Empresas Copec SA
SGO:COPEC
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Earnings Call Analysis
Q3-2023 Analysis
Empresas Copec SA
Empresas Copec's third quarter results showed a mix of recovery and challenge, marking an upswing from the previous quarter but also grappling with the year-on-year downturns. The forestry division is seeing a higher operational income thanks to increased pulp volumes and reduced fiber selling costs. Contrastingly, the energy sector struggled with lower year-on-year EBITDA due to volume decreases and deflated industrial margins. Major strategic movements included the completion of the Mapco sale for $745 million and new environmental commitments such as allocating a third of Arauco's plantations for preservation.
The company reported a $609 million EBITDA, a significant uplift of 38% from the second quarter, although it is down by 5% compared to last year. Stumbling blocks included a net loss of $31 million, mainly due to non-recurring asset impairments and a dip in forestry performance with lower pulp prices and volumes. Elevated costs from ramping up the MAPA operations and operational downswings at Arauco also dragged down the earnings. Notably, higher financial expenses and unfavorable foreign exchange effects further impacted net income.
Empresas Copec faced challenging market conditions, especially in its pulp and wood businesses, leading to decreased operating income and net earnings. Impairments related to the suspension of operations at the Licancel mill and an increase in costs across Copec contributed to the downturn. Despite these challenges, the company's EBITDA remains robust compared to previous quarters, with Arauco and the energy sector providing substantial contributions.
Foreseeing a gradual recovery, Empresas Copec anticipates improving its financial metrics with a slight uptick in quarterly EBITDA. The company's 6.2% return on capital employed reflects the lowered margins across divisions, but management remains confident in its financial policy and long-term stability, expressing comfort with the current level of debt when measured over a cycle of five years.
Empresas Copec has not only concluded significant business deals but also continued its push towards sustainability. This includes the indefinite suspension of the Licancel mill and setting ESG benchmarks like pioneering hydrogen fuel stations. Moreover, the announcement of the Mina Justa expansion and reaching the 500,000 tonnes milestone at MAPA underline the company's strategic progress despite prevailing economic headwinds.
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Good morning, everyone, and welcome to Empresas Copec Third Quarter '23 Results Conference Call. Today's presentation and the 3Q '23 earnings release are available on the company's website at investor.empresascopec.cl.
Before we begin, I would like to remind you that this presentation may include market outlooks and forward-looking statements, which are based on the beliefs and assumptions of Empresas Copec management and on information currently available to the company. They involve risks, uncertainties and assumptions because they relate to future events and, therefore, depends on circumstances that may or may not occur in the future.
Investors should understand that general economic conditions, industry conditions and other operating factors 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 conference over to Mr. Rodrigo Huidobro, Chief Financial Officer of Empresas Copec. Please go ahead, sir.
Okay. Welcome, everyone. Thank you for attending today's conference call. We will be taking a look at the results for Empresas Copec third quarter '23. So thanks for attending. We will be joined today by Mr. Cristian Palacios, who's heading the Investor Relations department at Empresas Copec; and also by Mr. Gianfranco Truffello, CFO of Arauco. They will both be helping us out in the last section of the presentation, where we will be taking the Q&A.
Let's take a look at the numbers on the presentation. The main highlights of the quarter are shown on screen. We recorded an EBITDA of $609 million, which is up with respect to the last quarter, with respect to the second quarter 2023. And the net income, a negative net income because of some recurrent effects on assets that we will explain going forward.
In general terms, we had higher pulp volumes Q-on-Q, lower selling costs in some of the fiber. So the forestry sector showed an increased operational income and EBITDA Q-on-Q. Year-on-year, we continue to have a lower operating income. And that is due to a drop in prices in pulp and the wood sector as well, together with higher costs on pulp. In terms of net income, probably the most important effect is that we had a [ non-op ] effect that we had to record between impairments of fixed assets.
Regarding energy, once again, we improved Q-on-Q, so we had a higher operating income, which is essentially associated to an inventory revaluation, most of it coming from Terpel. So a higher inventory in relation to Terpel causes us to have a higher EBITDA and operational income Q-on-Q. However, year-on-year, we continue to show a decreased EBITDA and a decreased income. And this is associated to lower volumes, inventory revaluation going in the other sense and also a decreased industrial margin at Copec.
We will look at some developments as well. We will explain a little bit more the Mina Justa expansion that was announced a couple of weeks ago. That's an interesting project that we have just announced. MAPA has reached 500,000 tonnes. And we will be giving out some more detail on that. We finally completed the sale of Mapco for a total enterprise value after adjustments of $745 million. We've also got some dividends from Mapco before closing the transaction. And finally, we will be commenting the fact that Arauco announced the indefinite suspension of operations at the Licancel mill.
And as always, we will also have some news in terms of ESG, where we will be commenting the fact that Arauco will be allocating 1/3 of its plantations for its preservation in South America and also the fact that Copec has installed the first gas station or first hydrogen station for fueling up hydrogen buses, so also another milestone in this energy transition we're going.
Let's look further into the numbers. We've got EBITDA of $609 million, which is up 38% Q-on-Q and down to 5% year-on-year. Once again, as we have said before, we are coming from 2 excellent years, where we faced very good prices of pulp for many months and also very good margins in the panel segment [indiscernible] fuels division, so '22 and '21 were 2 very good years. And now we are facing a different scenarios, especially in pulp. However, we have rebounded from the lowest point that we reached in the second quarter 2023. And this $609 million represents a good increase on that previous EBITDA that we have reported.
Net income, as we commented, is a loss of $31 million. And that is essentially associated with some nonrecurring events having to do with asset impairments. Then we have the comparison with the figure of third quarter 2022. The bulk of the decrease comes from the forestry sector, where we are facing lower prices of pulp from the previous -- last year was very good pulp prices. And also, we are facing lower margins in the wood segment, which was also exceptional last year. Together with that, we had lower volumes in the wood segment that are also higher related to a large expense to ramp up.
In terms of energy, we also have a lower EBITDA, $20 million lower than last year. However, it's still a very good level of EBITDA ratio in fuels. And the drop, once again, was related to a drop in industrial and also an inventory revaluation effect that was less favorable than last year. As always, if you look to the right-hand side of the graph, you can see that most of our EBITDA is contributed by Arauco and by the energy sector.
In terms of net income, we've already commented this. But once again, the bulk of the decrease comes from Arauco and all the operational factors that we already commented plus the fact that we have some nonrecurring effects in nonoperating income having to do with impairments of fixed assets.
Together with that, we had some nonoperating effects as well both in Arauco and in the other companies related to increased financial costs and also some less favorable exchange, foreign exchange effects. Another minor effect that we have highlighted here comes from the fishing sector where in the third quarter 2022, we had an important nonrecurring income coming from the sale of a related company. And that's not there anymore, of course, so we have a drop in net income.
Looking further into the details of the numbers. What we see here is that the change in operating income comes essentially from decreased results at Arauco. And that has to do with lower prices in pulp, panels and some timber, together with lower volumes essentially in wood. Also, we have these increased costs coming from the ramp-up of MAPA. In terms of Copec, we have some increased costs in distribution and administrative expenses, together with lower volumes and what we already commented in terms of revaluation effect, inventory revaluation effect and also industrial margins.
In nonoperating income, that's bulk of the decrease comes in terms of net income, and it has to do with higher other expenses because of fixed assets impairment coming from the indefinite suspension of the Licancel mill in Arauco. Together with that, we have net financial expenses that go up. That has to do with the fact that inflation and rates have gone up and also with fact that during last year, we were still capitalizing costs -- financial costs related to the MAPA construction. And that's not there anymore. So all of that gives way to a decreased net income and to a final loss for this quarter of $31 million.
Our financial ratios, of course, are also lower because of this decreased performance in our operations and also because of this nonoperational effects. In terms of return on capital deployed, we are going down because our margins have gone down in all of our divisions. So we reported a 6.2% return on capital employed. And in terms of net debt to EBITDA, we have been increasing our number there. Because of the fact essentially that we have decreased our last 12 months' EBITDA.
However, we are already facing a recovery as we saw. So we already rebounded from the levels that we reached in the second quarter 2023. So going forward, we could -- we should expect a gradual recovery in terms of this metric, a slight and gradual recovery as we begin to record -- to rebound in terms of our quarterly EBITDA.
It's important always to have in mind that given that we participate in a cyclical industry commodity, which is pulp, it is very usual for us, and you can see the history of our metric there, that our net debt-to-EBITDA metric goes up and down essentially related to the behavior of pulp markets.
And therefore, what we have defined in our financial policies that we should stick to certain metrics measured over a long-term horizon, over 5 years. And therefore, we can filter out or account for the effects of the ups and downs in commodity cycle and feel comfortable with the level of debt that we have in our balance sheet. Now that's the way we look at our financial policy, long term, 5 years.
If we move further into forestry division for some more detail on the numbers and also on the main drivers of the markets. We can see there that EBITDA for forestry was $282 million compared to $619 million for the third quarter last year. But again, we see an important rebound from the figure that we recorded in the second quarter this year. So in comparison to last year, we saw, as we commented already, a drop in prices all across the board.
We saw lower volumes for the wood segment in general, offset in part by an increase in volumes in pulp. And also, we saw increased cash costs coming -- still coming from the ramp-up of MAPA. However, we saw that those cash costs are beginning to show a more reasonable level with respect to the second quarter as we move forward in the ramping-up of MAPA. And we expect that to continue ahead.
In terms of nonoperating income, we already commented this. We have an asset impairment coming from the suspension of operations at Licancel mill. This implied a $75 million loss. Together with that, we have another sawmill at Horcones, where we also suspended operation. And they both add up to $81 million in asset impairments. So that is the main drivers for the nonoperating income.
We also have increased financial expenses, as we explained, because of higher rates and also because of interest rates -- interest expenses that are not capitalizing more, given that we finished the construction of MAPA and we already started operations there. Lower exchange differences, essentially because of the appreciation of the dollar and in relation to some assets that we have in local currencies in some countries, especially in Argentina.
Moving on to the pulp division and some more detail on pulp division. We can see that pulp EBITDA for the third quarter 2023 is $144 million as reported by Arauco. This represents a drop, of course, from $308 million that we recorded last year but a rebound from the second quarter of 2023, a very interesting rebound on that figure of '22.
This is driven -- this rebound is driven, in case of the Q-on-Q, is basically higher volumes, offset with lower prices. So we're still seeing lower prices in the third Q 2013 compared with the second Q 2023. The drop, however, is much lower than what we were seeing over time. It's only a 7% drop. And this is more than offset by an increased sales volumes of 43%.
In terms of year-on-year, of course, we are seeing prices that are much lower than the very interesting levels that we saw last year. We also are showing the maintenance stoppages there with the stoppages that have taken place this year and those that are scheduled to take place in the quarters to come.
In terms of the pulp market behavior during the quarter, probably one thing to highlight here is the graph that we have shown, where we are exhibiting the fact that our production has gone consistently up from 781,000 in the first quarter 2023 to more than 1 million tonnes reduced in pulp in the third quarter of 2023. And that has to do essentially with the increase at MAPA Arauco Line 3, has come to produce 277,000 tonnes in the third quarter of 2023. And we expect that to continue improving and going up as we move towards full capacity.
In terms of the market behavior, we saw a weak beginning of the quarter. However, throughout the quarter, we saw improvement in demand, particularly in China. And that has helped to bring up prices gradually and to bring down inventories very dramatically. As you see there in the graph, the inventories were -- hardwood had gone up very significantly at the beginning of the year. And they are now trending and moving towards figures that are much more in line with historic leverage.
In Europe, we still see a weak market. But however, prices are beginning to be aligned or moving together with those that we see in China. The dissolving pulp market was also showing signals of improvement. It was stronger. And we saw mills gradually increasing their operating rate as conditions in the market gradually improved.
The outlook for pulp. You can see here that over the last few weeks and months, we have quite consistently announced and the industry has consistently announced the increases in prices. You can see in the graph down here that we have moved from a low of $475 in May to a current level of more than $600, which is very interesting. And we can see that softwood as well has moved in line with the hardwood and reached levels of more than $750 per tonne.
So we have seen some improving conditions in the market, prices going up consistently over the last few weeks and months. And we could see some potential further increases but, in general, signs of stability going forward. China will continue to be the main driver of the pulp market. And what we are beginning to see as well is that the rest of the markets are following the trends in China, especially in Europe.
Flipping over to the wood products. We can see that the EBITDA coming from the wood products has dropped year-on-year from the very high levels that even reached above $300 million at some point in time. But in the third quarter of '22, we still recorded a very interesting level of $282 million, $283 million. And that has gone down to levels that we have seen in the second quarter and the third quarter, which are much more in line with the historical behavior of this market, so $150 million, $140 million, $130 million. That's the levels at which we expect to see these markets in the long term. And that's where they have gradually stablished.
We are still seeing some gradual fall in prices Q-on-Q in panels, however, some interesting rebound in prices Q-on-Q in terms of sawn timber. And in terms of sales volumes, Q-on-Q, we had a lot of stability in both panels and sawn timber. So in general, markets have given signals of stability going forward, but of course, at levels that are much lower than those recorded over the last year.
Zooming in, in our most important market, which is North America, which represents almost 50% percent of our sales, we can see a different behavior for the different products. As a matter of fact, in MDF, we are seeing some increased production and supply coming from other markets, so have some pressure there on prices and volumes.
In particleboards, however, we are not seeing that increased supply coming from abroad and from our competitors. So that market is much more stable. In remanufactured products, also higher supply, so some potential drops there. But however, in general, quite stable market as well. Same thing for plywood, in general, we have seen stability and a balanced margin.
For Latin America, in general, we continue to see the conditions that we have commented previously in other calls. Brazil continues to be our main concern because of some more MDF capacity going online and also slow demand. In Chile, we have seen some drops in some particular segments. Specifically, the construction segment has lowered its demand a little bit and, therefore, has affected demand for the country as a whole. In Argentina, however, which is also a very important market for our wood products, we continue to see demand improving and a very interesting market with good levels.
And finally, Asia, Oceania in Europe and the Middle East, which represents a lower portion of our sales in general, some uncertainty in terms of behavior of demand and also some supply that is relocated from some markets to another and, therefore, could affect some of the markets.
Moving on to energy. We have recorded an EBITDA of CLP 205 billion. This is a business that we record and monitor in local currency. It has stable margins in local currency in general. The EBITDA is CLP 205 billion, which compares unfavorably with the very interesting levels that we were still recording in 2022, CLP 238 billion. However, once again, it represents a rebound with respect to the figure recorded last quarter.
Those trends are explained basically by, in comparison with the third quarter 2022, we see a drop in volumes in general related to some specific factors with some specific segments that are dropping both in Chile and in Colombia, some increase in costs, administration and distribution in general, a very -- an unfavorable inventory revaluation in Chile, partly offset by a favorable one at the Terpel, a lower industrial margin in Chile that was exceptionally high because of very high volumes from industrial sector in Chile last year.
But it's not happening anymore. We have gradually gone down to more stable levels in terms of industrial customers and a good behavior of the lubricant segment in terms of margins, some decreased volumes but very good margins because of the drop of the main raw materials for lubricants. In nonoperating income, once again, we see the effect of increasing rates in our financial expenses and also of inflation in those debts that are linked to Chile's or Colombia's CPI.
Operational factors or operational drivers in the fuels segment. We continue to see stability in general market share, so 58.3%, accumulated as September 2023. That is very much in line with our historical market share. Volumes, as I said, have dropped somewhat.
And that has to do essentially with the industrial channel, where volumes have dropped 8.5% year-on-year and 3.1% Q-on-Q. And that has to do a bit with some segments that tend to be more volatile, such as power generation. Gas stations have decreased also somewhat, 1.7% year-on-year and 0.3% Q-on-Q. And that has to do with decreased activity in general in the local gas in Chile.
Going forward, in general, we see margin stability in terms of commercial margins. But of course, they are usually affected by factors that give some volatility to these margins, which are mainly inventory revaluations and industrial margins. We see a robust position in terms of competitive positioning, a good network efficiency, a good brand performance and brand positioning. And volumes, of course, are very much related to the economic activity and could eventually continue to present a decreasing performance or a stable performance, depending on the economic activity.
Terpel had a good quarter, COP 513 billion, which is up with respect to both the third quarter 2022 and the previous quarter 2023. And that has to do essentially with a favorable inventory revaluation in the countries in which it operates. Volumes went down in comparison with the second quarter 2022. But that is essentially with the aviation segment. The aviation segment had some airlines leaving the market. And therefore, we momentarily at least decreased our market there and that cost us [ $4 million ].
Some increases in distribution costs and some increased financial costs because of increasing rates and inflation. It's good to highlight, once again, the lubricant segment that has behaved very well in terms of margins because of the decrease in the base costs. We gradually trended towards more historical levels.
The LPG, the liquid gas market, is showing an interesting performance. We've recorded an EBITDA of CLP 48 billion. Once again, this is another segment that we monitor in Chilean pesos. And that compares well with CLP 44 billion recorded in the third quarter 2022 and also compares well with the previous quarter.
So we are seeing better conditions in general in terms of margins across the board in all countries. And that has to do with the fall in propane prices that has allowed, in general, the liquid gas companies to gradually move margins back to historical levels from the very decreased levels that they were showing last year. At that point in time, we were hit by very high propane prices.
Volumes are doing well in general with the exception of Chile, where we recorded a drop in Chile. But in all other countries, we saw increasing volumes. Some other nonoperational and tax effects, those tax effects are related basically to exchange rate movements. In terms of operational drivers, we have seen, in general, in Chile, the bottled segment decreasing and also a lower economic activity in the bulk segment that has caused also volumes to decrease a bit from also very high levels that we had recorded last year.
In Colombia, we have seen a good behavior of the bulk segment, essentially because of increasing the client base. Client base has increased particularly on the basis of a very successful commercial strategy. Bottled segment contracted a bit. However, all in all, we increased market share in Colombia.
In Peru, this is a company that has had a very interesting behavior this year and also last year, and in particular, with the performances that we had recorded during several years, where we had some difficulty generating EBITDA. The scenario for our division of Peru has changed quite a bit. And we are seeing much better numbers in Peru, which comes from a successful commercial strategy and also a very good supply positioning. So Peru is doing well in general. And in Ecuador, we see quite a lot of stability as usual.
Some a couple of things to highlight from our other investments. Mina Justa has once again recorded a very interesting quarter, $166 million EBITDA for the company as a whole. Remember that we have 40% of this company, so we do not consolidate it. We rather record it as income from related companies, equity investments. So $166 million for the company as a whole and $69 million for the net income of the company.
That compares very well with the $137 million and $53 million, respectively, that we recorded 1 year ago, so the third quarter 2022. And this comes from increased volumes of sale. Total physical sales increased by 12% approximately. And cash cost decreased from a figure that we recorded last year of $1.6 million, which was basically stemming from some recurrent operational factors that go into that point to the more stable levels of $1.4 million that we have seen over the last few quarters, so lower cash cost.
Among the other related companies, I would just like to highlight Igemar, our fishing division, where we had -- in the third quarter 2022, we had a nonrecurring net income coming from the sale of a related company in Brazil. So as a result of that, income that is not there anymore, we are recording a decrease in net income this year.
And also, Metrogas, where last year, we had a provision stemming from some judicial processes that we are facing in Argentina. And that forced a provision -- quite important provision of $250 million at the company level. Once again, we have 40% of that. But in terms of net income coming from Metrogas, we had the provision last year and we don't have that provision anymore. So that is the explanation for the increase in net income coming from Metrogas.
Moving on to the highlights of the quarter. Let us begin by commenting once again the improvement in production at MAPA. MAPA is doing well in its ramp-up process. We have seen a growth in volumes over the last few months with production increasing as expected and already reaching more than 500,000 tonnes as we saw previously. The increase from the third quarter to the previous quarter was approximately 50%. And we have already reached 500,000 tonnes. And we continue to make progress towards full capacity performance that should come over the coming months.
This is an interesting announcement that we made still very preliminary. This is an expansion, an underground expansion that we have preliminarily announced in Mina Justa, still waiting for some feasibility studies, still waiting for the permits to be in place. But preliminarily, we can say that this should be a project that should entail a CapEx of around $400 million. I said this is very preliminary, and we have to look at the details of the project in order to come up with more definitive figures.
But roughly, we should go ahead with a $400 million CapEx. And this should allow us to increase reserves by 30%. And that should mean also increasing total production of the mine by 500,000 tonnes. That would imply increasing the lifespan of the year by 5 years. So an interesting project, once again, Mina Justa undergoing project. And we will be issuing more details as we move forward in the process of study and receive the permits for this project. So a very interesting development.
We have commented this before through an essential fact actually, where we and Arauco in particular highlighted the fact that it was suspending operations indefinitely in the Licancel mill. This is a mill that is located near a river that caused flooding of the mill two times this year. So as a result of that and some other conditions, the economic feasibility of reopening the plant for the time being are not there. And that forced Arauco to announce the indefinite suspension of operations there.
This is a mill -- this is, of course, a very hard decision to make. But Arauco is going through a period of controlling costs in order to be competitive in these markets that have changed quite a bit from the scenario that we had seen last year. This is a mill that represents around 3% of our Arauco's total capacity and 1.7% of Arauco's total revenue. So for the time being, Licancel is going to remain closed. And this has implied an nonoperational effect of $75 million before taxes in the net income for this quarter.
We completed the sale of Mapco. We had commented it before. We had, I would say, a good performance at Mapco in the years that we operated the company. The reasons for going there were, first of all, in 2016, when we decided to go ahead with this acquisition, we saw the company was performing well below the company and the -- the industry average in terms of its most important metrics.
We saw a space there for operational improvement. And as a matter of fact, we were able to increase performance and increasing EBITDA for approximately $40 million or $45 million that we saw when we acquired the company to more than $80 million that we recorded by the end of our period. So the operational driver was accomplished. We were able to accomplish a very good performance there.
And the next step to make in this very competitive market was essentially increasing scale. These companies that are facing a scenario of increasing costs and also energy transition. And in order to face both drivers there, it was very important to be large scale. So our alternatives -- one of our alternatives was to sell the company to a larger player. And that's effectively what happened.
One of the acquirers here was the largest player in the U.S. market, which is 20 times larger than Mapco. So it made sense in terms of economies of scale for them to acquire the company and for us to sell the company. This is a company that is worth more in the hands of third parties. And we have acknowledged that fact and proceeding with the sale of the company.
Final enterprise value after adjustments and after dividends received was $745 million. And the net income that will be recorded in the fourth quarter coming from Copec Inc., which is the parent company of Mapco, is going to be approximately $128 million before taxes. So Mapco, we have completed the sale of Mapco.
And then moving forward to ESG. As we always do, we like to highlight our development in ESG. ESG is essential to our business. ESG, our business is strictly and very closely linked to ESG objectives. As a matter of fact, we absorb carbon. We absorb CO2 in our forestry segment. We replace some -- we substitute some products that are less environmentally friendly. We drive the energy transition in the countries in which we take part. Therefore, ESG is essential to our business and would like to highlight the progress that we make in this matter.
Arauco has announced that it will be allocating 1/3 of its land in South America to native forest protection. So this means almost 500,000 hectares that will be allocated for care and conservation of native forests. This is totally aligned with the Global Biodiversity Framework, which aims to protect 30% of the planet's land and marine areas by 2030, ensuring an adequate biodiversity management. Our initiative is totally in line with those global goals.
And this is also in line and in addition to some other initiatives that now Arauco has announced such as restoration of 25,000 hectares of native forest and also preservation of 148 endangered species in the areas where we have operations. So once again, ESG, totally linked to our business operations.
Also, in line with that, we have gradually been replacing our energy sources so as to make them carbon-neutral in the different countries in which we operate. In particular, during this quarter, we have a highlight we have a milestone in Brazil, where the plant located at Jaguariaíva has implemented or is beginning to implement a project of panel generation, which will mean that its sourcing will be progressively carbon-neutral. And as a matter of fact, Arauco Brazil is already getting its supply of energy, 2/3 from its own biomass and almost 1/3 from energy -- from renewable energy sources. So very good progress there in terms of becoming carbon-neutral in Brazil.
And Copec continues to drive its transition towards other fuels, towards other sources of energy and other business models. The milestone that we have for this quarter is the fact that we have installed the first hydrogen fueling station for buses in Chile. Hydrogen, of course, is one of the fuels that may have a very interesting future, not only in Chile but also in the world.
The estimates that we have looked at say that as of 2050, hydrogen could cover up to 24% of Chile's energy demand. And therefore, it will show a progressive improvement and progressive role. And we want to be there. We want to have a solid positioning in the different fuels and energy sources that will be driving the energy transition in Chile and in the countries in which we have operations.
That is essentially what we have prepared for you. And therefore, let me open it up for the Q&A section, where Cristian Palacios will be taking the questions which are going to come in written form from the audience, and myself and Gianfranco will manage to answer those questions. Cristian, please go ahead.
[Operator Instructions]
Okay. Thank you, Rodrigo, and welcome, everyone, to this earnings call. I'm going to start the Q&A.
We have a first question coming from Leonardo Neratika at Bank of America. This is in pulp. So he's asking about the price negotiations for December going so far. Trade media reported some attempts to raise prices by $20 per tonne. Do you believe the market could absorb it?
Yes. Sorry, I don't know if you guys can see me. Because I've seen some problems with my video, but I hope you can hear me. Well, we haven't started the negotiation for December. I think we are optimistic because what happened in November, I think the market situation is good. But we haven't started that and we haven't closed any negotiations yet.
So I cannot tell you if we are obtaining price increases or not, I hope. But it's going to depend on what volume that we can get and that sort of thing. So I think in the next couple of weeks, that would be decided and hopefully we can increase a little bit the prices. But the situation is ongoing.
Okay. And I have another question in forestry, Omar Avellaneda at Prima AFP. In MAPA, when do you expect you to have the ramp-up complete?
Well, the normal schedule is that we will have a capacity production in the first quarter. So I think that we will -- we can say that the ramp-up is complete in the first 2 months of next year. I mean, the thing is going according to schedule. I mean, we have had the normal progress that you get during the ramp-up, nothing serious to this point. But I think that probably the first 2 months of 2024.
Thank you, Gianfranco. Next one, also from Leonardo Neratika, about Mina Justa. What can we expect in terms of annual production and cash cost for this lifespan expansion? And when should Alxar start to deploy CapEx for this expansion?
Yes. Thank you, Cristian. Well, as I said before, this is all still very preliminary. We're expecting a total CapEx of around $400 million for the expansion. The good thing about the expansion is precisely that we will be able to maintain production at a stable level during more years. So rather than showing a decrease in production, which is what we had initially expected for the initial design of Mina Justa, we should see production stable for many years at a rate which is going to be close to 150,000 tonnes, which is the max that we are producing in its original design.
So that production is going to be stable for more years. And the decline is going to happen afterwards with respect to the original design. And that will also cause the total lifespan of the mine to increase. So as we said before, we should increase the total lifespan by 5 more years and increase the total production over that lifespan of -- by approximately 500,000 tonnes.
So it's a very interesting project. We still have to look at the details of it. We have to look at the permits. We have to obtain the permits and go into further studies. We are still at prefeasibility. But initially, it looks very attractive. And we should be able to go ahead with it, initially during the bulk of the CapEx in years '25 and '26. That's the initial design. But as I said, it's still very preliminary.
Okay. And then following on Mina Justa, if you can comment on the dividends received by Empresas Copec during the year and what you expect to receive in 4Q.
Yes. So Mina Justa has been giving out dividends at a very stable rate, basically paying out almost its full net income to its shareholders. So during 2022, we received approximately $130 million in dividends coming from Mina Justa and, during year 2023, we expect a very similar amount to come from Mina Justa. And of those, we should be receiving between -- around $50 million more during 4Q. But all-in-all, we will be getting to the same $130 million approximately that we received last year.
Okay. The next one comes from Rosario Achondo from Compass. If you can comment, Rodrigo, on the expected maintenance CapEx for 2024.
Yes, we have given out that figures before. We should expect the total maintenance CapEx of around $900 million to $1 billion for our consolidated figure. That's the initial figure that we had given out. We are still looking at some potential reframings of Arauco essentially, and maybe Gianfranco would like to comment on that.
But some operations have been internalized into Arauco, which could entail some more investments in Arauco, of course, obtaining some interest in cost savings for the future. But overall, we are still holding to our initial and previously estimated figures of $900 million to $1 billion. We will be giving out more detail as we look at the figures further on.
The next one, Jens Spiess at Morgan Stanley. Gianfranco, you mentioned that you produced 477,000 tonnes from MAPA in 3Q. How much shipments did you have from MAPA that quarter?
Yes. I'm not completely sure that, that was the total for Q3. We announced that as of September, we have produced 504,000, I think, tonnes accumulated, of course, mostly concentrated in 2 and 3Q because the first quarter was very low production, so -- but we were expecting about 800,000 tonnes for production for the whole year. And in terms of sales, about 700,000 because there's a buildup of inventory and things like that. So that's more or less the figures that we are still thinking of for the total year 2023 -- sorry, yes, 700,000 of sales, 800,000 of production, more or less, for the whole year for MAPA.
Thank you, Gianfranco. I have another question here about CapEx. It was already answered. And keeping on pulp, regarding the oversupply of pulp expected for next year with the entry of Cerrado and UPM and with China showing no signs of recovery, seeing that prices have already recovered significantly, what price levels do you expect for the next quarter and for the next year, if you can give your thoughts about that?
Yes. It's always very difficult to predict pulp prices. We all know that. And of course, there's new capacity coming. But in the case of Cerrado, which is the most important part in terms of the capacity, the mill is supposed to be starting at the middle of 2024. So they will have also ramp-up process and they have to accumulate inventory before reaching the market. So I think that probably that volume will reach the market in the last quarter of 2024.
The prices have recovered. But still, I mean, they are on the $600 range, let's say, of short fiber. And that could be an average, historically, something like that. So it's not so high. And even if China doesn't recover, I mean, the growth of the market, the natural growth to market could be at 2%, something like that. And that is around 1 million or more -- a little bit more than 1 million of increased consumption for the whole market.
So I think that we're going to be okay for the first half at least. The second half will depend on the conditions at that point and, of course, the volume coming from Cerrado. I think that the volumes from MAPA and the ones from UPM has been absorbed quite well by the market. And so I think that we should have probably a good first semester and, for sure, I think a good first quarter in the next year.
Thank you, Gianfranco. That was a question from Clemente Swett at AFP Cuprum. I'm going with the next one, Edward Palma at BICE Inversiones. If you can comment, Gianfranco, regarding the maintenance CapEx, if you can break down, if you have including, in your comment, investments in forests or not and if you can give some range of that amount.
Yes, of course. I mean, the number I gave in the case of this regarding what I told in the Arauco press conference, it's including forestry investment. And in that sense, one part is the plantations of the things that we are harvesting, let's say. And that could be probably $200 million, $220 million, more or less. And the other part of the forestry investments are the planting that we're doing in Brazil, which is the growing of new forest for a potential new project. And that could be, let's say, another $120 million, $150 million a year.
And then on top of that, we have the equipment that we are buying for the internalization of labor of harvesting. And that is another probably $100 million. That, of course, that internalization is replacing tariffs that are pertaining to subcontractors. So that is reducing, let's say, cost at some point. But that number that I gave of about $850 million is including all of that. So if you want to compare with other periods, you have to deduct the Brazilian investment in forestry and the internalization of harvesting to compare with the previous years.
Omar Avellaneda from Prima AFP. At current pulp prices, do you expect any operations to close temporarily?
No. I mean, we were producing all of we can even at the lowest price in May. So our variable cost, our total cost -- total cash costs are lower than the price that we saw on the worst part of the cycle. So at this point, it's even more impossible, let's say, to think about a market downtime. I mean, we had problems in operation. But there's nothing regarding market. So we will continue to produce at capacity.
And we have Mr. [ Jose Chavarro ] from Consorcio. If you can, Gianfranco, give an update on the status of Sucuriú project.
Well, the project is advancing. I mean, it's not been -- haven't been approved by the Board. We are going to probably analyze that at the Board at the end of next year, 2024. We are advancing on the environmental impact study, a feasibility study, logisticals. We are doing basic engineering. So still some way to go, but we are on a good track. And we will have more news probably at the end of next year once the Board gets all the information to make a decision.
And one of the part -- most important part is the CapEx. Until we have a more definite basic engineering, we can start getting quotes of equipment probably in the last quarter of next year to have a decision probably at the end of the year. That's our schedule. And we are working according to that.
Okay. And that is the last question. So thank you, everyone. I'm going to turn it over to the operator and Rodrigo for a couple of final words. Thank you.
Thank you. This does concludes the question-and-answer section. At this time, I would like to turn the floor back to Mr. Rodrigo Huidobro for any closing remarks. Please go ahead, sir.
Thank you, Adir, and thank you, everyone, for attending today. And we expect to see you again at the beginning of March next year to take a look at the results for the fourth quarter 2023. Have a great day. Thank you very much.
Thank you. This does conclude today's presentation. You may now disconnect, and have a nice day.