ENCE Energía y Celulosa, S.A.

Good morning, ladies and gentlemen. Welcome to the ANCES First Q2026 Results Presentation. I will now hand over to Mr. Ignacio Colmenares, Executive Chairman, and Alfredo Avello, CFO. Gentlemen, please go ahead.

Good morning, good afternoon, and welcome to ANCES First Quarter 2026 Results Presentation. Thank you for joining us. I'm Ignacio Colmenares, Executive Chairman, and today I'm joined by our CFO, Alfredo Bello, and our Head of IR, Inés Álvarez. Let me start with the strategic picture and our overall objectives. Our plan remains simple to describe and rests on four pillars. Growth in higher margin special pipe substituting BSKP, local food and biomass sourcing, cash cost efficiency, and EBDA growth in our deliverable platform, leveraging our position as the largest collector of biomass in the Algerian Peninsula. Slide four summarizes the first quarter of 2026. It shows the progress we continue to make in all pillars of the strategy despite a less than brilliant quarter impacted by several one-off events. Importantly, these events do not change our full-year park guidance. We consider that both the market and the company's costs are at an important inflection point that will be visible in future quotas. The bulk price environment has continued the positive trajectory we saw at the end of 2025. European gross BHKT prices stood at 1,286 per tonne at the end of first quarter 26, compared with 1,100 per tonne at year end 2025. Major producers have announced further price increases up to $1430 per ton to be implemented in the short term. Since prices in our contracts are linked to the two previous months, we started to benefit from the price increase in the second quarter. At the same time, we continue to work on the fundamentals of the business, improving our product mix, making progress in our cost reduction initiatives, and advancing the renewables platform. In our part operations, our performer cash cost was $479.479 per ton in first quarter. With Nadia, its plan shut down and excluding the impact of the Nadia strike. On the product needs, special part product, including initial FLAS volumes, accounted for 34% of total PALP volumes sold in first quarter 26, plus 13% compared to 2025, despite the strike. We remain on track to reach 40% for the full year 2026, and to exceed 62% by 2028. As for our renewable platform, pro forma energy generation was 303 gigawatt hour in first quarter 26, compared with 277 gigawatts in first quarter 2025. This figure excludes recent extreme weather conditions in the Iberian Peninsula. This had an impact of 40 gigawatt hour in production and of around 6 million at EBDA level. La Galera has completed its odor elimination program and will act as a showcase for our biomethane pipeline developments. Financially speaking, Group consolidated EBDA was 1 million in first quarter 26. Pulp EBDA was negative, 1 million. Renewable EBDA was 3 million, including 1 million of DEVX related to new business developments. Investments amounted to 53 million in the quarter, including machinery leasing on the FLAS project and the final payment of 15 million for the 2019 PubDiagy bottlenecking at Navia. Our full-year CapEx guidance of 120 million for both businesses remained unchanged. Net debt stood at 462 million, with 209 million in cash. We also continued to act proactively on financing. As a reminder, we registered a new 200 million mark bond program in January 2026 and completed a first 85 million issuance with a four-year bullet maturity and a 410 basic points coupon, a clear signal of the reliability of ENCE for the investor community. In addition to the 7 million Euros CAES already collected in the first quarter, we cashed in last week 21 million from the collection of tax losses. In summary, this was a quarter highly impacted by one of events, the Nadia strike in Palt and extreme weather conditions in biomass generation, but none of these changed our full year guidance nor our strategic trajectory. Before turning to the pulp market, I would like to address the geopolitical context. On slide 6, we not only outline why we expect the Iranian conflict to have a limited negative impact on our business, thanks to strategic mitigants in both pulp and the renewable platform, but also why the conflict could create opportunities for European pulp players and local energy producers. In PALP, our mitigants are structural. We are more than self-sufficient in electricity within our production process, with excess energy sold back to the grid, and that excess may benefit from higher pull prices. Our gas exposure will be further reduced in the near term through Nadia's efficiency and decarbonization plan, which includes replacing gas consumption in the lean kiln with pulverized biomass and bioethanol captured during the process. This investment will be fully operative by mid-2026. Remember that out of 6 thermal megawatt hours required per ton of pulp, 5.5 are already self-produced. we source wood locally, with an average radius of less than 110 kilometers. And our commercial focus is in Europe, which accounts for 92% of our pulp sales. In our renewable platform, we rely on fully local biomass sourcing, with an average radius of 145 kilometers. We have an ongoing electricity hedging program for 80% of production and gas hedging for 72% of our needs. The opportunities are real. In part, the positive pricing momentum favors European players focused on the local market, given the logistics constraints faced by Middle East, Asian and Latin American pulp and paper producers in its exports. In our renewable platform, We expect an acceleration in our industrial heating pipeline. Biomass is more competitive than gas and its supply is more reliable, as well as increased revenues from ancillary services due to higher power prices. Biomethane benefits from similar tailwinds. Let's look at cost competitiveness on slide 7. Our cash cross trajectory remains on track to meet our full year guidance of around €468 per tonne for 2026. Our competitiveness and efficiency plan aims at cost savings of €30 per tonne, €22 per tonne from headcount reduction, process re-engineering, and digital and AI-enabled optimization, and €8 per tonne from the NADIA cost reduction decarbonization project. In terms of progress during the quarter on the competitiveness and efficiency plan, we capture savings of 6 million euros on annualized basis in first quarter. Taking together these initiatives underpins a 30 euro per ton cash cost reduction expected during 26 and 27, with approximately 15 euros per tonne expected this year in 26, supporting our guidance of around 468 euros per tonne for the year. Slide 8 considers the market environment and the continuous upward momentum in hardwood pulp pricing. BHKP prices ended first quarter 26 at $1,286 per tonne. compared to $1,100 per ton at the end of 2025. Major pulp producers have announced price increases in Europe of up to $1,430 to be implemented in the coming weeks. The expected cost increase in logistics and chemicals stemming from the uranium conflict, combined with a tighter paper and bold market in Europe, may offer further upside on the spreads. We expect a price improvement in the second quarter and third quarter as our pricing structure is indexed to a two-month trading reference. Importantly, BSKP continues to gain share versus shortage. Eucalyptus path demand has grown by 1.3% so far in 2026, January and February, in contrast with a 6% decline in BSKP. Fiber-to-fiber substitution, combined with BSKP capacity closures and shifts towards dissolving wood pulp, will continue to drive BSKP demand up. Moreover, logistics disruptions linked to the Iranian conflict favor higher prices for regional players such as ENFE due to the limited availability of overseas products such as pulp and paper from ENFE. Asia, Latin America, and Middle East. Overall, the message is clear. The market backdrop supports firmer hardwood pulp pricing in Europe, given by a combination of favorable demand dynamics, supply constraints, and higher fiber costs. That is precisely why our strategy is built around cost, fiber security, and growth in special pulp substituting BSKP. Moving to slide nine, our product strategy continues to progress as a key differentiator. Special pulp accounted for 34% of sales volume in first quarter 26, compared with 30% in 25. These products deliver higher margins, approximately €36 per tonne above standard BHKP, since they substitute higher-cost sub-route alternatives in multiple applications. We expect this share to increase to 40% in 2026 and to exceed 62% by 2028. We have two range of special bulk products as they advance is our solid, broad range of BSKP pulp substitutes with different attributes. High strength and bleached hardwood pulp. Low porosity, softness, suitable for diverse applications including hygiene, decor and packaging. Our 28th target is 500,000 tons with an incremental margin of over 30 euro per ton versus standard BHPP. ENFE-FLAS is another flagship strategic product. ENFE is the sole European producer of FLAS parts based on eucalyptus roots competing with more expensive saltwoods. We are currently in a homologation process. Our 2020 target is 125,000 tons with an incremental margin of over 60 euro per ton. FLAF ramp-up is not just a startup story. It's a market access story. Qualification takes time, but once approved, volumes tend to be sticky, and the product is anchored in more stable end markets linked to the aging population and improved hygiene habits. These products are not simply marketing labels. They are an economic lever. When customers use our grades to substitute softwood pulp, they do so for performance reasons. That performance allows pricing discipline and, over time, a structurally higher margin than standard hardwood pulp. As you can see in slide 10, our strategic goal is simple. We are not only lowering costs, we are improving what we sell. Together, these moves are designed to reposition ENCE as the lowest cost producer on a BSKP substitute basis. By 2028, more than 62% of ENCE sales will come from BSKP substitute products. Combined with our cash cost reduction programs, this strengthens our relative position on the core in down cycles and increases our operating leverage in up cycles. Due to the effects of both the improved product mix and cost-saving initiatives, in 2028 the pulp spread will be 52 euros per ton higher than in 2025. Moving on to slide 11, let me now turn to our renewable industrial heating platform in Spain. Our target is to supply 2 TWh of thermal energy by 2030, contributing around 30 million to EVDA. We currently have one contract in operation, and we are adding one more in May, and three more in December. Five contracts operating at the end of the year. Our pipeline includes 11 projects under negotiation, of which three are under advanced negotiation with a required ROCI of about 11%. Continuing with slide 12, our biomethane platform in Spain continues to advance steadily. Our target is to produce over 1 terawatt hour of biomethane by 2030, and to contribute more than 60 million to EBITDA, with return discipline above 12% rookie. The pipeline is solid and substantial. 9 plants are expected to reach ready-to-build between 26 and 27, and 25 plants are already in their late permitting phase. We have 41 plants with gas grid connection authorized, feedstock and locations guaranteed. Slide 13 illustrates the depth and maturity of our biomethane pipeline. Our pipeline has a potential capacity of 4 TWh, 4 times our 2030 current target of 1 TWh. This underscores the different options open to us. and our ability to accelerate or pace development according to market conditions and return discipline. I now ask Alfredo to summarize our financial position.

Thank you, Ignacio, and good afternoon to everyone on the call. I will now walk you through the financial results for the first quarter of 2026, before handing back to our Executive Chairman for the closing remarks and the Q&A session. We start on slide 15 with an overview of our financial results. As already mentioned, the first quarter of 2026 was, apart from the annual planned shutdown at Navia, marked by two worn-off events. Strike at Navia linked to the ongoing collective dismissal process and the extraordinary spell of extreme weather conditions suffered in the Iberian Peninsula with randomness rainfall reaching a staggering 2.4 times the annual average. In any case, none of these change our full-year guidance given in our last call. Real consolidated revenues amounted to $154 million in first year 26 compared to $187 million in first year 25. In default business, revenues reached $114 million compared with $135 million in first year 25. The increase in gross fall prices was offset by a weaker dollar and by lower sales volumes in the context of the strike. In the renewables platform, revenues amounted to 41 million compared with 52 in the first year 25 as a consequence of lower electricity production due to the disruptions caused by the said extraordinary spell of extreme weather conditions. In the fall business, ABTA amounted to a negative 1 million compared with 29 in fiscal year 25, which included 30 million of energy savings certificates, the so-called CAES. The extra costs from the strike were mostly offset by 7 million of revenues from CAES, which are not included in our cash cost calculation. In the renewable business, ABTA stood at 3 million, compared with 6 million in first year 25, as a result of lower production, lower pull prices, extra costs derived from extraordinary severe storms, which alone impact the DPA by approximately 6 million euros. The bottom line, attributable net income amounted to a loss of 18 million in first year 26, compared to a positive 2 million in first year 25. Importantly, as highlighted by our executive chairman, these results reflect isolated events and the seasonal plant area shutdown. Looking ahead, the combination of stronger pulp prices, which you need to remember that have a time lag of approximately two months prior to pouring into our P&L, the end of the strike, in agreement with the unions, and therefore, the permitted execution of our efficiency and competitiveness plan, the start-up of an area cost-cutting decarbonization and wood-riding bottlenecking project, and the normalization of the devastating weather conditions should drive a significant improvement in the coming quarters. Turning to the next slide, the quarter ended with a free cash flow cash-out of $76 million. Please Note that this figure includes 41 million euros in growth capex, a high concentration of carryover capex payment in the period, as several strategic projects initiated in previous quarter or years will reach commercial operation by mid-year 26. Let me walk you through the main components of the cash flow. Starting from IBDA, we have 8 million of maintenance capex, 7 million of net interest payments, and no tax payments during the quarter. The results in Africa sold before working capital and growth topics of approximately a negative 14 million euros. Working capital absorbed 18 million euros in the quarter, driven mainly by an increase in paths, trade, and other receivables, and by renewable industrial heating inventories. These are assets that since would revert to the client at the end of the contract, rather than accounting them as assets, are registered as inventories. Growth and efficiency capex amounted up to 41 million euros in the quarter. This figure includes the final payment of 15 million euros from the NAVYAD 2019 power dryer about the NETGID project, capex associated with the NAVYAD cash cost reduction and wood yard about the NETGID project, as contest engineering development expenses, and the renewal of industrial heating capex linked to the MAU and Lactalis projects. Although first year 26 is marked by a high concentration tail of capex payments, we have a clear target of deliberating the company and a committed focus in continuing adjusting down our capex obligations in the coming quarter. All in all, we have flow for the quarter due at negative 76 million euros. It is important to stress that the NAVIA cost reduction, decarbonization, and woodyard decarbonization project, as well as the MA-100,000 annual industrial heating projects, are all expected to enter into operation in the second and third quarter of this year, starting to contribute to EVGA and cash flow in the second half of 26. In addition, as our chairman mentioned, we are receiving a positive cash flow cash inflow of approximately 30 million euros in the year, 21 from the collection of non-applied tax losses already cashed in during the second, during the first quarter, sorry, during the second quarter from the Spanish Inland Revenue Service, and the rest from energy saving certificates, the so-called FAS, of which 6 million have already been collected in the first quarter. Moving to our financial position in slide 17, we closed first quarter 26 with a solid and well-structured balance sheet. Considerated net debt stood at $462 million at the end of March, with $209 million in cash across both businesses. Let me break this down by business. In the past business, gross debt amounted to $498 million, including $63 million of IFRS-16 lease contracts. with 158 million euros in cash, resulting in a debt debt of 240. The pop business financial debt remains covenant-free and enjoys from great liquidity well-diversified financial sources between institutional investors and banks, long-term maturities, and more covenants. Maturities are also well-spread with no significant concentration in any given year. Also, back in our balance sheet, we have fully available 130 million euros RCF. As I see highlighted, in January 26, we registered the new 200 million mark bond program and successfully completed a first issuance of 85 million with a four-year volume maturity in 2030 and 410 basis points. This transaction extends our average debt maturity diversifies our funding sources, and represents a clear signal of the confidence of the investor community in M3's profile. In the renewables business, gross debt stood at 173 million, including 5 million of IFRS 16 list contracts, with 51 million euros in cash, resulting in a debt of 122. This financial structure is also well diversified, with comfortable, long-dated maturities, and a fully available €20 million revolving trade facility. Overall, we have strong liquidity, long-term maturities, and no covenants in the power business, which provide us with the flexibility to execute our leveraging objectives without any constraints. Before handing back to our executive chairman, let me briefly comment on slide 18, which summarizes our main sustainability highlights for the first quarter 26. Sustainability is not a side topic at ENCE. It is fully embedded in how we operate, and it directly enhances our cost competitiveness, our commercial positioning, and our license to operate. On safe and eco-finance operations, eco-efficient operations, sorry, Our cumulative lost time injury frequency rate stood at 2.54 in the first quarter, the best result across our entire historical series. At NADIA, we recorded no outdoor minutes, maintaining our 25th historic record, and we achieved a new historical low in specific water consumption. 100% of our top energy plants are Zero Waste certified, and on Climate Action, Direct Scope 1 emission of NAVIA were reduced by 10% in 25, sorry, by 10% in, yes, in 25 versus 24. On our products and ecosystem services, we obtained six new approvals for specialty pubs under our special, our identity special products portfolio. And we have submitted the application for the approval of our Fluff Pub under the Nordics 1 and EU Ecolabel schemes. Special power products substituting subwood now represent 34% of our sales. Recycled fiber projects at Aspontes have been awarded $25 million under the Industrial Decarbonization Project Program, reinforcing our commitment to circularity. We also continue to make progress in forested byproducts with a new eucalyptus clone, planned for 26, and where 4,300 hectares of CO2 foresting is registered in the voluntary carbon market schemes. On responsible supply chain, approximately 88% of the land we manage and 84% of the wood we source are certified, and 100% of our sites are sure system certified for sustainable biomass. On positive social impact, 30% of our managerial positions are held by women. 41% of job openings have been filled with internal promotions. We continue to advance in the allocation of 3,240 social and environmental projects under the sixth edition of the Pontevedra Social Plan. And we have launched four talent programs across Navia, Pontevedra, Magnon, and corporate forces. Finally, the external criminal compliance audit has been completed, with results indicating that The level of implementation and operation of our control mechanisms is more than adequate, with no non-conformities or observations identified. These achievements are not only reflected in our leading ESG ratings, Ovaris Platinum among the top 1%, an NSCI ESG rating, AT Finance Excellence, and our inclusion in the Food Super Good Index, but also translate into tangible cost and commercial advantages. With this, I hand the floor back to our Secretary-General for the closing remarks.

Thank you, Alfredo. Let's finally look at slide 20 with the outlook for 2026 and some closing remarks before inviting your questions. It is true that it has not been a great quarter because of the impact of several one events. However, putting all this together, our strategy remains consistent and disciplined. To increase sales of special parts substituting BSKB, to strengthen local wood and biomass supply, to reduce cash costs, and to expand our renewables platform EBITDA, while protecting the balance sheet and maintaining capital allocation discipline. To summarize the quarter and the outlook for 2026, I wish to highlight five key messages. First, the park market continues to improve. We have announced $1,430 per ton from May. The positive outlook is supported by fiber-to-fiber substitution, rising production costs in the context of the Iranian conflict, and scarcity driven by logistics disruptions on Middle East, Asian, and Latin American pulp and paper imports into Europe. We are already benefiting from the better prices in the second quarter. Second, we have strategic mitigants to absorb geopolitical volatility. In part, we are not only self-sufficient in electricity, we also export energy to the grid. We have local wood sourcing, and we are regionally focused on Europe. In renewables, local biomass sourcing. In both businesses, the conflict may offer opportunity. Higher parts prices are spread in Europe due to limited overseas supply. Energy surplus sold at higher pool prices. The acceleration of the renewables pipeline and higher revenue from ancillary services. Third, the quarter was impacted by wear-off events, but our full year guidance is unchanged. Ongoing cash cost initiatives are expected to reduce cash cost by 30 euros per ton over the 26 and 27 period. 15 euros per ton on savings are targeted in 2026, supporting our cash cost guidance of around 468 euros per ton for 2026. Fourth, our mix upgrade continues. Special parts substituting BSKP accounted for 34% of sales volumes in Q1 2026 and is expected to reach close to 40% in 2026. By 2028, over 62% of our sales will compete against BSKP, positioning ENFE as the lowest-cost producer in the BSKP cash-cost curve. Together with Pontevedra Avanza, we expect these initiatives to increase the average across the cycle EBDA by 1.5 times from 2028 onwards. Fifth, the renewable platform continues to grow and diversify. Liberating in our solid pipeline potential, we are building the largest Iberian biomass backbone renewable energy platform combining regulated biomass electricity, renewable industrial heating, biomethane, and renewable fuels, and we are on track to almost triple its contribution to ABDA by 2030. The execution of these projects will be adapted and aligned to our cash flow generation to maintain a prudent across-the-cycle leverage and an attractive shareholder remuneration. Thank you. We now invite your questions.

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'll 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. Thank you. We have your first question. It comes from Inigo with GDC . Please go ahead.

Yes. Good morning. Thank you for taking my question. In a context of significant investments ahead, how do you expect CAPEX to evolve and what measures do you plan to implement? Please. Thank you.

Yes, thank you very much. We ended the quarter, as you know, with 462 million net debt, 214 in part business, and 121 in the renewable business. We had a strong liquidity, which amounted to 157 million in the part business and 51 in the renewable business. And besides, as you know, We have undrawn revolving credit facilities for an amount of $130 million in the pulp business and $20 million in the renewable business. Said that, we are cautious that we have to deliberate. We don't have a problem, but we have to deliberate. As you know, in the second quarter we have cashed already $21 million from tax losses. Due to its cyclical nature, the pulp business is financed with governance-free debt and long-term maturities, as Alfredo has explained before. Our balance sheet and the expected cash flow generation should allow us to reach our growth and diversification goals while maintaining a prudent leverage and an attractive shareholder remuneration. The timing of our investments could be adapted to our cash flow generation through the cycle, as it has been always happening in the past. Net debt in euros will remain almost flat up to 4.36 when it should be reduced. The company is fully committed towards the leverage. No major new investments should occur prior to 2028. To allow the business to consolidate, a stronger cash generation profile on the back of the results of the Efficiency and Competitiveness Plan, an Avia decarbonization initiative, and the improved product mix in the context of a positive price environment, as we have described. In 2028, once cash generation reaches a run rate level and leverage is normalized, initial works of Pontevedra should start. The last 12 months net debt to EBITDA ratio is affected by the low PAL prices and strikes in fourth quarter 25 and first quarter 26. Nevertheless, investment discipline PAL prices and delivery on cash cost saving initiatives are expected to normalize the ratio by the end of the year. We maintain our target average cycle EBITDA ratio of below 2.5 times in the PAL business, below 4.5 times in the renewable business. Regarding CAPEX, we maintain our 2026 guidance of 120 million. CapEx in first quarter 26 amounted to 53 million and it will go down to 28 million in second quarter 26. In the second half of the year, we expect to invest the remaining 39 million allocated almost evenly between the two quarters. We should note that the majority of cash outflows will take place in the first half of the year due to, first, Payments related to growth investment scheduled for competition during the first half, such as the industrial heating projects and the NADIA cost reduction, decarbonization, and woodyard debutton making projects. Two, the 15 million payments related to the 2019 NADIA expansion, which was made in the first quarter. And three, the maintenance shutdown in NADIA in the first quarter. In 2026, per business, CAPEX will be $74 million, out of which $23 million are related to annual recurring maintenance of both factories and forestry activities that are capitalized, whereas the remaining corresponds to investment projects from previous years, with significant impact on the group's profitability. As an example, CLAS or Nadia decarbonization. Nadia cost reduction, decarbonization and woodyard de-bottlenecking, 40 million already paid in first quarter, 3 million to be paid in second quarter. Closing payments of Nadia 29 part dryer de-bottlenecking project, 15 million already paid. Fluff, 1 million paid in first quarter and 6 million to be paid in second quarter. Going now to review our business in 2026, 46 million, out of which 17 are related to 2026 maintenance or new initiatives, very limited, and the remaining are carryover investments from the previous years. Renewable industrial heating, 5 million cash out in first quarter and 14 million one-fourth expected in second quarter. In 2027, CAPEX should be around half for the 2026 level. The main items will be required maintenance of approximately 35 million in total in the full perimeter, and no more than, sorry, 35 million in total, and no more than 30 million in renewable packaging and biomethane projects. The pipeline of industrial heat projects should continue to grow supported by perfect programs and therefore with limited equity returns. Is there any other question?

Thank you very much.

Again, if you would like to ask a question, you may need to press star 1 on your telephone keypad. Just press star 1 on your telephone keypad. We'll just compile the Q&A roster. As of the moment, there are no further questions. Please continue.

Good, gentlemen. If there are no further questions, we will stop now. You know that we can call later in the afternoon myself next week if you have further questions, and we shall meet in three months' time with better results on the second question. Thank you.

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