Navigator Co/the Aktie

Good morning. We welcome you to the Navigator Company First Quarter 2026 Results Presentation. [Operator Instructions] I will now hand the conference over to Ana Canha. Please go ahead.

Good afternoon, ladies and gentlemen. Thank you for joining us for the Navigator Company First Quarter Results Conference Call and Webcast. We are joined today by the following directors: Antonio Redondo, Fernando de Araújo and Joao Le. As usual, we will begin with a brief strategic overview, followed by a Q&A session. You can access the presentation using the links on our website, and we invite you to submit your questions through the webcast platform at any time. I will now hand over to Antonio to walk us through the key highlights for the quarter.

Thank you for joining us again today. This quarter was defined by a particularly complex operating environment. We saw an increase of the global volatility driven by increased geopolitical tensions in the Middle East, compounded by very severe weather events in Portugal that led to temporary operational disruptions. However, despite these headwinds, Navigator's performance underscores the strength of our strategic diversification. Our focus on cost discipline and productivity remains consistent. And as we will see in today's presentation, our growth segments are providing vital balance to our portfolio. In a demanding market environment, Navigator demonstrated superior resilience, delivering results that once again surpassed those already reported by European pulp producers and global competitors in the paper, tissue and packaging segments.

I will begin with Slide 5 with an overview of the key highlights. Before we dive into the detailed operational metrics for each segment, I want to provide a high-level overview of our performance and strategic trajectory during the first quarter of 2026. As referred, the start of this year was defined by significant external pressures, increased geopolitical instability and extreme weather in Portugal created significant hurdles for our production and logistics, while rising energy and supply chain costs tested our operational agility. Despite these headwinds, Navigator delivered a resilient performance. We responded proactively with price increases across all business segments. Notably, the pricing initiatives we led in Europe since the end of last year have already succeeded in reversing a 6-quarter downward trend in the PIX A4 index.

The core message of today's presentation is that resilience provided by our diversification strategy is no longer a plan. It's a sound reality. With the reduction of prices in euros in both pulp and paper year-on-year and sales volumes affected by the impact of weather events, tissue and packaging businesses contributed with nearly 40% of our EBITDA. In tissue, we are successfully scaling up through premium positioning and partnerships such as our license agreement with Procter & Gamble. We are prioritizing margins over volume, particularly in U.K., while investing in new capacity in Aveiro. In packaging, our gKraft brand is driving exceptional growth with sales tonnage up 36% year-on-year.

Our PM3 rebuild is on track, transforming a mid-tier uncoated woodfree asset into a first quartile competitive machine at a fraction of a greenfield CapEx. We are funding this growth from a positive -- from a position of strength. This quarter, we reduced net debt by EUR 28 million, maintaining a conservative net debt-to-EBITDA ratio of 2.08x. This balance sheet provides the cushion and the capital to continue our transition into a more diverse, innovative and value-added company.

Turning to Slide 6, please. We can clearly see the external impact on our results. The quarter was negatively impacted by the before-mentioned temporary disruptions to some of our industrial operations, resulting from the extreme weather conditions experienced in Portugal. These constraints affected the available volumes of pulp and paper and led to an increase in fossil fuel consumption, particularly natural gas with a direct impact on costs, both through higher consumption and elevated price levels and through the increased need to purchase higher-priced CO2 allowances. Additionally, limited domestic wood access due to weather-related constraints forced an increased reliance on imports, driving up our raw material expenses during the quarter. Furthermore, we incurred additional logistic costs due to both the exceptional reliance on sea transport as rail transport could not be used for inbound logistics due to weather as well as due to cost increases in outbound logistics.

Our diversification strategy is clearly paying off. Recent international expansion and portfolio diversification have strengthened Navigator results in tissue and packaging, providing a more balanced and resilient earnings profile. Tissue and packaging, although they represent only 31% of our turnover, this quarter, they sum up, as mentioned, to nearly 40% of our EBITDA. A key strength of Navigator is its ability to generate strong cash flows, underpinned by our vertically integrated model and leading cost position in pulp, uncoated woodfree paper, tissue and flexible packaging in Europe.

Finally, our strategic investments boosted by NextGenerationEU funding are now in their final stages and will be fully completed this year. In the first quarter, CapEx totaled EUR 42 million, with 53% dedicated to value-added sustainability and ESG investments. These projects will make a significant contribution to reducing our future cost base. It should be noted that our industrial performance across our pulp and paper mills improved over the course of the quarter, with January and particularly early February being clearly impacted by the extreme weather events in Portugal. I will now hand over to Fernando to walk you through our financial highlights and debt profile. Fernando, please go ahead.

Thank you, Antonio. Turning to Slide 7, we can look at our debt maturity profile. Navigator has maintained a robust financial position by securing new long-term debt, ensuring we have no significant payments due within the next 5 years. Over the past 2 years, we have successfully increased our average debt maturity to more than 5 years with a well-staggered repayment schedule. We continue to lead in sustainable finance with 94% of our total debt now indexed to sustainability indicators. This directly aligns our financial strategy with our environmental targets. In a volatile global rate environment, our balance sheet remains well protected. 64% of our total debt is at a fixed rate managed through a combination of direct issuance and strategic interest rates hedging instruments.

Despite the general rise in market rates compared to the previous financing cycle, our proactive treasury management has kept our average cost of financing highly competitive and approximately 2.8%. We closed the quarter with ample liquidity of approximately EUR 570 million, combined with a conservative net debt-to-EBITDA ratio of 2.08x. This provides Navigator with the agility to fund our short-term CapEx requirements, namely the conversion of PM3 machine to packaging and the new tissue mill in Aveiro and navigate market volatility with total confidence.

Turning to Slide 8. Let's look at the primary drivers of EBITDA on a quarter-on-quarter basis. EBITDA stood at EUR 65 million, a 14% decrease compared to the previous quarter, resulting in a margin of 15.2%. It's important to note the structural dilutive effect of the non-integrated U.K. tissue business poorly based [ on converting ], a situation that the new tissue mill will address from 2028 onwards. The EBITDA decline was primarily driven by both price decrease expressed in EUR and the temporary production disruptions we discussed, which impacts sales volumes and push up energy, wood and CO2-related costs.

On a positive note, quarter-on-quarter, pulp and paper price start to increase this quarter. This reflects the upward trend in main benchmark index where Navigator continued to lead in uncoated woodfree sale. Regarding volumes and costs, sales volumes were constrained by production disruptions and lower inventory levels at the beginning of the year. However, we successfully reduced overhead costs, driven mainly by lower fixed rates in spite of lower production, which helped partially offset the spike in energy and raw materials expenses.

Turning to Slide 10 to discuss the pricing environment in our core markets. Looking at the pulp market, we have moved past the significant pressure seen in 2025. The downward cycle that we began in China last April finally signed a turnaround in August, and that moment has accelerated significantly since the start of 2026. In Europe, the PIX BHKP index ended the first quarter at $1,296 per ton, representing a 16% increase. While this was just below the $1,330 target. I'm pleased to note that those higher price levels successfully took full effect in April.

Meanwhile, in China, prices closed the quarter at USD 600 per ton, reflecting a more moderated 7% increase. However, the market continues to show room for further appreciation, supported by recent industry price increase announcements with announced list price moving from USD 610 per ton in March to USD 630 per ton following additional increase announced in April. Current market price in China have already moved up to USD 606 per ton.

Turning to European office paper market, the PIX A4 copy index averaged EUR 925 per ton this quarter. While this is 30% lower than the same period last year, more importantly, it marks the definitive end of a downward cycle that persists for 6 consecutive quarters. Even after recent adjustments uncoated woodfree market index remained historically strong, standing 8% above the 2016-2020 average. Navigator took a proactive stance on pricing in Q1 with the rest of the industry following our lead. In Europe, we implemented hikes in January and in May and announced already an additional one to be implemented next June. In overseas markets, we applied an increase of $30 in January, an increase of $30 to $50 per ton through March, alongside a 5% to 8% price increase for the U.S. market in March and another 5% to 8% now in mid-May.

In Europe, the initial move was instrumental in halting the downward trend of the European benchmark. In the downward cycle that ended in Q2 2025 and Q1 2026, Navigator premium products, which are the majority of our sales did not decrease by the same amount. And therefore, the price gap of Navigator branded cut size over copy-B went from the typical 10%, 12% or 19% in Q1 '25 to a staggering 31% in Q1 '26 without loss of market share. This reflects our brand resilience in the European market. However, as price trend upward, we are mindful of the impact of the growth pace of our value-added portfolio. In contrast, on the lower value products, we lead the European market increase with 5% gains quarter-over-quarter, but the impact on our net price is limited to the low share of -- on total sales, 15%.

In Slide 11, we have summarized the main developments in uncoated woodfree. Apparent global demand for printing and writing papers saw a slight decrease of 1.2% However, uncoated woodfree remains the most resilient grade in the industry, while coated papers and mechanical pulp products saw sharper declines of up to 4% and coated woodfree fell by only 0.5% globally. This consistently superior performance is a direct result of the segment versatility. In Europe, while demand was down 4% in the first quarter, the industry is maintaining healthy order books supported by a stronger flow of export orders. Supply side shifts are also providing support. The discontinuation of production by a leading manufacturer late last year removed 185,000 tons of annual capacity from the market.

While no further closure have been announced for 2026, many of our competitors continue to face intense margin pressure, which may lead to further future movements of consolidation. A key highlight for us this quarter is our operating rate. While the European industry averaged 84%, Navigator achieved 90%. This reflects a robust recovery towards the end of the quarter as we move past the initial operational instabilities caused by weather events. Finally, regarding the United States, the reported 9% decline in apparent consumption through February seems to be largely a supply-side discussion. We believe real consumption remained stable, but the figures have been skewed by the anticipated shutdown of a major U.S. plant and the gradual destocking of import volumes from 2025. This creates a temporary statistical dip rather than a shift in long-term demand. Joao Le will now provide further context on the global pulp dynamics. Joao.

Thank you, Fernando. Turning to Slide 12. As just mentioned, the pulp market spent much of 2025 under severe pressure. However, the turnaround that began last -- late last year has gained significant traction in 2026. Looking deeper into why prices recovered this quarter, we see a combination of supply side discipline and specific logistical constraints. On the supply side, the market has tightened significantly due to both planned and unplanned downtimes. Notably, one leading Indonesian manufacturer removed approximately 150,000 tons from the market following the cancellation of harvesting licenses by the Indonesian government on the grounds of the forestation accusations. Furthermore, we've seen swing producers strategically pivot away from BHKP towards dissolving pulp, further reducing available supply.

Regional factors also played a role. In Asia, hardwood chip prices rose by roughly $20 per ton, driven by increased Chinese wood imports as a major local producer resumed operations. Meanwhile, in Iberia, the extreme weather conditions created broader constraints in several mills output and trade flows. From a historical perspective, the current recovery follows the unsustainable lows of late 2025, which represented the lowest pulp price levels in recent years, excluding 2020. Current geopolitical tensions, particularly in the Middle East, have added inflationary pressure to production costs affecting energy, chemicals and logistics, which in turn supports a higher price floor for pulp.

Turning to demand. China and the U.S. remain growth drivers with demand up 3% and 13%, respectively, through February. Europe remains more challenged with demand down 9%. Despite these regional variations, eucalyptus pulp continues to gain market share. Its competitive edge over long fiber is driven by both cost advantage and the technological superiorities of hardwood fiber. We are navigated as the global pioneer of eucalyptus market pulp since 1956 remains the industry benchmark. While the sector has faced structural overcapacity from recent expansions in Latin America and China, the current shift towards high-quality eucalyptus fiber continues to strengthen our strategic position. European port stocks remain stable and aligned with historical averages. In contrast, Chinese stocks are currently above historical norms, suggesting that inventory levels are not the primary driver of recent price support.

Looking at tissue performance on Slide 13. The European tissue market remains resilient. In January, demand grew by 1.7% year-on-year, outperforming the 1.4% growth rate seen in the previous year. Q1 turnover decreased by 19% year-on-year with sales volumes down 13%. This performance reflects a deliberate strategic shift towards margin management and the ongoing industrial transformation of our U.K. operations. Our U.K. business currently operates on a converting-only model. And like our fully integrated Iberian operations, the U.K. lags the margin contributions from primary paper production, which structurally dilutes consolidated segment results. We are currently streamlining U.K. assets, optimizing locations and exiting unprofitable client contracts. This project is on schedule for completion by late 2026, early 2027, aimed at restoring operational efficiency and segment margins.

Furthermore, we confirmed our strategic tissue expansion this quarter with the investment of EUR 115 million in the new 70,000 ton tissue machine at the Aveiro complex scheduled for a March 2028 start-up. This project will provide internal raw supply for our U.K. operation, structurally improving margins through vertical integration. Our diversification strategy has successfully rebalanced our geographical exposure. Sales volume outside Portugal reached 81% in Q1, a significant increase from 54% in 2022. Spain is our largest market at 33%, followed by U.K. at 31% and France at 15%. Finished products now account for 99% of sales. The at-home retail segment represents 85% of our mix.

We continue to strengthen our positioning through R&D and partnerships. In Q1, we reached the final development stages for a series of high-impact innovations in the toilet paper category with launches scheduled for the coming quarters. These include proprietary odor mitigation and long-lasting aromatization technologies, notably 100% microplastic-free alongside the introduction of hypoallergenic properties for several key product lines. These advancements reinforce our position as a leader in tissue innovation. By delivering high perceived value and sustainability-led differentiation, we are effectively insulating our premium offering in an increasingly competitive global market. The extension of the Procter & Gamble licensing agreement is reflected in the strengthening of Navigator's position in the Iberian tissue market through the rollout of the Don Limpio range in Spain, alongside the preparation for entry into France with the Monsieur Propre brand in the coming quarters.

Now turning to Slide 14 on the main developments in packaging. Our packaging business delivered EUR 25 million in turnover this quarter, representing 23% year-on-year growth. This was driven by a robust 36% increase in tonnage, reflecting our successful penetration into the high demand, low grammage segments. Packaging now accounts for 6% of the group's total sales. Performance was led by flexible packaging, specifically low grammage applications for food and personal care. These priority segments benefit from the unique technical and cost advantages of our Eucalyptus Globulus fiber, a key differentiator that allows us to compete on both quality and cost.

Our growth is driven by our proprietary gKraft brand across its 3 segments: BAG, FLEX and BOX. Geographically, 73% of our sales are in Europe, while 27% are strategically located to high potential overseas markets in the Americas and the MENA region. The rebuild of our PM3 at the Setúbal integrated industrial site is progressing as planned. This EUR 30 million investment will introduce state-of-the-art technology, strengthening flexibility, improving energy efficiency and supporting the production of higher quality low grammage packaging papers. Once operational, at the end of Q3 2026, PM3 will produce approximately 90,000 to 100,000 tons of low grammage flexible packaging paper. Crucially, we are achieving this at a capital cost of 5x to 7x lower than a greenfield project of a similar capacity.

Furthermore, we maintain industrial flexibility to switch between uncoated woodfree and flexible packaging on the same machine, allowing us to pivot based on the market demand and margins obtained. This conversion transforms PM3 from a mid-tier uncoated woodfree asset into a first quartile competitive flexible packaging machine. As a result, Navigator will become the fourth largest producer of low grammage flexible packaging in Europe, perfectly positioned to capture a market projected to grow 2.5% to 3% annually through 2035. I will now hand over to Antonio for a wrap-up of the quarter results.

Thank you, Joao. Let's please turn to Slide 16. We cannot ignore the geopolitical instability and extreme weather events that pressured our early quarter results. These factors created logistical bottlenecks and inflated energy and raw material costs. However, we have been proactive. To offset these inflationary pressures, we have successfully implemented price increases across all business segments, ensuring our margins remain protected. Navigator took a proactive stance on pricing in Q1 with the rest of the industry following our lead. In Europe, we implemented hikes in January, another one in May and announced an additional third increase for June. In overseas markets, we applied an increase of $30 in January, an increase of $30 to $50 per ton through March, alongside a 5% to 8% price increase for the U.S. in March and another 5% to 8% now in mid-May as well in U.S.

As we have demonstrated today, our diversification is now a proven driver of our financial results. In a very challenging quarter for both volumes and prices of pulp and uncoated woodfree paper, 40% of our EBITDA was generated from tissue and packaging. This diversification is a bedrock for our stability. In packaging, we are achieving high-margin growth by repurposing uncoated woodfree assets with minimal CapEx. Our gKraft and FLEX brands are leading the way in international expansion and innovative eucalyptus-based solutions. In tissue, we are scaling operations and capturing synergies, and we are now consolidating our U.K. operations to drive greater efficiency. Our focus remains on operational excellence. The PM3 rebuild is on schedule and our new tissue capacity in Aveiro is strategically positioned to serve directly part of our U.K. jumbo rolls needs. These are high value-added investments designed to structurally reduce our future cost base.

Furthermore, we remain committed to financial discipline with a comfortable debt profile. It is worth emphasizing we are a fundamentally different company today. We maintain Europe's leading uncoated woodfree business, and we have built a tissue business that leads the market in innovation as well as innovative eucalyptus-based packaging business that is scaling rapidly. We are leaner, more diversified and strategically positioned to turn global challenges into a competitive advantage.

Let's move on to Slide 17 with a few comments on outlook. While geopolitical volatility continues to weigh on global business sentiment, the group remains well positioned to navigate these headwinds. Despite broader economic uncertainty, our core segments demonstrate significant resilience. Average pulp prices in 2026 are expected to be higher than in 2025, but with different trends throughout the year. In Europe, prices are expected to continue rising until Q3 in China until end of Q2, after which there might be -- that might be a moderate correction in the following quarters. In other words, no significant decline is anticipated compared to 2025, and the outlook remains positive. This appears to be driven more by supply discipline and the lower influx of new capacity in 2026 than by a strong recovery in demand yet, given that global demand for hardwood remains under relatively pressure so far.

On the supply side, the market will not face significant capacity increases this year. Major projects in Indonesia and Brazil are not expected to impact market supply until 2027 and 2028, respectively providing a favorable supply-demand balance for all the current fiscal year. In printing and writing paper, we have successfully implemented a multistage price strategy in response to robust order books and escalating production costs. In Europe, a second price increase of 4% to 6% is currently being implemented during the month of May with a third hike scheduled for June. In the international markets, increase of 3% to 5% in Latin America and 5% to 8% in U.S. take effect this quarter. While in the remaining international markets, price is likely to move up in the second quarter by some 3% quarter-on-quarter after the 5% increase in Q1.

In these markets, we are fully booked until end of June, booking already volumes for July. With the operational constraints of Q1 largely resolved, we anticipate Q2 average prices to be higher than the previous quarter. Despite this positive pricing momentum, the global environment remains complex, characterized by a structural decline in consumption and stagnation across key regions. However, we are seeing a significant rebalancing of the market driven by capacity closures in Europe and North America. In the U.S., specifically, supply is tightening rapidly. Following an initial 350,000 tons reduction by a major player, a second mill closure announced for early 2026 will remove another 320,000 tons of annual capacity starting in the second half of this year.

Furthermore, scheduled downtime at the primary U.S. mill in Q4 will pull an additional 80,000 tons from the market. When we aggregate these cuts, we estimate a structural shortfall of not less than 1.2 million tons in U.S. per year, representing 25% of total consumption. While no further cuts have been announced for the remainder of 2026, high margin pressure persists across the industry, maintaining a very tight operating environment. In the tissue segment, demand remains resilient with an estimated annual growth of 1.1%. We continue to extract significant value from the integration of Navigator Tissue Area and Navigator Tissue U.K. To protect margins, we have announced a price increase of 5% to 7% across all markets effective from this month onwards.

Our packaging business continues to perform strongly with growth quarter-on-quarter on both volumes and prices. Kraft packaging papers are very technical businesses with important qualification processes with customers and often with brand owners, lasting an average from 6 to 12 months to qualify a new product or supplier. These thorough testing processes tend to produce a lasting adoption once product benefits are demonstrated to customers.

GKraft presents an innovation to the global Kraft packaging markets with Eucalyptus Globulus as a main fiber and in some products being 100% eucalyptus furnish. This presents numerous advantages to global customers on performance and therefore, operational cost and unique sustainability advantages, but can extend somewhat the qualification process. As mentioned before, PM3 conversion project at Setúbal site is progressing as planned. Once completed, this investment will position Navigator as the fourth largest producer of low grammage flexible packaging in Europe. On the price side, we have already moved prices upwards by 5% to 10% as of April, with an additional increase scheduled for June.

The agility and proficiency of our teams and our integrated value chain management remain our primary competitive advantages supported by a robust financial position. Navigator is not only navigating current challenges, but is actively transforming its portfolio to ensure long-term value creation. In a particularly challenging quarter for the sector, Navigator once again delivered performance well ahead of both European pulp producers and international paper, tissue and packaging players that have already reported results. We look forward to executing our strategy with confidence throughout the remainder of 2026, driven by ongoing diversification and continuous innovation in our core business. Thank you.

Thank you, Antonio. This ends our presentation. We are now open for the Q&A session.

[Operator Instructions] The first question comes from Cole Hathorn from Jefferies.

I'd just like to follow up on the uncoated freesheet market and just hear your thoughts around what is needed in the European industry because it feels like we haven't seen material capacity reductions on the uncoated freesheet side. We're seeing some M&A from -- potentially from UPM and Sappi more on the coated mechanical grades. But I'm just wondering, what would you like to see firstly on the uncoated freesheet side? Is it M&A? Is it capacity closures? And does higher gas prices and higher pulp prices increase the probability of closures from some of the non-pulp integrated producers?

Okay. Thank you, Cole, for your question. Well, it's a rather difficult question to answer, but we'll try to give you some elements of our reasoning. Historically, we cannot say that the European market didn't react to the environment and didn't close capacity. Quoting from memory, in 2016, the European uncoated woodfree market had a capacity of over 7 million tons. This year, we believe it's around 5 million tons. So we had a reduction of at least 2 million tons on the last decade. And the operating rates are materially not very different. So it means that the market has been somewhat adjusted or being able to adjust to the dynamics of demand. Well, if you ask us what is our preference, our preference will be either M&A or shutdowns, but we cannot influence any of them directly. We don't intend to shut down capacity because as we speak, all our uncoated free mills generate positive and sound cash flow.

And at the same time, we are always looking to opportunities to participate in M&A, and we did so namely in tissue. We have failed so far to do the same exercise in uncoated woodfree because we don't find in Europe so far. It might happen in the future, but so far, we don't find any asset in Europe that increases our competitiveness, an asset that we can turn around and generate a significant higher return than the present owners and that can make sense in our portfolio. We own, as you know, 5 uncoated-free paper machines. 3 of them are not only the largest, but by far, the most competitive uncoated-free machines in Europe and actually in some other parts of the world, not only in Europe. And we have 2 paper machines, one more dedicated to specialty uncoated woodfree papers might be heavier grammages or creamy papers for book publishing and another one that we are reconverting for flexible packaging without losing the capability to swing in between flexible packaging and some uncoated woodfree grades in function of market demand and margins.

So we don't see in Europe, as far as we can see it today, we don't see in Europe any imminent candidates for further shutdown and further reconversion to other grades. We believe that a good part of that has been done in the past. We don't see it in the very immediate future. However, as you pointed out, we don't rule out if we have an up cycle of pulp prices together and pulp is an important driver, but is by no means the only driver. An upcycle on pulp prices, which actually we are witnessing since middle of last year, plus a very significant and severe cost increase on energy, plus a significant cost increase on chemicals, plus a significant cost increase in logistics, we don't rule out the possibility if this trend continues that less competitive players will shut down their capacities or will reconvert to other type of grades.

Reconversion is difficult because we believe that after our reconversion of PM3, the large packaging sectors are balanced. So I don't think it's going to be easy to have any reconversion. I mean, balance, I'm being probably conservative. I think they are balanced in flexible packaging. They are probably oversupplied in other packaging grades, but you dominate packaging much better than ourselves.

[Operator Instructions] The next question comes from António Seladas from A|S Independent Research.

So first one is regarding volumes. If you could provide some color in terms of volumes in paper and tissue that you expect to sell over the coming quarters, namely when compared with last year? And second question is related with your U.K. operation that you are trying to become -- well, you are rationalizing the operation. So my question is, when do you expect the process to finish?

Thank you, for your question. I'm going to try to rephrase it to make sure that we understood correctly. The first part of the question, you would like to get some guidance on how do we expect volume evolution in Q2 for both uncoated woodfree and pulp. Is that correct?

Exactly.

The second question, I'm not sure if you are referring to our tissue process in U.K. or if you're referring to conversion of uncoated free machines to packaging. Can you please clarify?

Sorry, is regarding your U.K. operation and the process that is now on the -- well, are you trying to become more efficient, your U.K. operation, sorry?

Okay. U.K. Very good. As you easily understand, we cannot provide and we will not provide specific guidance on volumes for uncoated free and pulp. But I think we can share some elements. Past, the majority of the issues we had in Q1, namely in the first half of Q1 with weather-related events, we believe that we will -- on the uncoated side, we will have more volume available to sell during Q2. Having said that, we have some maintenance shutdowns during Q2, particularly in the Setúbal mill and Setúbal is quite large. So this will have, of course, an impact. And we are starting Q2 or we started Q2 with a very low level of stocks, okay? So the issue is not demand. We have a very sound order book. As we mentioned, in overseas, we are already booking July.

But overall, we have a very sound order book. It's around about 45 days, which is historically high. A good order book for us in this sector is around 20, 25 days. So we have more or less doubled. So we don't have an issue with order book. We don't see an issue with demand for our products. In spite we have a very high premium price as it was referred, we are selling without any significant impact on market share. We are selling our office premium 31% above our -- the copy-B index in the marketplace. So uncoated free is what we can say. We expect normally a higher sales volume, no issue with demand, but a shutdown this quarter in a large mill and at the same time, low stocks to compensate if anything goes wrong.

On pulp side, also, we have shutdowns this quarter. We have 2 shutdowns this quarter. One actually is in the end of Q2, beginning of Q3, planned maintenance shutdowns and the availability of pulp will very much depend on the performance of uncoated woodfree packaging and tissue. If our performance on tissue, packaging and uncoated woodfree is what we expect, we will have most likely less volumes of pulp to sell. Regarding U.K., this is a major turnaround process. We are moving from 5 mills and 3 warehouses or 8 locations to 2 locations. At the same time that we are serving customers so this is them without putting any significant new capacity. We have some slight new capacity on wipes, but not on tissue. So we are migrating existing tissue converting lines to one existing site and one new site. The 2 sites are strategically positioned to serve the north part of England and the south part of England efficiently from the logistic cost point of view.

So the process is complicated, it's long. It's a process that also involves consultation with employees because, of course, we are going to reduce our workforce, part of the synergies are related to that. And of course, with efficiency to have everything together in 2 sites rather than 5. Our original plan is to have it largely completed by the end of this year, Q1 2027. We expect that this will help us to generate -- of course, now we are having the costs of this turnaround, which are significant, as you may imagine, in U.K. So we are paying that cost. We expect in 2027, again, to go back to our historical or above historical converting margins. And from 2028 onwards, we expect to serve the U.K. tissue operation with the new tissue mill in Aveiro.

The new tissue mill in Aveiro will start somewhere in between March and April 2028 if everything runs according to schedule. So it means that by end of Q2, early Q3, after testing and start-up curve phase, we expect by Q3 to start supplying the U.K. operation with tissue rolls from Aveiro.

The next question comes from Cole Hathorn from Jefferies.

I'd just like to ask on order books and logistics globally. On the packaging side, we've seen probably some stronger orders as people have built up some safety stocks. There's been a bit of restocking on some of your peers in the packaging side. And I'm just wondering what have you seen in the uncoated freesheet side from a European perspective? Have you seen less competition from some of the Asian players? Have you been able to take a little bit more market share? Have some of your buyers been stocking up ahead of price increases and to build up safety stock. So just understanding order books and stocking.

And then the second question is linked to that, and that's on your commercial decisions to push price. And I completely understand we've got higher gas. We've got higher chemicals. We've got logistics. We have cost inflation and you need to raise prices. But Navigator has also got best-in-class position on the cost curve. Is this not an opportunity now to potentially hold back on pushing price and force some capacity to exit the market? Or is that not a commercial decision that you're making at this point, you'd rather just push the price. I just want to understand how you think about it.

Okay. Thank you, Cole, for your follow-up questions. On a bit on order book and stocking. So as I mentioned, the 45 days -- around about 45 days we have on order book is actually for paper, both uncoated and packaging together. I don't have with me here the precise split, but I don't think it's very different one and the other. So it's probably slightly more in uncoated than in packaging, but the difference is not material. I'm sure that some customers have been stocking a bit ahead of price increases, both in Europe and overseas. I'm sure. I don't know, I cannot quantify the impact, but this is typically an effect that happens. Having said that, if you look to the financial performance of the European distributors of paper, you easily reach the conclusion that they don't have the means to overstock paper. On top of the financial situation, forever in our case, we have been always extremely tough on credit. We only sell with credit coverage. We don't sell at risk. It's why we have always meaningless bad debts in our books.

So from one side, they are limited by the credit that the credit insurers give them or the other credit instruments they can provide us. And from the other side, they don't have the financial means, unfortunately, to stock a lot of paper ahead. So I think the order books that we are seeing are really demanding -- demand for our products. Obviously, I think we are all benefiting Navigator as well with the fact that the U.S. market is now a significant net importer of paper and the companies that have the quality and the technological capacity and the converting equipment to serve the U.S. market, there are not many in Europe. There are a handful of European companies that have both the quality, the technology capability and the converting equipment to serve the U.S. market are also exporting a bit more to U.S.A. than in the past. And of course, this also helps to enlarge order books.

Regarding your comment on imports, this is quite interesting. I think Europe has a big threat of imports, particularly from Asia. I'm going to quote from memory. If we go back to pre-pandemic 2018, 2019, the Asian imports were probably around 30% of the total imports into Europe. Today, Asian imports are over 70%. So Asians are taking a significant step change into the European and coated woodfree market and namely in office papers. I think it's going to be very difficult for them to compete in volume sizes for the printing industry and rolls. Those are very technical, very specific sizes, long-lasting relations with printers, very short delivery times. So they are not standardized products. So I don't think they will have a chance over there with the present business model. But in [ quarter 3 ], they are a real threat. And I think Europe needs to wake up to that reality and provide a level playing field with those imports.

And by a level playing field, I can comment 2 things. I can comment EUDR, the European deforestation regulation that is already postponed twice, should be implemented by no late than 2026, end of 2026. We have a significant cost to behave like we are behaving vis-a-vis our forest sourcing of wood. And we know that the Asian suppliers are not doing that. The proof is exactly what my colleague has commented during the call, what has happened in Indonesia with the local government taking out licenses from Indonesian pulp and paper producers on the grounds of proven deforestation. So if Europe needs any more proof of deforestation, they just need to rely on the Indonesian government and their decisions.

So EUDR is one area. And the other one is CBAM. CBAM unfortunately, is not a uniform view on the industry across Europe. We at Navigator are very favorable to have CBAM. However, a CBAM mechanism that allows a grace period without losing free allowances for CO2 and with a decrease of allowances smoother than what Europe is anticipating. If not, Europe is going to be very green, but it's going to lose all industry. So I think you point rightly, there is a real threat on Asian imports going forward, and Europe needs to make up to that.

On your second question, is a choice. It's a choice that we decide and we try to measure each and every time. In the past, we did it. In the past, we have been capping price increases to benefit from our competitive cost position. To be honest, we didn't see any effect in the short to medium term. So it probably takes too many years to be able by doing the strategy to force others to exit the market. I think we have also today a very significant [ lead ] in terms of market share, and we have the responsibility also by leaving the market with our market share. We have the responsibility to behave responsibly vis-a-vis prices and vis-a-vis our customers, but also our suppliers that are charging us higher prices.

So I don't think if we change the strategy back again where we were some years ago, this will accelerate anytime soon any reconversion. This is our view after analyzing the data and thinking what is the best course of action for us.

This concludes our session. Thank you for joining us. If you have further questions, please reach out through our usual channels. Have a pleasant evening.

Good morning. We welcome you to The Navigator Company Full Year 2025 Results Presentation. [Operator Instructions].

I'll now hand the conference over to Ana Canha. Please go ahead.

Ladies and gentlemen, welcome to The Navigator Company conference call and webcast for the fourth quarter and full year results. We are joined today by the following directors: Antonio Redondo, Fernando de Araujo, Nuno Santos, Joao Le, Dorival Almeida and Antonio Quirino Soares.

As usual, we will start with a short presentation followed by a Q&A session. You can access the presentation through the links on our website, and you can also send your questions via the webcast platform. Antonio will begin by presenting the main highlights for the quarter.

I will now hand over to Antonio.

Thank you for joining us today. I am very pleased to be here once again and to share with you our fourth quarter and full year results. In the toughest market environment in decades, Navigator was able to maintain a strong market position, supported by its international footprint and the increasingly diversified business model, enabling volume growth and market share gains. Portfolio transformation remains a key driver of resilience.

Vertical integration, operational flexibility, innovation and sustainability focus continue to underpin our competitive advantage as you'll see in today's presentation. I will begin with Slide 5 with an overview of the key highlights. 2025 was defined by persistent geopolitical tensions and rapidly shifting global landscape marked by high volatility, commercial defense barriers such as tariffs, weaker consumer confidence and very limited market visibility.

In this environment, the pulp and paper sector faced particularly challenging conditions. From April onwards, pulp prices in China declined sharply with knock on effects in Europe. At the same time, uncoated woodfree consumption fell, growth in tissue and packaging slowed and in many products, operating rates reached unsustainably low levels across several regions. The industry also faced increased energy and chemical costs this year, further pressuring margins.

Navigator's strategic diversification played a key role in protecting results, with tissue and packaging accounting for 29% of the turnover, but 32% of group's EBITDA. In tissue, we continue to successfully scale up operations and capture synergies. Turnover increased by 6% year-on-year, supported by the integration of Navigator Tissue UK in May 2024. Around 80% of sales are now international with U.K., Spain and France as our core markets. Packaging also delivered strong performance with turnover up 8% year-on-year, volumes in tons up 11% and paper area in square meters at 17% reflecting the growth of the Flexible Packaging segment with a shift to lower grammage products. The rebuild of PM3 in Setubal to further focus on low basis weight flexible packaging is progressing as planned. In printing and writing, we reinforced our competitive position with uncoated woodfree volumes up 6% year-on-year in a shrinking market and market share of European deliveries increasing to 26%.

Looking ahead, we start 2026 with a positive final investment decision for the new tissue capacity in Aveiro, further strengthening our growth and resilience profile.

Turning to Slide 6, we can clearly see the resilience of Navigator business model. The key strength of Navigator is its ability to generate strong cash flows, underpinned by our vertically integrated model, and leading cost positions in pulp, uncoated woodfree paper, tissue and Flexible Packaging in Europe.

Over recent years, these cash flows have been strategically reinvested to strengthen our core business and diversify our portfolio, supporting long-term value creation. Since 2019, we have invested EUR 1.31 billion, including EUR 241 million in M&A and distributed a further EUR 1.32 billion in dividends. Our diversification strategy is clearly paying off. Recent international expansion and portfolio diversification have strengthened Navigator's results in tissue and packaging, providing more balanced and resilient earnings profile.

This robust position enables Navigator to consistently outperform its peers as demonstrated once again this year, even in very challenging market conditions, underscoring its resilience and competitive edge. Strategic CapEx boosted by next-generation new funding and started in 2023 is phasing out in 2025 and will be fully completed by 2026.

Last year, CapEx totaled EUR 210 million, with 60% classified as value-added sustainability investments, making a strong contribution to reducing future costs. While maintaining a strong financial position with net debt-to-EBITDA ratio at 1.87x.

I will now hand it over to my colleagues, who will walk you through the results in more detail and share some insights on our different business areas we have been doing. Fernando will start by commenting on financial highlights. Fernando, please go ahead.

Thank you, Antonio. Turning to Slide 7. We can look at our debt maturity profile. Over the past 2 years, we increased the average debt maturity to 5 years, maintaining a well-staggered repayment profile and strengthening the indexation of debt to sustainability indicators to 90% versus 65% in December 2024.

Also, Navigator continues to enjoy ample liquidity, EUR 390 million as of 31 of December. At the end of 2025, 70% of the total debt issue was remunerated at a fixed rate, either directly or through interest rate hedging instruments. It should be noted that despite the general rise in market rates compared to the last financing cycle, the average cost of finance at the end of December remains low at around 2.7%, an increase of 0.3% -- 0.3 percentage point, sorry.

Turning to Slide 8. We can take a closer look at the main impacts on EBITDA in a year-on-year comparison. EBITDA stood at EUR 375 million, down 30% year-on-year, with an EBITDA margin of 19%. It should also be noted that given its size, integration of U.K. tissue business converting only brings down the group's EBITDA margin by 1.2 percentage points, which without this additional operation would have been 20.3%. The downward trending in uncoated woodfree and pulp sales price was pressured by falling benchmark index. Changing our product and geographical mix also influenced our average sales price as Antonio will explain further.

On a positive note, the paper packaging and tissue segments saw a significant increase in sales volume. In 2025, cash costs were impacted by a combination of simultaneously and longer than normal planning and unplanned maintenance stoppage in our pulp mills, Figueira da Foz, Aveiro and Setubal. This includes a temporary shutdown following a small fire in the bleaching area at Setubal in July. There were no injuries and operations were fully restored within 2 or 3 weeks. This maintenance stoppage reduced energy generation from biomass during the period and led to higher natural gas consumption.

Cash costs were also affected by the U.S. customs tariffs and the resulting increase in antidumping duties. Despite these headwinds, cash costs ended the year below the level at the start of the year. Finally, the volatility of the EBITDA was mitigated by our financial risk management strategy, including the hedging for energy price and foreign exchange which offset negative impact of negative evolution of the U.S. dollar and the British pound. However, the energy hedging strategy implemented in 2025 delivered [indiscernible] effectiveness, particularly in the first quarter when its impact was most critical.

Joao will speak about the key projects focused on operational efficiency and portfolio diversification. Mr. Joao, please go ahead.

Thank you, Fernando. Turning to Slide 9, please. Navigator strategy is built on a responsible business model grounded in the belief that sustainability without performance has no impact and performance without sustainability has no future. This balance underpins responsibility, long-term growth and value creation. Drawing on decades of experiencing sustainable forest management, supported by science and technology, we have developed sector leading industrial assets and advanced R&D capabilities. Our R&D efforts span the full value chain from genetic improvement, pest and disease control, soil and climate characterization to support forestry management, industrial operations consumption efficiency and product development. At the same time, we continue to explore new long-term opportunities for product and business diversification, focused on adding value to Portuguese eucalyptus forests through new bioproducts, biomaterials and biochemicals.

Despite challenging market conditions, we continue to invest in diversification and sustainable transformation. In 2025, we completed several key investments across all segments to strengthen business resilience. This includes the new chemical recovery boiler at Setubal, which will significantly enhance the mills operational and environmental performance.

It will reduce malodorous emissions and marks a key milestone in our industrial decarbonization journey, cutting emissions by around 136,000 tons of CO2 per year, while enabling the capture in the incineration of noncondensable gases. And also, the oxygen delignification line in Setubal due to start up in April 2026, which will enable the plant to reduce consumption of chemicals at the pulp bleaching stage as well as improving the quality of the effluent from this industrial site.

AI-driven control systems reduced process variability by around 20% and lowered bleaching chemical consumption by 55%. The reduction in variability reflects, for instance, an internally developed advanced process control applied to PCC incorporation and chemical savings resulting from APC projects implemented in pulp bleaching.

We also scaled up Navigator hub, which generated EUR 300 million in online sales in 2025 and is now serving all business units, strengthening both our commercial reach and digital resilience. As already mentioned by Antonio, the evolution of our portfolio is a key pillar of our resilient business model.

The tissue segment illustrates this shift growing from 5% to around 25% of revenues over the past decade through acquisitions and organic growth, supported by in-house R&D Alongside this development, sustainable packaging solutions designed and scaled up entirely on the basis of internal expertise, R&D and technology already account for 4% of sales, an important milestone in the fast-growing segment, achieved purely by repurposing existing uncoated woodfree assets without any significant investment.

And of course, this enhances the operational flexibility of our assets, preserving the ability to produce uncoated woodfree grades while also enabling the production of a broad range of packaging grades. In 2025, we approved the rebuild of PM3 at Setubal to produce low grammage flexible packaging, equipping the machine with state-of-the-art technology to enhance flexibility, energy efficiency and product quality and to meet growing international demand.

Our diversification has reduced our dependence on uncoated woodfree paper, which declined from 75% of revenues in 2017 to around 57% in 2025. Not due to lower turnover, but to growth in new segments, while uncoated woodfree revenues remained stable at EUR 1.2 billion. Uncoated woodfree remains a resilient core business, supported by highly competitive assets, world-class quality and strong new brands. This evolution reflects a disciplined integrated strategy focused on long-term value creation, innovation and responsible resource management.

I will now hand over to my colleagues for a brief commentary on each of the business segments, starting with Quirino will comment on pulp and paper prices. Quirino, please?

Thank you, Joao. Good afternoon. Moving to Slide 11, we have the evolution of pulp and paper prices. Between April and August, the pulp price index for pulp in China, BHKP sharply decreased, largely driven by overcapacity in the pulp and paper sector. This overcapacity resulted from a sudden and expressive increase in integrated pulp capacity in China, alongside the local wood available at competitive prices, lower than imported wood.

This occurred amid the current situation of severe tensions in international freight and the reduction in demand in several paper segments across the different world regions. Although this downward cycle has been shorter than previous ones. It started from a significantly lower peak, reflecting a structurally weaker base than in previous cycles.

Recovery gained momentum in the first quarter with a clear improvement in pricing in China. Even so 2025 was the weakest year for pulp pricing in nominal terms since 2016, excluding 2020.

Average prices in China fell to around $540 per ton on average, which is down 16% year-on-year. In real terms and from the perspective of both Iberian and Brazilian producers, prices were even weaker than 2016 and 2020 once inflation and exchange rate effects are taken into account. Transforming 2025 real prices as the worst prices in decades.

In Europe, prices followed the volatile path after falling to $1,000 per ton at the start of the year, benchmarks recovered in the spring. Weakened again through the summer and then rallied in the fourth quarter. The hardwood pulp benchmark ended the year at $1,100 per ton reflecting this late year recovery, although average prices remained 12% below 2024 levels.

In 2025, the European benchmark for office paper, PIX A4-Copy B, averaged EUR 1,003 per ton, which is down 9% year-on-year. This decline was more moderate than in hardwood pulp, where European benchmarks fell by 15%. Importantly, despite these adjustments, uncoated woodfree price levels remained structurally strong, still around EUR 149 per ton or 17% above 2016 to 2019 average.

As Fernando mentioned, Navigator's average sales prices in Europe broadly follow benchmark trends, supported by 2 complementary strategies. On the one hand, we increased penetration in both economic and standard segments to quickly capture additional volumes, which weighs on the average prices, given our traditional premium rich product mix. Simultaneously, we reinforced pricing discipline on higher value-added products, particularly under our flagship brands, which achieved an 80 percentage point increase in price premium during the year of 2025.

In international markets, paper prices were affected by both the weaker dollar and more significantly by the sharp decline on the China pulp market index. This dual approach on pricing has helped us remain competitive and responsive to market dynamics, balancing volume growth with value retention.

Moving please to Slide 12. We have summarized the main developments on the uncoated woodfree markets. Apparent global demand for printing and writing papers was down by 2.4% year-on-year. Uncoated woodfree remained the most resilient grade declining by just 1.5% compared with a drop of 4.8% on uncoated woodfree and 3.2% decline in mechanical papers. This resilience reflects the versatility of uncoated woodfree end users, which has constantly outperformed other grades over time.

In Europe, however, apparent uncoated woodfree demand declined by 5% year-on-year, driven by weaker deliveries from European mills and a sharp reduction in imports. In fact, intra-European deliveries fell by 5%, while imports dropped by 10% year-on-year, confirming a significant slowdown in the effective demand across the region.

Despite a significant increase in uncoated woodfree capacity in Asia of 4.3 million tons between '24 and 2025, which more than offset the capacity reduction of 1.5 million tons in Europe and the U.S.

In the U.S., the decline was not as significant with consumption down by 3.8% year-on-year. At the same time, the closure of a major domestic mill increased the structural need for imports, which rose by 16%, partly also driven by anticipation of new tariffs last year. This tighter supply environment, combined with tariff impacts has supported higher price levels in the U.S. market, which are expected to remain elevated.

Navigator's operating rate measured as deliveries over capacity stood at 87%, up by 8 percentage points year-on-year, whilst the rate for European industry recovered slightly from 79% to 81%, up by 2 percentage points.

In 2025, Navigator increased its order intake by 13% year-on-year in volume, marking our strongest performance since 2021, and surpassing even the peak levels achieved in 2022, a particularly strong year for uncoated woodfree.

Nuno will now give some more market context on the pulp business.

Thank you, Quirino. Turning to Slide 13. As Quirino just mentioned, in 2025, the pulp market came under severe pressure, most visibly through the sharp decline in pulp prices in China from April onwards with a clear spillover effects into Europe. This weak pricing environment was driven by several structural factors. First, global overcapacity increased significantly with major hardwood pulp expansions in both Latin America in '24 and China over the last 5 years as Chinese producers pursued upstream integrations.

Second, China saw a rapid rise in the use of domestic wood by smaller and midsized mills, supported by very low cost CapEx, temporary availability of local wood diverted from the construction sector and strong state backing in areas such as financing, employment and energy.

Third, overcapacity in paper production and weak domestic demand in China compressed paper prices and in turn pulp prices, with operating rates across many segments falling to and sustainably lower levels. At the same time, demand softened in Western markets, particularly in printing papers, contributing to a decline in European hardwood pulp consumption alongside slower growth in tissue and packaging.

Finally, trade tensions, tariffs and geopolitical uncertainty increased volatility, shuffled trade volumes and accelerated the downward pressure on prices. Nevertheless, at the global level, demand for market hardwood pulp grew by 6% year-on-year.

China remained the main growth engine with demand up 8% while the rest of the world grew by 7%. This contrasted with Europe where demand declined by 1% in line with weaker printing paper consumption. In United States, demand fell by 3% following heavy restocking in '24.

The strongest mobile growth came from eucalyptus pulp, up 8% in '25 driven by a 10% increase in China, while Europe remained broadly stable. This trend continues to strengthen eucalyptus pulp share with the hardwood bleached chemical pulp market.

Looking at tissue performance on Slide 14. European tissue demand grew by 1.2% following strong growth of 6.3% in '24. Navigator's tissue sale increased by 5% year-on-year, with turnover increasing by 6%. Our tissue business operates through 2 complementary models, an integrated Iberian operation, covering paper production and converting and the U.K. operation focused exclusively on converting while margins in the U.K. are structurally lower, this model enhances scale and market research.

To strengthen our position as a leading paper tissue producer and enhance operational resilience, Navigator launched a strategic plan in '25 to consolidate its U.K. tissue rolls operations with completion planned for '26. Rolls and possibly wipe separations are being streamlined from 5 to 2 strategic hubs, the existing Leyland and the new site in Leicester, optimizing coverage of Northern and Southern England, improving proximity to key consumer markets and strengthening logistics efficiency.

Operations at the new sites are expected to start in the first half of this year, and the main workforce transition has been successfully completed with an investment of approximately GBP 18 million, this project is expected to deliver cost efficiencies through the optimization of personnel expenses and operating costs, driven by the integration, centralization and increased scale of operations. These benefits are expected to be realized from '27 onwards, following the completion of the restructuring with an estimated improvement of 2 to 3 percentage points in converted EBITDA margins, positioning them above the industry average.

Overall, acquisitions in Spain and the U.K. have improved our geographic balance and resilience with finished products accounting for 98% of tissue sales and a strong focus on the consumer segment, which now represents around 83% of volumes. Dorival will now comment on the main developments in packaging.

Thank you, Nuno. Now turning to Slide 15. In 2025, the European market for machine glazed and machine finished kraft paper grew by 2.6%. Navigator's packaging business outperformed the market with sales of 8%, supported by 11% growth in tonnage and 17% increase in paper area sold, reflecting deeper penetration in light weight low grammage segments. The strongest performance came from flexible packaging, particularly low grammage, food and nonfood applications alongside release liners for family and hygiene and personal care.

These priority segments benefit from the technical and cost advantages of eucalyptus fiber where Eucalyptus Globulus is a clear differentiator. This growth is fully driven by our own brand, kraft structured across 3 segments: bag, flex and box, where innovation based on eucalyptus fiber has been key to strong market acceptance and recognition. The packaging segment delivered a consistent performance over the year, supported by a gradual increase in sales.

Today, 71% of our sales are in Europe, with the remaining 29% in overseas markets, mainly in the Americas and the MENA region. As part of this industrial transformation, we approved in 2025, the rebuild of #3 paper machine at the Setubal complex to produce low grammage flexible packaging. This EUR 30 million investment running from 2025 to 2027 equips the machine with state-of-the-art technology, enhancing flexibility, energy efficiency and product quality.

The converted PM3 will produce around 90,000 to 100,000 tons per year, and it is expected to start up at the end of the third quarter of 2026 at a fraction of the cost, 5 to 7x lower than a greenfield project of approximately the same capacity. While we're still preserving our indusial flexibility to produce both uncoated woodfree and flexible packaging on the same machine. This conversion transforms PM3 from a mid-tier uncoated woodfree asset into a well-positioned first quartile competitive flexible packaging machine, leveraging our vertical integration and the cost advantages of eucalyptus fiber.

As a result, Navigator will become the fourth largest producer of low grammage flexible packaging in Europe, strengthening our position in a market growing at 2.5% to 3% per year through 2035.

Now I hand over to Antonio for a wrap-up of the full year results.

Thank you, Dorival. Let's please turn to Slide 16. As we said today, 2025 was the toughest year in decades for our industry. Yet, Navigator has emerged better positioned for growth. Our international footprint and diversified business model enables to capture opportunities, deliver higher volumes and continue expanding market share even in a highly challenging environment.

At the same time, we have repositioned the group for future growth. Key initiatives include the consolidation of our U.K. tissue operations, the investment decision for the PM3 rebuilding packaging and the investment decision for the new tissue machine in Aveiro, each reinforcing efficiency, scale and resilience. Our diversification strategy is clearly delivering results and help to capture the impact of sharply falling price in pulp and uncoated woodfree paper.

In packaging, sales benefited from the increase of our flexible packaging portfolio initiated in 2023. In tissue, we continue to scale operations and capture long-term synergies. And an execution plan is underway to consolidate U.K. operations and enhance efficiency. Alongside this, we remain further focused on our core operations, business transformation and innovation, delivering a meaningful reduction in future cost intensity.

These investments in efficiency and environmental improvement aim to ensure the longevity and continued exceptional margin generation of our world-scale high-tech mills. This transition reflects a commitment to leveraging our core expertise while expanding into adjacent markets with high growth potential. All of this has been achieved while maintaining disciplined and conservative financial policies with net debt to EBITDA at a solid 1.87x.

A brief note on capital allocation, specifically regarding dividends. Considering Navigator's performance in 2025, the Board of Directors will propose to the General Meeting of Shareholders the distribution of dividends totaling EUR 80 million. I will now hand over to Nuno and Dorival, who will comment on the investment decision for a new tissue machine.

I will now hand over to Nuno and Dorival, who will comment on the investment decision for a new tissue machine?

Thank you, Antonio. Let's move on to Slide 17. As part of our growth strategy in the tissue segment, we took an important step in '25 by launching a feasibility study for a new tissue paper machine. This project would add around 70,000 tons of annual capacity, specifically to support our U.K. operation acquired in '24. The U.K. business has strong converting capacity of around 130,000 tons per year, but currently relies entirely on external reels, making this investment a key enabler of integration, efficiency and resilience.

The idea behind it is simple to create a more balanced vertically integrated operation. By producing our own reels, we reduced dependence on external suppliers, strengthening the sustainability of the process and improve overall efficiency. It also allows us to develop products that are even better aligned with the needs of our U.K. customers while leveraging the sustainability forestry base we have in Portugal. Dorival will now provide some color on the CapEx and investment details.

Following this feasibility study, last week we moved ahead with the final investment decision. The new machine will be installed at our Aveiro industrial complex, which was designed from the beginning to accommodate a second tissue machine. This location brings several advantages, shared infrastructure, integrated pulp supply, lower drying and transportation costs and operational efficiency from being next to the first tissue machine, the TM1.

To further strengthen efficiency and resilience, we are implementing a tailor-made logistics model at the port of [ Aveiro ] dedicated to shipping reels in mega containers, instead of breakbulk. This new model delivers significant logistics savings per ton driven by lower handling costs, fewer movements and reduced variable costs.

Today, reels supply to our U.K. operations are shipped as breakbulk. Moving to this containerized solution will also bring qualitative benefits, including more efficient handling, lower loss rates and reduced environmental footprint through more efficient shipping. The investment totals around EUR 115 million spread across 2026, '27 and '28 with start-up planned for April 2028. The project will also benefit from support under the Portugal 2030 program. Antonio will now comment on the outlook.

Thank you, Dorival. Let me share our view on the current market environment and within the very limited visibility, our outlook for the coming months. Globally, risks persist, particularly around geopolitical instability in different regions across the world, protectionism, economic fragmentation and financial vulnerabilities in major economies remain a concern. While the recession does not appear imminent, growth is still relatively subdued and ongoing uncertainty continues to weigh on investment and international trends.

Even with limited visibility, we remain cautiously optimistic about near-term market development. Looking ahead, pulp prices are expected to strengthen in the first half of 2026, supported by improving momentum both in China and Europe.

In the second half, our downside scenario points to price stability rather than any significant deterioration. Demand in 2026 is expected to be broadly in line with 2025 with growth in China offset by flat outlook in Europe.

On the supply side, new capacity additions will be limited. In contrast with 2025, no significant new capacity is expected to come online this year, considering that most of the 2.7 million tons of capacity in projects announced for 2026, including 1.3 million in China and 1.4 in Indonesia is due to start up only in the final part of the year, and this impact will essentially be felt in 2027. The project in Indonesia involves 2 lines, each with a capacity of about 1.4 million tons, of which around half is intended for the market. But only the first of these lines is expected to start at the end of the year, joined by the second some months later with an impact essentially in 2028.

Finally, recent natural disasters in Indonesia have been linked by local authorities to continuous deforestation, leading to the revocation of forestry license. The Indonesian government have linked the scale of the disaster to the high level of deforestation in the past 2 decades, laying the blame on local industry and canceling the forestry licenses of some 22 companies, which supply wood to Indonesian's major exporters of cellulose pulp and coated woodfree paper and tissue, covering an area of more than 1 million hectares.

The tragedy in Sumatra highlights the structural challenges faced by the Chinese, Indonesian producers operating in the country, including their inability to certify forests and under internationally recognized systems. It should also reinforce concerns among European authorities regarding Indonesia's risk profile for wood and wood products under the EUDR framework. This has tightened wood supply and supported prices while reinforcing the strategic importance of certification and compliance with EUDR requirements.

In the paper segment, the first quarter of this year began with renewed optimism. Navigator led the market by announcing paper price increases, which were subsequently followed by other key players. In December last year, we announced a price increase in Europe of 5% to 8% and in overseas markets of 5% to 11%.

The increase in overseas was already followed by a second increase of $30 per ton in February this year. We also announced price increases of 5% to 8% in the United States, effective from next March onwards. The impact of these global price increases in printing and writing paper will be felt mainly in the second half of this quarter. And as a result, we expect average prices in the first quarter to be above fourth quarter last year, with further increases anticipated in second quarter, subject, of course, to the evolution of pulp price.

Despite this positive price momentum, the global environment remains challenging. The sector continues to face a structural decline in consumption and economic stagnation across key regions, partially offset by recent capacity closures in Europe and North America. In the states, following the reduction of 350,000 tons of annual capacity by an Asian producer, another uncoated woodfree closure was announced early this year, removing a further 320,000 tons of capacity.

Combined with impact of import tariffs and U.S. markets heavy reliance on imports, we estimate the structural supply shortfall of approximately 1.2 million tons per year or about 25% of consumption. These import requirements will need to be met by the limited number of countries able to supply products that meet U.S. market specs, notably a small group of producers in Europe and Latin America. U.S. producers at the same time are likely to focus more on their domestic market, creating opportunities in their traditional export destinations.

Looking ahead, the expected increases in pulp prices during 2026, should provide underlying support to paper prices. European import levels remain steady with no additional upward pressure on the market. While the sector continues to face a structural decline in consumption and a sharp economic slowdown across the regions, this has been partially offset by significant capacity closures, 430,000 tons in Europe last year and the combined close to 670,000 tons in North America across last year and this year.

Within this context, the uncoated woodfree segment is showing renewed opportunities across different geographies, supported by supply discipline and Navigator's competitive position. In the tissue segment, demand continues at [ investment ] levels. The integration of Navigator's tissue chain is progressing well with stronger collaboration between local and Iberian teams driving cross-selling and a higher-margin portfolio.

At the same time, we have launched an execution plan to consolidate U.K. operations in 2 core sites, Leyland and Leicester, integrated production and storage to boost efficiency, scalability and cost competitiveness, building on an already strong operational model. We have taken a final investment decision for a new tissue machine at Aveiro, a transformational project that will enhance efficiency and further strengthen the long-term resilience and competitors of our tissue segment. It's worth pointing out that we are now a quite different company from what we were.

We boosted Europe's pulp and uncoated wood free business, which is a distinctive grade in printing and writing, in Europe at least. We globally can sell our pulp at low discounts with solid margins. Our tissue business outperforms, and we are building a diversified, innovative and growing packaging business. Packaging continues to perform strongly with growth in both volumes and price.

At the same time, our PM3 conversion project is progressing as planned. Once completed, this investment will position Navigator as the fourth largest producer of low grammage flexible packaging in Europe, consolidating our presence in the segment with robust and growing demand. From late January this year, a set of raging storms, notably storm Kristin brought severe weather with strong winds and flash flooding to Portugal, particularly affecting the center of the country. Navigator responded proactively, working closely with impacted forestry producers and regions to support the sector's operational and economic recovery.

The storm caused disruptions at Figueira da Foz and Vila Velha de Rodao Mills, due to external power and water outages and some impact on our forestry assets still under assessment. There was no material damage to essential mills equipment and production resumed normally within a few days once utilities were restored.

All other industrial units kept operating as usual. However, adverse weather conditions associated with storms have disrupted forestry operations and hindered the transportation of wood to our mills. The relatively low stock levels at the start of the year, combined with the impact of the storms may require a temporary adjustment to sales volumes in the first quarter, which is still under assessment.

Navigator's integrated business model, strong financial position and the ability to respond proactively across the value chain from forestry to a set of different finished products are enabling us to navigate current challenges with confidence. Ongoing diversification and continuous innovation in our core business will further strengthen Navigator's resilience and long-term value creation. Thank you.

Thank you, Antonio. This ends our presentation. We are now open for the Q&A session.

[Operator Instructions]. The first question comes from Bruno Bessa from Caixa Bank.

I would focus on the new plant that you announced in Aveiro. Could you share any numbers on this new plant, mainly in terms of your expectations for EBITDA margin or even EBITDA contribution once it starts up, will be appreciated. And also regarding the investment that you announced, the EUR 115 million investment. One question about this. Would it be reasonable to assume that 20% of this investment could be in the form of nonreimbursable subsidies. So this will be the second question.

The third question, just a bit of a more technical one. If you could just explain the changes in the fair value of biological assets because I saw that in Q4, you had relevant movement of around EUR 5 million contribution in the EBITDA, positive contribution. If you could just explain what are the dynamics behind this? And what should we expect from this for 2026?

Thank you, Bruno, for your questions. I'm going to try to repeat them. The second I was completely unable to understand. I'm going to repeat first and third, and I will ask you to be so kind to repeat second. So first, we would like to try to understand better the EBITDA margin impact of Aveiro new tissue machine once it starts up, correct?

Yes, that's correct.

The third one is about fair value of biological assets. You would like to understand a bit more how we see things in 2025 and going forward.

Yes. That's correct.

And the second one, are you so kind to repeat it, please?

Sure. The second one is about the EUR 115 million investment that you announced in Aveiro. You mentioned that this should have some subsidies from the government. My question here is, if it would be reasonable to assume that 20% of this investment could be then in the form of nonreimbursable subsidies?

Okay. I will give some introductory comments on the questions. I will pass to Nuno, the first one and to Fernando the second and the third.

So the impact of the tissue machine is going to bring the Tissue UK operation closer to what is the EBITDA margin of our Iberian operations. As we have heard, we believe that with the reshuffling of the converting operations we are doing in U.K., this will add to the existing conversion 2 to 3 points in margin improvement. It will be more or less the same range, the integration of tissue -- new tissue machine.

Regarding the second question, obviously, we do not share any specifics on our discussions with the Portuguese government. But I would expect the levels not to differ from similar projects that we deal with the government, of course, outside the [ NextGen EU, Innovation ] funds in previous investments. So it's not going to be materially different from that percentage-wise. Nuno, can you add something more on the first question, please?

I can only comment and stress what you just said. I think overall, I think people attending the conference also have the benchmarks for what can be a tissue machine of this size. For us, we would expect on a long-term basis [indiscernible] that this should increase the EBITDA margin of tissue by 3%, something like that. And in fact, the EBITDA margin of Navigator by 1% because, as you know, tissue is already 1/3 of the EBITDA margin of the group.

Fernando?

Some mention related with the PM2 of tissue in Aveiro, the margin of support is around 20%. And we are talking about investment of EUR 115 million. In what concerns the biologic assets, it's -- we have an increase this year. It's mainly related with Mozambique. The way that we calculate the discount cash flow, it was on the basis that we will get and transport to Portugal. And fortunately, we found better ways to monetize these biologic assets in Mozambique. This means that we have less costs and we can have increase of return. For the near future, we are not expected to have huge amounts of variation on biologic assets, like we always do, we try to manage in a way that we do not foresee a big increase for the future. This particular year, it's because of this good news that we found ways to sell directly to local.

And just a follow-up. Could you please elaborate a little bit more on those alternatives that you have now for the wood produced in Mozambique. Are you exporting to Asia, what are those alternatives?

I will ask Joao to answer the question. Joao, please?

Yes, it's a good question. We -- in the last 2 years, we found out that we could sell wood locally mostly for furniture purposes. And -- but we sell it locally for Chinese operators, mainly but also from India. And we expect that with that these local sales we can monetize almost all the stocks, the wood stock that we have in the near future.

The next question comes from Antonio Seladas from AS Independent Research.

There are no further questions at this time at the conference call. Now we will go through the webcast. From the webcast, we have the first question. Thanks for the detailed presentation. Can you please provide us with some guidance on the possible margin uplift that the new tissue machine will bring now that you will become fully integrated in Tissue?

I think that question was also already answered in a very complete way.

The next question comes from [ Michael Saido, ] a shareholder. What are the dividend relevant dates ex dividend and payment date as well as how much dividend will you propose to the AGM?

The general meeting will be held on May 22. And regarding dividends, we already gave the answer, EUR 80 million is the proposal from.

And normally, it's paid 8 days after the general assembly meeting.

Okay. Thank you. This concludes our session. Thank you for your time. Should you require any further clarification, please feel free to reach out through our usual channels, wishing you all a pleasant evening.

Good evening. We welcome you to The Navigator Company Third Quarter 2025 Results Presentation. [Operator Instructions]

I'll now hand the conference over to Ana Canha. Please go ahead, madam.

Ladies and gentlemen, welcome to The Navigator Company conference call and webcast for the third quarter and nine-months results.

Joining us today are the following directors, Antonio Redondo, Fernando de Araujo, Nuno Santos, and Antonio Quirino Soares.

As usual, we will start with a brief presentation, and we will have Q&A session at the end. The presentation can be accessed through the links available on the website, and questions may also be submitted using the webcast platform.

Antonio will start by commenting on the main highlights of the quarter. I will now hand over to Antonio.

Good afternoon, and thank you for joining us today. I'm pleased to share the results for our third quarter and first nine months of 2025.

As you will see in today's presentation, Navigator once again demonstrated its ability to adapt swiftly to very challenging market conditions while maintaining its strong competitive position in Europe. We continue to focus on creating value and protecting margins while investing in diversification and reinforcing the foundations for sustainable growth.

I will begin with Slide 4 with an overview of the key highlights. The first nine months of 2025 were marked by very significant volatility driven by geopolitical tensions and rising protectionism, adding to macroeconomic risks. Like others in global trade, Navigator felt the impact of slower demand in key markets.

The pulp and paper sector has faced severe pressure visible in the sharp downturn in pulp prices in China since April, which also significantly impact Europe. As anticipated, the third quarter marked the lowest point in this downward cycle. Faced with falling prices across its markets, Navigator succeeded in positioning itself competitively. We are firmly established around the globe, which enabled us to seize opportunities, grow our sales volumes in all paper segments and increase our market shares.

Focused on operational excellence, the company implemented initiatives to optimize its variable costs and streamline its operations. The downward course of production costs is already visible despite the temporary impact of cost categories such as energy and chemicals, the effect of which has tended to be diluted as the nine-months period progressed.

Pulp and tissue cash costs dropped to near the lowest since mid-2021, with while paper cash cost reached a two-year low. As a result, the pulp and tissue cash costs fell at the end of third quarter to the second lowest level since mid-2021. The paper cash costs were the lowest of the last two years. Despite significant market volatility across all segments, our packaging and tissue businesses delivered solid year-on-year growth and already account for 32% of the EBITDA and 29% of the turnover. In tissue, we are successfully scaling up operations and following recent acquisitions, namely Navigator Tissue U.K.

In packaging, our sales continues to show positive momentum with growth in volume, value and strategic positioning in lower basis points. We maintained a strong financial position after dividends and strong CapEx, keeping our net debt-to-EBITDA ratio at 1.85x.

Now turning to Slide 5, please, with the main financial figures. Turnover totaled EUR 1,489 million. EBITDA stood at EUR 300 million with an EBITDA margin of 20.2%. Fernando will highlight the main impact on the period.

The successful execution of our diversification strategy has strength resilience amid market volatility with tissue and packaging segments helping to offset the impact of subdued pulp and paper prices. In an uncertain macroeconomic environment, our EBITDA margin remains among the strongest in the industry, namely amongst those exposed to pulp, although below our historical average.

I will now hand over to my colleagues, who will walk you through the results in more detail and share some insights on how our different business areas have been doing.

Fernando will start by the main impacts on EBITDA. Fernando, please go ahead.

Thank you, Antonio. Turning to Slide 6. We can take a closer look at the main impacts on EBITDA in the year-on-year comparison. As already mentioned, EBITDA stood at EUR 300 million, down 30% year-on-year with an EBITDA margin of 20%. Year-to-date results were below last year's due to lower sales price and rising cash costs, mainly for energy and chemicals in the beginning of the year, which, as I mentioned, has since started to reduce. The downward trend in uncoated woodfree and pulp sales price were pressured by falling benchmark index. Change in our product mix also influenced our average sales price. Apart from pulp sales, all paper and tissue products saw a significant increase in sales volume over the nine months period.

Turning to Slide 7 with a quarter-on-quarter EBITDA analysis. In this quarter, EBITDA stood at EUR 84 million, down 17% quarter-on-quarter, reflecting EBITDA margin of 18%. Quarter-on-quarter, the EBITDA decreased mainly due to the sharp price reductions, partially offset by strong volumes and variable and fixed cost savings. Navigator sales price fell across all segments quarter-on-quarter, following the drop in key benchmark index. We witnessed a strong rebound in pulp sales versus Q2, plus 31,000 tonnes, driven by the market recovery in Europe and overseas despite our selective sales strategy amid sharp price drops. In uncoated woodfree and packaging, we sustained volumes, offsetting the typical seasonality of the third quarter. We saw a good trend regarding production costs. Wood costs were down due to lower prices and lower extra Iberian purchase. Energy and chemical costs also decreased due to lower prices. External fibers were also down as a result of lower market prices. As Antonio already mentioned, pulp and tissue cash cost dropped this quarter to near their lowest since mid-2021, while paper cash costs reached a two-year low.

Turning to Slide 8 with debt maturity and liquidity. During the first nine months, we repaid close to EUR 400 million in debt, including EUR 275 million early repayment, strengthening our debt profile and increasing the share of sustainability linked instruments. We also secured EUR 365 million in long-term facilities with EUR 140 million still available, including an European Investment Bank loan, EUR 40 million to support the decarbonization projects with no significant payments due in the next five years. We raised EUR 225 million new debt with a seven-year maturity, extending our average debt maturity to 5.2 years from 3.5 years in December. We also raised the weight of sustainability-linked debt to 79%. After this debt renegotiation cycle, Navigator reduced its debt repayment commitments to very low volumes over the next five years, hence ensuring the reduction of its average credit spreads and increasing the weight of the debt raise and the ESG requirements. At the end of the period, 78% of our debt was on a fixed rate basis. It should be noted that despite the rising interest rates in relation to our last financing cycle, our average cost of financing at the end of September remained low at around 2.6%. The unused long-term credit facilities currently totaled EUR 140 million.

Turning to Slide 9 with an overview on CapEx. The high strategic CapEx cycle start in 2023, boosted by the NextGenerationEU and innovation funds is coming to an end and expect to be phased by mid-2026. In the first nine months of 2025, CapEx totaled EUR 160 million, of which approximately 61% of total corresponds to value creating environmental or sustainable investments. NextGenerationEU projects advancing on schedule, reflecting our strategic discipline and focus on delivering results with 77% is secured by the end of September in time within the PRR calendar and in budget.

Moving to Slide 10, which presents key performance indicators. Let me highlight our ongoing commitment to operational excellence and long-term value creation with a strong focus on decarbonizing our industrial process and investing in innovative technologies that improve resource circularity and cost efficiency.

This quarter, we achieved a significant milestone in our decarbonization road map, namely with two biomass power lime kilns in the operation at our Aveiro and Setúbal sites and the third biomass power kiln at Figueira da Foz is now in the start-up phase. These projects are designed to reduce both greenhouse gas emissions from pulp mills and the dependence on fossil fuels.

Notably, the new lime kiln in Figueira da Foz will also make a very significant contribution to simpler use of resource by enabling reclamation of carbonate sludge, reducing the quantity of this waste sent to landfill by around 90%. Thanks to this investment, the Aveiro and Figueira da Foz mill will operate in 2026, producing around 9% renewable energy. The conversion of lime kilns from fossil fuels to sustainable biomass will open the door to the innovative use of Eucalyptus globulus, a byproduct from wood preparation operation as a renewable fuel. At the Setúbal mill, the conversion of lime kiln to biomass as this energy source will lead to a reduction in carbon emissions of around 17,000 tonnes CO2 emission license per year.

In Aveiro and in Figueira da Foz, the project will allow a reduction of approximately 10,000 tonnes CO2 per year in each site. In Setúbal, this groundbreaking project has attracted support from the Innovation Fund, the European Union Fund for climate policy, geared especially to energy and industry and working to bring to the market solutions for decarbonizing the European industry and helping it make the transition to climate neutrality. The Aveiro project and the new lime kiln in Figueira da Foz have been partially financed by the NextGenerationEU funds.

Together, these three projects represent a total investment of approximately EUR 60 million. This innovation substitution of fossil fuels will improve the cost base of the pulp production process. It once again demonstrates Navigator commitment to operational efficiency and underlines how its actions are aligned with the principles of sustainability in transforming waste into value and taking real steps to consolidate the group's circular economy strategy.

Antonio Quirino will now comment on pulp and paper price.

Thank you, Fernando. Turning to Slide 12 with pulp and paper prices. Between April and August this year, the hardwood kraft pulp price index in China sharply decreased, strongly influenced by overcapacity in the pulp and paper sector in view of the current situation of severe tensions in international trade and the reduction in demand in several paper segments in Western markets.

The price dropping cycle bottomed out at a price of $493 per tonne, which is down by 18%, the lowest since 2021. Although this downward cycle has been shorter than previous cycles, it started from a significantly lower peak, reflecting a structurally weaker base than in preceding cycles. In Europe, the benchmark index for hardwood pulp, the peaks hardwood kraft pulp in dollars rallied to $1,218 per tonne in April, up 22%, only to lose ground again in the months that followed, returning to $1,000 per tonne in August, down by 18% as well and remaining at that level until the end of September. In both regions, China and Europe, prices ended the third quarter on an upward trajectory.

Moving to paper. The benchmark index of office paper in Europe, PIX A4 B-copy stood at an average of EUR 1,023 per tonne in the first nine months, which is 8% down on the same period last year, but 21% above the pre-pandemic average of EUR 847 per tonne in the period of 2015 to 2019, but below 25% from the 2022 peak.

As we review Navigator's performance in Europe, I would like to highlight our approach to sales pricing, which closely track the evolution of benchmark indices. We pursued two different strategies. First, we placed greater emphasis on economy products. So this allowed us to increase our sales volumes, though it did have some impact on our overall product mix. This strategy enabled us to offset the decline in imports into Europe by offering products with superior quality and stronger environmental credentials compared to typically typical imported papers into Europe, particularly those from Asia, while maintaining a price point above imports, but below our premium and standard ranges. At the same time, it allowed us to continue supporting our most loyal premium customers with this economy offerings.

Second, we maintained price premiums on our value-added product. This strategy ensured that our pricing on premium and standard products remained favorable compared to the market index and specifically for A4 B-copy PIX. It's important to note that in international markets, our prices were affected by two other factors, namely the weaker dollar and the decline in the pulp markets in China. This dual approach has helped us remain competitive and responsive to market dynamics, balancing volume growth with value retention.

Moving to Slide 13 on printing and writing paper market, we see that the global apparent demand for these papers fell by 2.7% until August. Specifically, uncoated woodfree paper remained the most resilient, falling 1.6% this year, which is aligned with historical average market decline, and this compares with 5.1% decrease in coated woodfree papers and 4.2% decrease in mechanical fibers papers.

In Europe, the apparent demand for uncoated woodfree paper fell by 6.4% until August, driven specifically by a reduction in imports that were 11% below the same period of last year. In the United States, demand slipped by just 1%, while the closure of a major mill drove import reliance at 31% year-on-year, leveraged by tariff expectations. With capacity cuts and duties adding pressure, prices have climbed and are likely to remain strong with more increases forecast through 2026. In the first nine months of 2025, Navigator grew its share of total deliveries from European mills by 1.2 percentage points year-on-year, reaching about 26%. This was driven by strong gains in international markets at 6 percentage points, while our European share remained steady at over 18%.

Navigator's operating rate rose to 87% in the first nine months of the year, 7 percentage points above the same period last year. Meanwhile, the industry rate as a whole recovered slightly from 80% to 81%. These developments enabled Navigator to strengthen its order intake market share by 3 percentage points globally to 27% and by 2 percentage points in the European market to reach 19% year-on-year.

Now moving to Slide 14 to discuss pulp market. As Antonio mentioned previously, from April through August, there was a steep downward adjustment in pulp prices. In terms of demand, global demand for hardwood pulp grew by 8% year-on-year until August. China remaining the main engine of growth with an impressive increase of 12% due to the continuous in new paper capacities in several grades followed by the rest of the world with a 9% increase. In contrast, demand in Europe continued to fall following the shrinking consumption of printing paper, as mentioned before, edging down by 1%. In the U.S., demand dropped by 1% as well after heavy restocking over the same period last year.

The strongest global growth was for eucalyptus pulp, which was up by more than 10% in the first eight months of the year, with China growing impressive 14% and Europe in line with the same period of last year. This performance has consistently boosted Eucalyptus share in the hardwood reach segment on the chemical pulps.

On the supply side, the ramp-up of projects on the pulp side that were brought online in 2024 increased the availability of market pulp in 2025, exerting pressure on operating rates. Even so, factors such as growing consumption, maintenance shutdowns and recently announced cuts in production helped to balance the market and sustain the activity of hardwood producers in the first nine months of the year. The global pulp market will continue to be influenced by China, where growth in domestic consumption and projects for new tissue, paper and board capacity have shaped the market balance. However, a significant proportion of these new lines are still at the initial start-up stage, which could mitigate the impact in the short term.

Doubts also mounting as to the region's ability to supply wood sustainably for the new capacity. In Europe, stock levels remained relatively stable. In China, although stocks at ports have been building up since January, analysis of paper production suggests that this growth is proportional to the expansion of their industrial operations and not an anomalous accumulation. The ratio of stock of days of production has been stable in recent months, pointing to a balance between supply and demand. Our sustained competitive advantage is anchored in the uniqueness of Eucalyptus Globulus, eco-efficiency and fiber quality.

On a positive note, as Antonio mentioned, our pulp cash costs ended Q3 at the second lowest level since mid-'21, down 20% from January to September and 19% quarter-on-quarter.

Moving to Slide 15, covering the tissue market. We see that after a substantial growth of 6.3% in 2024, Western European demand for tissue was up year-on-year by 0.6%. Navigator's tissue sales volume, finished products and mills grew to 177,000 tonnes, a 14% increase compared with the same period of last year, with sales up 17%, boosted by the integration of Navigator Tissue U.K. in May last year. The recent acquisitions in Spain, '23 and the U.K., '24 have enabled us to balance our geographical mix and creating greater resilience in our tissue business.

Finished products accounted for 98% of total sales, while wheels accounted for the remaining 2%. The at home or consumer retail segment has grown in importance and currently accounts for around 83% of sales. The away-from-home segment, wholesalers, the Horeca channel and offices accounts for the remaining 17%. The highlight of the quarter in the Tissue segment was the business in Iberia, which recorded its best ever quarter in sales of finished products.

We continued with the integration of the U.K. operation with increased collaboration between local and Iberian teams, aiming to boost cross-selling opportunities between markets, optimize the portfolio and identify and implement further cost cutting and efficient opportunities. Navigator also launched a strategic plan to consolidate its U.K. tissue rolled operations, building on an already efficient model to achieve even greater competitiveness and alignment with best practices.

Moving to Slide 16 on the Packaging segment, we see that the global market for machine glazed and machine finished kraft papers grew by approximately 11% year-to-date August, reflecting its strong performance. In this segment, Navigator sales were up 7% year-on-year in volume compared to last year, thanks to a rise of 1% in price and a 7% increase in volume with a 10% growth in the area of paper sold due to an increased penetration in low grammage segments according to the strategy.

Navigator has been developing and investing in the gKRAFT sustainable packaging segment, offering alternatives to fossil-based plastics and supporting the transition to renewable low-carbon products. gKRAFT brand has won market recognition, achieving a 15% growth in new customers opened during the period of year-to-date September with a presence now in more than 40 countries worldwide. The top performance in the period was the release liner products, together with solutions for food and nonfood packaging, which are strategic priority areas for our business. These segments benefit more significantly from the use of lightweight papers, where the Eucalyptus Globulus offer significant competitive advantages, both economically and technically.

MG and MF kraft papers or machine glazed and machine finished kraft papers are used in similar applications such as bags, sachets and several flexible packaging items. Traditionally, machine finished is a slightly lower cost alternative with inferior surface quality in comparison with machine glazed. However, with the conversion of PM3 in Setúbal, production of machine-finished kraft papers in the gKRAFT range will be able to compete with machine glazed on quality.

In Europe, machine finished kraft paper for packaging purposes is produced by paper suppliers who typically can only ensure products above 60 grams. The overwhelming majority of the paper machines able to produce below 40 grams are old, small and nonintegrated machines and aimed at the machine-glazed kraft papers. The rebuild of the PM3 machine in Setúbal takes advantage of Navigator's vertical integration and the cost efficiency of the Eucalyptus Globulus fiber for production of distinct top quality kraft papers. As a result of this project, Navigator will move up to fourth place in the European league table of low-grammage flexible packaging manufacturers, strategically consolidating its presence in the segment where demand is surging.

In order to ensure that the asset maintains its flexibility and it is adaptable, the project has been designed to allow, if necessary, the production of different grades of uncoated wood-free paper, guaranteeing our capacity to respond to market dynamics and preparing us for future scenarios.

I will now hand over to Antonio.

Thank you, Quirino. Let's please turn to Slide 17 with a wrap-up of the Q3 and nine months results. Our diversification strategy is paying off. The diversification to higher growth and less cyclical markets such as tissue and packaging, although more dependent on end user consumption, reinforces the company's long-term value creation and resilience.

In tissue, we are successfully scaling our operations, expanding into new markets and positioning ourselves to further unlock long-term synergies that will drive sustained growth. In packaging, increased penetration in low-grammage segments confirmed the strong appeal of Eucalyptus Globulus fiber for the same, leading to a 10% increase in paper area sold compared to a 7% increase in sales volume in tonnes. By focusing on efficiency and cost management, we achieved a significant reduction in cash costs across all pulp and paper segment. We kept our focus on core operations, business transformation and innovation. We carried out value-added CapEx of EUR 160 million aimed at sustainable long-term cost efficiency, while keeping consistent conservative financial policies after high level of CapEx and EUR 175 million dividend payout.

Let's turn to Slide 19 with a few words about the outlook. Let me now share our perspective on the current market environment and our outlook for the coming months. Globally, we are seeing a reduction in overall uncertainty and still moderate growth prospects. It's important to recognize the continued presence of risks, protectionism, economic fragmentation and financial vulnerabilities in major economies remain a concern. While a recession does not appear imminent, growth is still relatively subdued and ongoing uncertainty continues to weigh on investments and international trade.

Despite the challenges and limited visibility, we are cautiously optimistic about short-term market development. We anticipate that conditions will improve, particularly in the pulp, tissue and packaging segments, where the printing and writing paper segment demand is expected to remain under pressure, although with uncoated woodfree presenting most likely again better perspective than other printing and writing papers.

Regarding the pulp market, China continues to play a decisive role. Growth in domestic consumption and new capacity projects have shifted the market focus. That said, many of these new lines are still in the early stages, which should moderate the immediate impact. There is also increasing uncertainty regarding the region's ability to source wood sustainably for the expansions. As a result, we have seen pressure on global prices and a change in trade flows with China in growing.

Notably, the third quarter of 2025 was the weakest since 2021 with prices averaging USD 500 per tonne in China. We believe this marks the bottom of the current price cycle as both China and Europe saw prices start to recover towards the end of the last quarter.

In the printing and writing paper, the overall global outlook remains challenging and need a structural consumption downturn. Europe with strong uncoated woodfree demand contraction, while U.S. and remaining overseas markets with a more moderate fall. Global uncoated woodfree demand with minus 1.6% so far this year is in line with the last 10 years yearly rate. On the supply side, Europe has seen significant capacity reductions with recent closures removing around 430,000 tonnes annually, about 7% of the region's capacity. Another major European player is also facing financial difficulties, which could lead to further capacity cuts.

European imports remain stable with no upward pressure. EUDR discussions continue and its implementation is expected to reinforce European pulp and paper market. Meanwhile, the U.S. market has shown great resilience. The closure of the country's largest mill accounting for 8% of total capacity has deepened the market shortfall with North American production estimated to lag 800,000 to 1.1 million tonnes versus North American demand.

Another closure announced this quarter will remove 320,000 tonnes of uncoated woodfree capacity by Q3 next year, further increasing U.S. import requirements. Meeting this demand will depend on a select group of countries able to supply products meeting U.S. market stringent specifications, primarily manufacturers in Europe and Latin America. Latin American suppliers, however, are facing the prospect of higher tariffs, both antidumping duties and custom service than those currently imposed on European imports. In response, U.S. producers may focus on their domestic market, potentially creating opportunities for competitors in their existing export market.

Despite this complexity, new opportunities are arising in the uncoated woodfree market. For example, Mexico's customs tariffs on Asian imports and Colombian tariffs on imports from Brazil are providing competitive advantage for Navigator in these countries, supporting sales and expanding our footprint. In tissue, demand has increased by an estimated 0.4% so far in 2025, with annual growth expected to hold steady at around 1% through to 2029. The integration of Navigator Tissue U.K. is progressing with stronger collaboration between the local and Nigerian teams, unlocking cross-selling, optimizing the portfolio for higher-margin products.

To strengthen our market position and operational resilience, we have launched a strategic plan to consolidate our U.K. tissue roll operations in two sites, Leyland and Leicester, reducing sites from five to two, integrating production and storage for greater efficiency, scalability and cost competitiveness, building on an already efficient model to achieve even greater competitiveness and alignment with best practice. Regarding a new tissue machine, the final investment decision is anticipated by year-end 2025.

Packaging continues to perform strongly with growth in sales and price. Our project to convert the PM3 paper machine at Setúbal is progressing as planned. This will elevate Navigator to fourth place among European manufacturers of low-grammage flexible paints, consolidating our presence in a segment with robust demand.

Navigator's integrated management, sound financial position and our ability to respond flexibly to market demand from forest to finished products are enabling us to face these challenges and prepare confidently for the future. Continued development and diversification of our business base will further reinforce the resilience and sustainability of our business model.

The next slide provides a quick update on our operational excellence initiatives. Amid the ongoing global uncertainty, Navigator is proactively strengthening its resilience through several targeted initiatives under a program called Operational Excellence Initiatives 2025, 2026 as already announced last quarter. Keeping its focus on high operational standards, the company has launched internal programs designed to act on different fronts to protect results. These involve programs for the optimization and reduction of variable costs by streamlining specific consumption of raw and subsidiary materials, seeking strategic negotiation with suppliers as well as logistic cost reductions. The company will also step up its commitment to Iberian wood, promoting local and sustainable fossil fuel. in this first quarter is already visible the impact of some of the measures implemented.

As mentioned in our previous call, Navigator is advancing its operational excellence through a robust investment in AI, namely advanced process control solutions aimed at enhancing process stability, efficiency and product quality. The company has successfully deployed third-party APC systems, two in classification processes and value of breaching with two more in the pipeline, while it is also developing proprietary machine learning algorithm solutions internally. These include optimization of precipitated calcium carbonate incorporation and reduction of variability in tissue grammage control and integrated control of thickness, grammage and reference in uncoated woodfree paper production. This multipronged approach reflects Navigator's commitment to innovation and continuous improvement and across its industrial operations.

We're also focusing on improving efficiency by cutting fixed costs, mainly freezing headcount and optimizing running costs. We continue to invest in reliability by speeding up implementation of the asset performance management, APM system and executing specific action plans to build up teams and improve systems for asset management, maintenance and reliability. Along CapEx -- alongside this CapEx plans will be subject to careful review, especially as regards to scheduling, seeking to reduce projects in 2025 by approximately EUR 40 million, prioritizing those under the resilience and recovery program and those offering higher rates of return.

Lastly, we will address our commercial strategy and market diversification by relaunching economic products, being more aggressive with low-end products in the face of the current economic situation, while protecting the margins and volumes of premium products. With a positive perspective following the decisions of the European Commission on 24th of April 2025, the ERSE, the energy regulator in Portugal on 22nd of July, a revised third-party access tariff for less intensive customers has been set. Navigator installations in high and medium voltage will benefit from rant discussion on those tariffs between May and December '25. In addition, with approval of increased support for indirect CO2 costs in Portugal through the environmental fund. This support, we must say, has been both delayed and very modest, especially when compared to the more substantial measures provided to our competitors in several other European countries, notably in Spain, in France, in Germany, and in Finland. Business diversification and innovation in products remain at the heart of Navigator strategy, especially in the tissue and packaging segment, where there is still great potential for growth. Thank you.

Thank you, Antonio. This ends our presentation. We are now open for the Q&A session.

[Operator Instructions] Our first question comes from Cole Hathorn from Jefferies.

I'd just like to follow up on your office paper business. In a challenging demand environment, you've done exceptionally well. So I'm just wondering on your commercial strategy, how did you maintain the stronger operating rates of kind of 87% versus the industry? Was this a real focus on the economic products to keep your operating rate elevated. I'm just wondering commercially how you drove the better operating rates in uncoated woodfree.

And then I'm also just wondering, sticking to Europe, was there also something around one of your competitors or some of your competitors dropping the ball commercially? Just wondering if it's a bit of both.

Okay. Thank you for your question. And I'm trying to rephrase it just to make sure we fully understand them. I will give some elements to the answer, and then I'll ask Quirino to follow up.

Your first question is focused on office papers. And you realize that our results are quite resilient under the present situation, and you would like to understand how this resilience can be explained vis-a-vis our European competitors. Is this right?

That's correct.

Okay? And the second question is if you believe that some of our European competitors have dropped the ball under the same context, I understand.

Yes.

Okay. I will give you some elements of answer and then Quirino will follow up with more details.

For the first question, I think there is not a silver bullet. We didn't perform one single action that allow us to be significantly more resilient than our competitors. First and probably foremost, we have a unique product quality that is second to none to anybody else in the world. And we have very, very strong brands. And I think, again, this quarter, our quality has proven to be very differentiated from our competitors. And in an environment where people consume less products, they probably can afford to choose better products. At the same time, our brands have a very large recognition in the world, but particularly in the markets where we are in.

The second element, I think, is related with our sustainability practices and our sustainability reputation. We didn't saw and we are not seeing any drawback any decrease on sustainability when choosing papers, namely office papers and filling and writing papers. And we have the sustainability credentials that we show, we prove, we demonstrate, again, second to none in the group.

The third element is probably related with our geographic spread. We are very much present in the corners of the world, if you will, with a strong presence in Europe and a growing presence outside Europe, which I think also Quirino demonstrated.

I will stop here on the first question. I will ask Quirino to complement what I've mentioned. And then we can also explain how economic products has helped us to support the high end.

Absolutely. Thanks for the question. So I think Antonio mentioned the key points. So we see a strong resilience on our premium and branded offering products in the market. And this is related with the fiber and the quality of the products, which is very appreciated in the market. So I think this is really, as Antonio mentioned, a strong element to the answer.

The other one is in geography. Actually, our coverage of around 130 countries in the world provide contrary to some of our smaller competitors in Europe provide an insurance, let's say, because we're covering several regions, we take profit from local regional growth. We did see the Americas, both in North America and Latin America quite positive for us as well. Don't forget that we saw this year also a decrease in imports into Europe, which was also helping the European industry to find some space. But your question relates to our comparison to Europeans. So imports is not an element to answer this, but it helps everyone, I would say.

And I would just comment on what I mentioned before on the dual pricing strategy where we continue to protect more the price -- decreasing less the prices on the premium and branded products. But we went more strongly into the economy market with our partners, supporting them on their needs of economy products now that imports are reduced. And so this increased penetration in economy products also boosted our operating rates compared to European mills.

Regarding your second question, I think we can -- sorry, regarding your second question, I think we can concur with you. What we have seen so far is exactly in a market where demand is shrinking in some regions more than others. We see a significant amount of competitors leaving this market, either leaving to other markets or just, as you said, dropping the ball. This was the case clearly in the States, as we mentioned, with one large mill announced for this year, actually already stopped and another one preannounced for next year. We had a sale towards the end of last year and early this year in Europe.

And without naming competitors, I think we can keep on seeing the same pattern. If you just look to the results and keeping the geography around if you just look to the results of our European competitors in Q2 and Q1 this year, I think it's easy to understand that some of these companies will never be viable. So in a market that is going down in terms of demand and lacking strong elements of competitiveness, I think it's a question of time before we see others keep on reducing capacity.

And maybe just as a follow-up, your cash costs, you have on Slide 14, your cash cost going down 19% quarter-on-quarter. That's a very big reduction in cash costs. We've seen some of the Nordic players talk about lower wood costs. We've seen some easing of wood costs after a rally in wood costs, but most people are talking about an easing of costs into 2026.

So I was just surprised to see cash costs coming down so much for Navigator. So I'm just wondering if you could give a little bit more color of what drove the lower cash cost. Is it wood? Is it just better operating rates? Is it your own self-help initiatives to reduce chemical energy consumption? Any color would be helpful.

Okay. So if I understand correctly, you'd like us to give a bit more color on the cash cost reduction, correct?

Yes, please.

So the cash cost decreased in all different segments. They have decreased in pulp, they have decreased in uncoated woodfree and packaging and they have decreased in tissue.

The ones that you mentioned that are in our Slide 14 are specifically referring to pulp. And let me add the following. I think probably we have a couple of elements here. One, as we have seen, our cash costs are on top at the level of 2021. So it's a significant reduction on 2021. Having said that, we had an increase of cash costs in Q1. So we are comparing Q3 with the Q1 where we had higher cash costs. At the time we explained, this was mainly related with energy and chemicals.

So the different elements that we have mentioned, they all play a part here in the reduction. I think we can also say that in between September and January this year, our total cash cost dropped 20%. So you see the big impact that we are trying to have on cash cost control.

What are the main elements? For sure, energy and chemicals that have a bigger impact on the first quarter of the year. Also, wood is mainly by managing wood origins by managing the sources of wood. And also, we have managed to keep in control fixed costs. Of course, when your operating rates are improving, you have also an efficiency element on it.

I will pass to Fernando if he wants to add something.

No. Perhaps on the fixed cost that is on the payroll side, at the beginning of the year, the expectations for the year were higher than the ones that we have now. And part of our payroll expenses are related with the performance of the company. This means it's also some justification for the declining in the cash costs in the period.

Related to direct costs, it's like Antonio said, the energy, chemicals and the wood. Part of it is price and part of that is management, the proportion of wood available from different sources and trying to be more efficient on the operational side.

Following up the comments from Fernando,, let me just add one thing about HR, which is we took the decision on -- already on the second quarter. We announced it when we present second quarter results as a freeze in recruitment. So we are managing our operations with, I would say, a more limited number of people, which is a challenge because in some areas, we are building new equipment, we are building operations, we are growing. In some other areas, we are not. So we are balancing people between different operations to keep costs under control.

Our next question comes from Bruno Bessa from Caixa Bank BPI.

I have three, if I may. The first one, you mentioned an improvement in terms of your backlog for the Q4. Just wondering whether this is a pure seasonal effect or if there is an upturn in terms of demand that is above the usual pattern in Q4. This will be the first question.

The second question regarding paper prices. In the last cycle trough, you control quite well the price level because you reduced you and your competitors reduced the average capacity utilization rate. My question is why aren't you doing the same this time around? What has changed in the market for you not to follow the same strategy this time?

And the third question, we saw a relatively weak quarter on volumes in the tissue business following on a year-on-year basis. Just trying to understand what is behind this effect, if there is any kind of one-off impact in terms of production? And what are your expectations for the upcoming quarters?

Okay. Thank you. Again, for sake of clarity, I'm going to try to rephrase the questions and I will give some elements of answer. I will ask my colleagues to help on replying. So your first question is about the improvement of backlog. I think you are referring to uncoated woodfree and you'd like to understand if this is demand or purely a seasonal effect.

Correct.

Okay. Thank you. Your second question is that you believe that previously this industry a better discipline on pricing and we try to understand what is happening right now.

That's correct.

And the third question is about tissue. You saw coming to what you were expecting weaker volumes on Q3. And would like to understand if this is one-off impact or any issue regarding our mills.

That's it.

Okay. I will give elements over three questions. For the first two, I would then ask Quirino to follow up. And for the third, I will ask Nuno also to comment.

So starting with backlog improvement. A very quick comment, and Quirino will detail much more than myself. This is much more than seasonal effects. We are actually conquering, if you will, market share. I think we have shown that in one of the slides. We are conquering market share in order intake. Quirino can elaborate a bit more why we are doing that, but some elements of that have already been given, namely by enlarging our product offer with adding new -- not new, adding products that we didn't have before.

On paper prices, I think we agree with you. We see the same. We see that the discipline of the market this time was not at the level that was before. We, as a market leader, try to keep prices and provide actually an umbrella for prices where the majority of our competitors could protect themselves, but they choose not to do. They choose to -- in spite of that to lower prices and, of course, we are also reacting namely with low-end products.

Look, I'm not sure if I mentioned this in one of these calls, but I mentioned this very often. There is a very famous sentence from Robert Crandall. Robert Crandall was the CEO of American Airlines after the liberalization. And he said the airline industry was run by the dumbest competitor. And I think this applies also to pulp and paper. I mean no matter the effort that we, as a market leader, do to protect prices, some of our competitors, I guess, out of the aspiration, I go back to the first question that was raised by our colleague from Jefferies. Out of the aspiration, they just give up drop wall, I think was the expression and decreased prices.

Nuno, do you want to follow up, please?

Yes. So on the backlog on Q4 is a bit seasonal, but more than seasonal. So we see -- first, we are getting our market share in deliveries, in sales. But what you see in backlog is actually our ability more recently to progress more in market share in order intake, which is a bit more forward-looking because these are orders to be delivered in the next few months. So we are progressing on that.

Again, in the Americas, a bit in Europe as well. And in what we call the overseas markets, the North African and Turkish market, which also are picking up a little bit due to the opening of the upward trend on the pulp prices that we mentioned. So this is bringing more activity to the paper market as well.

On the prices, only to agree with what Antonio said, I mean, with low pulp prices in -- during the number of months in a row with a portion less now than in the past, but with a portion of players which are nonintegrated, operating on average. Our competitors were, on average, at a lower level. You listened for sure that on average, including us, the uncoated woodfree industry in Europe was operating at 81%, so slightly up from 80% last year, but we increased much more than the market. So our competitors are under severe pressure. So probably that's the explanation over there.

Regarding your third question on tissue, also an introductory comment and I'll pass to Nuno. First of all, no, we don't have any issue in our mills, so no operational issue, no one-off impact. The economic situation across Europe is not across the world, but particularly across Europe, and this affects tissue, obviously, that affects other brands, less tissue than other brands that also affects tissue. But also, we have been working on improving profitability and we have decided to net down some sales that we believe are not profitable for our objectives.

Nuno, do you want to follow up, please?

Okay. Can you hear me? I hope so.

Yes.

Okay. No, basically, you said it all already. The market in tissue this year is slightly slower in terms of growth. I think we've said it versus last year, we were -- we have a 3%, 4% growth rate in the market. This year, European market, Western market has been growing at around 0.3%, 0.4% growth rate, which is relatively small, reflects the economy, some tendency for some consumers to trade a bit on specs. So instead of buying three or four ply products, they might choose a similar product, but with two plies or reduce a bit the kitchen rolls used at homes.

But I mean, this reflects the overall economic sentiment on one side. And the second reason that Antonio also mentioned, we want to have sustainable and healthy relationships for both sides, always with our partners and clients and protect the long-term sustainability of the relationship. In some situations, it's better to drop a bit some volumes, but to protect the way we are able to serve those clients, and this is what we've been doing. But nothing that is concerning for others.

Okay. If I may, just a follow-up on the first question about the demand for -- and the backlog that you have. From what I understand, the improvement you are seeing is mostly driven by your market share gains more than an effective healthier end demand market at this stage, right?

Yes. The market in Europe in the latter part of the nine months is not significantly better than what it was in the beginning of the year. Of course, there is one positive impact is that imports are significantly increasing. And this, of course, also open space for long-term strategic suppliers to our customers.

[Operator Instructions] Our next question comes from António Seladas from A|S Independent Research.

I have three. First one is related with the different dynamics between Europe and U.S. regarding the printing and write paper. So U.S. is coming down by 1% and Europe about 6%. So what are the difference why the difference is so large, taking consideration that, I guess, the digitalization and all that stuff is more or less similar.

Second question is related with saving costs at your U.K. tissue operation. If you can provide some color on it and when we should start to see the results on the profit and loss account.

And last question is related with -- there were some provisions on the third quarter figures that you released last week. So I don't know if you can provide also some insight or explain why were these provisions.

António, sorry, I'm so sorry, but I think I can summarize the first two. I didn't at all got the third one. Can you please be so kind to say it again?

Sure. There were some provisions on your profit and loss on your third quarter figures in your third quarter results release last week. So if you provide -- if you can explain why were -- what was the reason for the provisions?

Okay. I'm going to rephrase the questions just to make sure that we fully understand them. First one, you'd like to understand the different dynamics between U.S. and Europe in terms of the downturn so far this year?

Yes, exactly. What explains the difference, so big, so large.

Okay. Okay? The second one, if I understood correctly, is about our tissue U.K. operation. And by saving costs, I'm not sure if you were referring about synergies or if you're referring about our project to consolidate into a smaller number of installations.

It's the second one, in fact.

Second one. And the third one are provisions on the third quarter results. Correct?

Correct.

I will give a quick comment on the first one and the second one, I'll pass then to Quirino or Nuno and the third one, Fernando will answer you.

So the different dynamics. I think most likely, we cannot justify what is happening in the uncoated woodfree market no longer by digitalization because I agree with you, if it was purely digitalization, the conversion will be more or less the same, and it is quite significant.

Having said that, let's not forget that the market downturn started in U.S. prior to Europe, a couple of years, three or four years prior to Europe. And in U.S. for probably quite some time, we see more an asymptotic behavior of demand. So I think the main explanation for the difference is the economic dynamics on -- between U.S.A. and Europe. But I will leave to Antonio to comment further.

I think just the same, if you think on the data between '19 and '25, if you compare 2019 with 25% and you average the average percent will increase in the market, the annual -- the compound annual growth rate is actually quite the same. It's 5.5% in North America per year from '19 to '25 with COVID in the middle and all of that and Europe as well, 5.5%.

So as you mentioned, Antonio, there is a matter of timing where U.S. started to decline much before and now it's more an asymptotic with 1% decrease.

Regarding the cost savings in tissue by consolidating the operation, and before passing to Nuno, just to remember, we are doing this with an ongoing operation in five sites. and we are not buying new machines. So this process is a process that is relatively slow because we need to make sure that we do not let our customers down. So we can only migrate the machines when we are able to reach production in such a way that we keep on supplying our customers in a continuous way. Also, this implies a reduction of number of people and in some cases, a reduction, which is the most expensive. In some other cases, people moving from one side to the other.

So if this takes people into consideration, you have from one side, our concerns with people like a company that is very much concerned with its HR. And also we have consultation processes with the employee representatives. So the process already started. It started around August to take significantly more than one year. Nuno?

Yes. I think it might be worth stating even though that's not exactly the objective of your question, but we are addressing both fixed costs and structural costs, but also variable costs in the U.K. operation. So we have -- since we acquired the company last year, we have been performing a revision and the redesign of all cost items. So our paper costs are going down significantly, but also, let's say, the packaging materials, logistics, et cetera. So that's one big element that we are working on.

Second, as Antonio mentioned, we are working on the fixed costs. First, of course, Accrol, as you know, as you remember, was floated in the market. We took out a lot of PLC costs and cost -- excess costs that a company that was independent and directly floating in the U.K. market required. Now we have started as it was announced in the process of restructuring and consolidation of our sites. We've just started. It's planned to last until last year. We will again optimize the cost structure of the company, and we will do this in order to have one of the most competitive and most efficient operations in the U.K.

In addition to that, something that we are working also in parallel, let's call it the third element of it is increasing productivity of our lines and our plants for you to have an idea, efficiency when we started and we -- the company joined Navigator one year ago, 1.5 years ago was around the OE of the operation was around 30%, 35%. And since then, we have already improved it to 45%. So this is a technical industrial measure KPI, but it's worth mentioning that productivity on the lines, the production lines has also increased significantly over the last 16 months. So overall, we're working on all of these elements.

About the provision, the provision has two elements. One element is the fact that we will dismiss some people at the U.K. and that represents more or less 30% of the value. The remaining value regards different with a supplier in our investment phase that is asking works and things like that, and it starts with process. And despite the fact if you lose this will increase only the amount of investment, we have accounted a provision because we have some tax benefits on that.

Okay. Just a follow-up question regarding the different dynamics between U.S. and Europe. Should we expect -- what kind of demand should we expect in Europe for next year? So I don't know if you can share with us your ideas.

This is the hundred million dollar question. Again, First of all, we cannot share what we have, but this is competitive information. But I think some of the elements that we gave you as an answer can provide you -- before I can provide you an answer now. If we believe this is very much linked to the economic situation across Europe, if we are positive that the economy next year is going to be significantly better, I think we will see a significantly lower decrease. If we believe that the economy is going to be more or less at the same level, we will probably see more or less the same type of decrease.

Ladies and gentlemen, there are no further questions from the conference call at this time. We will now proceed to read the first question from the webcast.

The question comes from Jaume Rey Miró from GVC Gaesco. And the question is, do you expect CapEx linked to ESG projects to keep these high levels we have seen in the last three years until you achieve these CO2 targets in 2035? Can we have a forecast in absolute terms for CapEx in general next year?

Okay. I'm going to give an introduction and then Fernando will follow up. ESG is not only decarbonization, but I understand that the main concern and of course, also the main CapEx so far has been decarbonization. If you probably remember the slide in our presentation, Slide #10, and you see that the emissions will be stable from 2026 to 2030. So we will drop vis-a-vis the reference here, which is 2018. In '26, we expect to drop 55% out of 86%, and in 2030, 58% out of 86%. So I'd say the large majority of the emission reduction is done.

So purely decarbonization, the large majority of the projects are behind us. is why we are able to keep this level of emissions in the next four to five years. Of course, we are always willing to look to opportunities to speed up the decarbonization provided we find that the projects are value added and they are value added by themselves or Europe makes available funds to increase decarbonization and we increase the value added by using those sites.

So, in short, a large majority of the ESG investments dedicated to decarbonization, which is the largest part, I would say that will be concluded by 2026 when we conclude the PRR, the EU Next Generation funds.

This means 2026 despite lower than the amount that we are expected to spend in 2025, it's still above our average investment.

Our average CapEx is around EUR 100 million and EUR 120 million. This means from 2027 onwards is what we would expect. Of course, without expansion CapEx. So the PM3 expansion, which will mainly in 2026 and using again grants from next-generation funds will be concluded by September 2026, and we hope to be able to take the final investment decision on the tissue machine by the end of this year and also the impact of '26 and '27. Fernando was referring this ballpark EUR 120 million is outside the normal maintenance CapEx without expansion CapEx.

This ends our session. Thank you all for your time. As always, we are available for any additional clarification through our usual contact. Have a great evening.

Good afternoon. We welcome you to The Navigator Company First Half 2025 Results Presentation. [Operator Instructions]

I now hand the conference over to Ana Canha. Please go ahead.

Ladies and gentlemen, welcome to The Navigator Company Conference Call and Webcast for the Second Quarter and First Half Results. Joining us today are the following directors: Antonio Redondo, Fernando de Araujo, Nuno Santos, Joao Le, Dorival Almeida and Antonio Quirino Soares.

As usual, we will start with a brief presentation, and then we will have a Q&A session at the end. The presentation can be accessed through the links available on the website, and questions may also be submitted using the webcast platform.

Commenting on the main highlights, I will hand over to Antonio.

Good afternoon, and thank you for joining us today. I'm glad to be here once again and share with you our second quarter and half results.

As we will see in today's presentation, Navigator again demonstrated its ability to quickly adapt to very challenging circumstances while preserving its unique competitive position in Europe. The company continued to display the capacity to respond to market dynamics through its focus on creating value, protecting its margins while continuously investing in diversification and consolidating its foundations for sustainable growth.

I will begin with Slide #4, which provides an overview of the first half. The year started with rising pulp prices, largely due to constraints on supply and an upturn in market activity. However, from early April onwards, after the formal announcement of rising protectionism and the normalization of pulp supply, it triggered a sharp drop in pulp prices in China, although imports remained overall robust. This drop in China had almost an immediate knockout effect in Europe.

Protectionist measures have added to market volatility, contributing to slower economic activity and the decline in consumer spending. Despite that, the slower economic activity and the decrease in consumer spending, our Packaging and Tissue segments delivered solid year-on-year growth.

In Tissue, we are successfully scaling up operations and harnessing synergies with 35% growth in turnover. Volume is up 27% and mill brands are up 20% on a year-on-year basis. This is following the recent acquisitions, namely Navigator U.K (sic) [ Navigator Tissue UK ]. As key highlights, our international sales represent now 81% of our total tissue sales.

In Packaging, our sales continue to show positive momentum with growth in volume, value and strategic positioning in lower basis weight. The share of low basis weight products in our portfolio rose to 46%, up from 15% in 2021. Over the same 4-year period, total sales increased by 2.6x.

Navigator sales were up 8% year-on-year in the first half, thanks to a 4% rise in price and a 5% increase in volume. Measured in area of paper sold, sales were up by 9% due to the increased penetration in low basis weight segments.

Navigator continues to be a world leader with its sustainability practices, keeping with Sustainalytics' list of 2025 ESG Top-Rated Companies, and ranking within the first top 5 companies in this sector worldwide.

Also with a top score of A in both CDP Climate Change and CDP Forests, this international recognition has bolstered our commitment to responsible management of climate and deforestation risks. Of the more than 22,000 companies assessed by CDP in 2024, only 2% are included in the A List for achieving the highest rating in one or more of CDP questionnaires, while we actually had A in both CDP indicators.

We maintained a strong financial position after dividends and strong CapEx. Our net debt-to-EBITDA ratio was 1.46x.

Now turning please to Slide 5 with the main financial highlights. Turnover totaled EUR 1,019 million. The success of the diversification strategy with Tissue and Packaging segments already accounting for close to 30% of turnover, supported by commercial initiatives geared to grow in new markets, has secured consistent and stable turnover despite a macroeconomic and geopolitical situation dominated by deep uncertainty and volatility, slack global demand and significant trade tensions, which have affected the performance of the overall pulp and paper sector.

EBITDA stood at EUR 216 million, down 28% on 2024. Fernando will soon highlight the main impacts on the period. In an uncertain macroeconomic environment, our EBITDA margin remains among the strongest in the paper industry, although below our historical average, but yet still outperforming once again the sector's average and well within the variance of the last 15 years.

Net debt stood at EUR 676 million, up by EUR 58 million in December despite an interim dividend payout of EUR 100 million in the first quarter and the high level of CapEx over the period.

I will now hand it over to my colleagues, who will walk you through the results in more detail and share some insights on how our different business areas have been doing.

Fernando will start by the main impacts on EBITDA. Fernando, please go ahead.

Thank you, Antonio. Turning to Slide 6, we can take a closer look at the main impacts on EBITDA in a year-on-year comparison.

As mentioned, EBITDA stood at EUR 216 million, down 28% year-on-year, with an EBITDA margin of 21%. Year-to-date results were below last year's due to lower selling price and rising cash costs, mainly for energy and chemicals, in the first quarter. Sales volumes, above last year's, driven by increased tissue capacity as from May 2024. This more than offset the slowdown in European demand for pulp and paper. As referred, the production costs show a year-on-year increase due to higher energy and chemical costs. Also, the acquisition of a tissue-free converter resulted in greater demand for external reels.

Turning to Slide 7 with the quarter-on-quarter EBITDA amount. This second quarter, EBITDA stood at EUR 101 million, down 13% quarter-on-quarter, reflecting an EBITDA margin of 21%. The weakness of the U.S. dollar, combined with lower sales volumes across all segments in spite of an overall slight positive pure price impact contributed to a quarter-on-quarter drop in EBITDA.

Navigator's paper price dipped EUR 14 per ton quarter-on-quarter, but including a negative foreign exchange impact of EUR 28 per ton due mostly to the weakness of the dollar, the currency in which Navigator trades in more than 100 countries around the world. So the pure price impact without the ex rate effect was actually positive.

Sales volume declined quarter-on-quarter across all business segments. Pulp and Paper were impacted by the slowdown in demand in Europe as well as a more selective management of opportunities in pulp. Additionally, in early April, given the deep uncertainty surrounding tariffs, the company took the strategic decision of preventively building up stocks in the U.S. during the quarter, trimming potential paper sales in Q2 by approximately EUR 10 million with the aim of achieving higher margins in the future, which proved to be a wise move due to the increase in the final tariffs.

The downward trend in production costs in second quarter, especially in energy, benefited from financial hedge contract in 2024 and already in 2025. We entered 2025 with special coverage of electricity, circa 60%; and natural gas, 25%, but no further hedging was made during until February in view of the significant price volatility. However, in March, it was possible to reinforce the coverage, and currently around 75% of electricity needs and over 40% of gas have already been covered until the end of the year.

Turning to Slide 8 with debt maturity and liquidity. As Antonio mentioned, net debt stood at EUR 675 million. Debt repayment totaling EUR 217 million were made over the first half. At the same time, new long-term debt of EUR 200 million was contracted. The final terms for the new debt are linked to the attainment of 3 ESG indicators already embedded in our sustainability agenda and also align with the United Nations Sustainable Development Goals.

Our average debt maturity currently stands at 4.3 years as compared to 3.5 years in December with rationally staggered repayments, more than 75% (sic) [ 76% ] of total debt tied to sustainability and 75% (sic) [ 78% ] of total debt issued on a fixed rate basis, directly or using interest rate swaps. It should be noted that despite interest rates rising across the market in relation to the last financial cycle, our average cost of financing remains low at 2.5% (sic) [ 2.4% ]. The unused long-term credit facilities currently total EUR 100 million.

Since the end of the quarter, in July, we have finalized new facilities that will further extend the average debt maturity beyond 5 years while maintaining low average cost.

Antonio Quirino will now comment on pulp and paper price.

Thank you, Fernando. Turning please to Slide 10 with pulp and paper prices. The benchmark index for hardwood pulp in Europe ended the first half at an average price of $1,125 per ton, which is down by 10% on the same period last year. The first half of the year was marked by a significant rise in prices, particularly in Europe. This upward trend persisted until early April when prices began to decline. The sharpest drop occurred in China, where prices fell by 16% between April and June. The index ended the first half at an average price of $562 per ton in China, which is 6% below average historical prices.

Hardwood kraft pulp price index in Europe up by 16% to $1,160 per ton by the end of Q1. In the second quarter, the index continued to rise until April to $1,218 per ton and has since fallen back, dropping around 13% to currently stand at $1,060 per ton.

Moving to paper. The benchmark index for office paper prices in Europe, the PIX A4 B-copy, stood at an average of EUR 1,035 per ton in the first half, which is down by 6% on the same period last year, but notably 22% (sic) [ 23% ] above the pre-pandemic average, which was EUR 847 per ton in the period of 2015 to 2019, but below 24% from the peak achieved in 2022, a level of EUR 1,358 per ton.

The second quarter ended at EUR 1,006 per ton in the A4 B-copy, down from EUR 1,094 per ton at the beginning of the year. As already mentioned by Fernando, Navigator's paper price dipped by EUR 14 per ton, 1-4, quarter-on-quarter, including a negative foreign exchange impact of EUR 20 per ton due mostly to the weakness of the dollar. The evolution of product and market mix has helped to offset the decline in prices explained by exchange rate, which was, as explained, aggravated by the exchange rate.

In Europe, the A4 B-copy index recorded a 4% quarter-on-quarter decline in average prices, while Navigator's average price remained stable, sustained by the preservation of substantial price premiums on mill brands whose reputation and market penetration enables the category to position its prices at a higher level.

Turning now to Slide 11, please. Let's look at the printing and writing paper markets, where global apparent demand for these papers fell by 2.4% in May on the global printing and writing papers, where uncoated woodfree papers remained the most resilient, falling by 1.7% compared to a 4.3% fall in coated woodfree papers, where coated and uncoated mechanical fiber papers reported a 2.5% decrease.

In Europe, apparent demand for uncoated woodfree papers fell by 8.6% up to June, reflecting a general contraction in deliveries and especially imports. Intra-European deliveries fell by 7%, while imports fell by 17% (sic) [ 19% ] compared to the same period of last year, confirming a sharp slowdown in effective consumer demand in the region.

In the U.S., consumption declined moderately by 2.1% although the region remains a significant net importer in order to meet domestic demand. The heavy dependence on imports, exacerbated by the introduction of custom tariffs, is likely to push prices up even in situations of falling consumption.

Notably, Navigator's order inflow, in other words, the volume of orders received during the period of the first half, regardless of the delivery of invoicing date, increased by 10% in the first half of 2025, contrasting with a 2% industry decline. Navigator also performed well in its European markets, growing 4% compared to an industry-wide average decline of 4%. As such, Navigator's operating rate rose to 87% in the first half of the year, up 2 percentage points on the same period of last year. Meanwhile, the industry rate fell to 83%, a decline of 2 percentage points compared to the first half of 2024.

Navigator's performance exceeded that of our European peers, particularly between Q1 and Q2, during which we effectively maintained price levels. These developments enabled Navigator to strengthen its order intake market share by 3 percentage points globally to 27% and by 2 percentage points in the European market to reach 20% compared to the same period of last year.

Nuno will give you now some more context on Pulp. Nuno, please.

Thank you, Quirino. Turning to Slide 12 with the pulp market. As Antonio mentioned, the year began with price increases. However, after April, uncertainty caused by increased protectionism, particularly the global announcement of tariffs by the new U.S. administration on April 2, and normalization of supply led to a sharp fall in prices in China with knock-on effects in Europe.

The current downward cycle came on the heels of an incomplete rebound from the previous downturn. In fact, prices peaked at $600 per ton in April '25, well below the previous cycle's peak of USD 741 per ton in July '23, a 20% gap. This new drop started from a structurally weaker base and has already accelerated by more than 15% in just 3 months, as already mentioned by Quirino. The index ended the first half at an average price of $562 per ton, 6% below average historical prices.

Global demand for short fiber pulp grew by 5% year-on-year up to May. This growth was primarily driven by China, which saw a significant increase of 11% and, to a lesser extent, by the Rest of World, plus 3%. In contrast, the European and U.S. markets saw demand dip by 3% and 8%, respectively, evidence of the difficulties felt across different paper markets in these regions in the period.

Demand grew fastest for eucalyptus pulp, increasing by over 6% up to May. Chinese demand grew by 13%, while European demand contracted by 3% year-on-year. The widening cost differential for softwood, particularly evident in Northern Europe, highlights a structural loss of competitiveness following the disruption of access to low-cost Russian wood, which have historically supported the region's pulp industry. This shift presents a strong opportunity for eucalyptus-based fibers to gain market share through fiber-to-fiber substitution, increasingly positioning Scandinavian long fiber as niche products.

On the supply side, the ramp-up of new capacity in '24 put some pressure on the operating rate. However, increased consumption and maintenance shutdowns, namely in the first quarter, contributed significantly to sustaining the activity levels of short fiber producers. China is expected to continue playing a central role in the global pulp market dynamics due to the growing importance of its domestic consumption and the new capacity plant. Between '22 and '24, around 3.7 million tons of pulp production capacity is estimated to have been added in the country with a further 2.4 million tons projected for '25, a significant expansion, which has so far largely been supported by inexpensive local wood as a result of the significant decrease of the consumption of such wood on the significantly depressed real estate market.

However, the future sustainability of this relatively unexpected source of chip supply is being questioned. This is disrupting global market balances, putting pressure on prices and altering trade flows. Nevertheless, despite being substantially more expensive, international wood is expected to remain the main source of supply for the Chinese industry with significant growth projected for the coming years.

Turning to Slide 13 with tissue market. European demand dipped 0.3% following 2024's 6.3% growth amid economic headwinds and softer consumer spending. Navigators tissue sales volumes, finished products and reels, grew to 119,000 tons, a 27% increase compared to the first half of '24, with sales up by 35% boosted by the integration of Navigator Tissue UK in May '24. The recent acquisition in Spain in '23 and in the United Kingdom in '24 have enabled us to balance our geographical mix and create greater resilience in our tissue business.

Finished products accounted for 98% of total sales, while reels accounted for 2%. Broken down by customer segment, the Consumer segment has grown in importance and currently accounts for around 83% of sales. The Away from Home segment, wholesalers, the Horeca channel and offices, accounts for the remaining 17%. Additionally, mill brands grew by 20% year-on-year on the strength of a diversified customer base and innovative products.

Dorival will now comment on the main developments in packaging.

Thank you, Nuno. Now turning to Slide 14. The global market for kraft paper, on flexible packaging applications, machine glazed and machine finished, grew by around 9%, demonstrating strong momentum.

In this segment, Navigator sales grew by 8% year-on-year in the first half of the year, with improvements in both price, 4%; and volume, 5%. Measured in area of paper, sales were actually up by 9% due to greater penetration in low grammage segments. Navigator has been developing and investing in gKRAFT sustainable packaging segment, offering alternatives to fossil-based plastics and supporting the transition to renewable, low-carbon products. The gKRAFT brand has won market recognition and continues to evolve more than 309 active clients.

In this regard, the final investment decision was taken to convert the PM3 paper machine at the integrated pulp and paper mill in Setúbal with the aim of directing its production towards low basis weight flexible packaging papers. This investment will boost our competitiveness in the flexible packaging market to the industry's top quartile, positioning us as a leader in this segment. With this paper machine conversion, Navigator will become Europe's fourth largest producer of low basis weight flexible packaging paper, strategically consolidating its presence in a segment with strong growth in demand and where the unique features of eucalyptus globulus provide once again differentiation opportunities.

Additionally, as part of the diversification of packaging business, progress has continued as planned on the project for integrated production of eucalyptus-based molded products designed to replace single-use plastic packaging in the foodservice and food packaging market under the gKRAFT Bioshield brand. The start-up of 4 production lines was completed in the first quarter, and these are now operating around the clock, whilst work is proceeding to consolidate the marketing of 5 products for the food sector.

Navigator achieved certification for food contact by ISEGA, being the first company in the world to achieve such certification on molded cellulose products. And by the end of this quarter, the first contracts were signed with major retail outlets. This innovative packaging solution is undertaking exhaustive testing under tough industrial and supply chain conditions in order to ensure it is suitable for packing lines used to process plastic materials as well as refrigeration conditions used by overall supply chain, replacing nonrecyclable PET or PE trays with packaging solutions which are 100% recyclable and compostable.

Now I turn over to Joao.

Thank you, Dorival. Turning to Slide 15, please. Our ongoing commitment and investment in consolidating our responsible business has also been reflected in positive assessments from independent rating agencies.

In 2025, Navigator was again classified by Sustainalytics as a low-risk company for investors, maintaining its status as an ESG industry top-rated company and reasserting its leadership in the forestry and paper sector. Placing it in the prestigious global list of 2025 ESG top-rated companies, this recent assessment consolidates Navigator's position as one of the world's best companies in terms of environmental, social and governance practices.

Additionally, Navigator obtained the top score of A on both the CDP Climate Change and CDP Forests questionnaires for last year, securing it a place on the prestigious A List for both climate and forests, and consequently, its coveted leadership status. This assessment by CDP provides international recognition of Navigator's commitment and good practices in relation to risk management and deforestation. Of the more than 22,000 companies assessed by CDP in 2024, only 2% are included in the A List for achieving the highest rating in at least one of the questionnaires, with Navigator having secured 2 A scores.

I will now hand over to Antonio.

Thank you, Joao. Let's turn please to Slide 16 with a wrap-up of the Q2 and H1 results.

Our diversification strategy is paying off. This diversification into higher growth and less cyclical markets, such as tissue and packaging, although more dependent on end-use consumption, reinforces the company's long-term value creation and resilience.

In Tissue, we are successfully scaling up our operations, expanding into new markets and positioning ourselves to further unlock long-term synergies that will drive sustained growth.

On Packaging, increased penetration in low grammage segments confirm the strong appeal of eucalyptus globulus fiber for these segments, leading to a 9% increase in paper sold compared to a 5% increase in sales volumes in tons. The 9% are, as referred before, in area.

Resilient results despite extremely high geopolitical instability led to significant uncertainty and severe volatility. We kept our focus on: one, core operations; two, business transformation; and three, innovation. Value-added CapEx of EUR 94 million for sustainable long-term cost efficiency, highlighting 60% value-added ESG investments and growth initiatives in the packaging segment. All this was done while keeping consistent conservative financial policies after high level of CapEx and EUR 100 million dividend payout.

To be noted that in terms of safety, the first half of the year marked a significant milestone for Navigator, achieving its best result ever in the half year in frequency index, an indicator that reflects the number of accidents involving sick leave per million hours worked. A remarkable almost 50% year-on-year improvement highlights the company's strong commission to occupational health and safety driven by its mission zero strategy and continuous efforts in prevention, training and fostering a robust safety culture.

Let's turn to Slide 17 with a few words about the outlook. In view of the volatility created by the trade policies of the new U.S. administration, it is still too early to predict precisely what the total impact will be on international trade. Over the weekend though, the European Union and the United States announced the principles of a trade bill, which includes a 15% tariff on European exports to the U.S. This is, of course, expected to impact our antidumping duties, though the exact percentage expected is yet to be confirmed.

In the uncoated woodfree paper sector, North America as a whole, so U.S.A. and Canada, has an overall shortfall in production, a situation recently aggravated by the closure in the coming month of August of the largest mill of the U.S. third largest manufacturer, a mill of 350,000 tons capacity, further exacerbating North American structural deficit, which is estimated at approximately 800 to 1,100 thousand tons, so 800,000 to 1.1 million tons, to be more precise. It's worth to note that only a few number of companies can supply the demanding U.S. market, either in terms of capacity or in terms of technical capability.

Navigator is also seeing new opportunities in Latin America as tariffs in Mexico and Colombia on Asian and regional imports create [ arbitrage ]. At the same time, a relevant Latin American operation is reportedly preparing to file for insolvency, potentially shifting market dynamics. We also know that the Chinese and Indonesian producers, subject to high antidumping duties and with relatively small volumes of sales to the U.S., are likely to play a very minor role and will not feel the need to repatriate large volume of exports.

Amid the ongoing global uncertainty, Navigator is proactively strengthening its resilience through a large number of targeted initiatives under the program called Operational Excellence Initiatives 2025-2026. Keeping its focus on high operational standards, the company has launched internal programs designed to act on different fronts to protect its results. This involves programs namely for optimization and reduction of variable costs by streamlining specific consumption of raw and subsidiary materials, seeking strategic negotiations with the suppliers as well as logistics. The company will also step up its commitment to Iberian wood, promoting its further development.

To be noted, the importance of AI as a means to reach new optimal operating points at Navigator is reflected in various ongoing projects. Notably, these include optimization models for fiber usage, our main raw material; contributing to a more sustainable use of wood; as well as APCs, advanced process control solutions, aimed at reducing chemicals consumption, starting by the pulp bleaching process that will be extended to all company departments in the coming periods. Developing some of these tools internally has proven to be a strategic advantage as it enables us to build deep expertise on how to best leverage available technologies, such as LLMs, in alignment with our operational needs.

By combining process knowledge with data science, we create a strong bridge between technology and our core business. This approach not only enhances tool adoption across teams, but also supports more effective management changes throughout the organization. We're also focusing on improving efficiency by cutting fixed costs, namely freezing head count and optimizing running costs. Investments in reliability are also to be noticed and are already in place by speeding up implementation of the asset performance management, APM, system and executing specific action plans to build up teams and improve systems for asset management, maintenance and reliability. Alongside this, CapEx plans will be subject to careful review, especially as regards to scheduling, seeking to reduce projects in 2025 by approximately EUR 40 million, prioritizing those under the EU NextGeneration funds and those offering higher rates of return.

Lastly, the commercial strategy and market diversification by relaunching more economic products without compromising. This means being more aggressive with low-end products in the face of the current economic situation while protecting the margins and volumes of premium products. Also with a positive perspective, following the decisions of the European Commission on the 24th of April and the Portuguese regulator on the 22nd of July, a revised green third-party access tariffs, or TPA tariffs, for electro-intensive customers has been set.

Navigator's installations in high and medium voltage will benefit from a relevant discount on the TPA tariff between May and December. It is, however, should be noticed that this support has been both delayed and modest especially when compared to the more substantial measures provided to our competitors in other European countries, notably in Spain, France and Germany. Business diversification and innovation in new products remain at the heart of Navigator's strategy, especially in the tissue and packaging segments where there is still great potential for growth.

The next slide, please, provides a quick update on our growth strategy. We will keep strengthening current businesses and investing in the future by assessing profitable diversification opportunities in line with our 2 founding values, innovation and sustainability. Our first obligation is inward-facing, to enhance the group's operational efficiency, not only by driving innovation in new products, but also by reducing costs, increasing output, improving energy efficiency and continuing to invest sustainably in both decarbonization and the digitalization of our operations.

In Tissue, focus on product differentiation, function of high-tech products and also the feasibility of installing a new tissue machine with a capacity of circa 70,000 tons is being studied to supply the U.K. operation as it is, as you know, a pure converter and thus has no lost production capability so far. This new machine will supply part of the circa 130,000 tons of the U.K. capacity. And after successful completion of the feasibility study, we would expect a final investment decision during this semester.

In Packaging, Navigator is operating in multiple segments and multiple products, as already mentioned by Dorival. Machine #3 in Setúbal will be converted to focus on producing flexible packaging. The new packaging operation is set to launch by the end of 2026 with an annual production capacity of around 100,000 tons. The project is advancing and equipment has already been acquired. This conversion will enable Navigator to respond flexibly and efficiently to increasing demand in the flexible packaging market as well as offering more flexible management of our industrial assets as the machine will be able to swing between producing printing and writing papers and packaging papers, depending on the state of the market.

Also, as previously shared by Dorival, in molded fiber business, Navigator achieved certification for food contact by ISEGA. We were the first in the world to do so for molded cellulose. And the first contracts were already signed with major retail outlets by the end of the last quarter. And there is a very wide range of biomaterials, biochemicals and biofuels, namely the study, the conceptual study, to produce biofuels in one of our mills that we are currently undergoing, but also in the near future synthetic fuels, which we are looking all with great interest.

We believe that all these factors, together with continuous development focused on diversifying the group's business base, will further underpin the resilience and sustainability of our business model. Thank you.

Thank you, Antonio. This ends our presentation. We are now open for Q&A.

[Operator Instructions] And our first question comes from the line of Bruno Bessa from Caixa Bank.

So a few questions from my side. The first one, just a clarification. You mentioned that one of your energy plants moved to self-consumption during the quarter. Just wondering if you could quantify the impact that this change had in your EBITDA in the quarter and if there's some way you intend to compensate this negative impact over the coming quarters. So this will be the first topic.

The second is focusing on the paper market. So if you could share with us a bit the evolution of paper imports in Europe, particularly those coming from Asia, if this is a source of concern, considering the tariffs raised in the U.S. or not.

And lastly, just trying to understand where do you believe the marginal cost producer is in Europe, considering that we are seeing prices relatively low for long. Just trying to understand if there is room for further capacity closures in the near term in the paper industry in Europe.

Thank you, Bruno, for your questions. I'm going to repeat them. I'm going to start on the second and the third because the first one, to be honest, and I'm so sorry for that, I didn't understood. The second is about the paper market evolution, namely paper imports into Europe and mainly coming from Asia. Correct?

Yes. That's it.

The third, I'm not 100% sure if you are referring to paper or mold, is about marginal cost producer in Europe, where do we believe it stands today?

Yes, for paper.

Okay. And the first one, can you be so kind to repeat the first question?

Yes. So regarding the first question, it was related with the fact that one of your power plants moved to self-consumption in the quarter. Just trying to understand if you could quantify the impact that, that change had on your EBITDA in the quarter, and if there is any way that you could recover that impact on the EBITDA over the coming quarters.

Okay. I'm going to give a couple of elements of answer on each question, and I'll ask my colleagues to follow and give you more detail. On the first question, actually, to be more precise, we had 2 installations that moved to self-consumption: one turbo generator in Figueira and another one in another mill in Setúbal. They both moved to self-consumption because of the loss of the feed-in tariffs.

And I will not give you any specific guidance on the impact on EBITDA, but I can tell you it's very difficult to anticipate also future impacts because it depends very much on the cost of energy that we are substituting in the future. So we don't know exactly -- we can have some views on the future, but we don't know exactly what is the cost of energy that we are not going to buy because we produce it internally and the tariffs that we will not pay because we don't need to buy energy.

Nuno, do you want to add anything further?

I think you got it.

On the second question, I'll ask Quirino to help me out with the figures, more precise figures. I'm quoting from the slide. We had a decrease of, if I'm not mistaken, 17% of imports H1 on H1 into Europe. And this is not because we didn't have more capacity, namely in Asia, we have more capacity to supply Europe. But as we said in previous conference calls, the production capacity in Asia is not meant to supply Europe. It's meant to stay in Asia. And this is what is happening. Actually, the decrease of 17%, one of the big contributors were actually Asia and Latin America. I'm also quoting by heart. So we don't expect Asia to be a big factor, and depending towards the end of this year, the approval of the EUDR, so the regulation for deforestation, it might even happen that those imports will be lower than what we are today. Quirino?

Just to complement, actually, so far this year, in the first half, the decline in imports from Asia has actually been more significant than the decline overall, so as Redondo mentioned, the decline of 17%. The imports from Asia was minus 22%.

Bruno, you mentioned how do we expect this evolution to occur after any possible tariffs or the implications of the tariffs. We don't see today Asians selling much in the U.S. market because of very important antidumping processes they face over there. It depends on the country and on the company actually that they face extremely significant tariffs over the already antidumping tariffs with additional tariffs right now. So they were out of the market and they will stay out of the market. So we don't see significant or relevant reallocations of volume because of that.

Regarding your third question about where does the marginal cost producer sits today in Europe, even with the pulp prices where they are today and, again, quoting by heart, without looking into any figures, I would say they are somewhere between high EUR 900 to above EUR 1,000 per ton. However, when we look to the cost curve, some of those products might be considered specialties, and they can go up to EUR 1,000, EUR 1,100, EUR 1,200. So it's difficult to anticipate what are the capacity in this area of the curve that will shut down.

What we have seen in the past that typically the shutdown is not -- or the very marginal cost producer is more midway in the curve, namely the mills that belong to companies that have other businesses and can repurpose their assets to different types of papers.

Quirino, do you want to add?

No.

Our next question comes from the line of Leonel Lucas from Oxy Capital.

So I have mainly 2 here. First, regarding the PM3 conversion. How much time do you expect the machine to remain off-line during the conversion? And when the process should start, so when should we start to see it being off-line? And then also if you can share some context on the differences in the price level and gross margins between the Packaging and the Paper segment that this machine was producing before? So this would be the main questions.

Okay. So the first one is to understand how long it will take and when we'll start the shutdown for the conversion?

Yes.

And the second one are price levels or, I guess, what you have to know is margin levels, price levels of Packaging and the coated woodfree Paper segment on that specific machine.

Yes, to understand a bit the difference.

Okay. Obviously, on the second one, we cannot give you precise figures, but I will try to give you overall comments, and then I will ask Dorival to give you a bit more insight on the first and Quirino on the second. The conversion on the -- so as it was explained by Dorival, we already bought the main pieces of equipment. They are, of course, being produced by the machine manufacturers, and they will start to be shipped here to Portugal somewhere next spring, and we'll look to a start-up late Q3, early Q4.

And without being very precise, we probably estimate 4 to 5 weeks of shutdown, but Dorival can probably add to that.

Thank you, Antonio. We are expecting 4 weeks of shutdown in the next year, starting in August and starting that in September. And that's our plan, 4 weeks in the end of August.

Okay. On the second consecutive question, I'm going to split the answer in 2 parts, and then Quirino can give you a bit more highlights. What we can comment is what we do today, okay? Today, if we look to our tail of uncoated woodfree, mainly produced on that machine, but not only, overall tail of uncoated woodfree, and the margins of the products that -- packaging products that we produce on that machine, the packaging products represents easily 3 to 4x a higher margin than the tail of uncoated woodfree. And the tail today is the tail that remains after taking this volume out.

Second comment, I think we have shared that publicly in the press release, on the study, we believe that we are going to move a machine that is on the third quartile in uncoated woodfree today to a machine that will be on the first quartile of flexible packaging in the future. But Quirino can add a bit more.

Sure. And the whole idea of the project is to position the machine into low basis weight, as mentioned a few times. And typically, today, these products have a supply-demand balance, a very specific supply-demand on this niche, which is, as we see it, favorable. And typically, the price levels are more interesting than the commodity, and coated and the commodity packaging market as well. Another element which contributes to the margins that Antonio mentioned is that this is purely a reels product for us, so no converting costs for us like we have in some of the uncoated woodfree products at sites where we have to convert into the final product. So this also contributes to elevate the margins of these products.

Although what you have asked probably is a good moment to remember because this is information that we have shared already in the past. We are committing to this packaging project, the overall packaging project, something between EUR 60 million to EUR 70 million, okay? And this includes the conversion of the pulp fiber to produce high kappa pulp, so to produce this innovative high kappa pulp with eucalyptus. This includes the conversion of the PM3 that we are speaking about and includes as well the molded cellulose business. So it's around EUR 70 million. A good part of this process -- sorry, and also some adjustments on PM1 in Setúbal and some adjustments on the effluent treatment plant to handle brown paper. The paper machine itself is around EUR 30 million. All these investments have been submitted to -- actually, not all, but almost all have been submitted to the EU NextGeneration funds. So we expect, of course, a contribution from the EU NextGeneration funds.

Out of the EUR 70 million, the paper machine itself is about EUR 30 million. Now to compare the 2 producers, it was referred, 100,000 tons. To compare with a greenfield project, a greenfield project will produce basically the same quantity, 100,000 tons is more or less the size of the machines that are today available in Europe for flexible packaging, and it will cost only the paper machine 5 to 7x more than the conversion. So our inroads into packaging are low CapEx, low risk. And of course, when successful, we can scale them.

And just to clarify one thing, when you mentioned the 3 to 4x higher margin, you are mentioning EBITDA margin or gross margin?

The contribution margin, gross margin.

It's actually a good point because the staff to operate a machine for packaging is smaller than the staff for operating a machine for uncoated woodfree. So proportionally, on EBITDA, we'll be even slightly better.

Our next question comes from the line of Antonio Seladas from A/S Independent Research.

So I have 3. So in terms of tariffs, I don't know, you mentioned that it's still early to measure the impact. Nevertheless, its impact, going from 10% to 15%, it seems to be manageable. I don't know if you can confirm if all this uncertainty, now that it's now clarified, it could improve the demand from your customers. So maybe some customers just postponed orders. I don't know if you can confirm it or not.

Second question is related to cost. You mentioned about cost, optimizing running costs. I don't know if you can provide some color, some figures on this, and if it's already for the second half of this year or it's just for 2026.

And the last question in terms of CapEx. You mentioned that you are now slashing CapEx by EUR 40 million this year. So if you can update us on the new figure on CapEx.

Okay. Antonio, thank you for your questions. Can you please -- I understood one question was about the certainty of tariffs, but now that we know the tariffs, if we can provide some color on that?

Yes. Just in terms of the tariffs, it seems from my side that moving from -- because you all have it suffering 10%. So moving from 10% to 15%, it seems manageable. Nevertheless, I would like to hear your comments on this. And if you really believe that there are customers that have been postponing orders because of all this uncertainty and if now with the agreement on tariffs done, settled, if you expect more orders or an inflow of orders or something different from the place up to now.

Okay. The third question was about cost optimization, if we could provide figures for our cost optimization targets. And the last question was about CapEx, if we could anticipate where we will end CapEx by the end of this year. But I didn't follow the first question, if you are so kind to repeat it.

First question was on tariffs, if you can comment on tariffs and about this 10% to 15% increase.

Okay. So I'm going to give some introductory comments on tariffs, and Quirino, which actually has been recently visiting customers in U.S., he can give you more color. I will comment costs, and I'll ask Dorival to comment costs as well, but obviously, we are not going to share specific figures. And CapEx, I will ask Fernando also to comment on expectations, a range for CapEx towards the end of the year with a reduction of around EUR 40 million.

So tariffs, my introductory comment. Again, it's yet too soon to understand the full impact because it depends on the impact of other regions of the world. Let me build a scenario. If Europe has 15% and Brazil has the 50% that has been commented so far, this could present a great opportunity for us, okay? There are not -- so the main players into U.S.A. are Portugal, one Scandinavian producer specifically, Brazil. And then all the others are very small, a couple of small in Asia and in Thailand, namely in the Middle East, one in Israel, but all very small.

So if our gap to Brazil is positive, this will present a great opportunity for us, and it might be manageable. However, like we said in previous calls, the tariff will be a cost for the antidumping. So we will see the antidumping increase. Having said that, our antidumping today is significantly lower the antidumping that Brazil or China or Indonesia are suffering. So if this gap to Brazil is positive, like it is already today to Asia, I think this will present a good opportunity. And yes, we believe that customers will be even willing to cooperate more with us.

But Quirino, can you give more color on this subject.

Okay, sure. So as we mentioned, out of a market of 5 million tons consumption, Canada plus the U.S., because Canada is USMCA compliant in this product, so let's look at Canada plus U.S., there is a deficit of supply of 1 million tons in a market of around 5 million. So this is quite relevant. And there is still -- not speculating, but there is still the question mark of 1 further machine, which is being discussed of when it will shed in the coming months or not. But even without taking that into consideration, 1 million tons out of 5 million tons is a big deficit. And this is a relatively new picture in the U.S. and the customers start to realize that. So when I was there very recently, the customers are clearly aware that the supply to the million tons deficit is not available from many origins, as Antonio mentioned. So you have a few producers that can do it.

Many of the products have specificities that make them possible to produce only if you have dedicated lines for that. So you need to have equipment ready to do that. Particularly, in the Capesize area, you need to have a letter size capability and you don't have all the mills in the world available to do this. So it is really a matter of who gets the relative tariff, which is less harming. So it can be a good opportunity for us.

There is a lot of discussions now about pricing. So we mentioned in our presentation that one possible scenario is also that the price moves up because of the tariffs. We are discussing with a lot of customers, existing customers and actually new customers, that are looking at us with the eyes on an opportunity. So let's see where it stands, but it all ends up with how much will the price develop and what is the final tariff for everybody.

Thank you, Quirino. On cost optimization, I will give also introductory comments and Dorival will fill with more information. Obviously, we are not going to give specific figures on where we expect our cash costs to land. I'd like just to comment that we are working in all the different areas of cash costs, so consumables, efficiency of production, logistics, better negotiating chemicals, mix of supplies from different origins and so on. Also, it's difficult to anticipate the evolution because we are moving from the traditional approach of cost control to introduce artificial intelligence, mainly through APCs, on controlling better our processes.

We have already examples on lime kilns, on bleaching, on recovery boilers, and we expect to extend these APCs to other areas of the business, to other parts of our operations. Also, we have developed internally a process of improving reliability. We had a couple of hiccups on our mills in the last quarter, so we expect to improve reliability. And only by improving reliability, namely through asset performance management, only that we'll improve cost efficiency. But Dorival can add some more on this.

Okay. In terms of variable costs, as Antonio already mentioned, the advanced process controls will play significant role in terms of chemicals optimization and in the paper side for the furnace optimization as well. And we already developed the reliability improvement plan and reliability is very critical and it impacts cost as well. And for the fixed cost, we already said that we are working to freeze some head count, and we have plans for expenses reduction as well.

Okay. On CapEx, I'd like Fernando to add some comments to give you some indications.

Okay. First of all, we need to consider that we are committed to fulfill our obligations with [ PRR ]. Nevertheless, I would say that our investment in the second half will be lower than the investment in the first half, slightly lower. I think we will not exceed the amount of the first half.

Okay. Just on the cost side, sorry about insisting on this issue. So I understood that the measures that we are going to take will save cost immediately over the second half or it's something that benefits over the next year?

It is actually a very good question, Antonio. Thank you. Some will have an immediate impact. Some will have an impact on Q4 and some will have an impact next year. So we have a mixed bag. But I think probably more important than when the impact is that mainly through this, I would say, digitalization of our process, we expect them to have a longer-term effect.

Our next question comes from the line of Luis de Toledo from ODDO.

Two from my side. The first one with regards to the Navigator Hub, the e-commerce tool. You mentioned last quarter, I don't know if you could provide some update on the performance, number of orders that you're receiving across that channel and the potential impact that it's having on your prices and your relative comparison with sector average.

And the second question with regards to the final investment decision on the backward integration into paper for the tissue activity in the U.K., which are the factors that could weigh more on the final decision? Are they internal? Are they external factors, assuming that they will not receive NextGeneration funds?

Okay. Thank you, Luis, for your questions. If I understand correctly, the first one is about the Navigator performance. And the second question are on the final investment decision of Tissue UK, what are the factors that might impact the decision, internal and external, correct?

Correct.

I will give an introductory comment for each one of them, and I'll ask Quirino to comment on the first and Nuno to comment on the second. So the performance of Navigator Hub has been reinforced and continued over the quarter and over the first half of the year. I think we already mentioned we expect that over EUR 300 million of our turnover will pass through the hub.

I do remember that the hub has been mainly a relationship with existing customers, but we are starting -- because mainly the situation of the paper merchanting in Europe with the bankruptcy of a large paper merchant in Europe that had a brand that was owned by us, but exclusively distributed by them, we plan to do some inroads of supplying the customers of this customer, not the customers of other customers, the customer of this customer, with these brands. And we have plans to start small projects in a couple of European markets very soon. But Quirino can give you more insights.

Yes. Not to repeat, so the hub has been so far a transactional platform for a few years now. It has grown. All the customers are basically onboarded. Many of them actually place their orders of the several businesses that we have, paper, packaging and tissue and then molded cellulose, they actually placed the orders online. And we are on track, as Antonio mentioned, to reach orders of around EUR 300 million -- actually, in excess of around EUR 300 million this year.

This second tier approach, as Antonio just mentioned, we are having inroads in a few -- the first inroads in a few selected markets in Europe, as we mentioned already in the first quarter. We started in Poland. We are now also approaching Spain, Italy, France and the Netherlands for different reasons. From the pilots we have seen, I think you also touched that in your question, we see that by doing this, we can have interesting average price and mill brand sales, which actually contaminates positively the rest of the market. So we see that we can penetrate more on those direct sales in the second tier by allowing a more -- a better penetration into the market with those brands, with our brands. We have more exposure, we increase brand awareness and it benefits collaterally actually our business in those markets, not only in those customers, but more generally in the markets with all the customers.

So in summary, this is not to compete with the existing customers, it's more to substitute customers that left the market and our experience that provides price stability that benefits everybody.

On the second question, I'll also give some introductory comments and Nuno will comment furthermore. I will split this in 2: the internal factors and external factors. Internal factors are obviously more related with the key variable costs for producing materials. One is our view on pulp evolution and the impact of pulp evolution has on the production of materials. Does it make sense to produce pulp and sell pulp and buy materials? Or does it make sense to introduce -- to integrate pulp into materials. And besides that, the other 2 costs that are critical are energy, which is very critical in tissue, and HR.

The external area where we are looking at is that we have not -- we didn't have yet a final decision on the location. We are still looking and discussing with the authorities 3 possible locations: Portugal, Spain, where we also need materials, we are sorting reels in Spain as well or directly in U.K. So the external most important angle is the kind of support local authorities are prepared to grant Navigator to conquer and establish this investment in their constituencies. Nuno?

I think you said it all. So at the end of the day, the decision, we view the tissue business as an integrated business. So on a long-term basis, we do believe that we have to be balanced between converting and paper production. So at the end of the day, we are looking forward to invest as we are now long in converting. So we're looking forward to invest in paper production and paper machine. As Antonio mentioned, not an easy decision to make. So we will look forward to the support and incentives that we will be offered from the different locations. We know that in some of these locations, we have some synergies in terms of energy, pulp and personnel integration. So we hope to be competitive in any of the locations. But at the end of the day, it will be very important to see the level of incentives and support that we will get from the different markets where we are considering to invest the new paper machine.

This ends our session. Thank you all for your time. As always, we are available for any additional clarification through our usual contact. Have a great evening.