Ence Energia y Celulosa SA
MAD:ENC
| US |
|
Johnson & Johnson
NYSE:JNJ
|
Pharmaceuticals
|
| US |
|
Estee Lauder Companies Inc
NYSE:EL
|
Consumer products
|
| US |
|
Exxon Mobil Corp
NYSE:XOM
|
Energy
|
| US |
|
Church & Dwight Co Inc
NYSE:CHD
|
Consumer products
|
| US |
|
Pfizer Inc
NYSE:PFE
|
Pharmaceuticals
|
| US |
|
American Express Co
NYSE:AXP
|
Financial Services
|
| US |
|
Nike Inc
NYSE:NKE
|
Textiles, Apparel & Luxury Goods
|
| US |
|
Visa Inc
NYSE:V
|
Technology
|
| CN |
|
Alibaba Group Holding Ltd
NYSE:BABA
|
Retail
|
| US |
|
3M Co
NYSE:MMM
|
Industrial Conglomerates
|
| US |
|
JPMorgan Chase & Co
NYSE:JPM
|
Banking
|
| US |
|
Coca-Cola Co
NYSE:KO
|
Beverages
|
| US |
|
Target Corp
NYSE:TGT
|
Retail
|
| US |
|
Walt Disney Co
NYSE:DIS
|
Media
|
| US |
|
Mueller Industries Inc
NYSE:MLI
|
Machinery
|
| US |
|
PayPal Holdings Inc
NASDAQ:PYPL
|
Technology
|
If you don’t study any companies, you have the same success buying stocks as you do in a poker game if you bet without looking at your cards.
Utilize notes to systematically review your investment decisions. By reflecting on past outcomes, you can discern effective strategies and identify those that underperformed. This continuous feedback loop enables you to adapt and refine your approach, optimizing for future success.
Each note serves as a learning point, offering insights into your decision-making processes. Over time, you'll accumulate a personalized database of knowledge, enhancing your ability to make informed decisions quickly and effectively.
With a comprehensive record of your investment history at your fingertips, you can compare current opportunities against past experiences. This not only bolsters your confidence but also ensures that each decision is grounded in a well-documented rationale.
Do you really want to delete this note?
This action cannot be undone.
| 52 Week Range |
2.71
3.618
|
| Price Target |
|
We'll email you a reminder when the closing price reaches EUR.
Choose the stock you wish to monitor with a price alert.
|
|
Johnson & Johnson
NYSE:JNJ
|
US |
|
|
Estee Lauder Companies Inc
NYSE:EL
|
US |
|
|
Exxon Mobil Corp
NYSE:XOM
|
US |
|
|
Church & Dwight Co Inc
NYSE:CHD
|
US |
|
|
Pfizer Inc
NYSE:PFE
|
US |
|
|
American Express Co
NYSE:AXP
|
US |
|
|
Nike Inc
NYSE:NKE
|
US |
|
|
Visa Inc
NYSE:V
|
US |
|
|
Alibaba Group Holding Ltd
NYSE:BABA
|
CN |
|
|
3M Co
NYSE:MMM
|
US |
|
|
JPMorgan Chase & Co
NYSE:JPM
|
US |
|
|
Coca-Cola Co
NYSE:KO
|
US |
|
|
Target Corp
NYSE:TGT
|
US |
|
|
Walt Disney Co
NYSE:DIS
|
US |
|
|
Mueller Industries Inc
NYSE:MLI
|
US |
|
|
PayPal Holdings Inc
NASDAQ:PYPL
|
US |
This alert will be permanently deleted.
Ence Energia y Celulosa SA
You don't have any saved screeners yet
Good afternoon, ladies and gentlemen. Welcome to the ENCE First Quarter 2021 Results Presentation.I now hand over to Mr. Ignacio de Colmenares, Executive Chairman; and Alfredo Avello, CFO.Gentlemen, please go ahead.
Good afternoon, ladies and gentlemen. Thank you for joining ENCE's First Quarter 2021 Results Conference Call. Our CFO, Alfredo Avello; and our Head of IR, Alberto Valdes, are also connected. After the presentation, we will be pleased to answer any questions you may have.Let's start in Slide #3, with the main highlights of our presentation. Pulp prices are rapidly recovering after 1 year at minimum levels, driven by a tight supply-and-demand balance. European gross hardwood pulp prices currently stands at $936 per tonne. Additional gross price increases are expected in Europe to match current net prices in China. $1,090 per tonne has been already announced for May.As expected, pulp business results in the quarter were driven by still low pulp prices and the annual maintenance shutdowns carried out at both biomills in March. Despite lower sales and higher costs because of shutdowns, pulp business EBITDA increased by 55% (sic) [ 51% ] year-on-year to EUR 8 million.On the other hand, renewable business results were driven by the deconsolidation of the Puertollano CSP plant last December. If we exclude the deconsolidation, comparable EBITDA improved by 13% year-on-year, boosted by 29% higher energy sales and a better regulated sales price.We have a strong balance sheet. Net debt stood at EUR 227 million at the end of the quarter, with EUR 475 million cash in balance. Net debt increased by EUR 45 million -- sorry, by EUR 49 million in the quarter, driven by a EUR 20 million reduction in the use of factoring lines and payments of EUR 28 million carried over from the strategic plan investments made in 2018, 2019.We continue operating safely despite the pandemic. Our priorities remains the health and safety of our staff, the reduction of costs and the increase in sales of differentiated products. We are moving ahead with all the permits required to develop our renewable energy pipeline as for the next year, subject to the results of public options, or PPAs.Moving now to Slide #4. We show the rapid pulp price recovery now underway. Robust pulp demand, together with supply and logistics constraints, are finding the global pulp market driving pulp prices higher. Net fixed prices in China have already recovered more than 70% from the minimum in 2020 and are already at $780 per tonne. These price increases are being progressively passed through -- to the European market, where gross fixed prices have only recovered by 38% since December up to $936 per tonne.We are already applying a gross price of $1,010 per tonne for spot volumes negotiated in Europe. This price should be reflected in the fixed price of the coming weeks. Those gross fixed prices in Europe should continue rising to match net fixed prices in China. In fact, Suzano has just announced a gross price of $1,090 per tonne for spot volumes negotiated in Europe in May. This spot price increase should be fully visible in the fixed price at the beginning of June and 1 month later in our P&L. Remember that most of our contracts are based on the previous month's fixed price.In the following slide, #5, we summarize our views on pulp supply and demand. We expect demand for PCU and hygiene products, packaging and specialties to remain strong and grow in 2021. And demand weakness for printing and writing is fading as economic activity recovers. Market balance should remain tight in the coming months without any new capacity additions until the end of the year.Strong economic recovery in the U.S. from May, the U.K. from June and the EU from July, following their vaccination programs and logistics constraints, too, will support high prices in third quarter, despite weaker seasonal demand. In the longer term, we expect pulp demand to clearly outgrow supply and support high prices during the coming years. Urban population growth and improving living standards in emerging countries, together with increasing plastic substitution, will continue to support pulp demand growth.On the supply side, there are 2 paper-grade pulp projects now under construction. Our Arauco's project in Chile and UPM's project in Uruguay. Next up, new mill in Finland is only at the project phase. Bracell's stream mill is expected to be more biased towards dissolving pulp. There are no other new projects confirmed, and as lead times for new projects are close to 4 years, no further capacities should come onstream before 2025. As you can see from the chart that the supply/demand balance will tighten each year.As you can see in Slide #6, we carried out the annual maintenance shutdowns at both biomills during the first quarter instead of the third quarter as in the previous year. This resulted in a 14% year-on-year reduction in pulp production in first quarter to 224,000 tonnes and a 2% year-on-year increase in cash costs to EUR 386 per tonne. Each of these shutdowns took almost 2 weeks. They were carried out successfully with no accidents and no COVID infections, despite the high number of temporary employees.For the same reason, our pulp sales in the quarter decreased by 10% year-on-year, as you can see in the following Slide #7. Almost all of these sales went to the European market, where our customers benefit from ENCE's unique wide portfolio of sustainable products and shorter delivery times. Our differentiated products, which are more sustainable and are adapted to replace plastics and softwood pulp accounted for 12% of our pulp sales in the quarter.Slide #8 looks at our renewable energy business, which was impacted by the deconsolidation of Puertollano CSP plant after its sale last December. The regulated quarterly remuneration from investment linked to the plant amounted to EUR 6 million. This deconsolidation has been partially offset by 29% higher renewable energy sales and a 6% higher regulated sales price, which has been reviewed this quarter to include the compensation for lower energy prices during the state of emergency in Spain.This is a good example of the government's commitment to the green economy. The increased contributions from the 2 new biomass plants commissioned in the first quarter of last year and from the Ciudad Real and Huelva power plants have more than offset the major overall revision carried out at Huelva 50-megawatt power plant since February.I want to inform you that we have just detected a failure in the generator of the Huelva 50-megawatt power plant during its ramp-up after its major overall maintenance revision. Its repair could take up to 3 months. Please note that both the generator as well as the loss of profit are covered by insurance. So we expect that this incident will have a minor impact on EBITDA. We currently estimate that it could trim our annual energy generation by 100 gigawatt hour in 2021, and it may reduce our annual EBITDA by between EUR 1 million and EUR 3 million.The next slide, #9, illustrates our renewable energy pipeline. We continue to make progress in securing all the permits needed to build this pipeline in stages from early '22 onwards, provided, of course, that the upcoming public options or the signing of PPAs allows us to secure the required price.I will now invite Alfredo to review the financial figures in more detail.
Thank you, Ignacio. As you can see in the following Slide #10, pulp business EBITDA improved by 51% year-on-year up to EUR 8 million, despite the U.S. dollar depreciation and the effect in this quarter of the planned annual maintenance shutdowns of both biomills. Our FX hedging program contributed with EUR 2 million to our quarterly results compared with the negative EUR 1.05 million for the same period last year. Also, the other income and expenses items below our cash cost line were EUR 1.5 million positive compared to EUR 0.5 million negative last year. This item includes, among others, the higher operating profits from the sale of wood coming from our Southern Plantation to third parties.On the other hand, our comparable renewable energy business EBITDA, excluding the Puertollano CSP plant sold in December last year, improved 13% year-on-year, boosted by 29% higher energy sales, 6% better regulated sales price and the collections from the insurance company of a EUR 2.4 million compensation related to the breakdown of the Huelva 41-megawatt turbine back in 2020.These improvements were partially offset by higher biomass costs during the quarter due to the lower oil price available. The group's net result ended the quarter with a negative figure of EUR 9.6 million compared with a negative result of EUR 12 million in the same period last year.As you can see in the following Slide #11, free cash flow before growth CapEx was negative by EUR 21 million in the quarter after a working capital outflow of EUR 31 million, including a EUR 20 million reduction in the use of factoring lines. Growth and sustainability CapEx for the quarter amounted to EUR 28 million, mostly related to carryover payments from the strategic plan investments made back in 2019. As a result, the group's net debt increased by EUR 49 million in the quarter, up to EUR 227 million, maintaining a cash in balance of EUR 475 million and included EUR 46 million related to lease contracts.Our balance sheet structure is really solid. Turning on to Slide 12, let's have a more closely look at our debt position in each business. Net debt in the pulp business reached EUR 75 million at the end of the quarter with a cash in balance of EUR 407 million. Only EUR 30 million are bank debt, while the remaining EUR 45 million are related to lease contracts. Long-term maturities and covenant free structures are the main characteristics of this business debt.Regarding the renewable energy business, net debt amounted to EUR 153 million at the end of the quarter, including a cash in balance of EUR 68 million. As you can see, this business also enjoys from long-term maturities.Turning to Slide 13. Let me update you on our hedging program, aiming to mitigate the volatility in the Pulp and Energy businesses. Regarding FX, our policy is to hedge around 50% of our pulp sales for the following 12 months. Currently, ENCE has secured an average cap of USD 1.21 per euro and an average floor of $1.14 or over 45% of U.S. dollar exposure for 2021.This program had a positive impact of EUR 2 million in the quarter compared to a negative EUR 1.05 million in the same period of last year. Assuming an average exchange rate of $1.20 per euro in 2021, our FX hedging program will have an estimated positive impact of approximately EUR 3 million in our EBITDA.Additionally, and for the first time, ENCE decided during the third quarter of last year to secure better pulp and electricity prices for 2021. We secured an average price of $773 per tonne for 24% of our expected pulp sales in 2021. This compares with an average price of $680 in 2020. Following the pulp price recovery in the first quarter, these hedges had a little positive impact of EUR 0.4 million.Assuming an average pulp price of $900 per tonne at an average exchange rate of $1.20, our pulp price hedges would have an estimated negative impact of EUR 26 million in 2021 EBITDA.Finally, we have also secured an average price of EUR 43 per megawatt hour for 33% of our expected renewable energy sales in 2021. This compares with an average electricity price in Spain of EUR 34 per megawatt hour in 2020. These hedges will have mildly negative impact of EUR 0.2 million in the quarter. Assuming an average full price of EUR 60 per megawatt hour, our electricity prices hedges would have an estimated negative impact of EUR 8 million in 2021's EBITDA.I will now return the lead of the presentation back to our Chairman for the final slide.
Thank you, Alfredo. Moving now to Slide 14, I would like to mention the highlights of our sustainability performance. Companies that care for the environment, for the staff and for the communities and companies with a strong corporate governance are more competitive.ENCE is already at the forefront in sustainable forestry, in the circular economy, in social commitment, in gender equality and in corporate governance. Our best practices have been recognized by independent agencies such as MSCI or Sustainalytics, which ranks ENCE among the leaders in ESG in our industry. We have also been included in the FTSE4Good Index.I would like to highlight the following achievements in sustainability in the first quarter. Firstly, we have continued to improve all our safety indicators, which are already 10x better than the average of the industry in Spain. No accidents were registered during the quarter.Secondly, the rigorous application of ENCE's protocols against COVID-19 has enabled us to continue operating safely and to carry out the annual maintenance shutdowns of our main production centers without any COVID infections.Thirdly, we have continued reducing the odor of both pulp biomills, which already are below 20 minutes per month.And fourthly, in our Board of Directors, we have increased both the percentage of female representation, now almost 40%, and also the percentage of independent directors.Regarding Pontevedra biomill concession in Slide 15, we expect a first ruling by the National Court in the next few months. Remember that it will be the first step in a legal case that could last for another 4 years, including appeals to higher courts.To conclude this presentation, I would like to emphasize the following key messages. Pulp prices are now revenue recovering due to a tight supply and demand balance. We expect gross price increases in Europe to match current net prices in China. The operating improvement of our Pulp business should continue during the rest of the year following the annual maintenance shutdowns carried out during the first quarter. We will almost fully offset the deconsolidation of Puertollano CSP plant in 2021.Our priorities remain the health and safety of our staff, the reduction of costs and the increase in sales of differentiated pulp products. We have a strong balance sheet, and we continue to make progress in securing all the permits required to develop our renewable energy pipeline as from 2022.Thank you. We will be pleased to hear any questions you may have.
[Operator Instructions] The first question comes from João Pinto from JB Capital Markets.
I would like to get some color on expectations for the second quarter. So my first question, in terms of cash costs, using the second quarter of last year as a reference, meaning the EUR 375 per tonne of cash costs. Can we expect a reduction versus this for above in the second quarter?
Yes, we are aiming to have a cash cost of EUR 365, 3-6-5, in the second quarter 2021. You have to understand that the first quarter was a high cash cost of EUR 386. And the main reason was the low production due to the 15 days of annual shutdowns in both biomills.We see the prices of the wood stable, if we compare to fourth quarter, but we see a huge reduction in conversion cash costs due to the normal production at both biomills. We see a slightly better and lower cost of logistics, who have been quite difficult on the first quarter. And we see the same euros per tonne in overheads than in the first quarter. Then today, we are working on the base of being able to report EUR 365 in 3 months' time. Sorry, 3 months' time, on the next conference call related to second quarter. Thank you, João.
Okay. My second question also on the second quarter regarding volumes. Are volumes accelerating this quarter? Can we expect volumes to surpass 207,000 tonnes in line with the strongest quarter of last year, now in the second quarter?
Yes. Yes. We can be quite above that. Thank you, João.
Okay. My third question. On pulp prices, are you receiving any pushback from the latest $8 price hike announced by Suzano?
Yes. We think that all the market is waiting that everybody makes these prices during May without any problem. Yes. Yes. Yes, the market is strong. The market is very strong in Asia because the economic recovery started before than in western world. The market now is very demanding in the U.S. And the market is strong, just strong in Europe.PCU and hygiene products are performing very well. Packaging is performing very well. Dissolving pulp, as you know, is improving. And then there is reduction of volumes available on stream mills, and they have switched from paper grade to dissolving pulp.And the market of printing and writing, although it's not growing, well, is better than last year. Then we see that we will be able to increase prices in May without any difficulties today.
Okay. Just one more question that I have. Can you tell us an approximation of the percentage of volumes that are benchmarked versus the previous months?
I don't understand the question.
So the majority of the volumes that you sell are benchmarked to prices of the previous month, right? Can you tell us an approximation of the volumes, 80%, 90%?
Sure. Sure. Yes. Yes, we have almost 85% of our contracts linked to the fixed price of previous month.
Your next question comes from Paco Ruiz from Exane.
I will make just one question as I was requested to do. So it's regarding the pipeline in terms of renewables. How confident you are on getting your targets on this, taking into account the recent lower price that we have seen in previous awards that we have seen in Spain? And I get a little bit concerned about the internal rate of return that they could obtain on these projects versus the estimated -- previously estimated internal rate of return they have in the budget.
Well, no -- yes, I would like to stress that we are -- and we have been always very prudent in renewables. We started and say, back in 2011, we've been growing step by step. We never had a failure in projects. We only bought companies when we were buying at good price. We've been studying and studying a lot each project before starting, and that's what we are doing today in PV.When -- we went to the public auction at the beginning of the year at the price just below EUR 30 because it's the price that we are pretty sure that will be the real cost -- actual cost of the modules. With the budget we have from third parties for the EPC and with the price of the energy at this price just below EUR 30 and stopping the PV plant in 15 years, not putting a crazy price of EUR 100 per megawatt hour from the year '16 to the eternity, we are sure that we are going to get between 8% and 7%, which is our target.Leveraging the plant at 60%, no more, because we don't want to work for the banks. We want, as you know, to have this green energy division in order, like last year, to compensate during the bad years of the Pulp business of the company.Then today, we are working on the permits of these 340 megawatts of PV we have. We are working on the permits and the engineering of these 3 biomass power plants we are developing. And we are working -- we are waiting, sorry, for the next auction. And in parallel, we are -- for the PV business, we are negotiating PPAs. We don't want at all to be matched.And well, I can absolutely confirm that if we don't get between 7% and 8%, we will not do these projects. We will sell the projects. A third-party can consult them. But today, with all the information we have, we think that we can develop these projects, and we can start to consult at the beginning of next year in PV.And in biomass, well, we will have auctions, then we don't need to have to be -- to have all the volume on the first auction. We have many years to do that. But to be prudent, this is what we have been doing till now, and it's how we will continue growing in energy. Thank you, Paco.
[Operator Instructions] Your next question comes from Alvaro Lenze from Alantra Equities.
Could you please elaborate a little bit more on what has happened at the Huelva 50 megawatts biomass facility? And whether the issues that you have find during the maintenance stoppage had any impact in Q1 results?And secondly, you have stated regarding to this that the costs will likely be covered by insurance. I don't know whether there should be some timing difference, maybe due to incurring expenses in Q2 and then recover these expenses in H2. Could you please elaborate on this issue, please?
Yes. Yes. I would like to point out before that as you know, the return on investment has only a requirement is that we produce above 3,000 hours. And these 3,000 hours are not on risk, then we are going to get 100% of the return on investment this year in Huelva 50 megawatts. We started the bid overall. We do this overall, not every year, but every 5 years, more or less. It is subcontracted to the manufacturer of the turbine. They dismounted the turbine, and they have been doing the overall maintenance during 2 months on a shop outside of ENCE.And the alternator remained at ENCE -- Huelva. And the manufacturer of the turbine has been doing the inspection and the maintenance. And according to him, everything was okay, then he started the ramp-up 15 days ago of the turbine. We were very happy because we were 5 days in advance, and suddenly, we noticed that there was a problem. We stopped. And on the alternator, in one of the bobbins of the starter, well, there is a problem.Well, the manufacturer of the turbine estimates that he needs 12 weeks to repair that. And well, we estimate that we can have a reduction of the EBITDA we were expecting for this year between EUR 1 million and EUR 3 million. Why EUR 1 million to EUR 3 million? Well, because we still don't know if it's going to be 12 -- 10 weeks or 15 weeks because we still don't know if the insurance company is going to pay 100% of the amount or 80% or 70%. And because we are reducing the volume of biomass we buy on the market, we will require this year between 100,000 and 140,000 tonnes less of biomass.And we think that being able to reduce the amount of biomass we are buying in Huelva, we can buy the rest of the biomass at a better price. And all in all, we estimate that we are going to be stopped during 12 weeks, and the impact on the EBITDA is going to be between EUR 1 million and EUR 3 million. Do you need more information, Alvaro?
Just to clarify whether this EUR 1 million to EUR 3 million is already considering that you get to receive something from the insurance? Or this is all the potential cost, and then you may recover some of that?
No, no, it's the net impact after reducing the price of the biomass to the other 2 plants after getting the part of the compensation from the insurance company. That is why I said between EUR 1 million and EUR 3 million because we have to -- today, we don't have a certainty about all the items.
Okay. That's perfectly clear. And also another question going to the Pulp business, if you could give us some guidance on the evolution of discounts. I understand that discounts are affected by the high volatility of pulp prices. But I don't know, if you could give us some guidance, both on what to expect for the next quarters? And also whether do you think that negotiation with clients should allow at some point in the future to cut back on the discounts, which currently sit at all-time highs?
Well, yes, the discounts we have negotiated with our customers for 2021, a kind of flexibility in discounts. And then with low prices, the discounts that are more close to 32% or 33%. And with high prices, they are more close to 34% or 35%. And at the levels we are today, we are at around 34%, and that is what we expect for second quarter. We expect for the second quarter a price. And when I say a price is the way we have that on the contracts with our customers that we are in 85% of our volume is linked monthly to the fixed price of the last week of the previous month. Then today, we expect a price slightly above $1,000 in the second quarter, and that will make a discount of 34%.
The next question comes from Jaime Escribano from Banco Santander.
So my question would be on growth CapEx, to review if you guys have changed your mind? Or if there is anything that has changed in terms of the new capacity or new expansion plans, for example, in fluff?
No, not yet, Jaime. No. No. We need -- even we are saying that because of the vaccination programs, well, the economy is going to grow tremendously in the States next month; and 1 month later, in U.K.; and 2 months later, here in Europe than it has been -- than it is today in China.We need more time in order to be sure that we don't have a risk in 6 months or 9 months with a different kind of wave. Then we want during the full year 2021 to work on reduction of the cash costs to developing and selling these new products we are selling. We want to sell more than 100,000 tonnes like last year, but 170,000 tonnes this year, and we are concentrating that.Well, we are continuing working with the EPC contractors for the fluff. Today, we have a budget, and we know that it's a 95% of certainty that the investment will be EUR 35 million. We continue working with labors and with potential customers. And I think that during third or fourth quarter, I will ask the Board to confirm the investment and not before. Then the investment will be down soon next year, but nothing is going to be confirmed before the end of this year.And regarding dissolving pulp, well, we continue studying the project. We continue working with the technology works. We have -- as you know, we have the land. We have all the permits. In fluff, we have also all the permits, which is very important because today, in Europe, to have permit for a pulp mill has a value, a big value. We have -- we are on all those projects of next generation, and we will see. But today, we haven't decided anything, and we would probably decide anything before also the end of this year. Thank you, Jaime.
Very good. I have a second question, which is whether with the current outlook, is it possible to start paying a dividend again? Is this something you are thinking about or not yet?
Well, I hope we will have profit after taxes in the second quarter, and then we will decide at the beginning of third quarter to pay a dividend, yes. But that will be normal things, yes.
Okay, very good. And a final question regarding market outlook. So in China, the prices -- the pulp prices seems to be stabilizing. Maybe you can tell us what's your feeling if there is a room for further price increases? Or is this the highest level that we are going to see? And on this regard, do you see there is further room to increase prices in Europe?
Yes. I think that prices in China have almost arrived to the limit for the time being. We don't sell in China. Then I know almost the same that you -- what we read on the reports. Well -- and I think the prices in China will stabilize. And we have started now in China a long period of stable prices at the level where we are.I think that in Europe, well, we will have no problem to pass the new price of $1,090. And -- well, we can maybe increase a bit more in June. I don't know. Let's see. But what I don't see is any risk of price reduction, although the analysts are a bit more conservative, and they see a risk of prices fading a bit -- falling a bit on third quarter. Despite that, we will be on the low demand season because a lot of paper mills shut down for 1 or 2 weeks in August. And because of this moving economy in the U.S. next week, in U.K. from June and in Europe from July after the vaccination and because there is no more capacity, we don't have very precise information about MAPA's project in Chile and about Bracell. But it's clear that the pandemia is not easy.We've been managing our annual shutdowns at Navia and Pontevedra. In both mills, every day, we have between employees and contractors, normally around 700 persons working. During the shutdown, we have on top of that 1,000 people more in each mill. And believe me, it has been a nice month to work on doubles with all the tests, doing all these COVID inspections in order to be sure that people were working with masks and with distances. Then -- it has been extremely difficult.Then -- well, to construct a new mill in Latin America where the pandemia is worse than here in Europe, I think that -- unfortunately for them, but they are not going to start on the third quarter. They will start if they are like at the end of the year. Then I think that we don't have any risk of -- today, I don't see any risk of price reduction on the third quarter. I see a stability at high levels. Thank you, Jaime.
Okay. Very good. And just a very last question. It's a very quick one. Can you remind us what is the spot price in Turkey right now? Or what is the selling price right now?
Yes, it's the same as in China.
Your next question comes from Bruno Bessa from CaixaBank BPI.
So I will start with -- precisely with the new capacity and with Bracell because of the very limited visibility that we have. I know that in the presentation, you have already given some visibility on your opinion regarding about 0.5 million tonnes of capacity coming to the market only next year.But we have been seeing some rumors in the press saying that Bracell is preparing a plant with a much larger capacity than the 1.5 million tonnes, around 1.5 million tonnes that was officially announced in the market. So if you could provide or give us any color whatever you can mention on this will be highly appreciated? This will be my first question.
I'm very sorry, Bruno, but I used to go every quarter to Latin America. Now with the pandemia, I haven't been there on the last 12 months. And I don't know more about Bracell. And what you know by what you read and what I read is the same. I cannot give you more information, sorry.
But following up on this, why do you think then that only 0.5 million tonnes of capacity will come to the market in 2022 from this plant?
Because at the end, it's the best information we have.
Okay. That's clear. So moving...
No, no, no. That's the information we know from the equipment suppliers and from people we talk, yes?
Okay. Okay. That's clear. So moving on to the second question. Regarding Pontevedra, if you could give us an update on the situation regarding the Pontevedra plant and the concession and all the noise that we have been seeing in the press? Any color that you could provide on this will also be appreciated.
Yes. Yes. Yes. Coming back to your previous question, yes, just to remember you that -- well, we are not quite too much concerned about what Bracell is going to do because they are more biased to dissolving pulp. Prices of dissolving pulp were very low last year. They have increased a lot. And today, for them, it will be more attractive to manufacture and sell dissolving pulp and BHKP. That's why we are not concerned about what Bracell is going to do.Talking about Pontevedra, well, there are no news. For us, what is important is that we are defending that we have a legal concession on the tribunals, and we are awaiting the results of the tribunals. And all the noise around Pontevedra which is not the tribunals is not important.
Do you have any visibility on the timing for...
In summer. Last year, we were expecting something by -- before Christmas. It didn't happen. And now we are waiting something before summer. But I don't have more information, I'm very sorry. But in any case, the one who will lose, ourselves or the other parties, they would appeal or we will appeal. And then, it's a long thing. It's not just to fix that thing. We are going to be there on the tribunals at least 3 or 4 years more.
Okay. That's clear. Again, regarding Pontevedra, we have been seeing in the press and you're suggesting moving the plant to another location in Galicia. And I think you already mentioned...
No, no, no. We are not suggesting that, sorry.
No, no. In the news, there has been this kind of possibility, not suggested by ENCE, of course. What is your position regarding this?
No, no. What I told you, we are discussing. We have a legal concession. And we prefer to stay where we are.
And -- but would you consider moving the plant to another location?
No, not for the time being. No. No. We are thinking in staying where we are. Let's say that -- just -- it's a supposition. Let's say that in 2 months, we again get acknowledgment or the court says that we don't have a good concession, and we have to leave Pontevedra. And the government gives us, I don't know, 5, 6, 7, 10 years to stay there. The government is saying publicly that at least till 2033. Well, we will study to -- if we have to move in Galicia, we'll have to move and the size of the mill. And today, we are defending the case that we have a legal concession, and we will stay till 2073.
Okay. So very last question and a quick one. Regarding cash costs, you get your target for this year, EUR 365, but you mentioned that this is based on stable prices. And...
Sorry, EUR 365 for second quarter. Second quarter, not for the year. For the year, our expectation is EUR 370.
Does that already includes the rising for prices that we are seeing as of today? Or should we expect a higher cash cost based on the hikes that were already announced in the market?
Sorry, we were expecting, at the beginning of year, EUR 365 per tonne at the price of the pulp of EUR 680. But we don't see that anymore. Today, we see a price, let's say, about EUR 900. And with those prices above EUR 900, today, we see -- for second quarter, EUR 365, and for the full year, EUR 370.
Your next question comes from Alvaro Lenze from Alantra Equities.
Just another question. Looking at your balance sheet, in the Pulp business, you are right now with a high level of cash on the balance sheet. Are the investments for dissolving pulp and fluff still on hold? And if so, what are you planning to do with all this cash in a context that it does not pay much interest, but you are still paying interest on the EUR 500 million gross debt?
No. We are reducing the gross. Yes, you will see that now -- you will see we are reducing all the lines in the gross debt in order to pay less interest because it has no sense to have between EUR 470 million and EUR 500 million in cash.
[Operator Instructions] Ladies and gentlemen, there are no further questions in the conference call. I give back the floor to Mr. Ignacio de Colmenares and Mr. Alfredo Avello. Thank you.
Thank you very much. We'll meet again in 3 months' time. Thank you. Bye-bye.