The agreement for the closure of pulp production in Huelva, signed recently with employees, was fully implemented in October and will mean annual savings of Euro 40 million. As part of this restructuring, the biomass generation plant which was integrated in the pulp plant will restart operations this November and will contribute annual EBITDA of close to Euro 20 million, with which the independent generation plants now contribute Euro 44 million /year to Ence´s EBITDA.
Ignacio de Colmenares, Vice President and CEO of Ence, stated that “the Huelva pulp plant shutdown and the savings achieved with the efficiency measures adopted, show that we are fulfilling our goal of returning, by 2016, to the profit we registered before the Electrical Reform was introduced. Ence will return to profit quickly.”
Along with the transformation of Ence´s activity in Huelva, the recovery plan is based on investment driven efficiency improvements in the Navia and Pontevedra pulp plants, as well as through intense cost reductions. During the first nine months of 2014, Ence quickly progressed in carrying out investments that drive efficiency improvements, which rose to Euro 16 million. These investments will generate annual savings of Euro 10.2 million, equal to Euro 12/t in cash cost.
Furthermore, the company's cash cost continued to show a downward trend, in the 3Q, reaching Euro 356/t, a reduction of Euro 35/tonne as of the end of 2013.
With regards to results, the Company achieved an important improvement in its adjusted quarterly EBITDA, which in 3Q shows a 30% increase over the prior quarter, reaching Euro 15.7 million, Euro 60 million annually. Recurring profit also showed a gradual improvement, rising from Euro 16 million in the 1Q to Euro 1 million in the 3Q.
The company reached adjusted EBITDA of Euro 40.3 million in the first nine months of the year, a 70% reduction due, primarily, to the impact of regulatory changes. The result for the period showed a net loss of Euro 139.7 million compared to the net profit of Euro 35 million obtained in the first nine months of 2013.
The results include a non-recurring impact of Euro 163 million for deterioration in energy crops, as well as for the stoppage of pulp and cogeneration activities in Huelva due to the Electrical Reform, although the impact forecast on treasury will be Euro 42 million.
Despite the impact of the Reform, Ence maintains a solid financial situation, with a strong liquidity position – at Euro 199 million - and without significant debt maturity dates until 2020. Net corporate financial debt was Euro 147 million. The leverage rate, excluding non-recourse debt, was 3.0x (calculated over adjusted EBITDA for the last 12 months) and is 1.2 times current EBITDA.