Ence Energia y Celulosa SA

MAD:ENC

Earnings Call Transcript 2020-Q2

[Operator]

Good afternoon, ladies and gentlemen. Welcome to the ENCE Second Quarter 2020 Results Presentation. I now hand over to Mr. Ignacio de Colmenares, Executive Chairman; and Alfredo Avello, CFO. Gentlemen, please go ahead.

[Ignacio de Colmenares y Brunet, Chairman, CEO & MD]

Good afternoon, ladies and gentlemen. Thank you for joining ENCE's first half 2020 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 #4 with the main highlights of the quarter, which has been marked by the international spread of the coronavirus. I'm proud to tell you that our early reaction to the threat from this virus on February 24 and the rigorous application of our protocols to prevent and minimize the risks of the spread of the virus, have allowed us to keep our people safe and to continue to operate. All ENCE's activities from forestry and biomass operations to pulp production and the generation of renewable energy were classified as essential. And have therefore continued during this health crisis. Our first half results show a strong operating improvement in both businesses. Following the strategic plan investments made last year and despite the difficulties caused by the pandemic. Firstly, our renewable energy sales increased by more than 50% in the second quarter, following the commissioning of 2 new biomass plants in first quarter '20.Secondly, our pulp production increased by 12% in the first half of the year and cash cost was reduced by 5%. Pulp sales improved by 19% year-on-year with a better commercial mix. Despite this operational improvement, first half financial results continued to be affected by the low pulp and electricity prices, with an EBITDA of EUR 9 million in the pulp business and EUR 27 million in the renewable energy business. Pulp prices remain at the minimum of the last 10 years due to the temporary imbalance resulting from the lockdown measures implemented worldwide during the second quarter. In order to ensure the resilience of our business in any scenario, we have increased our liquidity by 51% up to EUR 342 million. Remember that our 2 businesses enjoy long-term financing with no relevant maturities in the next 2 years and with no covenant in the pulp business. Our top priority now is the health and safety of our staff, the continuity of our operations and the reduction of costs and leverage in the pulp business.Moving now to Slide 5. You can see some of the early measures we took against the coronavirus and which have proven to be effective, preventing the spread of the virus in our workplaces and enabling us the continuity of our operations. We boosted teleworking in all functions wherever possible. And in all cases, of particularly sensitive people. We also reduced on-site work to the minimum. Shifts were adopted. Isolated work teams were appointed for each process and replacement teams were organized to remain in preventive quarantine at their other homes. Annual maintenance shutdowns have been delayed to the third quarter. We have successfully applied our prevention protocol since February 24 throughout our organization, including subcontractors and logistics services. This protocol has been periodically updated with best practices and more -- as more became known about this pandemic. We continuously monitor the evolution of the pandemic. Since the end of June, we are progressively returning to our workplaces. 60% of those who were teleworking are already back. Our reactive action protocols are implemented whenever new outbreaks occur in areas near our workplaces. We have also taken measures to reinforce our liquidity. Firstly, we have drawn the revolving credit facility of EUR 70 million in the pulp business maturing in March 2020. Secondly, we have closed long-term backup credit facilities with no covenants for an additional EUR 67 million. Thirdly, we have pushed back to next year CapEx payments for an amount of EUR 37 million. And finally, we continue to optimize the use of our factoring and confirming lines.Moving now to Slide #6. I would like to mention the highlights of our sustainability performance. Last year, we defined our sustainability plan, which contributes our road map to excel in sustainability and create value for all our stakeholders. Companies that care for the environment, for the staff, and for the communities, companies with a strong corporate governance and companies which are also more efficient, more flexible and more competitive in the long run. ENCE is at the forefront in circular economy, sustainable forestry, social commitment and gender equality. Our best practices are being recognized by independent ECG analysts, such as sustained analytics in the last assessment ENCE attained a total score of 80 points placing us as leaders in our industry. In addition to all the measures that we implemented to protect the health of our staff during the first half, I would like to highlight: firstly, the successful development of our differentiated and more sustainable products, which already account for 10% of our pulp sales. Secondly, the 41% year-on-year reduction in the other impact of our Navia biomill to 1.5 minutes per day. Thirdly, we continue to reduce water consumption levels in Navia and Pontevedra year after year. And last but not least, we have substantially reduced and NOX and SO2 emissions in our biomass plant at Mérida, Jaén and Córdoba. Moving now to Slide 7 and our renewable energy business. We commissioned 2 new biomass power plants in Huelva on January 31 and in Ciudad Real on March 31. Our renewable energy sales increased by 51% year-on-year in the second quarter, despite the difficulties caused in the pandemic. The scheduled ramp-up of our 2 new biomass power plants and the fine tuning of equipment was delayed by the mobility restrictions at the absence of external technicians caused by the pandemic. The repair in Germany of the turbine of Huelva 41-megawatt power plant is already taking 3 months longer than expected, also due to the pandemic. We now expect to generate 1.4 gigawatts this year 34% more than in 2019.This regulated business is adding stability to the group, as you can see in the following Slide #8. Our renewable energy sales price is supported by its regulated minimum. It has declined by just 7% from its regulatory cap to its regulatory floor compared to a 44% drop in the market energy price. Additionally, the regulated annual return on investment of our power plant was confirmed at 7.4% for the next 12 years. This implies an annual amount of EUR 63 million with no costs and subject to a minimum operation of just 3,000 hours per power plant. The next slide, #9, illustrates our renewable energy pipeline. Firstly, we have 8 new projects with a combined installed capacity of 405 megawatts. All of them already have grid connection permits and location centers. Administrative authorization are being processed. We expect the public auctions required to implement the national renewable energy plan before Christmas. We expect to begin their construction between the third quarter 2021 and the first quarter 2022. In addition, we have other projects at an early stage of development. Turning now to the pulp business in Slide #10. We have recorded a strong operating improvement in the first half following the 100,000-tonne capacity increase carried out in 2019. Our pulp production increased by 12%. The lower transformation costs resulting from this capacity increase, together with lower corporate expenses and wood costs has enabled us to reduce our cash cost by 5% compared to the first half last year. This production increase was achieved despite the difficulties caused by the pandemic. Foreign technicians required to commission the new pulp dryer and digester in Navia and the new turbine in Pontevedra were unable to work in Spain. We have delayed our annual maintenance shutdowns at both biomills to the third quarter due to mobility restrictions during the health crisis and to minimize the risks for our staff. The delay is caused by the lockdown could entail a slight adjustment to our initial production target, up to 2%. And the minimum adjustment to our additional cash cost target, up to 1%.Our pulp sales improved 19% year-on-year with a better commercial mix, as you can see in the following Slide #11. Almost all of them went to the European market where ENCE has significant logistical and service advantages. More than half went to the growing PCU market. Our differentiated products, which are more sustainable and are better adapted to replace softwood pulp in specialty segments already account for 10% of pulp sales. In the following Slide #12, we can see the evolution of global pulp shipments and pulp producers' inventories over the last 5 years. Global pulp demand recovered by 8% compared to the first 5 months of 2019, which was affected by the destocking of pulp in the paper industry. It's restocking in the first quarter, together with higher demand for tissue paper and hygiene products has offset lower demand for printing and writing papers, particularly during the lockdown. The spread of the coronavirus has forced pulp producers to postpone maintenance shutdowns to the second half of 2020. These, together with the impact of lockdown measures, has caused a slight upturn in producers' inventories since the beginning of the year. As you can see in the following Slide #13, pulp prices have remained at the minimum level over the last 10 years. These prices have remained below the cash cost of many pulp producers for 3 quarters, even worse. They have remained below the free cash flow breakeven point of most pulp producers for 3 quarters. This situation is unsustainable for most of the industry, and we have started to see some market-related downtimes of high cost mills. In our case, our free cash flow breakeven point, including recurring CapEx and financial expenses, is USD 440 per tonne, which is below current market prices. In Slide #14, we summarize our views on pulp supply and demand. Our demand could decrease this year due to the impact of the lockdown measures, particularly on printing and writing paper consumption for as long as schools and offices are closed. We expect demand for tissue and hygiene products to remain strong during the second half of the year, while demand weakness for printing and writing will gradually fade as economic activity recovers. Pulp prices should start recovering after the summer, supported by printing and writing demand recovery and by annual shutdowns. In the longer term, pulp demand will surely outgrow supply. 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 only 2 major paper-grade pulp projects being executed, Arauco's MAPA and the UPM project in Uruguay. Let's continue in Slide #15 with a summary of our first half financial results. Pulp business EBITDA reached EUR 9 million. Renewable business EBITDA reached EUR 27 million. Lower pulp and electricity prices complicate the comparison with the same period last year despite the stronger operating performance.Turning to Slide #16. You will find the main cash flow components and our net debt position at the end of the period. Free cash flow before growth CapEx and dividend payments amounted to EUR 29 million, while carryover payments from investments implemented in 2019 amounted to EUR 42 million. The group's net debt increased by EUR 27 million, up to EUR 540 million, including EUR 55 million related to lease contents. It is important to highlight once more that our 2 businesses enjoy long-term financing with no relevant maturities in the next 2 years, and without any covenant in the pulp business and that our cash balance at the end of the quarter amounted to EUR 342 million.Finally, let's look at Slide 17, concerning Pontevedra's biomill concession. We have been expecting a first ruling by the national court in the next few months, but this could be delayed until the end of the year due to the coronavirus. I will now invite Alfredo to review the financial figures in more detail.

[Alfredo Avello De La Peña, Chief Financial & Corporate Development Officer]

Thank you, Ignacio. Let me start with our pulp business results, which you will find on Slide 19. Pulp sales increased by 19% year-on-year, up to 520,000 tonne, thanks to the higher production levels achieved after the capacity expansions carried out in 2019. During the second quarter, these increases were little lower due to the inventory built up ahead of our annual maintenance shutdowns planned for the third quarter. So our Chairman has previously explained the higher fixed cost dilution derived from the capacity increases together with lower corporate expenses and wood costs, allowed us to reduce our cash cost by 5%, down to EUR 378 per tonne compared to the first half of 2019. On the other hand, and in line with the sharp drop in the reference price, our average sales net pulp price decreased by 29%, resulting in an EBITDA of EUR 9 million. This figure includes negative FX settlements of [ 9 ] in the first half compared to the EUR 50 million recorded in the same period last year. Moving forward on to the pulp business P&L in the next slide after EBITDA depreciation amounted to EUR 34 million. This figure represents a 15% increase, driven firstly by the biomass capacity expansion investments carried out in 2019; and secondly, by a larger wood depletion figure, mainly related on the higher wood sales coming from our southern plantations under our long-term contracts signed at the end of 2018.Next to the right, we showed the recording of the provisions for EUR 2.5 million related to ENCE's environmental pact in Pontevedra with no cash outflow effect. All these resulting in a negative EBIT figure of EUR 27 million for the period. Finally, the negative financial results for EUR 5 million, together with a positive tax effect of EUR 8 million, added up to a net result of minus EUR 24 million for the first half of 2020.If we continue to Slide 21, we can analyze our pulp business cash flow generation. Normalized free cash flow after working capital changes, maintenance CapEx, financial payments and taxes attained EUR 13 million, which after the carryover CapEx payments coming from 2019 investments, resulted in a free cash flow figure of minus EUR 15 million for the period. As our Chairman highlighted earlier, we continue actively managing our cash outflows related to these carryovers, both postponing some of them into next year and cancelling some others not yet incurred. After today, we have postponed carryover payments in the pulp business, amounting to EUR 35 million, and we have reduced other investments by another EUR 5 million. As a result of this, our initial CapEx payment guidance of EUR 115 million for 2020 is now reduced by EUR 40 million down to EUR 75 million, including maintenance CapEx. Let me update you now on our ongoing FX hedging program in Slide 22. As we mentioned in the first quarter results presentation, we have returned to our standard policy consisted on hedging 50% of our pulp business sales using average cycle prices are limiting the period to 12 months. This program had a negative impact of EUR 9 million in the first half of the year compared to EUR 15 million in the same period last year. The U.S. euro exchange rate remained at an average of $1.2 in 2020, the full year impact in our P&L should total approximately EUR 10 million. If you continue to Slide 23, you will find our pulp business balance sheet. Net debt increased only by EUR 16 million during the first half up to EUR 322 million, including EUR 46 million related to IFRS 16. At the same time, cash imbalance increased by EUR 128 million, reaching EUR 234 million at the end of the period in this business. Within our plans to maximize liquidity and help shielding our operations against any adverse scenario in the framework of this pandemic, we have firstly drew down our revolving credit facility of EUR 70 million and expanded our long-term backup credit facilities by another EUR 67 million. Secondly, and as we previously said, we have negotiated the postponement to 2021 of carryover payments amounting EUR 35 million and reduced our investments on another 5. And thirdly, we are increasing the use of our factoring and covenant lines available. As you already know, this business is covenant free and the most long-term maturities leasing our balance sheet from short-term pressures. Net debt-to-EBITDA ratio in this business is affected by the minimum pulp prices and the negative EBITDA recorded in 4Q '19 due to Navia's extraordinary shutdown. Let's now focus on the renewal energy business in Slide 24. The energy volume sold increased by 27% in the first half of the year, thanks to the contribution of our 2 new biomass plants commissioned in the first quarter and despite the delay caused by this pandemic. Ciudad Real 60-megawatt biomass plants performed well after the repair work carried out in the first quarter, which couples with enhancement performance of our Huelva 50-megawatt and Jaén 60-megawatt biomass plants following the repair work last year. On the other hand, as we mentioned in the first quarter results presentation, our Huelva 41-megawatt biomass plant suffers a failure in this turbine in March. Repair in Germany has been delayed due to the pandemic, and we expect to resume operations very shortly. Regarding prices, the average selling price in the first quarter was 7% lower than the same period last year as a consequence of deploying the electricity market price. Current market prices are below the floor set by the regulator. And therefore, we have recognized an income of EUR 50 million for the full year related to this regulatory follow-up. All in all, higher energy sales increased by our EBITDA by 5%, up to EUR 27 million, offsetting the decline in the average sales price.On Slide 25, you can find the breakdown of our renewable energy business P&L. Below EBITDA, depreciation and others column increased by 60%, up to EUR 22 million as a result, of decommissioning of the 2 new biomass plants, together with the transfer of the remaining assets from the pulp business to the renewable business in Huelva during the first quarter. Net financial cost of EUR 8 million implied a 14% reduction compared to first half 2019, which included certain one-off expenses related to the 50-megawatt CSP project financing reaching maturity in March 2031. Following a EUR 1 million tax income contribution, the attributable net result of the energy business after minorities shows a negative figure of EUR 3 million in the first half of the year compared to a positive balance of EUR 1 million in the same period last year. Let's follow on the next Slide 26 with our renewable energy business cash flow generation. After taking into consideration changes in capital, maintenance CapEx, interest and taxes, normalized free cash flow amounting to EUR 16 million. Following the EUR 50 million adjustment related to the regulatory color, which we will cash in in the future, the strategic planned CapEx figure of EUR 8 million represent trending payments of the 2 new biomass power plants commissioned in the first quarter of the year. We have also negotiated the postponing into 2021 of certain carryover payments in the energy business amounting to EUR 2 million. As a result, our initial CapEx payment guidance of EUR 50 million for 2020 is now down to EUR 48 million, including maintenance CapEx. All these drives our renewable energy free cash flow figure for the period to [ minus EUR 5 million ]. Please note that a Royal Decree was published in June, regulating certain aspects of the pandemic and specifically, reviewing the electricity prices applicable during this period. We foresee that this review will have an extraordinary positive cash flow impact within this year of approximately EUR 11 million in our energy business, plus other EUR 2 million in our pulp business. In any case, we need to wait for this final regulation under a ministry of order that we expect to be released in the coming weeks.Let me conclude this review on Slide 27 with our renewable energy business debt situation. Net debt increased by EUR 10 million up to EUR 218 million at the end of the period, with cash in balance of EUR 108 million. As you can see, this business also enjoys very long-term maturities and ample liquidity. Our financial leverage of multiple of 4x will decrease moving forward with the contribution of the 2 new biomass plants commissioned in Q1. Let me please return the lead of this presentation back to our Chairman for the closing remarks.

[Ignacio de Colmenares y Brunet, Chairman, CEO & MD]

Thank you, Alfredo. All the early measures taken and the rigorous application of our protocols to prevent and minimize the risk of the spread of the coronavirus are allowing us to keep our staff safe and continue to operate during this health crisis. The capacity expansions we made in 2019 are beginning to bear fruit with a strong operational improvement in the first half. We have delayed our annual maintenance shutdowns to July to the third quarter due to mobility restrictions during the health crisis and to minimize the risks of our staff. New biomass plants commissioned in the first quarter are boosting our renewable energy generation. The regulated business is adding stability to the group. 405 megawatts of our pipeline await the upcoming public auctions of the national renewable energy plan. We have reinforced our liquidity to face any continued adverse scenario. Our 2 businesses enjoy long-term financing with no relevant maturities in the next 2 years, and without any covenant in the pulp business. Our top priority now is the health and safety of our staff, the continuity of our operations and the reduction of costs and leverage in the pulp business. As schools and offices reopen, demand for printing and writing will increase, and this combined with annual shutdowns should strengthen prices in second half. Thank you very much. We are now open to any questions you may have.

[Operator]

[Operator Instructions] The first question comes from Jaime Escribano from Banco Santander.

[Jaime Escribano, Equity Analyst]

Two questions from my side. Well, 3 questions actually. The first one is regarding sales and the volume sales in Q2 which declined 10% quarter-on-quarter versus Q1 2020. And you mentioned that is due to stockpiling ahead of the maintenance you are doing but I was wondering also how has been the dynamics from PPPC information the demand seems to be weaker in May, June, maybe you can comment on those dynamics. The second question is regarding the...

[Ignacio de Colmenares y Brunet, Chairman, CEO & MD]

Sorry, if you don't mind. We will go question by question. It's easier. Thank you very much. We are here with a mask, and it's quite difficult to handle the video conference like that. Sorry for your comprehension. We finished first quarter with 43,000 tonnes. We finished second quarter with 55,000 tonnes, that's an increase of 12,000 tonnes. You have to take into account that we already done just at the beginning of July, the annual shutdown of Pontevedra, and we are now doing the annual shutdown of Navia. That means that we were forced to increase stock by 12,000 tonnes, diminishing sales in order to be able to supply our customers during July and August. These annual shutdowns are very complicated in the context we are living today. In Pontevedra, in our budget, it was a shutdown of 15 days, it took us 25 days. We had teams isolated in order to prevent any infection. We have normally on an annual shutdown 1,000 people from other companies coming to do the annual shutdown, we limited that to 250. But nevertheless, it was 250 people who are not used to all our protocol or safety. And then it was difficult to trade them and to be responsible. And we are now finishing the annual shutdown of Navia that means that, that is the main reason why we reduced sales, and we increased stock by 12,000 tonnes from 43,000 to 55,000 tonnes. Nevertheless, it is true that the demand was buoyant in March, April and beginning of May. And suddenly, in third week of May, the demand of printing and writing was reduced due to the lockdown, due to children not going to school, due to many people teleworking and not going to the offices, the consumption of printing and writing paper stocks and many printing and writing mills shut down at the end of May. What is happening today, which is quite important. It has to be confirmed. But what is happening is that those, let's say, 6 big customers of big printing and writing, they have announced that they already have a better demand for September. They have placed firm orders for August. And we think that although the problem of the pandemic is not solved at all, the situation will improve in third and fourth quarter. Thank you, Jaime. Could you ask your second question?

[Jaime Escribano, Equity Analyst]

Yes. Very clear. The first one. Yes, my second question is regarding the guidance you provided in Q1, you have -- you said the little bit in terms of pulp production, you passed from 1.06 million tonnes to 1.02 million tonnes. And you have also fine-tuned a little bit the cash cost. So at the beginning, you were expecting EUR 375 million for the whole -- sorry, EUR 372 million for the whole year and now EUR 375 million, which surprised me because actually, the cash cost in Q2 has been quite good. So just to understand why have you fine-tuned this?

[Ignacio de Colmenares y Brunet, Chairman, CEO & MD]

Thank you, Jaime. You have to understand that we have delayed, as I told you, our annual maintenance shutdowns at both biomills to the third quarter, to July due to mobility recessions during the health crisis. And this annual shutdowns are going -- are taking longer, 10 days more than expected in Pontevedra. And well, we hope to start on a couple of days in Navia, but let's do if it is right. Then on the first half of the year, we were not able to do the annual shutdowns, would mean that the equipment were tailored and efficiency and productivity during second quarter have been worse than expected. And on the third quarter, we are suffering longer annual shutdowns than expected. On top of that, we are behind schedule in our optimization plans this year due to the absence of external technicians that were required to commission the new pulp dryer and the new digester in Navia as well as the new turbine in Pontevedra. After March 15, any German and Scandinavian technicians disappeared out of our mills. And that means that the ramp-up took longer. Now it's fine that we have lost some volume that we have -- we are not going to be able to recover during the second half of the year. And as that affected the digester in Navia, the new dryer in Navia and the new turbine in Pontevedra, remember that we made huge investments on fourth quarter last year.

[Jaime Escribano, Equity Analyst]

Okay.

[Ignacio de Colmenares y Brunet, Chairman, CEO & MD]

Sorry. Do you want me to give more information?

[Jaime Escribano, Equity Analyst]

No, no. I think that was good. But yes, please go ahead.

[Ignacio de Colmenares y Brunet, Chairman, CEO & MD]

No, no, no. It's fine if it is. It's okay.

[Jaime Escribano, Equity Analyst]

Okay. Yes. And my last question is regarding the working capital. You have done a very good job in controlling the working capital and improving it. And I was wondering if you can give us the figure of factoring and confirming that you have done in order to improve the working capital?

[Ignacio de Colmenares y Brunet, Chairman, CEO & MD]

Yes, absolutely. Alfredo will give you this answer, but I think it is in the documents we have we have published. Yes. Alfredo, could you give the figures of increase in factor and confirming?

[Alfredo Avello De La Peña, Chief Financial & Corporate Development Officer]

Yes. Thank you, and thank you, Jaime. We have increased the use of these facilities, this got premiumized by EUR 40 million in the first half as part of the measures taking, as we said, to maximize the liquidity. Regarding factoring, we have not increased it. Actually, we have decreased it by EUR 4 million since December '19. December '19 figure was EUR 101 million. And June '20 has been a little more than EUR 96 million. I mean what we have was much more success on the on payments on our wood and biomass. December figure was EUR 93 million on conforming and June '20 figure is a little above EUR 136 million. We have increased here EUR 44 million altogether, plus EUR 44 million in confirming, let's pour in -- factoring, you have the EUR 40 million of increase of these facilities.

[Operator]

[Operator Instructions] The next question comes from João Pinto from JB Capital Market.

[João Filipe Pinto, Associate of Equities Research Portugal]

I have 3, if I may. The first one, you adjusted slightly production estimates. We do have...

[Ignacio de Colmenares y Brunet, Chairman, CEO & MD]

Sorry, Joao, I don't understand what you are saying.

[João Filipe Pinto, Associate of Equities Research Portugal]

Is it better now? Yep, it is better now?

[Ignacio de Colmenares y Brunet, Chairman, CEO & MD]

Yes. It is a bit better, yes. Let's start. That's right.

[João Filipe Pinto, Associate of Equities Research Portugal]

So regarding the adjusted production estimate, with information that you have today, do you expect to reach the same number in terms of sales?

[Ignacio de Colmenares y Brunet, Chairman, CEO & MD]

Yes, yes, yes. I think that normally, we will match -- we will sell every single tonne we are going to produce, yes.

[João Filipe Pinto, Associate of Equities Research Portugal]

Okay. My second question, regarding the potential minority sale in the energy business. You said in the previous call that it is on hold. However, do you expect to conclude it before investing in new projects?

[Ignacio de Colmenares y Brunet, Chairman, CEO & MD]

Yes, I have nothing new to comment on this transaction in terms of...

[João Filipe Pinto, Associate of Equities Research Portugal]

Okay. And my last question, you told us that the stoppage in Pontevedra was -- took 25 days. Can you tell us about Navia?

[Ignacio de Colmenares y Brunet, Chairman, CEO & MD]

Well, as I told you, Navia, according to the plan. It's going to be 5 days. Well, let's see how it does. We are now just on the middle of the shutdown. We are supposed to start in 48 hours, but we have to be sure that we are able to do that. It's very difficult, but Navia, we're very much affected by the outbreaks, the outbreak in Marina 10 days ago with all our many, many people living there and the outbreak in Oviedo now, and it's a lot of restriction of people who cannot attend the mill. Many subcontractors who cannot attend, then it may take a few days more. You will know that in 3, 4 days.

[Operator]

[Operator Instructions] The next question comes from Jaime Escribano from Banco Santander.

[Jaime Escribano, Equity Analyst]

Just a couple of more questions. I wanted to leave for the rest, but just think if there are no more questions, I will ask 2 more. One is your outlook, so we are seeing pulp prices in China in the last few months going down, correction. But then in the last few weeks, it seems it's stabilizing. And in general, both in [ santree ] and the Brazilian-listed stocks are rebounding a little bit. What is behind this, in your opinion? Is it because there is a better outlook in China? Or what do you think?

[Ignacio de Colmenares y Brunet, Chairman, CEO & MD]

Yes, yes. We have analyzed the reason behind the programs we have in demand and then in prices after April. Remember that first quarter demand was quite strong, even in March, April and beginning of May, demand was buoyant. Remember what we launched a price increase. I remember in April. And then as a result of the lockdowns, schools being closed, offices been closed people stay in a home, right? The market of printing and writing collapsed. Nobody is printing A4. Nobody is buying any paper to write. And the supermarket and the stores are not publishing anything for publicity. Then as -- even that the coronavirus is not solved as we are moving from lockdown to a different way of living, but a lot of people coming back to the offices. And soon, the schools reoffering, the market is going, again, up. That's what happened in China. China is 2 months in front of us. I remember that in December and January, we were looking what was happening in China, and that's the reason why we started our first coronavirus protocol on February 24 because we were monitoring what was happening in China in terms of healthy end demand from the beginning. And what we are seeing in China is -- well, the activity of China is now at 90% of what it used to be. If you take any KPI like coal consumption, oil consumption, electricity consumption, sales. And what is happening in China that as the activities coming back to almost the normality, while consumption of printing and writing is going up, and therefore, demand for pulp is going up. And we expect the same to happen in the second half of the year in Europe and in the states, although the outbreaks, we are holding to suffer. One thing is absolute lockdown. And the other thing is like we are leaving today, with outbreaks to close city, to close an area to be locked down but not the whole country. Thank you, Jamie.

[Jaime Escribano, Equity Analyst]

Okay. Yes. And my second question is just a follow-up on the Pontevedra case, which I know is very difficult to know. But I don't know if there is any news or -- from your lawyers on when could we have a resolution from the court? Is it something that is imminent in September? Or is it something that is going until the end of the year? Just to have a little bit of color on where we are here?

[Ignacio de Colmenares y Brunet, Chairman, CEO & MD]

Yes. We think it will be more at the end of the year than in September 1.

[Operator]

[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.

[Ignacio de Colmenares y Brunet, Chairman, CEO & MD]

Thank you very much for attending this conference call. I hope that we will meet again in 3 months' time with a better situation. Thank you very much. Bye-bye.

[Alfredo Avello De La Peña, Chief Financial & Corporate Development Officer]

Thank you.