Ence Energia y Celulosa SA

MAD:ENC

Earnings Call Transcript 2018-Q4

[Operator]

Good afternoon, ladies and gentlemen. Welcome to the ENCE Fourth Quarter 2018 Results Presentation.I now hand over to Mr. Ignacio Colmenares, CEO; and Alfredo Avello, CFO. Gentlemen, please go ahead.

[Ignacio de Colmenares y Brunet, Vice]

Good afternoon, ladies and gentlemen. Thank you for attending ENCE's 2018 Results Conference Call. I'm here today with our CFO, Alfredo Avello; and our Head of IR, Alberto Valdes. After the presentation, we will answer any questions you may have.Let's start with the main highlights. Firstly, our financial results during 2018 were very solid. EBITDA was 35% higher than in 2017. Net income was 41%, up from 2017. Our free cash flow before strategic investments and dividend payment reached EUR 200 million, 36% more than in 2017. Our dividend payment with total EUR 67 million. This is 69% higher than in the previous year. Secondly, we invested EUR 231 million in the Renewable Energy business. This includes the acquisition of a thermosolar plant in Puertollano, valued at EUR 140 million, that is already adding EUR 18 million to our annual EBITDA.Last year, we also invested EUR 104 million in our new biomass power plant under construction, which will add another EUR 30 million to our annual EBITDA by the end of this year. We invested EUR 62 million in the Pulp Business, including a 30,000-tonne capacity increase in Pontevedra and the first payments of further 100,000-tonne capacity increase to be completed during the first half of 2019.Thirdly, our leverage ratio is just 1x our last 12 months EBITDA. We will pay a final dividend of EUR 0.054 per share to be approved by the AGM on March 28. Fourthly, during 2018, we refinanced our debt to save EUR 11 million in annual interest payments from 2019 onwards.Finally, we believe that pulp prices will remain strong in the coming years. Eucalyptus pulp demand, which have increased by 4.7% since 2017, will remain strong. There are no major capacity increases expected neither this year nor in coming years.In the short term, we expect a gradual increase in prices due to the recovery in demand in China after the new year and due to the plant maintenance shutdowns before summer. All in all, we will finish 2019, the first year of our new strategic plan, with an EBITDA of EUR 340 million.On Page 5, you can see our overview of demand and supply. As you can see, the market tightness will continue to increase until at least 2022. Let me remind you that the lead time for new projects is close to 3 years, so we do not expect any surprise increases in supply. We expect the strong pulp price scenario to continue in coming years. Short-term price volatility is possible, as we have seen recently, but the tight supply and demand balance should correct it quickly.In Slide 6, we show the pulp price evolution during 2018 and RISI's estimates for 2020. As you can see, this forecast is well above the price we have used in our new strategic plan. Today, only one large capacity increase has been confirmed for the second half of 2021, and it will only be a mild and short relief to the increasing supply gap.Let's now move to Slide #7, which explains our financial results. Our Pulp Business revenues increased by 14%, while EBITDA grew by 44% due to an increase of 20% in net pulp selling prices despite a 3% reduction in volumes sold due to pulp inventory building ahead of first half 2019 expansions and 8% cash cost increase.Our Renewable Energy revenues increased by 4%, with stable EBITDA due to a 5% increase in energy volume sold and despite the lower operating performance of the Huelva biomass power plant during the second half of 2018. Finally, our net income grew by 41%, and 2018 dividend is 69% higher than the one paid in 2017.Slide 8 shows the evolution of our cash cost. The increase of around EUR 27 per tonne compared with the same period last year can be explained by the following factors: EUR 9 due to an increase in wood cost owing to the linkage to pulp prices; EUR 6 because of higher conversion cost due to rising chemical and fuel prices; EUR 10 per tonne owing to higher corporate expenses, especially headcount growth to pursue new strategic plan goals; EUR 2 per tonne due to higher logistic costs. The most important number here is the spread between gross pulp price and cash cost, which reached EUR 502 per tonne. Our cash cost for the full year, considering all the factors I have just mentioned, was EUR 377 per tonne.Slide 9 shows the performance of our Renewable Energy business. EBITDA is flat compared to last year despite the lower operating performance of the Huelva biomass power plant during the second half of 2018. Our 2019 EBITDA will reach EUR 65 million, 44% higher than in 2018, thanks to the 50-megawatt thermosolar plant we have acquired and our biomass plants operational recovery already visible in the first 2 months of the year.Let's turn now to Slide #10. During 2018, free cash flow before strategic investments and dividend payments reached EUR 200 million, with high EBITDA conversion of 69%, including a EUR 13.7 million one-off refinancing cost. Our CapEx increased significantly to EUR 291 million: EUR 62 million in the Pulp Business and EUR 231 million in the Renewable Energy business. After these investments, our net debt reached EUR 305 million.Our leverage ratio is only 1x our EBITDA over the last 12 months, 0.6x in the Pulp Business and 2.5x in the Renewable Energy business, assuming the pro forma full year EBITDA of the new thermosolar plant. The company decided to reinforce the equity of the Renewable Energy business with EUR 78 million to better finance its growth. This contribution, obviously, has no effect on the consolidated balance sheet of the company.In Slide 11, you can see our investments in the Pulp Business. We will invest EUR 190 million during 2019. We are adding 20,000-tonne capacity at our Pontevedra biofactory during the first quarter of 2019. This will add EUR 18 million to our annual EBITDA during our strategic plan assumptions. We are also adding 80,000-tonne capacity in Navia at the end of the second quarter of 2019. This will add EUR 28 million to our annual EBITDA using the same assumptions. We will start our first investments in the fluff and dissolving pulp during 2019, subject to board reconfirmation before the summer.In Slide 12, you can see our investments in the Renewable Energy business. The main investments were the Puertollano thermosolar plant, valued at EUR 140 million. That will contribute EUR 18 million to our annual EBITDA. The investment in the construction of our new biomass power plant to be completed by the end of 2019 was EUR 104 million. We expect an annual contribution to EBITDA from these 2 power plants of EUR 30 million. In 2019, we are investing EUR 130 million in this business.Finally, Slide 13 shows our attractive dividend policy. It includes 3 dividend payments during the year to achieve a 50% payout ratio. We paid the second interim dividend of EUR 25 million in December, and third and final dividend of EUR 13.2 million will be approved by the AGM on March 28.I would like now to review in Slide 14 some of the main highlights of our sustainability strategy. Firstly, we are promoting sustainable forestry through which we have reached 85% of local certified wood. Secondly, we are pursuing the dynamization of rural area. We spent EUR 182 million in wood purchases and over EUR 40 million in biomass. We are working with more than 1,800 forest owners. Thirdly, we care for our communities. We are eliminating odor and noise and investing more than EUR 3 million per year to community involvement projects. Fourthly, in the following slide, we are reducing our water footprint. Fifthly, we are promoting the circular economy in all our production sites. And last but not least, ENCE is committed to transparency and integrity.I will now invite Alfredo to review the figures in more detail.

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

Thank you, Ignacio. Moving on to Slide 17, let me start with the operating performance of our Pulp Business. Net pulp price grew by 20% in 2018, driving our revenues up to EUR 602 million. As expected, our pulp production increased by 1% after the Pontevedra 30,000-tonne capacity expansion, although the volume sold was some 3% lower due to the announced inventory rebuilding process related with the capacity increases of our biofactories. In order to ensure the correct servicing to our clients during 2019, we have increased our inventories in the second half of the year, and we'll continue doing so in the first quarter of 2019.Please remember that we will expand capacity by 20,000 tonnes in Pontevedra next month and by 80,000 tonnes in Navia during the second quarter, and our inventories were at record lows back in the second quarter '18 with just 28,000 tonnes or 10 days of production.Despite lower fixed cost dilution due to the said lower sales, 7.8% cash cost increase is twofold explained: on one hand, higher raw material prices, including the effect of wood linkage to pulp prices as well as rising caustic soda and fuel prices. On the other hand, higher overheads coming from the team building-up process of the necessary resources related to our capacity additions in progress. In our case, these costs also include all of our wood and biomass supply team, which we report as overheads and that we need to strengthen in advance of any capacity expansion. These higher costs should be diluted as from the second half of 2019 with their ramp-up of said expansions.Turning to the next slide, EBITDA of the Pulp Business targeted expected EUR 245 million. Let me now please explain in detail our nonordinary results shown below this business EBITDA. Starting with our forestry assets, as advanced in the presentation of our strategic plan during the fourth quarter, ENCE signed 2 long-term contracts for the sale of wood coming from our plantations located in southern Spain. These contracts will last for the next 12 years at prices higher than those considered in the previous year's mark-to-market calculation of our forestry assets. As a consequence of these new conditions, we are reverting an impairment for an amount of EUR 11.6 million with no cash impact in 2018.Secondly, back in 2008, with the aim of reducing the wood and pulp logistic cost of our Navia biofactory, the company entered into certain contracts to develop alternative logistic infrastructures with different core destinations within north of Spain. Since 2008, those infrastructures have been slowly developed but not finished. During this period, ENCE has implemented a different logistic strategy that has proven to be more efficient and from which the company has benefited during the last years. The fulfillment of the 2008 contract would imply higher structural logistics -- logistic cost for the future than those currently implemented.Under these circumstances, during the fourth quarter, ENCE decided to approach our 2008 counterparties with the aim of negotiating the possibility of a potential contract cancellation. Negotiations are currently being held with high possibilities towards accruing a wreckage-free cost of approximately EUR 10.7 million. This amount is significantly lower than the present value of the additional cost that the company would incur during the next years in the rent of said contracts are enforced. The corresponding cash outflow is expected during 2019. For this reason and offsetting the impairment reversal of our forestry assets, we have accounted a provision for EUR 10.7 million, which covers the foreseen amount for the cancellation of those contracts.Finally, we have also recorded EUR 5 million related to the ENCE environmental pact in Pontevedra signed in June 2016, which were already provisioned at the end of the third quarter and that will represent a cash out in the following years. This provision corresponds to the first phase of our committed -- commitment to contribute to the modernization of Pontevedra's city water treatment plant that, as you know, is neighboring our biofactory. It is our intention to progressively provision over the next 2 to 3 years the remaining EUR 60 million related to ENCE's environmental pact in Pontevedra.Low EBIT is worth mentioning the financial expenses column. Out of the EUR 27 million recorded, EUR 18.8 million are related to the early redemption of the EUR 250 million high-yield bond launched back in 2005, of which EUR 5.1 million have no cash flow impact. As you may be aware of, this transaction will save ENCE approximately EUR 11 million in interest on a yearly basis until its maturity date in 2023. All in all, 2018 ended with a net profit of over EUR 126 million, almost 46% higher to that of the previous year.Following with our Pulp Business cash flow generation in Slide 19. Recurrent free cash flow improved by 39% up to over EUR 173 million compared to EUR 124 million in the previous year. Our working capital grew by EUR 15 million, mainly due to pulp price increases and the already explained inventory replenishment process. As said, financial payments again include EUR 13.7 million related to the early redemption of the high-yield bond in Q2.During the fourth quarter, our Pulp Business has strengthened the balance sheet of the Renewable Energy business with a EUR 78 million contribution to further tap the growth opportunities contemplated in our 2019-2023 strategic plan, while keeping the leverage limits well below the thresholds established by ENCE for each business unit.Finally, expansion and sustainability CapEx amounts to EUR 62 million, mainly related to the Pontevedra 30,000 tonnes capacity expansion executed during the first quarter and other investments connected to the next 100,000 tonnes capacity expansion in the first half of 2019. This figure has been EUR 37 million lower than the one forecasted in our previous strategic plan, mainly due to calendar effects already considered in our new strategic plan CapEx forecast. Altogether, Pulp Business free cash flow amounts to EUR 41 million in 2018 after the contribution to the Energy Business.Slide 20. Let me update you on our hedging program. With the only aim of mitigating currency volatility, we hedged a minimum 50% of our expected U.S. dollar revenues for at least the next 12 months on a rolling-month basis. These hedging structures are weekly build up, monitored and timely adjusted taking into account the expected pulp price increases.Turning to Slide 21 and continuing with the balance sheet. Pulp Business net debt ended the quarter at EUR 148 million, representing a leverage ratio of just 0.6x LTM EBITDA, well below our self-imposed limit of 2.5x. As we already explained during the first quarter, we issued EUR 160 million convertible bond, with 125 basis points annual coupon. Proceeds plus additional cash available in our balance sheet was used to prepay the EUR 250 million high-yield bond issued on October 2015, with a 5 3/8 coupon. This issuance will translate into a more efficient capital structure, reducing our annual financial cost by EUR 11 million starting in 2019 and ensuring our long-term capital needs.We're not only moving into a more efficient financing, we're also fully committed to sustainability as a key driver of our company's long-term strategy, and our capital structure is already reflecting it.In May last year, we refinanced the fully available EUR 90 million credit facility due 2021, with a new EUR 70 million sustainable credit facility due 2023. Part of the cost of this financing is linked to ENCE's environmental, social and corporate governance performance and will be independently yearly audited. This facility is completely undrawn and, therefore, fully available if needed.In order to be prepared for the execution of our 2019-2023 strategic plan, the company has taken advantage of the current liquidity and financial conditions environment, and during the last quarter has refinanced EUR 25 million in bilateral noncovenant loans and entered into additional one for EUR 75 million at an average fixed cost of 186 basis points and maturing 2023.Let's now change the focus to our Energy Business operating performance in Page 22. The energy volume sold was 4% higher than in 2017, mainly due to the new Cordoba 27-megawatt plant acquired in August last year, and which has been partially offset by the lower operating performance of other biomass plants. Average selling price was 2% lower than the previous year due to lower average pulp prices. In addition, the company has cashed in that provision, revenues for a total amount of EUR 13.9 million, of which EUR 10.5 million are related to the regulatory collar and EUR 3.4 million to a temporary suspension of the national electricity generation tax. However, note that this last item has no impact in our EBITDA as this tax was a pass-through in our P&L.Finally, in December, we have taken control of our new 50-megawatt thermosolar plant, which is already contributing with an annualized EBITDA of EUR 18 million. Taking all the above into account, the Renewable Energy business EBITDA remained stable for 2018 at EUR 45 million, in line with the guidance provided back in November.For 2019, we expect a 44% annual EBITDA growth in the Renewable Energy business up to EUR 65 million based on the already visible operating improvement of our biomass plants, together with increasing contribution from the new thermosolar plant incorporated in December.Following with our Energy Business P&L in Slide 23. Below the EBITDA line, year-on-year high depreciation charges are mostly strained by the asset base increase after our last acquisition in Cordoba. Finance cost increased by EUR 2.8 million up to EUR 10.4 million due to the increase in the average gross debt balance to finance the construction of the 2 new biomass plants that will start operations in the fourth quarter. After minorities, the Energy Business reported a net attributable profit of EUR 9.1 million in 2018.Focusing now on cash flow generation in Slide 24. Normalized free cash flow after maintenance CapEx, working capital changes, interest and taxes, amounted to EUR 33 million compared to EUR 19 million in the same period last year, due to a better working capital performance. Strategic plan investments amounted to EUR 231 million, mainly related to the construction of the 2 -- of the new 46-megawatt biomass power plant in Huelva and the 50-megawatt biomass power plant in Puertollano. That will contribute approximately EUR 30 million from its startup at the end of this year. 2018 investments in the Energy Business were EUR 24 million lower than our initial guidance due to calendar effect, which will be compensated within 2019.Regarding our new thermosolar plant, the net cash outflow related to its acquisition taken into account the cash available in the [indiscernible] had been EUR 125 million as of the end of the year.Looking backwards and reviewing our M&A activity. As of this quarter, once ENCE Energía receives a 2018 expected dividends from its all affiliates, the company would have already recouped up to 84% of its investment equity capital in this assets, just after less than 2.5 years from its acquisition. ENCE will continue to closely monitor any opportunities that could target our objectives and our strategic plan.Moving on to Slide 25. Net debt position as of -- for the Energy Business ended at EUR 157 million, including, on one hand, EUR 231 million investments related to the execution of our strategic plan, and on the other hand, the EUR 78 million contribution made by the Pulp Business in the fourth quarter. This contribution will allow us to better tap the growth opportunities contemplated in the 2019-2023 business plan, while keeping leverage well within the threshold established by ENCE for its business and saving more than EUR 2 million in financial expenses in 2019.ENCE has been very active in the concerned markets during the last quarter of 2018. Firstly, we closed the financing of our new 50-megawatt Puertollano biomass plant, adding a new EUR 60 million tranche to our EUR 220 million corporate financing facility closed at the end of 2017. Conditions are the same ones as of the initial facility with an amortizing banking tranche for EUR 70 million due in 2024 and a bullet institutional investor note for the remaining EUR 43 million due in 2025.And secondly, we have raised EUR 139 million bridge loan to fund acquisition of the 50-megawatt thermosolar plant, also, in Puertollano. We expect to close on the final refinance structure within March this year. After all these transactions, financial leverage of our Renewable Energy business stands at 2.5x LTM EBITDA, considering a pro forma at 12-month contribution of our new thermosolar plant.Let me please now return the lead of this presentation back to our CEO for the closing remarks.

[Ignacio de Colmenares y Brunet, Vice]

Thank you, Alfredo. I conclude this presentation with my belief that pulp prices will remain strong during the next few years. The supply and demand balance is tight and will remain so at least until 2022.Prices in China have already bottomed out, as you know. I expect demand recovery in China after the new year and price increases in all markets by the end of this quarter.Pulp Business EBITDA will strengthen during the second half of 2019. Sales in the first quarter will be lower than in 2018 due to the building of inventories prior to the important capacity expansions in both of our pulp mills. These capacity expansions will reduce pulp production during the first half of the year. They will also affect cash cost negatively since there will be less dilution of 5 fixed costs. Our FX hedging policy and our spot sales outside Europe will also affect results during the first quarter.On the other hand, stronger results from the Renewable Energy business are already visible in the first 2 months of the year, as we are improving the operations of our biomass power plant in Huelva together with the increasing contribution from the new thermosolar plant purchased in December.Altogether, we see an EBITDA for the first quarter of around EUR 55 million compared to EUR 65 million in the same period of 2018. For the full year 2019, we expect 1 million tonnes of pulp sales and EBITDA of EUR 275 million in our Pulp Business, and EUR 65 million in our Renewable Energy business. We believe our 2019 EBITDA will be EUR 340 million.Finally, we will increase our attractive shareholder remuneration during 2019, thanks to the increase in our net price.Thank you very much, ladies and gentlemen. Now we are happy to answer any questions you may have.

[Operator]

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

[Jaime Escribano, Equity Analyst]

So my first question regards to the margins of Q4 2018, both in pulp and in energy. So the margin of pulp was 35.3%, and so there was quite significant increase. I don't know if you can elaborate a little bit on what is behind because the price was similar to -- well, actually below Q3, however, the margin was very similar. And also, in the Energy Business, even if we strip out the new acquisition of the solar plant and the margin, to me, looks like a very high, 38%, excluding the acquisition, and given that the energy volume has been below other quarters, just to try to understand these 2 margins. And the other question I have is regarding the Chinese pulp prices. We saw this week an increase of $20 per tonne, which was a significant increase. And maybe you can give us some color from your insight what is behind these price increases? Is that demand is very strong? Or the Chinese players are restocking? Or what is your view?

[Ignacio de Colmenares y Brunet, Vice]

Thank you very much, Jaime. If you don't mind, I will start by the last question because I think it's really important to understand where we are. What happened in China in November and December? Well, Chinese people are gamblers. As prices were going up during the full '19-'18 -- sorry, 2018. They were buying and buying and buying, and we discovered in October that the huge supply chain was with too much stock, lot of stock of paper, lot of stock of paper reels, a lot of stock of pulp in the warehouses and a lot of stock of pulp on the floors and a lot of stock of pulps navigating from Latin America, Canada and Scandinavia to China. And then at the same time that the trade war was affecting the economy in China with some tax in the credit, they decided to stop buying. As you know, when they decided to stop buying, Chileans reduced prices of solid wood. Scandinavians and Canadians reduced price of solid wood and Chileans reduced price of hardwood, trying they keep on buying. Brazil decided to don't follow and they not accepted to reduce prices. But they continue to ship pulp from Brazil to China, and you know that they need 45 days of shipment. During November and December, the market was very limited in China. As Brazil was continuing to ship to Chinese ports, the stock was rocketing in China. What we did in -- at ENCE is in order to support prices in Continental Europe, which is our main market, we did spot prices in the Mediterranean countries where we normally don't sell. That is a reason why we have higher discounts in the third quarter -- sorry, on the fourth quarter. And that is why we are going to have -- will still have higher discounts in the first quarter of 2019. Well, during November-December, the stocks were continuing going up. Since Christmas, Brazil is not supplying -- is not shipping to China. Then what we see is that the prices starts to decline by early 30 January. Since beginning of February, prices are going slightly up every week, every week. This week, they have went up with more strength. And we believe that the stocks will be normalized in China by the end of February, beginning of March. What is very important is that today the stocks are not on the warehouses of the paper makers, but they are on hands of the pulp producers. Then the risk is controlled. What is very important is, today, our customers have no stocks, neither in Europe nor in Asia, which means that as soon as this stock in China -- this stock problem in China is solved by the end of February or early March, we are fully convinced that prices will rocket again. That is why we see that even -- sorry, despite we are going to have the worst first quarter than the first quarter of 2018. We are absolutely convinced that we are going to make EUR 340 million EBITDA during 2019. And now going through question #1, I -- Alfredo, please go ahead.

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

Yes, Jaime. If you look at our margins, you look at the quarter, margins in 4Q '18, EBITDA margin was 35%, while fourth quarter '17 was 32%, just 3 basis points. The reason of this margin increase, on one side, you had only 4% increase in the revenues that you had from EUR 175 million up to EUR 182 million on one side. It is -- as I was saying, a 4% increase. Also, this EBITDA grew by EUR 15.4 million, which -- I mean, which more than compensate the -- sorry, the price grew by 10.7%, which more than compensate the reduction in the production and the cash cost. Also, you need to take into account that you have some revenues coming from the hedges, the EUR 3.7 million in revenues coming from hedges resulting from our collar transactions. But all of that is what is making the difference of these 3 basis points in margin in the Pulp Business. When we look on the other side, you look at the Energy Business. The fourth quarter -- I'm sorry, and coming back to the Pulp Business, if you look at it yearly, we're looking about -- [ there’s ] 35% from 28% margin, so it basically comes from the price difference. If you look at the energy, in the fourth quarter '18, you had a margin of 41%, while the fourth quarter '17, you have a margin of 32%. One of the main reasons that you have here is, on one side, a new thermosolar plant acquired that was incorporated in the last month of the quarter. And there were some other -- basically, some other costs that were not affecting this last quarter as year-end effects that were basically reverted. But that's it. I mean, there is no other -- and any other difference in coming back. Prices, a little difference on the pulp price, including some hedges and revenues and thermosolar plants and some other currency effects -- minor currency effects as of year-end looking there.

[Ignacio de Colmenares y Brunet, Vice]

Yes, thanks. As Alfredo is saying, in Energy, you have to take into account that the margin, the percentile margin of the thermosolar power plant is different to our biomass power plant. And in December, we got a part of the EBITDA with the power plant. And you have to take into account that the improvement in yield of our biomass in the South of Spain has already started. We were suffering a lot during the second -- the third quarter and in the beginning of the fourth quarter. But at the end of the fourth quarter, we started to see results and that's improving the margin. And regarding pulp, as Alfredo was saying, well, we've been doing provisions during the full year and there were too high. And at the end of the year, we reverted some of these provisions and we can explain that to you later on with more specific detail.

[Operator]

The next question comes from Nuno Estácio from Haitong Bank.

[Nuno Estácio, Equity Research Analyst]

My first question would be on the CapEx. In pulp, you have announced a CapEx of EUR 190 million. Just to ask if this is all -- this includes the part that is not yet confirmed by the board? And my question regarding that is also is, in case the pulp market is not as strong as you expect, is there a possibility that could you adjust this CapEx this year, or do you think that you are quite confident that this EUR 190 million will go ahead? The second question would be if you could explain us a little bit more in terms of the cash cost, the evolution of the structural cost increase because it was really -- it continues to increase. So if you could help us a little bit understand that. And if you could assure that the structural costs as -- in the cash cost will not be increasing? Final one. I think you have mentioned during the presentation, EUR 55 million of EBITDA in the first quarter. Does this include the biomass? And if it does, why is it so low considering that the current prices are still quite solid? Are you expecting a huge spike in cash cost during this first quarter because of the capacity expansion or very low volumes?

[Ignacio de Colmenares y Brunet, Vice]

Thank you, Nuno. A lot of questions. I will -- I hope I don't forget any one. Regarding CapEx of EUR 190 million, yes, it is the full CapEx expected for the year. Some part of it is already approved by the board. And quarter-by-quarter, we are approving more CapEx with this total amount of EUR 190 million, if everything from a financial position and from the market perspective is fine. Regarding your question, I would ask from a theoretical point of view and then I will precise what is going to happen and how I see that in 2019. As we said during the presentation of our strategic plan, we are committed to a dividend and to a conservative financial policy. Before -- if we see that the market weakens, if we see anything changes, well, we will reduce the speed of the CapEx, not approving it -- not really approving further CapEx quarter-by-quarter. But today, we don't see at all this situation because we are absolutely convinced that what happened during November and December, January and February, is arriving at the end and prices will very soon rocket. If I am not wrong, your third question was about cash cost increase. Well, if we compare our fourth quarter cash cost with the third quarter cash cost, we had an increase of 2% from EUR 376 to EUR 383 per tonne. Wood cost was 3.9% higher from almost EUR 200 to EUR 207 because of strong winter and a lot of rain in the Northwest of Spain during the autumn and the beginning of the winter. We prefer to transport exceptionally wood from our southern plantations and the logistic cost is higher, and that is why the wood cost is higher. But we have not increased a single euro our prices in our normal market in the Northwest of Spain. Conversion cost was lower. It was 1.6% lower from EUR 107 to EUR 105. Commercial and logistics was almost the same, 31.5%. And overhead increased 4.2% by EUR 1.60 from 37.4% in 39%. If you're interested in a comparison of fourth quarter '18 to fourth quarter '17, we can give you that later on. Regarding the EBITDA of the first quarter of the year, it's going to be low EBITDA. It's going to be almost EUR 10 million lower than in the first quarter last year. Despite we have better EBITDA coming from our biomass business, at least, EUR 4 million, we are expecting today an EBITDA of EUR 13 million lower in the Pulp Business. I have to say that we have several impacts affecting negatively this EBITDA during the first quarter. Although production is going to be 11,000 tonnes higher this year if you compare to the first quarter of 2018, the sales are going to be 13,000 tonnes lower. We are building a stock for the shut down in Navia at the month of May. It's going to take at least 4 weeks. And as we need to have stock for our customers, we are reducing sales during this first half of the year. For your information, we are building a stock. This stock should be, at the end of April, of 73,000 tonnes, while it was only 46,000 tonnes at the end of September and 53,000 tonnes at the end of December. And we are increasing our stock by 20,000 tonnes during January, February and March. And despite we have higher production, we have lower sales than the same quarter last year. The FX hedging is affecting negatively our P&L during this first quarter of the year because today the spot price of the dollar is stronger than our hedges. First quarter last year, we improved our results by EUR 3 million because of hedging, while we are destroying EBITDA by EUR 5 million during the first quarter of the year because of these hedges. And regarding discount, discount was 27% 12 months ago. And discount, because of these spot sales in Mediterranean countries, if you don't press European market, it's going to be 30% during this first quarter of the year. And we think that's going to change as soon as the market will start to be normalized. That's the reasons why the cash cost is going to be higher because we have less dilution cost. Cash costs during the first quarter is going to be around EUR 392, and we had a cash cost of EUR 369 in the first quarter of 2018. As a result of that, we expect a weak quarter impact of only EUR 41 million, EBITDA compared to EUR 54 million first quarter last year. As we are expecting a EUR 13 million EBITDA in energy, EUR 4 million higher than the EUR 9 million EBITDA we had in Energy in the first quarter of last year. As a result of that, we are expecting EUR 55 million for both businesses on the first quarter. As we keep on our commitment to EUR 340 million for the full year because we are absolutely convinced that prices will tread early March. Thank you very much, Nuno. I think I have answered all your questions.

[Operator]

[Operator Instructions] The next question comes from Maksym Mishyn from JB Capital Markets.

[Maksym Mishyn, Vice President]

Just one question, if I may. I was wondering if you could quantify what was the contribution of the Puertollano solar plant to the EBITDA in the fourth quarter -- energy EBITDA in the fourth quarter of 2018?

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

Yes, Maksym, it was -- only in December, it was EUR 1.3 million.

[Operator]

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

[Bruno Filipe Bessa, Analyst]

Just one question from my side. And if you could please give a little bit more visibility on the assumptions behind the EUR 340 million consolidated EBITDA that you expect in 2019? And then maybe the assumptions in terms of pulp prices and euro dollar?

[Ignacio de Colmenares y Brunet, Vice]

Yes. We are expecting -- well, we are expecting EUR 340 million. First of all, EUR 65 million are coming from the Energy Business. That's our actual perimeter, plus Puertollano thermosolar power plant is EUR 80 million. Regarding the pulp business, we are expecting this weak first quarter that we are expecting for third, fourth and -- sorry, for second, third and fourth quarter, we are assuming $1,050 per tonne as a fixed price, a discount of 26% and an exchange rate of $1.20. And with that, we are in EUR 340 million.

[Operator]

The next question comes from Alvaro Lenze from Alantra Equities.

[Alvaro Lenze Julia, Research Analyst]

I just wanted to know, if you could give us some color on the volumes that you have agreed with your clients for 2019? I don't know if you have secured 100% of the production already as you did in 2018? And what can we expect in terms of -- or what has been the negotiation in terms of discounts, excluding the extraordinary sales to, say, in that way in the Mediterranean?

[Ignacio de Colmenares y Brunet, Vice]

Yes. Thank you very much, Alvaro, for your question. Yes, we have to raise a few hundred percent of our sales from our European customers at average discount of 26%. And I forgot before to -- when I was answering to Bruno Bessa, well, this EUR 340 million is with 1,030,000 tonnes of sales of pulp and with an estimated cash cost for the full year of EUR 375.

[Operator]

Ladies and gentlemen, there are no further questions. I now give back the floor to the company. Thank you.

[Ignacio de Colmenares y Brunet, Vice]

Thank you, ladies and gentlemen. We will be in touch again at the beginning of May. Thank you.