Empresas Copec SA
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Good afternoon, everyone. And welcome to Empresas Copec Second Quarter 2022 Results Conference Call. Today's presentation and the second quarter 2022 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 management and an 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 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.
Thank you very much. Thank you all very much for being here, joining us today in this conference call where we will be taking a look at the results of the second quarter 2022 of Empresas Copec and Executives Companies. I'm joined here today by Mr. Cristian Palacios, leading our Investor Relations department as always. And also this time, joined by Mr. Charles Kimber, who is the Senior VP for Human Resources and Sustainability at Arauco.
They will be helping us out in the last part of the presentation for the Q&A session. Having said that, let us turn to Page 4 where we have an executive summary of the main developments and the main highlights of the quarter. We had an improved EBITDA, of course, reaching approximately $1 billion for the quarter.
And the basis of that is good performance of both the forestry and the Energy segments. In forestry, we continue to see a good performance of pulp and wood panels. We had higher margins in panels offset to a certain extent by lower volumes. Lower volumes in pulp as well in general votes have been marked by logistical difficulties, but that is all partly offset by better prices in general.
In the case of energy, we continue to see a strong recovery in fuels. We are seeing volumes above pre-pandemic levels. We saw a higher EBITDA across the board in our fuel divisions, in Copec, Terpel and Mapco all of them showed a higher EBITDA with respect to the comparable quarter last year.
In the case of liquid gas, however, we are seeing some compression in margins related basically to the high international prices of propane. In terms of developments and projects, we are seeing MAPA at a progress of 97.5%. So entering the last weeks of construction and expecting to produce the first bale during October.
We continue to see Mina Justa ramping up and about to reach the design capacity. And in terms of net debt to EBITDA we have continued to go down and have stabilized at a level which is much lower than the pace we saw a couple of quarters ago.
Finally, in terms of ESG, significant milestones during this quarter. We continue to make progress in electromobility and Energy transition in our Energy division. And in the case of Arauco, we have obtained the recertification for the third year in a row of carbon neutrality.
Let us switch to the numbers. You can see here that EBITDA is up to $1.027 billion, which is up 16% with respect to the comparable quarter last year and 7% Q-on-Q. In terms of net income, we recorded $382 million, which is up 12% with respect last year, but down 38% in respect to the last quarter.
We'll see some more details on that right away. But if you look at the historical context, we continue to see quite high levels of EBITDA, we've been recording EBITDA very close to $1 billion for several quarters already. So EBITDA is up by 16% with respect to the comparable quarter last year and that is basically due to the good performance of Arauco and Copec.
In Copec, we saw good volumes and also better margins, offset to a certain extent by a drop in liquid gas. Meanwhile, in the forestry sector, we have seen -- we continue to see a good performance in pulp and in panels.
Regarding the composition of EBITDA, to the right-hand side of the past, you can see that this is pretty much in line with the historical distribution. Roughly 60% of EBITDA coming from Arauco and very close to 40% coming from the Energy division.
In terms of net income, we are up to $382 million for this quarter, which is 12% up with respect to the second quarter 2021. That is explained by [indiscernible] in Arauco and Copec, together with the contribution of Mina Justa through Alxar Internacional.
All of that is offset to a certain extent by a lower result in the parent company related to foreign exchange differences and also to a large provision that we have to record in our associate Metrogas, standing to the resolution in first instance of judicial dispute with an Argentinean transportation, gas transportation provider.
I will give some more details on that going forward. But it's quite a large flow in our net income related to this provision coming from Metrogas, $95 million, which finally gives way to a $91 million final result in Metrogas for the quarter.
Once again, to the right-hand side, you can see the composition of net income, which is in line with the historical distribution. Going further into the figures for the income statement, you can see that we reached this net income of $382, which is 41% more than the second Q 2021.
That comes from an operating income increasing by $99 million and nonoperating income decreasing by $55 million. In nonoperating terms, we had this provision in Metrogas, which we already mentioned. We had a drop in other expenses or more negative other expenses related to charges, which stem from an event at the Valdivia mill, fire in the Valdivia mill and we also had offsetting all that.
We had other income increasing because of higher gains related to biological assets. In terms of financial ratios, we continue to see an increase in return on capital employed, reaching now 16%. EBITDA margins in line with the last few quarters, around 13% and in terms of leverage, we are down 1.9%.
So this is the evolution of leverage here. Net financial debt on EBITDA. Remember, we reached a peak of 4.6% some quarters ago when we were in the middle of large phase of expansion with very significant projects being carried forward.
And also, at that point in time, we had been hurt by the effects of the pandemic on our forestry and energy division. So since then, we have been normalizing our EBITDA generation and also paying down some debt and therefore, reaching the current number of 1.9%, which is quite a comfortable level for the best.
Very well balanced maturities for the debt going forward, as you can see here. Going further into forestry, we have a stable operating income for Arauco in relation to the second quarter last year.
We had, as I said before, improved margins in wood products, but partly offset by lower volumes. Similar in the case of pulp, we had lower volumes again but offset by higher prices. EBITDA is up to $609 million, which is very much in line with the last quarter.
Some more detail on the pulp division. You can see here some comments on the evolution of pulp prices during the quarter. We saw a good level of prices for pulp, quite stable actually during the quarter, in general, supported by logistical issues.
This is a market that is very tight. And we've seen several logistical issues affecting supply and that has put pressure -- upward pressure on prices. That has caused prices to remain quite stable across the quarter. Some particular events, for example, Finland has been affected by supply coming from Russia. And on the other hand, demand has been quite stable.
In the Chinese market, we have seen some slowdowns because of restrictions to mobility related to COVID cases and port restrictions as well, a slight reduction of economic growth, as you've seen. But however, prices have remained stable and we continue to see stability in prices going forward for the time being.
Europe continues to be very strong in every type of fiber and prices and producers have been able to transfer increases in costs to final customers. In the case of dissolving pulp, we have seen a stable demand and also some supply restrictions and therefore, prices increasing by 20%.
Inventory levels quite within historical ranges, as you can see there as well, so for the time being, no significant disruptions, so no significant signals coming from the inventory levels. In terms of the outlook, we continue to see stability.
We are going through a summer season, which is usually as a low season. However, we haven't seen downward pressure as we usually see during this month. China, as we said before, we continue to see some slowdown or some decrease in the growth rates because of restrictions and because of the economy.
Inventories at historical levels and some slowdown in the packaging market and also some increased supply coming from Russia in that particular market. As you can see here, the prices have been quite stable for the last 4 or 5 months.
You can see here, prices for softwood a little above $1,000 per tonne and prices for hardwood in China, around $860 per tonne, quite stable over the past few months. Moving on to panels.
You can see that EBITDA generation for panel is very significant, $358 million, which refers very well to our historical levels. We usually have generated somewhere over $100 million per quarter for this division. That's the historical level. So this is almost 3x as high as historical level. Very good performance for the last few quarters. And as you can see here, in general, prices have been trending up quite significantly actually a 51% increase year-on-year for panels and a 25% increase for solid wood whereas volumes have been a little slower in the case of panels, minus 7.9% and stable in the case of solid wood. Very good performance of the plant division, however.
The outlook continues to be stable, continue to see signs of stability with a question mark, however, related, of course, to the slowdown in housing starts the slowdown in the economies across the world and also the increase in interest rates and still to see how all that is going to affect this particular market.
In the case of particleboards and MDF, we tend to see robust consumption. Market is better balanced today in terms of supply and demand. So a little less excess demand that we saw a couple of months ago. In the case of remanufactured products, we see some logistical disruptions, demand a little slower, but still a very solid market.
Housing starts decreasing a little bit and that might be a trend going forward, still to see. And in the case of plywood, we continue to see a stable market also affected by, in this case by decrease in supply coming from Europe because of the war.
So that has meant prices facing a strong upward pressure. In our other main markets, the second most important one is South and Central America and the largest market there is Brazil. We are seeing a slower market than some months ago definitely. So domestic market is slower. And given that, we are beginning to see exports from local producers to other markets around the world.
So that means that other markets could be affected by these volumes coming from Brazil. In the case of Chile, we have seen a slowdown in construction, but stability in prices. In the case of Argentina, we continue to see a positive market. In the case of Asia, which is a small market for ourselves, we are seeing some slowdown related to restrictions in mobility basically.
Let us move to the Energy division. Copec had a very interesting quarter with an EBITDA that amounts to CLP 293 billion, as you can see here. This is a business that we record in local currency, and that's why we make it comparable -- strictly comparable. We are showing here the evolutionary Chilean pesos, CLP 293 billion consolidated for Copec. We had higher EBITDA generation across the board. So Copec, Terpel and Mapco all of them showed a higher EBITDA than in the second quarter 2021.
Very strong growth in volumes in the case of Copec and Terpel, 26% in Terpel, 19% in Copec-Chile. So very strong growth. Recovery continues very strongly after the pandemic. In the case of Terpel, we had an inventory revaluation effect -- a very significant inventory revaluation effect also in Chile. So that accounts for part of the increase in the margin. We also had a very good performance of the industrial segment, especially in Chile and very good volumes in lubricants -- in the lubricant segments. So all in all, good news in the fuels division -- in the Energy division.
Some operational data here. Market share continues to be in line with historical levels, 57.5% as of April, which is the latest figure we have. Volumes are up to 2.8 million cubic meters in Chile, which is in line with the preceding quarter, the first quarter of 2022 but much higher than in the second quarter of 2021. So it's up. In the case of gas stations, it's up 17%. In the case of Industrial segment, which we had a very good performance this quarter, we had an increase of 22.7%. The outlook, as always, it is a stable market. The gas station volumes, in general, grow with the economy.
Of course, we've seen a faster growth than that over the last few quarters because of the low base of comparison that we had due to pandemic. Volumes continue to be strong. We continue to see high growth rates and they are already above pre-pandemic levels. This also relates to an increased total number of cars in Chile and in all geographies will take part and of course, to the progressive lifting of restrictions and mobility. Real margins tend to be very stable in this business, however, over the last few months and given the very high inflation we have seen, of course, real margins pressured by that very high inflation.
Going forward, we continue to see a very good positioning of our gas station network and a dealership in this segment. In the case of Terpel, we recorded an EBITDA of CLP 408 billion, also a record EBITDA in at least in the quarters that we are showing here, a very good figure. This relates once again, to a very strong growth in volumes, amounting up to 26% in total. And with very significant growth in some markets, for example, Peru, which is essentially aviation, the result by with respect to last year. Colombia, also a very good market where aviation is also very strong, up by 31% with respect to last year.
Together with that, we saw, as we said before, a very significant effect of the inventory revaluation during this quarter. In the case of Mapco, we saw an EBITDA that is higher than less than in the comparable quarter last year. This relates basically to higher margins.
We have been able to stick to higher markets in a very competitive market to higher margins. With that, we ended up recording an EBITDA of $24.4 million, which compares well to $19.1 million that we had in the second quarter last year. This company continues to work very strongly in trying to achieve an increase in margins and stabilization in margins.
We're working in operational efficiency, so bringing down costs. Working also in convenience stores, which also did very well in this quarter, optimizing the product mix there. We are also working in gas station renewals and network optimization. I remember that Mapco sold 30 gas stations approximately last quarter in those areas -- those geographical areas that were further away from the core geographical area. And it continues to renew and build more gas stations in the area that has been defined as core. So a lot going on in Mapco and quite good results. Abastible has been facing a scenario of very high propane prices during the last couple of semesters, I would say, at least and therefore, margins have gone down.
This is a result of elasticity of demand, basically, margins have gone down. We have seen better volumes in general in the 4 countries in which we have activities. With the exception of Peru, where due to a commercial strategy -- a new commercial strategy, we have seen volumes going slightly down.
Total EBITDA for the core is CLP 30 billion. This is also a business that we recorded in Chilean Pesos. In terms of operational performance for the 4 countries, we are showing some data there. Trends seem to be quite similar across all geographies. We have seen margins going down because of the increase in propane prices and international supply prices basically.
This has brought volumes down in some segments and some more than others. In general, we have seen final customers going either to other brands, more informal brands, which are cheaper or customers moving to other energy sources, such as fire, and this tends to happen whenever gas prices are high.
But all in all, the commercial performance of the companies are -- has been very good in relation to the other companies in the LPG industry. We have been gaining market share in general across all geographies. Now moving on to our other investments.
Mina Justa recorded an EBITDA of $144 million for the quarter. This is not consolidated. But remind you, this goes in to our net income coming from associates, so into our equity income. $144 million for the EBITDA for this quarter, lower than the quarter immediately preceding quarter.
That has to do with lower prices to some extent, also higher costs stemming from logistical difficulties as many copper producers have faced across the world and also some increases in raw materials and chemicals for the company, a slightly lower production as well so $1.4 million, the cash cost compared to $1.1 million in the preceding quarter.
Still a very good EBITDA generation with $144 million 4th quarter and a net income of $58.6 million for the company as a whole. Mina Justa continues to ramp up, and we have seen already that the sulfide plant, as we've said before, has been operating at full capacity since late last year.
And the ramp-up of the oxide plant is still going on and is expected to be fully operational during the fourth quarter of this year, so with all that, we're expecting a total production for Mina Justa for this year, which should be around 125,000 tonnes. Now we define the range between 115 tonnes and 134 tonnes so somewhere around 125, which is the center of that range. That compares with the 86,000 tonnes that we produced during last year. So good ramping up prices.
In the case of Sonacol, this is very stable. It relates to volumes pipeline basically. So it grows in line with volumes pipeline. The -- probably the most important effect here in this quarter is Metrogas. Metrogas Issued financial statements still not recording this effect, which they knew of after issuing the financial statements.
So they did it through an essential fact. We received this essential fact before we issued the financial statements at the Empresas Copec level. So according to accounting standards, we had to include this effect in our results for this quarter.
The total effect is $240 million at the Metrogas level. We have 40% of that. And therefore, the total effect for ourselves is $95 million as a provision and this is a result of a ruling -- a judicial ruling first instance. So still the pill, the appealing is still pending.
So our first system moving by the Argentinean justice, and this relates to a judicial process dated very long ago. It started in the years of the natural gas crisis, the natural gas supply from Argentina crisis, which was around 2009. And the provision has to do with costs -- transportation costs that would be payable to a local Argentinean pipeline provider in those years plus, of course, the costs and interest. This is noncash. Metrogas has announced that it will appeal.
This is still first instance. And as I said, we have to record it in our financial statements for this quarter. So that's the explanation for the provision in Metrogas. Moving on to highlights in terms of projects and development for the quarter. First of all, we have MAPA, which is going through its last stages of construction, the last weeks of construction actually, the first day is expected for October.
Total CapEx is now estimated at $2.85 billion, and there are several areas of the facility that are listed there that are already in operations. So we added some more during the second quarter. The workshop warehouse with the Baylor Machine test, the wood preparation area is also up and running, the line kill area and the beam assembly also for the road access in internal railway. All of that is already up and running. And so very close to starting operations in MAPA.
Moving on, we have the Sucuriú Project, which was announced by Arauco in the last few weeks. This is a project that is still very preliminary. This has to do and is based upon an agreement that Arauco signed with the government of the Mato Grosso do Sul state in Brazil.
This is a very important step in the sense that [indiscernible] to evaluate the construction -- the potential construction of a new pulp mill in that state. A lot to happen yet, of course. This is very preliminary and is subject to many -- to the results of many different factors and elements such as market conditions, environmental permits with supply, financing and also, of course, the final approval of the Board.
If all of that goes well, we could eventually start construction by 2025. The total CapEx would reach a figure around $3 billion. And initially, the project is expected to have a total capacity of 2.5 million tons of hardwood. So it would mean a very significant decrease close to a 50% increase of Arauco's total capacity in pulp.
This is located in the town of Inocência, and this is an area that has very significant logistical advantages. Okay. Then we're moving on to the ESG highlights. We just published in July, we published a sustainability report for Empresas Copec consolidated for 2021. A lot of significant milestones are described there. But in general, what we've highlighted here are the different strategies of the different affiliate companies for facing this ESG elements. In the case of Copec, Copec has communicated a new climate team strategy, which involves a carbon neutrality goal and the 0 waste goal for 2029, carbon neutrality further on.
And also an investment target for initiatives related to electro-mobility and energy transition. In the case of Arauco, we have highlighted the -- once again, the recertification of the carbon neutrality. This is for the third year in a row. And together with this, we are including high investment in fire prevention new elements of community engagement and also a 0 waste goal for 2030 in this case. In the case of Abastible, new technologies for protective health and safety and also very significant innovative energy solutions. And in the case of our fishing company Orizon, a commitment to operate with renewable energy by 2030.
So with all that and the initiatives that we already had going on, we are contributing significantly to the sustainable development goals. Let us turn to Copec Voltex, which is the division of Copec that is pushing electromobility. We had a major highlight here.
We won a tender for installing 94 charging points for Codelco for the buses that operate within Codelco's divisions. These are 3 divisions, 3 very large divisions of Codelco. This is actually the largest electromobility project that has been awarded in the mining industry. So a very interesting highlight and milestone for Copec Voltex.
Copec will be in charge of providing 94 charging points, which will supply 150 buses for the transportation of workers within this division. Along the same lines of energy transition, the consortium integrated by Copec, Colbún and Air Liquide was formed through the signing of a memorandum of understanding. And the objective of this is to promote together with the local airport -- the Santiago Airport promotes the use of green hydrogen at the airport.
It is expected to become the first Airport in LatAm to incorporate the use of hydrogen into operations. Milestones are 2025 for the provision of hydrogen to ground operations and 2035 to start providing of supplying hydrogen to planes and Copec will be in charge of developing the infrastructure for the supply of Hydrogen.
Having said all that, that's what we had prepared for presenting to you. I will take the presentation off and we can open up the floor for discussion. We will be joined by Cristian Palacios and Charles Kimber in this part of the presentation to be able to tackle the questions that you might have.
Thank you. We will start now the Q&A session in this opportunity. [Operator Instructions].
Thank you. We're going to start with the first question. Here, we have Camilla Barder of Bradesco BBI. This is for Rodrigo. If you can comment on volumes outlook for a second semester on fuels and in artilleries.
Yes. The trends seem to continue as we described in the presentation. In the case of the fuels division, we are still seeing quite strong levels of growth. This is related to recovery in the economies starting from the base of the pandemic.
It's also related to the increase in the total number of cars in the geographies in which we operate. And that in turn relates to the increase in liquidity, monetary liquidity in the markets which we operate and also to the lifting of restrictions in mobility.
And so to -- without that, we continue to see a good scenario for volumes in general in fuel. As I said before, margins are usually stable in real terms in this division. But in this case, they have been oppressed by very high levels of inflation, and we continue -- that to continue further on for a couple of months at least.
The other elements are very, very -- the relevant of the margins, which also lent some volatility to the margins like the inventory devaluation. So the industrial segment are very, very hard to project. But in general, it's a good scenario for fuels.
In the case of our Abastible, also the same trends. We have a high level of propane prices and that has been very determinant on the performance of the liquid gas division across all geographies. And so we have seen volumes is still growing but very slightly because customers tend to switch to other substitutes in formal brands or other sources of energy. And we also have seen margins going slightly down. However, a very good market position in general of those companies in liquid gas.
Thank you, Rodrigo. We have a couple of questions on Mina Justa. Omar Abilene. Mina Justa made a liability management operation. Should we expect this unit to deliver dividends to shareholders in the short term.
Well, yes, I would expect so. That has been the objective for the last few months. We've been going through a refinancing process, which is already up and running. It's already in place, the refinancing. This project initially had a project financing structure. And as usually, these structures do, it had a lot of restrictions to cash payouts. With this refinancing, we have difficult restriction. Together with that, we have listed the guarantees that were placed by the shareholders in relation to the project finance in Mina Justa, so that -- it's not there anymore.
It's a corporate financing structure without restrictions to dividend payments. So we should see some payments coming over the next few months, coming through both shareholders in Peru and in Chile.
Thank you. Another couple of questions on Mina Justa, Rodrigo Godoy at Credicorp and Juraj Domic at LarrainVial, basically both asking about the outlook for cash cost at Mina Justa and if you expect to keep this 1.4 level of C1 cash cost for next quarters?
Yes, we continue to see some logistical disruptions. And as you have -- you all know probably there's also an inflation that is affecting some inputs for mining companies. So yes, still hard to say. We are also working on improving the grades for the iron ore, and that seems to be working well.
We're also increasing production in Mina Justa, as I said before, because we are still through the ramping up process. So all of that will bring -- put some downward pressure on costs, but that could be offset by these initial factors that I mentioned. Probably one -- yes, probably stability in terms of cash costs for the next few quarters.
Thank you. We are going to pass a couple of questions for Charles Kimber. This is on forestry. Carlos De Alba at Morgan Stanley, what is your level of confidence that MAPA not -- will not be delayed further.
Then what's your expectations for pulp prices in the coming months? What is the likelihood that they will decline. Then if you can give some details on timing, volumes, CapEx, OpEx for the new pulp project in Brazil. And finally, if you are seeing signs of volume weakness, this is for Rodrigo -- of volume weakness in fuels due to higher price. So we have these 3 first to Charles and then Rodrigo.
Look, as Rodrigo mentioned, we are at the very final stages of completing the construction of MAPA. We have started with commissioning of many of the equipments. We just have one line that is pending. And therefore, we are expecting to start production in the next couple of months.
So our objective is to be producing pulp in the month of October. And after the delays that we have had, we have a high level of confidence that we will be producing pulp in October. That's as to MAPA. Pulp prices, I cannot make comments on what our predictions for pulp prices.
I can talk about demand. Demand continues to be strong, both in European markets and in Asian markets. This has been the summer season. Normally, it's a little bit slower, but there is strength there. And so we have good expectations as to -- from a demand point of view for our products -- for all of our grades in the coming months.
And as to Sucuriú project, as Rodrigo mentioned, we are at the very early stages. We've just signed this agreement with the government of Mato Grosso do Sul. We've announced an initial CapEx expense of $3 billion for pulp capacity of 2.5 million tonnes.
But we are running now all of our analysis -- financial analysis as well as preparing documentation for environmental permitting and all other permits that are required for a project of this size.
Yes. And then you had one for me in relation to fuel volumes. We haven't seen any signals of slowdown yet. However, it's definitely a possibility, of course, given the scenario that we're facing, where we are seeing an economic slowdown across the board in all geographies. We are seeing high inflation and we are seeing also liquidity -- monetary liquidity running out of the market. That's a combination that could, of course, bring about a slowdown in volumes. We haven't seen it yet, but of course, that's a possibility.
Thank you, both. Another one in forestry for Charles is Rodrigo Godoy at Credicorp regarding the incident at Valdivia mill, how many tons or what's the capacity utilization rate do you expect to produce in the coming 2 quarters before receiving full productivity by March or second quarter 2023.
We have not been producing for the last 3 months. We expect to make some modifications in the drying machine, finish those modifications now in September. So we will have 2 quarters in which we will be producing at approximately 60%, 65% of capacity.
We need to try this system. We have high confidence that it's going to work well. And so that's why it's moving between 60% and 65% of our annual capacity, which is 500,000 tonnes. And then we will stop -- sorry, and then we'll stop for a couple of months and resume 100% capacity in the month of April.
Okay. And one more on Valdivia. Jens Spiess at Morgan Stanley, what level of inventories do you have of dissolving pulp at this moment. And if this impact of this fire will be distributed through the next quarter? Or when are you planning to resume full operation. I think that was already tackled. But regarding inventories, if we can comment something.
I'll repeat myself a little bit here. We've been stopped for 3 months, so our inventory levels are negligible. Whatever we have has already been assigned to a particular customer. And we will resume production now in the month of September, but only at a rate of about 60%, 65% of the capacity and then expect to be back with full production in the month of April.
So we have 2 quarters of limited production stopped for a couple of months and then start again with 100% capacity.
Thank you, Charles. A couple for Rodrigo. Rodrigo Godoy is asking if you can give some guidance in terms of the FIFO effect or the revaluation of inventories in the liquid fuel business during the second quarter.
And to complement that, if you can give some outlook for inventory revaluation for Q3. This is a question from Leonardo Neratika at Bank of America.
Yes. As I mentioned in the presentation, we had a positive effect during the quarter. It was quite significant, actually amounting up to approximately $60 million at the consolidated level. So Copec plus Terpel which are the 2 divisions in which we registered this FIFO effect recorded effective -- a total effect of around $60 million, quite significant.
So far, as in fact, it's very hard to predict. But so far, we've seen a positive effect during the third quarter as well. As all continues to be possible.
Thank you. Continuing in forestry here. We had Leonardo Neratika at Bank of America. With MAPA starting by October, when the volumes are expected to reach China? If you can give some color on volume expectations for MAPA for this year and next one, please, Charles.
Did you say reach China?
China?
Yes. Okay. So we started in, let's say, the capacity of MAPA is somewhere between 125,000 tonnes on a monthly basis. Of course, we will not be running at full capacity when we start up. We have -- in our budgeting, we have between 125,000 and 150,000 tonnes for this year.
And then that's going to be ramping up for the whole of 2023. We expect to reach somewhere close to 1.2 million, 1.3 million tonnes. And so volumes for the Chinese market, we hope to be arriving there towards the end of the year, early 2023.
Thank you, Charles. We have another question for you. This is for wood products. If you can comment a little bit on the market outlook across the regions for the panel division for this second half of 2022.
We'll probably divide this between North America and South America. In North America, we have a very strong market. As you remember, we have done some rationalization with older mills. There's a tight supply. There is strong demand. There's good demand at the remodeling sector.
New housing is still at high levels. We have confidence that the business activity will continue in North America. And then Brazil is a market that is somewhat oversupplied. So we see there some softness in this second semester.
And then Chile is mainly a supplier of volume to North America in boards, both Mexico and the U.S. So Chile will -- should be doing all right in the next coming months.
Thank you. And another one from Rafael Barcellos at Santander for -- this is for Rodrigo. If you can give us more color on capital allocation. What is the expected CapEx for 2023? And if you think the company will be paying more dividends this and next year.
Yes. Capital allocation has to do with our growth strategy, of course. What we aim to do is going forward, we should continue to invest according to our traditional philosophy, which is basically long-term investments in areas where we have competitive advantages, focused in energy and natural issues.
These long term, means by the definition, a very strong element of sustainability in our investment decisions. In forestry, we'll continue to look for geographies where there are good conditions for growing trees as we have done in the past in LatAm and from there are building facilities for processing in those locations.
In energy, we will continue to try to add as much value as possible to our existing networks, eventually looking for assets that may complement those networks and also investing quite decidedly, as we have shown in the last few years in ventures that have to do with electromobility and energy transition.
So those are the focuses of our growth strategy going forward, and that is what will be turning capital allocation. In terms of CapEx, we still haven't issued a guidelines for next year.
What I can tell you is that we have a base of the recurrent CapEx of around $800 million that should be there every year. And on top of that, we should add the CapEx related to the different projects that we decide to go ahead with.
But we will be issuing that towards the end of the year, precise estimation for next year. And then in relation to dividends, it is something that we could analyze. We have a financial policy that we have made public, where we have set a target for our net debt to EBITDA, which is 2x to 3x long term, measured in a long-term basis. So if in relation to that target and considering the investments that we decide to go ahead with, we have some leeway in terms of excess cash, of course, paying out dividend is something that the company could consider and that could eventually in turn has to be approved by the board and by the shareholders. But given our financial policy, it is a possibility.
And probably too soon to tell, given that we have defined the exact investments that will take place during next year. And probably one more word cation to our future capital allocation with the announcement of everything that we've announced in electromobility and what we have recently announced in forestry, Sucuriú plus the panel mill at Zitácuaro in Mexico, of course, we have a road map of where we will be allocating capital over the next few years.
So that's a clear signal of the fact that our traditional philosophy of growing long-term in those areas where we have competitive advantages continues to hold.
Thank you, Rodrigo. [indiscernible] was asking about MAPA again about the ramp-up. I think that is already answered by Charles. So I'm going to pass to the next one. This is John Timmerman. Regarding the provision at Metrogas, basically asking about what will happen with the bonds. If there is a chance of a capital increase solution in terms of improving the situation of the company, given the covenants of the bonds might be broken at this time.
No, I would say that it's too early to tell, and that has to come in the first instance from the company itself -- from Metrogas itself. Metrogas in effect announced that they would be making this provision, and that would bring potentially covenants to be broken during the third quarter this year.
But we still have to wait for the actions to be taken by Metrogas. Remember that this is an associate company that we don't control, and we do not have a very detailed information on the financial structure of the company. So at this point in time, we are not able to give an opinion on that.
Just to explain further, this provision stems from the initial instance of ruling in Argentina, our first instance related to payments that would be -- the Metrogas would be forced to make to a transportation supplier, a pipeline supplier back in the years of 2009 and the following years related to the natural gas crisis in Argentina when we didn't have gas in Argentina -- we didn't have gas for exporting in Argentina. So the first ruling held Metrogas liable, but still that has to be appealed by Metrogas. That's one thing. And the second thing is this noncash charge. That's also to have in mind. Other than that, I would say it's probably too soon to tell.
Thank you. Okay. We don't have further questions. So I'll turn it back to the Operator and Rodrigo.
This 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, Mr. Rodrigo, you can proceed.
Thank you, [indiscernible]. Thank you, Cristian, and Charles for joining us today and helping us out in this Q&A session. And to all of you, thank you for joining us, and we'll see you at some point during November in order to take a look to the results of the third quarter. Thank you very much. So see you then. Bye-bye.
Thank you. This does conclude today's presentation. You may disconnect now, and have a wonderful day.