Empresas Copec SA
SGO:COPEC
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Good afternoon, everyone, and welcome to Empresas Copec's 2Q '20 Results Conference Call. Today's presentation and the 2Q '20 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'll now turn the conference over to Mr. Rodrigo Huidobro, Chief Financial Officer of Empresas Copec. Please go ahead, sir.
Yes. Thank you very much. Thank you, everyone, for meeting us today through this means. We are going to take a look at the results of the second quarter of 2020.
I will be joined in this conference by our people from the Investor Relations department, whom you may well know, led by Mr. Cristián Palacios, and also joined by people from Arauco, our forestry division, led by Mr. Gianfranco Truffello. They will all be helping us out in any questions you might have at the end of the call.
Having said that, let us move to Page 4, where we are highlighting the main developments of the main data for the quarter that we're reporting. We had EBITDA and net income coming down basically on COVID-19 effects on volumes of fuels and panels and also on a scenario of low pulp prices that is still outstanding.
In the fuels division, we had a drop in volumes basically due to the COVID-19 effect on mobility and, in general, on economic activity. We had significant drops in Chile, Colombia and the U.S. So in Copec Chile, in Terpel and in Mapco, we had drops that are shown there, 26% in Chile, 46% in Colombia and 23% in Mapco, all in terms of volumes.
In addition to that, we had losses on inventory revaluation, both in Colombia and in Chile, which were pretty significant as well. And therefore, we had a hit in EBITDA stemming from that factor. Also in addition to that, we had higher provisions related to the aviation segments, especially. Possibly contrasting that and offsetting all this a bit, we had a good performance of the LPG business, which basically performed with a very stable EBITDA when measured in local currency.
In terms of the forestry segment, in general, we had factors which were low pulp prices and the impact of COVID-19. These are particularly outstanding in terms of panel sales, which were affected by the pandemic, essentially in our South American markets.
In August, as you will see going forward through the presentation, we already see some signs of markets starting to recover. We continue to see low pulp prices. They're actually at their lowest in 10 years when measured in real terms. And this level has been sustained for a while already. In spite of all this, we were able to achieve continuity in operations, in general, and we were able to move ahead with our investment projects as well.
We had operational continuity in all business segments. We will give some more detail further on, but our MAPA progress is at 57%, and we're continuing to expect start-up by mid-2021. We had the first production of dissolving pulp in our Valdivia mill. And we also made progress in spite of the interruptions related to the pandemic, we made progress in the Mina Justa project. It is at 86% progress now, and we are still expecting a start-up for the first quarter of 2021.
Let us please move to the next slide, Slide 5, where we are showing our results for this quarter in a historical context as we usually do. We came up to an EBITDA of $315 million, which, of course, compares unfavorably with the immediately preceding quarter versus which we recorded a fall of 30% approximately. And we have a 42% fall with -- in relation to the comparable quarter last year. So year-on-year, it's 41.9% drop, $315 million EBITDA for this quarter. Minus $32 million, which is a loss, of course, in terms of net income for this quarter.
Now if we move to Page 6. We are showing this cascading graph where we explained the main variations for our EBITDA and the composition of our EBITDA for the quarter as well. So to the left-hand side, you can see that the main variations take place in Arauco and Copec. EBITDA decreased, especially in the fuel sector, and this relates to the effect of pandemic on mobility and economic activities in general, as we will see further on. Together with that, we have a hit of the exchange rate as well. The depreciation of local currencies, also finally mean that when translated into dollars, the figure for fuels is less than it was last year.
In the forestry business, EBITDA is affected because of the lower pulp prices when comparing with the second quarter last year and also because of the drop in panel volumes.
To the right-hand side, you can see the compensation of EBITDA. And as always, the bulk of it is made up of Arauco, followed by Copec and Abastible.
In terms of net income, which is shown on Page 7, we can see a decrease because of a lower operational result as we saw in terms of EBITDA, and this is driven, once again, mainly by Arauco and Copec.
There's also a drop in nonoperational result, which is driven by the asset sales that took place back in the second quarter 2019 and also impairments that were recorded in this particular quarter, we'll see some more of that further on.
Now going into the detailed consolidated income statement on Page 8. We can see that there's a drop quite significant in operating income, which is driven essentially by our fuels companies. Actually, Copec Chile and Terpel show a decrease because of the effects of the pandemic on volumes. Together with that, as we already mentioned, we had a quite significant effect of revaluation of inventories and also the impact of the depreciation of local currencies when converting the results to U.S. dollars.
In addition to that, we had lower results in Arauco, which are explained by lower pulp prices and also a lower panel sales volumes. Abastible, however, showed stable results in local currency in spite of being subject as well to the effects of the pandemic.
In terms of nonoperating income, as we already mentioned, we have, first of all, higher other expenses, which are in part explained by one-off expenses related to pandemic but also to impairments in Arauco, that we will detail further on. Together with that, we had a high comparison base in other income, which is related to the sale of a minority stake that we owned in a port called Puertos y Logística back in the second quarter 2019. And finally, of course, a favorable tax movement because of the lower tax base.
On Page 9, you can see some of our most important financial ratios and the debt indicators as well. Of course, the returns have been going down as our EBITDA is hurt by the prices in forestry sector and also by the effects of the pandemic on volumes. We are showing -- curiously enough, we're showing an increase in the EBITDA margin, but this has to do basically with a mix effect. The fuels division, which is the lowest margin division, is weighting less in this particular quarter than before because of the drop in sales, so it's basically a mix effect.
In terms of our credit metrics, we are up to 4.6 net debt to EBITDA, as expected, and we will probably continue to go up as we make progress in our CapEx initiatives and up until they are starting up by mid next year. In terms of financial maturities, we have a well-balanced financial debt schedule for the coming years.
Now moving on to Page 12. We'll get into some more details for the forestry division. We have a net income here that is definitely decreased. We have a loss of $56 million at the Arauco level, and it has decreased because of lower results in the pulp and wood segments. In terms of operating income, we have lower pulp prices and also lower wood products volumes. This is all partially offset by higher pulp costs on one side and also low unit costs when compared with the comparable quarter last year.
There's a drop in nonoperating income, as we mentioned already, this is explained by impairments in the Arauco Line 1. We're recording an $18 million impairment on a quarter-by-quarter basis. So every quarter, on a quarterly basis, we are recording this $18 million impairment related to Line 1. This will be up until the new MAPA line begins operations by mid next year when the Arauco's Line 1 will be permanently shut down.
In addition to that, we had a write-off related to the Albany panel plant in the U.S. This is part of the optimizations in production and distribution that we had scheduled following the starting up of operations at our new Grayling Mill. So this is basically as planned. This is one of the oldest mills in the U.S., the organic plant is, therefore, written off from more balance sheet. In addition to that, we have lower other income because of this sale of Puertos y Logística back in 2019, that this is the port in which we owned a minority stake, which we sold for a total amount of approximately $100 million recording a net income of approximately $20 million.
Moving on to Page 13, we can see some more detail on the pulp division. When you see the -- when you look at the pulp EBITDA, you can see that this quarter, we came out to $96 million, which compares favorably with the $80 million that we recorded in the immediately preceding quarter. This is basically stemming from improved volumes, as you can see the table down there.
You can see volumes going up by 10.2% with respect to both the preceding quarter and the comparable quarter last year. EBITDA is, of course, down with respect to the second quarter of '19 because of the very significant fall in prices, 24.5% drop in prices on average for the quarter for pulp.
The unit costs were down with respect to last year for all kinds of fiber dropping between 1% and 3% for the different kinds of fibers. With respect to the immediately preceding quarters, some of them were up, some of them were down, always in small percentages between 1% and 4% in that case. You can see some more detail of the scheduled maintenance stoppages for the rest of the years in the table down there.
Moving on to the next slide, on Page 14, some comments about the pulp market. This is a quarter that was challenging, of course, because of the effect of COVID-19, but was widespread to all of our main markets. It used to be -- in the first quarter of the year, it used to be -- we used to have China as the most affected market, but then it started to hit our other main markets as well. We had gone through periods of very strong demand for tissue, which have offset the drop for other segments for some time, but it has not been enough to boost an increase and cushion increasing prices.
We have seen some producers -- integrated producers, paper producers and also some producers of other kinds of fibers, such as dissolving pulp, which have switched into market pulp, thereby increasing supply and preventing prices for going up. So even though we are seeing an interesting increase in total demand, you can see down there that total increase for world pulp demand is 5.9% with respect to last year. But given the increase in supply, to a great extent, driven by producers that are streaming, either from paper production or from the dissolving pulp production, pulp prices have been stable, and there hasn't been a recovery of price -- pulp prices.
In Europe, we have seen some more stability of prices, and we also have seen some periods of strong demand, especially for tissue, but demand that also started to decline when restrictions have been gradually eased. Inventories are now standing at 49 and 42 days, which is slightly above the historical levels.
In terms of the outlook, which we are commenting on Page 15, still very uncertain because of the development of the pandemic. The prices are usually affected by seasonality, but of course, they will be probably more indexed to the pandemic than to any seasonal effect in this particular year. The Away from Home tissue segment would usually counterbalance any drop in demand, but in this particular year, once again, we see that the activity for that particular segment remains low because of the pandemic.
We are confident, however, that as restrictions are progressively eased and as the pandemic slowly goes away, the demand for paper and other fibers should gradually recover. And given that there should be space for price normalization as some suppliers go back to the traditional production rather than producing the paper grade market pulp. So that is what we should be expecting for the months to come.
Just as a general indication of prices, you can see the graph on the right-hand upper corner there, which shows our pulp prices in China, which are $569 and $445. And Arauco's prices when compared to that are pretty much in line with that. Arauco's prices, which you can see in the chart, in the bottom left-hand quarter is $565 and $465 for softwood and hardwood, respectively. Very stable during the last month, but at very low levels.
In terms of wood products, which we are showing on Page 16, we can see a drop in EBITDA when comparing ourselves with the second quarter 2019 from $85 million to $67 million. However, we can see stability with respect to the first quarter 2020. We can see -- in terms of panels, we can see sales volumes going down by more than 20%, essentially driven once again, by the pandemic effects and prices going slightly down as well. In the case of sawn timber, we can see volumes going down by 14% and 2.6%, with respect to the -- to last year and to immediately preceding quarter, respectively, and prices were falling by 1-digit figures.
Brief comments on our main markets for panels on Page 17. North America is our most important markets, with 55% of our sales, and has been and is showing signs of being our most favorable market as well in terms of performance going forward.
In particleboard and MDF, we had a complex second quarter, of course, because of the effects in volumes, but we are seeing clear signals of improvement in sales volumes and also in prices. We should be heading towards normal levels during August.
In remanufactured products, which is a segment that has behaved quite well. We have seen increases in sales volumes and also in prices over the past few weeks. In this particular segment, we also have the effect of anti-dumping duties that have been placed on producers from China and Brazil, which might have an interesting impact, a positive impact on the other producers in the market.
Plywood has also been a segment that has behaved quite well throughout the pandemic and over the last weeks, especially, we have seen the market improving. We have seen increases in sales volumes and also in prices, and these are very good signals. In this segment, we also are seeing some disruptions from Brazilian producers that have helped to boost volumes and prices for the other producers. You can see the housing starts indexed down there, which has shown a very strong recovery and is now heading towards very interesting levels, 1.5 million as of July 2020.
Moving on to Page 18. A brief comment about South and Central America, which is 29% of our panel sales. This has probably been the most severely hit segment during the pandemic.
In Brazil, we see a market scenario that remains complex, but we are seeing some slight improvement in July and expecting volumes and prices to normalize gradually over the next 2 months.
Argentina has behaved quite well during the last couple of months. July and August, we saw recovery in demand and recovery in prices as well even above inflation and devaluation. So that's interesting signals coming from Argentina.
In Chile, we have seen sales below normal level, of course, still affected by COVID-19, but definitely better than the second quarter. Demand, as always, is indexed and will depend on the evolution of construction and industrial activity going forward.
In our other segments, which are Asia, Oceania, Europe and the Middle East, pretty similar comments. Sales have been below normal levels for a while. But in general, we are seeing signs of normalization and recovery.
Moving on to fuels. If we move to Page 20, we had a significant drop in net income, in operating income and in EBIDTA and you can see it on the table there. And this drop is even more pronounced when these figures are translated into dollars because of the depreciation of local currency. The drop in local currency -- when measured in local currency, the drop in EBITDA has to do basically with volumes. Volumes dropped a very significant 25% in Chile and even more than that, 46% in Terpel and 23% in Mapco, which is our U.S. subsidiary.
This is all related to the pandemic, of course, and the different percentages of decreases in volumes had to do basically with 2 things. One is how hard where the restrictions related to the pandemic and the other one is how important certain segments are in the different companies. Aviation, for example, is much more important in Terpel than in Copec or Mapco.
Together with all that, we had revaluation of inventories, a negative effect of revaluation of inventories, both in Terpel and Copec Chile, which was also a very significant hit on EBITDA. Together with that, we had some increased provisions on accounts receivable in Terpel and also in Chile. And this is, of course, related to the economic effects of the pandemic with some of our clients.
All of this is partially offset by a very good performance in Mapco, which recorded a higher EBITDA despite the drop in volumes, which is related basically to a higher unit margin, a very good commercial performance of Mapco during the quarter. Together with that, we had high industrial margin in Chile, which partially offsets one of the negative effects that we have highlighted above.
Operating result -- the nonoperating result was stable. We had basically a higher other income offset by lower other expenses or boosted by lower other expenses. In general, in all of our subsidiaries, we have made significant efforts to cut costs, and we have made very good progress in that. And this has allowed to assume an extent to offset the effects of the pandemic and the dropping in volumes.
This is all offset by lower profit associates, and this is related to the provisions that we mentioned already coming from certain subsidiaries. And also the reclassification of Sonacol, which is our pipeline division, which we have already classified as an asset held for sale. And therefore, the equity income coming from Sonacol is not recognized anymore in the income statement for Copec. Together with that, we have a lower tax base and therefore, a more favorable tax result.
Moving on to Page 21. We can see some more detail of the operational performance of Copec market share as of May 2020, which is the latest data we have, the latest efficiency we have, is up to 58.9%. And we get to the market share evolution in the graph down there. This is within the usual rate in which we -- of our market share, our market share moves, which is usually between 58% and 60%.
The fuels volumes in Chile are, of course, as we mentioned, very hardly hit by the restrictions related to the pandemic. We have seen a drop, especially in gas stations. This is related to private mobility in Chile, and that has been down by 28.7%. The industrial channel has been able to, in some particular segments, keep activity as usual. And therefore, the drop in that segment has been definitely less than in gas stations, 22.6% in this particular case.
Related to the outlook, we see the volumes in months to come, which will be totally linked and indexed to the evolution of the restriction measures related to the pandemic. We are -- as always, this is a segment which has very stable margins when measured in local currency. The exception to that stability is potential First-In First-Out inventory effects related to the movements in the price of oil and of refined products and also some industrial variations in margin that we see every now and then. Other than that, we see stability in general in margins.
Our gas station network is very well positioned and continues to be very strong in terms of brand positioning and customer perception. In Mapco, which has been performing very well, we are trying to achieve more margin stability. And it has been very high for the last 2 months, but it is very volatile as well. So we are trying to achieve more margin stability by putting in place initiatives such as related to customer loyalty, to better service and to changes in the mix of sales. It has gone very well for now. We're also focused on operational efficiency and mix at the convenience stores.
On Page 22, we can see some more detail in relation to Terpel. This has been very hardly hit. This is a division that has been very hardly hit by the pandemic. Restriction measures in Colombia has been very hard. And as a second driver of this decrease in EBITDA, the aviation segment in Colombia is also quite important, much more important than the other subsidiaries, the other fuel subsidiaries. So we had net income and EBITDA impacted by the very significant drop in volumes, minus 46%. And you can see the breakdown down there. We had 58% down in Peru, 79% down into the Dominican Republic, which is essentially aviation, 37% down in Ecuador, 51% in Panama and 45% in Colombia for a total of 46% drop in physical sales of liquid fuels. In addition to this, we have a very significant negative impact of inventory revaluation in Colombia, Panama and Dominican Republic during this quarter. All in all, this translates into a negative EBITDA that is shown there.
On Page 23, we have some more detail about our LPG division, Abastible. Abastible has proven to be -- is a segment that has proven to be very resilient in terms of results. And in spite of the pandemic, EBITDA is stable and slightly up in local currency when compared to the comparable quarter last year. Of course, when you translate this into dollars, there will be a drop. But in local currency, which is the functional currency of this division, we can see an improvement, a slight improvement in EBIDTA.
In terms of net income, we have the main effects stemming from nonoperating income. We had low resulting associates. Once again, because of the reclassification of Sonacol and Gasmar as assets held for sale. We also have higher other expenses, basically one-time and related in a large part to the extent of the pandemic and some inflation adjustment differences.
In terms of operating income, we have seen slight drops in volumes in general, so 1-digit drops in Chile and Ecuador. We had an increasing volumes in Colombia, and then we have a slightly higher drop 23% in Peru, where the bulk channel is more important that has been hit more strongly than the other channels.
On Page 24, there's some more detail on commercial aspects of the LPG division. We can see a drop in volumes of 3.1% in Chile. The sales were, of course, impacted by the pandemic, but to a lower extent than the rest of the market. And therefore, market share has actually increased during this quarter. The most affected segments are small industrial and commercial clients, restaurant, hotels and some other clients of the sort that are quite important for LPG and that have been hit the most by the pandemic.
In Colombia, we have a very good performance. Volume growth of 1.8% in spite of the pandemic, which is related to higher consumption related in turn to a series of marketing initiatives and also through geographic expansion. The pandemic is felt once again basically in the bulk segment because of small industrial and small commercial clients.
Same logic applies to Peru, but in this case, the impact on the bulk segment has been even higher. It has been affected by quarantine measures and the most affected clients are hotels, restaurants and shopping centers. The bottle segment, however, shows a very moderate impact and the marketing efforts that we have been doing in Peru for a while are starting to show results. So we expect a fast recovery and good results once the pandemic effects are gradually left behind.
In Ecuador, which is the smallest company in terms of EBITDA contribution, we can see a decrease in consumption on the bulk segment as in the other ones as well. And this is, of course, related to restrictions related to COVID-19. However, we were still able to gain market share in our Duragas company in Ecuador.
On Page 25, we can see a very brief reference to Sonacol. Sonacol is the pipeline division in Chile, and we have a drop in EBITDA and in net income, which is, of course, driven by a drop in volumes that have been pipelined during the quarter, and this, in turn, has to be with final consumption that has dropped because of the COVID-19 effects.
Moving on to our other investments. Igemar, which is our fishing division, has shown a better result in general than the previous quarter. We have been gradually moving towards commercial lines of more value added and this is gradually impacting the results of the company. So we have been showing increases in results in spite of eventual drops in demand related to the pandemic.
In the case of Alxar Internacional, this is the company through which we own our stake in Mina Justa in Peru. That is a project that is still, as you all know, it is in a development stage. And therefore, we are recording some SG&A expenses and also some financial expenses related to the development of the project.
In the case of Corpesca, which is one of our other fishing companies, we have basically a large base because of asset sales in the last year. In the other company, which resulted as a division of Corpesca, Caleta Vitor, which holds our investments basically in Brazil and outside of Chile, we are seeing basically movements related to exchange rate differences.
Laguna Blanca, which is the print company of Mina Invierno shows a small loss there. This is a company that is shutting down operations already. The Mina Invierno project is already shutting down. Metrogas and AGESA show results pretty much in line with the behavior of natural gas volumes and prices. That's it for results, net income and EBITDA. And now I would like to refer to some developments that have taken place during the quarter, some general developments.
Let us start out by referring to this huge challenge posed by the sanitary prices. We have been able to keep operations uninterrupted at our Arauco, Copec and Abastible. They were all segments that were declared essential and that has allowed to continue operations in basically all of the regions. We have, of course, upgraded and put in place significant health, hygiene and safety protocols in order to ensure the safety of our workers and also prevent contagions. This includes -- as you all know and as is happening everywhere in the world, this includes social distancing, use of safety gear, face shields, hand sanitizer, monitoring of temperature, remote working policies and many, many other measures, which have been defined to ensure the safety and well-being of our workforce.
At the same time, while keeping on with their operations in Empresas Copec and its affiliates have managed to have an exercise of very important social roles during the pandemic. And some of the initiatives are shown here. Just as some examples of what we have done, Arauco has supported local communities in terms of hospital, medical devices, labs and a lot of sanitary and health-related actions. Copec has donated fuels to the public health system of ambulances for whole pandemic emergency. Abastible has contributed LPG to the national network of elderly homes and some other initiatives. These are just examples of the wide range of different initiatives that we have put in place in order to help our local communities.
Moving on to Page 30. Some good news about dissolving pulp where we have produced our first dissolving pulp bales from the Valdivia mill. Just to remind you, this is a project where Valdivia mill was converted to dissolving pulp while keeping flexibility to switch back to paper grade pulp. So we have the first bale production. Everything has been progressing as planned. We are sending samples to clients and receiving their feedback. This is a new market that we are entering. We are entering so we have a challenge there in terms of our commercial activities and of being able to get to new clients, and that's what we are doing with this initial production.
We're also running some lab tests in relation to the quality of production. And results so far as well as feedback from the clients have been successful and encouraging in terms of the quality. And so good news in general. So although gradually, this mill is already starting to produce and heading towards production of dissolving pulp.
On Page 31, some elements related to the MAPA project. This is, as you all know, our largest project that we have going ahead right now. And actually, the largest project that the company has historically gone ahead with. The progress as of July 2020 is 57%. We went ahead with upgrading and enhancing the protocols and safety measures in order to ensure the safety of our workers and to prevent contagion. Once again, this includes social distancing, temperature monitoring, testing among other different measures.
We have approximately 8,500 people currently working on site. And just to remind you, this is a project consisting of the construction of a new 1.6 million ton short fiber line which is called Line 3. And once Line 3 comes in -- goes into operation, we will be closing down Arauco's oldest line, which is Line 1, which is 290,000 ton per year. This is a state-of-the-art facility, which will increase total pulp capacity for Arauco by more than 30% and will produce at a low cash cost. Estimated investment in terms of the interruptions continue to be $2.3 billion, as we have announced before, and start-up continues to be expected for mid-2021. That's an update for the MAPA project.
On Page 32, we have some information related to our other -- the other main project that is now going ahead, which is the Mina Justa project in Peru. As of July, the project presents a progress of 86%. And this is the total progress plan has been updated. And according to the updated plan, we are at 86%. We had a long interruption here. It was a little harder to come up with the protocols and measures required to bring -- to jump back into construction. But after that interruption, we are -- we have upgraded and enhanced our protocols and measures significantly, and now we're back on track and moving on according to the expected progress. We continue to expect start-up for the first quarter 2021 and continue to expect total CapEx at around $1.6 billion, as originally announced.
Just to remind you, this is a project where we own a 40% stake. We are partnering with the Breca Group in Peru through their mining business, Minsur. This is a project located in Ica, in the south of Peru, and we're expected to reach a production of up to 150,000 tons of fine copper per year during the first years of operation and an average of 115,000 tons during the 16 years of the life of mine. And so investment, as I already mentioned, continues to be expected at $1.6 billion.
On Page 33, just a brief mention of our asset sale process. We had already announced some months ago, we announced the processes for the sale of our stakes in Sonacol and Gasmar. Sonacol is a pipeline company. Gasmar is an LPG terminal. In the case of Sonacol, that is a company that we too consolidate because we own 52% of the shares. In the case of Gasmar, this is a company where we -- that we do not consolidate, and therefore, we usually register as an equity income because we own 36% of the shares. Those process are up and going, and we are making progress in them.
Progress throughout the pandemic has been hard, and there are a lot of restrictions for going ahead with the sales, but we have managed to make significant progress in all that has to do with hiring consultants, hiring bankers and lawyers. Going ahead with some agreements among shareholders, where we have to align decisions in order to sale -- to sell these assets. We have also made progress in terms of formalities related to obtaining access to information in companies in terms of ensuring that the processes are done in a transparent way. That we strike the right balance between our position as a shareholder and our future position as a client and so and so forth. So we have been moving all the way, trying to take advantage of internal work while the pandemic is going on and getting ready to move as fast as possible through the commercial stages of these processes. We have already gone ahead. We have also gone ahead with a vendor due diligence process, which should -- which is already done and which should enable us to speed up the commercial phase once it is launched.
In the case of Metrogas and AGESA, we announced this quite recently, and we announced the intention to evaluate a potential sale of our stake in these 2 companies. These are 2 companies related to the natural gas businesses, one is natural gas distribution to final customers, Metrogas. And the other one is wholesale for natural gas, AGESA. In this case, we are also in the first stages of the process, and we have hired a bank and are going ahead through the analysis required to take a final decision on whether to go ahead with the sale or not. Still too soon to commit to any particular dates regarding the 3 processes actually, but moving ahead in the right direction and making progress.
In the case of all these 3 transactions, the fundamentals of the decision are basically the same. In all these transactions, the assets involve stable long-term cash flows and therefore, should be very attractive for specialized investors, and we expect these operations when we carry them out, and if carried out, we expect them to be definitely value adding. And as I said, very attractive for a particular profile of investors. And this should also contribute to maintaining a robust and healthy balance sheet throughout this period of very significant investments that we are moving through. So that's a brief update on our process of sale of assets.
And finally, on Page 34, a brief mention of our sustainability report. We have published recently our sustainability report related to year 2019, where we are here highlighting very significant historical and future milestones, progress and also goals related to these ESG dimensions to which we have given the strategic utmost importance.
So you can see the detail of the whole report. It is worthwhile looking at. It is published in our web page. And some highlights are shown here. Just to give you some examples, we have 29% of total native forest plantations. We had a significant power generation contribution through biomass generation. We have important reductions in water consumption that we are also showing here and also important contributions to the sustainable development objectives, which have been set by the United Nations.
Among them, for example, Arauco's commitment to becoming carbon neutral and also Copec's commitment to gradually move towards carbon neutrality, hence the progress made by Copec or Terpel in terms of electro mobility. Those are all shown and detailed in the report.
That would be for now. That is what we had prepared for you as information, which is outstanding for this quarter that we have just ended and reported. And having said all that, I will be glad to open up the floor to any potential questions that you might have. Thank you for listening.
[Operator Instructions] Our first question comes from George Staphos with Bank of America.
Thanks for all of the details. I'll be very brief because it's late in the call. First of all, could you talk about what the inventory revaluation effect was in the second quarter? And assuming current prices hold, what we might be looking at for the third quarter?
Second question, broadly, for Copec's fuels business, was there much change in local currency pricing? Prices were down in dollar terms, I assume that was mostly FX, but I wanted to check on whether there's any local currency change.
And then lastly, if we hold current trends should we assume that volumes broadly within Copec fuels is stable with 2Q and therefore, down versus 3Q? And if there's any way to quantify that would be great.
Thank you, George. I will take the questions related to the fuels division, and then I will hand it over to Gianfranco for the question related to price for pulp.
The question on pricing was for Copec as well, not on pulp.
Okay, great. Okay. No problem. First of all, related to the inventory effect. We have actually quite a large effect this quarter. I would dare to say that we have more than $30 million when adding up Copec plus Terpel, all of that related to the FIFO effect. So quite significant during this quarter. Going forward, this should be gradually reverted as oil prices have trended upwards. But for the particular quarter, the effect was quite significant.
In terms of prices for when measured in local currency.
Correct.
We basically follow the margin more than the total sales. And just to remind you, this is a segment where prices move up and down in relation to our inputs and our -- the cost of all of the oil and refined products we buy. And therefore, the core of this -- of the business is the distribution margin rather than total income -- total revenues. In this particular quarter, we had total revenues of -- that were hit, in one sense, because of the drop in oil prices; in the other sense, because of the increase in the dollar evaluation. So -- but all in all, what is most important for our business is that the margins have been very stable all the way. As usual, we aim to have a stable margin in real terms in this particular business. So as to be able to give a reasonable profitability to our investments. And we have managed to do so throughout the pandemic.
With the exception, of course, of what we have usually highlighted, which are basically the FX related to the First-In First-Out movements in inventory and also with some exceptions related to industrial margins that we are able to move up in some particular cases, and especially when we see opportunities for imported fuels. But other than that, this is a very stable margin business. We can go back to you with the exact revenue figures in local currencies, if you wish.
That's fine.
Afterwards.
I assume so, but that was fine. And then just kind of what are your current volume trends year-on-year and third quarter as we're entering 3Q, in the fuels?
That's great. Yes, the volumes have been recovering as restrictions have been progressively lifted. We have seen some good signals. For example, as Colombia has moved from total quarantine and has gradually lifted restrictions. The total drop in volumes that came as -- that was as hard as 60% at some point in time is now in the range of what Chile saw during the restrictions, which is more closer to 30% drop.
In the case of Mapco, which has lifted restrictions, which had lower restrictions and that has pass over lifted them faster. In Mapco, we are always seeing drops of not more than 1-digit figures. So recovery has been quite rapid and encouraging as well.
And finally, in our fuels division in Chile, it's probably too soon to tell. But in those districts where restrictions have been lifted, we are already seeing that the drop in volumes is somewhere around -- this is very general and a very bulk and gross figure, just a general sense, but somewhere around 0.5 point loss during the total restrictions when they were in place. So all in all, we definitely see a very quick recovery. We see that the recovery is picking pace. It will be very closely linked to how fast restrictions are lifted in the different markets. But the signals so far are encouraging. The drop in volumes is definitely lower than what we saw during the most important restrictions when they took place. In some convenience store sales, we are already seeing increasing in sales, which is also very encouraging. So once again, good signals, still very soon to predict and to project and whatever happens going forward will be linked to the evolution of the pandemic and the pace at which restrictions will be lifted.
Our next question comes from Leopoldo Silva with LarrainVial.
Rodrigo, I hope all the team is doing well. I have 2 questions. First of all is regarding asset allocation. In the recent days, we've seen in the news here in Chile that the Las Salinas project, which is $800 million. This real estate project has been approved, has gone ahead one stage in the process. So here, I wanted to ask you what further or additional setbacks, could this project face? Is it all in order to give it a go? And if in case, in a positive case, will you be interested in selling a share of the project? And also could -- if you could please give any color on profitability that you're expecting of the project? That's number 1.
And number 2, I've been quite positively impressed about what you've done in Mapco. Your margin has been very healthy. So I wanted to ask you, what are your impressions regarding the expansions from this point on? I recall you said before this is an asset that could provide you growth in this market, clearly a big market. And if your -- the balance sheet of overall Copec is trailing in any way, a more aggressive growth strategy that you would like to target in this asset?
And lastly, on Mapco, have you -- could you give any color on electric vehicle adaptation of your gas stations? Those are my questions.
The second question is on Mapco as well, right?
Right, yes.
Okay, Leopoldo. Thanks for your questions, and I hope you are doing well also. Regarding your first question, Las Salinas, this is a patch of land where historically, there were some fields of facilities for many, many years. We are aiming to clean up that patch of land and potentially go ahead with a very interesting real estate project there. When we have got the authorization to do so far is for cleaning up the land. So we are going to start in that process. And that is a long process that is going to take 2 years or more than that. So all of the decisions here are going to be very gradual and will depend on how the process goes. But it is clearly very good news that we are finally given the authorization to go ahead with this remediation or cleaning up of this very interesting patch of land, where we are aiming in the medium term to build a project that will be very interesting in terms of contribution to the city as a whole.
It is still too soon to tell whether we would make here or not. We will go ahead with it on our own or we should explore some partnerships with real estate players. It does make sense to be open at this stage to all the possibilities. So as to create the most value possible in terms of profitability and also in social terms. And this is a project that has a very strong social foothold. But the good news so far is that we have been given the green light to go ahead with the cleaning up. That is a very significant first step.
In relation to Mapco, Mapco has been performing very well. As I told you during the presentation, we have been progressively focusing in improving the operational and commercial performance of the company, and we have achieved significant progress there. This is a company that when we first acquired it, one of the motivations for acquiring it actually was the fact that it was ranking below average in terms of operating performance, whichever way you look at it, I mean, whichever key parameter you look at, in all those parameters, we've made significant progress. We have improved service, we've improved customer loyalty and we have managed to increase margins, although they are still very volatile. And that's our challenge to make them as stable as possible and potentially and hopefully, at this levels that are higher than where we took them. So Mapco, for the time being, the focus is placed in improving operations, improving performance. And going forward, we would be open to look at potential other steps, but it's probably not at this time that we would follow those steps.
At this time, we're basically focused, as you all know, in bringing our large projects to an end, MAPA and Mina Justa, basically, while at the same time, taking care of maintaining a robust and strong balance sheet throughout this phase of strong event. But definitely, in the long term or medium term, we could look at other alternatives for Mapco.
Regarding the electric vehicles in Mapco, it is not a significant issue. It is an area, a region of the U.S. where electric vehicles have not penetrated significantly in the market so far. And they're, for the time being, ranging quite below other states such as California and the Eastern Coast states, which are basically making the most progress in electrical vehicles. In this particular case, in the area where Mapco operates, it is -- the penetration has not been significant so far.
Our next question comes from Isabella Vasconcelos with Bradesco BBI.
I have a couple of questions on my end. So first, could you just -- a quick one on -- could you just describe your CapEx estimates for 2020 and 2021, would be helpful? And also, on asset sales, you're very clear on -- during your comments, but I was just wondering if you were considering after these deals take off potentially, if there are any other opportunities that Copec is analyzing for the future? That will be helpful.
My apologies, Isabella, I didn't get the second question related to the asset sales for the second part of the question.
Sure. If you're just analyzing further opportunities after these deals are done?
Okay. Perfect. In relation to the CapEx, we ended the first semester with a total CapEx of approximately $1 billion. And we had initially announced $2.5 billion figure for the year, but that is definitely -- it's definitely going to be less than that for the year as a whole. We have been delaying some nonessential CapEx. I'm working very hard on that, and we have been also postponing some initiatives. And therefore, the total figure for 2020 should be around $2 billion, somewhere around $2 billion. So twice what we have recorded as of June 2020.
And then for the next year, basically, we should have a maintenance CapEx, which is somewhere around $700 million to $800 million, which is the traditional CapEx that we incur on a yearly basis, plus whatever is left from our large projects. And therefore, which should basically amount to $1.5 billion. That's our initial estimate, very bulk, very preliminary for 2021.
In relation to asset sales, we're permanently looking at opportunities for divestments and also in normal times, we are looking for opportunities for investments in order to optimize our portfolio. We have been looking at potential opportunities for divesting certain assets basically because we have a very heavy balance sheet now as we are integrated, vertically integrated horizontally. We own most of our lands, most of our real estate, we own our terminals, our pipelines and so on and so forth. And therefore, we had detected since some years ago that there could be opportunities for monetizing some of those assets and optimizing our returns by going ahead with those divestments. So we decided to initiate those divestments last year with the sale of Puertos y Logística. And then we followed suit this year with Sonacol, Gasmar, and we are also evaluating Metrogas and AGESA.
Going forward, there might be additional opportunities. We are permanently evaluating them, but it's probably too soon to tell what exact opportunities we can find. But it makes sense to look at potential divestments as well as investments in order to optimize our balance sheet, strengthen it up even more and also optimizing returns and focus our efforts where we have our true competitive advantages.
[Operator Instructions] Our next question comes from Jens Spiess with Morgan Stanley.
I wanted to ask how certain is it that you will be able to perform the maintenance downtime in the fourth quarter and are there any risks of any further degrade? I mean -- and if that's the case, are there any risks of potential equipment failure? Or asked differently, how much can you stretch them even there?
And second question on end markets. If you could give any update, I know, for example, do you see any improving signs in the printing and writing market or have you seen tissue producers using more virgin fiber, for example, due to lack of recycled fibers in the market?
Thank you, Jens. I will hand it over to Gianfranco to tackle the questions relating to downtime and also the update and follow.
Okay. Thanks, Rodrigo. Well, regarding the annual shutdowns, I mean, we were able to do most of them in the first quarter, and we did attended stoppage in the second quarter. In the third quarter, we don't have any plan, but we don't see any big risk in the scale of stoppages that we have. I mean we don't like to risk our assets. And I don't expect any unscheduled stoppages in production because of this. The next round of stoppages are in the fourth quarter, and we will start with Constitución and Alto Paraná and Montes del Plata has stoppage in November. So we are currently in the normal levels of separation between stoppages for our mills.
In terms of updates in the final market, there's still a lot of volatility and because the pandemic is evolving differently in different parts of the world, I mean, we have seen that in Asia, for example, in China, growth is better than other parts of the world in terms of GDP and it's more dramatic growth in GDP, children going back-to-school and more normal life going on in the big cities. So demand should start to pick up a little bit more, but we haven't seen any big impact yet in the market for pulp. We hope that ending the slowest part of season, which is the summer season in North Hemisphere, meaning in the third quarter and fourth quarter, we can see a pickup in demand as usually you see in this part of the year.
In Europe, growth is not there. I mean -- but I hope that probably in Asia, they can lead the pickup in demand in printing and writing as the economy is further ahead in the recovery of the coronavirus.
In the other markets, in the U.S., Latin America, still waiting for second rounds, probably of contagions. And so it's very difficult to predict what's going to happen in demand for printing and writing and pulp.
In terms -- the good news are in the wood products division. We have seen a very quick pickup in demand. Based on remodeling basically and people staying more time at their houses and spending, while they are not spending in traveling and probably dining away from home, in remodeling their homes. And then we have -- I've been surprised by the pickup in demand for panels, moldings, plywood in terms of pricing and volume. So that was a surprise. And we hope that, that could continue through the end of the year to compensate the low prices of pulp that we are seeing right now at the market.
This concludes the question-and-answer session. At this time, I would like to turn the floor back over to Mr. Rodrigo Huidobro for any closing remarks.
Okay. Thank you all very much for attending, and we expect to get back to you at some time during November with the third quarter results. Thank you all very much.
Thank you. This concludes today's presentation. You may now disconnect your lines at this time, and have a nice day.