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    MO
    Earnings call· Sep 2025(Q3 FY25)

    ALTRIA GROUP, INC. MO

    Nov 21, 2025 Source

    Executive summary

    Altri Q3 FY25 — Lower Pulp Prices and Weaker USD Impact Profitability, Strategic Diversification Continues

    Altri navigated a challenging Q3 FY25 marked by significantly lower pulp prices and a weaker U.S. dollar, leading to a substantial year-on-year decline in EBITDA and revenue. Despite these headwinds, the company demonstrated strong cost optimization, achieving further cash cost reductions, and continued advancing its strategic diversification initiatives, including the Biotek conversion to dissolving pulp and the acquisition of AeoniQ for sustainable textile fibers. Management anticipates a normalization of market conditions and progressively higher returns in 2026.

    Highlights

    5

    • Global hardwood pulp demand grew by 8.8% year-on-year in Q3 FY25, with China up 13.4% and rest of Asia/Africa up 18.1%.

    • Cash cost declined by 3% quarter-on-quarter and 8% year-on-year in Q3 FY25, with a target for a second consecutive year of reduction for FY25.

    • Biotek's migration of BHKP production to dissolving pulp is on track for completion by end of 2026, aiming for over 180,000 tons capacity.

    • Acquisition of a majority stake in AeoniQ, focused on sustainable textile fibers, was completed in Q3 FY25, with expected revenues of EUR 20M-EUR 25M from 2028.

    • Altri earned the EcoVadis Platinum Medal for the third consecutive year, ranking in the top 1% of companies globally in its sector.

    Concerns

    4

    • EBITDA reached EUR 11.6 million, a 79% decrease year-on-year, with a margin of 7.1%, primarily due to lower pulp prices and U.S. dollar devaluation.

    • Total revenues for Q3 FY25 were EUR 165 million, down 20% year-on-year.

    • Global dissolving pulp demand declined slightly by 1% year-to-date August, impacted by U.S. tariffs.

    • Net debt increased during the quarter due to additional CapEx and corporate tax advanced payments.

    Guidance & targets

    10
    CategoryTargetConfidence
    Biotek conversion to dissolving pulp
    Completion by end of 2026
    high materiality
    High
    Biotek dissolving pulp production capacity
    Exceed 180,000 tons (potential to reach 200,000 tons)
    high materiality
    High
    Caima acetic acid and furfural unit operation start
    First half of 2026
    medium materiality
    High
    AeoniQ production capacity
    1,700 tons per year
    medium materiality
    Medium
    AeoniQ revenues
    EUR 20 million to EUR 25 million
    medium materiality
    Medium
    Full-year 2025 cash cost reduction
    Second consecutive year of reduction
    medium materiality
    High
    Market volatility
    Less volatile
    high materiality
    Medium
    Supply and demand balance
    More balanced
    high materiality
    Medium
    Returns
    Progressively higher
    high materiality
    Medium
    FY26 cash cost evolution
    Similar level or very low single-digit reduction
    medium materiality
    Medium

    Operational metrics

    14
    Net financial costs
    EUR 2 million negativevs. EUR 11 million negative in Q2 FY25 and EUR 8 million negative in Q1 FY25
    Q3 FY25

    Significant reduction driven by lower interest rates, better FX, and hedging gains.

    Return on capital employed
    8%
    9M FY25

    Maintained a high single-digit return despite challenging environment.

    Volumes sold
    9% higherQoQ
    Q3 FY25

    Higher volumes partially offset lower prices and weaker USD.

    Wood prices
    Fairly stablevs. FY24
    FY25

    Prices stable with a better mix, less costly imports.

    Wood imports
    Lessvs. prior periods
    FY25

    Reduced imports of more costly wood from outside Iberia.

    Chemical costs
    Mostly trending downin line with last year
    FY25

    Contributing to overall cost optimization.

    BHKP pulp prices (Europe)
    25% decrease (USD), 30% decrease (EUR)YoY
    Q3 FY25

    Significant decline compared to Q3 FY24.

    BHKP pulp prices (Europe)
    12% decrease (USD), 15% decrease (EUR)QoQ
    Q3 FY25

    Further reduction compared to Q2 FY25.

    PIX price index
    EUR 1,000 per ton
    September FY25

    Index value at the end of September.

    PIX price index
    $1,080 per ton
    Current

    Current index value.

    Dissolving pulp prices
    15% decreaseYoY
    Q3 FY25

    Decline compared to Q3 FY24, but stabilized during Q3 FY25.

    Dissolving pulp price premium over paper pulp
    40-plus%
    Current

    Premium expected to continue due to different production processes.

    Dissolving pulp price gap over paper pulp
    $300
    Current

    Absolute price difference.

    European port inventories
    Stablein line with historic average
    Since H2 FY24

    Inventories stable, indicating some market balance.

    Industry KPIs

    4
    MetricValueDetails
    Unit cash costs2% decrease%
    Volume production growth8.8% increase%
    End market demand driversRecovery led by Asia and China
    Adjusted underlying EBITDAEUR 11.6 millionEUR

    Deals & partnerships

    1
    AeoniQAcquisition of a majority stake in a Swiss company focused on sustainable textile fibers.

    Completed in Q3 FY25. Gives control over market-leading next-generation technology, allowing for integration within Altri's facilities and positioning in broad-scale sustainable textile opportunities.

    Capital programs

    4
    Biotek conversion to dissolving pulpon track

    Benefit: Exceed 180,000 tons (potential to reach 200,000 tons) of dissolving pulp

    Migration of BHKP production to dissolving pulp is on track. The plant will be swinging completely into dissolving by the end of 2026.

    Acetic acid and furfural production unit at Caimaprogressing

    Benefit: New high-value products

    Project is progressing, with commercial development already underway. Expected to be complete by end of Q1 or early Q2 2026.

    AeoniQ industrial unit at CaimaadvancingEUR 60 million
    Funding: Net of subsidies

    Benefit: 1,700 tons per year capacity; EUR 20 million to EUR 25 million in revenues

    CapEx for the industrial unit of the recently acquired AeoniQ project, focused on sustainable textile fibers. Major part of subsidies expected in 2026.

    Gama projectunder environmental permitting

    Currently undergoing environmental permitting for integrated environmental license. Application to European Innovation Fund did not receive allocation due to limited funds, but project merits were validated. Exploring electrical grid connectivity.

    Risks & headwinds

    6
    Lower pulp pricesQ3 FY25

    EBITDA decreased 79% YoY to EUR 11.6 million; BHKP pulp prices fell 25% in USD and 30% in EUR YoY.

    Mitigation: Focus on cost optimization, strategic diversification into higher-value products (dissolving pulp, sustainable textiles).

    Weaker U.S. dollarQ3 FY25

    Amplified the impact of lower pulp prices, contributing to 30% fall in BHKP pulp prices in EUR YoY.

    Mitigation: Hedging strategies (contributed to improved net financial results in Q3 FY25).

    U.S. tariffs impacting Asian textile chainH1 FY25, stabilizing in Q3 FY25

    Global dissolving pulp demand declined 1% YTD August (vs. -4% by June, -8% in Q1).

    Mitigation: Demand stabilizing and recovering in H2 FY25; diversification into pharma market for Biotek DP.

    Increased net debtQ3 FY25

    Net debt increased during Q3 FY25.

    Mitigation: Expectation of improved net debt-to-EBITDA ratio in FY26 due to pulp price recovery, subsidies for investments, and corporate tax adjustments.

    Pulp industry supply-demand imbalanceRecent past and near-term future

    Supply-demand balance has been "somewhat long on the supply side."

    Mitigation: Expectation of industry slowdown in output, potential conversions, or shutdowns, particularly in high-cost units; Altri's own conversion to dissolving pulp reduces BHKP supply.

    Increased domestic fiber prices in ChinaSummer 2025

    Roughly a 30% increase in domestic fiber prices over the summer.

    Mitigation: Implies increased marginal cost for Chinese operators, potentially supporting global pulp prices.

    What to watch in Q4 FY25

    5

    Pulp price recovery

    Coming quarters
    CurrentEarly signs of improvement
    TargetPositive development

    Why it matters

    Critical for profitability and EBITDA margin recovery, as lower pulp prices significantly impacted Q3 FY25 results.

    We see early signs of price improvement and remain moderately optimistic for the coming quarters.

    Q&A highlights

    10

    What is Altri's view on the pulp industry balance, specifically regarding the need for permanent capacity shutdowns or conversions, and where these are most likely to occur?

    Management noted that the supply-demand balance has been long, with most new capacity now operational. They expect a slowdown in output, potential conversions (citing Bracell's 600k ton DP conversion and Altri's 250k ton Biotek conversion), or eventual shutdowns, particularly in high-cost units in North America and less efficient Latin American units.

    “I'm sure there's going to be a review of a lot of those and the outcomes will be some sort of slowdown in terms of output, potential some conversions, although it's not clear into what type or what integration that could take or eventual straight shutdowns.”

    asked by Bruno Bessa · answered by Jose Armindo Farinha de Pina

    2 min read5 chapters

    Detailed Narrative

    01

    Pulp Market Dynamics

    Global hardwood pulp demand showed a significant pickup in recent months, notably in China and Asia, which drove an 8.8% year-on-year growth in Q3 FY25. However, prices remained under pressure due to additional Chinese capacity and a weaker U.S. dollar. Dissolving pulp demand, initially soft in the first half of 2025 due to U.S. tariffs, stabilized and began to recover in Q3, with European port inventories remaining consistent with historical averages.

    02

    Strategic Diversification Initiatives

    Altri is actively advancing its strategic diversification. The conversion of Biotek's BHKP production to dissolving pulp is on schedule for completion by the end of 2026, aiming to increase capacity to over 180,000 tons. The acetic acid and furfural production unit at Caima is progressing, with operations expected to commence in the first half of 2026. Furthermore, the acquisition of a majority stake in AeoniQ in Q3 FY25 positions Altri in sustainable textile fibers, with an industrial unit planned to generate EUR 20M-EUR 25M in revenues from 2028.

    03

    Cost Optimization and Efficiency

    Despite a challenging market, Altri demonstrated strong cost management, achieving a 3% quarter-on-quarter and 8% year-on-year reduction in cash costs for Q3 FY25. This was primarily driven by optimized wood sourcing, lower chemical costs, and enhanced operational efficiencies. The company is confident in achieving a second consecutive year of cash cost reduction for FY25 and anticipates continued, albeit lower, efficiency gains in FY26.

    04

    ESG Achievements and Recognition

    Altri maintained its strong commitment to environmental, social, and governance (ESG) principles, earning the EcoVadis Platinum Medal for the third consecutive year, placing it in the top 1% globally in its sector. The company was also ranked third worldwide among the 500 most sustainable companies by TIME and Statista, highlighting its leadership in sustainability. Altri further reinforced its ESG focus through a dedicated Sustainability Day and a health and safety convention.

    05

    Gama Project Update

    The Gama project is currently undergoing environmental permitting, with the integrated environmental license process underway. While an application to the European Innovation Fund successfully met funding thresholds, it did not receive an allocation due to limited available funds. However, the project's merits and alignment with the European Union's strategic industrial priorities were validated. Altri is also exploring options for electrical grid connectivity for the project.

    AI-generated summary of the company’s earnings call. Not investment advice.