Irani Papel e Embalagem S.A. (RANI3) Earnings Call Transcript & Summary

Good morning, everyone. Welcome to our webinar for the earnings in the first quarter of 2025. We're going to begin with the earnings in the quarter. And by the end of this session, we'll have time for Q&A. [Operator Instructions] We're also providing simultaneous translation into English. Please select this option, and also in sign language. And we'll have the webinar recorded and available in both languages on the company's website. Now I'm going to present our slides here. Just a second. Getting into the earnings for the quarter. In the first quarter of 2025, we have BRL 423,078,000 of net operational revenue and a net income of BRL 60,803,000; an EBITDA margin of 32.2%; ROIC of 11.3%; the cost of our debt the last 12 months after income tax and social contributions, 7.4% a year; and a net debt-to-EBITDA ratio of 2.21x. Moving on in our comparison with the previous quarter. We had a quarter that was very good when it comes to revenues. We had BRL 423,078,000 with 10.1% of exports, and we grew 16.7% compared to the first quarter of '24 and 3.7% compared to the last quarter. Our EBITDA ended at BRL 136,254,000 million, a margin of 32.2%, 13.7% higher than the first quarter of '24 and 14.8% higher than the fourth quarter of '24. Our profits were at BRL 600,803,000 (sic) [ BRL 60,803,000 ], the recurring income -- net income. This is a growth of 36.8% compared to the first quarter of last year. In the fourth quarter, we had also the acknowledgment of the exclusion measure of the ICMS from our tax basis. Now getting into the Sustainable Packaging business and the Corrugated Cardboard business. The overall market had stability in regards to the first quarter of '24, a slight drop of 0.7% and a drop of 6.1% compared to the fourth quarter due to the seasonality. The first quarter was typically slower when it comes to volumes in the fourth quarter. And in square meters, the same thing applies. We have an evolution of 0.1% and a drop of 5.5% in regards to the fourth quarter. Now in our case, we had a performance that was higher than the market. And this is mainly due to the increase of capacity in Gaia II, which was the increase of capacity in the Santa Catarina packaging with an evolution in regards to the first quarter of 5.1% and a drop of 2.3% in regards to the fourth quarter with a total of 43,621 tons. And in square meters, it was 6.4% compared to the first quarter of 2024. And we dropped 1.6% due to seasonality with 86,696,000 square meters of packaging. So our pricing in tons, we had an evolution in regards to the fourth quarter of 1.7% average. And in regards to the first quarter of '24, we had an evolution of 9.7% with some transfers that continue to happen in the packaging. We are still at our second trend for this adjustment, which started off in the month of March, and it will start getting into this more intensely in the second cycle now; and also the increases we had throughout the last quarter, which was very substantial with an evolution of almost 10%. In square meters, 8.4% evolution and 1% in regards to the fourth quarter of '24. Now when we get into the packaging business, getting into the paper business specifically, which are the papers we sell directly to the market, most of these papers are transferred to the packaging units, but we also sell a significant amount of papers to the market. And we've split this into flexible packaging paper, which are bags and sacks; and also papers for rigid packaging like corrugated cardboard, where we sell quite a bit of volume in the market. And those are the TestLiner and KraftLiner papers. And then in the first quarter of '25, we had a sale of 32,921 tons and 6,796 for rigid packaging, a significant evolution when you consider the amount of sales of paper for flexible packaging, 12.4% and 8.3% in regards to the first quarter of '24. Here, we get into the impact of a market that was pretty good in the first quarter, but also an evolution of the exports as well as the Machine #2, which was Gaia III, and that's where we had a very good performance with this machine and an evolution of the volume sold. And the average prices for flexible packaging paper had evolved 7.3% in regard -- in an annual perspective, and we had a drop of 0.9% in regards to the fourth quarter of '24. This drop is mainly due to the dollar, but also due to a mix of countries and types of paper. So the prices for rigid packaging, which are the paper for corrugated cardboard, had BRL 3,626 of average price per ton, 2.7% above fourth quarter and 23.2% in regards the first quarter of '24. This more significant increase in the rigid packaging paper is due to the scraps prices that were pressured. And also, consequently, we had some price increases to reestablish our margins due to the increase of the scraps. And that's what we're going to see here in sequence. The market overall had an evolution of 87.6% in regards to the first quarter of 2024 and 6.9% compared to the fourth quarter of 2024 with an average price FOB of BRL 1,090 per ton. At Irani, we had a smaller increase of 81.6% in regards to the first quarter of '24 and 7% in regards to the fourth quarter with BRL 1,004 per ton. And so the scraps started off -- we had a pressure, of course. And this started the year also a bit more pressured, but more towards the end of the first quarter and beginning of the second quarter with a bit more pressure in the OCC price and due to pretty good demand but also stability and economically, which brings in more instability and risk perception, which also, of course, influences the price of OCC. And well, the Rosin business, as we mentioned, we discontinued this business. It was a business that represented only about 5% of our revenue, and it had results that were really bad in the last 2 years due to the drop in the international market. And prices went into -- got into a slight significant drop from '22 onwards. And then -- and that's when we decided an opportunity that came out to be able to sell our factory of rosins and leasing out our forest assets for the extraction of these rosins. So then we'll be selling the logs and the rosins also that are going to be extracted from our forest plus this kind of leasing model. Well, when we look at the position of our debt, we ended the quarter with BRL 1.769 billion (sic) [ BRL 1.760 billion ] of net debt, a cash position and a net debt of BRL 1.093 billion. And this is a leverage starting to have a downward trend due to the increase of our EBITDA, although our debt did -- gross debt did drop a bit. There was a slight drop of 2.21, and our expectation is that this should continue to drop in the next quarters. And then our debt is basically all in reais due to our revenue sources and only 1% is in foreign currency. The cost of our debt on average in the last 12 months of 11.3% a year, which is about 5% of the CDI without the spread. And in the short term, we have -- before, of course, income taxes and social contributions, for the short term, we have 92% in the long term and 8% in the short term. And this is a debt position that is really well controlled and at a deleveraging process starting off and potentializing in the next 3 quarters. So in the last 12 months, as we mentioned, our debt was at about 11.3% on average. And here, we have our ROIC in the last 12 months, which is 11.3%. And our ACD is at 7.4%, which is the average cost of debt after income taxes and social contribution, so with a difference of 3.9 percentage points. And I think the good news is the beginning of the increase in the ROIC after our investment cycle, which led to a slight drop significantly, but then we start having this growth process in the ROIC again as our debt starts dropping and our results are proving to be better than the first quarters in the last year. And the buyback program we started off in 2024 in March for 18 months, this is still ongoing and active with 76.4% performed. We have a limit of acquisition of 10,651,000 common shares, and we've already repurchased up until the 31st 8,136,400 common shares that are in the treasury. So about dividends, we distributed BRL 0.71 per share in the last 12 months with a dividend yield of 7.71%, so very positive. And in the last 12 months, BRL 0.71 and a total of BRL 168,516,000 paid out in the last 12 months. And in the quarter, we are going to be paying BRL 44,777,000, BRL 0.19 per common share. The investments in the Gaia platform are practically -- the main investments are complete already. We just have the new printer for the Santa Catarina. It was already installed actually and now it's just commissioning. So we should be ending this in this quarter and the refurbishing of Machine 5, where we've already planned everything and we performed the orders, and the shutdown is scheduled for the beginning of '26. The good news is that in the last month, we had the licensing of our PCH in Sao Luiz. That was a bit late compared to our initial plan. But when we have this licensing, so we could begin the investments this year. So some highlights. We were acknowledged in the PME (sic) [ PMI ] Brazil award, the best PMO with the Project Management Institute with this annual award. We were the best PMO manager in Brazil. And we're really proud of this because this is a very important capacity in a capital-intensive company as ours. So we were also the award winners of the EMBANEWS Premio (sic) [ Premio EMBANEWS ] prize. So we received the Roberto Hirashi trophy. This is an award that recognizes the packaging considering aspects like innovation and quality. This is also a very cool award or prize we received. And just today, we're going to be disclosing our integrated report. And up until then, we were reporting the sustainability. Now we have the integrated report from 2024 onwards. And this version has many new innovations with a business view and performance in 2024 opportunities and commitments and especially our indicators connected to the SDGs. We have 6 public targets for ESG commitments that we've been advancing with consistently so that we can overcome these challenges up until the end of the decade. And our IR team as well, as many of you already know, Odivan is our CFO, and he's responsible for our finances and investor relations. Andre is our Investor Relations Manager. And we also have our analysts, Mariciane, Ítalo and Daniela; and the financial team guys, Marcos, our Finance Manager; and Emanuel, our Financial Specialist; Evandro, our Accounting Manager; and also in the new business area, we have Giovana Bucco that provides some support to the Investor Relations guys. And so these guys are always available to provide information, clarifying different information about our results as well. And well, I think now I'm going to stop sharing. And I think from now on, we can answer the questions from our participants. So we'll be available now.

Thank you, Sergio. Good morning, everyone. We already have a list of questions. I'm going to start off with Guilherme. How is it going? Guilherme sent 7 questions in sequence, but we have a lot of information here. Anyways, let's start off here with -- we'll split this into point by point so that we don't miss anything here. So the first one is the demand for corrugated cardboard. I want to hear a bit of the dynamics for this. Which sectors have been -- really levered the demand and if you also expect a strong year throughout 2025? So the first is about the corrugated cardboard demand. The second is about the demand. So what factors have been really leveraging the performance of the paper? If you could separate what's our natural demand with the effects of like a shutdown in the boiler in the last quarter and the ramp-up of Gaia III. But we can talk about these first ones, and then we'll get into the next one.

Let's start with the corrugated cardboard demand, and Lindomar can also add on. But we started the year really well. And although the market was a little lower in the first quarter of last year, but it was a quarter that was very strong last year. And it was a drop that was pretty small in the market as a whole. In our case, we had pretty good evolution. And one of the main factors has been increase in consumption of animal protein industries due to our unit in San Catarina that's very close to that cluster. And so that's really been helping with the growth in the first quarter. And Lindomar, do you want to talk about this a bit in the first quarter and the perspective you're looking into up ahead?

So to add on to Sergio point about animal protein, I want to highlight the poultry and pork segments. And so it was a segment that has been growing a lot. There's still a perspective that is positive considering the pork segment, especially now what we're experiencing, and then we can highlight the exports also to China. For poultry, the impact is not too big, but what we export in the sector is -- has been some cuts of chicken, like smaller pieces of chicken. So we don't have too much availability in the sector. We don't export like other types of bigger cuts. But the product expectation is very positive. As you mentioned, the segment had a slight impact compared to last quarter. But I want to remind you that the base is very strong, and we're really optimistic about this growth when it comes to demand for the second quarter and especially a growth projection for the second semester. So maybe we'll also talk about the papers a bit, but one of the main factors have been Argentina. They got back to buying regularly. And so for exports, you saw the percentage as it represented more in this quarter than in the previous quarter. And the internal market of corrugated cardboard, which is quite intensive, the bag markets also has responded to strong demand this [indiscernible]. So in the bags market, we still have space that we're filling out, which still considers the substitution of the paper by plastics or plastic by paper. And so these are the 2 factors that -- besides Argentina, right, that you mentioned. And generally, this process worldwide could lead to benefits for Brazil, especially in agribusiness, beef and overall agribusiness as a whole with an impact in economic growth overall. And that all helps with the demand for corrugated cardboard that helped in the quarter, and it should also contribute to the demand in the next quarters.

Well, the third question is about pricing. If you could talk about how you're considering the dynamic for prices for corrugated cardboard in the next quarters? Were there more announcements for price increases? Moving on to the context of the prices based on the last [indiscernible]. And so he's asking about DPO prices.

Well, we had an increase in prices that was extended until January and February in the last increases. And we started this new cycle of price increases that started off in the month of May -- March, sorry, but that was potentialized by the month of April. And in the second quarter as a whole, there should be an important impact with a new movement towards an increase in prices to be able to offset this. And as the market has a pretty good demand, we have been able to perform these price transfers. There's a bigger resistance from the market. But there's also an understanding that this recomposition is very strong. And we've been able to have the price increases based on our goals established for each of these cycles.

The next question is about Forestry and if you can talk about what you expect. The Forestry line, do you expect to have any breakdown on this information? Should the revenue be at this BRL 2 billion we've seen throughout the first quarter of 2025?

Well, the Forestry business, most of the wood actually that we cut goes to our pulp production, and we sell part of this to the market as well. But most of the wood is used for the production of pulp integrated on our paper production business. And the Forestry business is something that we discontinued. We kept this -- the Forestry assets, but we're going to just receive the leasing of this Forestry area, right, Henrique? I think this question is even related to Rio Grande do Sul where we had a relevant fact issued to the market. And we hope that in the next 10 years, we'll have the -- of about BRL 6 million estimated per year. And that's what we based ourselves on the expected volume, and this volume can actually be a little bit higher and the price of the project could be varying a bit upwards or downwards. But on average, in the 10 years, this is the expectation. Well, just to help here besides the numbers in the first quarter, there's also the forest that we bought in Rio Grande do Sul that's going to be used to be able to produce more rosin. So the numbers you see are not full yet, are not complete as we just acquired this, which led to the delivery of this factory. There was a swap of assets. And so it's not included in this number. It should be a bit higher than this. But anyways, it's not relevant. Our focus is packaging paper, and this is secondary. It's not strategic for us, and it's not that significant either in the revenue and the company's results as a whole. Well, actually, I think just to reinforce this issue, we had already defined this in our strategic plan from the previous cycle actually to leave the rosin -- like the rosin business since it's not a core business. And finally, we were able to have a business that was really well structured. And eventually, we could even eliminate the Forestry assets with better market conditions. And so at this moment, we're going to continue this rosin activity plus the processing.

Well, now here, getting into the costs, we have pretty good performance of the cost throughout the last quarters. And although we have a bit of pressure in the price of the scraps ODD, but we've been able to -- want to know what you expect for the next quarters and if we expect any kind of correction in prices that could in some way benefit this from a cost perspective with a more normalized scenario and after some of the extended holidays in the first quarter and second quarter of 2025?

Well, for scraps, we're seeing this pressure in the short term. And we believe that there should be a bit of a slowdown in this because -- in the next months because there's normally a peak initially, but then the market kind of balances itself out. And we think that the scraps should get into a more normality period in maybe 2 months or so. And so what was the beginning of the question?

[indiscernible]

And so we had some important cost-reduction work in the formula of our budget for 2025, support from Falconi, the -- our advisers. And we have costs a little lower compared to the fourth quarter. This is actually hindered by the overall expenses because in the last quarter, you had some adjustments in variable compensation. And in this year, we ended up having an adjustment upwards, and that affected the results. But the trend overall is to keep very controlled costs throughout the quarter. We don't have that much control over variable costs. Of course, there are many other variables that could be affected. But the costs that are under our control, we've been able to keep controlled with quite a bit of rationality.

Great. Perfect. So the sixth question is about -- we saw a reduction of BRL 20 million in the first quarter. Could you remind us about the effect of the deconsolidation of these and the cost lines that either needs to be? And if you could mention the main costs of these between the lines and the cost of doing business and cost of goods and services?

Well, we're going to have a more detailed information on the reference channel. That's where you'll see most of the operation is actually discontinued. This rosin segment that we were disclosing is more of a Forestry process, where we're just going to have a [indiscernible], and the operations volume is a lot lower. You could consider that what's in the segment for rosin in the previous quarters is really what's going to disappear from now on and remain only with the Forestry part, which is less relevant. So when we segment this, we have the information you can read, right? And anyway, you can also send us an e-mail, and we'll be able to talk clear. We'll clarify this further and explain what was the impact. But once again, it's always in the rosin segment, which is not that relevant. Then that was -- And the main numbers were already mentioned by Henrique. The impact is positive in the reduction of the fixed costs, of course, and it's one unit less corporate structure that was in that unit. That would continue. And the maintenance CapEx is also going to be reduced a bit. So you have a lot of positive impact in other lines of our results, but our IR team can [indiscernible].

Okay. Yes, exactly. And then the seventh and last one from Guilherme, then we'll get into the next questions, are related to projects, an update on the Neos platform and the schedule for the announcement of this project or any other details you could also share with us?

Well, we're in the engineering phase for the Neos project platform, and we're waiting on this process for deleveraging that's a little more significant to be able to share the new investments with greater confidence and announce this to the market. We should be announcing something by the end of this year on this topic, most likely.

Now we have [ Marcelo Guaras ] with [indiscernible].

Well, I think Guilherme asked most of my questions, but if I could just provoke you guys on another point here. We saw that the cash flow generation this quarter was a little tighter. So wanted to understand how you're looking into this up ahead and how this balance between cash generation and leverage could eventually impact the pace of the buyback program that you guys have been working on. And then the second point, based on this Neos project point, what's the level of flexibility you have for these projects considering the level of higher interest rates that we've seen so far and even a slight weakening of the demand from now onwards?

Well, about the Neos platform, of course, we're only going to be announcing investments that are really mature and that have a return rate that is more long term that could justify some investment like this. But of course, we are always conditioned to macroeconomic situations in the short and midterm when we define investments. We're always going to have a very conservative approach in the approval and allocation of capital in the company to be able to have results and returns in the investments we make. We have flexibility because we have many different projects. We could be starting off a project that may be a little smaller or postponing some other projects. But this is the beauty of the Neos platform, a real set of projects that you prioritize to be able to keep the level of leverage and also prioritize projects that maybe have a better return in the short and midterm. And what was the other point, Marcelo? Sorry about that.

Yes. It was about cash generation and buybacks.

Well, the buyback program, we actually didn't do it during a few moments because of not being able to disclose this while we were disclosing relevant events. But we actually had less buybacks in the first quarter than what we had in the previous quarters. But we should continue with the buyback programs with firm cash generation, and cash flow should actually improve as quarters advance. And it's going to be pressured a bit by the price increases. So you have a price increase in the packaging taking place, and that pressures the need for working capital and that affects the cash -- free cash flow as well in the short term. So that's not going to keep us from having our buyback program because we believe it's super important. And we are convinced that the value of the company is not represented by the share price in stock exchange at the moment. And the free cash flow at this moment in the first quarter is impacted also by the dividends with the interest rate. And if you look at the interest paid, there's a pretty high value, BRL 60 million, which ends up pressuring the quarter. But it's not a quarterly process, right? So you need to always consider this from an annualized perspective to be able to have more visibility. And the cash flow as well in -- for the last 12 months is in line with what we've been working on. So there's no type of significant tightening, let's say, in this process. So it's navigating within the expected normality, right? And the investments in expansion are really reduced at this moment and also the level of leverage and liquidity and the cost of the debt is. And that's how we can also monitor the buyback program. But the level of liquidity is very healthy as well. And so the total value is about BRL 86 million if you consider the quote of the share close to about 8. And so we've already done about 50% of it, and we're getting close to the end of this program. We may have another one eventually. But we always look at the liquidity conditions considering the buyback program to be able to perform this in a very careful manner, but of course, trying to improve our returns and then consolidate this as well. And the same is applicable to investments, right? We have a policy for financial management. So any kind of investments we're going to work on, we always have to consider our goals for leverage ratios. And once again, we can see this is quite common here in Brazil space. We have a pretty good capital structure where we consider different indicators to keep the company always really healthy with an excellent rating and really keeping an AA to be able to operate in the capital markets, having resources and really being able to operate in a healthy manner.

Well, let me move into the next one here. I think there's no one else with a raised hand. Our next question comes from [ Stefan ] [indiscernible].

Is the company going to pay off all of its debt first and then start the Neos project?

Well, actually, we're going to control leverage to make decisions in regards to the project. These are fundamental factors to approve any kind of project. We're not going to pay debt. It's healthy to keep a level of debt to be able to leverage the return on capital for shareholders. So you need to have like quality debt as we have today and really take care of the leverage as we do.

[ Tim ] also has a question.

Congratulations on the results in the quarter. On the cost aspect, could you mention why scraps is just so high? What's the cost dynamic for the year? And when you consider the revenue, what do you expect for the pricing for cardboard and paper? That's something that was mentioned.

Yes, it was mentioned. How is it going, Tim? Anyways, this pressure of the scraps in the beginning of the year is due to demand that was pretty good, but also because they resumed some capacity for recyclables. And also the KraftLiner exports have been evolving, and this removes a bit of the paper from the internal market and you produce more paper based on scrap. So that ends up pressuring the market a lot internally. So as the international market requires more KraftLiner from Brazil, then that should be happening in the next quarters. Then you have to produce a bit more recycled paper, and some operations are going to be resumed, ending up kind of pressuring the scraps market.

So my question is about the compensation for management. Even with this drop, the values paid increased. So what are the criteria that justify this kind of increase, especially in a scenario with more challenging conditions? And also, would these adjustments indicate some kind of a reduction for 2025?

Well, we have all of the -- management overall has compensation between fixed, variable and short term and long term, which is long-term incentive programs, right, for management. The long-term incentives have been paid based on results from previous years, and so it really impacts the compensation in the year. Normally, that's related to prior moments than those in 2024. There was nothing too exceptional. There were some paid based on market research, and the targets that were financial ended up being achieved, which end up leading this compensation to a pretty good level, as you mentioned. And so most of this comes from the long-term compensation that comes from -- that is related to previous periods.

All right. Next question here. Well, do you have anything you want to add on to this?

No, Sergio. I think that's it. You covered it. And maybe you could just talk about -- we're going to see the components of the fees and short-term incentives and long-term incentives. And so the people committee that looks at this topic and validates and approves this and takes care of this topic related to compensation for management. So there's some governance that's quite robust. Well, here do you expect to increase capacity organically only? Or are you also considering M&A?

So we're always looking at M&A opportunities. Our strategy is to grow organically, but also through acquisitions. And the possibilities of good assets in our sector, we're always looking at this and assessing if it makes sense for us. And we've already had an experience with M&A in 2013, and we know about the challenges. And so we really assess this synergy and with the improvements in logistics and buying inputs and different variables we consider, of course, with the financial condition of the company, the quality of the assets. And we also don't have that many possibilities in the market that really interest us at this point. But the companies that have this kind of quality, I referred to, we've been able to assess, but there is nothing that objective about this yet at the moment.

Well, the next one here is also anonymous, and it's about how cash management is with short-term debt.

Well, I think I already mentioned this quickly before, but we have a financial management policy. If you're interested, you can also see this on our IR website. But we're very careful about liquidity. So we have over BRL 600 million in cash for liquidity purposes. We also look at the average term of debt. So our debt is [ all sorted ]. And we have very little short-term debt. Most of our debts are long term. So from a financial management perspective, we don't have refinancing to be done in '25 or '26. And so the actual cash generation in the company, plus what we have available to pay off the debt, of course, we have to look at this a lot more carefully due to the scenario, establish what -- which is more challenging. But our capital structure is designed so that we don't have to go to market and refinance debt in the short term. So we never do this just for political purposes -- sorry, due to our policy purposes.

And about the international market, a question from Guilherme has been asked, is there a possibility for expansion? Or should you focus more in the internal market? Well, about your question on the recent acquisition of land, would be the objective of the company in regards to this acquisition?

Well, about the acquisition, as Odivan mentioned, we had a stop in our assets. We have decided to discontinue this business from a [indiscernible] perspective. But now we performed this, and the rationale was that we would remain the rosin extraction from outside our forest. And if we complete this transaction, we completed this comprehensively first asset for the extraction of rosins, which is an issue -- business that has its profitability, and of course, waiting on the most adequate moment so that we can assess the permanence with these forest assets as well.

And then also about the international market, is there a perspective for expansion in the international market?

Well, that's a difficult question because of the turbulence we've seen up until where -- we could see there could be new opportunities for Brazil in paper exports, especially for Asia. But these are markets that are not very profitable, especially not at this moment. But of course, this could affect the paper market as a whole. On the other hand, the papers in the U.S. that don't leave the U.S. due to tax issues, they could reduce their supply of paper in the international market, and that could benefit Brazil from a volume and price perspective. But that's a hypothesis that we -- is still being analyzed. Let's see what's going to happen in the next days or weeks when it comes to the fees and the rates in the overall market as well.

So now the next question from [indiscernible].

There's been pretty good recovery. What's the expectation for the market and for Irani with the...

Well, yes, there's a lot of influence in the price of the stock, but you have the purchase and sale flows that also influences what we see in the stock exchange currently is the issue with a lot of companies that have very low valuation in the stock exchange and also pretty low cash flow. Of course, we can't talk about the future. It depends on many factors, but also considering the regulatory restrictions that were submitted too because we're a public health company. And the market analysts, they also disclose information about the perspectives in the business, et cetera.

Well, Stefan, congratulations on the results. About the price of the flexible paper, they had a setback quarter-over-quarter. Is there an expectation for the price increases in the flexible packaging as well?

Well, we had an adjustment in the lighter paper in the end of last year and beginning of this year where we really fulfilled this increase in prices of thinner paper, but the thicker paper industry is a market that is -- has a lower demand. It's been a while in Brazil, and it's mostly influenced by civil construction. And the civil construction that really buys from retail -- like cement from retail, and they use a lot of paper. But on one side, we have this increase and there's also an increase in demand due to the bags and sacks. Do you want to add on to this?

Well, I think that's it. Due to the thinner papers, as Sergio mentioned, we increased price. And this drop in prices, as you saw, is really how the -- the price of the paper itself didn't drop from one quarter to another. We sell paper that's like 30 grams to 180 grams, and there's months where it goes more to China, Argentina, et cetera. And so this variation in the price of 0.9% that you've seen also has a bit of the currency and the mix of countries we ended up selling to. But it was a natural drop due to the thickness of the paper or per market considering the foreign currency per segment as well. And thinner paper, we already increased our prices and maybe in the bags, sacks market depending on demand. But of course, you have this civil construction issue that Sergio mentioned that could in some way influence this in the second semester. But we must wait and see and understand what's going on in the market also with the coming and going in the tariffs also related to paper around the world. And so this drop, as Henrique mentioned, leads to many different possibilities, right, the mix of countries, the mix of types of paper, the dollar. And so you have many different factors that could influence this besides exports also. The prices for exports are normally smaller than the internal market prices. So we had more exports in this quarter compared to the previous quarters that also impact the -- and so there's many different possibilities. So what we could say is that line by line, the types of papers didn't really suffer much of a price modification.

And [ Alexandre Sandberg ] is also questioning about the new customers and their perspectives also with Argentina.

Well, Argentina is a market where we export to traditionally for over 20 years, leading the market for flexible packaging. We were always there on paper. We needed Brazilian paper. So we haven't opened up new customers. It's normally the same customers in the last 20 years. But the perspective is pretty positive, and the volume has also been increasing quarter-over-quarter. And -- however, there is -- there are not new customers. It's the same as always for the past 20 years. There's also some stability when you consider the paper market, which is quite significant in our portfolio of customers. They buy recurringly and some buy many times a month. And so the exports typically have a 60-day cycle, but the new customers end up helping us against [indiscernible]. We sell almost all of [indiscernible] for paper bags. And Argentina is also a very important market for us. And then in packaging, there's a more significant turnover. But the biggest accounts and the most traditional customers remain in our portfolio for many, many years. And do you want to talk about that a bit more, Lindo?

Well, we also have the ability with customers that are very traditional. They see value in our offering. And we also have some prospecting initiatives where we're always looking at new opportunities. But as long as, of course, these are in line with our profitability levels, we also have prospecting initiatives and we have a really consolidated and healthy portfolio. Well, when you have an increase in prices, as we've experienced in the first and second quarters, then we have to prioritize the price increases instead of the volumes, right? And actually, the volumes end up being recovered in the second semester in the year. You could have some shift in suppliers to avoid the increase at the moment, but the volumes eventually resume normality in the second semester, which is where you have the strongest seasonality.

Well, now you have Santiago also mentioning this. And he says, of course, the international scenario has probably already been a topic of discussion in management meetings. But what would you think are the main impacts that Irani has that are discussed internally due to the war and the overall global scenario? Do you want to talk about that, Odivan?

Well, I think the situation initially is everyone is trying to understand what's going on. No one knows what are the actual effects. There's a lot of primary, secondary, tertiary effects with product allocation. Everyone is trying to understand the impact of the war on tariffs for different countries and segments and markets. We've been monitoring this and this topic is, of course, on our table. We talk about this weekly. But the feeling we get is that at the end, it's like what people were talking about in Brazil, right? Brazil could even be benefited. Our customers could be benefited. But there is a scenario that is positive. It isn't confirmed. And on the other hand, there is also a possibility for global recession that could lead to this global scenario due to the same topic with the tariffs. And so we have to really monitor this closely. We have this capital structure prepared, and we also are prepared to for the -- take advantage of this opportunity up ahead, right? When we consider which direction this story is going to be finishing for us in Brazil, we have a lot going on, and now we're monitoring this on -- at this space.

Sergio, do you want to talk about anything in regards to this?

Well, I think the scenario of stability, we have a drop in the global demand that's going to reach us, of course. But Brazil is an important player here as we search for volumes, especially on behalf of China.

We have another anonymous question here. Could the company have a follow-on to structure the Neos platform?

Well, all of the different initiatives for funding are available. With each investment cycle, we have other opportunities. And our expectation, at least for the Neos platform, is to do this through a debt. But of course, it's going to depend on the size of the investment and the market moment, the returns so that we can really define what's going to be the source of funding. But it's not discarded, the possibility to have some follow-on eventually.

Exactly. Well, [ Hector Suarez ], and we have 2 more questions here from [indiscernible].

Well, Irani, congratulations on the results. My question is about the dynamic for the price of scraps. Is there an international demand that's really pushing this demand? Is there some kind of a cyclic perspective on the prices?

Well, the international demand for Brazil is really closed. There's not like exports of scraps. What happens is when you have major pressure in the pricing, you have to activate the imports channel, which was really lower in the beginning of the year. But the companies end up importing papers, especially from the U.S., in moments where you have more pressure on prices. There's some seasonality, of course. But theoretically, in this phase, you would have a smaller volume resuming because of return in the scraps for recycling represent a cycle of about 90, 100 [ spending days ]. And so you already have months with lower productions in the second semester. So we had a month with lower production seasonally. And resuming of the scraps will start happening now and there'll have a bit of pressure. But in the beginning of the second semester, we'll also have a bit of pressure because the increased demand for recycled papers, and that causes some sort of increase in the scraps as well. But this is not kind of written on stone. Each moment has its own story in the increase of scraps. And at this moment, we also have this pressure. But we don't think it's totally bad, especially when you consider price increases that could somewhat justify this need for price increases and eventually could lead to a stability in the price of the scraps and then prices kind of remain at the dimensions they had now after -- upon price increases.

Perfect. So well, we have our last question here from [ Shane ], and he's asking about what are the main [ challenges ] that are affected in Argentina?

Well, in Argentina, you have paper for scraps and bags, bakery bags, et cetera. These are basically the main volumes, very little coming from corrugated cardboard. Henrique?

Well, how is it going? Shane, just to give you an example here, a big market is like bags of flour, powdered milk bags, packaging, which are the bag we call industrial bags for like agribusiness, et cetera. So this is a big segment that's used a lot. And then, of course, you can also look at cold bags, takeaway, bakeries, et cetera, but most of this use is for agribusiness.

Okay. Perfect. No other questions now. So I think we're ready to wrap up now.

Great. Thank you so much. And Fabiana, talking about our integrated report available on the website. Yes, we have a leaner, more summarized version but without losing the essence. And we want to encourage you all to take a look at our report, get to know Irani a little more. And we're going to be sharing the main highlights of what's going on in 2024. So it's really cool. We also have the main indicators and permanent indicators that are going to make it easier also to look at the numbers and the evolution. And so we want to invite you all to take a look at our integrated report that's already available.

Perfect, guys. Thank you so much for your presence, everyone. And we're all available to clarify any of your questions. Our IR teams and directors are available also to clarify any of these points. Thank you, and see you in the second quarter. Bye, guys. Take care. Thank you so much. Bye-bye. [Statements in English on this transcript were spoken by an interpreter present on the live call.]