Empresas Copec SA
SGO:COPEC
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Earnings Call Analysis
Summary
Q1-2024
Empresas Copec reported a notable increase in EBITDA to $846 million, up 33% QoQ and 37% YoY, driven by better performances in its forestry and energy sectors. The company’s leverage decreased from 3.9% to 3.3%, reflecting stronger financial health. Despite a slight decline in sales, net income rose to $228 million. Key investments include $1.7 billion in CapEx, with highlights being the Granja Solar project, and Arauco’s CO2 reduction goals. The outlook remains positive with stable demand and potentially increasing pulp prices.
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Good afternoon, everyone, and welcome to Empresas Copec's First Quarter '24 Results Conference. Today's presentation and the first quarter '24 earnings release are available on the company's Investor Relations website at 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 management and on information currently available to the company. They involve risks, uncertainties and assumptions because they relate to future events, and therefore, depends 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 interim performance measures that have been adjusted with the respect of IFRS definitions, such as EBITDA. [Operator Instructions] I will now turn the call over to Mr. Rodrigo Huidobro, Chief Financial Officer of Empresas Copec. Please go ahead, sir.
Okay. Thank you very much. Welcome, everyone, and thanks for joining us today in this presentation, where we'll be talking about the results for the first quarter of 2024 for Empresas Copec. We have new limits for the company. We have launched a new purpose. We have a new setting as well. So we hope you like it. I will start on my own, going through the presentation. And in 20 minutes or so, I will be joined by Mr. Cristian Palacios, our Director of Finance and Investor Relations. And also by Mr. Charles Kimber, who's VP of Human Resources and Sustainability at Arauco, and they will be helping us out with any questions you might have at the end of the presentation. You may start posing your questions right away through the chat that we have on the Zoom platform, so you're really welcome to start sending your questions right away.
Having said that, let us start with the most important highlights of the quarter. As usual, we'll start with the most important developments of the quarter, an executive summary of what the quarter was. Then we will go deeper into each business sector. And we will also have a look at the most important milestones that we had during the first quarter 2024. And then we will end our presentation with the answers to the questions that you are going to send through the platform.
Okay. So let's start by looking at the highlights for this quarter. We had quite an interesting EBITDA, increasing significantly year-on-year and Q-on-Q, which is explained basically by the improved performances in our 2 main divisions, both forestry and energy showed improved results with respect to their comparable quarters. In the case of forestry, we had -- year-on-year, we had increased volumes and lower costs in pulp actually, very good performance at our pulp division.
In terms of Q-on-Q, we had better prices in pulp as well. We increased volumes and also lowered costs. Once again, essentially our pulp division is well explained most of the increase in our forestry sector. In energy, we also showed the increased EBITDA. In terms of year-on-year, we had favorable inventory effects at Copec and also at Terpel and also increased industrial margin together with better performance at Abastible, our liquid gas division. In terms of Q-on-Q, we had an improved operational efficiency Q-on-Q and also better margins at Abastible.
Regarding projects and other developments in the quarter. We had our shareholders meeting, where we announced our purpose. We launched our new corporate image and also, we took a look at our investment plan for 2024. Our leverage went down from 3.9 at the end of last year to 3.3 during this quarter. And in terms of ESG, we also had some significant developments basically related to our issuance of the integrated report. There's a lot of information in our 2023 integrated report. We continue to make a through Copec in transition and business model transformation through companies such as Turntide and Optibus. And also, we made an investment in Granja Solar, which is a foreign generation project in the north of Chile. And in terms of goals, we had Arauco announcing its greenhouse gas emissions goals for 2030. We'll take a look in more detail at all of those milestones in some minutes.
Now we can see the most important figures for the quarter on screen. We had sales going down slightly. EBITDA, however, ending up at $846 million, and going up significantly with respect to the last quarter and also to the comparable quarter last year. We had leverage going down to 3.3%, as we said before, from a beginning level of 3.9%. CapEx was announced for 2024 and established at $1.7 billion. We had pulp EBITDA going up to $360 million, quite a significant increase with respect to 1 year ago and also to the immediately preceding quarter. The EBITDA coming from wood products going down slightly, $115 million. We will go into that in some minutes.
The EBITDA at Copec at CLP 294 billion, also up interestingly with respect to the comparable quarters, same for Abastible with CLP 41 billion. And lastly, but not least, Mina Justa's EBITDA going down to $144 million on the back of a reduced production because of the reduced grade at the part of the mine that we are operating right now. Some more details to come, of course.
Now we can go look at the results from a historical perspective. You can see EBITDA, $846 million, up 33% Q-on-Q and 37% year-on-year. We had gone through 5 quarters of EBITDAs in the range or in the vicinity of $600 million, and now we are to $850 million approx. So it's a major increase in EBITDA to $846 million for the reasons that we are going to explain in a while. In terms of net income, it's up to $228 million, also an increase with respect to 1 year ago and also to the immediately preceding quarter.
Our financial situation is on the screen there, our bonds situation. We have debt maturities for 1.5 this year, a lot of it coming from the Arauco level. Also half of that bond is bond debt, half that is also bank debt. A large portion of that has been refinanced already. We have cash for more than $2 billion. So everything there, under control as well as our leverage, which has been going down gradually from a peak of 4.0 that we reached at the end of the third quarter last year, we have been gradually going down to the current 3.3 and we expect this to continue going down, of course. In terms of returns and margins. We -- absolutely, margins going up, of course, increased EBITDA for this quarter. And a return on capital deployed that is gradually also beginning to roll back. Those are the most important numbers for the quarter.
And now if we look into each business division, let's take a look into forestry, our most important subsidiary Arauco. In the end of the quarter, we got an EBITDA of $471 million compared to $298 million in the first quarter 2023. So a significant increase here. This has to do essentially with improved margins in pulp, which is associated to higher volumes essentially and also to lower costs. Together with that, at the net income level, we also had an improvement in nonoperating income which has to do with the fact that last year, we recorded nonrecurrent expenses related to the forest fires that affected our forest at the beginning of last year. And together with that, some nonrecurrent expenses related to mills stoppages, mainly also as a result of forest fires last year.
So $471 million EBITDA for Arauco and net income going up to $100 million for this quarter, this particular quarter. This is up significantly from the last quarter at $272 million, and especially with 1 year ago, where we were [ growing ] $78 million. So $360 million for the pulp division. This, of course, was driven to some extent by costs going down. We had costs going down all across the board with different fibers year-on-year, quarter-on-quarter and also especially volumes going up. You can see the table here that volumes went up significantly, 67.9% with respect to 1 year ago. So that was a major driver of increased EBITDA for this quarter compared to 1 year ago.
We also showed the maintenance schedule down here, and we are going to go through 2 maintenances this quarter, 1 at Constitución, 21 days and also Arauco's Line 3, which is MAPA, for 16 days. This is a stoppage in which we are going to do the last adjustments related to MAPA and restart operations after that and continuing at full capacity. So in general, good using pulp. The behavior of the markets, you have probably seen, this the behavior of markets, in the first quarter was quite favorable. We have seen inventories that stands below historical levels. So inventories are at levels which are neutral to positive. In general, you can see them here with leverage that are below historical averages.
We have seen, in general, stability in China, a stable demand in China picking up a bit after the new year with higher operating rates of paper mills. Europe especially has been a major driver of the situation in pulp. We are seeing a strong situation in Europe with quite a stable demand and strong demand picking up. Some supply disruptions, both at the paper level and at the pulp level. So shipments from Asia together with some interruptions in production related to stoppages in Scandinavia have driven pulp prices up quite significantly during the quarter. So [ despite ] all of that, the world in general has seen prices going up during the quarter. This holding pulp well has shown an improved market with prices increasing during the quarter. You can see the global production and global demand of pulp in the table on the right-hand upper corner, standing at 7.8% year-on-year, which is quite a healthy level of growth.
The outlook for the next quarter, for the time being, appears positive. Demand in China is expected to remain stable despite some noise coming from paper overcapacity in the market, which could potentially add some pressure to both the operating rates of mill. Europe has continued to show strength in demand, a stable and paper demand and tissue market demand as well. And we have seen some customers placing additional orders which could press -- that could cause some additional pricing pressure, upward pricing pressure, on pulp.
In terms of supply. We have seen some disruptions coming from strikes, as we said before, in Scandinavia, particularly in Finland. Added to that, we have seen some strikes in Chile at Puerto Coronel also affecting shipments during this quarter. And we have also seen bad weather conditions, floods affecting parts of Brazil and Uruguay, which will also mean disruption to shipments and also onboard treasury prices. So the outlook for the time being for pulp is of prices stable and potentially increasing a little bit. You can see here the levels of prices in China for Arauco, $740 in May for hardwood, $820 for softwood and $944 dissolving pulp.
Let's switch to wood products, our other division within the forestry sector. We have recorded an EBITDA of $150 million, is slightly down with respect to the levels of $130 million, $140 million that we were seeing during the last year essentially. And this has to do with decreased prices basically because in the tables that we're showing there that prices have gone down in some products quite significantly, however, offset to a great extent by volumes going up, in some cases, quite significantly. But in general, the EBITDA generation for panels has gone down a bit, staying, however, still with historic leverage levels. And also still healthy levels for woods and panels, however, going down a little bit.
What have seen is housing starts remain quite stable in the North American market, which is our most important market with 52% of our sales. In general, in North America, we see stability across the board for the different products. We see MDF with some potential increases in demand, stable prices in general. In particle board, the same thing, also stable demand and eventually some support for prices going up. In remanufactured products, we were entering part of a season which we could see probably demand potentially to some extent, offset by a slight overcapacity as well. And finally, in plywood, we see a balanced market. So stability in general, with some eventual support for price increases.
Second most important geographies or geographical area for wood segment is South and Central America, where our most important market is Brazil. In Brazil, we have seen some positive signs. We have seen domestic markets showing some signs of improvement with a potential increase in the construction sector, driven by lower interest rates. Our second most important market within this area is Chile, where we have seen a lot of uncertainty in this market essentially having to do with some of the industries that drive this market with a slow down. For example, construction and retail have seen some slowdown. So as a consequence of that, we are seeing a slow demand.
This will eventually be offset to some extent by supply disruptions however, and so prices are not necessarily going down. In Argentina, we were able to keep prices of margins up for a while, but now there's a lot of uncertainty in Argentina with volumes decreasing a bit. So nothing very clear still in Argentina. In terms of Europe and Middle East and also Asia and Australia, which represent a smaller part of our shipments. In general, we see a good situation, quite stable with some space for demand recovery and also some potential price increase distributed by supply shortages. So once again, supply shortages could drive prices up a little bit in these geographies. That's it for the forestry sector. We can now move in to the energy division.
We had a good quarter for energy as well. You can see on the screen there, our Fuels division Copec recorded an EBITDA -- consolidated EBITDA of CLP 294 billion, which is up quite considerably from the CLP 207 billion recorded for the first quarter 2023. This has been driven by increased volumes in our gas station channel in Chile, together with a good inventory revaluation effect. So those are the 2 main drivers in Chile, also an effect of industrial margins for the increased EBITDA in Chile. So CLP 294 million EBITDA for Copec consolidated, which is an interesting figure.
In operational terms, we saw the gas station volumes going up by 1.4%, offset to some extent by industrial volumes going down, as you can see in the graph there. All of this meant market share stay quite stable at the levels that have been held for a long time, around 58% market share. But in general, gas station products going up and also industrial margins going up and offsetting the effect of volumes going down in the industrial channel.
We had our international fuel subsidiary Terpel also performing very well during this quarter. Terpel showing an EBITDA of COP 461 billion that compares with COP 333 billion recorded in the first quarter '23. So quite an interesting increase in EBITDA there. What we have there is a positive inventory revaluation effect as well and also an improved performance in lubricants. The lubricant division here has been performing quite interestingly. Let me remind you that some years ago, we bought the assets for lubricants from ExxonMobil in Colombia, Peru and Ecuador. And we have been gradually see an operational maturity in that segment, in the lubricant segment, in those 3 countries. And we are progressively generating more interesting levels of EBITDA in lubricants. So this increase in lubricants helped increased performance -- improve performance at Terpel for this quarter.
You can see there that volumes went down at the aggregate level by 3.8% and this has to do with different behaviors across different geographies, but essentially going down in Colombia because of some industrial clients and also some of the Asian clients. Abastible performed well also during the quarter with an EBITDA of CLP 41 billion compared to CLP 28 billion last quarter. And this has to do with improved performance, operationally speaking. Basically across the board, we saw increased EBITDA in all geographies, better volumes in Chile with Ecuador, offset to a certain extent by a drop in margins in Colombia. And in general, improved margins in some segments in the different geographies. So a better operational performance [ are actively ] offset to some extent by a tax effect. This is quite unusual. We have volatile tax effects here because we have some effects coming from foreign exchange from the currency levels. So foreign exchange levels affect the valuation of the international [indiscernible], which is carried on accounting on tax terms in dollars. And in this [ third ] quarter, we had a negative effect of foreign taxes at Abastible.
But in operational terms, a very good quarter for Abastible. You can see some more detail for different countries there. In general, we are seeing, as I said before, decreased volumes coming from an improved commercial performance, very successful commercial strategies across the board and some particular segments that have increased quite significantly. For example, in Chile, the Industrial segment has shown a very good performance. Together with this, we are seeing general improved margins.
Let me remind you that we come from a couple of years of reduced margins in Abastible, which were driven by the very high prices of international prices were paid that affected all of our countries. And now we have gradually begun to trend towards more historical levels of margins in Abastible. So this is beginning to make itself noted in the improved operational performance.
Regarding our other investments. Let me just focus on 2 particular effects here or 2 particular things. One of them is Metrogas, which shows quite a decreased results, more negative results with respect to the last quarter, and that has to do with a foreign exchange effect that has affected a provision that Metrogas recorded in dollars with Empresas accounting in Chilean pesos. But this provision, which is related to judicial contingency in Argentina, and it's a major provision, this provision is carried in U.S. dollars. And so this appreciation of the U.S. dollar against the Chilean peso, and we saw in the quarter, has given way to this quite significant foreign exchange effects that has affected the results of Metrogas.
Together with that, let me comment the effects at Mina Justa. Mina Justa is showing an EBITDA that is still quite interesting, $144 million, but that is well below the $225 million that we recorded in the first quarter '23. As we anticipated last year, we would be going through an area of reduced grades in the mining operation of Mina Justa. So during the whole of this year, we will be producing at an area in the mine that has reduced rate, which in turn affects production, which is going to be lower than last year and also cash costs, which are going to be higher than last year. So you can see here that sales go down because of production going down. We should aim to produce between 120 and 130 -- 130,000 tons this year compared to almost 150,000 tons that we had last year. And in addition to that, we should -- because of the same reduced rate, we are going to see costs going up from the levels that we saw during most of last year, which were around 1.3 or 1.4. We're going to go up during this year to levels of 1.6 or 1.7, as we can see during this quarter. So reduced performance in Mina Justa because of what we had anticipated. This will be offset, to some extent, however, and going forward by the very good pricing scenario that we are currently seeing in international markets.
So that's it for the most important figures of the quarter. Let me tell you about the most important developments that we saw during the quarter in our different divisions. We have our shareholders meeting during this quarter and [indiscernible] which among other things, we launched our corporate purpose, Empresas Copec's purpose, so this is the purpose for the parent company, Empresas Copec, which is we have [ phrased ] tests to shape the world for future generations. This has to do with the areas in which we do business, which are essentially Energy and Natural Resources, which are 2 areas that are critical in terms of the effect they have on the country, on the environment, on the planet. And in terms of the effects they will have in the future of our environment.
Together with that, we think we have a way of doing business, which is very traditional, very characteristic of our company and which has to do with looking at business in a long-term fashion, thinking in decades. Looking at the effects that all of our businesses have on environment, on the communities nearby and all of our stakeholders, all of that with a long-term view. So on one hand, the areas in which we do business, on the other hand, the way in which we do business, all of that places us in a good position to be able to influence on the world that we are leaving behind for the future generation. So to shape the world for future generations is our purpose.
We issued -- through the parent company, we issued a bond during the quarter in the Chilean local markets, approximately $60 million with inflation of just a rate of 3.86%, so UF which is the local inflation adjusted currency plus 3.86%, which represents the lowest corporate spread in the whole year. So good corporations at the parent company level. And thank you once again to the investors that participated in that operation. We gave up some more detail on the CapEx level for 2024 during the same shareholders meeting. Investment -- total investment baseline for investment is around 1.7 billion for this year. This is comprised of 70% going to the forestry sector and 25% going to the energy sector. So basically, the whole of the investment going to our key areas. And this comprised as well of around 800 million to 900 million, having to do with the maintenance of our asset base.
Together with that, we have some additional acquisitions and projects going on. One of them is the [ Visitanio ] mill in Mexico, which is a project that is around $230 million, and that is going to double our plant capacity in Mexico. That project has been delayed a bit, so the bulk of the investment is going in this particular year. In addition to that, we have an interesting investment in lands and plantations during this year. An important part of that is going to Brazil in preparation for our potential project at Sucuriu. So part of the investment that is contemplated here also has to do with plantations, potentially related to the Sucuriu project.
And also, we have between $50 million and $100 million contemplated for these investments that Copec has been doing for energy transition and business model transformation, which is in line with what we have been investment -- what we have been investing over the last few years in those 2 concepts, so the $50 million and $100 million for Copec's transition and business model transformation. And finally, a lot of different smaller projects having to do with optimizing the commercial positioning of our companies and improving our efficiency in our industrial operations all across the globe.
That's our investment plan for year 2024. Both Abastible and Copec stood out in one of the important customer experience rankings that are issued yearly in Chile. This is a very important dimension for Copec and Abastible. So this position in the ranking is very welcome for both companies. We had good news over the last few days for the Sucuriu project, which saw its installation license already granted by the environmental Institute of the state of Mato Grosso do Sul. So this is an important step forward in our Sucuriu project. Let me remind you that the Sucuriu project is up for discussion by the Board of Directors at Arauco. It's going to be up for discussion by the end of this year or beginning of the next year. The Board of Directors at Arauco is going to look at all of the important elements of the Sucuriu project, including, of course, environmental permits, but also including evaluation, engineering, feasibility -- economic feasibility, financial evaluation, financing and so on and so forth in order to be able to make a final investment decision at that point. But this is, however, an important step forward in the development of this project in Brazil.
Let us switch to our ESG highlights for the quarter. As usual, we had a lot of developments in ESG. ESG is basically undistinguishable from our business activity. We do a lot of ESG though our business activity by our absorbing carbon at the plantations in Arauco, by replacing materials and products that are less environmentally friendly, by pushing energy transition and so on and so forth. But in addition to that, we have achieved several milestones in ESG during this quarter. Among them, and things that are worth highlighting are the publishing of the annual report by Empresas Copec.
This is an integrated report, which includes a sustainable management model, which is shown there and includes the peers of sustainability and innovation, governance and integrity, climate action and management of natural resources and also creation of social value. This is an integrated report that has a lot of information to meet with metrics, goals and a lot of our IOs that show our progress in many different dimensions. A lot of divisions have been validated by external monitors, so it's worth taking a look at. This internal report, it's published on our website, and you are more than welcome to have a look at it.
Together with that, we received a very important position in the ESG ranking published by Merco, and we were recognized as leading all-in company in terms of ESG responsibility. So once again, a very welcome award, and thank you for recognizing all of our efforts in these dimensions. Copec continues to make progress in electromobility. Copec has the largest or one of the largest networks of charging stations in South America, already around 101 -- 1,800 kilometers covered in the Chilean territory, and this contributes to expand our network further. So what we did here is a very symbolic inauguration of the southernmost test charger for electric vehicles in the world. This has been inaugurated in the city of Punta Arenas, very far to the south in Chile. So we continue to make progress in positioning ourselves as leaders in electromobility and contributing to drive this energy transformation in the countries in which we operate.
We also made progress in business development -- business model transformation. Two of the companies in which we have invested through our venture capital. Let me remind you that we have a venture capital arm that invests in different companies and technologies that are related to energy, convenience and mobility, which we have defined as the 3 areas in which we have business know-how, energy competence and mobility. In this particular quarter, we made 2 a bit interesting progress or a decrease of progress in 2 of these companies. One of them is Turntide Technologies, which provides a technology of efficient motors. And this is gradually gaining commercial traction. And as a matter of fact, we entered into an agreement with Walmart Chile. Walmart Chile is going to roll out the installation of this efficient motors in a large part of its network of stores in Chile. And so this motor efficiency operation is already gaining commercial traction.
Together with that, we invested in a platform for optimizing the operation of city buses. It's called Optibus, and it [ complements ] very well the positioning that we have been gaining in the area of supplying services for city buses. Another interesting development is Arauco announcing the goal of reducing its CO2 emissions by 1.5 million tons of CO2 as of 2030. Let me remind you that Arauco is already carbon neutral and actually it absorbs carbon and this has been validated and certified by external companies. So Arauco continues to make progress in this area and commits itself to go ahead with a further reduction of 1.5 million tons of CO2 by year 2030. So once again, an interesting development there in terms of carbon absorption. And finally, an investment that we announced towards the end of the quarter -- or actually after the end of quarter, a couple of weeks ago. We announced the investment from our fuels division Copec into a solar generation pool of assets held by or called Granja Solar, which is located in the north of Chile, a total investment of $91 million for these assets that have a total generating capacity of 123 megawatts. So we continue to make progress in solar generation. This comes to complement very well where we had in terms of distributed generation and also in terms of energy trading activity by our different divisions, [indiscernible]. So we continue to make progress in sustainable energy generation.
So that is what we have prepared for you in terms of information conveyed to you. And we are now going to open up the floor for any questions that you might have. Please go ahead and continue posting your questions to the platform that is available in the Zoom platform. And I will be joined in a couple of minutes by Mr. Cristian Palacios, Director of Finance and Investor Relations at Copec and also by Mr. Charles Kimber, who is the VP of Human Resources and Sustainability at Arauco. So we will all be looking at the questions that you might have. Thank you very much, and I will hand it over to the host.
[Operator Instructions] Now I'll hand the floor back to Mr. Cristian Palacios, who will conduct the Q&A. Please, go ahead, sir.
Okay. Thank you, everyone, for joining this webcast. I'm going to start with the questions. The first comes from [indiscernible] Bradesco BBI. This is on forestry. Could you comment on the strikes in Chilean ports if they have affected your operations?
I'll take that one. It's basically the [indiscernible] mill that has not operated for the last 49 days. There is a strike going on there. This is between temporary workers and the management of the port. It relates to policies on drug and alcohol testing that temporary workers do not want to abide by. Unfortunately, that has meant that the port has not operated, which is 1 of the 3 ports present in the region. So we are using the other 2 ports as well as moving material, moving our cargo to the ports that are further north in the area of San Antonio and [ Paraiso ].
Thank you, Charles. And on pulp, if you can comment on how our negotiations for [ made ] orders. Also, there are some information that there might be another hike for June. Do you believe that the market can absorb this?
So they have been concluded. We closed all of our loaders for [ being ] with pricing increases in both mills [indiscernible]. We expect a strong market still for June. We're in the process of closing those orders. We see a firm market in the European market and the firm response also from the Asian market.
Okay. And finally, from [ Camilla ], if you can comment on your cost expectations along the next quarters, please?
I think we have 2 interesting points to make here. One is that our mills have been operating very well. So we should see a cost structure that is an improvement to what we saw last year in second quarter. We do have, however, the maintenance of Line 3 or the MAPA. It's going to be 16 days now starting in May and -- May. And as of that, once that has been completed and we expect very good revamp up and operating at design capacity. So that is going to have a real effect on our cash cost as of June onwards.
Thank you, Charles. You mentioned in previous calls that CapEx for 2024 was going to be 1 billion. Right now, we are announcing 1.7 billion. If you can clarify or give some color on what has changed.
Yes. No, I guess that 1 billion corresponded to just for the forestry portion of our CapEx. As I said in the presentation, we are expecting a 1.7 billion CapEx for this year, 70% of that actually goes to our forestry sectors. So that fits in well with the 1 billion that you had in mind. The breakup of that 1.7 billion I mentioned is approximately 800 million to 900 million in maintenance, as I said. Together with that, we have some particular projects going on in the forestry division, such as the [indiscernible] power project in Mexico, some acquisitions of plantations in different geographies, some of them related to the potential Sucuriu project. Some CapEx related to the energy transition initiatives that Copec is going ahead with. And the remainder is basically a myriad of different small projects related to operational efficiency and also to competitive positioning for different subsidiaries. So that's the 1.7 billion and the 1 billion is just for the forestry division.
I have [ Enrique Marquez ] from Goldman Sachs. First, if you can provide a follow-up on MAPA. We understand that ramp-up is going well and in the final step. So if you think that volumes could be higher in second quarter versus first quarter.
The ramp-up has been very good. We expect now that after the maintenance we have in a few days, to have a very good start-up for the rest of the year. So yes, volumes should be going up from a production point of view. What we could see, however, is a slight delay in shipments because of the problem I mentioned before on a strike at Puerto Coronel. So we are working with our logistics team to move cargo to other ports in order not to have to postpone those shipments much further than the end of the second quarter.
Thank you, Charles. And then second question is about pulp market, so it was already answered. And then Rodrigo, you can comment on Mina Justa. We saw an improvement in cash cost quarter-on-quarter, despite lower volumes. Should we expect a sequential decline going forward, maybe back to 1Q '23 levels?
Not necessarily. As we have anticipated, Mina Justa is going to a place in the mine and it's not a local grade space, and that will bring about 2 things. One is decreased volumes; and the second one is increased cash costs. So we have anticipated that during that year, we will be operating at cash cost of around 1.6 to 1.7 per pound, which compares to the 1.3 to 1.4 that we achieved last year -- during most of the year last year. This will be transitory. And then on 2025, we are going back to grades that are similar to the ones we introduced where we operated last year. So during 2024, we'll have higher cash cost. And then going forward, we should revert to the 1.4 that we had announced as a long-term period.
Thank you, Rodrigo. I have [ Maria Theresa ] at Itau. She is asking about the situation of Metrogas and the material fact that was issued on May 8 related to the situation with the [ curtain ] in Argentina. If you can give some color on that.
This is a provision that Metrogas announced that it will be reporting last year and it relates to our [indiscernible] process going on in Argentina that has to do with some differences with the provider of natural gas transportation that were generated backing of [indiscernible] because we did a long story. So there was a first instance ruling last year that then natural gas to pay with these services. And therefore, the provision was booked last year. This is a provision in dollars. Now we have been informed to an essential fact that there's a second ruling by the Court of Appeals in Argentina that has reverted that initial ruling in this [indiscernible] with Metrogas. And we expect Metrogas to analyze the potential accounting effects that this will have and to inform them to us as a parent company and that we'll be informing the market. But so far, nothing to report.
Okay. Charles, regarding the [indiscernible] operation [indiscernible] how many days the market you'd expect the operation to be stopped? Or is a final decision?
[indiscernible] sawmill was operating in one shift as of 2 months ago, and we decided last Friday to discontinue the operation. So there's a suspension. It's an indefinite suspension. Any pickups in demand we expect to absorb with our other 5 sawmills operating either on a third shift or extending the other 2 shift. So [indiscernible] sawmill for the time being is not coming back into production.
Thank you, Charles. [indiscernible] is asking about leverage. Since net debt to EBITDA is going down, do you have any new acquisition in mind for the short to middle term?
We're always looking at potential acquisition of potential projects along the lines that we have for the market. So of course, we look for countries where [indiscernible] and countries that have potential [indiscernible] forestry. In energy, we are looking at assets that complement our existing operations and also as a opportunity in the transition towards a new energy environment. At the same time, we have to look for our financial [ prudency ] and financial health. So we have a financial policy in place that we have to follow. Net debt to EBITDA effectively is going down because we are increasing our EBITDA and bringing down our debt. So as opportunities come along, we will look at them and we will inform the market duly if we decide to pursue any of that.
Thank you, Rodrigo. We don't have more questions at this point. So I'll turn it back to you and the operator.
This does concludes the question-and-answer section. At this time, I would like to turn the floor back to Mr. Rodrigo Huidobro for any closing remarks. Please go ahead, sir.
Thank you all very much for joining this presentation. We hope you like the new format, and we expect to see you again sometime in August to take a look at the midyear results. Thank you very much.
This does conclude today's presentation. You may disconnect now, and have a wonderful day.