Ence has signed agreements for the sale of 100% of its targeted pulp production in 2018. The agreements reached represent a rise in the company’s pulp sales compared with 2017, also ensuring lower discounts on reference prices than last year.
Ence has obtained these agreements earlier than in previous years and under much better conditions. The strength of the global pulp market is behind this. Prices are at the top end of the cycle and it’s hoped that they continue like this over the coming years.
Furthermore, almost all the sale agreements will be for Europe. This is a market with bigger sale margins and where Ence has strong competitive advantages in terms of logistics and service compared with its Latin American competitors.
For Link Securities, Ence has benefited from the strength of the pulp market over the last year.
We believe the reduction in the discount on the reference price is very positive, after years of successive increases. That said, we think Ence’s current share price has already discounted this positive scenario.
We remind that our target price for the stock is 5,11 euros/share and our recommendation is a Hold.