Empresas Copec SA
SGO:COPEC
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Good afternoon, everyone, and welcome to Empresas Copec's 1Q '21 Results Conference Call. Today's presentation and the 1Q '21 earnings release are available on the company's website at www.empresascopec.cl, and also on our Investor Relations website, investor.empresascopec.cl.
Before we begin, I would like to remind you that this presentation may include market outlooks and forward-looking statements, which are based on the beliefs and assumptions of Empresas Copec's management and on information currently available to the company. They involve risks, uncertainties and assumptions because they relate to future events and therefore, depend on circumstances that may or may not occur in the future.
Investors should understand that general economic conditions, industry conditions and other operating factors could also affect the future results of Empresas Copec and could cause results to differ materially from those expressed in such forward-looking statements. This presentation contains certain performance measures that have been adjusted with respect to IFRS definitions, such as EBITDA. I will now turn the call over to Mr. Rodrigo Huidobro, Chief Financial Officer of Empresas Copec. Please go ahead, sir.
Yes. Hello, everyone. Thank you very much for joining this conference call, where we will be taking a look at the results of the first quarter 2021. I'm joined here today by people from our Investor Relations department, led by Mr. Cristián Palacios, and also people from Arauco, led by Mr. Gianfranco Truffello. They will be all helping us out in any questions you might have at the end of the presentation.
Let me just remind you that we have switched to this webcast conference mode where you can submit your questions at the end of the presentation through the webcast platform. Okay. So let us now turn to Page 4 of the presentation, where we have -- where we're presenting the most important facts of the quarter.
There's a strong recovery in EBITDA with respect to the last quarter and also with respect to the first quarter 2020, which is basically explained by our forestry and fuels divisions. In the case of forestry, there's a huge improvement, which is driven by wood products and also pulp prices. There are higher prices and also volumes in panels and also some timber, with respect to the first quarter 2020.
There's also an increasing pulp -- in pulp prices with respect to both 2020 and also with respect to the fourth quarter of 2020. In the case of the wood products, there's also a sustained performance. Over the last couple of quarters we've seen a very strong performance of the wood products segment.
In the case of fuels, we are -- we had higher margins, both with respect to the fourth quarter and to the first quarter 2020, which is basically explained by a positive revaluation of inventories driven by increase in oil prices. Together with that, we have seen a drop in the exchange rate or an appreciation of the local exchange rates, especially in Chile, which means that when translating the results to dollars, the figures are amplified because we are translating them at this new exchange rate.
We are seeing recovery in the fuel segment and basically reaching levels which are very close to pre-pandemic levels. We have seen improvements in Copec Chile and also at Terpel, very significant in both cases. In the case of the LPG business, we continue to see a very resilient business with a higher EBITDA, both -- with respect to both comparable quarters.
Regarding our projects, MAPA is up to 83% as of April 2021, so making good progress there. And we continue to expect the start-up for the fourth quarter this year. In the case of Mina Justa, we've already started operations there, and we are in the process of starting production and accumulating inventories and looking to go ahead with the first shipments during the second quarter.
Regarding on leverage, we've continued to decrease leverage in terms of net debt to EBITDA, and we're now standing at 3.6x. Let's turn now to Page 5, where we are placing the results of this quarter in a historical context. We ended up with $693 million of EBITDA, which means an increase of 55% with respect to the first quarter 2020 and 20% with respect to last quarter 2020.
In the case of net income, we're up to $229 million, which means a very significant increase with respect to both comparable quarters. As you can see in those graphs, we are going back to figures which are much more representative of a good year for Empresas Copec. Actually, the $693 million compares very closely with the figures we reached back in 2018, which was a very good year in terms of market pulp prices.
Moving on to Page 6. We can see the EBITDA there, $693 million, which means 55% up with respect to the first quarter 2020, and which is basically explained by the forestry segment in relation to the better performance of pulp and wood products, and also explained by an increase of $89 million in the fuel sector, which has to do with increased margins because of inventory regulations and also because of a lower dollar when measured in Chilean pesos, which means a positive conversion effect when converting the figures to U.S. dollars. To the right-hand side of the graph, you can see that the EBITDA is basically contributed by Arauco, Copec, Abastible and Sonacol as usually is the case.
Moving on now to Page 7. You can see a net income of $229 million, which is considerably up with respect to the $6 million that we recorded back in the first quarter of 2020, and explained basically by Arauco, Copec, Abastible, and also by some different effects at the parent company level.
This is basically non -- this is basically operating and nonoperating effects that are explaining the increase in results. To the right-hand side, once again, you can see that net income is contributed by our main subsidiaries, which are Copec, Arauco, and Abastible.
Moving on to the detail of the income statement. You can see that we went up in terms of operating income from $176 million to $406 million. That is basically explained by higher results in our forest division in Arauco, in turn explained by the wood products and the higher prices in pulp.
In the case of Copec, we also saw increased results because of this inventory valuation, basically. In the case of Abastible, we saw improved results because of stronger physical sales in Chile, Colombia and Ecuador. There's a lower nonoperating loss, which has to do basically with lower impairments and closure expenses which were recording in Arauco last year, some increased other income because of sale of forestry assets in Arauco and also all of that, which is offset to some extent by higher taxes.
Moving on to Page 9. You can see our financial ratios here. Both operating margins, EBITDA margins and also the returns are gradually improving as operational figures improve. And in terms of leverage, as we just commented, we've continued to go down. So we've gradually left behind our peak of 4.6x, and now reaching a level of 3.6x, which allows us to gradually approach our comfort zone. I would say that this is a company that has traditionally stayed within the 2 to 3x EBITDA range. And given the last developments in market pulp -- pulp markets and also the gradual finishing of our large investments, we have managed to gradually go down in this net to EBITDA indicator. Quite comfortable in terms of maturities and a very well balanced debt schedule for the coming years.
Moving now to Page 12, some more detail on our forestry division here at Arauco shows net income that increases quite significantly from $23 million -- from a loss of $29 million to $102 million. That is explained by a stronger operating income, which has to do with prices and volumes in pulp. And also with margins in wood products, which are in turn associated with higher prices, also with lower costs resulting from logistical optimizations there. The volumes are also up in that division, both in sawn timber and in panels.
In terms of nonoperating income for Arauco, we are seeing a higher other income, which is basically related to the sale of forestry assets. There are lower -- other expenses because of lower impairments and closure expenses that we recorded last year, in 2020, and there are also lower financial expenses, which will lead to the possibility of capitalizing part of the interest expenses related to the construction of MAPA. So that capitalization was higher this year, and that explains the lower financial expenses that we recorded in our income statement. All of that, of course, is offset by taxes that are higher than in the first quarter 2020.
In the case of pulp, which is shown on Page 13 with some more detail, we are seeing that EBITDA is up year-on-year from $152 million to $210 million. And EBITDA for this quarter is pretty much in line with the fourth quarter 2020. We have prices increased quite significantly, both with respect to the first quarter and with respect to fourth quarter of 2020.
So prices are up by 14% -- 15% with respect to the last quarter and by 21% with respect to the first quarter last year. And volumes are up with respect to the first quarter also, but down with respect to the last quarter. So that's why we -- in spite of the higher prices, we ended up with an EBITDA that is very similar to last quarter basically because of volumes going down. You can see -- on that same page, you can see the schedule for maintenance going forward.
On Page 14, some more comments about the pulp markets during the first quarter, we saw that pulp demand was strong basically across the board in all markets. We saw price increases in every fiber and in every market, basically. The end products, in general, have been very strong and with good margins. So there is space to -- there has been space to transfer the increases in prices to the end customers. We continued to increase prices during the 3 months in the first quarter of 2021 but not all those increases were reflected in the figures in this quarter because of delivery delays. As you well know, there have been some logistical problems in this market during the first quarter. However, those increases are implemented from a commercial perspective. So we should see some of them materializing during the second quarter.
Very good demand in China and everything passed through to final customers. In Europe, same thing, we have seen a very good end market for the different kinds of papers. And all of them with very good demand, and this has provided space to pass additional increases in prices through to these end customers. So in China and in Europe, we saw prices increases significantly in the first quarter.
A brief overview of inventory. As you can see there that last figure we have for softwood is 38 days, which is pretty much in line with normal levels. And in the case of hardwood, we do not have the latest data, but we believe they are also quite close to their historical averages. So no significant changes in inventory levels.
On Page 15, some brief words about the outlook for pulp and the behavior of the pulp markets during the first months of this second quarter. We actually saw the pulp price continue to grow, continue to go higher during the first month of the second quarter. And then we saw it stabilizing at very good levels. Going forward, there might be some price adjustments because of seasonality, especially in China, but we continue to see very strong markets. So China, success there, lower demand because of seasonality. This is usually a lower quarter for demand in China. However, Europe and the U.S. are still showing very strong demand. So this should offset to a certain extent, whatever effect we see in China.
Clear -- signals of the tissue market being very strong because of increased mobility, basically and because of the beginning of the holiday season. In terms of dissolving pulp as well, we have seen a good behavior of the market with very good demand and also with price increases. Might be some seasonality effects as well in the coming months. But all in all, very strong markets all across the board. And you can see there in the graph in the bottom left-hand corner that prices are standing around 800 -- a little less than $800 per ton, it's around $780 for hardwood, around $980 for softwood and somewhere around $1,100 for dissolving pulp. So all in all, very strong markets.
Moving on to Page 16, some more info on our wood products segment. You can see that EBITDA was pretty much in line with the last quarter with fourth quarter 2020, reaching $187 million. This is a very interesting figure for this segment. The usual figure for this wood segment during an average quarter is somewhere around $100 million per quarter. So we're basically doubling that figure in the last 2 quarters. So this is a very strong market, and with very good signals as well. Our signals are continuing to be strong for the months to come.
You can see -- in the tables there, you can see the behavior of prices and volumes for panels and sawn timber. You can see prices going up for panels with respect to both quarters. And in the case of sawn timber, also price is going significantly up, especially with respect to the first quarter 2020. In that case as well, volumes have strongly gone up to 18%. So all good so far in the wood products division.
If you move one slide forward, some brief words about the potential outlook for these markets. In the case of North America, that is now -- has come to represent 50% of our sales approximately. We are seeing a good behavior in general, driven by Housing Starts. You can see down there that the Housing Starts index has continued to grow. So it has quite consistently grown over the last several months already.
And this is also driven by home repair and home remodeling demand as well. So very strong demand coming from all of those segments, construction, repairing and remodeling and also some supply restrictions on the -- basically on the logistical side that has put additional pressure on prices.
Prices are at record level in North America, and we see that it's very probable that these market conditions could continue for the next few months. In the case of remanufactured products, active prices, very high prices, very active markets. And this basically has to do with supply shortages and also very good demand.
Supply shortages have to do in part with China, which has been impacted by the import duties and therefore, has reduced total supply to the market. In the case of plywood, we have seen basically the same behavior. Demand continuing to steadily increase. And especially during the past few months related to construction and good weather for construction. And that, coupled with logistical challenges that have placed additional pressure on prices as well. So very good pricing scenario in North America in general.
On Page 18, South and Central America has come to represent 37% of our sales. So it's our second most important market by far. Within these geographies, Brazil is the most important market and Brazil has been showing very strong demand, stronger than supply actually. And that places pressure -- upward pressure on prices. And this has to do with activity in furniture, in molding and in flooring. We also see signals in this case that this strong demand could continue over the next few months.
Similar scenario for Chile. We're also seeing very strong demand, and therefore, upward trend in prices and some record levels for some products in prices as well. Likewise, for Argentina, we are seeing good demand, and therefore, we've seen price increases that have been able to compensate for inflation and for devaluation of the local currency. In the -- our 2 other markets, which are Asia and Oceania and also Europe and Middle East, which are quite smaller for ourselves, but the trends are pretty similar. In every case, basically, very good demand and some supply restrictions. So all in all, upward pressure on prices.
Moving on to Page 20, some additional data on fuels. This is a segment that has recorded a very good performance during the first quarter, CLP 192 billion for the EBITDA compared to CLP 141 billion in the first quarter of 2020, so a significant increase, which is driven -- basically, the most important effect in this quarter is basically the revaluation of inventories. So just to remind you, this is an effect that we see whenever oil prices are trending upward. We will revaluate our inventories, and this is finally part of our margins. Until prices begin to go down again, and then we record the opposite effect. And so this lends some volatility to a market that is otherwise very, very stable in terms of commercial margins. So that's by far the most important effect. Once again, when translating these figures into dollars, we're also held by the fact that especially the Chilean pesos went down during this quarter by approximately -- it appreciated by approximately 10%.
So the exchange rate, number of Chilean pesos per dollar went down by 10% approximately during the first quarter. So this allows a higher EBITDA figure in dollars when conversion is made to U.S. dollars for this business that is where the functional currencies, local, Chilean pesos and Colombian pesos.
In terms of volumes, getting very close to pre-pandemic levels. You can see there that volumes dropped by single-digit figures in our 3 most important geographies, so Colombia, Chile and the U.S. So volumes dropped by 1.8% Terpel, 2.9% in Chile, and 6.2% in Mapco. And actually, in the case of Chile, they recovered with respect to the fourth quarter last year. So gradually reaching normal levels, pre-pandemic levels. Some minor effects also in nonoperating results, basically one that has to do in other income that has to do with some adjustments of sale of assets in Terpel recorded in the first quarter last year. All of that, of course, is offset by a higher tax.
On Page 21, some additional operating figures. We reached 58.9% in terms of market share in what regards to volumes, you can see there that volumes are up in gas stations. So this is very good news. The gas station segment is up with respect to the first quarter of 2020. Once again, very quickly reaching normal levels. In the case of the industrial channel, this has taken a little more time, but also a single figure drop with respect to the first quarter 2020, 4.6% down in the case of the industrial channel.
Going forward, we see, as always, the commercial margins for this segment being very, very stable. Other than the effects that we might record because of potential FIFO [ deregulations ] and also potential variations in industrial margin. We see the company very well positioned in general, very strong network and a very good customer recognition. So all poised in a very good way to continue growing gradually.
Moving on to Page 22. Some data about Terpel. In the case of Terpel, we recorded an EBITDA that is COP 326 billion, up from COP 153 billion. So quite a significant increase here, more than 100% increase in Terpel, which is basically explained, once again, and this is one of the most important factors in our consolidated figures actually in this quarter, the revaluation of inventories.
In terms of liquid fuels volumes, you can see there that at a consolidated level, Terpel volumes dropped by 1.8%. And that is made up of 0.3% increase in Colombia, minus 9.6% in Panama, flat in Ecuador, minus 31% and minus 26% in the Dominican Republic and Peru, respectively. So as you can see there, the markets that dropped the most, basically are those in which the aviation segment is stronger. Of course, aviation has taken more time in recovering to pre-pandemic level. We are still seeing drops of around 35% to 40% in the case of the aviation segment. Other than that, pretty much like what we've seen in Chile. The other segments, non-aviation, have gradually trended towards pre-pandemic level and are doing very well.
Lubricants, also brief words on lubricants. The segment performed very well in terms of EBITDA during this quarter and has shown an increase in both in volumes and in margins. So we believe that we will gradually approach the levels that we initially highlighted for the ExxonMobil assets when we bought them back in 2018. So this -- as we -- you probably remember, these assets gradually began to increase their EBITDA contribution, that was -- that trend was interrupted by the pandemic. And now we're back on track towards incremental $50 million to $60 million figure that we originally envisioned as the contribution from the ExxonMobil assets that we had acquired.
Moving on to Page 23. Some information on Mapco. Mapco has shown a decrease in fuels volumes, which basically has to do with climate issues and also with -- climate issues stemming from a relatively hard winter, but also with COVID-19 effects as well, of course. Margin is lower -- unit margin is lower in Mapco. Let me just remind you that during last year, we had very good margins throughout the year, basically, unit margins that are basically non sustainable. We're gradually going back to more normal levels in terms of unit margins, and that's what we are seeing here in this slight decline in EBITDA.
Focusing on margin utilization going forward, this is a company that does have quite a volatile unit margin. So we are working hard in order to increase customer loyalty. And therefore, try to give some more stabilization to this -- some more stability to this unit margins. At the same time, working on improving the product mix at convenience stores and also seeing some potential expansion of the network and renewal of the sales points. All in all, and you can see the trend in the EBITDA since when we started taking hold of the company back at the beginning of 2017, quarterly EBITDA has gone up gradually from a range of $5 million to $10 million that we got initially to the range that we are now seeing, which is basically between $10 million and $15 million on a normalized basis. So the EBITDA evolution has been very favorable. And in general, we are quite comfortable with the performance that we have seen in Mapco.
In the case of Abastible, we are showing the EBITDA there, which is pretty much in line, a little higher than the first quarter 2020 when measured in local currency. However, once again, when measured in dollars, this means a figure that is more strongly increased because of the appreciation of the Chilean peso during this first quarter.
Operating income goes up basically because of higher margins in Chile and basically higher volumes in Colombia and Ecuador. In general, volumes rose all across the board. So in all oyou're 4 countries, we achieved a growth in volumes, particularly interesting because of Colombia, where volumes decreased by 13.5%. Then we have some small nonoperating effects as well. And finally, a more favorable tax result, which is in the case of our still highly influenced by the way of recording the investment in foreign assets. So this has to do, again, with the appreciation of the Chilean peso during the first quarter, which translates, in this case, into a lower tax.
Moving on to Page 25. Some more detail about our different geographies. In the case of Chile, we have seen volumes growing in the bottled segment. In general, this has been a persistent trend throughout the pandemic. We have seen the bottled segment growing in general in the different countries. Lower margins, however, in the case of the bulk segment, we have seen a better recovery than before. We have seen a growth in volumes, and also increased margins in this particular segment. Increasing market share that has been the trend in Abastible over several years now.
In the case of Colombia, once again, the bottled segment is growing in a highly competitive environment, stable margins and stable market share as well. In the case of a bulk segment, we also saw growth in this particular quarter in Colombia. We have seen some decreases before in Colombia, but in this particular quarter, we saw the trend going back to growth.
In the case of Peru, the environment has been more challenging. Peru has been very severely hit by the pandemic, and there's a strong degree of informality there as well. So this has caused basically the bottled segments to recover, but very slightly. And also, this has caused decreased volumes in the bottled segment. This is basically because of rising costs, where it is very hard to pass that through to the final customers because of the very high degree of informality in the market. That is also the cause of margins being decreased during this particular quarter. So in general, things are improving in Peru, but it has been very challenging throughout the pandemic.
In the case of Ecuador, we saw a strong quarter explained by some factors related to liquefied natural gas that was stopped during this quarter. In the case of bottled segment, as we have seen in the different countries in general, volumes have continued to increase throughout the pandemic.
A very brief word about Sonacol on Page 26. This is a very stable business that is, as you well know, this is up for sale now. Very stable cash flows and net income and EBITDA that is basically related to the total volume that is transported in the quarter. In this case, we saw a lower volume in the quarter, and this has translated into a lower EBITDA, but in line with what was expected.
On Page 28, a very brief word on our other subsidiary companies and related companies. In the case of our fishing company, Igemar, we're seeing better results in general, a good performance, both in the Northern and the Southern division in fishing and also better results in associates in terms of lower losses in associates.
In the case of Alxar Internacional, which is the parent company of Mina Justa, we continue to see losses, of course, related to the start-up period. This has to do with administrative expenses and also with financial expenses in the start-up phase. Most probably, we will see some more details about Mina Justa as from the next quarter with some operational figures and also some -- potentially some positive results -- financial results as well.
In the case of MetroGas and AGESA, some variations with respect to their -- to the previous quarters. But all in all, the sum of the 2 is very stable with respect to the first quarter 2020.
That's basically a quick view of the numbers for the quarter. And moving on to Page 30. We are presenting here some developments during the quarter. The company held its shareholders meeting -- its second shareholder meeting. And one of the -- a good piece of news here is that the Board was elected, a new Board was elected. So we had 6 of the directors confirmed and reelected in their positions: Mr. Roberto Angelini, Mr. Jorge Andueza, Manuel Bezanilla, Juan Edgardo Goldenberg, Andrés Lehuedé and Francisco León were all re-elected for this 3-year period to follow. We had 3 directors leaving the Board: Mr. Andrés Bianchi, Gabriel Bitrán and Mr. Arnaldo Gorziglia. All of them after many years of a very strong and valuable contribution, they left the Board.
And we had -- in their places, we had 3 new directors, which are taking -- who are taking office: Mrs. Marcela Achurra, Mrs. Karin Jürgensen and Mr. Maurizio Angelini. They are all new members of the Board. They have backgrounds in law, in economy and architecture. And we -- overall, we think this is good news for the company in the sense that the new Board is more diverse in terms of gender, in terms of skills and background and also in terms of age. So that's the first development that we wanted to comment in relation to the shareholders meeting.
The second one of them is basically the investment plan that we announced at the same shareholder -- shareholders meeting. We presented a figure of $1.88 billion. We had anticipated a figure in the range of $1.6 billion to $1.9 billion. The revised figure turns out to be $1.88 billion. This is basically going to forestry and fuels, as usual. And the main users here or the main components of this CapEx are basically maintenance CapEx, where our usual CapEx is of around $700 million to $800 million, which is the usual maintenance CapEx for the company at the consolidated level. Plus around $700 million that are going to MAPA during this year, plus around $100 million that are going to Mina Justa during this year. And the rest, basically smaller efficiency projects and some remodeling to take place in the Fuels Sector in terms of gas stations as well.
Moving on to Page 32, a brief word on MAPA. MAPA has continued to make progress. We are now reaching 83% of progress as at the end of April. Some milestones that have been met here. The marine outflow was recently completed. The high-voltage transmission line has also been completed with some important work being done there. Some tests have been carried forward in the power boiler, the hydraulic test, particularly.
So all in all, things are going well in MAPA. Continue to estimate that the startup will take place at some point during the fourth quarter 2021. We expect the pulp price scenario to continue to be good at that point in time. Just one word about the challenges of building throughout the pandemic. This has been a major challenge, and the company has privileged and prioritized the safety and the health of workers and contractors during the whole time.
On Page 33, Mina Justa has started operations, as we already announced at the last conference call. So Mina Justa started operations in March 2021. It has begun producing already, and it has begun accumulating inventories, and we are expecting shipments to take place during this second quarter. The first shipment should take place during the second quarter. Production estimated for this year is around 100,000 tons to be produced and sold during this year.
During next year, when the company is up and running at full speed and at full capacity, that production should go up to 150,000 tons. Total investment for the project goes was well -- very much in line with what we initially projected, a little less actually than the $1.6 billion that we initially projected. So that was good news, because once again, the challenges of building throughout the pandemic here were major.
And just to remind you, this is a project where we hold 40% through our subsidiary company, Alxar Internacional. And this is a project located in the south of Peru in a region called Ica. The average production should be somewhere around 100,000 tons (sic) [ 115,000 tons ] during the 16 years of life of mine.
Moving on to Page 34. Sales of assets that was -- that is recorded by Arauco during this -- not get recorded in the figures, in the financial statement figures, but it was closed or signed by Arauco during May. So this is a forestry asset, whereby a master agreement was executed. And total number of hectares are about 81,000 hectares. 61,000 of which are productive hectares and the total price for this hectares was $385 million plus the value-added tax.
Still some conditions to be met and to be revised by the authorities. So the closing is still subject to compliance with these conditions, which are very usual for this type of transactions. Some of them related to antitrust issues. If this transaction finally closes, the after-tax process profit that Arauco should finally record should be around $200 million figure. So $192 million is the current estimation if things goes well. And if this transaction is finally closed, that should be the final net income figure recorded by Arauco.
On Page 35, likewise, in the case of Abastible, we also went ahead with a sale of an asset, sale of Gasmar. We issued an essential fact to the market, giving the details of this sale. We had previously communicated that this asset was up for sale. The total enterprise value that was implied in this transaction is $422 million for the 100% of the company on a cash-free and debt-free basis. That amount is subject to eventual variations because of working capital or other factors that affect the company between this date and the final closing date.
Once again, the final closing is subject to some conditions, which are also very customary and usual for this type of transactions. If this transaction finally closes, we are estimating the before tax profit at about 100 -- $97 million, so $100 million, approximately pretax for Abastible. And just to remind you, we have 9% -- 99.2% of Abastible, that's the stake held by Empresas Copec.
And finally, on Page 36, a brief word about second capital contribution that we went ahead with for Arauco. Just to remind you, we had gone ahead with in September 2020, with the first capital contribution, which was $250 million.
In May this year, we complemented that with an additional contribution of $200 million to Arauco. So we are up to $450 million of equity contribution to Arauco. We initially committed up to $700 million. And this is, of course, subject to the needs that Arauco might have. Depending on its -- the evolution of its credit indicators, the evolution of the pulp market and the finishing and completion of its main project basically. At this point in time, we estimate that we should not need to go ahead with an additional capital contribution, but that will depend on these factors, given that the main objective of this contribution is to strengthen up the balance sheet of Arauco and allow it to go ahead with its large investments without significant difficulties. So all will depend on the future evolution of pulp markets and construction of MAPA.
So that is basically what we had prepared for you for this quarter. If you want to go ahead with any questions you might have, please do so.
[Operator Instructions]
Okay. This is Cristian Palacios. I'm going to be reading the questions. The first one comes from Etienne Céléry at Grupo Security. In fuels, as we expect [indiscernible] the depreciation of the Chilean peso, can higher fuel prices improve margins? Or is it fixed?
Well, this is, in general, a business that we see as having a very stable margin when measured in its functional currency. So margins when measured in Chilean pesos are very stable for Copec, Chile. I'm talking about unit margins, of course. So pesos per liter are very stable in the case of Copec Chile. Colombian pesos per liter are very stable in the case of Terpel.
That's for the commercial margin. So -- but on top of that, we have some elements that lend some volatility to this business, which are basically inventory revaluation, which we already commented. And actually, the main explanation for the increased business this quarter has been even to revaluation, which was very strong, both in Copec Chile and Terpel.
Besides that, we usually have some variations in industrial margins, which also gives some volatility to this segment. But all in all, the unit margins measured in their respective functional currencies tend to be very, very stable. When translating that into dollars, of course, what we do is we take the figures in the local functional currency and we translate it to dollar at the average exchange rate for the quarter. So any further appreciation of the Chilean peso or of the Colombian peso could be translated into higher figures when measured in dollars. Because of this translation, this way of translated figures into U.S. dollars. But once again, when measured in their own functional currency, these margins tend to be very, very stable.
Okay. Thank you, Rodrigo. Next one comes from Carlos De Alba of Morgan Stanley. How much was the [favor] inventory regulation effect in Copec and in Terpel during the first quarter?
It was quite strong, actually. If you take the 2 companies together, we were up to a figure, which was very close, I would say, to $30 million, a little bit more than $30 million positive during this first quarter 2021. That compares to a minus $20 million or a little bit more than $20 million loss in the first quarter of 2020. So once again, it's from minus $20 million approximately to plus $35 million in terms of the inventory effects. So that's by far the major contribution to the increase in total margins.
Okay. We have Leonardo Neratika of Bank of America. On the same line, besides giving some details on impact in Q1 of inventory evaluation, what we can expect for the second quarter in terms of the FIFO effect, basically?
That depends, of course, on the evolution of the oil prices and products which are derived from oil during the quarter. Up until now, we've seen quite a stable trend with a slight increase. So if things continue to go like that, we could still see a positive effect. But I would say that it shouldn't be as high as what we saw during this quarter. But it all will depend on the final evolution of prices during the quarter as a whole.
We have another question from Carlos de Alba. This is on Mina Justa. Does Mina Justa have a tax stability agreement? And if so, when does it expire?
It does. Yes, it does have a tax stability agreement, which should be prolonged up to 2025. So we still have some 5 years or so of invariable taxes.
Okay. And...
With a -- that's with a 26% rate -- sorry, 26% tax up until 2025.
Okay. Thank you. On the same line, we have a question from Alfonso Salazar at Scotiabank. Can you remind us what is the dividend policy or what level of dividends or net income should we anticipate from Mina Justa as it starts production? And is there any special consideration about taxes over the events that we should consider?
Yes. Well, we are working on that with our partners in -- or with the other shareholders of Mina Justa and shareholders of Minsur, we can anticipate that Mina Justa will generate quite a lot of excess cash. And therefore, it could make sense to go ahead with dividends paid to the shareholders. We are in the process of defining that. The recurring CapEx need in Mina Justa is not very high. It's around $20 million to $30 million per year. So we should have excess cash to be able to send that to the shareholders. We have some restrictions related to the project finance that is in place. So as usually, this financing structure is due.
We have some restrictions on cash disbursement in Mina Justa. So we had to take a closer look at what's the exact amount of cash that we can distribute to shareholders. But I would say that it is Mina Justa -- it Minsur's and Empresas Copec's intention to try to distribute as much as possible from Mina Justa to shareholders. We will definitely be giving some more info on that as we clear up the financing issues.
Thank you, Rodrigo. The next one comes from Leonardo Neratika at Bank of America again. When do you expect Mina Justa to fully ramp up to the 150,000 tons per year run rate of production? That's the first one. And to the extent that you can comment, do you see any risks to be operational from the Peruvian elections?
Well, yes -- well, as I said before, we aim to produce around 100,000 tons this year. And we should be able to get to our full capacity of 150,000 tons next year. So in 2022, we should be able to produce 150,000 tons already. Regarding the political scene in Peru, while it is, of course, very hard to comment before we know the outcome of the election, which is going to take place this Sunday. The election is a very close call. And we also need to show -- to know the final shape of the proposals that are going to be posed by the candidates. We understand that already we have -- there have been some signals of moderation in their proposals as they approach -- as the candidates approach the moment in which they potentially take office. The decisions of this sort are also a condition to having majorities in Parliament. So I would say it's too soon to comment.
However, we have total confidence in Peruvian institutions and a very strong commitment to Mina Justa. And we are very proud of this initiative that has meant, I would say, excellent news for the Peruvian economy. And that is moving, as I said, towards its full operations stage, and that has the merit also of having been developed under a full pandemic scenario with special care for the safety of workers.
Thank you. We have another question from Carlos De Alba, Morgan Stanley. This goes to Gianfranco. How do you see unit sale cost for pulp moving to the coming quarters?
Okay. Well, I think that unit cost of pulp should go down a little bit because if you look at the production that we had in the first quarter 2021, was a little bit low compared to a year ago the last quarter and basically because we had a [ very normal ] annual stoppage of 2 big mills, Valdivia and [indiscernible]. So that meant that the dilution of fixed cost was harder. So I would guess that the next quarter could show a lower unit cost of production. And then that is, of course, translated into lower cost of sales, but that's going to depend on the total production of the quarter that we haven't ended yet. But I think that, that should be the trend. In terms of chemicals, we could have a little bit of increase in -- probably because of the price of oil and things like that are not very big. I think the most important effect is always the amount of production that you get from the mills. And that should be better than last quarter.
Thank you, Gianfranco. The next question comes from Rodrigo Godoy, Banchile. Is there any progress on the sale of Sonacol? This goes for Rodrigo.
Well, as we said before, we cannot comment details on these processes, which are confidential. They are all under confidentiality agreement. We have moved ahead with all of our processes. As you have seen, we took the decision approximately 1 year ago already or even more than that. Under the philosophy of basically trying to make our balance sheet more efficient and also more robust at a time when we needed sources of liquidity.
We firmly believe that these kind of assets, which are long-term stable cash flow assets can be worth more in the hands of specialized investors, and we are moving in that direction. You see that we have completed the Gasmar operation, and we also completed a very important sale of forestry assets in Arauco. And regarding the other operations, one is Sonacol, the other one is MetroGas and Agesa, where we still haven't issued a final decision to sell, but we are exploring the market for potentially selling these assets.
It has been hard to make progress throughout the pandemic. Each of these processes also has its own complexities, particular complexities related to its shareholding structure or some limitations and restrictions that we have to access their information. But we've managed to make progress. I would say that we will be informing the market whenever there is significant milestone to communicate. Other than that, we cannot say a lot at this time.
Thank you, Rodrigo. We don't have further questions at this time. So operator, I turn it over to you.
Thank you. This concludes the question-and-answer session. At this time, I would like to turn the floor back to Mr. Rodrigo Huidobro for any closing remarks.
Okay. Thank you very much for joining us today, and we expect to see you again by mid-August to take a look at the second quarter of 2021. Thank you very much. Bye-bye.
This concludes today's presentation. You may disconnect now, and have a nice day.