let me start with our Special Pulp Centered business in Slide 18. In the third quarter, pulp sales rose up to 263,000 tonnes, plus 8% quarter-on-quarter, while the average net selling price decreased by around EUR 90 per tonne down to EUR 452. Crucially, cash costs declined by EUR 29 per tonne down to EUR 459, driven primarily by lower wood costs and operational leverage. This sequential step-down supports our second half cash cost guidance of EUR 466 per tonne.

Pulp EBITDA accounted for EUR 4 million in Q3. The third quarter includes approximately EUR 8 million of insurance proceeds related to the Navia turbine fully cashed in during the period, but no additional revenues from the Energy Savings Certificates. Turning now to our Renewables Business Backboned platform in Slide 19.

Biomass to electricity volumes increased up to 315 gigawatts hour in Q3, plus 4% quarter-on-quarter with lower operating costs per megawatt hour following several maintenance interventions in the first half, operational leverage and lower biomass input costs. Revenues per megawatt hour were 2% higher versus Q2, resulting in an EBITDA of EUR 9 million in our biomass to electricity business vertical, offset by around EUR 1 million from the rest of the business verticals currently in ramp-up process.

The final platform EBITDA was EUR 8 million versus EUR 3 million from the previous quarter. Let me now guide you through the consolidated P&L figures on Slide 20. Group revenues declined by EUR 11 million compared to the previous quarter. The growth in renewable energy business has partially offset a EUR 15 million decline in the Pulp business derived from the depressed pricing environment.

EBITDA declined to EUR 13 million in 2Q despite the improvement in operating costs in both businesses, ending in a bottom-line showing EUR 15 million losses. In this context, our main focus is to align operational expenditure, investment cadence and cost discipline to capitalize on cycle turn from day 1. Turning to Slide 21; free cash flow before growth CapEx was EUR 12 million in Q3 despite low pulp prices.

Working capital contributed with a positive EUR 18 million, fully reversing the first half build. Growth and efficiency CapEx totaled EUR 17 million in the quarter, including the fluff project, Navia decarbonization and cost reduction initiatives, renewable packaging development and the ramp-up of our biomethane and renewable thermal energy projects. All in all, free cash flow for the period was negative by EUR 8 million. Slide 22 highlights our solid financial position.

Consolidated net debt stood at EUR 367 million, supported by a strong EUR 265 million cash position. Importantly, both our Pulp and Renewable business have fully available revolving credit facilities for a total amount of EUR 150 million, and our Pulp segment is covenant free. This high liquidity position ensures the strengthening of the company along the different cycles.

As you've heard me say before, maturities are well distributed across several years, and we benefit from a flexible capital structure that provide us with optionality and growth room. Finally, on Slide 23, let me go through ENCE's sustainability performance indicators, a core pillar of our profitable long-term strategy. We are rated Platinum top 1% by Ecovadis, confirming our position at the forefront of industrial sustainability.

Key milestones include our accident rates remain 4x lower than the industry average, and we completed the Pontevedra shutdown with no severe incidents. Navia recorded 0 odor minutes during the 3 quarters '25. 100% of our sites are zero waste certified, 2 new sustainability certifications for our fluff pulp products.

Our forestry operations include 4,200 hectares with CO2 sinking rights officially registered in an OECC voluntary as well as improved plant material adapted to climate change. 100% sites SURE System certified, confirming the sustainable origin of our biomass. Promotion of professional development in rural communities with 750 technical advice sessions with forestry owners and forestry machine training programs.

Let me please now return the floor to our Executive Chairman for his closing remarks.

Thanks, Alfredo. Let me please conclude the presentation with some closing remarks. Firstly, price increases announcements of gross $130 per tonne in Europe should consolidate on the coming weeks on the back of U.S. tariff redemption for pulp imports, good demand, wide gap with softwood and significant annual maintenance shutdowns announced for the fourth quarter.

Secondly, we are firmly committed to cash cost reduction that should target EUR 466 per tonne for the second half of the year. Thirdly, our ENCE Special Pulp Centered business should increase the average across-the-cycle EBITDA by 50% through top line and cash cost initiatives by 2028.

On the top line front, I would like to highlight our product mix upgrade towards higher-margin special pulp products that substitute more expensive BSKP, reaching 62% of total sales by 2028 that should contribute with an incremental EBITDA for approximately EUR 22 million. From the cash cost side, the levers are the ongoing competitiveness plant, EUR 22 million; Navia's decarbonization and cost reduction projects, EUR 8 million as well as Pontevedra Avanza, EUR 20 million.

On the growth side, the As Pontes project got its Environmental Integral License in third quarter 2025, and we foresee the start of renewable packaging solutions plant in '26. Both projects will further increase our results. Fourthly and finally, we are building the largest biomass backboned renewable energy platform in Iberia, including biomass to regulated electricity, renewable industrial heating, biomethane and renewable fuels.

And it is on track to more than triple its EBITDA by 2030. The execution of all these projects will be adapted and aligned to our cash flow generation to maintain a prudent across-the-cycle leverage and an attractive shareholders' remuneration. In Pulp, no one of all these projects require more wood, a [ scarce ] resource worldwide.

Thank you for your attention. We will be pleased to hear any questions you may have.

[Operator Instructions] And your first question comes from the line of Alvaro Lenze.

The first one is on the expected cash cost. You're guiding for EUR 466 for the second half. If my math is not wrong, that implies an increase from EUR 459 in Q3 to around EUR 473 in Q4. I just wanted to understand why do you expect cash cost to go up?

Yes. In winter, normally, collection of wood is more expensive. It's more difficult due to weather conditions. And these bad weather conditions at the North Atlantic also normally make a pressure on prices of the freight. And as we are prudent, that's why we expect a slight increase -- a slight temporary increase due to weather conditions.

Okay. My second question is, if you could please try to clarify a little bit of what's going on with the net prices and the discount because you mentioned that the weight of differentiated products, which have a premium keeps going up, but the discount is also going up quite significantly this quarter is about 49%.

I understand that the discounts tend to go up in the industry, but I do not think that competitors are having this discount, let alone if we could make the numbers of what the actual discount is in the normal BHKP product that you're selling, it will be probably above 50%. So it's like we should expect the discount to narrow at some point or to stabilize, thanks to the change in mix, just to understand the dynamics there.

Yes. Third quarter has been the worst quarter on the year with the lowest prices. And when the fixed price is at [ 1,000 ] and you are at the lowest moment, it's absolutely impossible to sell the full volume of standard BHKP at this price. Then you have to accept spot orders who have a huge discount in Europe and in the Mediterranean.

What I recommend is that you wait for other competitors to publish their results and you will see what is their net price and what is our net price. And that's where you are going to see the big interest of these special products.

If we take the average price of this 61% of standard BHKP we have sold on the 9 first months and you compare with the average price of the special products we have sold on these first 9 months, 29%, corrected by the extra costs they have, we have this EUR 33 per tonne of more margin, and that is like that. The problem is that the standard products on the third quarter have been sold at very low prices due to a very tough market.

Okay. And my last question would be on the cost saving plan. I think it's very welcome. And I just wanted to know first, why now what has changed? Why do you see -- why not do this a year ago or something because you have been struggling with high cash costs for quite some time now.

And then it also strikes me as very cheap 1-year payback is very good payback for a restructuring plan. So I wanted to know what the mix is from the savings? How much of the savings are coming from layoffs? And why is the plan so cheap?

Yes. I have to start apologizing, but I cannot now disclose a lot of details because we are just on the middle of the negotiation with the unions, and I don't want to disclose my cards. Why now? Well, it has been the fourth quarter, the fourth quarter, one after the other, where prices have been declining and where EBITDA has been declining.

According to the Spanish law, you can launch a restructuring plan by economical causes while the more clear, only if you have 3 quarters of turnover and results going down. Then we prepare everything during the second quarter, and we have launched the negotiations during the third quarter. And we are now on the middle of the negotiations. As you know, the 2 mills where we produce pulp in Navia and Pontevedra are very heavily unionized.

It's very difficult to reduce employees there. It's almost impossible. We've been -- it has not been possible. But now we have a strong opportunity because law wise, now our position is very solid. And that is why they have accepted negotiations and we are negotiating. We are negotiating at Navia, and we are going to start negotiations next week with Pontevedra and with the unions representing the forest activities and the administrative activities.

Sorry. Out of the total layoffs we are planning, 10% can go out immediately, but the balance, we need to invest. We are going to rationalize the control rooms we have in our pulp mills. We have to invest in loops to do that possible. We are putting automation and artificial vision in quality control, and we have several other plans. That's why we have small investments to do all that, but it's small investments.

And that's the way we can reduce the number of employees we have. That's going to take 2 years because we need some investments. And we have ways to do that with a good agreement with the unions, and that's what we are working on, okay? On top of that, because the EUR 20 million -- EUR 22 per tonne saving is not because of layoffs. On top of that, we started now one year to do strong reengineering of all the activities subcontracted at ENCE.

It's all the movements of biomass and pulp inside the mills. It's all the industrial training. It's all the movement and sales of byproducts. It's all the medical service. And well, we finished by summer all the reengineering has been very tough, and we had -- we did that very carefully in order to have good results. And now we are starting to see the first savings, and these savings will continue over the next 12 months.

[Operator Instructions] And I'm showing no further questions at this time. I would like to turn it back to Mr. Ignacio Colmenares for closing remarks.

Well, I thank you very much for attending our call. I hope to give you more details about these strong plans. We are now working on it and to give you good results about the cash cost and that you will able to see the prices going up at the next call at the beginning of next year. Thank you very much.

Thank you.

Thank you. And ladies and gentlemen, this now concludes our presentation. Thank you all for attending. You may now disconnect.

Good morning, ladies and gentlemen. Welcome to the ENCE First Quarter 2025 Results Presentation. I will now hand over to Mr. Ignacio de Colmenares, Executive Chairman; and Alfredo Avello, CFO. Gentlemen, please go ahead.

Good morning, ladies and gentlemen. Thank you for joining us today. I wish to take you through our second quarter results for 2025. Our company is based on local wood and also local biomass. Our production of Advanced pulp products continue to grow, substituting for the more expensive BSKP products. We continue to generate diversified nonconventional renewable energy. We are doing this prudently and our focus is on profit, strength and sustainability.

Our CFO, Alfredo Avello; and our Head of IR, Ines Alvarez, are also connected to this call. I'll begin with the main strategic highlights of the quarter and the operational backbone of our businesses. Alfredo will then present our detailed financial performance. I would like to start with the main highlights of the second quarter in Slide 4.

We continued our disciplined delivery in cash cost reduction during the quarter and made steady progress within a complex global situation. We successfully reduced our pulp cost to EUR 488 per tonne, a EUR 22 per tonne improvement from first quarter, underpinned by our operational efficiency and energy optimization initiatives. Our strategic diversification program is also advancing firmly. ENCE Advanced pulp sales now account for 32% of total sales, underscoring our continuing shift toward higher added value Advanced pulp grades with resilient demand. The first Fluff pulp line remains on track for commissioning in fourth quarter. Our targets are the growing but resilient end-use sectors such as hygiene and health care. Both ranges of products substitute more expensive BHKP.

We have initiated the decarbonization project at our Navia facility and continue progressing with our diversified renewable energy platform, including incremental biomethane output at La Galera and the construction of a new renewable industrial heating project. Together, these steps form part of a coherent strategy focused on margin quality, business diversification and operational resilience. As always, our investment approach remains disciplined, prioritizing long value term creation, cost effectiveness and alignment with European sustainability goals.

Following pulp prices in Slide 6, we think that the pulp market is at a transitional moment. In July, prices in Europe dropped to USD 1,060 gross per tonne, effectively close to marginal cost of part of the industry, impacted by U.S. tariff uncertainties. Historically, this low price level should signal a potential future recovery. Softwood pulp continues to command a gross premium of over $200 net per tonne. This reinforced demand for hardwood grades during the first semester. However, tariff-related disruptions, particularly between the U.S., Brazil and China have interrupted the recovery of prices that began during the first quarter.

Continuing with the current global situation on Slide 7, one of ENCE's greatest strength is our roots in Europe. 100% of our biomass and nearly all pulp inputs are locally sourced. We are not energy self-sufficient -- sorry, we are not only energy self-sufficient, but we also produce a surplus that is sold to the grid. And our sales are virtually all with the European Atlantic and Mediterranean markets. This situation should give us cost reliability in the current geopolitical climate. However, we have to be cautious and follow its development closely. Although we think that there will be no significant impact on trade flows in the very short term, there could be some impact in the medium term.

Moving to Slide 8. Let's talk about currency volatility, which is a significant risk for any non-U.S. producer. In view of this risk, we've hedged nearly half of our 2025 pulp sales with an average cap at USD 1.09 per Euro. Our top line is partially protected from these movements. Potential positive liquidations from these hedges should result in an inflow of approximately EUR 9 million during the second semester at a euro-dollar exchange rate of 1.18.

In Slide 9, our ENCE Advanced portfolio, which now accounts for 32% of our pulp sales is the clearest indication of our value uplift. These products yield a higher operating profit, higher by around EUR 30 per tonne. The Advanced product range substitutes BSKP. By 2028, we expect over 62% of our pulp sales to come from these grades, including annual pulp production. It's a story of higher margins and long-term differentiation from the traditional BHKP market.

Continuing with our product portfolio in Slide 10, our 125,000 tonnes fluff pulp line set to launch in the fourth quarter opens new avenues for growth. This pulp is used for personal hygiene, medical and absorbent products, stable, high barrier and ESG cautious segments. It will deliver an estimated EUR 60 per tonne uplift in margins and grow to 12% on sales by 2028. Most importantly, this is a value-added niche where ENCE will be the one and only European fluff manufacturer with BHKP sourcing. As you know, more than 90% of fluff pulp is BHKP.

Now turning to Slide 11. Let's talk about the global cost curve at ENCE. In view of the 62% ENCE advanced products and fluff mix anticipated for 2028, we are seeing a strategic repositioning of the company within the cost curve. At the current EUR 488 per tonne, ENCE sits firmly in the top quartile of global producers for this 62% of its product mix, where we are better positioned than any of our North American, Asian or Nordic peers.

Let me update you in Slide 12 about the energy efficiency credits, the so-called CAEs. By means of officially verified and registered efficiency projects, which imply annual energy savings equivalent to 251 gigawatt hour, we generated another EUR 10 million in energy saving certificates in the second quarter. Together with the EUR 30 million already cashed in the first quarter, this will account for EUR 40 million in the first half of the year. And we expect an additional EUR 4 million by the end of the year.

Let's talk now about our renewable platform in Slide 13. La Galera, which is our conventional biomethane plant has increased its quarterly output by 2.2x since its acquisition by ENCE on December 18 last year. This increase has been achieved without any additional CapEx. We achieved it simply by our team revisiting the operational process and by applying our best industrial practices to these assets. We will continue to increase its output up to the 50 gigawatt hour design in future quarters, whilst at the same time, we began to produce compost and biofertilizers. Others will be fully eliminated by September 30.

We can review our biomethane growth project in Slide 14. La Galera is only the first step. We now have 37 projects with location and feasibility studies completed. 17 of these plants are at the late permitting phase and biomass is already secured. The project will carry a ROCE of over 12%, and we aim to deliver over 1 terawatt hour by 2030. This should yield over $60 million in incremental EBITDA.

Looking at renewable industrial heating in Slide 15, our biomass heat solutions offer a contracted stable revenue base. In addition to the operation of our first boiler in a brewery in Northwest Spain, which we started in 2024, we have begun our Mahou-San Miguel project with the construction of 2 boilers. The production target is 85 gigawatt hour annually over a 15-year contract and with a ROCE in excess of 11%. Lastly, we have recently reached a final agreement for another 2 contracts for over 80 gigawatt hour per year with a major international dairy company.

In Slide 16, and as with our biomethane business, we aim to expand our renewable industrial heating business up to 2 terawatt hour by 2030, contributing over EUR 40 million EBITDA. This should produce a stable income in the long term with controlled CapEx and strong corporate alignment. I now invite Alfredo to present our detailed financial performance.

Thank you, Ignacio. The second quarter marked a challenging yet resilient performance despite external headwinds, particularly trade uncertainties and price pressure. Let me unpack this in detail in Slide 18 for our pulp operations. Although net sales price decreased by 3%, pulp sales volumes grew by 12% quarter-over-quarter, reaching 243,000 tonnes, a recovery driven by the return to full capacity after the Navia annual plant shutdown in Q1.

Crucially, we achieved a EUR 22 per tonne reduction in cash cost down to EUR 488 per tonne, marking a foreseeable progress in cost optimization and realignment with our full year guidance of EUR 485 per tonne. Notably, temporary cost headwinds from Q1, such as the turbine setup at Navia have now fully dissipated. Regarding this, full impact of the Navia turbine in the first half has been EUR 10 million, of which EUR 3 million were incurred in the second quarter. However, EBITDA fell to EUR 20 million, down from EUR 29 million in Q1, mainly related to the energy efficiency certificates. We have sold a total of EUR 40 million in CAEs during the first half of the year, representing energy savings for 251 gigawatts hour. Of this, EUR 30 million were registered in the first quarter and just EUR 10 million in the second one.

As also said in the previous quarterly presentation, this transactions are registered in the other operating revenue line of our P&L following the interpretation of the current accounting regulation in the absence of a specific rule and pending a consultation from the Institute of Accounting -- and not yet answered.

Turning to Slide 19. Let's review our biomass renewable electricity business. Energy volumes rose by 9% to 303 gigawatts hour, recovering from Q1's extensive maintenance stoppage. Biomass renewable electricity cash costs were reduced by EUR 14 per megawatt hour, thanks to lower biomass prices and improved operating leverage. However, energy revenues declined by EUR 25 per megawatt hour, reflecting softer energy prices, leading to an EBITDA for the quarter of EUR 4 million versus EUR 5 million in Q1. This includes a EUR 1 million negative EBITDA from the rest of the platform businesses in their ramp-up phase. While margin compresses in the biomass electricity business, we are laying the foundations for a stable long-term value in a diversified renewables platform, including renewable industrial heating, biomethane, renewable fuels, having the biomass sourcing and trading vertical as solid common backbone.

Slide 20 summarizes our group-wide financials. Group revenues increased up to EUR 192 million compared to the first quarter, with growth in pulp offsetting lower energy revenues. EBITDA declined to EUR 24 million, down from EUR 34 million in Q1, mainly as a consequence of the effect of the different level of CAEs registered in each quarter and the pulp price pressure, ending in a bottom line showing a net loss of EUR 9 million compared to EUR 2 million of profit in Q1. We're managing through this with caution, aligning operational expenditure, investment guidance and cost discipline ahead of the potential market cycle turn.

Slide 21 represents our cash flow dynamics. Free cash flow before growth CapEx was minus EUR 3 million, impacted by a EUR 12 million working capital outflow in the pulp business due to the higher wood inventories and receivables, notably the ones linked to the recent EUR 10 million sale of CAEs that will be cashed in, in the third quarter. EUR 19 million in growth and sustainability CapEx were deployed across strategic projects, including the fluff pipeline, Navia's decarbonization initiative, engineering for Pontevedra Avanza, development of biomethane and renewable thermal projects. All of this stays with available resources, ensuring that we continue investing in value while safeguarding our balance sheet.

Now Slide 22 highlights our solid financial position. Consolidated net debt stood at EUR 362 million, supported by a strong EUR 283 million cash position. Importantly, both our pulp and renewables business have fully available revolving credit facilities for a total amount of EUR 150 million, and our pulp segment is covenant free. This high liquidity position ensures the strength of the company along the different cycles. Maturities are well distributed across several years, and we benefit from a flexible capital structure that provide us with financial optionality and growth headroom.

Let me now highlight Slide 23, which showcases ENCE's leadership in sustainability, a core pillar of our profitable long-term strategy. We are rated as Platinum top 1% by EcoVadis, confirming our position at the forefront of industrial sustainability. Key milestones include our accident rates remained 4x lower than the industry average, and we completed the Navia shutdown incident-free. Navia recorded zero odour minutes [ greenhouse ] in the first half of the year, 100% of our sites are zero waste certified. 32% of our pulp sales now come from special products with higher margins and a clear path to 62% by 2028.

Naturcell Zero, our carbon-neutral pulp product, and our forestry operations include 2,100 hectares with CO2 sinking rights officially registered in the OECC voluntary as well as improved plan material adapted to climate change. We're also strengthening our supply chain oversight with over 1,000 suppliers reviewed and full alignment with the EU deforestation regulation.

On the social side, we've launched a new Pontevedra social plan and continue promoting internal talent. 38% of hires were internal and over 30% of women in managerial positions. Profitability, sustainability is clearly embedded in our operations and help differentiate ENCE commercially and reputationally.

Let me please now hand back the presentation to our Chief Executive Chairman for his closing remarks.

Thank you, Alfredo. May I conclude with these closing remarks. Prices are now below marginal cost levels of part of the industry. This should lead to a potential start of price recovery in a few months provided that the tariff war has ended. Our first 125,000 tonnes fluff pulp line in Navia will be commissioned in the fourth quarter 2025. The operating margin is expected to be approximately EUR 60 per tonne higher than our standard pulp as we compete against BSKP.

Special pulp sales are expected to exceed 62% of total sales by 2028. This is significantly repositioning ENCE in the top quartile of the global cash cost curve. We expect to start the production of our renewable packaging solution in late 2025. Cash cost has been reduced by EUR 22 per tonne in the quarter, in line with our target of below EUR 485 per tonne for the full year. We are building a large biomethane platform in Spain with aims to produce over 1 terawatt hour by 2030 and to contribute over EUR 60 million to EBITDA.

Our renewable industrial heating business aims to produce 2 terawatt hour by 2030 and to contribute over EUR 40 million to EBITDA. Reaching these goals should allow us to more than triple the renewable business EBITDA over the next 5 years, whilst the transformation of ENCE into a producer of special pulp will significantly improve the business operating margin by over $20 million per year. The execution of these projects will be adapted and aligned to our cash flow generation to maintain a prudent leverage and an attractive remuneration for shareholders.

Thank you for your attention. We will be pleased to hear any questions you may have.

[Operator Instructions] Your first question comes from the line of Manuel Lorente Ortega from Santander.

So my first question probably is on the energy certificate savings. We have been talking a lot in the recent past regarding pulp dynamics or even your diversification strategy in renewables. But we -- I believe that we lack of information regarding how the energy certificates are created. This is a sustainable business model for you. This, let's say, EUR 45 million positive contribution of this year, it's a run rate for the future? I don't know. Any more color regarding this issue is more than welcome because it looks like it's having and it might have a relevant impact going forward.

Thank you very much for your question, Manuel. Unfortunately, not. I think it's several one-offs this year. The law has been modified. And then from next year, we will get also cash, but on a lower amount, and we will need to invest for having them to invest more than what we did. Then any figure between 0 and EUR 10 million per year is going to be possible on the next years, but not on the amount of this year and always related to CapEx.

Okay. Understood. So let's return to the basics then. And you were mentioning it last year, you have more or less, I don't know, some positive thoughts regarding pulp prices by the second half of the year. It will be very much appreciated if you can elaborate a little bit on those thoughts regarding the, I don't know, the news flow that we are receiving on weakening demand in Europe, cheap availability of wood in China, overall FX headwinds. It looks like we might be lower for longer on the current, let's say, low pulp cycle.

Yes. Well, I have to insist in what I said previously, yes. Current BHKP prices are below the marginal cost of part of the industry at the price of today, $1,060 per tonne gross, which is equivalent, for instance, to $500 per tonne net in China. At current price levels, integrated cost producers in China, despite there is more wood, are already replacing the production for market pulp. And then market pulp demand is increasing and will continue increasing.

Demand in Europe is not so strong than last year, but is good and fundamentals are strong. On the other hand, the BHKP price gap versus BSKP is above $200, favoring short fiber market share again. A lot of customers are switching from standard BSKP to standard BHKP and that is improving the demand of BHKP and it will continue with this gap. And as I said before, historically, when reaching these levels, a restocking process occurs, driving prices up. Common sense lead us to consider that once the tariff uncertainty disappears, prices should bounce back.

And your next question comes from the line of Cole Hathorn from Jefferies.

The first one is on wood costs. I'd just like to understand what you can do to improve the wood cost position over time. I know you've guided to EUR 485 per tonne for this year, and you also get the benefit of some of your projects. Could you just remind us of the project benefits that you should get to lower your production costs in '26, '27 at a high level?

And then also, are there any structural reasons why wood costs in Iberia could go down? I mean if we look back versus history, wood costs are up in Iberia and they're up globally. So I'm just wondering, could there be a shift or a trend change to lower Iberian wood costs going forward?

Yes. Thank you for your question. Yes, we have, let's say, a totally different view. We think that wood cost worldwide will continue to increase. The main 2 drivers are the past demand increasing by between 1 million and 2 million tonnes per year, which equals to 4 million to 7 million tonnes of wood per year. In the other hand, all the new biofuels while going to be made in Brazil are going to consume a lot of wood. In first hand, the Green Steel also in Brazil will consume a lot of wood. That's why we think that globally, the price of the wood based, the eucalyptus wood is going to be higher year-on-year.

If now we go to the Northern Hemisphere, well, the plantations in Canada, the forest in northern part of Europe is suffering of disease, drought and it seems it is starting to be structural then we strongly believe there is going to be less availability of soft wood on the next years. By all those reasons, we see globally prices of the wood going up.

Going now to your question on Spain, we see the wood stable. We don't see it will be possible to reduce the price of the wood in Spain or maybe by EUR 1, that is EUR 3 per tonne of pulp. From a structural point of view, we see a strong demand, but have to go and have to refer to our strong network buying wood. As you know, 1/3 of the wood is sourced purchasing it directly to the forest producers. And the size -- the average size in the Northwestern Spain of each plantation is 0.5 hectare. And we are very, very close -- extremely close to the market. We have -- and it is in our cash cost.

We have over 100 persons being in contact with this market purchasing. And the other 1/3 is purchased through small forest companies we have developed. We are financing. It is on our assets, and we are supporting them. They buy very few quantities every month. But this capillarity is extremely important to protect our market share. And we only buy 1/3 of our needs to something around 20 big trading companies of us. Then as a resume, we see on the next 5 to 10 years, strong prices of the wood going up. We see scarcity of wood. And we strongly believe ENCE has a very strong competitive advantage with our capillarity and our network buying almost directly to the market in Northwestern Spain.

And then maybe just some comments on demand. You've been very clear that you're positioning your portfolio to target more into Advanced and you'll start ramping up fluff pulp, you get a margin premium trying to kind of compete with softwood. But I'd like to hear your thoughts around the current demand trends on the standard hardwood as well as what you're seeing on those niche products. We've seen shipments into China higher, but it's also against very easy comps. So the comp base is easier, whereas Europe and North America has been a bit softer.

And I'm just wondering, is it the situation where people are destocking a little bit on expectations that pulp prices are declining. So is some of the lower demand statistics in Europe and North America just because your customers are destocking. Any kind of customer feedback or thoughts from the tissue or graphic paper producers into the second half of the year would be very helpful.

Yes. Thank you. Well, I don't think I can give you more information than the one you have. What we see is that the apparent demand is very much affected by the so-called tariff war. Then what we see is a destocking of important customers. That's what we see in June. In June, the first 15 days of June, it was terrible. It was impossible to sell a single tonne of pulp anywhere in Europe, in Northern Africa, in Middle East, in Far East. Then prices went down a lot at prices close to $500, then the market restarted to buy. We see the market buying in Far East and Middle East at those prices. And we see that the European customers are waiting ENCE.

I think the market and the purchasing decisions of our customers are very affected by all these tariff wars. Nobody knows if in August 1, Brazil will have 50% of tariffs on these -- on the regular export to U.S. They export something close to 2.4 million tonnes per year. China has 30% tariff on their exports. They are not exporting a lot of paper. They are. And then we see the market very, very affected by this tariff war. And it's very difficult to see really what is happening. Our vision is that the final demand, the demand from houses, the demand from the industry, from the end users is stable, both in Europe and in China. We are pretty sure about that. And what we see is customers not taking decision of purchase because of the uncertainties due to the tariff war.

And then maybe just following on from the Brazil point you mentioned. I know it's very difficult to comment, but if there is a tariff on Brazil, how do you think the market plays out here? Do you think that will be the trigger for some of the larger Brazilian players to take commercial downtime and kind of manage supply to demand? And how long does it take to reroute shipments from maybe the U.S. to Europe? I think logistically, it's probably a lot more challenging than people imagine to move that pulp around.

Yes, you are right. This market is not flexible at all. We saw that on COVID. What happened in COVID is a good example and is a good comparison of what is happening today. Then our colleagues in Brazil, if they have this 50% tariffs on August 1, well, they cannot switch to Europe from one day to the other because what they have contracted these vessels for transporting the pulps to the states, not to Europe, and these vessels have to come back with other goods who are already contracted, then it is not flexible at all. It can take several months, many months to change and to switch those traffics.

What we see, and I don't know what Brazil is going to do, I have to ask that to them. What we know at ENCE is that despite all these uncertainties and this very disruption market we have today, well, we see opportunities for us. We see that the U.S. is exporting to Europe today 1 million tonnes of fluff pulp, well, if we really go to a tariff war, well, it will be much easier for us to sell our new 125,000 tonnes of pulp in Europe.

We see the U.S. also exporting 1 million tonnes of fluff pulp to China. And the same, we see a lot of interest of Chinese customers to buy fluff pulp from us. Our target is Europe because we are a small player with only 125,000 tonnes. But well, maybe at the beginning of the ramp-up of the project, it can ease things if we can sell a bit to China. But regarding what Brazil is going to do, what they know is from a logistical point of view, it's different -- it's very difficult to switch, but you have to ask to them what are they going to do.

And then just finally, a question for Alfredo on CapEx. Is there a guidance that you can give for 2025? Because I imagine most of your projects are planned and you know the number for 2025. And then into 2026, you've always said that you would adapt your projects depending on cash flow. And if pulp recovers strongly, you'll have more cash flow to put into your projects. But how do you think about CapEx where we are now into 2026? And which would be the projects that you would say this is our focus area and the other ones if demand improves and cash generation improves, we accelerate? Will it be kind of more focused on Pontevedra, more focus on kind of the renewables business? How do you think about that CapEx into 2026?

Thank you. As we said from the -- I mean, we've always said regarding our CapEx policy is fully linked to our cash flow generation. At this moment, as our Chairman has said, we are in a kind of uncertainty situation regarding these tariffs and so on and so forth. But be sure that we'll be conservative and we'll be facing our CapEx expenditure for next year depending on what we see. Right now, it might be, as you may understand, too early to talk about '26. But at this moment, I would tell you that we'll be fully matching the cash flow generation that we'll have for next year.

There's 2 things here. One is regarding the pulp. The other is regarding the renewables. You've seen the cadence of our renewable business and how we are growing in biomethane and in industrial heating at the same. It will be adapted to whatever we see. Regarding '25, we maintain the same view that we were saying previously of about 75% in the pulp and around 50% in the renewable business, including those growth projects or those inorganic...

[Operator Instructions] your next question comes from the line of Luis de Toledo from ODDO BHF.

My first question refers to the global cash cost curve in the Slide 11. I was surprised to see Indonesia taking over Brazil as cash cost leader. I don't know if you can elaborate on the reasons and potentially the impact that this can have on world trade flows, listing prices. I assume that Brazilian producers maintain the price condition. But I would like to know if considering lower logistic costs in China, if this can be a threat to prices. And I would also like to see your relative position on the sector, if something material is advantage of Indonesia over Brazilian producers.

Yes. Thank you very much for your question. I think you can have a look to our presentation on Slide #11, you have the market pulp production cost by regions. You have in light green BHKP and in dark green BSKP. Then what we would like to highlight is that we are at the middle of the curve, as you see, Iberia, $553 per tonne. That's where we are, and that's where we are really.

Then if you compare us with the people who are on dark green at our right, yes, well, you have 23,000 tonnes in dark and you have further 5,000 tonnes more in light green have a higher cost than us. Then if you analyze and you compare ENCE as a pure BHKP player, well it is true that our position is not excellent. Indonesia and Brazil and Chile are better positioned than us. But now we sell 32% of special products, not competing with Indonesia, Brazil or Chile on BHKP, but competing against the Scandinavians, the Canadians in BSKP. And our target is by 2028. The mix has to be over 62% with the ENCE Advanced pulp products and the fluff pulp. Then more than 50% of our revenues will come from products where we are competing with BSKP. Therefore, if you analyze again with this view where we are in terms of competition, well, we are very well positioned to win this game and to have a good yield from our strategy.

But I mean you're not concerned about the Indonesia cost advantage becoming wider?

Well, because we don't compete against Indonesia. Indonesia is selling in Far East Asia. Well, they are a significant player. They like Brazil, they mark the price on BHKP. But in 2028, that will be below 40% of our sales. Over 62% of our sales, we will compete as we are doing today on 32% of our sales, 1/3 already against Canadians, Scandinavians and other people buying...

Understood. The second question with respect to commercial discounts, 48% in the current context and I mean, assuming that prices rebound once uncertainties on tariffs disappear. I mean, do you expect also the commercial discount to decrease? Or you would tend to believe that this reference is adequate one for the next semesters?

Well, yes, the problem is that we don't know when the prices are going to bottom out. I think that the -- today, by fundamentals, the prices should have already start to bottom out, but they haven't. And they haven't not because a problem related to demand of pulp, but related to the tariff uncertainty. Then I don't know what is going to happen on 3 months' time.

Now in the second half of July, well, if you have to do a spot price, let's say, in Turkey or in Egypt to sell while it will be below the normal discount because the fixed price today is $1,060 per tonne. $1,060 per tonne gross price is equivalent to a net price of $570 per tonne. And today, if you want to sell on those countries, you have to sell close to $500 per tonne, then the discount will be higher. It depends on how many tonnes you are forced to sell at these low prices and how long does it take before the prices recover.

That ends our question-and-answer session. Ladies and gentlemen, this concludes today's call. Thank you for participating. You may all disconnect.

Thank you very much, gentlemen.

Thank you.