Klabin S.A. (KLBN3.SA) Earnings Call Transcript & Summary

Hello, and welcome. Good morning. It is a big pleasure to be here to kickstart Klabin Day 2024. Let me introduce me to you. I'm Patricia Pais and I'm happy to be able to host you this morning. Thank you so very much for joining us. And I also want to thank the audience who's with us online, live on YouTube. We have live translation into English for those of you who need it. And before we start, let me say a few things. Safety is a nonnegotiable value here at Klabin. So for those of you who are here with us in person, I'd like to remind you that we have emergency exits at the back of the room to the left. And our team will be here to support you in any situation. Like in every other year, this is when we revisit our year and show you what our prospects are for the next cycle. Today, we're going to be welcome Cristiano Teixeira, our General Director, who will be telling us more about Klabin's irreplicable business model. And then we're going to have Gabriela Woge, our CFO, who will be talking about financial discipline here at Klabin. And finally, Cristiano will tell us more about the pillars that we use to generate value at our company. At the end of these presentations, we're going to have time for Q&A with the company executives. For those of you with us in person, we can take a microphone to you. But if you're connected with us online, on YouTube, you can send your questions by scanning the QR code that you see on your screen. But please remember to identify yourself when sending your question. So to officially launch our agenda, I invite to the stage, Cristiano Teixeira and Gabriela Woge. And with that, I hand it over to Cristiano.

Well, good morning, everyone, and thank you for joining us. Let me see if I can get these slides to move. Well, I'd like to start by talking a little bit about our succession line. I always say that, at least this is something that I've done recently because we have had C levels either retiring or moving, and we want to always be transparent in the changes we have in our company. Of course, there is a limit to this, but I don't think we have either had any confidential process in that sense. It is important to say because we are Klabin's labor, like any other and we know that to keep a strong culture, we need to keep training people. I have the privilege of meeting people who were able to go through all different areas of the company, like myself, which is important. But now I wanted to show you Marcos, who now is also moving to other areas [indiscernible] so he can reach the business role like Douglas and others coming from finance, but learning more about our business to really take on a business role. He is very young and are now preparing him for this new moment in his career, and he's going to be taught by a prevalent mentor, someone I've known for more than 40 years. And this person will be training Marcos for as long as he needs and Klabin is happy to count on slides to do so. Then we have Gabriela Woge who joined us 3 years ago. And she was hired to take on this role. She is young, but widely experienced. And she has had an amazing journey here to Klabin. This was a very important year for her because she was able to raise [indiscernible] in capital. So we were able to change our debt structure significantly. We were able to reduce our debt in dollar and also extent the payment deadline -- the payment time line. And this year was the first time that Gabriela made the budget overall, much better than that of Marcos Ivo and it is a privilege to count on these people who are being trained by different areas because this is very important for our business. I've been asking the communications team to put more photos of our plants and products on our slides and not because we don't want to have the trees on our slides, but because sometimes we try to show how complex our company is in terms of processes and technologies and when showing you only beautiful photos of trees that might not be the case. Especially because sometimes we might be biased thinking that, well, it's only planting trees, and that's it for paper and pulp, but that's not it, right? We also have many industrial processes that are involved here. But I'd like to start by touching on an important topic. What gets us to stand down from the competition? I know that a lot of that we will cover here may sound just like, I don't know, a narrative for you, but it might -- you might have seen some of the videos and interviews that I've recorded discussing in pine trees. And at Klabin, 55% -- 57% actually of our -- of the wood that we use is pine in the state of [indiscernible]. But I have to remind you that the states that are the largest producers of pine are precisely these 2, because this is the best area for that 3 type. And it's important for us to touch on that because pine trees, they have some advantages that we will cover later. But that starts by showing why our -- why no one can mimic what we do because eucalyptus is, of course, a 3 type that we use at our company, but we know that due to Brazilian geography, you can plant eucalyptus in other parts of Brazil. The same thing is not true for pine. And when we talk about our product portfolio, as you will see in the next slide, will always be close to products that need to be moisture resistant that only pine can offer. I'm not here to criticize fiber-to-fiber processes. And I want to reemphasize that because, as you know, Klabin was the company that first introduced eucalyptus into kraftliner and then was able to develop a full eucalyptus product. In any case, we're always pushing the limits of what we can do in fiber-to-fiber processes. But it's also important for us to have the option of using softwood as well so that we can produce a very comprehensive line of products, for example, those that are used in milk and beer as well. And that requires softwood fiber. These are assets that make us very competitive in terms of price as well. Of course, since we operate in the state with the highest productivity, we get good rainfall there, more than other states. And we do not need to irrigate our forestry areas. Because, as I mentioned before, we have a regular rainfall across the year in a very productive area, which makes all the difference. I know that I'm going to talk about sustainability. Sometimes, things seem intangible. And many people have lost interest, but to us, sustainability is not the only thing. Yes, we have always discussed the fact that sustainability is part of our DNA and at first it was actually hard for us to really emphasize sustainability because this is everyday business for us. We're always talking about sampling, mortality and rainfall rates, we know how many millimeters of rainfall we have at the [indiscernible] today, and that comes with a price, right? We know that changing stock from one place to the other due to operational safety may add some hardships, but on the other hand, I don't need to irrigate and therefore, we have a higher share rate for sapling. So yes, I can, therefore, have a more comprehensive portfolio of products now that I work with softwood as well. We work in the best geography possible for softwood forestry. And Klabin today is definitely among the top 3 countries that invest softwood fibers in their research and development efforts. And this is important for us when we think about the amount of assets needed for each new plant. And here, I mean, wood. And one more thing here will also be discussing asset value here at Klabin. We always try to convince you of the fact that if I only look at Klabin's productive areas and I think about the average negotiation price, I believe -- actually, I know that the valuation of the company or our market cap is not enough to even by the land that we're in. I've told you that many, many times before. Because sometimes it's hard for us to find recognition on the assets that we already have. We will try to show you these numbers a bit better throughout today's lives. We will show you some examples in which we use third-party woods. And then at some point, we bought areas near those supplier -- near actually our plants, and we're able to get more cost effective operations due to the reduced distance. And I saw that if you look at share prices before and after these changes, the company's share prices have remained the same. As if we were not even verifying risk, meaning I have all the risk of buying fibers from from far places and all the operational risks there. And then little by little, I buy land closer to our plants, a cheaper price. I sell land that was further from our plants. And we're going to talk a lot about land because it is important for us to have the expertise at home on land trading. And we will show you the numbers because we're not afraid of sharing it with you. To the contrary, we believe that this is actually one of our assets. But we see that the risk perception has not changed. We went from third-party wood to softwood. We reduced the distance from our forestry land and our plants and share price has remained the same. We can discuss why that is the case because it is hard to understand. Now let me tell a little bit more about our product portfolio. And here, softwood plays an important role. Well, you know that we talk a lot about our business model. 8-9 years ago, when we first designed our strategic plan, and you will see will talk a lot about our investment cycles here, we decided to split the company into 3/3 because we wanted to reduce volatility and to also work in some niche markets that had higher price per ton. And this was openly discussed with you and was executed with no risk to the company. I mean, of course, there was always some risks in implementing a new project, but everything was done within the time frame that was established early on. And I know that we're not here to audit investments halfway through, given the fact that these are investments that will reap fruits for 50, 60 years. But in any case, all the capital that was invested with no exception, so all the investments that we made are better now than they were when we first suggested these changes. So this is a company today. And we use revenue as our main metrics. And you can see, we are market leaders in many markets in which we operate, especially here in Brazil. And we are also building a closer relationship with end users, meaning known brands, especially brands that are known not only in Brazil, but globally as well. And we -- we focus a lot on food-grade products and hygiene, cleaning as well as civil construction. And just by looking at the slide, you can see that these products, they are not printed by Klabin. If you look at these, some can be done by us for end users, especially in packaging, but not all. The others require us to have a close relationship with big brands in Brazil and globally. And if you want to understand Klabin, first, you have to look at the supermarket near you and average consuming ticket because if we perform well in markets such as beer and milk, this is incredibly relevant. As you can see, I will be able to go through all the products because we have many of those here. And what I wanted to say is that many of these products, especially deals made out of softwood, they are important to our portfolio. Yes, sure. We continue to use hardwood as well, but we can now make products that would not be possible if we only worked with hard water. Diapers, for example, are a good product that we can offer to our customers. I can talk to a customer that we have softwood diaper with 10%, 30%, 40% of hardwood if needed, the customer chooses, and then that's given to them ready. They don't have -- the customer, I mean, don't have to change the fiber in any way because we're going to have a balanced mix and the customer doesn't have to do that in their own plant. So the fraud market in Brazil is so much in [ vogue ]. And it definitely depends on the softwood to make it happen. And the BR market that, of course, has its [ peace in valleys ], but basically, we are already certified in all the biggest companies in the world to work with their -- to work with our product, of course, for their packaging. And this is all to tell you that historically speaking, Klabin is, of course, well renowned in all the commodities and companies in the sector, in the food and beverage sector. And this is a rather linear perspective. And I just wanted to make sure that this is in line with you. So having this forest with more than 50% of trees of softwood. And even though we do use hardware if necessary, and it is going to be available, usually, the majority of the products are going to be contracted with softwood. And I don't want to mention the biggest names here, but we do have contracts with the largest companies in the food and beverage sector. And at least 2/3 of the company are considering the margins within inflation plus, of course, and extra. So the stability level is pretty consistent. This is how Klabin has been developed. We wanted to be where we are. That's not to say that we are not going to change that in the future depending on the investments. But we really wanted to go through a stability and cash flow generation period. It's an ideal moment. So this is why I will ask you to bear in mind these products, the market that we are currently working on. And it's important to bear in mind as well that 70% of our cardboard customers have contracts with us that have terms from 3 to 5 years, considering already fluctuations with inflation. Now let's change gears a little bit. And we already know that people is one of the most important factors. And of course, the industry of paper and pulp goes along the same way. We are in a sector that definitely needs this experienced its knowledge to add more value because we are dealing with processes that are often 20, 30 years long. And we know that oftentimes, we are talking about the processes that are only going to be actually coming to fruition in the next generation. So the biggest plans for paper and pulp were designed from -- by thinkers or executives from a generation before us, and we are now working for the generation that's coming after us. So this discussion about capital allocation is really a short-term process. If I am an executive of the company, and I am designing or preparing the company for the next 10 or 15 years, we need to say -- I need to be taking into account what is the competitiveness of our fibers of our wood for all the different sectors. That's why we need to work alongside consumer goods consultancies to understand what are the trends and where is the market going to? And it sounds like a very crazy -- rather crazy discussion. But that's the true. If we consider the data about the market, about income in the country. And I'm not even talking about the mainstream countries, the countries that we go for leisure time. We are talking about our focus countries, which are mainly the emerging countries, right? And obviously bring enormous possibilities. We're talking about India, the African continent as well as Latin America. And we know that there are some countries that are still going through this process of recycled fiber, recycled wood. And that's true because this is what happens for the next 30-year cycle. And we know that there are no alternative ways to consume that product on the other end of the process. That's why we always have to consider the long term. And I am not even talking about strategy yet. I'm still going to get there. So specifically talking about capital, we need to consider, okay, what's the value of -- the current value of my share, the inflation, interest rates on those countries. And of course, it has to be considered by the entire Steering Committee, we even have our CEO representing our Board here with us today. And we have to discuss that without any preconcept -- or preconceived concepts. So you remember -- we are here to talk about controversial issues as well. You guys remember that Figueira's investment was quite controversial, right? But Figueira was paramount to our business. And I remember saying that at the last Klabin Day as well, because the investment in packaging materials, especially considering consumer goods, where, of course, we have to consider the inflation, where [indiscernible] is now lower than it was. We know that, that investment is going to protect our ROI. So hopefully, this discussion today is going to be very free and open minded. As we did for Figueira, we already know that, that was a protection to our -- to the ROIC of our machine #27, right? So if I did not have that new factory there, I would have to get all that paper from the machine '27, I could not convert our own packaging, and we will have to sell the paper. So you know that already. You know that even better than we do. If I had to sell that directly to the market, I would have to be fighting for our contract, considering the tariff hike as well as competitiveness in many other countries -- with many other countries in the world. And we are also going to be talking about the cost per carton. Even for the exports, we have that covered already. And we usually say that we at claiming are the last ones to fall because our cost is the best one. And this is the reality that we've had last year. This is the reality that many companies that are so well known in the market, and they are now losing business, they are having to close down factories or shut down factories. And claiming we have the most competitive equipment in the world, and we don't even have to export the paper at very low prices, considering the kraftline. We're talking about [ $30 to $40 ] per ton. We can actually transfer that paper to our packaging material, we can need sale that at a higher price. If you get the data that we have in terms of revenue, we are talking about more than $100,000, and we can transfer this product to another area with a CapEx per tonne that is way lower to stabilize our results, because, of course, the negotiation of this product is by inflation. We can increase our productivity, therefore, stabilizing our cash flow. So I wanted to bring that up again because currently, many companies in the sector are considering exactly that this debate that we started 10, 15 years ago. And this is how we look at that about capital. And we have already discussed that, okay. So we considered all the scenarios. Okay, what if we have to export, what if we have to convert it, and this is how we protect the ROIC. So why not just rebuy the shares. As you know, the executives are not there to just buy the shares again. Otherwise, I would be working at the finance -- financial capital. Our role here is to bring more differentiation. We get a look at the opportunities and see them where usually other people are not there. We can only be opportunistic about it if we have to rebuy the shares. But we have to consider the next 50 years of the company. If we really want to generate yield for the shareholders, then we are going to go over here. And if not, we can go other ways, thinking about the purchase of the shares again, okay? And this is something we can discuss. I'm not going to say that we are not going to do it, but this is not majorly what we have to do. Now, here we're talking about our strategy when it comes to leveraging. As you know, Klabin is always looking for investments that are at least 3 to 4 points over our capital costs. We are very straightforward when it comes to that. And even in this process, and I am going to tell you a little bit more about that. But again, we are in a moment to decrease our debt and we have already made our peace with that. We actually know how to work with it. And we always have to pay our shares to the shareholders, of course. As you already know, this is one of our goals. This is something that we always want to do. We need to give this objective, very clear, this goal very clear to all the shareholders because we always want to pay our dividends in a very stable way. Now again, we have already talked about the returns on our investments, always considering if necessary, these leveraging, but we focus on anything with the WACC that is greater than 4 points. And I think that's alright. Okay. Next slide. So how is the company right now. And they really like the slides because they help me keep things in mind and also to keep on track. So let's talk about our current moment at the company. So we have just been through one investment cycle. And I will let you know about the main investments that we have over the last few years. And this is the trajectory that we have followed with high execution risk. But now we are over it. The investments are already up and running, and I will let you know a little bit about the volume that we are forecasting for the near future. Now we are focused mainly or what we call harvest loss or the deleveraging. So we are still a growth company, okay? I have just told you about the long-term growth plan for our company. But Klabin is not just seeing the competitiveness of the cost of the fibers is mainly located here in Brazil. We could talk about all Latin America, but specifically here in Brazil, we already have a couple of million tons that we can structure in a very consistent way with the best cost in the world as a global reference and our goal is to take it to -- take it to other countries in the world to work with the conversion outside of Brazil. So this long-term overview can still be discussed. But in the moment, do we have any new investments in the pipeline? Well, the answer is no. But currently, we can assure you that considering that we no longer have the execution risk that all the hardships of the struggle that we have to buy the third-party wood is already something that we have worked even for Arauco. Maybe we already have the asset that is available and is probably the most strategic and most valuable one in the world with a large area of pine forests pretty close to the company. And this is something that's already there. It's already operational. So now we are going to talk about the free cash flow generation. And just as I told you that it is kind of complicated for us to understand how the values of the share of the company cannot even buy our own land, which is our asset. And I have to say that there's probably 3 likewise, assets here in Brazil, considering, of course, its value over time. If you consider the value of the productive land in that region, we're talking about mainly Parana, Sao Paulo and Santa Catarina, okay. And I am not talking about lands in the Central West region or in the Northeast area, which, of course, are areas with a complete -- completely different regulation framework and different sustainability practices. And of course, I am not talking that it is in detriment to the region. But of course, it is something that is in better conditions here in that region in the South and Southeast region of Brazil. We are talking about land that is mainly novel. And we can even buy and sell with 30% or 40% gains over this transaction. And when we scan the land, you see what it could be used for. And this is a technology that we already have. And I only know a handful of companies in Brazil who try to do that. And of course, I'm not here to tell you that we are better, but -- better than them, but Klabin is one of the very few companies in Brazil that actually have the know-how to do that, to assess the potential of the land. And of course, here in Brazil, we are a reference for the entire region of Latin America. And we are really good at assessing how much it's going to cost. Our team here at Klabin is benchmarking in the entire market. So we know our land. We know how to execute large investments in a very organic way. And we can buy companies and bring more synergies to the company. As an example, the assets that we have purchased by International Paper. We could be telling you about M&A and we bought this company with 4,000 employees. So we are talking about a company with financial tools that are modern via partnerships, improving our ROIC. And because we know all these leverages, all these attributes that we can use in a very unique way in the world, and that allowed us to get you a deleveraging moment, of course, respecting the payment of dividends because we have this strong commitment to our shareholders. And as you can see here in this road map, we have a document that has been created in 2017 actually. It was already made official. And you can see that in the next 10 years, we have already mapped a long time ago. So now this is, I think, the key messages that I wanted to tell you, and of course, we are going to have a Q&A moment. And now I give the word to [ Gaby ]. So she can tell us not only tell you not only about our businesses and other attributes, and I will be back with you to make sure that I was able to convey the message.

Thank you, Cris. Well, good morning, everyone. First, I want to publicly thank Cristiano for the opportunity to be here with you today. I am very, very proud of that. I also want to thank Marcos for this transition period. I know it was long, but you've helped me greatly in preparing to be here today. Again, as I said, it's an honor to be here, but I know that replacing Marcos will be a huge challenge. Let me start by telling you a bit more about our financial discipline. And we are actually responding to your feedback. You've always asked us about our cost structure. And now we have a guidance with our total cash flow cost so that we can show you what our cost is for our products in total. And here, you can see the historic average since 2023, showing you how disciplined we have been in managing costs. In the bar chart, you can see not only our forecast for 2025, and I will drill down to that later on, but also numbers from 2026 meaning the best forecast we have today for our cost next year. And in this period 2023 to 2026, you can see that the interest rate total is 14%. And if we put that into our cost structure, we should be now at [indiscernible] per ton. And as you can see, we have been able to keep our costs stable, and actually, any increase is below inflation. And where does that come from? Well, let me tell you more about the numbers around 2025. We know that we have very few days before the year is over. And as you know, in the fourth quarter, we had the longest downtime in one of our plants. And this was actually done brilliantly with our team, keeping costs and time within our plan, which is very important for our results. But overall, in 2025 and of course, our quarterly meetings, we've always told you how challenging this year for Klabin, but not Klabin alone, but for the globe. This was a year filled with the uncertainties. Many companies faced many challenges, but we were very quick to adapt to a new context and look for initiatives that would again bring us back into the cost control that we have set forth to do. In the first quarter of the year, we had some production issues that impacted how much pulp we had available. And then we launched initiatives to compensate for the production loss. And we are happy to tell you now that we have normalized the production levels and have recovered amounts throughout the year, therefore, leading to positive results, as you will see today. But we are also facing climate issues, inflation, a new world when it comes to inflation, the interest rates and exchange rates. And this is something that impacted both our fixed and variable costs, but we were able to launch initiatives to keep us within our guidance. As Cristiano mentioned earlier, we also talked to you about the Caete project and the plateau projects, meaning the company has been selling land, which is important to our financial results, and we have a very detailed plan ahead of us as well. And we are here to share information as transparently as possible. We always put that into our cash flow cost numbers. And the number in 2025 means BRL 70 per ton. And when combined with all the other initiatives, this is what allowed us to keep the costs where you see them. And what do we expect for 2026? Well, we hope costs to remain stable. We are a very robust company, and we're looking for initiatives that can compensate for inflation when it comes to our cost structure. And in 2026, as you know, we will continue to grow in sales volume, and Cristiano will talk more about that later. But this is what we expect to see from the investments we have had and that will be ramped up in 2026 and 2027 for better results. And in 2025, as we have already talked to, we had some downtime in [indiscernible], but not in our second largest plant. And in 2026, it will be the other way around. We will have some downtime in [ Monchalegro ] plant in the first quarter of 2026, but no downtime in Ochigira, which is also something that will help to increase volume throughout the year, also reducing maintenance costs for sure. And with the ramp-up, and this is publicly available, you will see that in all our results, but the ramp-up plus the net effect of these 2 downtimes represent 80,000 tons of production -- additional production when compared to 2025, which will help us to dilute costs overall. And we know that we also face different challenges in terms of shipment, labor, inflation, fiber cost. And when we look at that internally, we, of course, need to find more initiatives that can offset these growing costs so that at the end of the day, we can continue to keep our cost stables. And we hope to have proven to you that we are able to do that, and we have been able to mitigate rising costs. And just like we were very successful in doing so in 2025, we are sure to repeat the same results in 2026. Now let's look at our investment structure. Another piece of good news is the following. Not only we are very disciplined in how we control costs, but we also have great predictability in the investment execution, which has also translated in meeting the forecasts and budgets that we sent to the market share. So here, you can see our guidance for the past few years. As is the case with the previous slide, we've been keeping track of these metrics since 2023. And as you can see, we have reduced investments because we are now reaping the fruit of previous investments. So we are not expanding capacity any longer. This is something that we did at a previous stage. And now we are moving into the following stage where we want to see some stability in investment amounts so that we can continue to have a strong culture and also we will look into our operation cost for forestry, and we have no expansion investments in our pipeline right now. If you look at 2025 and 2026, we -- our guidance for 2025 was BRL 3.3 billion invested and we believe that we will end the year below that number. We are close to BRL 2.9 billion. Part of those investments, they will be done in 2026. So we expect 2026 to amount to BRL 3.3 billion, and this is what is usually expected because this is the investment we had in previous years and might be the case for future years as well. But basically, this number has been brought down, and you will see that this is going to be a way for us to leverage and increase the cash flow -- free cash flow in the company. Here, I would like to raise an important point. Yesterday, we launched publication with some of the measures taken by the company to benefit our shareholders. And we know that we have a new bill, [indiscernible] that might change how dividends are paid and to mitigate it our company has issued a -- what we call intercooler dividend statement at BRL 1.1 billion. This is done based on the accumulated profit in 2025. So this is something we are going to be splitting to 2026, and it represents [ $0.18 ] per share or [ $0.921 ] per unit. And how does that work? Shareholders who will be getting those dividends, they need to be in the [indiscernible] base until next year, the 16th of December because after that day, we -- our shares will be traded differently in 2026. And the second initiative was to pay a bonus due to an increase in capital. This bonus will amount to BRL 0.8 billion, and we're going to use the reserves from the company. And it is -- we can also offer on new share per 100 shares. So we want to increase our basin 1%. We will be issuing new shares, 1% of new shares and those who can receive the bonus, they have to be part of our EBITDA base until the 17th of December, and the shares will be traded without this right to study on the 18th, meaning the bonus is going to be paid still in 2025. So this is what I had to share with you. And I hand it back over to Cristiano for his final messages.

Well, you might not know, but this is one of the corrugated machines that we have at Figueira. So where are we right now? This might look obvious to some of you, but I think it's important for us to reinforce that message and to think about it more deeply. So we have made the major investments already, and that includes the fact that we are changing one of the recovery furnaces in one of our plants so that we can have more sustaining operations, and this is the heart of paper manufacturing plant and is one of the key equipment to show the capacity that we have. And we hope that this is a new equipment. This -- will be used for 40 or 50 years, and this is what we are assessing in terms of investment for Monte Alegre, okay. I talked about that [ boiler ] so that you know that this is an asset that well has been used since the 40s to show you precisely that we can have the new one also serving as an asset for decades to come because -- and it can be a big asset in helping us build packaging and other products. We also have [ Puma ], for example, which is a top-notch state-of-the-art technology when it comes to high-end products such as beer and milk grade products. And in that regard, we have brought 900,000 additional tons of capacity for this paper that can be used for packaging for liquids. Now, okay. So we have covered most of the investments already. And I've mentioned a few times the fact that we have very long-term contracts with safe prices with some of our customers. And we also work with partners with home research and development plays an important role. And this is particularly important for us because it also reduces our cash cost and Klabin is the company that has reduced the weight of its paper the most in the industry, while we're maintaining the paper characteristics. Customers who use Paper 27 for boxes, that box can weigh 10% more than traditional boxes. This means, among other things, reduction in the cost of shipment and freight and more efficiency across the value chain. And all the investments we've done and the investment we've made in our people as well is something that we focus on in the first step of this information and now we are going into the second step. Of course, we have bought some of our competitors, and we have made investments to protect ROI. And this amounted to BRL 25 billion total, but now we are entering into a new cycle that should last at least 5 years in which we want to bring leveraging to very, very safe levels and in the meantime, we've been studying forestry, we know that there are some parts of South Brazil, where we need to prepare that land for future investments and this is what we've been doing throughout those 5 years. The company will also undertake a new process related to operational continuity, including forest operation so that we have all new trees being planted so that we can use them in the future. And another thing, [indiscernible], our Head of Engineering, has been very meticulous in choosing what needs to be done in each plant. We now have a department that is dedicated to assessing that. And this is what has made us more efficient in terms of business continuity because that is the [indiscernible] of our sector across the globe. If you visit any paper pulp manufacturer in the Northern Hemisphere, and of course, we're not here to say that, that region is not as good as ours. But if you visit those manufacturers, especially in North America, we're talking about the fact that they have very little predictability when it comes to operational continuity. And in some cases, if you make a 5-year curve, there are companies and equipment that are now reducing their capacity with time because they cannot make new investments. They don't have the room for that. Sometimes, they don't have available labor. Sometimes they don't have available wood. And there is a big difference between competitive cost and wood availability. Because it's one thing to buy wood waste and then use a boiler that lasts for 40 years and make sure that, that wood will be available for 40 years. These are completely different debates. Okay. So all of that has been done. We have high-end products in our portfolio, a stable production and letting you know that our governance structure and our operational continuity has been very well established, and I believe that we are serving as a benchmark in our industry. Ricardo has seen that in other countries. So yes, we will now start to reduce our debt structure through EBITDA? No, not right now. As I mentioned, well, we actually increased our leverage through -- EBITDA through cash generation. But now what I want to show is we said that we're going to be reducing our debt structure in the next years. And here, I'm not even counting on EBITDA. And why not? Well, because prices, if we look at the worst pulp and kraft paper prices today, and I mean today between the worst price here and the inflation in the U.S. on top of it, that is the price that shows that we are at a quarter of worst price in history in our industry. What do I mean by that? We cannot count on cash flow generation through EBITDA. Yes, we will continue to be very disciplined in terms of our cost structure, regardless of whether we'll be selling wood or not -- that -- sorry, no, not wood selling, but land selling, that would be just an additional revenue gain, but that's not what we're counting on. But in any case, if you look at the slide here, and we could discuss more on paper and pulp prices and higher low-income countries. But just by looking at the statistics, which makes the discussion easier, you can see that in 30 years, that price should go back to normal levels. And I also believe that this is what we're going to see in the next few years. If prices go back to $100 or $200, this is not even something that we are going to take into consideration. Meaning that we can reduce that even more or increase our free cash flow even more if prices go up, which is not something we are considering right here. Lastly, but not least, we always try to find a way for you to see the value without us having to straight out asking you to. But we also had to take a stand outside of the company, right? To see how our companies being perceived. And this is what I was trying to tell you from the beginning. I was telling you about the risk perception. It's -- as if we had consider the pricing of all the actions that the company took to derisk our operation. Of course, there are other companies -- other factors that have to be considered. So these are the main leverages of the company and tell you why Klabin then? Why Klabin then? Because we have attributes compared to other manufacturers in the world that [ tailing ] comparison actually. And that could not be replicated in Brazil for the fact that we have a short -- sorry, hardwood as well as the portfolio of assets that we have. So we have great forest as well as industrial assets. We also have breached the end cycle of investments as well as a great portfolio. We have the equipment number 27 and 28. That can be converted into a cardboard. And I was even talking to one here and they said, I think it can be even better in the future kraft paper is going to become even better in the world. And I'm talking about virgin fiber kraft. It's starting to become [indiscernible] product. So it could be in competition with cardboard in the future. And if we discount the calculation to the cost and the cycle of investments of the few years, you can see that we are way beyond the value of the company. So I think I can just close here, right Gaby. And I think we are ready to open for our Q&A. Thank you.

Thank you, Cristiano and Gabriela. And now, yes, we are going to open our Q&A. This is the moment where we're going to have the opportunity to clarify any questions about the presentation that we just heard. We are also going to have the presence of other directors of the company also to be able to answer to your questions. If you are connected online, let me just reinforce that we are going to have a QR code available up on the screen, so you can send your questions, okay? If you are here in person, just raise your hand, our team -- someone from our team will hand you a microphone. And it is not possible for us to see the right order. So the questions are going to be chosen at random. And we have enough time to guarantee that everyone will have a chance to participate, okay? So we already have a few questions here in the audience, right? You can begin, just please introduce yourselves.

I am Marcio Farid Filho from Goldman Sachs. Gaby, congratulations on your new world. Good luck. And I have 2 questions. I think, of course, the discussion about CapEx and cost was pretty relevant to Klabin. You have already given us many details. And I think 2 things that I would like for you to elaborate on are on the perspective about CapEx. We can see that there is a stabilization over the next few years that considers a relevant deflation. Even if we consider what is already embedded as operational continuity, we already know that Klabin is growing bigger. So considering the inflation in theory, we would have to -- in theory, we would have to increase the CapEx. So what do you -- could you please elaborate on this nominal deflation on the assets for the next few years, especially to get to the BRL 2 billion. We already know that every year, Klabin brings new projects including to increase competitiveness. So if you could just please elaborate on the CapEx for the next couple of years, of course, you have already detailed, but for the future, at least. And the other point is about the cost you have already shown that this gain in inflation. I think even the purchase of the Arauco forest, it's already contributed to that. So in nominal terms, of course, keeping a flat that could still be a great achievement. But of course, we could also have the nominal gains. So have you already reached full potential of the acquisitions that you made? And what do you believe it is going to look like in the future, especially considering that part of this gain came from selling some of your forests. So how relevant is the forest sale going to be in the next years, especially to bring better operational costs? Yes, especially even more so about lands than forest itself.

So let me start talking about CapEx, okay. This is what we were talking about. We were discussing the strategy and that was the current question -- a common question actually. And I said, okay, that is probably one of the best or biggest assets that we have at the company. We do know how to buy and sell land. We do know land and soil as just maybe a handful of others in the market. And again, it is -- our team is a benchmark in the entire country. But of course, that this is something that tends to decrease a little bit. But we have already showed you the figures, right? So the impact in the cash cost is something that I have to say it is pretty negligible, I guess. In the next few years, if we consider that we are selling land, but we are also improving our assets, bet to say, I am going to be selling lands 20% or 30% with higher price, I guess. So this is not a problem at all, right? This is something that we can talk pretty openly about that. And it is not going to affect on the structure and the framework of the cash cost of the company. And of course, they have to agree with you. There are some limits, but we are a listed company, and there's still a lot of potential for this asset. Just to give you an idea, when we were discussing that internally, we actually put down a security or a safety percentage over all of that. Again, of course, we have to be conservative. But we are located in a region with a lot of precipitation. And that's very good. It is better here than in the other -- from the other regions in Brazil. So of course, we can see there are some short-term struggles, which is normal. But considering the productivity of the world for the next 10 to 15 years as well as the reduction of the average distance from our sites, it's definitely going to be a great game. In the next 3 years, you're still going to see the benefits for it. However, the benefits that we will have in 10 years, it's pretty much unbelievable. And this is the second pillar of the strategy of our company, buying that asset after purchasing the Monte Alegre farm because, of course, of the lasting potential of these assets as well as the company. So again, you'll see some gains for the next 2 years. However, that number of BRL 70 is still going to be decreased, and it doesn't change the vision of the cash cost gains that we had in the company. Now specifically about the operational CapEx. And of course, it's not possible to do so all at once. But I'm going off script here, but if you would like to know more about the companies because, of course, you have -- or written reports about our company, so we would like to invite you to spend a couple of days with us in Parana. Ricardo is something that was pretty much raised in the company. He had his whole training there. And in the next couple of years, he has established these governance presses in the company where we are investing in the crucial areas in the company. Of course, we have different IOs per se, those the chemical ones, the wood preparation ones, and we can show you why we are safe to say that our company as well as the operational continuity is going to even decrease. We have owned the methodology, and we really do invite you all to sit down with our governance team to talk about our operations for you to get to know a little bit more about the process. And again, in the last few years, we have invested great amounts in the company. So now we are basically just reaping the fruits of our investments -- of our investments, of course, and the support of all of you guys, investors. So this is it.

Thank you, Cristiano. Next one here on that slide, please.

First of all, congratulations to the team for organizing this event. And I would also like to thank -- I'm sorry, to congratulate Gaby for your new world in the company. So there are 2 points that we are always involved in discussing as investors. The cost, CAGR and the other thing is about Machine 28 that had its operational ramp-up finalized with success. However, there's another point about the market. Investors are still trying to understand a little bit more about that and understand how we can get the most value out of this asset that is so important to the -- for the company. So the first question is about the Machine #28. And Cristiano, you also talked about the future of craft, about this niche market with a higher added value. How long do you think it's going to take, though. And up until then, we need to understand how we are going to evolve the mix of the 28, especially for cardboard. And other thing about Cristiano, you talked about your trajectory of leveraging and the commitment of the company with paying dividends. So the second question is to try and understand in the short term, considering the deleveraging of the company in a faster fashion, How can you back up this commitment of the dividend? And does it make sense for us to say that the company is probably going to be paying dividends in the lower -- and considering this deleveraging process?

Well, first of all, I would like to thank you for your question and to invite [indiscernible] to sit with us. He will definitely be able to answer this question in much better way than I can. But anyway, let me try and start. Our idea is that our strategy and the policy that we had at the company is that we have to pay dividends, okay? So what happens is if we can see an opportunity, we will absolutely discuss it with the Board. Nevertheless, we need to consider that those projects take time. We need to prepare the forest. We need to have all the environmental permits. It involves negotiation. And this process oftentimes stays 2, 3 years to happen. And at least at the executive management level, whenever we decide something, we need to have attributes and perimeters to present it to the Board and sometimes it takes 2 to 3 years, okay? So, considering the need to grow this forest and to get all this environmental permit as well as selecting the best sites, it takes a maturity level. And when we combine them with the deleveraging, we know that the deleveraging is happening even before we proposed the investment. So paying dividends is not a bottleneck for us, okay? Not at all. But I would like to invite that to tell you a little bit more now about the Machine 28.

Okay. Thank you very much for your question. So cardboard is now going through a difficult time globally, okay? It's not only a struggle here in Brazil. We can see that this demand is basically decreasing the numbers of this year show a decrease of about 4%. Globally, it's pretty much lateral. If we consider the U.S., Europe, including China. And then, of course, we also have the problem with a huge capacity in China. We're talking about 7 million in capacity for our cardboard in China, and that is reaching the markets at prices that are pretty much unbeatable. And then, of course, we can use the same machinery to sell kraftliner. So for us, it is more advantageous to buy from the 28 of the kraftliner then start competing with the cardboard. We believe that in this year, we're talking about 140,000 tonnes of imported kraftline and 40% of it comes from China alone. We're talking about 30,000 tonnes to 40,000 tonnes. This year is already 70 tonnes, okay? And we're talking about a very small plant here in Brazil. We can see that the market is growing more competitive and that, of course, is going to affect the smaller competitors and it's going to impact us all. So our option was, number one, we are not going to compete with that type of cardboard. We are looking for alternatives with kraftliner. And fortunately, we were able to have the new capacities by IP, Georgia Pacific with a very important volume. We're talking about over 2 million tonnes, which has brought new opportunities for Klabin to start exploring this market as -- at the same time as the U.S. is leaving that market. Other emerging markets as China, India, Bangladesh, we can see that their demand for kraft has been increasing. Cris has already talked about that actually. We do believe that kraftliner is going towards this niche market. And we already have seen this thicker diameters. And Klabin is ready to do so. The number -- the Machine #28 has the capacity to do so at [indiscernible] cost, we also have machinery that is available to meet this demand. And we already know that in China, as being one of our biggest customers. In the last 5 months, our share or our growth in exports to China has grown tenfold. So this is only talking about price. So if you compare kraftline against cardboard, we know that we have better businesses -- to close or -- to close better deals with kraftliner. The Machine #28 is pretty much flexible. We can make cardboard or kraftline or all of our range of cardboard. We have just finished our certification for cardboard for liquid products, which has been a struggle. It was not easy at all, but now we're finally done with that, which is also going to open up new avenues for us. And again, because it is an equipment that is pretty flexible, it is -- we could do it for kraftliner, for example, which is currently being sold 200 tonnes more than the brown kraft -- sorry, brown cardboard. Now we are also producing white cardboard, which Klabin was not doing up until then. But for pharmaceutical or for cosmetics, they usually use white cardboard. So now we have adapted our Machine, #28. We have reached the final of our potential. So the end of our potential, we are now ready for other products. We have certification for cosmetics, pharmaceutical companies as well as book covers, for example. So in 2026, we are definitely going to be growing in our presence of white cardboard. And we do believe that we are going to get 50% in cardboard and the other 50% in containerboards with the price. So we are now looking more at margins than necessarily wanting to produce the cardboard. We are doing, but not as quickly as we thoughts at the beginning.

So for 2026, when you look at the budget, you have already considered this improvement of the mix being produced there?

Yes.

So you expect to get to 50% in 2026?

Yes. And the other 50%, again, trying to get these products with higher margins.

Yes. Maybe now I can say the Klabin is already approved for all the milk brands in the world, right?

Yes, absolutely. Of course, now it's going to be up to the global demand to increase. We can see some increases already in the demand for containerboard in Europe, for example, Europe has been lateral for a long time up until last year pretty much growing at 0%. So now we can see some difference, some improvements. And the other thing is about the U.S. market. The kraftliner, we do expect to see some reaction in terms of prices in the first quarter of the year, considering the domestic demand that is still pretty much lateral. So as soon as they start growing in containerboard, we're definitely going to be able to see the 2 million tons that are going to leave the market. And considering the demand, of course, the prices are going to be affected in the short term. And the options -- once we have the approval for the milk, of course, we can do that already.

Thank you, Jose, for the question. Can we go to the right side this time to mix things up. Can you say your name before question?

I'm Caio Ribeiro from Bank of America. First of all, I want to congratulate Gabriela for her new position. I wish you all the success of the world, same thing for Marcos. And now let's go back to, well, Klabin [indiscernible], you're talking about integration, diversification. So I want to ask a bit more about whether there are any products today that you identify as being missing in Klabin's portfolio and that you would like to add to it or maybe to expand it in any way, bringing additional integrations into the company. And also talking about growth avenues, we've seen Klabin in the past looking for organic and inorganic growth opportunities. Given where the company is today, can you please tell us more about well, what do you expect in terms of how you would like to grow from now on?

Thank you for the question. Well, in terms of the products that you would like to bring to the portfolio, I think this has more to do with a business model than a specific product, I can tell you what it is right now because this is something that we're still developing. But yes, we will be working towards something new in the next few years. In packaging, for example, we've realized in the past few years that service is also very important. We need to be able to support our customers in different ways, providing them with services in their own plants and businesses and I believe that we could offer other products beyond corrugated boards when working with customers. In other geographies, well, we believe and I mean, here, I'm not trying to sound [indiscernible], but there are some things that are fundamental to us. For example, fibers, made in Brazil. We believe that Brazil can even produce more fibers. And here, I'm talking about both softwood, hardwood, paperboard and others, but we believe that competition and fiber production in Brazil, this is something that can also grow. And even though there is competitive wood prices in other parts of the globe. But if you look at everything we need for long-term investment to us, at least Brazil continues to be the best place ever to invest in fibers. And as I mentioned before, I believe that Klabin in the next few years will change. I'm not saying whether this is going to take as the next 2, 3 or 5, 10 years, but everything that we develop in terms of fiber technology here in Brazil is also going to benefit exports. Yes, if Brazil can increase its income level, we can bring more products to the Brazilian market as well. But we are too large for Brazil, let's say, in the future, we want to know where to send it to and whether we want to sell it through partners or directly. But I'd say that there is nothing in our pipeline in the short term that we will take to the board in terms of new growth of revenue.

I'm [ Luis Basu ]. I am a long-term shareholder. And I'd like to first congratulate on the presentation every time that I have had the chance to come here and participate on a Klabin Day. We've always had brilliant presentations that were truly clarifying and comprehensive. So I would like to say one thing. Klabin's DNA has always been acquiring more debt. And this increasing debt, If we look at the main analysis and analysis, they have criticized the debt levels of the company, which is one of the reasons why Klabin shareholders are always at a excellent point to be bought by others. And I hope that this continues to be the case. I hope they can -- these analysts continue to talk about our debt levels. But what I want to say is something else. In the market now, there are 6 companies that pay quarterly dividends. These companies that pay quarterly dividends from what I understand, are companies that they do not offer variable in comp papers like equity, but fixed income bonds. And Klabin pays us every 3 months. So it seems to me that Klabin is one of the great shares that we can buy in the Brazilian market right now due to that. And that being said, I'd like to know whether you are considering any other major investments because these major investments, they require you to take on even additional data and Klabin will continue to have its share cost, what it has always cost.

Well, we expected our share prices to double or even triple despite investments recently because we've built a safety net after recent investments. Now we have different levels of investments in terms of absolute numbers. If we want to invest, let's say, on something new, given our EBITDA and our EBITDA in the past months, is well known, and the price curve is not favorable, but we've been able to create more cash flow through debt reduction, which in turn would allow us to invest BRL 10 billion without requiring additional debt. That's why we created the safety net. And now we believe that BRL 10 billion investments won't even require additional credit. And as I mentioned earlier, we currently have 5.3% of debt costs in our USD loans. And this has not gone down since 2014, if I'm not mistaken. We haven't issued new shares either. So any renew shareholder in the past 10 years, we're able to see our cash flow double with no need to issue new shares to water down your equity. I really say that this is almost like a private equity, but with a 20- to 30-year business plan, which is great for any shareholder. Now back to the topic of investments. And well, that structure, given the safety net that we have established through recent policies, we believe that these investments will take place more easily. I spend 2 to 3 days out of a weekend. I'm not talking about 5-day a week, but a 7-day week because I work on weekends as well. Talking about new investments, Sandro, which is -- our guy who looks at Brazil more broadly in looking for new land, especially in Southern Brazil for us to grow. He's doing great work. And I talked about increased tons of productivity in Southern Brazil. We are just checking when it will be the best moment to take that to the Board, and then announce it to other shareholders. But we know that this is actually one of the important assets that we have in our company because we see that we have had companies in North America who are growing smaller, even though they have been in the industry for over 100 years, and this is not where we are. We want to increase our market share because we know that we have the ability to increase our capacity at -- with low additional costs.

And now I have a question from Daniel, who is with us remotely. He is an individual shareholder and he's asking whether we have any plan or the Klabin has any plans to launch a new plant in [indiscernible].

That's a very specific question. The legal team will not allow me to specific -- to answer something so specific. But what I can say is that we have made known publicly that we are conducting studies in Piracicaba, and we are planning on launching planned for recycled paper. You -- and on the website, on [indiscernible], actually, you that -- and you have seen that we have already prepared the site for recycled paper machinery. But what -- it is not contingent to export price. If export prices go up, we want to continue to export 40,000 to 45,000 tonnes of kraftliner. And again, if the Brazilian market also grows with increased GDP, we might need to increase the recycled paper production.

Now we have a question by Lucas Gabe Weber, who is also an individual investor who says, well, congrats on the presentation. The dividend that you announced other day will include everything that shareholders are paid in 2026 or should we wait for future announcements to know that?

Well, the interim dividend that we announced, they are the result of our financial discipline policies. So this is taking declaration in the dividend that we will be distributing. So we hope to have something similar next year.

Okay. Thank you. And now let's ask another question from the in-person audience. We have one question at the back.

I want to congratulate to Gaby on your promotion. Now I have a quick question on the competition. We know that some of the main players have plants that are going to be inaugurated. Dorado, Suzano and Kimberly Clark, and you will be leveraging the business as well. But if you can tell us more about some of the new offerings and how Klabin will handle the additional volume that is going to be put in the market?

Great. Thank you for the question. I feel we're talking about hardwood pulp, 60% of which is used here in Brazil. So let me elaborate on top of 1.1 billion tonnes that we have in Klabin, the 4.4 million -- so out of the 1.1 billion tons of 4.4 billion are hardware products. And if you look at the last few decades, the demand was -- well, mostly drawn from Asia. This is something that we all know. And this organic growth in Asia was crucial for the industry's result. This number, very strong 0.8 million tons a year to 1.5 million tons of growth in Asia every in the past years. And this additional capacity has never really scared us because we know that the organic growth in Asia was able to take up additional capacity from Brazilian players. And I'd say that -- well, for some time, we did not even account for the fact that some companies have reduced their production capacity in recent years, but now more recently. And this is [indiscernible] mentioned, we have seen some small plants being closed in North America, reducing 2 million tons in a single quarter, which is a lot. It is too soon to say, but it seems that one of our hypothesis of the recent years is now being confirmed. So these products that are now being launched, they are challenging because they require the large engineering efforts and they are far from the forestry land, but this is the new reality in our industry. They work in parts of Brazil that require further soil analysis and analysis related to rainfall regularity. So they can't understand what they can expect from these projects in Northeastern Brazil and the Midwest. And we believe that they might need grade production to be able to offset the investments. But yes, we have seen sites with 3.5 million tons and the idea now is to see when that's going to enter the market. 2 years from now, 3 years from now, what is the organic consumption? Will China continue to buy what it does? Or will it grow its consumption. These are somewhat easy forecast. But what we're doing is looking in the longer term, and we're even considering making a larger plant in years to come. If we look at an increased per capita consumption in the next years -- of course, we believe that the top players will probably move sideways, but we believe that other smaller countries might see their consumption go up. So we are looking into investments to meet that demand. But there is one thing that I wanted to bring to this discussion because it's something that I've seen come up many times, and I love talking about it. I often hear people say, "Oh, Brazil is bringing lots of capacity into the market at low cost, which is great. It shows that we are competitive and then people say that prices will therefore go down in the future. Well, I love debating that with others because I don't believe that is the case. Why not? Well, because, and actually, I'll cover 2 simple examples. When I bought coconut in the beach for the first time, and I then learned about pricing strategies in college. I learned that things -- the prices actually set by the market. If I go to the beach now to buy coconut, it cost 10x more than it did in the past. So if we have demand prices will go up regardless of the cost structure, but companies with lower cost structures, we'll be able to have a higher profitable margins. But let's say, if Brazil temperatures go down and then no 1 is going to the beach anymore. No one is buying cononut anymore, the price will go down, right? So the same thing is true here. But since we have the low cost as we can adjust to lower prices as well.

Thank you, Chris and Gabe for sharing the information with us. Gabe, I hope that you have success in your new role. Now, I want to go on to the strategy. I know that you have already talked about that, but I wanted to understand more about what you expect in terms of resilience in the ROI and downstream changes because we've been talking a lot about fiber competitive here in Brazil. So looking forward, we always think of Klabin as a company that can operate in pulp and paper industries with a balanced mix. Is that still how you see that? Or should we think that Klabin will work more with paper and less with pulp. I just wanted to know whether your mindset has changed when you look at the paper pulp industry with these new verticalization strategies in China? I know that you work in a different niche because you also work with softwood and fluff, but I just want don't you know? And Gabe, your guidance for cost per ton next year does not include the amount that you expect to raise with land sold, right? So this [indiscernible] per ton is not taking into consideration, right?

Okay. Let me go first because my answer is easier. Yes, we do not bring that into the slide, but the expectations for land negotiations next year is very similar to the ones that we had this year. So there will be no big variation between 2025 and 2026.

And we usually say that the world of paper and pulp is all about the fibers, right? Fibers could do anything. So we just need to think about what products we can actually produce. And Klabin for decades now, they started -- we started working with corrugated cardboard for example, in the 70s. And we have this characteristic of diversifying our portfolio and being stable. And we are a company stable because we want to. So we strive to do so. And when we talk about cash flow generation, we usually know that [indiscernible] potential of bringing in cash flow in a faster fashion, in a better or higher levels than paper. The dynamic for paper is different because we have recycled paper, for example, and a quick story here to share with you that back in the '80s or '90s, when we walked around the city, we could see those huge paper bags in the city. And we know that we could also see those scraps of papers. And now we have customers that became customers with us because they wanted those scraps of paper. And it doesn't exist anymore. That type of fiber is no longer used. And toilet paper, for example, especially in a country such as ours, usually is discarded in landfills and that fiber can no longer be used. In other countries of the world, it's not -- it doesn't go to landfills, but it goes to other treatment plans. Tissue paper is not retrofitting the whole system. And that has changed the profile of use of fibers, especially because we are no longer writing or printing paper as much. So now we are basically talking about new papers that can either go to landfills or treatment blends. And whenever we think about urbanization in other countries in the world that are still going through this process, we have to consider the behavior in tissue consumption as well as what we call these entire chain whenever the income starts growing. So we know that the tissue has this per capita consumption potential of about 4 billion people with a huge consumption potential. And of course, this is something that happens over time and in a marginal [indiscernible] so here in Latin America, we still have a large, huge potential. Now when we talk about land availability, I am not scared about the myth of lack of land. We do have land here in Brazil. We have a lot of land that is being used for lifestyle creation with low productivity. Part of this land is going to go for agricultural purposes, but part of it is going to forestry as well. And that gives us the potential to more than double the amount of area being used for paper and pulp. We're talking about more than 10 million acres of land, doubling then the capacity for forestry in Brazil. So I mean, I took a long term to tell you that, yes, there is a lot of potential yet for Brazil, even though if it is long term.

My name is Igor Guedes from [indiscernible]. Congratulations Gabe once more. Everyone is congratulating you, right? So to build on what Marcelo asked you were talking about imports of cardboard paper? And of course, many analysts also have the synergy with the steel industry. And there are these antidumping measures for steel. So do you believe it's possible to do so with cardboard as well?

I don't know whether you were addressing her, but I am going to start and then you can build on that. Well, we were actually talking about ore and steel and comparing that to paper and pulp. And of course, there are differences. So let me elaborate on that. Just to make sure that we are on the same page, okay? So Brazil produces ore and the steel industry is highly competitive outside of Brazil. In the case of paper and pulp, we also produce wood, okay? So let's compare forests to ore. So right, this is basically the raw material, the main input for the steel industry. And of course, with all due respect to my colleagues from the steel industry, and I am no expert in their industry, okay? But I mean, this is the perspective that we see when it comes to the competitiveness of the steel in the world and we know that Asia is extremely competitive. Now specifically about paper and pulp. Brazil has the lowest cash cost in the world, okay? As Jose was talking about the imports. If we compare that to the cash cost, we know that there is no threat there. Our threat comes from a different phenomenon that is the export of the deflation from China. Currently, we can see that China is overproducing, and they have displaced from some places in the world, especially Europe and the U.S. So now they are aiming Latin America. So we are aiming -- so we are suffering the impact of the export of this deflation from China. But this is -- it has to do with the capital cost in the investments of China. But all that is to say that the paper and pulp industry is different from the steel industry because our industry is the most competitive industry in the world. So it is not related at all to other infrastructure or structural risks that other industries do. About this specific measure that you mentioned, I mean, back in my days of college. If we ever talked about taxes, it was a problem because we're talking about globalization, right? But nowadays, the whole world is doing so. Even Brazil, they are defending against the outside market with Texas. But this is not related to cash cost. It's more to do with the circumstantial conditions given the fact that there is this deflation from China. And I am sorry if I were just too [indiscernible] with that answer.

Okay. We have another answer here, and then we go back to that to you, okay? So there first, and then we go to the last question from this side.

Now I'm going to talk about specifically cardboard, it was a very positive highlight from this year, maybe you can get some share because of the price and so on. So if you could elaborate on the main factors and the contributions, even Figueras contribution to your outstanding performance and what you expect for next year? We can see that paper has this forecast of growth of about 4%. And very quickly about the cost. If these higher volume of corrugated cardboard could change the directions in the fixed cost or have any impact on the cash cost?

Thank you very much. The dilution of this fixed cost has to do with the increment of the growth of our productivity. And this is more significant than the cash cost. But now the next start of the year, side of [indiscernible] to answer that -- yes, we have grown more in '24 -- actually, we have grown more than the market above the market in 2024 and 2025. And this is mainly due to the fact that we are present in all the regions. So we can benefit from the different impacts of the market in all of the regions. And we also have the fiber just [indiscernible]. And that gives us more flexibility to seize the opportunities. So this is one of the main attributes. We can actually be more competitive and we can deliver our product with a better operational efficiency to our customers. And this is definitely a differential. But the other point to me is that we are present in sectors that require virgin wood what we call in Brazil [ FLV ], but this is mainly the sector of food, fruits, vegetables and milk. They are growing. We have a high market share there, so that gives us a good opportunity. The export of protein has also been growing in Brazil, way above market, and it allows for us to combine our edge with fiber as well as our presence with the market. And you also could close the deal at the end of 2024 with one of the biggest packaging buyers in Brazil. I think the final piece is that we can guarantee our service level. The corrugated cardboard does not have inventory. So sometimes we have large orders being put in with 24 hours' notice. So we bought IP consolidating our position in the market as well. We also have invested in the Northeast region, in [indiscernible]. We also invested in Figueira and also other smaller investments that you don't necessarily have access to, but they have to do with equipment improvements as well as other plants in the world -- in Brazil, sorry, increasing our service level, okay? So when we add all that, we expect that for the next year, our GDP can grow in about 1.5% to 2%. Paper and pulp is going to do maybe a little bit better than that. So these are good opportunities for us next year as well. So increasing this volume from the market as well as seizing the better inflation for the next years, helping us with this price push.

Okay. Thank you very much for your presence. And now the final question, please.

I am [indiscernible] from BTG Pactual. And again, thank you, Marcos, and good luck Gabe on your new role. First of all, Cristiano I know that that's a very difficult question, and maybe you don't have anything to report on that. But in the past, we have always considered consolidation in a more structured or transformational movement. In the world, we have seen 2 big movements from your competitors -- competitors, sorry. In Brazil, we also had some different movements with billions creating synergy, and the discussion with the market is, okay, what's the future for Klabin 10- and 5 years from now. You talked about that a lot, how we can prepare the company for the future. But I wanted to hear from the main opportunities. I know that maybe you don't have anything to report right now, but what are the opportunities that you can see maybe creating partnerships or considering this new changes with China competing against import paper. So maybe you can combine in partner up with other companies in a more structured way. And the other question, and I don't know, maybe it was just for me, but we can still see this message about harvesting and deleveraging. But of course, that the rhythm is a little slower, maybe because of the entire international landscape. But I wanted to hear about fluff. You were -- in the past, you were talking about possibilities for the future. So is this opportunity -- is there any opportunities there? Is this a commodity that has a differential? And I'm sorry for calling it a commodity. But anyway, what is the future for that? And even if there is a future for fluff?

Well, absolutely, yes, there is a future. And even if we are still not ready to bring it to the Board, we are laying the pipe work for it. Fluff has been one of the main investments for the company as well as for cycle paper for a while now. And I don't like the word niche -- I'm sorry, the word commodity for fluff because we're talking about a 6 million-ton market -- 8 million tons. And we don't even get to 70 million. So we're talking about less than 10% of the pulp or both soft and hardwood combined only the hardwood fluff, there is, of course, a niche within this is this entire market. And of course, it's not easy to approve that as well as the softwood. So we consider that in the paper and pulp world, the biggest fluff -- this softwood fluff is one of the priorities still for our investment. And why is that? Well, that's simple. While the operational cash flow generation in the North Hemisphere company corresponds to 10% of our capacity. So if they are doing $30, $40, we are doing $300, $400 per ton with the same product. So it is a niche product with a high entry cost for the fact that we don't have softwood. There are not many companies with this availability nowadays, and we can actually get to these replacement for softwood with an opportunity that I don't think can be matched anywhere in the world, [ 400, 900 ] per module, getting to 1,000 tons of this product for the -- 1,000 tons produced per year, which we can do. So this is one of the projects that we have. We have other 3 or 4. We are still studying, of course, the engineering aspects and so on and so forth to consider the forest aspects and when this asset is ready, of course, there's interest rate and many aspects that have to be considered. But of course, this is something that we have to present to the Board. Now about the M&A, let me give you some figures. If we get the 20 biggest listed companies in the world in our sector, it sums up to $150 billion in the market. And I know that it is crazy to compare things, but one of the biggest technology companies is worth $3 billion to $4 trillion. So if we consider the investment that has gone to technology. And in here, it is going to become investments and it is going to generate returns in the future. There's even this article from the CEO at IBM with the hypothesis. So I would like to invite all of you to Google some things. And I don't think this video is going to be launched all over the world. But I wanted you to start discussing the thesis, considering that we are in a sector that is more than 100 years old. And with a very solid demand trending for the future, with a profitability that is 10% -- that is 10x bigger than other Northern Hemisphere companies. So let's compare 20 of the biggest companies in the world against one of the technology sector. And you guys from finance, you are very pragmatic. You are fact-based, right? And you can see that the biggest returns in the world do not come from those factors in technology sectors. We are talking about returns here in our industry, that we can actually forecast it for the next 30 to 40 years, at least here at Klabin. So we are still at a very fragmented sector. We're always talking about sustainability. And we do not see that in the market, not even in the soft skills or hard skills. So the way of creating value for companies outside of the southern end of the world is going to happen through M&A. So yes, I do believe in M&As, we already had some happening last PAUSE year. And part of the next ones that will take place in the next 5 to 10 years have to do with how successful the last ones are. So let's see how they are going to perform and I have not seen a large M&A of a company from the South and of the North -- from the North. So I guess that the cherry on top that I want to leave to you now of -- we've already had some small M&As considering the potential of the entire market. But when we start combining northbound companies with southbound companies, the north ones where we have, of course, high added value and the very competitive cash cost companies when they actually are better considering the freight values. Of course, this is going to be a very transformational M&A. So we are here in the south of the globe, and we export to the companies in the north of the globe, so they can do the packaging and so on. So I think this is the biggest potential that we have for M&A in the future. We don't have anything inside, but it could generate more value for the sector.

Cristiano and Gabe, thank you very much for joining us and for answering our audience's questions. Unfortunately, we have run a short of time, and we're going to have to wrap up. If you have questions that are left unanswered, we will be answering them by e-mail. Please look out for the e-mails by the Investor Relations team. And now ladies and gentlemen, we are here to recognize Klabin's commitment to the industry. This is the 24th year in a row where Klabin has given the [indiscernible] award given by AMAC Brazil, which is the Association of Investment Analysis in the capital markets. And I invite to the stage, [indiscernible], who is the Vice President of [ AMECBrasil ], and welcome. Mara, if you want to say a few words, you're welcome to do so.

Well, I want to congratulate Gabe for your successful journey. I know that everyone else has said that, but I want to say it again. And [indiscernible] has been linking analysis and on the professionals in the capital markets with openly traded companies for more than 50 years and I've been at Apimec Brazil for 33 years myself. And we use Apimec as a way to connect companies and professionals in the capital markets. So on behalf of Apimec and all the professionals that we represent, I want to thank you. I want to thank Klabin. For the past 24 years, you've been giving this award consistently. And this is the last time you get a network with [indiscernible] because now you're an [indiscernible] company, which is the highest possible because you have been one of the greatest companies who work with us. I want to congratulate you on today's event, and it has become common event in our calendar and always with a very high-quality information, and we're very happy with the partnership with they have built.

Thank you for the recognition. I also want to thank [indiscernible] for joining us this morning. And I want to thank Cristiano and Gabriela for hosting this event. Feel free to go back to your seats and with that ladies and gentlemen, we are at the end of our meeting. On behalf of Klabin, I want to thank you all for joining us this morning. This has been a valuable opportunity to share how the company has advanced and reiterate the Klabin's commitment to generating value to shareholders and the broader society. Thank you so very much, and we will see you next time.