Ence Energia y Celulosa SA

MAD:ENC

Earnings Call Analysis

Earnings Call Transcript 2024-Q2

[Operator]

Good afternoon, ladies and gentlemen, and welcome to ENCE Second Quarter 2024 Conference Call. [Operator Instructions].

I would now like to turn the conference over to Ignacio Colmenares, Executive Chairman, and Alfredo Avello, CFO. Please go ahead.

[Ignacio de Colmenares, executive]

Good afternoon, ladies and gentlemen. Thank you for joining ENCE's Second Quarter 2024 Results Conference Call. Our CFO, Alfredo Avello; and our Head of IR, Alberto Valdes, are also connected to this call. After the presentation, we will be pleased to answer any questions you may have.

I would like to start with the main highlights of the quarter on Slide 6. The pulp price recovery continued during the second quarter, boosted by strong pulp demand growth, low pulp inventories and pulp supply constraints. Our average net pulp price improved by EUR 127 per tonne compared to the previous quarter, and by EUR 150 per tonne compared to the same quarter of last year, up to an average net price of EUR 728 per tonne, boosted by strong pulp demand and supply constraints.

At the same time, we were able to reduce our cash cost by EUR 13 per tonne compared to the previous quarter, and by EUR 60 per tonne compared to the same quarter of last year, down to EUR 474 per tonne, largely due to lower raw material and logistics costs. Both levers contributed to lift our pulp operating margin by EUR 140 per tonne compared to the previous quarter, and by EUR 210 per tonne compared to the same quarter of last year, up to EUR 254 per tonne in the second quarter. We expect to keep a strong operating margin in the third quarter, as I will show you later.

Continuing with Slide 7. As we anticipated, the new methodology for quarterly updating the cash remuneration of biomass plants was published in June. According to this new methodology, we should sell and cash our energy output at an average regulated price of EUR 115 per megawatt hour. As a result, the former regulatory has been eliminated, sorry, the former regulatory collar has been eliminated. Our business cash flow generation is now aligned with EBITDA and our cash generation profile has improved. This year, the use of this new methodology will improve our initial cash flow forecast by over EUR 60 million.

Let's move on to Slide 9, which summarizes our outlook for the pulp business in the coming quarter. The European PIX price is flattening out at high levels. We only expect a small fall of the PIX price on the third quarter. Take a note, that our PIX sales represent over 60% of the total. The price of these contracts are based on the PIX price of 1 or 2 months ago. That is why we see a high price for a large amount of our sales during the quarter, despite some falls in the spot markets. We see a strong average price for the third quarter.

At the same time, our cash cost is also expected to stabilize during the third quarter, despite the Pontevedra biomill maintenance shutdown scheduled for September. Both levers will contribute to maintaining a strong operating margin and cash flow generation in the pulp business during the third quarter. On the other hand, our operating costs in the biomass business should continue the downward trend in the coming quarters, contributing to an improved EBITDA and cash flow generation.

As you can see on the following Slide #10, our shareholder remuneration policy is based on cash generation and on our prudent leverage limits per business. We have approved a first interim dividend against 2024 results amounting to EUR 26 million, equivalent to EUR 0.107 per share payable at the 7th of August. The first interim dividend payment implies 3.4% yield over yesterday closing price. According to our shareholder remuneration policy, a second interim dividend will be decided by the end of October.

I now invite Alfredo to elaborate further on our financial results.

[Alfredo Avello, executive]

Thank you, Ignacio. Let's continue with the financial performance of our pulp business in Slide #12. The pulp business EBITDA was over 7x that of the second quarter last year, reaching up to EUR 61 million. When comparing to the same period last year, our EUR 150 per tonne improvement in average sale prices, together with a EUR 60 per tonne reduction in cash cost, increased our operating margin up to EUR 254 per tonne in the quarter.

Regarding the EUR 60 per tonne cash cost reduction, almost 50% is explained by operating improvements in our Pontevedra biomill and the rest by lower wood, chemicals and logistic costs. Looking at our first quarter '24 and as advanced in our previous call, the cash cost also improved by EUR 13 per tonne, in this case mainly due to lower chemicals, logistics and fixed costs among others. As our Chairman has already pointed out, the expected stabilization of real sale prices during the third quarter together with our cash cost level should result in another quarter of solid operating margins and cash flow generation.

Turning now to Slide 13. The renewable business EBITDA reached almost EUR 5 million in the second quarter, which is 10% above the same period last year. The 24% year-on-year improvement in the energy output, together with a 20% year-on-year reduction in the biomass operating costs, more than offset the lower revenues per megawatt hour derived from the elimination of the regulatory collar under the new renewable regulation.

Last renewable regulatory changes increased the average sale price of our biomass plants up to approximately EUR 115 per megawatt hour. This price will be passing through 2 components, regulatory pulp price composed by a combination of forward yearly, quarterly and monthly pulp prices, and then Ro for the difference up to the said EUR 115 per megawatt hour price. The calculation of the remuneration is updated quarterly and liquidated on a monthly basis, thus aligning our cash flow generation with our EBITDA and improving our cash flow generation. This new regulation is applicable as from 1st of January, '24.

The regulatory collar generated after the 31st December, '23 will continue to be cashed in, in the long-term within the RI as with the previous regulation. As our Chairman has previously stated, we see an improvement in the renewables business EBITDA and cash flow generation in the coming quarters, also due to the reduction of our biomass operating costs.

Let's continue in the Slide 14 with the solid performance of our consolidated results based on a higher pulp and energy sales and boosted by the improvement in pulp prices and the reduction of our operating costs. Consolidated EBITDA grew by EUR 54 million compared to the same quarter last year, reaching up to EUR 66 million, and the net income rose by EUR 40 million year-on-year up to the EUR 23 million.

Turning now to Slide 15. At the group level, free cash flow was positive by EUR 24 million in the second quarter after including a EUR 12 million working capital outflow, driven by higher pulp prices and EUR 10 million growth and sustainability CapEx. The said EUR 12 million working capital increase is explained by a EUR 27 million working capital outflow in the pulp business, mainly due to the increase in pulp prices, partially offset by a working capital inflow amounting up to EUR 15 million in the renewable business. This last figure includes the non-recourse factoring of part of the Ro of our biomass plants accrued from January to June '24 under the new methodology for an amount of EUR 35 million, which will be completely paid by the regulator in the third quarter.

Continuing in the Slide 16. On a consolidated level, net debt was reduced by EUR 44 million during the second quarter, down to EUR 279 million, with a solid cash balance of EUR 281 million. On top of the free cash flow generated in the quarter, net debt reduction in the quarter also includes the bridge loan provided to Magnon Green Energy by its shareholders during the second quarter, which is expected to be redeemed during the coming quarters starting this month of July.

Please note that the way we manage Magnon is maximizing cash distribution when possible, while at the same time temporarily supporting the company, if needed, under non-ordinary circumstances. Actually, 2021 and 2022 were years of very strong cash flow in the renewable business due to the high pulp prices, so we distributed up to EUR 66 million to the shareholders, including the last one last year.

One of these non-ordinary circumstances occurred during the first semester '24 when 2 important events were [ co-living. ] The interim period between the end of the previous regulation and the new one, which deferred the collection of EUR 40 million coming from the Ro, accrued during the first semester -- for the first semester which is not going to be collected until the end of the third quarter, and the refinancing process of Magnon's EUR 111 million remaining corporate loan, which could not be launched until the new regulation was published back in June. Until both events happened, the shareholders decided that the appropriate way to temporarily finance the company during this period was through shareholder loans at full market conditions to be repaid in the following quarters.

Well, I'm very glad to announce that yesterday, July the 30, we closed and disbursed a EUR 170 million 7.5 year term loan facility plus a EUR 20 million RCF among 14 banks and institutional investors, extending its financial maturity until January 2032. The new facility qualifies as refinancing and it has non-recourse to the parent company or the renewable business.

The use of these proceeds are the refinancing of the previous facility as well as fee repayment of shareholder loans, among other CapEx and corporate purposes. Actually, EUR 25 million are being distributed today to Magnon shareholders as part of the above-mentioned shareholder bridge loan amortization and interest payments. This again evidences the confidence and support of the financial community in the operation and development of our biomass energy business. Also, the solid cash flow generation expected during the second half of the year should allow us to end the year with a lower net debt figure even after the planned growth CapEx and dividend payments.

Let's turn now to Slide 17. I would like to conclude my section emphasizing once again ENCE's continued and exceptional sustainability performance. We are leader in sustainable forestry, circular economy, social commitment, gender equality and corporate governance. Our best practices have been recognized by independent ESG agencies and indexes. In the latest study, Sustainalytics has confirmed ENCE for the 4th consecutive year as the most sustainable player in the global pulp market. We have also been awarded the EcoVadis Platinum Medal, the highest rating awarded by this platform, and we remain members of the prestigious FTSE4Good Index since 2021 and the IBEX ESG and IBEX Gender Equality indexes.

Let me now give the floor back to our Chairman and CEO to update you on our growth and diversification projects.

[Ignacio de Colmenares, executive]

Thank you, Alfredo. Moving now to Slide 19. Let me update you on our growth and diversification initiatives in the pulp business. Firstly, we continue to diversify our production towards higher value added pulp products.

ENCE Advanced pulp sales continue to gain market share. They accounted for 28% of total pulp sales in the second quarter. Remember, we aim to reach 50% by 2028. Our ENCE Advanced pulp products deliver higher margins as they are better adapted to replace softwood pulp which is more expensive. These products deliver an extra margin of EUR 35 per tonne in the second quarter and imply a EUR 10 per tonne improvement in an average sales price.

Secondly, our project to diversify up to 125,000 tonnes of our production into fluff pulp is on track. This is an innovative project that has generated a lot of interest among our clients in Europe, who are currently importing fluff pulp from North America based on softwood. Our fluff pulp will be based on eucalyptus. It will be very competitive and will deliver much higher margins than our standard pulp. The project has all the permits required. We have already ordered the equipment and started the civil works. The commissioning is scheduled for the end of 2025. We estimate a total CapEx of EUR 30 million between 2024 and 2025, and we expect to achieve a return on capital employed above 15%.

Thirdly, and continuing in Slide 20. We have developed a portfolio of renewable packaging solutions capable of replacing plastic food trays. This project has a huge growth potential and very attractive returns. We are currently in the technical homologation and process with a number of clients in the space. We are finalizing the engineering and permitting to build a plant with an initial production capacity of 40 million units with the possibility of scaling it up in the future. We expect to take a final investment decision before year end. The initial investment will amount to EUR 12 million and the expected return on capital employed is well over 15%.

Fourthly, we are analyzing the engineering of our Pontevedra Avanza project, which will place Pontevedra's efficiency and flexibility at the forefront of the industry in Europe. This project should allow us to reduce Pontevedra's cash cost by EUR 50 per tonne, to improve its flexibility by using different species of eucalyptus, and to continue diversifying to ENCE Advanced pulp products. We expect to take a final investment decision at the beginning of 2025. The estimated CapEx in this project will amount to EUR 120 million during the next 5 years, with a required return on capital employed of over 12%. This is a diversification and efficiency project, not a profit increasing capacity.

And finally, we continue to make progress with the engineering and permitting of the As Pontes project for the production of bleached recycled pulp for paper, textiles and bioproducts. It will be a fully circular plant based on the recovery of paper board and textile fibers. It will be 100% decarbonized with no waste generation and minimal water consumption. It also avoids a new mill invading a natural space since the project will be located on industrial land occupied previously by a thermal coal plant.

For all these reasons, the project has already completed the public information process without any meaningful social opposition. This project is very well positioned to receive grants from the European Decarbonization Funds. We expect to take a final investment decision next year. Note that none of the investments I have described will require more root, which we believe is an increasingly limited resource. The Iberian pulp industry is already importing over 2 million tonnes of wood annually from Latin America. The execution of these investments will be adapted and aligned to our cash flow generation throughout the pulp cycle and to our leverage and dividend policies. Remember that our aim is to maintain a prudent leverage and offer an attractive remuneration for shareholders while investing for profitable growth in the future.

Turning now to Slide #21. Let me update you on our growth and diversification projects in renewables, where we want to double the EBITDA over the next 5 years. Firstly, through our subsidiary, ENCE Biogas, we aim to produce 1 terawatt hour of biomethane by 2030. Our unique business model is based on the recycling of local agricultural and livestock biomass [Technical Difficulty] as well as producing a high quality organic fertilizer and biogenic CO2.

ENCE Biogas is already working on a portfolio of 42 biomethane projects for development. 28 of these projects already have the land secured and the feasibility studies completed, of which 13 are in their engineering and permitting phase. We expect 6 of them to be ready to build next year. We plan to build these plans with EPC contracts using non-recourse project financing backed by long-term PPAs. The initially estimated CapEx is EUR 400,000 per gigawatt hour. The targeted return on the capital employed is over 12%. Additionally, some of these products will be sold at ready to build status to help finance the growth of this business. Nobody in Spain has a deep understanding in biomass sourcing that we have. Our know-how and expertise in this field constitutes a unique competitive advantage.

Continuing with Slide #22. Biomass thermal energy is not only carbon neutral, but may also be more price stable and more competitive than fossil thermal energy. Through our subsidiary, Magnon Servicios Energeticos, we signed our first service contract that year with a major industrial company in the food and beverage sector in Spain. We are already supplying renewable thermal energy to this company. We are now working on 14 other projects with important industrial companies in the food and beverage and chemical industries in Spain to provide them with renewable thermal energy.

Our customers appreciate our strong position in the biomass market and our experience in providing integral solutions from biomass sourcing to plant design and operations. We are in advanced negotiations in 8 of these projects. And in 3 of them, we are negotiating in exclusivity. These 3 projects are already in the engineering and permitting phase. We expect to be ready to start building by next year.

As in the biomethane business, we plan to build these biomass thermal plans with EPC contracts and using non-recourse project financing backed by long-term PPAs. The estimated CapEx is around EUR 100,000 per gigawatt hour with an estimated production of between 60 gigawatts and 200 gigawatts hour per plant. The targeted return on capital employed is over 11%. We have already presented 5 projects for European Next Generation Funds, one of them has already been awarded a [ EUR 4 million grant, ] and we expect the remaining 4 projects to be successful too. Ence [ Renovables ] growth is based on our unique experience of biomass sourcing. We are transforming today this biomass into electricity and thermal energy, soon also into biomethane and beyond 2019 into renewable fuels.

Slide 23. Let me now finish with some closing remarks before we move to the Q&A session. We expect to maintain a strong operating margin and cash flow generation in the pulp business during the third quarter. The new regulation for biomass plants improves our cash flow generation profile. The reduction of biomass operating costs will boost our renewable business EBITDA and our cash flow generation.

The first interim dividend of EUR 26 million will be paid on the 7th of August and the second interim dividend will be decided by the end of October. I believe we are well positioned to grow and diversify our business, while maintaining a prudent leverage and an attractive shareholder remuneration. The accomplishment of our goals will allow us to significantly boost our recurring EBITDA in the pulp business and more than double the recurrent EBITDA in the renewable business over the next 5 years.

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

[Operator]

[Operator Instructions] Your first question is from Enrique Parrondo from JB Capital.

[Enrique Parrondo, analyst]

I have a couple of them [Indiscernible] and jump back to the queue. First one would be related to sales volumes and cash costs for the pulp business. Maybe if you could share your expectations for these 2 for the remainder of the year.

[Ignacio de Colmenares, executive]

Sorry, could you repeat it? Because I haven't listened. Because of the problem we had here.

[Enrique Parrondo, analyst]

Yes. So, the first one is related to the sales volumes and cash costs for the pulp business, if you could share your expectations for these 2 for the remainder of the year, please.

[Ignacio de Colmenares, executive]

Thank you very much, Enrique. We expect to produce over 1 million tonnes in 2024. We expect cash cost to stabilize around EUR 475 million, maybe between EUR 475 million to EUR 480 million maximum during the second half of the year despite Pontevedra annual maintenance during third quarter 2024. A higher energy contribution should mitigate the slight increase in wood costs.

[Enrique Parrondo, analyst]

Great. So, second one on energy output. Can we expect some sequential increase versus second quarter levels due to the new regulation? So I'm basically assuming that the pickup in volume -- sales volumes in the energy business is mainly related to the month of June and wanted to understand if there is any upside to third quarter and fourth quarter output volumes versus what we have seen in this second quarter.

[Ignacio de Colmenares, executive]

Thank you very much, Enrique. Our production run rate in 2024 should be over 300 gigawatt hour per quarter. That means more or less 1.2 terrawatt hour annually. We expect volumes to be slightly the same on the third and fourth quarters than they were on the second quarter, not on the first quarter. We see -- as you can see on the forward market, high prices of energy, but we are a regulated company. Then we are selling at EUR 115 megawatt hour. We had -- during this year, we had till now 2 plants shutdown because of difficulties in sourcing at a good price all the biomass we need for all the fleet.

Now, one of these plants has already restarted, and most probably, at the end of the year, the second one will restart as well. Then we see, as a conclusion, same volume, so slightly higher volumes than in the second quarter for both third and fourth quarter, and starting to better volumes at the end of fourth quarter and beginning of next year. The rains of Spain are going to allow a very good collection and harvest of olive oil. And therefore, this raw material we are using called [ europaea, ] who has been very scarce in the last 2 years because of the drought, is going to be very abundant and it will allow us to work 100% on the short future.

[Enrique Parrondo, analyst]

Perfect. And the final one also related to the energy business. If you could maybe give us an update on where do you currently stand on the 223 megawatt capacity to be rotated to Naturgy. If you could share some timeline for this, it would be helpful.

[Ignacio de Colmenares, executive]

Yes. We are now negotiating the sale to different players of 100 megawatt in the South of Spain. We think this deal will be probably closed before the end of the year. And there is another one near Granada, slightly smaller. And today, we see some difficulties in selling these PV plants due to 2 factors. The low prices of the energy at solar hours are decreasing the price of those assets. That's the first reason. And the second reason is that we are facing some problems on the development of these PV plant near Granada. And then, today, we're not sure that we will be able to have these PV solar plant ready to build by the end of the year.

[Operator]

[Operator Instructions] Your next question is from Cole Hathorn from Jefferies.

[Cole Hathorn, analyst]

I'd like to focus on pulp and how you see the business developing over the next, let's say, 2 to 5 years. And where I'm going with this is I want to understand if, on average, your margin per tonne is going to be better through the cycle. And I'd like to focus on 2 items. Firstly, on the ENCE Advanced pulp, you talk about getting from 28% to kind of 50% kind of more specialized pulp volumes. What will help get to that 50% number? Will you benefit if the premium of softwood pulp is a lot higher versus hardwood?

[Ignacio de Colmenares, executive]

Yes, it is absolutely what you said. Then those products we have developed are substituting in our European customers' softwood. What we are agreeing with our customers is to share the difference -- the price difference between the hardwood and the softwood.

And it has 2 very important effects. As I mentioned before, on this second quarter, where we sell -- 28% of our volume were Advanced -- ENCE Advanced products. We made with these products EUR 35 per tonne of higher margin than the other products. But what is even more important, when the market is depressed, these products are sold at EUR 50 to EUR 60 per tonne, higher price than the volumes you are forced to sell on the spot market, with always a very low priced market.

Then if you take as a basis what we have done on the second quarter, those products, they have improved the average price of our sales by EUR 10 per tonne. If you analyze that, that's EUR 10 million per tonne. Today we are 28% and we aim to go to 50%, well, we have a value of EUR 20 million per tonne. At the gap, we are able today to be priced. And we think this gap will be larger because, today, on this 28% of volume sold in ENCE Advanced products, 1/3 is still at normal prices because we are on the process of homologation. As a conclusion, we have a potential value of around EUR 25 million per year.

And on top of that, we have the fluff project. We are going to be on the market early 2026. And while you know the gap between fluff and normal BHKP pulp, and that's where we are going. Our philosophy for the next 5 to 7 years is to invest and to work in increasing the percentage of ENCE Advanced products, work in homologating those products and having a good marketing of them, to invest those EUR 30 million in the fluff project.

And I'm pretty sure that, after 2029, we will continue investing in fluff because it's a product with high margins today, marketed worldwide from softwood with the exception of Suzano. And we are pretty sure that being able to sell this project -- this product with eucalyptus pulp is going to be a fantastic business. Then we don't want to grow in terms of volume. We as I say always, wood is going to be scarce, but we want to diversify into higher margin products. That's our strategy.

[Cole Hathorn, analyst]

And then, maybe shifting from -- if you're able to keep kind of higher sales price per tonne in the next downturn, that's great, improves your sales mix. But on the cost side, I mean, when I look at your CapEx projects, Pontevedra stands out, if you're able to get EUR 50 a tonne cash cost production. How do you think about that? I know that investment decision is only Q1 2025, but if I look at Page 20 of your report, in my mind, that project is probably the most appealing to me as it reduces your cash costs. How do you think about that? Can you accelerate that investment at all? How can we think about that cash cost per tonne reduction development over the next 5 years as you do annual maintenance, invest behind it?

[Ignacio de Colmenares, executive]

Well, you know that we are a quite prudent company. And for us, EUR 125 million is a lot of money. Then we have to follow the path we have decided. The path starts with having cell 1, cell 2 and cell 3 engineering completed by the end of this year. In order that we are absolutely sure, 100%, that the CapEx is going to be EUR 125 million, it is going to be EUR 180 million, and the reduction of OpEx, and then for the reduction of cash cost is going to be EUR 50 per tonne.

We are going to have that finalized by the end of the year. And then, on the first quarter of next year, we are going to approve these investments, and we are going to start. Due to the concession we have in Pontevedra, we cannot build new buildings. What means that we have to do all this plan following a certain rules and laws, and therefore, we cannot do that with the company producing pulp.

We have to do that every year. Connect what we have done on the annual shutdown, restart, connect on the next shutdown, restart, and connect on the next shutdown. And that's what we are going to do. By this reason, and because, as I said at the beginning, we are a prudent company, we have the balance sheet we have, and the market is a market where you have low prices. It's a difficult market. And then to have engaged a large investment of EUR 125 million, if the market goes down, it can be risky. Then we prefer to split these investments in 4 to 5 years and do that step by step.

Regarding Pontevedra concession, I have to tell you that while Enrique Parrondo was asking his first question, that is why I asked him to repeat the question. We have been informed by our lawyers that in 1 of the 2 appeals in the City of Pontevedra, yes, one of the appeals on the Constitucional Tribunal, well, it has been rejected by the Constitucional Tribunal, which is very good for us because we win on the Supreme Court and now it seems that we are winning again on the Constitucional. Thank you very much.

[Cole Hathorn, analyst]

That's all clear. And then maybe just the last one is, what's your outlook for pulp from here? Whatever you can give, color, would be helpful.

[Ignacio de Colmenares, executive]

For now, yes. Well, you have to differentiate between 3 markets. You have the Asian market, mainly a Chinese market. You have the market of Middle East and North Africa and you have the European market. And the trends of each market are totally different. Chinese market, a market where we are not, but as it is 40% of the global demand, the prices in China are affecting more or less what is happening in the rest of the world. It's a market, I would say, very speculative. When the Chinese customers have to buy, they overbuy. And when they decide they don't buy, they don't buy at all. Then on the last 5 weeks, they have not been buying and they have been forcing a price reduction in China. We are not in China, I repeat.

And then you have the market in North Africa and Middle East who has a trend between what is happening in Europe and what is happening in Asia. And in this market, we have the same problem in Turkey, what is the largest market where they have not been buying and they have forced a reduction of the price of certain amounts of money, which has not affected us in July and who may affect us a bit in August because we are not very active in this market.

Our main market is Europe. We are selling in Europe close to 90% of our sales. And in Europe, we have 2 kinds of contracts. We have contracts who are linked, as I was saying before, to the PIX price where you agree annually volume with a customer and you agree that the price of -- you are going to invoice every month, it's going to be the PIX price and you have different possibilities.

Some customers, we are invoicing at the price of the PIX of this month. Others, the previous month. And even a lot, 2 months ago. What it means is that when the prices are going up, you are not capturing all the price increase on every month. It takes time. But when the market change and the market goes down, you have a net because you have a big volume of contracts at PIX price and the PIX doesn't change as quick as the spot market. And you have a lot of tonnes at the PIX price of the previous month and even a lot of tonnes at the PIX price of 2 months before.

And then in Europe, you have volumes who are negotiated month by month at what is called market price. And today, we know that most probably the market price for August is going to be negotiated between $50 and $70, below $440. If you put all that on a calculator, what you have is that the -- most probably, the average price of the third quarter, despite reductions on the spot market, is going to be, for us, very similar to the average price of the second quarter. And that is why I was saying we are going to have a very good third quarters in terms of results and cash flow. And cash flow -- because as the price stabilize, you stop to invest in working capital.

Regarding the fourth quarter, it's too early to have a vision. Well, today, it seems that the market is going to be worse on the fourth quarter than today. As you know, what happens in this market, suddenly, you have 2 big -- 2 large mills who have a problem and the market change and you are able to increase prices. Then, today, it's quite difficult to have a vision about what is happening on the fourth quarter.

[Operator]

[Operator Instructions] Your next question is from Enrique Parrondo from JB Capital.

[Enrique Parrondo, analyst]

Yes. Just an additional question from my side. So, regarding BPA, so in a previous conference call earlier in the year, you highlighted that the [ Constitutional ] Court ruling should lead to a tax collection of close to EUR 20 million in your case. And we've heard from some company that they have already cashed this in. So, wondering if there is any update on your case that you could share.

[Ignacio de Colmenares, executive]

Alfredo will answer you this question, and I will read what we have now just received from the Constitucional Tribunal while Alfredo is answering.

[Alfredo Avello, executive]

Enrique, I mean, there's no question that we will cash in the approximately EUR 20 million in the coming quarters. If we are optimistic, could be at the end of the year. But within that it will be more within the first semester, year 2025.

[Operator]

Thank you. There are no further questions at this time. Please proceed for the closing remarks.

[Ignacio de Colmenares, executive]

Yes. I would like just to tell you that now I am reading what we have received from the Constitucional Tribunal. Well, what it says is that the appeals -- one of the appeals presented has been rejected, would mean that the Supreme Court decision has been confirmed. We will probably publish that on the CNBV now this afternoon. Thank you very much.

Thank you very much, gentlemen. And we are in contact at the end of the holidays. Thank you.

[Alfredo Avello, executive]

Thank you.

[Operator]

Thank you. Ladies and gentlemen, the conference has now ended. Thank you all for joining. You may all disconnect your lines.