ENCE Energía y Celulosa, S.A.

Good afternoon, ladies and gentlemen. Welcome to the NSAID Q3 2025 results presentation. I will now hand over to Mr. Ignacio Colmenares, Executive Chairman and CEO at Alfredo Avelio CFO. Gentlemen, please go ahead.

Good afternoon, everyone, and thank you for joining NSAID's third quarter 2025 results presentation. Let me please start this presentation pointing out that, firstly, ENCEP Palp's division is firmly evolving towards a higher margin special pulp-centered business, substituting more expensive BSKP alternatives based on local wood sourcing and proximity service. And secondly, our local biomass backbone, renewable energy platform, continues its development, transforming the biomass nearby collected into a diversified range of energies, including regulated renewable electricity, industrial renewable heating, biomethane, and renewable fuels, with solid recurrent EVDA and tangible pipelines under execution. Today, I'm joined by our CFO, Alfredo Bello, and our IR Director, Inés Álvarez. I will begin with a brief overview of the quarter and our strategic process. Alfredo will then take you through the financials and I will return with the closing remarks.

On page 4, you can find the main highlights of the quarter.

BHKP prices hit lows in third quarter. Price increase announcements were made by the main producers for a total gross of $130 per ton in Europe, of which 60 are already recognized in the peaks. In third quarter, we continued our disciplined in cash cost reduction with an improvement of 29 euro per ton, quarter on quarter. Cash cost savings were mainly driven by operational efficiencies and the positive contribution from the energy revenues after the successful ramp-up of Navia's turbine in June. Reinforcing our commitment towards efficiency and competitiveness, ENCE has launched an efficiency and competitiveness plan based on two main pillars.

Firstly, process re-engineering, and AI initiatives.

And secondly, streamline of the operations to an orderly reduction of FATs. The full plan will generate potential annual savings of 22 euro per ton at cash cost level and will require a cash out of approximately 23 million euros, resulting in a net present value of 200 million euros. The plan will be implemented in the next 24 months. The Navia decarbonization plan and Pontevedra Avanza will continue in parallel. Enses higher margin special parts products accounted for 29% of the sales volumes year to date, 30% higher than in the first nine months of 2024, delivering an incremental margin of 32 euros per ton over the remaining 61% of standard BHKP. Despite low pulse prices, free cash flow before growth capex amounted to 12 million, compared to a cash consumption of $13 million in the previous quarter, solidly supported by the optimization of the working capital that has fully neutralized the increase of the first half of the year. Our investment approach remains disciplined, prioritizing long-term value creation and cost effectiveness, implementing a clear strategy for both businesses

in this new growth phase.

By 2028, ENCE aims to increase its across-the-cycle FBDA by 50% in pulp on the back of higher-margin special products. Operational efficiency and cash cross-focus, Pontevedra Avanza, a Spontes project, and renewable packaging solutions. And by 2030, our diversified renewable energy biomass backbone platform is on track to more than triple its recurrent EBDA, growing into renewable industrial heating and biomethane businesses prior to entering the renewable fuel business. Moving to slide six, you can see that gross BHKT prices bottomed at $1,000 per ton in August. Since then, two price increase announcements were made for a total of gross $130 per ton in Europe, of which 60 are already reflected in the pig's pulp, as well as $30 ton net in China. The demand backdrop remains supportive, with global demand 7% up to August and a widening gap versus sold with pulp. The recent U.S. tariff redemptions for pulp imports and the planned maintenance shutdowns among large Latin American producers in fourth quarter should consolidate the positive price trend into year end. Continuing with our FX policy in slide seven, we've hedged nearly half of our 2025 PALP sales with an average cap at $1.09 per euro. In this quarter, FX hedging has resulted in a positive inflow of 4 million and should add another 3 million in the fourth quarter, assuming a euro-dollar exchange rate

of 1.16.

Turning to slide eight, I would like to review with you the efficiency and competitiveness plan launched in third quarter. It is a 24-month program to streamline our operations based on process re-engineering and AI-enabled initiatives across procurement, maintenance, industrial operations, safety, and quality. The plan targets approximately 22 euros per ton of cash cost savings by the end of 2027, with a cash out of around 23 million. To be deployed in the next two years, yielding an estimated net present value of 200 million euros, and one year payback. Projects have been launched in both businesses and negotiations with labor representatives are on track. The ultimate goal is to strengthen emphasis competitive positioning while securing a stable and constructive employment relations framework.

Turning to slide nine,

Our higher margin ENFE Advanced portfolio continues to expand. In the first nine months, special products represented 29% of filed volumes, an increase of 30% compared to the first nine months of 2024, and delivering 33 euro per ton operating margin premium versus the remaining 61% standard BHKP. The improvement of the mix is central to our strategy of substituting higher cost softwood grades in targeted applications. Continuing with our higher margin product portfolio in slide 10, our first 125,000 tons fluff line has started its production in the fourth quarter and is already in product homologation phase. As a reminder, FLAF is a value-added niche with a gross price gap of around $900 per ton versus standard BHKP, where ENCE will be the one and only European FLAF manufacturer with cheaper hardwood sourcing.

Just for your information, as of today, more than 90% of worldwide fluff pulp is sold.

Our fluff pulp should account for more than 12% of sales volume by 2028. And we expect a structural extra margin of roughly 60 euro per ton versus standard BHTP at across the cycle prices. This is on top of the 50% of the higher margin ENCE advanced product sales. Special bulk will account to 62% of total sales by 2028. Moving to slide 11, let's look at the global cost curve and ENCE's positioning. Leveraging on the 62% ENCE higher margin special part mix forecasted for 2028, we are repositioning the company within the cash cost curve. At the second half 25, cash cost guidance of 466 euro per ton equivalent to $545 per ton, ENCE stands as a top quartile producer compared to global BSGP ones that deliver an average cash cost of $678 per tonne. Continuing with the energy saving certificates on slide 12, we have cashed in the 10 million recorded in the second quarter of the year. To date, in 2025, we have sold energy certificates for a total amount of 40 million fully cashed in. Also, we are working on generating additional certificates for approximately 4 million euros that should be recorded by year end. Let's move now to our local biomass backbone renewable energy platform in slide 13, talking about La Galera, our Tarragona biomethane plants. As you know, we acquired the plant in December 24. Well, La Galera is now on track to increase its annual production by 20% without capex, just by applying ENFES industrial standards. On top of that, others will be completely eliminated by year end. As guided, we will continue upgrading the plant to increase its annual biomethane output up to 50 gigawatt hour, and we'll launch our first biofertilizer production unit in 2026.

These initiatives should be fully completed by 2027.

Turning the page to slide 14, we would like to update you on our solids and tangible biomass end pipeline. We have 38 projects with locations secured and feasibility studies completed. 18 of these projects are already at a late permitting phase and its biomass is secured. The projects will carry a ROCI of over 12% and aim to deliver over one terawatt hour by 2030. These should yield over 60 million in incremental EBITDA. Nobody in Spain has any experience in biomass procurement, small rural projects development, and digestion know-how.

Continuing with our renewable industrial heating solutions in page 15.

We will reach 2 terawatt hour of thermal energy with 40 million incremental EBDA contribution also by 2030. To achieve this target, we already have one plant in operation since 2024, one contract in its startup phase, and three projects under construction. On top of that, we are currently negotiating 10 projects and we expect to close at least one of them during the fourth quarter, having another project ready to build before year end.

Continuing with renewable industrial heating business, I would like to explain you its key achievements of the quarter on slide 16. On top,

of the ongoing plant construction at MAU facilities, we have started the construction of two plants for a well-known French dairy group located in Andalusia and Castilla-La Mancha. These 15-year term projects will start its operations during the second quarter of 2026 and will have an estimated combined production of approximately 85 gigawatts hour. In addition, we have gained another O&M contract for eight megawatts ready to operate plant for a food and beverage company located in Extremadura that is in ramp-up phase and should be fully operational within fourth quarter 2025.

Alfredo?

Thank you, Matthew. Let me start with our special pulp center business in slide 18. In the third quarter, pulp sales rose up to 263,000 tons, plus 8% quarter-on-quarter, while the average net selling price decreased by around 90 euros per ton down to 452. Crucially, gas costs declined by 29 euros per ton down to 459, driven primarily by lower wood costs and operational leverage. This sequential step down supports our second half cash cost guidance of 466 euros per tonne. Power TVDA accounted for 4 million euros in Q3. The third quarter includes approximately 8 million euros of insurance proceeds related to the Navier turbine fully cashed in during the period but no additional revenues from the energy savings certificates. Turning now to our renewables business backbone platform in the slide 19, biomass to electricity volumes increased up to 315 gigawatts hour in Q3, plus 4% quarter-on-quarter, with lower operating costs per megawatt hour following several maintenance interventions in the first half, operational leverage, and lower biomass input costs. Revenues per hour were 2% higher versus Q2, resulting in an EBTA of €9 million in our biomass for electricity business vertical, offset by around €1 million from the rest of the business verticals currently in ramp-up process. The final platform EBTA was €8 million versus free from the previous quarter. Let me now guide you through the consolidated P&L figures on slide 20. Group revenues declined by 11 million compared to the previous quarter. The growth in renewable energy business has partially offset a 15 million-year decline in the power business derived from the depressed pricing environment. ABDA declined to 13 million in 2Q. despite the improvement in operating costs in both businesses ending in a bottom line showing 15 million losses. In this context, our main focus is to align operational expenditure, investment cadence, and cost discipline to capitalize on cycle turn from day one. Turning to slide 21, free cash flow before growth cap is worth 12 million euros in Q3. despite low power prices. Working capital contributed with a positive 18 million euros, fully reversing the first half bill. Growth and efficiency capex totaled 17 million in the quarter, including the FLAP project, Navia decarbonization, and cost reduction initiatives, renewable packaging development, and the ramp-up of our biomethane and renewable thermal energy projects. All in all, free cash flow for the period was negative by 8 million euros. Slide 22 highlights our solid financial position. Consolidated net debt stood at 367 million euros, supported by a strong 265 million euros cash position. Importantly, both our pulp and renewable business have fully available revolving credit facilities for a total amount of 150 million euros and our power segment is covenant free. This high liquidity position ensures the strengthening of the company along the different cycles. As you've heard me say before, maturities are well distributed across several years and we benefit from a flexible capital structure that provide us with optionality and growth rule. Finally, On slide 23, let me go through ENSYS sustainability performance indicators, a core pillar of our profitable long-term strategy. We are rated starting in the top 1% by Ecovaries, confirming our position at the forefront of industrial sustainability. Key milestones include Our accident rates remain four times lower than industry average, and we completed the Pontevedra shutdown with no significant incidents. Navia recorded zero odor minutes during the three quarters 25. 100% of our sites are zero waste certified. Two new sustainability certifications for our fault products. Our forestry operations include 4,200 hectares with CO2-sinking rights officially registered in an OECC voluntary as well as improved plant material adapted to climate change. 100% site shear system certified confirming the sustainable origin of our biomass. Promotion of professional development in rural communities with 750 technical advisations with forestry owners and forestry machinery training programs. May we please now return The floor to our Secretary Chairman for his closing remarks.

Thanks, Alfredo. Let me please conclude the presentation with some closing remarks. Firstly, price increases announcements of gross $130 per ton in Europe should consolidate on the coming weeks. On the back of US tariff redemption for pulp imports, good demand wide gap with SOLIDWORKS and significant annual maintenance shutdowns announced for the fourth quarter. Secondly, we are firmly committed to cash cost reduction that should target €466 per tonne for the second half of the year. Thirdly, our ENFE special part-centred business should increase the average across the cycle EBITDA by 50% through top line and cash costs initiatives by 2028. On the top line front, I would like to highlight our product mix upgrade towards higher margin special parts products that substitute more expensive BSKP, reaching 62% of total sales by 2028. That should contribute with an incremental EBDA for approximately €22 million. From the cash cost side, the levers are the ongoing competitiveness plan, €22 million, Navia's decarbonization and cost reduction projects, €8 million, as well as Ponte Vedrabanza, €20 million. On the growth side, the Aspontes project, got its environmental integral license in third quarter 2025, and we foresee the start of renewable packaging solutions planned in 26.

Both projects will further increase our results.

Fourthly and finally, we are building the largest biomass backbone renewable energy platform in Iberia, including biomass to regulated electricity, renewable industrial heating, biomethane, and renewable fuels. And it is on track to more than triple its EBITDA by 2030. The execution of all these projects will be adapted and aligned to our cash flow generation to maintain a prudent across the cycle leverage and an attractive shareholders remuneration. In part, no one of all these projects require more wood, a scarce resource worldwide. Thank you for your attention. We will be pleased to hear any questions you may have.

Thank you. And ladies and gentlemen, the Q&A session starts now. If you wish to ask a question, please press star 1 on your telephone keypad. You will have the opportunity to ask all the questions that you may have. We kindly ask you to ask only one question at a time to our speakers instead of asking multiple questions at the beginning. Once again, please press the star one on your telephone keypad if you would like to ask a question. And your first question comes from the line of Alvaro Lenzay. Please go ahead.

Hi, thanks for taking my questions. The first one is on the expected cash cost you're guiding for 466 for the second half. If my math is not wrong, that implies an increase from 459 in Q3 to around 473 in Q4. I just wanted to understand why do you expect cash costs to go up?

Yeah. In winter, normally, a collection of wood is more expensive, is more difficult due to weather conditions. And these bad weather conditions at the North Atlantic also

normally make a pressure on prices of the freight and as we are prudent that's why we expect a slight increase a slight temporary increase due to weather conditions okay my second question is uh if you could please try to clarify a little bit of what's going on with the with the net prices and the discount because you mentioned that the the weight of differentiated products which have a premium keeps going up but the discount is also going up quite significantly. This quarter is about 49%. I understand that the discounts tend to go up in the industry, but I do not think that competitors are having this discount, let alone if we could make the numbers of what the actual discount is in the normal BHKP product that you're selling, it will be probably above 50%. So it's like we should expect the discount to drop to narrow at some point or to stabilize, thanks to the changing mix, just to understand the dynamics there.

Yeah, third quarter has been the worst quarter of the year with the lowest prices. And when the peak price is up to 1,000 and you are at the lowest moment, it's absolutely impossible to sell the full volume of standard BHKP at this price. Then you have to accept spot orders. who have a huge discount in Europe and in the Mediterranean. What I recommend is that you wait for other competitors to publish their results, and you will see what is the net price and what is our net price. And that's where you are going to see the big interest of these special products. If we take the average price of this 61% of standard BHKP we have sold on the nine first months, And you compare with the average price of the special products we have sold on these first nine months, 29%, corrected by the extra costs they have. We have these 33 euros per ton of more margin. And that is like that. The problem is that the standard products on the third quarter have been sold at very low prices due to a very tough market.

Okay. And my last question would be on the cost-saving plan. I think it's very welcome. And I just wanted to know first, why now? What has changed? Why do you see... Why not do this a year ago or something? Because you have been struggling with high cash costs for quite some time now. And then it also strikes me as very cheap. One-year payback is very... Good payback for a restructuring plan. So I wanted to know what the mix is from the savings, how much of the savings are coming from layoffs, and why is the plan so cheap? Thank you.

Yeah. I have to start apologizing, but I cannot now disclose a lot of details because we are just in the middle of a negotiation with the unions, and I don't want to disclose my cards. Why now? Well, It has been the fourth quarter, the fourth quarter, one after the other, where prices have been declining and where EBITDA has been declining.

According to the Spanish law, you can launch a restructuring plan by economical causes, who are the more clear, only if you have three quarters of turnover and results going down.

Then we prepare everything during the second quarter, and we have launched the negotiations during the third quarter. And we are now on the middle of the negotiations. As you know, the two mills where we produce part, in Nadia and Tontevedra, are very heavily unionized. It's very difficult to reduce employees there. It's almost impossible. It has not been possible. But now we have a strong opportunity because law-wise now our position is very solid. And that is why they have accepted negotiations and we are negotiating. We are negotiating at NAVIA and we are going to start negotiations next week with Pontevedra and with the unions representing the forest activities and the administrative activities.

Okay, thank you. Sorry, sorry. Out of the total layoffs we are planning, 10% can go out immediately, but the balance we need to invest. We are going to rationalize the control rooms we have in our park mills We have to invest in loops to do that possible.

We are putting optimization and artificial vision in quality control. And we have several other plans. That's why we have small investments to do all that, but it's small investments.

And that's the way we can reduce the number of employees we have. That's going to take two years because we need some investments.

And we have ways to do that with a good agreement with the unions. And that's what we are working on. On top of that, because the 22 euros per ton savings is not because of layoffs, on top of that, we started now one year to do a strong re-engineering of all The activities subcontracted at ENFE. It's all the movements of biomass and pulp inside the mills. It's all the industrial cleaning. It's all the movement and sales of byproducts. It's all the medical service. And we finished by summer all the engineering, which has been very tough. And we did that very carefully in order to have good results. And now we are starting to see the first savings, and these savings will continue over the next 12 months.

Thank you. Thank you.

Thank you. And once again, if you would like to ask a question, simply press the store one on your telephone keypad. And I'm showing no further questions at this time. I would like to turn it back to Mr. Ignacio Colmenares for closing remarks.

Well, I thank you very much for attending our call. I hope to give you more details about this strong plan. We are now working on it and to give you good results about cash costs and that you will be able to see the prices going up at the next call at the beginning of next year. Thank you very much. Thank you.

Thank you. And ladies and gentlemen, this now concludes our presentation. Thank you all for attending. You may now disconnect.