Klabin S.A. (KLBN4) Earnings Call Transcript & Summary

[Interpreted]. Good morning. Welcome you all to Klabin Investor Day. My name is Adriana Bittar. I'm a journalist, and I'll be with you throughout the day. It's a great pleasure to share with you all of the results of Klabin in 2020, the outlook and everything that's new and that's coming down the road. Thank you so much for joining us today. For those of you who are with us in the English channel, the presentation is available for download in -- at Klabin's IR website by looking at the QR code that you see on your screen. Now we will -- at the end, we will have some time for the officers to answer your questions. And please use the chatbox that you see on your screen. Now for our welcome remarks, I would like to call Cristiano Teixeira, Klabin's CEO.

[Interpreted] Good morning, everyone, and welcome to Klabin Investor Day. It's a pleasure to see you here, and the future is now. There was no other way to start this event except by talking about COVID. This has been a very transforming year to all of us in every sense of the word. I think I could refer to solidarity. I could also refer to support our communities. And I could also talk about many things that we did to set up new ways to relate to the communities in general. But I would like to talk about the empowerment of our own teams. And this is very comforting for all of us here that this company is prepared any time. Due to its culture of over 100 years, we are experts in dealing with difficulties. It was during the pandemic moment that it became very clear to us that empowering our teams and trying to look at every single reality of the country that we learn what we had to do. So we will leave this pandemic moment now knowing that our teams are ready to face any dire circumstances. Also, I must reinstate Klabin's business model. This is a year where we are able to really make sure that whatever we are, in whatever business we are, in any moment of the economy, driven or not by any kind of incentives, Klabin can certainly play a very important role. And finally, not only we have a perennial work, a sustainable business that is part of your DNA. We can also certainly say that flexibility, a subject that is constantly debated amongst this -- flexibility has proven to be a major value driver. Now I would like to talk about what lays ahead. What's our view looking forward. We just came out of a very difficult year. We still have many questions in our minds. But where do we stand as a company? We stand as a company as a business that now knows how to deal with different trade pathways, like e-commerce. E-commerce has been a very important avenue of our growth, and it has been with us from the very beginning, supporting our customers. And today, we are protagonists in this new distribution channel. We know, even more now, that the conscious consumption has changed the commitment of companies. Global companies, global brands are positioning themselves as companies responsible for replacing some solid waste, improve innovation. Klabin is standing out as an innovator in these new trends. And so once again, we can reinstate Klabin's sustainable DNA. This is a year where sustainability has gained momentum, something that we've never seen anywhere else in the world. We have the privilege of receiving or being included in the Dow Jones rating, the only Brazilian company that joined that index. In fact, we are a company that walks the talk. And we are very proud to say that. And I very much cheer that this will be a great aspirational event where you will be able to see that the next 10 years of Klabin will be just as promising as the last 10 years. And this will be very clear to you throughout this presentation. Thank you very much, and I wish you a very good event.

[Interpreted] What about tomorrow? We are already building tomorrow. Thank you, Cristiano. And during the presentations, you can use the chatbox to post your questions. And at the end of the event, we will just leave some moment on the side for our officers to answer your questions. Now we will have the CFO and IR Head, Marcos. Welcome.

[Interpreted]Good morning. As Cristiano was saying, and we all know, the year of 2020 was full of great challenges and different than the challenges that we were used to facing. But once again, through Klabin's business model, which is very flexible, also supported by a strong culture that engages people, deliver results and builds the future. We were able to post sound numbers throughout the year. Looking at the numbers until September 2020. Our sales volume was up by 9%. Our net revenue grew in all segments. It grew 14%. The company's EBITDA reached BRL 3.6 billion, which is a significant growth of 31% year-on-year. If you look at the recurring result, and at the same time, we were able to generate value because the company's ROIC was almost 14%, once again, showing that this growth is associated to return to our shareholders. Throughout the year, we met with you and talked to you several times. We talked to our shareholders, analysts and the financial market in general. Be it through Klabin's quarterly results and in other conferences organized by investment banks and individual meetings with our shareholders. Usually, we focus on the results of the year as well as the near future. But today, this is a very special day. This is Klabin's Day. So today, I will invite you to draw a different analysis, even taking the advantage that we are concluding a whole decade from 2010 to 2020. And let's look at the KPIs of the company in that 10-year window. In the last 10 years, Klabin transformed itself, and it became much better. The growth of the company was very significant. In regards to our production capacity, we were able to double the size of the company. Net revenue was multiplied by 3-folds. EBITDA was multiplied by almost 5x, going from BRL 462 million, reaching BRL 4.6 billion in the last 12 months. It's also important to highlight that this very robust growth comes with good returns as well. Early in the beginning of the decade, the ROIC of the company did not remunerate it, the company's capital. But now this ROIC adds value to shareholders. And this improvement in ROIC that more than double has been supported by the company's investments throughout this window of 10 years as well as the way we are utilizing our current assets. All of that put together let the company to multiply its market cap by 5-folds. The market cap that used to be BRL 5.5 million back in 2010, today is worth over BRL 27 million. Now we again talk about the resilience of Klabin's business model. In the previous slide, we saw the strong growths -- growth with good returns, also associated to low volatility. In the slide, now we see the company's EBITDA back in 2010, all the way to 2020, the last 12 months ended in September. So since 2009, Klabin has been growing steadily every year, growing its EBITDA with no exception year-on-year. And if we were to stop for a few minutes to think about what happened in the world in the last 10 years, particularly in Brazil in regards to its social and political status and economic situation, we encountered different scenarios. In the beginning of this decade, 2010, '11 and '12, our GDP was growing, growing a lot. 8% in the Brazilian currency was strong vis--vis the U.S. dollar. And then in the middle of the decade, we faced 2 consecutive years of GDP in decline, high Selic rate, and now the situation we have at the moment. So what am I trying to show you is that despite the economic landscape, more or less favorable, Klabin with its business model is capable of adapting, and at the same time, generating consistent results with very low volatility in terms of its results. So what is the bottom line here? What does that represent to our shareholders, shareholders who acquire stocks from Klabin in 2010? In that decade, the total return according to total shareholder return, which are proceeds plus appreciation of the share, the shares appreciated 431% in that window. When compared to Ibovespa in the same period, that appreciated by 138%. So once again, here, I would like to stress another point today. The company's business model allows the company to grow as we grew in this past decade. And at the same time, we pay good proceeds to our shareholders, so we can give liquidity to our shareholders with a good dividend payout. And at the same time, the company continues to post growth, and I believe that these 3 slides can give you a snapshot of Klabin's overall results in this last decade. Now as Cristiano was saying, we have to share with all of you the company's view and the company's outlook for the next decade. So looking until 2030. So now we have to look at the company's capital structure. Klabin's capital structure is very sound today. Klabin is, therefore, prepared in terms of capital structure to continue to post growth so that in this next decade we will experience the same growth. This, I would like to draw your attention to the average tenure of the debt. The average tenure of the debt is almost 10 years, and that allows us to work with good leverage, but in a very responsible way and with a good financial discipline. And at the same time, with good leverage that can at the same time generate value to its shareholders. In addition, we are a company that is a reference when it comes to sustainability. Klabin also made important advances in regards to ESG in the last 10 years. In regards to governance, we were able to strengthen our governance, and these were important moves that were made in the last few years. In 2014, there was an important wave that was when the company migrates to Bovespa's B3 level 2. Our level 2 is very robust because it has 100% tag along. The 2 share classes, ON and PN, ordinary and preferred shares have the same status because we believe that if you migrate to the single class of shares there will be no payout. And once again, in the last 10 years, we were -- we strengthened our governance. We have independent committees. We approved policies for financial debt and proceeds and also Sogemar Incorporation. So now Klabin owns its own brands. And as a consequence, that eliminated a contract-vision-related parties and the payment of royalties. And finally, what's still in the pipeline is that the market will get to know the -- all of the committees of the Board and the members of the Board. And with that, we close that evolution journey of the last 10 years. Klabin has always been a company that stands out. And all of that combined led us to receive many acknowledgments. Since 2014, we became part of IFC. They just released their portfolio. So Klabin is going to be part of IFC for like 4 years now. We have an excellent evaluation in WWF for paper and pulp. And finally, something that is very symbolic also is, now we are part of the sustainability Dow Jones Index in the global and emerging market indexes. So therefore, we became the only Brazilian industry to join the global portfolio or the global index. We are referencing sustainability, and this will also help us to boost our future growth. So what is the view, but even more than just a view, what is the company doing right now? We are working towards having the same robust evolution we posted in this last decade. But that's what we see looking forward. We intend to grow in all of our business lines, going through Eukaliner, which is in progress, coated boards. We will grow our packaging business. We will grow our pulp business in softwood and also many new products and correlated products to the existing ones through our research and development business. So we will at the same time generate value to our shareholders. We will contribute to a more sustainable world through sustainable packaging. And once the market for environmental services becomes more mature, Klabin will certainly join that market, and we will also be a part of the carbon market as well. And finally, I would like to conclude my presentation with a question for you. Something for you to think about. Well, Klabin is a company that is more than 120 years. It has been around for 120 years. And in the last 10 years, the company posted significant growth. And for the next 10 years, we also have very ambitious plans. Therefore, we are a company of growth, Klabin's analysis demonstrates that, in fact, our results have very little volatility. So the better the company is low. The company growth has low volatility of results, and the ROIC pays out consistently and well. And we are a reference company when it comes to sustainability. Therefore, what I want you to take home is what is the fair value of this company? What is the valuation model from the market, from market players? What do they take into account when they look at all of the company's attributes? Well, this is something for you to think about. Thank you very much. [Presentation]

[Interpreted] Thank you very much, Marcos. Klabin investor is going to open the company's doors to investors who want to learn more about the company and to everyone who has an interest in the Klabin universe and in topics of the financial market. Every week, we'll have new contact in video or podcast on YouTube and Klabin's Spotify. The launches today were the first podcast episode already on air with the participation of our Director General, Cristiano Teixeira. Now let's find out more about some business and products of the company. I will invite the Paper Business Director of Klabin, Mr. Flvio Deganutti.

[Interpreted] Good morning. Good morning, everyone. It's a pleasure to be here after this beautiful opening by Cristiano and Marcos Ivo. My mission here is to talk about the paper markets. Paper, cellulosic fiber, renewable, composable, recyclable. We could continue for 10 minutes telling you a little bit about this and how proud we are to be in this segment. But I'll tell you a little bit about the markets, especially the containerboard market for corrugated boards and the coated board market. There's 2 very important chapters here. One is China, the other is Brazil. I'll tell you a little bit about these 2 very important regions for Klabin. I'll also bring more details to you about Eukaliner. We have this product now with Machine 27. I'll tell you a little bit about its history that is very close to Klabin's history. So the paper market has a series of divisions, a group of families that's very important. And Klabin works mainly in the containerboard market, the coated-board market and papers for industrial bags. Here, I'll talk a little bit about the containerboard market. And you can see here that it's a huge market, it's 167 million tons. And you can see as well that we have 75% of this paper already made of recycled fibers. It's recycled entirely naturally without any need for incentives. And that's how we see this market. Klabin works especially in the virgin fiber market in the plants in Paran, Santa Catarina and So Paulo. And we're there in that 42 million tonnes market. And our Machine 27 that will start up in June will deliver an additional 450,000 tonnes in this market of unleashed kraftliner and white as well. So our growth rate, I'm not kidding you. It's looking back, looking forward. We see sustained growth at around 2%, 2.5%, 3%. This is a special year. If I brought the base with 2020, it would be surprising. This market of corrugated boxes supported by our papers grew in a very expressive way, anchored on e-commerce. We'll talk more about e-commerce later. But what I can tell you is that the rates for 2020 were higher than what you see here on the slide. Again, we're there. We're part of the market, see a lot of growth for the future. That's why we invest heavily in packaging papers. China has a significant relevance within Asia. Asia is already quite large today, and that's where a lot of our growth comes from. We looked at Asia, and I brought some specific information on China because it is very relevant. As you can see, there's a small percentage of virgin fiber, the tiny green bit at the bottom of those bars. And we start to see the Chinese policies, and we see that they're changing significantly their behavior towards papers and other materials. I'll talk a little bit about that as well when we address China specifically. What we see in reality is that these continents are moving towards virgin fibers because the percentage of recycled fibers is quite high today and it continues to grow. So where does it come from? Sometimes, we're surprised because we look at the number of announcements or capacity, there's a 114 announcements of new capacities. There's a lot to go -- to happen in the world. But doing quick math and 2.5% over 167 million tonnes, the annual volume coming in is very big. An expressive share of this volume is being announced for recycled fiber of containerboard. That's different from Klabin's. Maybe what's more relevant from what I'd say is how North America dominates the global flows of these types of paper with the American economy performance, the strength of e-commerce and how relevant virgin fibers are becoming for all destinations in the world. This map shows the flows from the United States supplying Europe, Asia, Central America. Naturally, they try to maximize the integration of their own businesses. These exporters have boxes factories as Klabin does, and their prices at the domestic markets are much higher than the prices they make for exports. And that's what dominates the global flow and the price rationale in the world. There's also an important parallel to be made to what happened in the pulp market a few -- many years ago. It's like looking or having a flashback of what happened with the bleached pulp market and projected for Klabin. In Klabin's aspirations, we see that this dynamic will shift from North America to South America, very strongly for Brazil in this import. So let's go into the coated boards market. You see it's quite big as well. It's smaller than containerboards, but it's big. The containerboard market actually is just as big as the market for single-use plastics. If we compare the waste, equivalent markets, especially plastics for packaging. It's weight by weight. On top of that, we have coated boards, multiple families. And since we have a lot of direct contacts and products for liquid foods and solids and industrialized foods and proteins, we start seeing a more relevant percentage of virgin fiber, a liquid packaging, food service, the cartons for beer packages and bottles and cans, CUK, FSB and [indiscernible]. The rates are actually quite healthy as well. And the main product group here impacted by 2 elements; migration of less sustainable packages and the new regulatory policies that are coming up every day associated to these barriers, 2% growth, sustainable, more in some families, less in others. Klabin is present in 3 of these families quite expressively. Liquid packaging, folding box board and CUK. And it continues growing. From our point of view, these 2 very important family is very relevant, containerboards and coated boards, with sustainable growth looking backwards and forward. The same story is present here with an expressive growth in Asia. So we pay a lot of attention to that continent. We know there's significant difficulty with growth and full integration from the forest to the end production of paper. So there's a dependence of either imports of fibers or other raw materials that limits the logistic activity in many corners of the world. But here, just as I showed about the flow of containerboards, we see a very expressive relevance in Europe. We see how they make do with a circular flow at the center of Europe and how they supply a lot of Asia and also a relevant part of the United States. And the parallel with the pulp business, in the future these axles will shift towards the south. Maybe the main highlight that I bring and the main innovation driver that Klabin has been seeking. When we compare the growth of carton -- coated boards packages with the growth of cellulosic packaging associated to any type of barrier as we have listed on the right side, it's incredibly expressive. The numbers here from 2019, projection up to 2024, growth rates that point to 7.7%. So they're very expressive growth rates when we combine our type of product with biodegradable sustainable barriers. So a lot of our innovation force and their development points towards this. I also have here in -- I said in the beginning, the baseline advantage, the ground base that Klabin has to act in this product that brings everything that we need; returnable, recyclable, sustainable with extremely well sorted sources, renewable. We have virgin fibers, recycled fibers. One of our colleagues will talk about our carbon footprint later. That's very positive from our forestry base, certified forests. We don't talk about cutting. We talk about harvesting as with more traditional crops. So it's a series of requirements that really make a lot of sense and communicate with the new consumer. So what about China? 2 very relevant axles. The first is waste ban and the second is plastic ban. I have 2 slides to show you a little bit of this force. In 2017 and even 2016, they announced they would significantly decrease the import of OCC and for many other products that were imported and reprocessed in China. So look, what happened? This is the last year that the government authorizes the import of OCC. That number, that 7 million tonnes gives you an idea of the dimension and of the step the country has taken to cut down on OCC imports. Next year, it's going to be 0. And this will lead the world to reorganize with OCC left over in Europe and the United States, for example, with a lack of OCC in some continents in China and the imports of the papers and pulp to sort this gap. The packages will be made of other materials, and they will be seeking to close this gap. There's secondary and tertiary derivatives here. But as I said, there is this movement towards more sustainable packaging. 3 main figures here. In 5 years, a [indiscernible] ran with the expressive reduction on OCC imports, we'll start to see the first numbers of the effect of banning less sustainable packages for cellulosic packaging. It indicates there will be 2.3 million tonnes related to the food service market. The same consulting firms mentioned 1.17 million tonnes of packages that are today done with plastic bags, moving on to ivory board, the Chinese white coated board. That's a lot and that's not a spontaneous derivative. We need to understand the movements that are arising there. In addition to packaging associated only to the Chinese market, there's 2.34 million tonnes in the last 5 years. Again, this is happening now, and projections that we've seen in China very quickly based on the indications from the Chinese government. And the beautiful surprise of the year, the Brazilian market for coated board, there's a very stable behavior in terms of volume. If we look before 2016, that's the history that I brought, we would see the stability of this market and a very healthy behavior, especially starting in March of this year. Of course filtering the evolution of this market associated to the pandemic. Of course, there was an important migration of packages. We sold more papers because of what happened. However, we see lasting change taking place day after day and expressive growth of the economy towards this type of packaging. One example is the carrierboard market associated to beer packages, as I show here. It's the fourth consecutive year with a double-digit growth rate. That's not only consumption, it's a migration of packaging towards carton carrierboards like ours. And finally, to conclude, I have my comments about Eukaliner. So Phase I, I will leave Phase II for later, but we're talking about a machine of 450,000 tonnes that will reach 465,000 exclusively for eucalyptus fiber paper, both white top liner and the unbleached kraftliner. We like the 2 fibers. Both fibers are necessary. We also like recycled fibers as I said earlier. But this balance of the right fiber and the right application is the secret that we're seeking here. We ran a lot of tests. We've been in this road for more than 30 years. The introduction of eucalyptus in our products started way back then, and there's a lot of collaboration of people who have decided and try to get us reach the 100% we have today. In addition, we've been fortunate enough to run smaller tests in these different destinations. And this is the result, an expressive loss in grammage and many other benefits this product brings. These are actual tests. We make it -- make the box, fill the box with fruit, transport the fruit, open the containers, look at how they arrived, their conditions. So it is the industrial production of products that is showing an expressive performance. Here a little bit about this region. We have it clear that the destinations of the big fruit producers in the world, the markets value lightweight products combined to e-commerce or the markets that value print quality are the natural destinations for our assessment and then the sales plans. So the right fiber is the message here. This is a great image about how paper made exclusively from short fiber, long fiber, how the fiber is more compact and dense allowing for better print. And can you imagine our first contact of many brands with their customers is the box that arrives at your house. So this is one of the added values of our product. This chart shows the comparison with traditional products, even Klabin zone products of the same grammage with 10% weight reduction. Of course, this benefit will be shared with the users of this product, be it Klabin or our partners. Finally, we have a very well-defined sales plan, focusing on countries in Central, the Pacific Coast of South America, who are big producers and exporters of fruit in addition to other agricultural products, also the south of Europe in addition to Asia in important destinations for Klabin. Historically, they become stronger now. If we exclude the volumes we'll deliver in our operations, we already have signed contracts or about to sign with 50% of the volumes sold to the first paper machine. I will remain available later for your questions. Thank you very much.

[Interpreted] Thank you, Flvio, very much. And now to talk about packaging in the spec of the market in 2020, I would like to give the floor to Douglas Dalmasi, the Packaging Officer at Klabin.

[Interpreted] Good morning everyone. I will show you how Klabin participates in all the structural changes of the packaging market and how we became the protagonist of all of these disruptive changes. My presentation is divided into 3 topics. I will talk about the packaging market and how Klabin fits into this context. I will talk about acquisitions of all the packaging assets in Brazil, like International Paper and the future of our packaging and how we see the future looking forward. This first slide focuses on the boxes, the packaging is boxes. This is a market that is very resilient. It grows above GDP rates. The greener bar shows the ABPO growth is the Brazilian association of corrugated boxes and the lighter line is the GDP. And as you can tell, throughout the years, this is an industry that grows above GDP numbers. And we see this because we are very resilient, and we have a very strong participation in the food market. There is a very strong participation in other markets where Brazil is quite representative like protein and fruits. And so we can compete in terms of experts. And also, we are very much present in all the e-commerce business. If you look at 2020, you realize that the industry was significantly impacted by all of the changes in addition to the emergency aid provided the government to boost consumption. And what about Klabin in the whole scheme of things. The corrugated boxes and packaging has been growing in the past few years. And Klabin is posting extraordinary growth, growing above market growth. CAGR is over 5% when compared to a market growth of almost 2%. And we grow because we are very much focused on development, on entering new markets. We acquired companies that helped us boost our growth. And at the same time, we developed new types of markets. And we also have new objectives to be closer to the fruit market to follow the growth of that industry. So we are growing over GDP numbers. We promoted structural changes, and we operate in industries where Brazil is very competitive, like with the experts of fruits and protein, and Klabin is growing above market figures. In the back market, the history repeats itself. If you look at shipments of cement, the back business has strong impact in civil construction. While cement business was dropping in the past few years, but at the same time, Klabin was able to grow in that same period. We were able to increase our development, not only in other markets, other regions and other countries, but also we developed other sectors, other types of high added value packaging. And as we say internally, this is a very good problem because we found different avenues of growth. In 2014, if you look at the first pie chart, it was 45%. But today, we have 1/3 in other markets of high added value and 1/3 in expert. So that means that we open different avenues of growth. So when the cement market picks up again, we can grow with the market and follow the industry's growth. So this is not a capital-intensive investment. And so that allows us to be more integrated and at the same time add more value to the company. So we see in corrugated boxes, a great opportunity to grow further. What about prices? So we are focusing on the Brazilian Association of Corrugated Box. We had impressive growth, not bringing volatility, but on the contrary bringing growing results and Klabin also practicing prices above the industry. We have an impressive differential, as my colleague previously said. We offer all the fibers and all the products that can be added to our processes. Therefore, Klabin can enter every single market. We have plans in almost all the regions of the country. And therefore, we participate in the growth and the benefits of the market. And our pricing when compared to prices in the market are 6% higher. And this is due a better mix, a mix that offers added value, and this has been the case throughout the past years, bringing more markets, more products, more differentiated products that, as a result, allow us to be -- to distinguish ourselves. Well, as for the acquisition of International Paper in Brazil for recycle and corrugated boxes, we joined -- we joined that operation on October 14, after the agreement from CADE. It was very successful integration process. It was well-orchestrated, well-planned. This is a very interesting case because we signed the acquisition on the onset of the pandemic, but our planning was very well done, which shows that we were able to engage in a very well-structured process. So on October 14, the market was bullish, was going well. And today, all of the information that we collected in our business case are better. There, we have better volumes, better prices, better synergies when compared to what we had during our business case. Therefore, all of the projections for good returns are now showing much better signs, they could be much -- will be much better. This project also allowed us to be stronger in the Southeast region with new packaging plants in that region. We also became stronger in the Amazon region because we gained market share. And then we are also entering the midwest of the country. It's a sector that is growing a lot because they produce a lot of protein that is then exported to many other parts of the world. And if you look at the map here, you see that we cover almost 1/4 of the entire Brazilian market. The table down below in the slide shows that we went beyond the strategic rationale that permeated the entire acquisition. So this shows the low investment amount. You might recall that we released information. The entire asset was acquired by BRL 330 million. And after the acquisition, we sold 1 paper business for BRL 196 million, meaning that the final investment amount, I mean, was almost 7% of market share. So at the end, it was -- the total price was BRL 134 million. So the price per tonne of the market share is probably 1 of the lowest number, BRL 400 per tonne versus the new growth that could reach BRL 3.2 million per tonne when compared to other previous acquisitions, which was close to BRL 3,000. This will certainly add more value to our shareholders. With this acquisition, we are bringing almost BRL 1 billion of revenues denominated in BRL. So this is very robust because it was translated into almost 10% in terms of actual revenues and 20% in gross revenue. And what about the future? How do we see ourselves vis--vis all of the structural changes in this current scenario? I think you were all monitoring our e-commerce growth. And today, our e-commerce share in the retail industry went from almost 4% to 5% in Brazil to close to 10%. This chart on the left shows the numbers in September, 8.6% according to MCC-ENET. And throughout the years, you could see the incredible growth of revenue in that market. Now growth per region. In general, in Brazil, e-commerce has been growing not only in Brazil but all over the world. If you look at the gray bars in the lower part of the slide, this shows what has been happening during the pandemic months. I think our e-commerce shares in retail should be around 8% to 10% in our sales. We posted almost 200% growth in that same time line. And how can Klabin take an active part in all of that? This is a strategy that we are very proud to launch firsthand now with you. It's called e-Klabin. We were able to consolidate our strategy and our service, serving small customers and also very large retailers. And we are very proud to share with you this new strategy and this structural change. And what does it mean? We operate in 3 different fronts. We have e-commerce from our regular customers, customers that are already with us related to retail sales, and we can offer services, knowledge, relief-printed packaging. And packaging, they are relevant to our customers. We offer people knowledge and equipment for our customers. In the middle column, we have marketplace. We are exclusive suppliers to Mercado Libre. We also have a very robust participation with Amazon, Kaboom. And we also have box-on-demand. This is our solution that we in partnership with another partner, and then we can serve the entire e-commerce supply chain, meaning that we supply the packaging, the continuous corrugated paper. And the packaging is tailor-made depending on the order. So it doesn't matter whether there is a variation, individual variation per order, and we can have partitions within that packaging. And this also improves logistic costs in terms of taking the packaging to our homes. For every strategy, we offer additional services and customized service that at the end makes a big difference. And finally, our innovative marketplace. We are very proud to show you that. And further on, I will play a video that illustrates what Klabin for you means. With that, we consolidate our strategy and our proactive participation in this e-commerce market. What is E-Klabin? Early next year, we will launch this effort, and this will be further consolidated. So when you enter the website of E-Klabin, you can be directed to a B2B page if you are a customer. If you're a marketplace or if you are a small customer, you have Klabin for you. So the website will refer you to the best option for you and what we can do to expedite your business. So you can see the whole range of solutions we have for you. Another important appeal, and Flvio already talked a little bit about this, but we have this capacity to offer sustainable solutions by offering packaging that minimize waste, like dispersible bags. This is already a solution. We already have some customers using that. And then you can mix things in the cement mixer. We also have packages with potato and onion with dividers. We also offer packaging for the fruit market, reducing the participation of plastics. And this is ready arriving in the large supermarket chains. We also have other packagings that replace the plastic film like this that shows car battery. Therefore, Klabin is always ahead in offering important innovation to the industry through e-commerce in more sustainable package. Now I'll play a video that shows what is the reality of our e-commerce and our marketplace for Klabin for you. [Presentation]

[Interpreted] And we have a content full of inspiration in red. Klabin for you has just landed in the market, but we already have some impressive figures to show. In only 8 months since we started, we have more than 170 active products in our portfolio, over 1,200 clients and approximately 300,000 single clicks since the website started to operate. And this is just the beginning. Klabin, for you. The new era of consumption has already begun. So just click on the website and start shopping. So this is just part of all of the structured changes we are promoting. Thank you.

[Interpreted] That's excellent. Thank you so much, Douglas. Now to give us an update on the Puma II project and shows the progress and ambitions of the company in sustainability, I invite the Industrial Technology Director in Innovation, Sustainability and Projects, Mr. Francisco Razzolini.

[Interpreted] Good morning. Thank you so much for your presence here and this opportunity for us to talk about the progress in the Puma II project as well as our sustainability sides and the launch of our [indiscernible] and our goals -- 2020 goals. So the Puma project is now reaching its 49th week of the year, week 84 in the project, so it's more than 19 months working on this. Works are proceeding at a good pace. The -- effective now is at this point, at its peak, now we have the general stoppage of the Puma unit with more than 300 interconnections from the existing client in the new project. There are more than 8,800 workers there today on Puma construction works and another 2,500 working at a stoppage. So right now, we have more than 10,000 people working. At this time, we have 69 -- more than 69% of the works completed and moving along at a good pace. So I have a video to show you a little bit of the evolution of these works, and we will talk a little bit more about the progress after the video. [Presentation]

Evaporation cooling towers. So you're seeing the works, the storage as -- and how the project is [indiscernible] water treatment, effluent treatment, external container shipment yard, kraftliner MP27. So showing you a little bit about the progress of the projects. We have an image of what we showed you last year at our meeting in November and how the works are today. The construction here is the wood yard. We have this new area here on the left. Last year, we were just in the beginning of the foundation of civil construction works and now we have made quite a lot of progress. Construction works are pretty much close to completed. We seal the structure of the chips some -- I'm sorry, it's the biomass storage. Here is the building, the construction of the chips, silo at the bottom, at the back. We have the other dealers and chippers. Here, we see the evolution of the boilers, the recovery boiler and the power boiler that are being built. They share a lot of common facilities. We see that the construction has progressed quite a lot. The 2 buildings, the 2 structures that will support the boilers are already finalized. We are installing the boilers, as you can see, the chimneys as well. The chimneys' already in place. It's quite an impressive image. If we look at it, it's an image showing the assembly of this chimney with 130 meters of height. Yesterday, the last part of the boiler chimney went up. We see here in the back, a concrete structure chimney that's a little higher for the -- considering the capacity of the installed line in that area. This shows you a little bit about progress of construction. One of the landmarks of installing the boilers is the recovery boiler balloon that's installed at the top of the boiler. We can see here the crane with carrying this 80-ton piece. This is about a 20-story to give you as reference. So it goes on from the top and put the pipes in place for the furnace that are supported by these beams, the top beams that we see here. The boilers' built from the top down. We have the workers there for the reference and we can see the size of the equipment and the size of the construction itself. This is inside the boiler. We see the walls and the furnace. We see the welders working on the side of this well, but this is part of the structure with the panels and pipes already in place. Moving forward, we see a new part, that's the fiber lines. In November of last year, we were basically putting down the foundation for construction. And this year, we already see the electro room concluded, the pipe racks around it. Here is the area where we have the curation and washing systems, the digester array was here, almost completed. It has been closed this week, and we also see the chip's silo there as well already in place and closed. One of the big issues of projects of this size usually is the transportation of the large pieces, the large parts, many of them come from other countries. So it's a very complex logistic process that is -- requires a lot of planning. We brought up most of the cargo that came imported from the Port of Paranaguá of Tru Telemaco. We were able to transport it smoothly, no problem. This is of the digester rings we see in this picture. But just to give you an of the diameter that we were transporting. In terms of the big star of this project, machine 27 that will produce Eukaliner as Flavio mentioned, products that Klabin has been developing for 3 generations. In November of last year, we see the structures of the building being laid and installed, remoded. But now we already see that everything has been developed and the roof already in place. This is the implementation of the control room. The connection here with the interconnections through the rest of plant. And I would like to point these dots here on top give us an idea of the size of this machine. It's a meter with -- 8 x 10 meters wide. It's more than 30 meters wide in this building to accommodate and all the pieces of equipment. But as a reference, these are our workers. And you can see the size of this machine. So some images already of the installation of equipment. In this case, is the drying cylinders for machine 27, progressing quite nicely, moving along as what's been programmed and planned. This work had an impact between March and April of this year due to the pandemic. We interrupted for some days -- for 3 weeks. And then we remobilized people gradually. So that has affected our program, delaying the start up of the machine in 70 days. But this is -- here, the installation of other equipment. This is the kiln -- the lime silo, our third lime for the unit. This slide year shows us how it was 1 year ago. In terms of construction also, it's still in the foundation. And now with construction already completed, the silo in place, the kiln as well and in place with finalizing the alignment, it came in 5 parts of finalizing the alignment and welding. We see the cooler here ready as well. And right next to it, we're building a wood gasification system that will help reduce the use of fossil fuel at our Puma unit. This is the affluent treatment facility construction. That's also quite big. And the construction part is concluded. We see here when we tested the tank and the primary and secondary clarifiers. This is going to be the erosion reservoir. So the constructions are completed. And doing this stoppage, we are making the system interconnections for both water and effluent for treatment at this unit in parallel with the 2 existing units that we see here at the top of this image. So the project is going well. The effective is good. And if there's no greater COVID impact in the coming months, we will be able to deliver this machine in operation on July 15 of next year. This was a brief presentation on the programs of the Puma project. Now I'll talk a little bit about sustainability. It's been very relevant, and this is something that Klabin really likes addressing because we walk the talk. First we walk and then we talk. This has been a very good story to share and tell. It's been growing over the last few years or many years. And leading up to this moment, with our Klabin 2030 agenda, the launch -- official launch today of the Klabin Sustainable Development Goals, the acronym is KODS in Portuguese, that's Klabin's commitment to the goals to reduce impact on the environment until the year of 2030. The continuous improvement of our social indicators and the company's governance, the ESG that has been so much talked about and discussed in recent months. So Klabin has been working on these goals for quite some time. We based ourselves in the 17 sustainable development goals that are in the -- launched by the UN in 2015, and Klabin is a signatory of this commitment since 2016. And based on the sustainable development goals, we break it down in 3 levels: Economy and society and environment, which are topics that Klabin works on for a long time. This tripod is the base of our certification processes and our FSC certifications, the social, environmental and economic components that led to the stronger view, especially for the social environmental development and the governance requirements of the company. So we prioritized these KODS, the Klabin Sustainable Development Goals. We listed 14 of them. And on top of them, we develop our work and goals and proposals for 2030. There are 3 others here that we have direct contribution with that are in no way led to the side. So why did we get to this? Where does this location come from, to be on the path of sustainability? If we look at some of our indicators, over the last 15 years, we've been able to reduce 45% our water recollection for production in terms of specific water consumption per ton of product, that's very impressive. We've been able to include in many of our projects to improve processes, increasing the reuse and recirculation of water, reducing water intake. Another point is our energy matrix from renewable sources. This is something that Klabin has been working on quite heavily over the last few years, integrating our operations close to the forestry bases with the generation of waste into biomass. And now we have 89.5% of our energy matrix for Klabin, not only electricity, but all the energy matrix already coming from renewable sources. And something that has been quite relevant for us as well is the reduction on the emission of scopes 1 and 2. Since 2003, we've been able to reduce by 60% our emission of greenhouse gases at our operations. Our value today is quite relevant at 185 kilos of carbon dioxide per ton of product produced, which is quite significant. With our integrated operations, and all the work we've been doing to reduce emissions, the growth of our forestry base, our planted forest, and the large areas of preserved native forests that Klabin preserves, that's more than 240,000 hectares today, we have a positive carbon balance and a carbon uptake balance. Our balance from 2019 was 4.7 million tonnes of carbon absorbed into the atmosphere, coming from our emissions of 6.4 million tonnes, but the removal of carbon stock and our operations at 11 million tonnes. So this is really something that makes us proud of what Klabin has been able to accomplish, the investment. It's been prioritizing the technologies it's been implementing. Another quite intensive work has been the solid waste reuse movement from what we -- our operations generate in terms of waste. We're getting close to 97% of reuse today. And we have wastes such as sand and sludge, fibers, in the treatment station. So that has been generating products, such as the eco-soil or pavers. We've been paving areas already with this type of material. So it's quite intensive work with our research development lines, incorporation works. And very close to your communities, we are looking at the singularity and the reuse of our byproducts and our waste for the communities where we are. We also have renewable energy certificates. Today, we have a relevant position in renewable energy. We provide energy back to the system today with a renewal certificate, but we also have certificates available with more than 900,000 megawatts of certified renewable energy. Klabin has got this far to the point of announcing our proposals for the 2030 agenda based on the development we've been working on over the last many years. By signing protocols, participating in movements and compact, we are signatories of the global compact, the UN's global compact since 2003 as well the compact to eradicate slave labor since 2013 and the compact for integrity and against corruption by Instituto Ethos since 2013. More recently, we aligned 3 new factor works that we are developing. We already been informed of our participation at the task force on climate-related financial disclosures. We're working with the science-based targets for -- to reduce emissions in December, now we'll get our target to reduce greenhouse gas emissions. And we also work with the EcoVadis platform with our supply chain, all of our suppliers monitoring the performance and environmental risks in our chain, so that we get our chain involved in this ambition, in this goal of making the country or the planet rather better for all of us and a better environment for work as well. That has also led to many different recognitions such as CDB, where we already reached level A in Water Management, Climate Change and Forest. We also had the best performance of companies in the paper and pulp sector, in the Spot Index Assessment, WWF as well, an excellent performance in Environmental Paper Company Index. 90% index is the highest in the pulp industries in the world, paper and pulp. We're also in the ISE. This was renewed now, and we continue being part of it. And we're honored to. We've also been working with other indices of conscious capitalism companies, Conscientiousness is the name of the index, in carbon index. And as well, as Marco mentioned, becoming a member of the Dow Jones Sustainability Index, stressing that Klabin is the only Brazilian industry present under this index at this time. So we outlined our sustainable development goals. The KODS, as we call developed over the last 2 years involving the entire company, and the different departments and directors and management, our general public of workers, internal public, working a lot with consulting firms and benchmarks. We worked on 11 priority themes for the ESG by Klabin, leading to 4 main pillars, where we detailed 23 work goals and governance to follow up and oversee these goals, seeking compliance to the target, the goals and the value of results to our agenda and the global agendas that we are part of. So we work in 4 main pillars. One is the construction of a renewable future, contribution to a sustainable economy, the prosperity of people and technology and innovation. And at this time, we are working on these 11 priority topics: Energy use, water use, waste management, the impacts of climate change, local development, especially the communities where we are present, and social and environmental performance of our suppliers, our works with clients and products, the whole biodiversity aspect that for Klabin is extremely relevant, we're very dedicated to this, and diversity aspects, occupational health and safety and information security. Just mentioning some of these goals that will be available as of today at a specific website by Klabin. Highlighting some of them. Our ambition is to get to the level of 92% of renewable energy matrix. That's our commitment to 2030 and 100% of the purchase of certified energy from renewable sources. As I said before, we've also reduced significantly our water consumption, but we believe we can get even further away. Our ambition is to reduce the specific industrial water consumption by 20%. Also about industrial waste. Our objective is to get to 0 destination of industrial waste to landfills. I believe this is quite feasible and we will work towards it. This is a commitment we're making. And for climate change, to meet the goals agreed with the science-based targets initiative and especially to capture 45 million tonnes of equivalent Co2 from the atmosphere until 2030. Now in biodiversity, we've been working a lot on this. We are expecting the reintroduction of 2 extinct species in our areas and promote the population reinforcement of 4 other endangered species as well as making more than 1 million plantlings of native trees -- seedlings to reforest areas. In terms of local development, we've been working with the municipalities where we are present, where Klabin develops important work. We want to expand it to 100% of what we call priority municipalities for the company. And if possible, increase the range of municipalities. But at least these ones we want to support and the works that we develop are for planning of public management, definition of strategic plans of the municipalities, the management of the municipalities' projects. We also work a lot on school management and education. These are the works that we feel we can help our municipalities grow and make a better use of the resources available. And the social environmental performance of suppliers, our ambition is to engage 100% of our critical suppliers in a sustainable management program. If you look at the matrix, it's quite broad, and we definitely will have more than 500 suppliers involved. So at a first moment, that's what I had to show you. And we'll be providing, as of today, this website kods.klabin.com/br, where you'll be able to find the 23 goals and the performance indicators about this year and how they're projected to continue to develop. I have a video to show you about this launch of our KODS, the Klabin sustainable development goals. [Presentation]

Thank you, Francisco very much. Well, now we have some time left for Q&A. We already received some questions, but you still have time to send your own question. And to answer your questions, we have here the officers who were presenters, Cristiano Teixeira, Marcos Ivo, Francisco Razzolini, Flavio Deganutti, Douglas Dalmasi, and also the forest officer, Jose Artemio Totti, the Officer of business in pulp Ricardo Nicolini, the IT Officer, Sergio Piza; the Paper Commercial Director, Sergio Soares, the Industrial Paper Officer, Arthur, and Gabriella Michelucci from Corrugated Boxes, Operational Logistics and Procurement, Sandro Avila, and the Legal Officer for Integrity and Risk Management, Fabio Medeiros.

To keep social distancing and according -- and in compliance with all of health care protocols, the officers of the company will only come forward to answer your questions. The first question is addressed to Teixeira, who's already here. With the elimination of royalties what else do you think that the company can do in a short and midrange to continue improve its profile of corporate governance. And this question came from Rafael Barcellos from Santander Bank.

Thank you for your question. The negotiation process of the royalties was a very rich process. It was rich in terms of growth and the relationship that Klabin has with its investors. We abided by the contract, and we were in compliance with all of our guidelines. We had the opportunity to extensive we discussed the subject, and we are very pleased with the outcome from our general meeting that really showed that Klabin being active in a very transparent way. From now on, I mean, I am -- I would say that Klabin's governance is extraordinary. This is how we stand. Our strategic view, in terms of control, it's very determining for the success of the company. And in addition to that, in addition to our strategic view and the way we lead the company, we can certainly mention all of the evolutions of this year as important policies because we addressed all of the priorities. We addressed the royalty issues and all of our policies. Therefore, I'm proud to say that the company is very proud of its governance.

Now we have 2 questions from Caio Grenier from BTG Pactual. The first question is to Flavio. Flavio, how do you see the supply and demand dynamics for kraftliner for international markets in 2021? What are the main drivers in your own view?

Well, thank you for the question. Well, in particular, we look at the U.S., the utilization rate is 90%, and they are responsible for most part of the flow into the world, especially their virgin fibers and this impacted our prices today, even given signs to new moves looking forward. The second highlight is demand. Demand remains very strong. I'm not even going to mention Brazil because we have a special demand condition. But also including the U.S. and China, there is an important demand in terms of corrugated boxes, so that impacts our paper business. And this points to a longer duration of this current moment. And third pillar is supply. We have a capacity starting in July, another one ramping up further down the line for virgin fiber but not enough to contain the demand and in the U.S. market. So we see a very positive situation looking forward.

So now Flavio, please come forward. The next question from Caio from BTG is addressed to you. What about pricing increases for corrugated boxes? Could we expect increases above inflation in the next quarters, given the inflation of OCC in the pricing of paper?

Thank you for the question. While costs are bringing pressure by OCC and other raw materials, we should see some price increases above inflation with cost prices throughout the chain, also associated to our improved mix because we also see growth coming from other markets of added value. Therefore, our prices should be above inflation and this will give better profitability rates.

Next question is addressed to Marcos Ivo. The question is from Daniel Sasson from Itaú BBA. Could you give us an update related to the output decision related to the second machine of Puma 2? And what about the alternatives in terms of MPV? He is asking for you to give more details of higher CapEx and that option for coated boards.

Well, we are still looking at all of the alternatives in terms of maintaining the second kraftline machine in comparison to migrating to a mixed machine that will produce coated boards. We will choose the best alternative. But what I can tell you is both alternatives maintaining 2 kraft machines as previously approved or migrating the second machine to coated boards, both alternatives are pointing out to better returns when compared to our base scenario of 2 years ago. What is the deadline for the decision? The deadline is whatever does not delay the start-up of the second machine. When we started the Puma 2 project, we said that the second machine would start-up in May of 2023. So this time frame has been maintained. Therefore, that decision has to be made now in the first quarter of 2021, between the end of February and early March. So as soon as we have something -- some decision, we will share that with you.

Now Daniel Sasson from Itau BBA has a question for you. It's clear that it's important to have access to virgin fiber today. And Puma 2 will give Klabin that option. How do you see the mix of the company looking forward to 5 to 10 years ahead?