Empresas Copec SA
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Good afternoon, everyone, and thank you for standing by. Welcome to Empresas Copec Third Quarter 2022 Results Conference Call. Today's presentation and the third quarter 2022 earnings release are available on the company's website at www.empresascopec.cl and also on our Investor Relations website at investor.empresascopec.cl. Before we begin, I would like to remind you that this presentation may include market outlooks and forward-looking statements, which are based on the beliefs and assumptions of Empresas Copec'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. [Operator Instructions] I will now turn the call over to Mr. Rodrigo Huidobro, Chief Financial Officer of Empresas Copec. Please go ahead, sir.
Okay. Thank you. Thank you all very much for joining here today, and welcome to this conference call, where we'll be taking a look at the results and the main developments of the company during the third quarter 2022. We are joined here today by people from our Investor Relations department, led by Mr. Cristian Palacios; and also, people from Arauco, led by Mr. Gianfranco Truffello. They will be joining in at the end of the presentation for the Q&A session.
Let us begin by going over the presentation into the executive summary for the quarter, where we are highlighting the fact that the EBITDA was stable with respect to 1 year ago to the third quarter 2021 and that was explained basically by a drop in forestry offset by an improvement in the Energy division. In the case of forestry, in general, we saw a decreased EBITDA slightly because of a drop in volumes, both in pulp and panel and wood division. And that was coupled with some increases in costs.
That was all offset by some prices that were somewhat higher than the comparable quarter last year. In the case of the comparison quarter-on-quarter, we saw an improved EBITDA basically because of the Pulp segment. We will go into more detail afterwards, and that was partly offset by the performance of the Wood Products segment. In the case of Energy, we saw an increase in EBITDA year-on-year. That was explained by increases in Copec, Chile and also Mapco, offset to a certain extent by a drop in Terpel.
This is all explained basically by an improved FIFO effect in Chile together with improved industrial margins, also in Chile. In terms of volumes, we continue to see growth, quite interesting growth in Terpel in all countries basically. That was offset to an extent by drops in Chile and also in the U.S. in Mapco. In the liquid gas business, we had lower EBITDA year-on-year. Regarding our projects and our main developments, we are going to show some detail about LATAM is about to start 99% progress and expected to produce the first bale by mid-December.
We went ahead with some acquisitions and other announcements during the quarter. In particular, we announced the acquisition of last mile logistics company called Blue Express by Copec, more on that to follow. Some expansions in panels, specifically in Chile and Mexico, we'll give some more detail about that. And also, we placed some bonds in the local market very successfully.
In terms of ESG, a couple of things to comment here. We as a company, we were confirmed as part of the FTSE4Good Index, one of the important indexes on sustainability worldwide. Copec has announced that it will enter the distributed generation market with renewable energies through its company, it's a fill company called Flux Solar. And we will also be commenting the participation of Arauco in the COP27.
Let us move to the main numbers for the quarter. We reported EBITDA of $965 million, pretty much in line with the EBITDA for the third quarter 2021, down 1.1% and down 6% with respect to the immediately preceding quarter, which was $1.027 billion. We've already completed several quarters, 5 or so, in which our EBITDA generation goes up to roughly $1 billion per quarter. In the case of net income, we are up to $474 million for the quarter. This means a decrease of 35% year-on-year, which is explained basically by nonoperational factors, we'll dive into that afterwards. But it also means an increase of 24% on the preceding quarter.
Moving on to EBITDA compared to the third quarter 2021, we had a 1% drop, as we said. This is explained by an increase in Copec offset -- more than offset by a decrease in Arauco. In the case of Arauco, as we said before, the main drivers there are drop in volumes, together with higher costs and all of that offset with higher prices in all divisions basically.
In the case of Copec, we saw a higher EBITDA, which is based essentially on a higher FIFO effect in Chile and also increased industrial margins. To the right-hand side, you can see the composition of EBITDA, which is pretty much in line with our historical composition that is to say Arauco, Copec and Abastible make up the bulk of our EBITDA generation. On this slide, we have the same analysis for net income. We're comparing net income 2022 versus net income 2021.
We have a drop of 35%. We have Copec basically increasing from 1 quarter to another, but that is more than offset by decreases in Arauco, Abastible and Alxar. In the case of Arauco, Abastible have to do essentially with the asset sales that they went ahead with in the third quarter 2021, which provides for a high comparison base for net income. In the case of Alxar, it has to do with lower results stemming from reduced prices and also reduced volumes, coupled with higher costs in Mina Justa.
Once again, to the right-hand side, you can see that net increase is essentially explained by Arauco, Copec and Abastible and now join outside International, which is Mina Justa, has joined in as well. Going on to the income statement. You can see there that we recorded, as we said, an income of $474 million compared to $734 million in the third quarter of 2021. This is explained by a decreased operating income. Arauco has shown reduced volumes across all lines, basically, higher costs and offset all of that to some extent by higher prices across most business divisions within Arauco as well.
In the case of Copec, we had higher margins that stems from an industrial margin improvement and also inventory revaluation effects because of our Abastible also improved operating income essentially coming from Solgas and Duragas that operate in Peru and Ecuador, respectively. The bulk of the variation in net income, as we said before, comes from nonoperating factors that has to do essentially with asset sales recorded in third quarter, both from Arauco and from Abastible.
Arauco went ahead with forest sales in 2021 and stay the same thing with its stake in Gasmar, which is this liquid gas terminal that was sold in the third quarter 2021. Together with that, we see lower profits in associates and JVs, that's essentially coming from what we just commented, a reduced results in Mina Justa. We also have higher other expenses because of planned stoppages or costs related to plant stoppages at Arauco.
And we also have offsetting the lower operational results that we've mentioned, we had some increases in the revaluation of biological assets also at Arauco in the other income line. In terms of our balance sheet and our credit metrics, we are doing quite well. We are staying around 2x net debt to EBITDA, just like in the preceding quarters. This is a level that is very comfortable and is in line with our financial policy that we published in our website. We have quite a good return on capital employed over the last few quarters and also good operating margins and EBITDA margins.
This, of course, comes from the good operational performance in our Forestry and Energy divisions. In terms of maturities going forward, we have a well-balanced debt schedule. We have quite a significant amount of maturities next year, but we have gone ahead with some operations which are aimed to refinance some of those maturities in advance. As a matter of fact, during November, we placed 2 local bond businesses in the Chilean market with very good results, and we will detail going forward.
Let us move to a review in detail of each business division. That means Forestry, Energy and other investments. We are starting out with Forestry where we will look at the results of Arauco during the third quarter of this year. As you can see, there on the screen, Arauco recorded an EBITDA of $619 million which is slightly down as we commented with respect to the third quarter of 2021 where we recorded $677 million.
This has to do with reduced volumes in pulp, panels and sawn timber. Together with that, we had increased selling costs or cash costs for all segments. And that is all partly offset by increased prices for our products. In the case of nonoperating income, we commented, we have the asset sale that took place last year, which increased nonoperating income. And offsetting that, we have a higher revaluation of biological assets during this year.
Going into further detail in the Pulp division, we recorded an EBITDA of 700 -- sorry, of $438 million -- an EBITDA of $438 million in this quarter, third quarter 2022, which compares unfavorably with the third quarter 2021, but is up with respect to the second quarter 2022. In the year-on-year comparison, we had lower volumes, but offset by higher prices. And we also had costs going up quite importantly. As you know, there's been a cost inflation in the pulp industry.
And in our particular case, we have cash costs going up by anywhere between 8% and 20% for the different fibers. In the case of the quarter-on-quarter comparison, we have higher prices, offset to a certain extent by lower volumes. In that particular case, we have unit costs also increasing a bit, but much more stable than in the year-on-year comparison. So we've reached probably a plateau of costs already in the pulp market.
Regarding the pulp market during the third quarter of 2022, we saw stable prices overall during the quarter. We had some effect of the Russia-Ukraine conflict essentially on the production of Finnish companies, which get their supply from Russia. And therefore, we had short fiber coming from Finland impacted by this conflict. We had stability in China in terms of demand and prices in general.
Paper producers have increased their exports to Europe and other parts of the world because of improved logistic conditions. And pulp prices, as I said, were essentially stable, long fiber decreasing a bit and short fiber increasing a bit during the quarter. In Europe, we continue to see a strong market. Demand has been strong. Prices are high. And this is also explained to certain extent or what other trend we are seeing is the higher cost base of paper producers essentially because of increased costs in Energy.
In the case of dissolving pulp, we've seen decreased demand from this cost producers, and therefore, price is going down a bit as well. We can see the inventory graph there where we can see that inventories are pretty much normal at historical levels for both, short fiber and long fiber. And in the case of demand variation, a quite healthy 3% as of May, this year. In terms of the outlook and latest developments for the pulp market, paper demand could face some decreased demand or lower expectations as well, at least for paper demand. We could continue to see a slowdown in China.
We have seen some cross-border paper market transactions reactivating because of the gradual normalization for supply chain, essentially China to Europe. In the case of European paper producers, we see that they could be affected by exactly this factor, exports coming from China and also by higher costs of energy and fiber. For the time being, though, markets look quite stable at quite healthy levels.
And in the particular case of Europe, we see the summer season that is, not for the time being, affecting prices. We can see in the pulp prices in China that we continue to sell the short fiber around $880 to $890 per ton. And softwood has been decreasing a bit, but quite stable around $950 per ton. So the gaps between the 2 fibers have gradually closed over the last few months, now standing around $60 or $70 per ton coming back from a high of more than $150 some months ago.
As you can see there, in terms of list prices and indexes, we can also see some stability at high levels, both in China and in Europe. In the case of wood products, which we are showing on the screen right now, we can see EBITDA going down from a quite stable levels of more than $300 million per quarter that we had seen over the last few quarters. We are seeing now a drop to $283 million, still very healthy levels, but coming down from the highs that we saw in the preceding quarters.
That has to do essentially with volume reduction. Prices have decreased in some particular products, but in some others, they have continued to grow, both in the year-on-year and in the quarter-on-quarter comparison. However, volumes in general have trended to go -- have trended downwards in the different products. In terms of the outlook for Wood Products, North America is our most important market quite significantly with 60% of revenues.
We are seeing some changing trends here. We have seen this market performing very strongly over the last 2 quarters. Now we are seeing some gradual changes in trends in these markets. In the case of MDF, demand has been declining since the beginning of the fourth quarter. And this has to do with increased customer inventories and also with demand going lower because of uncertainty and higher interest rates. In the case of particle boards, similar trends, but with a better distribution because of lower supply in this particular market.
In the case of remanufactured products, we have continue to see rising inventories and also uncertainty coming from the interest rates and reduced economic activity. Accordingly, housing starts, and repair and remodeling indexes have begun to show some adjustments. In the case of plywood, the market's still strong, better than the other ones, essentially because of mass supply of alternative sources and alternative products, but also showing the effect of seasonality and economic factors.
So all in all, still good levels but trending slightly downward in North America. In the case of South and Central America, which is our second most important market with 29% of revenues. We continue to see Brazil with a weakened domestic market with more MDF supply and also lower demand. This is exacerbated by the fact that the export markets have also worsened because of what we commented before, and this placing additional pressure on the local market.
In Chile, we have seen stable prices in general in local currency. Volumes, some were affected by reduced construction activity and also returns and margins in dollars affected by the depreciation of the local currency. In the case of Asia and Oceania, which is 7% of our revenues, we have seen the effect of COVID restrictions and also the economic situation in China.
Moving on to the Energy division now. We can comment some further detail on the Energy division. Here, we have Copec on the screen. We have seen a better operating income at the consolidated level at Copec, partially, of course, offset by more unfavorable nonoperating results and also higher taxes. We have seen higher margins in Chile and also in Mapco, offset by a drop in Terpel.
In the case of Chile, as we said before, we have a positive inventory revaluation effect that is partially offset by a decrease because of the same effect in Terpel. Let me remind you that we have sometimes have -- we sometimes have conflicting trends between Chile and Terpel because of the different accounting methodologies that we use in both cases. So in this particular case, we had a positive effect of Chile and a negative effect for the Terpel.
In the case of volumes, we continue to see a very strong activity in Terpel essentially driven by aviation but also by the other segments. Whereas in Chile, we have seen some slight change in trends with volumes decreasing with respect to the last few quarters. In the case of Mapco, we also saw a decrease, which has to do to a large extent by the fact that as we commented some quarters ago, a significant portion of the gas stations in Mapco were sold at the beginning of the year.
We've also seen some good volumes in the lubricant segment, which is becoming more important, but offset to a certain extent by a decrease in margins because of increased costs in lubricants. EBITDA amounts to CLP 266 billion. This is a local currency business to CLP 266 billion compared with CLP 181 million in the comparable quarter 2021. The market share continues to be stable at around 58%, which is pretty much in line with our historical level of market share.
As you can see on the right-hand side there, industrial channel volumes are down by 3.9% year-on-year, at 3.6% quarter-on-quarter. In the case of gas stations, they are down by 3.7% year-on-year and 1.4% quarter-over-quarter. So volumes are still above pre-pandemic levels, but of course, during a slight and gradual change in trend related basically to economic activity.
What we also see is that in spite of this being a division where we are traditionally able to stick to margins, which are stable at just inflation adjusted local currency. In this particular year, because of high inflation of course, real margins are going down. So we are not being able to cope with inflation, and therefore, not transferring to the final customer.
And real margins are, of course, going down. Those are commercial margins, which are, of course, as always, subject to some volatility elements such as the FIFO effect and industrial variations, which in this particular case -- this particular quarter were positive. We continue to see a quite good positioning of our gas station network and also a very good performance in operational terms, in general, in Copec and its fuels distribution subsidiaries.
In the case of Terpel, we reached COP 250 billion EBITDA, which is down from COP 321 billion last year. This is essentially due to an unfavorable inventory effect in this particular case. Volumes continue to show quite significant strength, and they are up by 13% at an aggregate level. They are essentially strong -- especially strong in those markets in which aviation represents an important part of volumes.
Aviation is already at pre-cut or above pre-pandemic levels in the different countries. You can see there that Colombia and Dominican Republic and also Peru, which are all countries where aviation represents a significant portion of volumes, are significantly up. This is all offset to some extent by higher taxes.
In the case of Mapco, we've seen a good EBITDA generation during the quarter, going up to $30 million. We have seen more stable and also higher unit margins in general, having to do with the competitive dynamics in the market. At the same time, however, we have seen decreased volumes, which stem at least to an extent with the sale of around 30 gas stations at the beginning of the year.
So we are measuring volumes on a different gas station base. Together with that, we have seen some changes in the home office culture that gives way to lower volumes in general across the U.S. and particularly in our geographical areas. So people are traveling on best to the office, and therefore, volumes are affected to some extent by that new working culture.
In Mapco, in general, we continue to focus on margin stabilization, which has been achieved to a certain extent. We continue to focus on operational efficiency, improvement of the product mix at convenience stores, where we have also made interesting progress. And we are continuing to optimize our gas station network with some closures and also some new openings of gas stations and trying to define a clear geographical focus for our operations.
As you saw at the beginning of the year, the sale of assets that were located outside the geographical core was a good signal of that strategy. In the case of Abastible, EBITDA is up to CLP 44 billion, which is up with respect to the third quarter 2021. And this has to do essentially with higher margins in 2 particular countries, mainly Peru and Chile. Chile is compared with a very low base 1 year ago.
In the case of Peru, stemming from a quite successful commercial strategy. In the case of volumes, we are seeing increases in Peru and Ecuador, 9.6% and 7.6%, respectively, partially offset in that case by decreased volumes in Colombia and Chile, with 4% approximately in each case. The nonoperating result is lower than last year.
And as we commented before, this is explained essentially by the sale of Gasmar in the third quarter 2021, which involved a quite significant onetime profit for our state. Together with all of that, we have higher taxes during this quarter compared to 1 year ago. In operational terms, as we commented before, we have seen increases in volumes in Peru and Ecuador and decreases in Chile and Colombia.
As a general trend during this year, and in particular, during this quarter, we have continued to see, in Chile and Colombia, volumes affected by high propane prices, especially in the bottled segment. In the bulk segment, however, we continue to see volumes increasing in general. And that has to do with new commercial strategy that have allowed for a higher client base.
Margins have improved essentially in the bulk segment because of a very low comparative base in the case of Chile. Market share has decreased a bit in Chile and Colombia. There is also an effect that has taken place over the last 2 quarters, which is especially, notably Colombia during this quarter, which is the fact that high propane prices have incentivize the use of substitutes and also the -- they have boosted the informal segment in LPG in some countries.
In the case of Peru, volumes have continued to go up. We have higher volumes and also higher margins and that has to do with successful commercial strategies for the company. In the case of the Pulp segment, volumes have increased, but margins have gone down a bit because we have basically supplied new customers where margins are very low. Volumes are very high, but margins are very low. Market share has decreased a bit also in Peru. And in the case of Ecuador, finally, we have a new base of distributors that has given way to increased volumes.
And also we have seen a recovery in the bulk segment associated still with post-pandemic recoveries In this case, market share has continued to decrease. Moving on to other investments. Probably the most important highlight here is, again, coming from Mina Justa, we have a decreased net income, and this is on the basis of lower sales and lower prices, together with higher cash costs related to general cost inflation, which has affected the industry as a whole, but also maintenance in this particular quarter.
One important milestone during the quarter is that Mina Justa paid for the first time, some cash distributions to shareholders. In the case of Empresas Copec, that amounted to $140 million. So we are receiving cash distributions from Mina Justa for the first time, $140 million in October for Empresas Copec. You can see some further detail of the operation in the right -- in the left lower corner of the slide. Not a lot to comment in our other companies within other investments, Sonacol pretty much in line with its usual EBITDA in relation to transported volumes. Igemar has been performing positively in operational terms.
And in this particular case, this particular quarter also has a positive effect coming from the sale of an associated company in Brazil. In the case of Metrogas and Agesa, one is up, and the other is down in the affiliated terms. We see stability in general in those natural gas companies. Let us move to the highlights of the quarter.
We're going to comment the most important developments in terms of projects that have taken place during the quarter. Just a brief word on refinancing operation that we carried forward some -- a couple of days ago actually. We issued 2 series of local bonds, inflation adjusted pesos. The U.S. is the inflation adjusted local Chilean currency. The equivalent amount is $254 million divided into 2 series with maturities of 10 and 21 years, respectively.
The second one is amortizing with a 10-year grace period. The rates obtained were to 2.65% and 2.58%, which are very good rates among the lowest that has been registered in the local capital markets for similar operations within this year. The process, as I said, will be fully used for the refinancing of the upcoming maturities, both at Empresas Copec and the subsidiary level. And once again, a good performance in the local financial markets, which talks well of the confidence that the local market has in the business model and sustainability of the company.
This is an acquisition that we have announced probably a couple of weeks ago or 1 month ago. This is a last mile logistics company called Blue Express, one of the most important local players with a very good positioning in the local market, very good assets in general and quite an interesting growth, both looking backward and also expected going forward.
There's a strong demand for this kind of logistical service in Chile -- in LATAM and also in terms of convenience related to e-commerce logistics. There are also -- this is a very good investment by itself as a stand-alone company, a lot to grow, a lot to catch up with the best in Latin America compared to some particular markets in Latin America. So high growth expected for the company on a stand-alone basis. But the driver here was essentially synergies that we see between Copec's gas station and logistics related to last mile. Basically, gas stations are well located. They're -- they have a well-known location, will lead and known by everyone with good parking sites. And therefore, they represent very good points for delivering and receiving packages and then moving on to the last mile logistics.
So strong synergies between both companies. The total price paid amounts to a little over $200 million, CLP 221 million. We see synergies between both companies representing quite an interesting proportion of that total value that we placed on the company. And this transaction has not been closed yet, but we are awaiting final approval by the local economic authority.
So this is a transaction that lies within the strategy that Copec has defined for facing the energy transition. We have defined several pillars there, several areas of strategy. And this has to do essentially with one pillar that has to do with locum for alternative sources of profit and profitability for our existing gas station network. And as we said, we see a strong complementarity between last mile logistics and our gas station network.
And so we are opening up an interesting option here. We see it as a prudent step into a new industry that has strong synergies with our existing assets. It's prudent. This represents less than 1% of total assets. And at the same time, the option that we are opening is very interesting. So that's it for the acquisition of Blue Express by Copec.
In the panel division, this is along our traditional lines of growth. We have finally approved a project that we had announced as potential over the last few quarters. This is the plant that we are building in Mexico in a location called Zitácuaro. This is a mill that contemplates a total investment of around $235 million. It will involve state-of-the-art, world-class operational, environmental and security technology.
It will add approximately 300,000 cubic meters to the production of MDF and of those approximately half will be melamine panels. At the same time, we are working ahead with a potential new project of OSB in Chile. This is a region called Ñuble, a complex called Trupan. And Arauco has presented an environmental impact study for developing this new OSB mill.
The CapEx associated with this project is $280 million. It involves an additional capacity of 360,000 cubic meters per year. So 2 very interesting developments in the panel mill segment. We're updating our MAPA project. This is almost ready, 99% progress as of November 2022, about to start and expecting the first bale for mid-December 2022. Construction works especially complete.
The areas that have been completed, have been delivered to the operations teams and are undergoing their commissioning phase. Still pending some pulp machines and the finalization of the construction of roads and railways, which is in progress. Total CapEx continues to be estimated at $2.85 billion. At the same time, we have resumed operations in our Valdivia mill. As you may remember, this was affected by a fire in May this year.
And it has partially started operations again in September. This is a transition. This is a temporary repair of the dry machine that has allowed operations to gradually resume. We are also -- has become customary over the last few quarters. We are also highlighting some ESG developments over the next few slides. FTSE4Good has confirmed Copec as part of its index.
This is one of the most important thing other than the indexes around the world, but Copec has been a member for several years on [indiscernible]. This is a global index that ranks companies which are publicly traded around the world based on public information. So good news for here regarding the inclusion in the FTSE4Good index. Flux Solar, which is a company owned 100% by Copec and operating in the potable-type panel. Energy segment has announced its first distributed generation projects.
This is comprised of 23 initiatives that will be built over 2 years. It will be located between the Tarapaca region, in the north of Chile and the Biobio region in the south of Chile. The total investment amounts to around $150 million and total megas for these '23 initiatives will be up to 146 megas.
This is an interesting segment. There are some special pricing conditions for selling energy production for the generation product of small scale, that's [indiscernible] and at the same time, they have a series of technical and environmental benefits. So this is once again part of Copec's gradual transition into new energies. Together with that, left bottom corner, we announced the first charging terminals for buses outside of Santiago in Chile. And that will be supplied and operated by Copec Voltex. This is located in Antofagasta, a large mining city in the north of Chile, and it would supply the local fleet of electric buses.
So step by step, entering and increasing our position and improving our position in the electromobility and at the same time, developing other forms of energy. In terms of sustainability, we are also making progress in pushing the concept of construction with wood. In this particular case, we have highlighted the fact that Arauco's Hilam mill has produced the first cross-laminated timber panel, which is a panel that is very suitable for wood construction and represents an important milestone in Arauco's decision to promote construction in wood.
Several advantages related to this kind of panel and to wood construction in general, which has to do with reducing construction time, reducing specific weight, and showing very important attributes in terms of thermal insulation, acoustic absorption and others. And this is used, as I said, for coating floors, ceiling and construction of buildings up to 12 stories.
So very interesting development in the wood construction segment. And we would also like to comment on Arauco's presence in the COP27 that is taking place in Egypt. Arauco is taking -- is attending the conference for the third year in a row. Arauco has become a member of the Friends of COP group, which is an initiative that aims to accelerate private sector commitments to decarbonization and to increasing climate resilience.
Together with this, Arauco has announced that it's initiating an ambitious plan to measure the natural capital related to its operation. And the aim here is to become nature net positive. So not only carbon neutral but also nature net positive, which involves other additional dimensions, which are water management, biodiversity on top of the carbon absorption.
So Arauco is also working through science-based targets to limit increase in global temperature and therefore, increase its carbon absorption with some goals for 2030. So that's it for what we had prepared as information and material to show you. We are going to move into a Q&A session in a couple of minutes. But before that, I would like to ask the operators here to please show up a video, a very short video that reflects the current status of the MAPA project.
And after that, we're going to open the Q&A session. So please go ahead with the video.
[Presentation]
We'll now start the Q&A session. [Operator Instructions]
Hello, everyone. Thank you for attending this earnings review and this meeting. I'm going to start reading the questions. The first one has to do with MAPA. So Gianfranco, please, if you can provide a recap of MAPA and what drove the several delays to start production and if you can provide an update on the expected ramp up.
Okay. Thanks for the question. Well, the delay of MAPA could be explained basically by COVID first. I mean we had a lot of efforts put in to maintain the productivity of the construction during the constraints of COVID here in Chile. So well that was the initial effect. And then we have some delays in the lack of some workers in the specialists in terms of welding and things like that.
And also at the end, most was because of delay in 1 of the construction companies. We had 4 construction companies doing the main areas of the construction. And 1 of them was more delayed than the others. The other 3 ended the work a couple of months ago and the other -- but the company in charge of constructing the final line was this construction company. So that has taken more time. And we are almost ready. I mean there's -- from the 2 pulp machines that the mill has.
One is ready and the one that is delaying the start-up that at this moment, we are expecting till mid-December. In terms of the ramp-up, the ramp-up normally takes about 6 months to get to maximum capacity. That measured it in 1 month of production. So we are expecting that probably next year, we'll be getting about, let's say, 1.2 million tons. So it's an average of 100,000 tons per month, more or less.
Of course, we won't sell that amount because we have to put some more inventory there. So most probably, we will be selling between 1 million to 1.1 million tons to the market. That is our expectation. We expect to have a good startup. We have been testing the equipment in this -- during this time. So most of the -- rest of the mill has been tested in isolated -- in isolation, and we will start producing the first bale and as I said, in mid-December.
The total CapEx of the mill, it was supposed to be at the beginning about $2.3 billion. And now it's up to probably $2.9 billion, something like that because of the delays in construction basically.
Thank you, Gianfranco. That was a question from Alfonso Salazar. Then we have Isabella Vasconcelos asking again, about the ramp-up of MAPA. And also, this is for Rodrigo on capital allocation. How is the company currently thinking about the balance between organic growth, M&A opportunities and shareholder remuneration in the coming years?
Yes. Thank you, Christian. Thank you, Isabel, for the question. We look at both ways for growth in general. If you look at our history, we have gone ahead with both organic developments and also acquisitions. We permanently do build-versus-buy analysis that we have our opinion, but that varies a lot at different moments in time. There are movements when it's preferable to buy under moments or more convenient to build.
Has to do with the assets we have at any particular point in time and also has to do with market conditions at any particular point in time. So that is a dynamic for ourselves. And we look at both kinds of opportunities definitely. And you can see that historically, we have gone ahead with both kinds. In terms of shareholder remuneration, we also go ahead with some -- we have a clear dividend policy, which is 40% of net income. And we have managed to keep it quite stable over time with some exceptions related to the 2 particular years in the pandemic which -- when we saw some deteriorated credit metrics.
But other than that, that policy has been very stable over the last 20 years or so. In addition to that, there are sometimes when we have given out extraordinary dividends. And of course, we can consider that. We did it last year after the asset sales of Gasmar and the forestry asset in Arauco. And we have done it before as well. We have a very clear financial policy that we have published in our website where we say that we aim to look for a 2 to 3x net debt-to-EBITDA ratio.
And depending on where we are in our credit metrics, we will either look for opportunities for M&A or opportunities for organic growth or shareholder remuneration or a combination of all, as long as we stay within our aimed net debt-to-EBITDA target. So you can see our history. We are -- we try to keep to a good balance between all of those objectives.
Thank you, Rodrigo. Another one for you. With the new bond issue, are you going to refinance bank debt or bonds? Could you please indicate approximately what percentage of the funds will be used for each? This is Thomas [ Marine ].
No, we are going ahead with different operations at different points in time, and we are gradually going to allocate that to the different subsidiary companies for their own refinancing needs. We are basically -- we want to be as open and flexible as possible regarding our refinancing. We have quite a significant amount of maturities next year, CLP 1.5 billion at the consolidated level. But we have begun to face those maturities with a lot of time in advance.
So we are moving ahead already with those refinancings. Part of that has to do with placing local bonds. Part of that has to do with maintaining a large amount of cash in our balance sheet. We also have access to some committed credit lines. As you can see historically, we have always had access to international markets as well and to bank that, of course. So we are trying to keep all those channels open to refinance our bank debt and our bond maturities that are coming next year.
WWe have [ Sante Venezuela ] asking about the estimated amount you have for the synergies between Copec and Blue Express.
Well, we have our internal estimations. I would say that it's a significant portion of the total price paid. I'll give you a wide range because it depends on the scenario that finally materializes, but our range goes from 10% to 30% of the price paid for synergies approximately. So it's quite a significant proportion of the total value that we see in this acquisition.
The next one comes from Jens Spiess of Morgan Stanley. This is on forestry, specifically on the Valdivia Pulp Mill. What will be the timeline for the mill repair? And when do you expect to start and conclude the stoppage of the mill?
Yes. For the Valdivia mill, we are now producing at probably 90% of capacity in 95-some days. And we have a plan right now to stop the mill at the beginning of April. To do the definite repairs to the dryer. And we are planning that stoppage. And now we're expecting that could be between 2 to 4 months.
We are -- we need to plan very well that. And of course, we have enough time to produce, to get all the parts to do the repair of the mill. At this moment, we are planning for April to do that.
And a follow-up on that, considering that the price premium of dissolving pulp has contracted, you have plans to switch production from dissolving pulp to paper grade pulp.
Not at this moment. We have commitments with our clients that we need to fulfill. Remember that we stopped production for some months because of the fire, and we want to comply with our commitments. So that's why we're not planning to switch to paper bag at this moment.
Okay. another one in forestry, Rodrigo, do you see market conditions for pulp that could allow prices to continue at the current levels in China and Europe during December? And another one, why is dissolving pulp falling to level similar to softwood? And finally, when does the company expect the new production line in Zitácuaro to be operational?
Okay. Well, the easy one, the Zitácuaro, we're expecting to -- we're negotiating the equipment at this moment. So once we have an agreement with the vendors, we will sign contracts and start construction. And we expect that probably the mill could be -- start producing at the end of 2024 or beginning of 2025. That is our timeline for the Zitácuaro Mill in Mexico.
In terms of the pulp market, at this moment, we are seeing a more stability, more strengthening in hardwood and softwood in terms of pricing. So we probably expecting to be more stable than softwood. Softwood has been going a little bit down the last month. So probably it's going to be harder to hold prices in softwood. But on the other side, the spread of softwood and hardwood is relatively low for the average that we have seen in the past.
So right now, it's about $70. So -- and the markets are different. And in Europe, the market has been very strong, but we have this fragile condition in the economy of Europe at this moment because of the cost of energy and the war in Ukraine. So things could develop for the worst in Europe, quicker than probably in China. And in China, the situation is a little bit more stable. But again, pressures are more on softwood than hardwood. That's on my view. But we had to see it month by month during the price negotiations.
And regarding the dissolving pulp price, of course, the prices have gone down because of the demand for viscose which is the end product of producing textiles. And the price has been approaching the prices of the paper grade pulp. For us, the breakeven or the decision to go back to paper grade depends on the price of hardwood because that's the alternative that we have to produce hardwood pulp in Valdivia or dissolving pulp. And as I mentioned, we are prioritizing the commitments with our clients at this moment, and we keep on producing the dissolving part from the time being.
Thank you, Gianfranco. And we have a couple of questions on Mina Justa. First one is coming from Gabriel Simoes at Goldman Sachs. This is dividing in 3 first. If you can provide more details on the coupling between sales and production during 3Q. Sales were up slightly but significantly lower than in 2Q.
That's the first one. Then if the company has plans to expand the capacity of concentrates production versus KSL and finally, if you can comment on the production for expected production for this year and next one.
Yes. Thank you, Gabriel. Regarding the production and the cutting between production and sales, they are not always exactly linked. There are some movements of inventories from one quarter to the other and some deferred sales from one quarter to the other, which was the case in this particular quarter. So some sales were deferred from the second quarter to the third quarter.
The differences in production stem from the grades, which we find at the ore. And that was also the case in this particular change that you are referring to from this one quarter to the next. In relation to expected production, we continue to estimate production for this year in a range of 110,000 to 130,000 tons approximately. So we are sticking to the figure that we gave a couple of quarters ago. For next year, we should move up to 140,000 or 150,000 which is the design capacity of the mine and that which would be for 2023.
In relation to production of oxides and sulfurs -- sulfides. That has to do basically with the composition of the ore. We have gone ahead with our mine plan and designed the facilities in order to optimize the recovery from the mine. And therefore, we are not planning on changing that. Because it is determined by the fact that we have both kinds of ore in the mine site.
So that's why we have both kinds of production as well.
Spiess on Mina Justa, if you can comment on cash costs for 2022 and expectations for '23. In Jens Spiess, yes, a following question on Mina Justa.
We had a very good beginning of the year in terms of cash costs. They went up quite importantly, during Q2 and also Q3 and particularly in Q3. And that has to do, to some extent, with some special maintenance that we had during the quarter. And also, to that extent, with general cost inflation that has affected the mining industry as a whole.
We expect at least part of these trends to be reverted as we approach next year and during next year as well. And we are now working with an estimate of [ 1.4 ] for next year.
Okay. Again, on Mina Justa. Cesar Perez of BTG. If you can comment on the possibility to expand production rates at the mine, considering that there is resource potential at the site.
We would consider that possibility. It's probably too soon to tell if there's grounds for that. As we've commented before, one of the very important attributes that we saw in this project when we made the decision to go into the project was the fact that we had a very interesting upside. As a matter of fact, the project as it is, uses up only 10% of the total mining property of the company, which means that the remaining 90% is up for exploration.
We are beginning with some exploration campaigns. And so far, the results are positive, but it's probably too early to tell whether there is enough base for an expansion project. If it were the case, that we found additional reserves enough to consider an expansion project, we must surely consider that expansion.
These kind of expansions are usually very profitable because they use up part of the existing facilities, developed in the mines. Usually, what they do is that they allow to stick to a more constant production rate along the life of mine and sometimes increase the life of mine as well. So they are very good in terms of that stability to use the existing facilities optimally. So if the exploration campaigns go ahead positively.
Of course, we will consider the possibility of going ahead with a potential expansion.
Next one, also from Cesar Perez. Now that your flagship investments are finalized. Where should we expect Empresas Copec allocate more capital, just considering that the next large project may start in 2025 at Sucuriú? And what levels of CapEx should we look forward in 2023 and '24, please?
Well, as we've commented before, we have a growth strategy that is pretty clear, we should continue to invest according to our traditional philosophy of long-term investments basically in areas where we have competitive advantages, focused on energy and natural resources and with a strong focus in forestry, in this last case. Long-term assets by definition mean that we will look for a strong component of sustainability in our decisions to invest in the particular case of forestry, as we have done before. We will look for geographies that have good conditions for growing for us in LATAM and setting up a strong plantation base and from there, build the facilities that allow for producing pulp and wood products.
In energy, we will look for alternatives to add as much value as possible to our existing networks. And at the same time, looking for complementary assets that may help us to add this value and also for assets that will help in the transition to a low carbon economy or in the energy transition.
Copec is doing this as we've shown through electromobility, innovation, through venture capital initiatives. And actually, the projects that we described during this presentation of Blue Express and Flux Solar, point essentially in this direction. Regarding CapEx, the figure for this year, as we've said before, should be up to approximately [ CLP 1.8 billion ]. And for the next few years, it will depend on the projects that we carry forward.
We have probably a more precise amount in our presentation for next quarter. But you should consider a base of investments that is around to $800 million to $900 million, which is basically maintenance. And on top of that, add the projects that we have gradually -- that we have announced over the last few quarters, which are, as we've mentioned, Blue Express for a total of around $200 million, which may fall either in this year or the next one.
And we are going ahead as well with the Flux Solar project that we described and the 2 panel mills that we described in the presentation as well. So, so far, that is what we have announced for our project and acquisition pipeline for the coming months.
So could you, as you mention, we've also announced Sucuriú, which is pretty much in line with the philosophy that we described for forestry, but that should start around 2025 or 2026, not earlier than that.
The next one in the same line. I think it was pretty well answered with the previous question, Alfonso Salazar. How do you see Empresas Copec business portfolio 10 years from now, which business units should expand, and which ones declines or might be divested and what other units are part of the long-term strategy? I don't know if you would like to add something here.
No, I would say, that's covered by the previous answer.
And I have a final question here from Rodrigo Godoy. Is there any progress on asset sales, in particular regarding Metrogas 40% stake?
Not any particular news to comment on. Just to emphasize the philosophy of asset sales that we've got ahead with, over the last few years. We permanently evaluate and make analysis on our portfolio of business -- of businesses. And basically, the philosophy of sales is that certain assets may be worth more if they had specialized investors or in other hands, basically. And by selling these assets, we make the value more visible and at the same time, we attain a more efficient balance sheet.
This rationale continues to hold. As a matter of fact, we completed the Gasmar sale, the forestry asset sales that we commented on during the presentation. And we also went ahead with the Mapco gas station sale at the beginning of the year. So this is a rationale that continues to hold. In the particular case of Sonacol and Metrogas, that we've announced as ongoing processes, they continue to be ongoing. But we do not have any particular depend development to comment on.
But the philosophy continues to hold. And we will continue to analyze our portfolio and look for the best alternatives.
Okay. I think that was the last question. I'll turn it over to Rodrigo or [indiscernible].
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 may proceed.
Thank you all very much for joining in today. And we will probably see each other again sometimes at the beginning of March for taking a look at the results for 2022 of fourth quarter. Thank you very much. Bye-bye.
Thank you. This does conclude today's presentation. You may now disconnect your lines and have a wonderful day.