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

Hello, everyone. Welcome, and before we start our day, I would like to start with a lot of energy with a special good morning. Is that okay? So I will greet you, and I would like to hear back from you, good morning. So it's very nice to have you here. We are starting Klabin Day 2022. Welcome. I am Ludimila Bates, and I will be here with you this morning. Thank you all very much for all of you that are with us in this Klabin Day. And I would like to especially thank the Board of Directors of Klabin on behalf of Paulo Conde Ivo, the Chairman of the Board. 2022 was a year of a number of achievements. And now it's the time to share the results with you. This is the moment to analyze our advancements and talk about the guidelines for the next cycle. But before we start, we have some important information. This event is a hybrid event that is we do have an in-person audience. And also, we have people that are following us virtually. So we are prepared to organize the interactions and demands from all areas. Safety is crucial to Klabin. That's why those of us that are here in person, we would like to remind you that the emergency exit is at the back of this room. The team will be available to address any of your needs. So if you are with us from your home, we do have simultaneous interpretation from Portuguese to English. At the end of our program, we will have Q&A session with Klabin's directors. [Operator Instructions] We have here with us Cristiano Teixeira, Klabin's CEO; Alexandre Nicolini, Pulp Director; Douglas Dalmasi, Paper and Packaging Director; Flavio Deganutti, Paper Director; Francisco Razzolini, Director of Industrial Technology, Innovation, Sustainability and Projects; Marcos Ivo, Chief Financial and Investor Relations Officer, our Forest Director; and also Tina Barcellos, People and Corporate Services Directors. Thank you very much, and welcome to officially open our agenda today. I would like to turn the floor to Chief Executive Officer of Klabin, Mr. Cristiano Teixeira. Welcome, Mr. Teixeira and a round of applause to him.

Good morning, everyone. Thank you. I would like to ask you to turn to the first slide. Another one, please. That's the slide we can start. You can pull the images on this screen. So I would like to start by thank you all for being here in person. I know that we are not used to going back to in-person events but we did have a good turnout considering what we were doing during the pandemic. But now we also have those that are following us remotely. I would like to bring to you a quick presentation, especially for new investors that might not know our history. Each one of us directors will have quick introductions. I started in the pulp and paper industry at Ripasa in the '80s, I had experience there with some of the directors that are now at Klabin and then I had a long career at Duratex, where I worked for 13 years and then Tauza Group. And then I turned to drilling -- oil drilling company. And then Fabio Schvartsman invited me to come to Klabin. And now at Klabin, since Fabio left, I took over as the CEO. Each one of us will make a brief introduction, mainly focusing in the new Klabin Investors. Well, the first and important information that we need to put into context is that our economic situation and then I will turn to our business model and the main highlights that you have seen -- that you will be seeing on that our directors will talk about our economic scenario really poses some concern. You know that from information that you get from the market. But we know and we are sure about the defensive and resilient and perennial model, we have the planned model. Klabin's officers are not distracted by the short term. Our pieces of equipment or business model is a business model the long term. This short-term distraction that might pose some curiosity and we are always available to take questions and bring answers, but you need to understand the mindset of these officers, the mindset of a company that is designing today something that is going to be realized 15 years from now, for machines that will last 50 to 60 years. Machines that are now generating a lot of value to Klabin and they are already 50 years old. So this long-term structured business than a sound business that is not distracted at the same time, it's not running a risk of being dogmatic. Dogmatic, I mean here, it's that in a sense that we actually believe in the rigorous planning of what we want to achieve. We discussed and -- we discussed Klabin and we talk about Klabin in 2030 to all our employees. And this is a strategy that we built starting at the top management of the company and then we engage it communication and talks to all the employees of company. We have conventions with managers and coordinators. And yesterday here in the same room, we had a direct communication with 580 coordinators of the company, that's what we call the middle management or the middle leaders, not only bringing to them our 2023 vision but also our 2030 vision. So it is this business understanding, this soundness in our mindset in the perennial model without distracting ourselves what the short-term issues and that's why we are always focusing on growth. The forest area of Klabin is preparing itself new cycles. We have a great awareness about where we can get to, especially related to what has been done in the last 5 years. But if we project to the next 10 years. If we go back to the idea to the planning of Puma that we built in 2013. Throughout this period, we were focused in this area, in the forestry area that today is managing 50 million tonnes of wood. This is the largest wood in the world in a single place. In the past few years, in addition to having prepared the construction of the forestry base to supply Puma II, that is ready now. In addition to having done this process of mapping areas, buying third-party wood that is going to bring us especially right now in mix anticipation moment and you will understand it. We are anticipating the use of buying wood, especially because of the machine curve, the Machine 28. Some of the products that were to the middle and the end of the curve of the machine, we anticipated by commercial negotiations, and they will bring more value and more return on invested capital for Machine 28. For example, coated board for beer and going to talk more about that. So that anticipation of Pinewood made us replan ourselves, and now we are ready and we already have a formal commitment of all our suppliers for that period, especially for the first rotation and the forestry supply. The second rotation for wood for these machines is already have in the forestry. It's already being planted close to Klabin. Before, we always say that we are to buy third-party wood in the beginning, especially when we bring in a special mix of fibers that have not yet been planted in our region. So we are going to go get this third-party wood. But during this period of time, we are acquiring areas that are closer to Klabin and then the first rotation, the second rotation of the machine, it will be at for those, the average distance will come down. Therefore, the structural cost of wood that basically today is determined at the region because of the distance because we already have the highest forestry yield, the trees grow faster than in other regions. And that determines the distance cost. And this distance comes down in the second rotation of the machine or in our first rotation of our wood, the wood that was planted by ourselves. Then we'll talk about pulp. Today, we have a focus and we have always told you. When we brought in the puma project. It already had a special characteristics we had 2 dryers, 3 types of pulp, 2 types of fiber, seizing a great competitive advantage that we have in the region, which is the Pinewood and you will see Nico's presentation, that this focus is great now especially preparing for what we understand that is important, that is bringing focus to niche products, especially in fluff and bringing a future view growth that is in line to what I mentioned for the forestry and already having a trust that we delivered the enough supply for Puma II. And then talking about kraftliner and coated board. I would like to draw your attention to, first, our Eukaliner. Eukaliner was the first kraftliner that was manufactured with 100% of eucalyptus. And but we had a lower cost. It was a lighter paper. And for those of you that do not know it very well, pleased, to each business model when we have those presentations. And when we talk about packaging paper, you will see the versatility of Eukaliner. Today, this is a product that is known worldwide. Six years ago Klabin announced in a conference in Chicago. And that's where I say this that the maker of kraftliner. We announced that this product was going to be made out of eucalyptus 100% and is much lighter product, and it would be better for transportation because it was a lighter material. A lot of people question us at the time, but we were already working. We're already doing a lot of R&D on this product. So when we place this product in the market, in the beginning, people asked about it. We tested it all over the world in the main converters and they set it themselves. And these are clients in other business areas. There are our competitors, and they proved the cost reduction, especially in energy consumption and less fiber per square meter. Therefore, very virtual tile product. Another product line that I would like to draw your attention to our coated boards. Coated boards of Klabin, they are bringing us an opportunity to replace other types of packages, for instance, plastic at a speed that was higher than what we expected. This explanation, we are anticipating the consumption pinewood of and that has caused a reaction in our forestry area because it's already -- it's ready for the supply, but this anticipation of the pinewood consumption and the response here and the input comes from the market for this anticipation and the replacement of plastic. The first product that drew Klabin's attention, and we'll talk more about it are the liquid products, specifically milk and beer. And these products since in the midst of the pandemic, we're already posing a higher demand for Klabin. Therefore, like milk, food, beer, and we are 70% food. And then I come to our packaging area. Klabin has in its integrated business model, we always focus on that word when we go towards the end of our chain. Therefore, we prepare, we invested in R&D, and we have the best forests the most productive ones in the world. We have a pulp area, which is a niche one for specific markets such as diapers and that is with a high added value all over the world. We have papers versatile papers and especially for e-commerce or any type of packaging, secondary packaging. We have our coated board that is very close specifically to replacing plastic, and we have our conversion area. Our conversion area, therefore, has this integration than stability. And so that really helps us and the commodities [indiscernible] curves, thus turn in Klabin into a sound company even in a moment where we have economic instability, something that was discussed by everyone, and I would like to draw your attention. This is the right moment. 2023 in my opinion is going to be the great the perfect time to show and to prove not because of the dogma, but to prove by the belief in the business model, how much packaging will normalize, will stabilize Klabin's results. As international prices come down especially in packaging paper for corrugated boxes. We then reduced exports. We reduced the purchasing of third-party paper. We regulated our own plant, our own recyclable paper production, and we increased our conversion capacity with transfer price at the market, ensuring a profitability that will ensure the best return on invested capital on the machines on the forest. Therefore, Klabin's ROIC, which has doubled in the last 10 years and will continue to increase. The answer to improve the ROIC is in the integrated model with products that are focused in perennial businesses and with a strict planning, sound planning with no distractions in the short term. Finally, moving away from our business area. So we'll have an opportunity here with Francisco Razzolini to talk about the on-market opportunities. That's very interesting. We came back together from COP. We have direct participation in interesting negotiations also with Brazilian negotiators that represented us, therefore, Itamaraty was representing negotiation that COP. And also Tina and Christina, she is our management Director, and she's going to talk about the ILP for everyone. If you do not know this acronym, this is something that we have here. This is an inside acronym. And Tina can tell me if I'm wrong, were not, but I believe this was the first company in Brazil and maybe the few companies in the world to thinking about if we consider intensive capital companies that allowed all employees. Therefore, I'm talking about the lady that works in the kitchen, the guys that work on the shop floor, all employees can convert in this first year, 10% of their profit share and distribution of their annual award into Klabin's stocks. That allowed us to have an amazing engagement level. We are now seizing this engagement level, the response to feedback of our employees was really surprising. It is surprising because I mentioned our kitchen lady, and she really went after our officers for a better performance. So I'm very glad to say that. I think this is first company in Brazil and probably one of the few in the world that has distributed stocks to all employees of the company. Thank you all very much. I would like to quickly introduce our officers. Now Sandro is our next our next speaker. So I will take over the NCs function. So for those of you that do not know Sandro, he is our new Forest Director. But will put things into context here, so that it's not too vague from like where he came from. That's why I'm going to introduce him and then the other ones we will introduce themselves. Sandro has almost 30 years of Klabin. And he started and he got us right with Douglas and other colleagues. So almost 30 years of Klabin. He started as a controller in the forest area in Santa Catarina, then the controller of Santa Catarina factory in OtacÃÂlio Costa, then he was transferred to Puma. At Puma, he also was project controller. Then he came and replaced me, and I went to operations, I was from operating planning. That's how I came in to Klabin. Then I want to operations. As Sandro came in, he replaced to me coming from Puma and he worked on the plan -- operating planning. And now we invited Sandro because Totti retired, and we are very proud for his leadership and everything he has done for the company. But at the end of the year, Totti will retire. And then we are transitioning with 1 year. I would like to draw your attention to that with a year ahead of Totti's retirement, Sandro worked with him. They worked on a shared management, and that's how it was announced in the company. And now Sandro is taking over by himself. Good luck Sandro, and welcome. And now the floor is yours.

Thank you very much, Chris. Thank you for the introduction. It's a pleasure to be here. It's a pleasure to be to talk about our forestry area and to talk about it to all of you. I would like to start by showing you our main figures. Cristiano already touched on them, but we have good numbers this year consolidating on important guidelines of our planning. We reached 349,000 hectares of productive areas. And this figure means a very important landmark because it has a conclusion of over 90% of the expansion program of our base for Puma II. So right now, we are moving on with our expansion program in a more strategic and selective fashion always aiming and maintaining the areas with better quality and especially reducing the distance, bringing our areas, our structural base closer to our operations. We also have some planning for 2023. It's structure planning for the reforestation program. In 2023, we want to exceed 50,000 hectares of reforestation within a year. That's a very important reference for the forest area. We've been planning and getting ready for over a year now, and this is turning into a reality. Like Cristiano said, the operation close to 16 million tonnes per year. A very important move in Parana State alone, approximately 14 million tonnes. It's very important to say as well that very intensively in the beginning of our business model, diversification of fiber, it all starts in the forest. We're very careful to come to a balance among different fibers and pulp. It brings us a lot of benefits and opportunities in operation. And now we can have a planting program that is relentless. We plan only around trying to find the best location in the area. We route areas according to the cycle and the species response. So we're constantly getting ourselves ready to different fiber and pulp diversification, which always starts in forest. So here we have a direct link. You think about the base condition of the forest. This is very diversified with different fibers and pulp. So this is very nicely integrated and very strongly integrated in our plants, allowing these plants in units to put together different fibers in our production line in order to react very promptly to different products for different types of applications. So responding with our production for the right demand. Like Chris said before, we were very well prepared to and Puma I and Puma II, include in the forest basis. And this allows us now to be very fast and agile for this increased and diversified demand for softwood and Flavio is going to tell you more about it later. So here we want to share and show you a little bit of our supply strategy. But we always say an expansion cycle in the window of opportunity comes to meet a need of acquiring third-party wood in the first cycle, in the first rotation. So this topic is one of the well plan from the moment we make a decision to expand our capacity because we have -- to have guaranteed that we have the wood so we can properly plan in order to be in a stable operational cycle. As we can see with eucalyptus, we are arriving in a very strong ramp-up phase for the following years. Stability is planned more recently. And when it comes to pine because the cycle is longer, and we are always benefiting from market demand for this fiber and pulp. The cycle is slightly longer. This shows an overview of our planning system. These 2 pictures show you a little bit of our years ahead. And this is how we're going to work and operate our forest. It's important to say that third-party wood that I showed you in the supply metrics on the slide before it was fully mapped before we made a decision for the project. And today, it's almost fully contracted. This allows us to plan our operations for the next 5 years. And this is a fully designed, know exactly where you're going to be, the volume that will be delivered by region the needs to be mapped by every region because naturally, we are not there. So we have to have full respect for this planning. So this has been on for about 2 years now. And it takes into account where the wood will be taken in the cycle. And the second map is really cool. This is when we reach stability. And it has to be on our radar. Just to give an idea distance be operating in this phase in radio depending on the year, slightly longer reaching 150, 170 kilometers. And once we are stable, this number is under 100, keeping the structural and competitive distance required at Klabin. So this is our daily operation, not only planning our operations but also a vision for stability and structural competitiveness. End-to-end, I would like to show 4 drivers for the forest area. And these are strong investment in research and development, technology and innovation everywhere in all business, but very strongly in our forest. Our fiber and pulp diversification allows us to be very keen and research development rotating areas, always trying to have a maximum productivity and yield in the areas where we are. The second driver today, we are fortunate enough to have an expansion program for a forest-based different areas. And this is nearly concluded, like I said before. Next, the operations for the next 4 to 5 years has been fully mapped and designed and always in our operational schedule, which includes structure, the operations required to run the cycle. And last but not least, because in forest, I'd like to say that the future is right now, we are moving very well in the base expansion in Santa Catarina stage, reaching 35,000 hectares added to our base already being planned in order to cater for our future expansion on that side. So this is what I had for today. Thank you.

Thank you, Sandro. I also thank Cristiano, thank you so much. Before we move forward, as a reminder, for those who are following us remotely, you may also send your questions. So after presentations delivered by the management, there will be a Q&A session. [Operator Instructions] So now we'll be addressing the outlook for paper, pulp and packaging. The first speaker is Alexandre Nicolini, Pulp Business Unit Officer. Welcome, Nico.

Good morning, everyone. Welcome. I'm going to be on this side, so you can see the slides carefully. So just a brief summary of my career. I joined Klabin about 2.5 years ago, 29 years in the industry now. I started back in 1992 in the industry of Simao , which was acquired by Votorantim Group back in 1993 and have been through other Brazilian companies in the industry as well, also a multinational company from Sweden and Norway before I joined Klabin in mid-2020. It's a pleasure to be here, and I'll open my presentation addressing the pulp business, making reference to our diversified product portfolio. Klabin is the only Brazilian company that sells 3 types of fiber and pulp, eucalyptus, pinas, softwood and fluff for eucalyptus and pine. It's important to highlight this diversified portfolio. The single purpose is to show you that Klabin does not rely on a single product. And why is this important? This diversified portfolio brings an important contribution to the results the business unit today for fluff and softwood accounts for 38% of the EBITDA margin of the whole business. When it comes to production, it accounts for only 1/3 of our total production. This diversification and geographical flexibility allows us to work on key strategic options. On the one hand, maintain our strategic accounts, clients whose relationships are long term started working with clubbing since we started up Puma back in 2016 with a very strong relationship, and we maintain these accounts as top priorities for us. On the other hand, we have the commercial area jobs with relentless demand for our products above our production capacity, allowing us to make some choices in terms of having the best revenue management. It all converts into this slide down here showing our geographical footprint. This footprint has been changing over time. The main assumption is always the search the best results. Brazil is one of our priorities at all times, be it in terms of lower service costs vis-a-vis the international market, but also a geographical distribution that does not heavily depend specifically in one region or another. I underscore our revenue management, which has been on the key aspects of the pulp business results over the years. This has allowed us to contract in recent years. And also for 2023, 90% of our production. This percentage is quite high. And it brings us better predictability, better outflow of our products and confidence about the perpetuity of the business and the remaining 10% are maintained sales spot market in order to optimize our earnings. So where is Klabin or in the global pulp market? Basically, we are in these segments, hardwood, softwood, and fluff. All segments are growing with demand projections that are very significant for the coming years. Consulting firms address and talk about the demand of over 11 million tonnes, including all fibers by 2030. So a period from 8 to 9 years, very similar to the growth that happened in the last decade, which was 14 million tonnes annualized accounted for 1.4 million tonnes of demand -- additional demand over the years for all pulp and fiber. For hardwood market, eucalyptus is the dominant player. Our strategy is quite simple. Operating excellence level of service and revenue management. For softwood, Klabin competes with high-cost manufacturers despite lower production volumes, considering we've been concentrating our efforts in the fluff market, Klabin plays a very important role in the Brazilian market. Today, we are a supplier with over 80% of the Brazilian market share in softwood alone, not only paper but also fiber and cement with a different dynamic compared to board and paper. And lastly, the fluff segment accounting for 10% of the global pulp market. As you know, Klabin put a lot of energy in the sense of increasing our exposure to the market. And this will be the focus of my presentation over the next slides. Projections for fluff growth. These are very sound and healthy. Just for other pulp. But considering projections from the major analysts in the market, we expect growth of 3.5% from 2022 to 2040 on an annual basis. These projections and forecasts are very conservative, considering some segments of the fluff market have demand growing more than 3.5%. At the end of the day, we that heavily on this segment, and we dream high in our future to develop new capacities in this specific segment. So what are the major growth drivers for the fluff market? Obviously, increased expectation of the population is the main driver for demand growth, which is broken down to different drivers like population growth and demand for personal hygiene, personal care product, change in female care products, particularly in developing countries. That's a very important thing to take into account and population aging, which allows us to maintain a lifestyle and welfare of the population at large. Innovation and development of new products is another driver, obviously, to meet the expectations and demand from the market. And finally, increase in income. I highlight specifically the increase in adult incontinence. Like I said, we project growth of almost 5%, which is way above projections for annual growth for the fluff market at large. So who are the major players in this segment? Here, I show the main players. As you can see, this segment is very much concentrated, 3 producers in North America with 85% of production, annual production of fluff and softwood. Klabin ranks 4 for the last 2 years, considering all our efforts and assumptions to increase our production capacity for flu. Other manufacturers as well you can see on the slides. When it comes to competitiveness, Klabin stands out in the market. It is the lowest cost producer in the world. Here, I show our average cash cost forecast on a global basis. It also includes the cash cost of Klabin, which is the lowest and also other manufacturers in Latin America. And this strengths our cash cost, which is very high. Please bear in mind that these data are the most updated data, maybe they don't include a marginal increase for the last 2 years. The inflation process that we going through, but we also highlight some manufacturers. For instance, number 8, the cash cost is greater than $900 per tonne. It makes us believe that the flow of cost for this segment is very high. And that's a market where we are more stringent when it comes to price compared to other pulp that are more commoditized. I also highlight things related to production lines of these high-cost manufacturers. These are old line. Obviously, these projections of cash costs are average projections. They don't include by plant, by factory. But we all know what happened this year, closing capacity, for instance, WestRock closing units at a time in which the market reached historical price levels. And we're based on this assumption that we believe that Klabin will stand out as a player for fluff in the future. What about our approach in the market? This is one of my favorite slides, and I'd like to share with you now. It's a little bit of the history of Klabin ever since the beginning of our operations in the production line of the Puma project back in 2016. In 2016, close to 80% of our production was concentrated -- I'm sorry, the laser pointer is not working well. 80% of our production was in softwood and 20% production for fluff. This market dynamic is very different. Sales are more technical. The qualification process takes longer about 6 months in the best scenario. And over the years, Klabin has been increasing its exposure in the pulp market. Please bear in mind, we used to have a single product, which was the base product. Fluff was not treated -- untreated fluff and it remains in our portfolio from 2016 to mid-2019. And we work a lot on this, the innovation area, the commercial area in terms of trying to explore specific niche for this segment, bringing added value. Considering this, as of 2020, Klabin started the test and qualification of several other products focus on such market niches from 1 to 5 products. Out of these 5 products, in 2022, 7% of our sales for fluff are related to these new products, which were recently launched. Starting 2023, will more than double the sales of specialty products moving to 15%. And this is the assumption that we'll be using ahead. Now, I bring more color to these 5 products that Klabin has developed. And please note that this stands from a single production line, a production line, which is Machine 26, already achieving some record levels, the world record in terms of speed. And this machine has huge operational excellence. We manufacture 5 products in a single production line without interfering our efficiency in that particular machine. Out of the 5 products in our portfolio, I'd like to highlight PineFluff eXcel, which is in yellow. Just like to comment, this is a new product. And now it is included in our portfolio. The official launch was in October this year. This product has the best from both fibers, eucalyptus and pinas pulp. This product is very disruptive. Nobody else in the world manufacturers, this kind of pulp to date and demand is significant by our clients. It's very cost efficient for us, manufacturers and customers as well, but with very significant margins. And it begins to be part of our portfolio starting in October this year, like I said, and this is where we're also going to put a lot of focus starting 2023 in the sense of promoting this line of products to the specific niche markets. All these efforts oriented to our operational excellence and the production of different pulp grades, the performance of the commercial area contracting 90% of our production, it wouldn't haven't been possible if there were investments in logistics as well. Klabin, we will open a new terminal in December this year, PAR01. It is state-of-the-art, a terminal that is interconnecting the plant to the port, eliminating completely the need for trucks. In terms of sustainability and also in terms of operational efficiency, it brings significant gains for Klabin cost-wise. And at the end of the day, we'll double starting next year, our operations in Paranagua port. So as my take-home message, I would just like to highlight our focus on niche markets. I told you before about eucalyptus and the 3 basic assumptions, excellence, high level of service, revenue management and more specifically, for fluff and softwood focusing on niche market with higher added value that may contribute very effectively to the global earnings of the pulp business. All this global acknowledgment already achieved by Klabin is due to the high level of service delivered to our customers and strategic partnerships already set, they all allow us to contract more 90% of our production, like I said before, considering the solid and sound client portfolio. The focus for the future is high competitiveness. This is a business in which competition is very important. Focus on operational excellence, continuous optimization of our pulp and fiber portfolio and as a pillar, innovation and sustainability. At the end of the day, this will allow us go to market and improve our capillarity in the global pulp market. I end my presentation. Thank you. And I'll be with you for questions.

Thank you, Nico. So now we will check the performance challenges and the outlook of the paper business. And to talk about it, I'd like to invite up stage Flavio Deganutti, he is the Paper Unit Officer. Welcome Flavio. Over to you.

Thank you. Thank you. It's so good to see full house and also people in a hybrid everybody keep an eye on Klabin. I have a brief presentation. My story is mix with Klabin. I've been here for 23 years. I come from countryside of Mato Grosso do Sul. I study an engineer in Paraná and I joined Klabin going through the industrial base. 17 of the 23 years, I was in Paraná in Monte Alegre plant with multiple products and one of the stars of the company. So the paper business, I think you'll recall, last year, I spoke a lot about Eukaliner, Machine 27. So that's a dream that turn into reality. Chris reminded us of his speech back in ECC in Chicago years before. And the crowd was speechless. Kraftliner, 100% high-performance eucalyptus brought a lot of questions to people's minds. Well, this was converted into reality, which is Machine 27, tested and approved by Klabin in its operations and also in Europe, Italy for protein and fruit manufacturers, it confirmed that Klabin's promises turned into reality. Today, my focus is on the coated board market. We are about to start a new dream with Machine 28, which is being built. I'm going to show some photos for coated board, which is the main benefited from these single-use plastic for our units with fiber products. Look at the size of the market, 27 million tonnes of virgin fiber coated boards, 20 million bought from recycled fiber. This market has grown very significantly over the pandemic. So consumption at home, e-commerce and the replacement of materials gain momentum in the cycle. You're very familiar with Klabin's performance. Klabin has a strength, which I highlighted before, 3 stars, LPB, liquid packaging board, CUK, which is for beer, cans and bottles, to universes that benefited from additional owing to replacement, and we're also active in the folding boxboard in orange 11 million tonnes. FBD, particularly for boards that require high technology softwood with special folding and therefore, they need performance in the point of consumption. Specifically for LPB and CUK. These are brown pulp products. Most of these boards, 5 plus 3, 8 million tonnes. This is part of the base brown pulp market. So this is how it goes. And this code has different layers, which cover the surface for LPB and naturally, for beer, we need strong softwood, which is what we provide. I always bring some news here. Please note this landmark of 80% of the 27 million tonnes, these are white pulp product, 100% or mostly white particularly the base layer. We don't play this game, but we'll become a player soon. We're just about to do it in the final approval phase to get the machine ready to be in the white pulp market without compromising the supply for market pulp like Nico said. So through debottlenecking, we also managed to manufacture white pulp coated board. And why does it matter? We get in to SBS, so we have an avenue for growth in solid white board, and we have an avenue for growth in FSB, the darker green of 5 million tonnes. FSB is food service board and tray and cups. I'll bring you more color later on. Big fast-food chains, large food consumption, they need this kind of application and that's why we want to open this kind of avenue for Klabin to be in the flexible market. So bringing you more color about the liquid packaging board market. The long story since the '80s. Francisco started this project, but our colleagues in the past. It's a hard time, the only manufacturing in the Southern Hemisphere to produce this high-level board as we're doing today. As you can see, well, everybody used it before. We don't have a better way to store milk to give long life to milk, maybe it's trivial for more mature countries, but it's not easy for development countries, bring it from the field and allow a long life. So the same goes for functional foods that are increasingly being more prominent. As a leadership, we are one of the major LPB manufacturers in the world opening the avenue I signed before. And part of LPB boards, just as in the U.S. and also in Japan and in Australia and Korea, they're exclusively from white coated board. So this machine also has this opportunity and that's where we grab a lot of contracts signed by the company. And I have another highlight, the future agenda of the coated board goes through one route, which is to increase the content of fibers. You know that this coated board that needs layers of aluminum and polyethylene to improve the life of the package. But all the agenda with the major picking manufacturer in the world includes one element, which is to increase the content of fiber. So we have some triggers to reach 80% of fibers involves whole chain that's going to reduce our carbon footprint, it's going to turn easier the recycling process. And that becomes a noble material for the following material in terms of recovery of that. So I also have some color on the CUK, coated unbleached kraft, which is especially dedicated to beer. And if I go back to 2018, we had 2 digits growth a year after year here in Brazil. Part of the plastic films that we see that unitized 12 cans or bottles have been replaced by packages like these that you see here. There is not a limit in terms of technical limit here. We have machines that operate well with plastic and offering solutions as Machine 28 will do, we bring immediate solution and that has to do with agreements towards that direction. I highlight here our tech team, and you see here MFC, microfibrillated cellulose. So it's a way to offer the same coated board with the same functionalities, but in a lighter fashion. The only way that we have now to offer a lighter coated board for this application is by using special fibers, that is the ones that we manufacture in Parana. Also some color in the folding boxboard. We do not have an operation to work in this world with hardwood. And going back to what Cristiano and Sandro mentioned, these are tack-coated boards for the high-end segment. And then we associated our coated board to barriers. You heard about an important investment of a barrier applier, dispersible barriers that replace plastic films that usually replace the coated boards and just like that nice pizza that we see here in this image. And just like the detergent packaging, they do have a plastic because there, they need a water barrier. So Klabin is ready to product that can work well for that application, for food service board here. And the growth that we have seen in the world for coated board replacing packaging. The food service world was the one that has benefited the most and one that is growing more. The average growth in the period is over 4%. Klabin is already working there. We learned a lot in the segment with that brown cups that you currently see in the machines in Parana. What we have now that is new as the same avenue that I mentioned before in the beginning of the presentation. The possibility manufacturing cups like the ones that you see at Starbucks and the image that you've seen in the middle of the slide. This is our mainstream here. So most of the cups, the trays, and clamshells are made out of the coated board. So now let's analyze now our growth rate, 2.2%, a very healthy growth rate that was more relevant in 2021 and 2022. To the right, I highlighted growth rates by family. Look at the figures that I mentioned, the 4.3% in the food service business. Now the drivers. I mentioned of them here, almost all of them, I mentioned. And they do relate to what Nicolini mentioned before, plastic replacement, the main driver and thus bring additional demand urbanization of fast and practicality. Now you're talking about food service, cups and trays for home delivery packaging as a marketing tool. This is the first point of contact a lot of times when you receive an e-commerce package when you open it, you get surprised with the quality of the printing. A major concern with the environment. So our barriers tack straight to that, smaller families, aging families and also legislation. Europe is very close to regulating central elements that will help the type of packaging that we have. Now I have a highlight with a figure of what we're talking about. This is brand-new information from our engineering partner on this topic from AFRY. Here, we have the FBB world, the folding board box. Just Europe benefits from 1 million additional tonnes 2x Machine 28 just by replacing -- by the replacement aspect. The growth rates of CUK, that blue small circle to the left, it goes close to 6% on this map. And the growth rate for the folding box, the orange ball goes up 2%. So it's almost 50% of growth rate what we are seeing here. So now let's check the dream turning into reality. It might be more interesting to some more than others, but this is really a dream that comes true for me here. This is in Parana. The plant is already built 70%. The [ drawn ] navigated over the machine. We have over 5,000 people in the construction of this equipment. It's a huge building that is just by the machines, 25 and 23, the dry pulp, and also Machine 27 that produces kraftliner that, in fact, look at our train transporting Nicolini's pulp to Paranaguá port. I would like to stress the ramp-up of this machine. 70% of construction is concluded. It's on time, on our schedule. We are gaining time whatever is possible, most of the materials already there. Our labor is favorable, and we compare that to Phase 1 of the project. We see that there's an advancement. We are in a very positive stage. And now the chain now is filed by all product families, also the ones from white [ nature, ] including SBS, with this ramp-up curve that I bring here and the upper part of the slide. And let's analyze your 2 scenarios, and my boss will come after me after that. But we have 3 optimistic scenarios, and those scenarios were developed in 2021. And here are the scenarios. And this is what we see today, the machine getting to 100% filled with coated board in 2025, and remember, this machine is a hybrid machine. So it can produce not only coated board but also kraftliner and white top liner. This is Klabin's investment in a flexible model. Naturally, this could happen, but that's not what we foresee now because of the context that I just mentioned. So we believe we'll have the machine manufacturing 100% of its capacity with coated board by 2025 and 60% of this volume is already contracted now for liquid packaging, CUK and also in floating box. And to end my main message going back to our main topics here and new machines starting in the second quarter with a ramp-up that is being well planned, 100% tilt with coated board by the end of 2024, very positive periods. This is the only large machine that goes into this time window. We do not have a competition with other plants that are able to manufacture these products from '23 to '24 and part of '25, and that's also something that favored the signing of this contract. We have the Machine 27 history there, even in a moment where we see the pandemic peak and also greater trends of productivity, quality and tech products. So we'll be available to take your questions at the end. And now I conclude my presentation.

Thank you very much, Flavio. Really, we will have a Q&A session shortly. Now we are going to get an update on the results, opportunities and expectations for the Packaging segment. For that, we'll have Douglas Dalmasi, the Packaging Officer, Douglas, welcome to the floor. The floor is yours.

Thank you. Good morning, everyone. It's a great pleasure to be with you. When Cris said that we wanted to introduce ourselves, I had to calculate how many years I have been with Klabin. It's 30 years. I'm very proud to be with Klabin for 30 years. Since I graduated from college, I have been through different areas, 3 or 4 years in different areas. I had an experience in the financier and supply chain, different business units. In the last 4 years, I was -- and I have been now the Packaging Officer for Klabin. So that was a great opportunity to work in the different areas and get knowledge on all of them. So we'll talk now about packages, our boxes and bags, and they are part of our chain as we already have seen this morning. It is part of our forestry competitive advantage. Our pine trees and eucalyptus also integrate our papers, most diverse ones, and here we are diversifying ourselves. We have different types of papers, different types of fibers and the right paper for the right use with high technology, a lot of knowledge, knowledge for many years, low cost and scale. And we have this huge internal client that is driving growth for the company brings diversity, flexibility footprint at this end client, and I will show you all these drivers, and it also reduces the volatility of results in the company, bringing in resilience of its markets, the packaging market boxes and stacks so that we can have growth for annual growth. I do like this chart. We'll talk about growth. This is a growth projection that was developed by a respected consulting company, AFRY. They project growth in the sector. The width of the bar shows the market that these are paper markets, and this shows the size of each market, and the height shows the growth. In blue, we have the containerboard and the sack craft and green the coated boards that Flavio just talked about. And for containerboard, this is a market that has a good world projection, 2% for the next years. And for sack craft, it's a growth of 4%. This is a market that has a huge overlap with replacement of its other materials, plastic, for instance, and that has become really a special position in terms of growth. So we are seeing a lot of replacements here. This is the world projection. But when we look at Latin America, the growth is even higher. And in Latin America, Brazil's growth is the highest one in Latin America. Now when we go to Brazil, this is what we have. We are leaders. One at every container box or corrugated boxes that you'll find in the Brazilian market is ours, 1 in each 4. 1 out of 2 sacks or bags are ours. So we are strong leaders in these areas. Now when you look at the growth history of corrugated boxes, and this was measured by Empapel. We have a historical growth from 2015 to 2022 over GDP so a resilient market that is growing over the GDP historically. And if we expand this history, we'll see the same behavior, growth over GDP. And the trends drive even more of this growth. So the e-commerce, which is already a reality, but it still has a lot to deliver. It's going to drive growth even more in the packaging industry sustainability. We see changes of other things changing from other materials to paper packaging and also design and esthetic appeal that we see that is more present in our clients. So these global trends are driving the business, and we see a correlation among them. So e-commerce, considering that the packages are getting to our homes more and more, we find that clients realize that it's important to have sustainable packages and also to have a package that will bring a special experience that complete the product when it gets to their homes with a good design of sophisticated printing so that we can have a nice experience when we receive the package. Zooming into the e-commerce now, a lot of deliveries. The Brazilian market is growing here. I am comparing it. I'm comparing the American market, the Chinese market and Brazilian market. Klabin is at the vanguard herein. And United States has an average growth of 20%. The percentage of retail is over 20% in the e-commerce. China, 50% of its e-commerce -- or 50% of the retail is e-commerce. And Brazil before the pandemic was at 7%, and now it is at 13%, and we know it does have a lot to deliver. 13% of the Brazilian retail business is coming from e-commerce. We see that growing every day, and it's growing strongly. Klabin works in 3 different ways in the e-commerce business. We have a pillar, which is to accelerate marketplaces. We have clients such as Amazon, Mercado Livre, Magalu, KaBum!. These are our clients with a high participation of Klabin, and we have sellers to accelerate the e-commerce of their marketplaces. Another pillar, we work with a sale accelerating e-commerce of our additional customers, such as Boticário, Carrefour, Unilever, other ones that have their own marketplaces, and we have work sales looking at the whole chain with packages and logistics and everything to accelerate the e-commerce of our clients. And we have our own marketplace for paper products. Klabin For You. You can go in there and purchase. So we do have a sale there. So it's a huge website offering paper products, and you can buy them from Klabin, and these products can be manufactured at Klabin or not. This is a marketplace for Klabin. And you might ask as why Livelo is there, and we accept Livelo so that we could find people so that people could have access to our marketplace and buy, for instance. You can convert your points at Livelo and the points market is growing in the market, and you can convert your points to buy packaging at Klabin for you. This is an amazing synergy, and we are learning and we are growing with this e-commerce market and a lot of resilience. 70% of our volume is in retail. Another information, 65% is in food. So it brings a lot of resilience to us. When you go to the supermarket, on the shelves here, we'll find products with corrugated boxes, industrialized food, foot boxes, a tray in a shelf. That's what we call shelf-ready pack. That's a display where you pull the products from. So we are really there at retail with consumers. Therefore, we do have a lot of resilience. Diversification. We are in different industries in the local market -- supplying to the local market but also areas that export, and they cater to large brands following the growth of large brands just as average and the small clients. We have over 3,000 clients. We sell to proteins, for instance, proteins that are exported. We sell to the fruit market that exports the oranges in the country [indiscernible] the south, the apple that goes abroad in the Northeast, mangoes and grapes that are exported to Europe and also major brands that supply to the local market. We have over 16,000 products. You can see that we have become more and more customized. Look, these are over 15,000 products so very customized. So this brings us a lot of resilience, a lot of the diversification, more added-value products. So the market is evolving. We have invested in 2021 in a package of printers and equipment to cater to this diversification, digital printers, 7 color printers because this is the market demand. The market has demanded more and more printing, different designs to meet the new trends. So all this growth, the growing market, both in coated board as well as in packaging, sack craft and bags, all that diversification increase our prices above inflation and improves our return. Here, we have a comparison of our prices from 2015 to 2022 compared to inflation. So price increased over inflation. So we do have diversification growth, and we are growing our margin with a growth that allows the demand to increase and push up the prices, but also by diversification and added value more and more every day. This is something new. That's something that we opened a month ago. If you follow us, you know that we have a tech hub for papers and fibers that was installed in Parana. And we have researchers working there for future developments, and we want to use the best way possible our forest. And now we have opened a tech center for packaging. We have methodology process. We bring in the customers, and we developed this hub, and that's in Jundiaàin Sao Paulo. And that will connect all our chain for different developments. We have a huge pipeline of new products that is being developed, and that comes via e-commerce, sustainability, esthetics, but also it comes because of the pains and needs our clients have. Sometimes they don't tell us, but when we bring these customers inside, we are able to hear them and to develop the equipment. So when they come in, they bring someone from marketing, from the industrial area, supply. And so in the very same day, they leave the place with a prototype for something that they need. So this is an innovation, and it is internally connecting with the final clients. I have a few examples here, and I like to mention what you see, that continuous plate, it seems the simplest one, but that's one of the nicest examples that we have. We are going to open what we call Box on Demand. So we developed a continuous paper, and you connect to the equipment. And at the end of the machine, it will develop the package and the size that they need. For instance, Amazon or Mercado Livre, they want -- they have to deliver a umbrella and then a chocolate. So that's going to be a tailormade package, and we'll have a better logistics and better integration with the whole chain, bringing innovation to our client. So this is growing in the company. So for the next years, new products growing and in -- from 2018 to 2022, we had a growth of 23% thanks to new developments that we have been able to carry out by hearing our clients. So to end my message, we have a lot of resilience, growth over GDP. The trends are driving this growth ahead. We have lower volatility, a great diversification, lower volatility of results thanks to integration. And even going through different economic cycles over the years, we have a pipeline of new products, new markets, a lot of new things happening, and we will guarantee supply to -- we have Puma II. We acquired forests. We acquired third-party wood. We invested in Puma II. And this year, we announced 2 new operations project Horizonte in Ceará will start up in the first quarter of '23. And Figueira will start up in the second half of 2024 to cater to the needs of our clients. That's what I had to bring to you. Thank you.

Thank you very much. Thank you very much, Douglas, and now delivering consistent results and generating value to its investors, Klabin has a sustainable business model. Over 120 years, sustainability is present in the whole strategy of the company, and Klabin is leading the company and the climatic issues, discussions. Now to talk about the carbon market, I would like to bring to the floor, Francisco Razzolini who is an industry technology, innovation, sustainability and project Director. Mr. Razzolini, the floor is yours.

Good morning, everyone. It's a very interesting to follow Klabin's trajectory in all our business areas, right? We started forest, and we go to paper packaging. And you see that is a -- paper packaging's so simple, and a piece of paper, a sheet of paper is so simple, and that sometimes does not reflect all the technology involved and all the passion that we have because we are in this for a long time. So I would like to introduce myself. I am at Klabin for 38 years. I'm a chemical engineering. I have a master in paper engineering. I have been in different positions at Klabin. I started in Monte Alegre factory, and I was with Flavio in liquid packaging start. Also, the first prototypes of Eukaliner that we developed in the '80s that ended up culminating with the this winning project, which is amazing in the packaging paper. I have been in different areas in Klabin: operations, M&A, planning. And in the last 20 years, I have dedicated myself to projects and major opportunities of expansion for Klabin in paper. I worked with the [ MAB100 ] project, and also I was in supply and then since 2011 R&D working with projects and planning at the time. And then the structuring of Puma Project, starting with the name up to the plant's operation, and Nico took over that in 2020. And then we focused in other opportunities, such as innovation, consolidation of R&D automation technology. And finally in 2019, sustainability at Klabin, we chose to work with sustainability on the technical side. We are very rigorous with our operations in Klabin. We want to have our operations running very well so that we can show what we have been doing, and this is happening more recently. I came from that time from 1985, and I usually joke the day that I started at Klabin was a holiday. Not because I joined Klabin, but because Tancredo Neves, our former president, passed on the very same day. So that is to say that I have been with Klabin for a long time. And so I was able to follow the transformation of Pulp and Paper. We were known by pollution and the odor. And it was easy to tell, you work at Klabin, right? Because we would get to places when we would have that odor from the plant. But that doesn't happen anymore. So we have seen an amazing growth of the company. And right now, we are on the right side of sustainability, I can say. We now have planted forests of very high yield, and Klabin has the best yield in the world, and the plants are very modern, automated. All the digitization cycle that we had and still have and that we see in the developments also in innovation, and research and development, and also the transformation to final products, and that opportunity that we see now that we have, which is to look for sustainability for all the planet with renewable-based products; recyclable, biodegradable products; and more than ever sustainable products also in terms of energy. I have talked to Marcos and Cris, and we've discussed about what to bring to you today. We brought Klabin sustainable development goals and our targets for 2030. In 2021, we brought to you our ESG panel with all the transparency that this topic requires. And right now, it's -- there's a very easy access, and we can follow all the opportunities that we have developed at Klabin all our investments and how we are following the targets that we compromised -- or committed to follow. So we also now are AAA at CDP, and once again, we are in the agenda -- in the Dow Jones agenda. And also, we have had our target approved at SPTI. For this year, I want to talk about something very specific, which is carbon. This has been very much discussed. And also by the recent COP27. We bring this now, been working a little bit on some concepts that perhaps we don't fully understand at first. Sometimes you don't know what carbon balance is all about or carbon footprint and, more specifically, the carbon market. Just very briefly about carbon balance. We have been very vocal at Klabin. What do we do about it? Carbon balance is a balance considering emissions and removal of carbon dioxide we have. At Klabin, we work in 2 different ways. First way is our total emissions, everything or all carbon dioxide emission from our operations, SCOPE 1, 2 and 3, 7.2 million tonnes. On the other hand, in the balance, we are an integrated product from the forest to the product, and we can remove 12 million tonnes of carbon from our native forests. Sandro showed us almost 292,000 hectares and our planted forests, which are approximately 350,000 hectares. So this balance is positive at Klabin. And by the way, this is one of our goals from 2020 to 2030. We want to capture 45,000 tonnes of carbon. Next about the same definitions. Another topic is carbon footprint. What is the carbon footprint? Nothing but a calculation of CO2 emissions calculation throughout the life cycle of a product. We can tell today the carbon footprint of kraftliner, for example, LPD or Eukaliner or the corrugated box. So it enhances compare these products with other products from other chains and competing materials, particularly in the packaging industry but also in the personal care and pulp. This is important. Last year, we showed a chart. You can revisit last year's presentation, and we show Klabin's rank in terms of specific carbon emission. The carbon footprint through our Klabin, which was around 150 kilograms per tonne, one of the best rates in the world when compared to peers in our industry and also compared to other segments. Our goal as BTI, we foresee and expect to be lower than 150 by 2025, 125 and then under 100 or less than 90 by 2035. And last but not least, what is the carbon market actually? A lot is spoken about this today. This is nothing but a tool that was created to encourage the reduction of greenhouse gas effect emissions by setting a financial value to carbon. How does it work? Well, it happened during conference on climate known as COP or C-O-P. This topic was defined at COP in Kyoto, COP 3 back in 1997, creating a mechanism of clean development. And more recently, this was revisited back in 2015 in Paris in COP21. And therefore, the Paris agreement was created, a new framework for all issues related to carbon, and since 2015, this is going through a regulation process. Last year, we had a significant headway, which were approvals during COP of Articles 5 and 6, addressing ecosystemic or environmental services involving the carbon market, per se. This mechanism is still ongoing. The name was not formally defined. It's known as MDS (sic) [ SDM ] or sustainable development mechanism. In this COP, the regulation process made some progress and COP demanded to the Executive Board to work this over the year. So we know better about the transition process between MDL to MDS. MDL was expected to win back in 2020, and then COP didn't happen. So it was transferred to 2021. It was not deliberated upon, and now in 2022, and finally, COP approved the Executive Board to address this transition instrument. By the way, we also have projects including this transition. So how does the market work with carbon today? There are 2 ways. One is the regulated market. In the regulated market, it goes according to the framework by country, taking into account the goal set by every country. We could say this market has a regulated and approved system. In this market today, we find good prices. But unfortunately, there is -- it is not so broad. It is restricted to the European unit, who is already advancing, and also other countries in the world. We have the California mechanism, for instance, California, now with Quebec, they have a partnership. So this is going on. And in Brazil, we are also going through a regulating process. And we also have the voluntary market. These are transactions that are on a volunteer basis for emission compensation among parties. The market also has to go through a certification process. but it's still very small, and prices are not so attractive. Brazil is working in its NDC. There was a revision of this nationally set contribution, NDC. So how is it going to work, this nationally set contribution? If we don't meet this, carbon credits can be or not sold by countries. So this regulation has not been concluded yet. And then there are some efforts by decrease of 11,075 last year setting forth plans by sector, by industry, creating the national system of greenhouse gas effect emission reduction. And in Congress, there is also a bill about the same topic. So nothing has been set yet in COP or internationally, nor in Brazil or even subnational level. What about carbon credits, per se? In order for -- well, a credit represents 1 tonne of carbon that is not emitted or absorbed by the atmosphere. So that's a currency to be transacted. So this is a long-term project. It goes through a phase of viability or feasibility study. You have to check the stakeholders. You work to design concept document. It has to be audited, and then you post a registration, and even when it's on a voluntary basis, you also have to go to the approval by someone who validated the terms. It also has to be checked until we finally have the authorization from the UN to emit carbon credits. If you want to be an international player or in Brazil, if you want to perform transactions in the country only. What about opportunities at Klabin? We launched the Puma Project II wood gasification project. We're also working for a while transforming our matrix into biomass boilers and also power boilers. In recent years, we had several implementations. We're increasingly working with other products from wood, and one of them is the pine or tall oil. Several applications, including replacing fuel oil and particularly for plenty come Klabin -- plant with Klabin. We have several small, mid- and large-sized partners. So we work on forested areas, and we treat permanent preservation areas, and we want to have an addition process. In other words, we're adding the removal of carbon, and this is also feasible. And it's about to be approved. And 2 projects that are more related to conservation, Klabin has possibly one of the largest preserve areas for Araucária in the country. In Parana states in [indiscernible] as well. We have about 3,000 Araucária trees. So Araucária is a tree considered to be an endangered species, and we have a project in order to manage and find a mechanism for environmental purposes. And Jaguar connection. We have several air preservation projects, and they're being discussed and about to be approved. So at the end of the day, what is a carbon project? Let us assume we have 1,000 hectares, and these 1,000 hectares generate 120,000 tonnes of carbon or 120 per hectare in 20 years. We can see 150, 140, but it's not clear yet how this is going to happen. Some people say you can only have 150 of credit emitted over this time frame and maybe a little bit more at the end. Other people say there will be a compensation process. And 20% of the credit will comprise a bank, which will attenuate any potential problem should a forest, for instance, be on a fire or is attacked by pests. So what do you mean by 120,000 tonnes of carbon? If we consider the price of carbon for $10, it means [ $1.2 million ] if the carbon price is $50, $6 million, and if the price is $100, $12 million per 1,000 hectares. So we know that considering forestry costs today, for such a product to be self-sustainable based on carbon credit alone, the carbon credit adds to cost more than $30. So what about carbon credit again? We believe at cabin in the regulated market, this is where truly we need to invest our actions, but it also depends on several approvals. I would say that possibly a 2- to 3-year horizon for the market to be consolidated. Regulations involve several areas. The voluntary market exists, and there are opportunities for transactions, but they are side by side. And we tend to say the capacity to add is our goal. Klabin showed our big balance of carbon. We retain a lot of carbon. But these are already existing forests. We are now bringing additional contribution to the environment for this planet. So whenever there are expansion areas or areas to recover, this is where we can use forests under this mechanism. So this is important input. We're working on projects. We have dedicated ourselves to it but in the long run. And this is our hand enhanced. If you want to know more about ESG, check our panel, our portal, and you can also contact us directly. I'll be here to take any further questions. Thank you.

Thank you, Francisco. Next, we introduce another important topic at Klabin, people, human resources, and to talk about people management and policies, we invite to join us upstage Tina Barcellos, People and Corporate Service Officer.

Good morning, all. It's a pleasure to join you today in person after a couple of years. I'm Tina. I'm in charge of Human Resources and Corporate Services at Klabin and fully in charge of the legal area for the moment. Just telling a little bit of my story. In general, I'll be joining Klabin for 10 years. I'm very proud of it and something that I realized while I listened to my colleagues. Of all the executive officers who spoke today for you, only one of them came from the market. All the others made a career -- built a career at Klabin. So it's a live example how Klabin invests in succession and is concerned about having and educating successors to lead the company. So I address 2 topics today. The first topic is about the mix of our management payment. So we have 3 elements here. One is the base salary, the fixed part of compensation. It's the only fixed part, accounting for 34% of the compensation base. The remaining 66% are variable payment methods, 40% short-term incentives paid to our annual goals, and 26% are related to our long-term performance. Now diving deeper into our long-term payment, which is long-term incentives that comprises of 2 parts. One part known as matching, and this is where the executive can have part of short-term investment and can do a matching investing in the company, and his matching only becomes official after a 3-year time frame. We also have another part of long-term incentive, known as performance. And this is added to a long-term performance 5 years. This is our performance assessment and the performance indicator is TSR compared to cost of capital. When we speak of short-term incentive, our annual goals comprises of financial indicators as well as operational, market and ESG indicators. Speaking of ESG, this is something new. In our process change, many goals for many executives already were related to ESG. But starting 2022, we have a combo, so to speak. This is ESG for Klabin for 2030. So we have a combo with all ESG fronts. And all officers of the company have their goals add to this combo in ESG and not only where they are in their areas, but also as a group. All officers are responsible for meeting these goals. Coming back to our long-term incentive. This is a very important tool in terms of alignment with shareholders, long-term alignment. Klabin is a long-term company. Retention generates a lot of freight. And speaking of long term, Cristiano said in the beginning, he talked about the program internally known as LP for All. This is where we talk about this program at Klabin Day last year. It hasn't started yet. We started back in 2022 as a big challenge ahead. Christiano said, there, are very few companies who dare -- who are about to have such a level of project to all employees. Some people only relate to the company's management. But Klabin already extended it to all levels of [indiscernible] and we also extended to all our employees in 2022. It was a big challenge. We didn't know how compliance would be an enrollment. These people have a harder time to expose immediate liquidity. So a group that counts on our share in results that are already previously taken, but we strongly invest in communication, and not only communication, we also invest heavily in financial education for our employees not only employees but to our families as well. So we posted results that were just amazing. 33% of enrollment in Year 1. We started with some companies, most of them multinational companies, which extend the program to Brazil as well. Very few companies, like I said, have this option to all employees. And the companies we talked to, they came and said, well, after many years, a lot of communication, we managed to achieve 30% as something very successful. At Klabin, we managed to have 33% in Year 1. So for us, this shows the size and magnitude of the company's engagement in the company in the long run. Our employees joined Klabin in order to stay for longer times, and this program also has a 3-year vesting period. And I brought some figures because we just had our climate poll. And the engagement index is 94% of our employees reflected from this question that we asked, would you recommend Klabin to your friends as a good company to work at? So that's the question that companies who work on climate survey in the market usually, they have all these surveys because it directly reflects the engagement and commitment by employees with the company and their intention to stay. So just as I talked about the executives, many of these officers have been in the company for many years, but it also applies to all levels of the company. Many people, many generations of the company who joined with the intention to make history and to build the future of the company. Last piece of information. If 100% of employees enrolled our long-term incentive plan, the value of the company in this program would be BRL 13 million. So we brought this to say that this is a small value compared to the return it may bring in terms of employee engagement. And to close, coming back to the example shared by Cristiano, our coffee server also enrolled as well as many people in the shop floor, people in the forestry area, we also went to the field to talk to all of them, and the coffee server really came to the table, our CFO, and she said, "I want to check if you're really taking care of the company because now part of the company also belongs to me." So this engagement return is invariable, and we can see this reflected in all -- everyone who works at the company. This is what I'd like to share, and I'll be here to take questions. Thank you.

Thank you, Tina. Here at Klabin, we talk a lot about the company's business model, which is an integrated model. And like I said before, in addition to diversification and flexibility, this also shows the resilience of the company and how easy it is for us to navigate in different economic scenarios, delivering consistent results to shareholders. To talk about it and talk about the outlook for the future, I'd like to invite up stage Marcos Ivo, CFO and IRO. Welcome, Marcos.

Hello, good morning, everyone. So happy to be back. Part of the audience, almost 500 people also watching us on the web. I will be brief today just trying to summarize the outstanding presentations that were delivered up to now so that we can have more time for the Q&A session. We know that it's a very important part of our interaction. Just briefly introducing myself to those of you who I never met before, I joined Klabin nearly -- well, 2 eucalyptus cycles or 1 pine cycle. Next year, I will be at the company for 14 years. I've been through nearly all areas of the financial sector, but I also worked for 5 years in the forestry area, first as a head of the business unit and a very rich experience work in other forest area with a chance to live in Parana state where we have 2 big plants, and it gave me a lot of knowledge of the company's reality at large. Firstly, today, over the presentations, we know that Klabin is very well positioned in markets with future demand positively affected by circular trends. For example, we have growth and populational growth and aging, internet sales like e-commerce and also replacement of single-use plastic. In addition, we are also positioned in basic or stable markets related to foods and beverages and personal care. This positioning added to Klabin's business model brings a lot of resilience to the company in several economic cycles. And it also brings excellent opportunities for growth in the future. We shouldn't forget sustainability of our products that were very well discussed and explained over our presentations. Considering our products come from renewable sources, they are recyclable and biodegradable. Klabin made significant investments over the years, particularly in Puma II project and also investing in conversion in corrugated box and industrial bags. Klabin sales volume for the next 5 years will benefit from the ramp-up of the 2 machines in Puma II Project and corrugated box projects. Speaking of the 2 machines for Puma II project, we have Machine 27, which manufactures Eukaliner and startup happened late last year. This piece of equipment has a total capacity of 150 million tonnes, and full capacity is expected to be achieved by 2024. As for Machine 28, which we will bring [indiscernible] total capacity of 460,000 tonnes. The full capacity is expected to be achieved between 2026 and 2027. At the end of the day, Klabin has this growing volume for the next couple of years. We also would like to mention corrugated box, particularly owing to Figueira and Horizonte projects, bringing volume growth for this product at Klabin. If you put both businesses together, for the coming years, there will be an increase in the share of packaging and paper with a total sales volume at Klabin and as a result, an increase in the share of this business in the company's EBITDA. Please bear in mind that, historically speaking and structurally speaking as well, the EBITDA of the paper and packaging business is more resilient and more stable, especially in coated board and corrugated box, and that's especially where the incremental volume will come from Klabin. So speaking of coated board, Flavio talked a lot about the context of this market and to what extent this market is favorable, at least by 2025. In other words, we have a couple of years that will be very favorable for us in the future. And what does it mean at Klabin? In addition to making it easier with Machine 28 with 60% of production sold, it'll also convert to a price rise. Our vision today for year 2023 give signs of an average price of coated board with an increase vis-a-vis year 2022 of at least 2 digits. Here we show ROIC. We spoke a lot about ROIC in our interactions with capital markets. Klabin, as a result of successful strategy, capital allocation, business model and good performance in -- for the last 13 years, we improved EBITDA more and more. And this also includes year 2022. At the same time, we also changed the level of return on invested capital. The first 6 years of the last decade, Klabin's ROIC was 9%. When I checked the period from 2016 to 2022, this average ROIC increased to 14%. Looking ahead, I'm very confident to show you all that Klabin's ROIC for the next 6 years, on average, will be greater than what we had in the last 6 years. And how does this confidence come from? From the maturation of our projects since PUMA I. For the next 6 years, we're going to have these projects becoming more mature, sustaining the company's ROIC increase. We always wanted to be transparent. So on this slide, we share our capital allocation. It continues to be focused on increased CapEx and maintenance as well in payment of value to our shareholders. Klabin has a policy for proceeds, and it sets as a goal the payment between 15% to 25% EBITDA as proceeds. Historically, it pays 20% EBITDA or the middle of the average between dividends and interest on capital to shareholders. For the last 12 months, following this policy, Klabin paid a total of BRL 1.624 billion as dividends plus IoC or long-term interest rates with a dividend yield of 6.6% to our shareholders. In terms of allocation of CapEx. The forecast for 2023 is total CapEx of BRL 5.4 billion, out of which BRL 2.1 billion to conclude Puma II project, BRL 1.1 billion for other special projects towards growth and substantially the Horizonte, Figueira corrugated box project, another BRL 2.2 billion as maintenance CapEx. Out of this CapEx, BRL 800 million for replanting of our forest, and BRL 1.4 billion of industrial maintenance. A topic that also has been discussed with the capital market is the replacement or the reform of our boiler in Monte Alegre because it's from 1978. Our engineering team is still working on this topic. We are moving well. Today, we have 2 possible alternatives, and they are being detailed, and they point to a lower CapEx than what we had initially considered. We believe that the engineering studies and the submission of the project to our Board of Directors will happen over the first half of 2023. It's important to mention that, in terms of CapEx for this boiler project in Monte Alegre for 2023, we'll have only the disbursements of preparatory works and that the full amount is included in the total of BRL 5.4 million that I bring to you here for 2023. Klabin has a robust balance sheet, and that prepares the company both for a scenario in the global -- a more difficult scenario in the global economy and also possible growth after Puma II. We ended the last quarter with a 2.6x net debt over EBITDA average. Our average tenure is of 9.4 years for our debt, and we have diversified source of debt. Also important, considering our interest rate context right now to highlight the profile of our dollar-denominated debt. The net debt of Klabin is mainly in dollar. Out of this dollar-denominated debt, the average cost is of 5.1% a year, and 92% of those dollar-denominated debt is contracted at a fixed interest rate. And what does that mean to us, even with the interest rate increase that we see all over the world, in the beginning, in the first moment, we will not be affected because we have contracted fixed rate. Therefore, our debt is not increasing right now. Finally, I would like to bring to you a very clear message of Klabin that is well prepared to cater to current and future demands of society. We saw that we have model that is integrated, diversified and flexible. And it brings resilience and stability to our results, allowing Klabin to have predictability and regularity in paying dividends to its shareholders. And at the same time, Klabin continues growing with new projects where it will materialize its competitive advantages in increasing capacities and large projects of great return, and therefore, we move on in our trajectory, generating value to the whole society in a sustainable fashion. Thank you very much, and I will be available to take your questions in the Q&A.

Thank you very much, Marcos. I thank you all very much, thank you all the speakers. So now we end to these presentations. Now we are going to open the floor for the Q&A session. [Operator Instructions] And those of you that are here with us in person, just raise your hand, one of the receptionist will take the microphone to you. We already have a question here, is that true? Okay, so please raise your hand. And before starting the Q&A, I would like you all to identify yourselves when you ask the question. Now I would like to invite all the officers that had the presentation here that they come to the floor so that we can start the Q&A session. Thank you. Welcome, again. Well, Cristiano, this is what I'm going to do. The questions that come with a name, I will direct to that person. And the questions that are more general questions, I will turn them to you, and then you can redirect them if needed. We have an in-person question. We have questions here. So please, you can introduce yourself.

I'm Rafael Barcellos from Santander. Thank you all for the presentation, and thank you, the IR team. for this event. My first question is about demand and innovation. Considering this extensive cycle of high commodity prices, especially paper and packaging prices that are high. How do you think this could affect or inhibit the innovation in the segment of paper and packaging, replacing plastic, all these macro trends are driving up this sector. But when you go through a cycle of high prices, the question is how much that can hurt the demand or even inhibit the innovations that are driving the demand in the sector. And my second question is about cost. This is one of the main topics here, the 1 of the main questions from investors, I believe. So on the side of the top line, we understand that Klabin has a flexible approach you work in resilient sectors. But for 2023, our question is on cost. Cristiano, you talked about the forest dynamic, and you talk about costs there. And we know there are some exogenous factors that affect cost as well. Can you comment on how you see this on 2023. And then if you can talk about cost of pulp and cost of paper and packaging, that would be great.

Thank you for your question. Let's start by R&D. Klabin has been increasing its investments and we measure it on top of the net revenue. We are already at 35% of investments vis-a-vis our net revenue, and then I'll turn to Francisco and who will give you more color on these projects that we have ongoing. And my answer is no. I do not see ourselves changing that profile. Very much on the contrary, we have a line that we call the bio-products. [indiscernible] talked about the tall oil and that is a fuel and replaces the fossil fuel. So now I am very excited about the increase of investments in R&D because we see Klabin with a new business division in the future for bio-products. As far as costs are concerned, I will separate that just like you said it. In terms of forestries, that -- the distance topic, it's a choice of ours. And this is a discounted cash flow at the end of the day. When we see an investment, for instance, and the coated board machine, I can wait to having 14 years, all of the wood planted then to add a machine there or I can listen to the market. I can follow markets and trends and clients, and that's what we do here. And then instead of waiting for the wood, we could use that investment that could make an early investment. And in this period of time, we could acquire an area in plant wood close to Klabin's plant. So this is an example we always give people the structural cost of distance when compared to the anticipation of investments that is normalized in the first rotation of our own wood. So structurally, the cost comes down and the trend is to come down at Klabin. And the other costs, the other raw materials that are affected by oil and chemical products and so on. We always focus in efficiency and specific consumption that also goes through R&D investments and also a state-of-the-art equipment that allows us to be a resilient company in terms of costs exactly because of the efficiency and the chemical consumption. Finally, still in the cost line to get us investment. That unit is reducing 50% of the conversion cost, just a fixed conversion cost. If I consider my higher conversion costs, I can exchange it by 50% last fixed conversion costs, therefore, have more capacity and a more efficient site. And with that exchange, and we have been doing that a lot in pulp and paper. We will also be doing that in the conversion areas, reducing, therefore, the conversion costs and allowing ourselves to have more competitiveness. I would like Francisco and Marcos, if they want to elaborate more on that, feel free to do so.

Thank you, Rafael. I think your question is more structural, right? Because we have seen the world decelerating on the energy area, and we might see some hiccups, but the trend is, of course, to have sustainable products. And I think Klabin, as Cristiano mentioned, with all the efforts that you are driving towards direction.

Well, Rafael, just adding to what Cristiano has and trying to translate into figures in the short term, we expect for 2023 and the total average cost for Klabin, I'm not going to separate products here, but if Klabin were to be -- to have a single product in reals per tonnes, we foresee the cash cost per ton, the general cost growing lower 2 digits. For these lower 2 digits, we have 2 percentage points that are mixed. Next year, we are going to produce more coated board and coated board there more expensive and they have a higher added value. The wood impact represents around 4 percentage point of growth in the total cash cost of Klabin. Other than that, we have inflation and inflation just like we have in the model for all the items. And I also like to highlight wood sometimes is a question, but how do I see that? Klabin has learned how to develop safe projects without anticipating the CapEx of wood. And that can easily be seen in terms of a better return of the project. This was the first time in the company's history where we developed a project without having the full forest asset ahead of us. So it's great because we have now learned, we have done it. All the projects are there, and that's going to help us in the future growth.

Thank you, Rafael, for your question. So we have another question here in the audience, please introduce yourselves.

I am Leonardo Correa from BTG Pactual. My first question is, Nicolini, your presentation was very much focused in fluff. When you look at Klabin's projects, there's nothing improved in terms of expansion for fluff capacity. And clearly, there is a growth trend. You are excited about it. Almost all the presentation was towards that line of thought. And so what do you need to have more capital invested in this front? And my second question, Cris, I want to bring you to the discussion, something that people don't usually ask about, but I think that it's clear for most of the markets and for analysts and for opinion makers, the Klabin has been under-valuated in these past few months. When we think in terms of performance of paper, and any metric that you used to analyze it. The company's shares are very much discounted in different areas. I would like to hear from the management. How do you explain that? How do you see it? What the market is not seeing -- the market is not paying for growth? Or just like Ivo showed and that ROIC slide, the market is not seeing the sustainability, the ROIC from now on. Maybe the market does not understand this flexible diversified model with low volatility. I would like to hear from you, how do you see this moment and why the stocks are not reflecting the value that some people think that it deserves to have?

Very well I will help Nico here, and he can add. But let's start talking about new investments. Yes. In fact, we do not have anything that has been submitted to our Board of Directors. But you know it well. We work with the clear vision and 5 or 6 years ahead of time, ahead of having any idea of investments. We studied the market. We know well which pieces of equipment are going to start by the engineering process and the maturation time of a process like that is very long. We are paying attention to that. And in fact, we see fluff, especially for softwood, which is a larger market of a great value as 1 of the main products in which Klabin should invest in the future. We are getting ahead of ourselves, of course, in the region. That is a region different from Parana, we are being conservative and we are already working on our for space. And yes, we should extend this year of 2023. In the light of today, we do not feel comfortable to submit that to our Board of Directors. If throughout the year, the macroeconomic situation changes or at least if what we see in the world, which is a movement to increase interest rates to control inflation, the American mortgage, over 7% of population and so on. If we do not see it happening, what we -- it seems like it's going to happen, which is a worldwide recession, we'll submit that to the Board. But in light of today, we rather wait. Nico, would you like to talk about the product itself, and then I'll come back to talk about the market.

Yes, I would like to add. We have 2 different things. On the 1 side, we have a success story, which is our Machine 26 evolution. I showed it to you in terms of market product penetration, a sound client base. I think this is already settled. On the other hand, we have a cautious side, the macroeconomic situation, we do not know how the main economies will behave. So we do have market studies, we have feasibility studies, but the macroeconomic situation really draws our attention and makes us to take a step back right now and analyze the market and to try to find out what's going to happen in if we should anticipate or postpone a possible future investment.

Now to conclude the first part of the question. In terms of engineering and forestry and that's what we need before we propose a new project, well established. So in fact, what we have now is a process that I consider to be right for this cautious moment. And let me try to address the fact that the market is discounted and Klabin is discounted. But I would like to say that maybe we should hear from you rather than saying anything. But of course, I would like to hear from Marco after I comment on this. Well, in the beginning, I dedicated myself to the spreadsheet that you run the main analysts that work with Klabin, I analyze the Excel spreadsheets to see how you've got that number because we do have our discounted cash flow. We know what is the volume that we are bringing into the next years. We do know the price curves of these products. We also know the global trends of consumption of products that are based in fibers and recyclables and biodegradables. We have the sustainability characteristics by sequestration of carbon is still under-evaluated on the economic point of view, we have new technologies. We are going into this area, mitigating carbon. We know how much we can improve the company's ROIC, switching equipment, diluting fixed cost, providing life to 60-year-old sites of the company that could be the most modern sites in the world. So I do know the capacity of cash generation and the resilience of this company. I can state that this company is among the main ones, and I would not add more than 3 companies there. One of the 3 main efficient companies in pulp and paper in the world and the company with a higher trend to grow organically. And a lot of that just by replacing production of high cash cost of the Northern Hemisphere. I see Klabin as a company with a huge potential and the potential that cannot be followed by the competition because our process, our people, our technology and our forestry. So I think we are way to discount it, but I would like to hear from Marcos.

Well, I will go with Cristiano. This is something that we ask you a lot in our interactions with we talked about that with investors and analysts. And just like analysts mentioned, we are focusing the intrinsic value generation and what we have done, what we'll do ahead we are focused on that on the intrinsic value generation and ROIC. In terms of the market, we are very much disciplined we are always talking to investors in Brazil and abroad. And we are explaining our business model. We are explaining our value drivers. Today, we have again presentation since the beginning showing you Klabin's models and why Klabin cannot be considered a simple or commodities company or simple items basket. This is clear. And these moments when the market is more [ depressed ]. So we can just look at the results of the last quarter and the next quarter. We really do not behave as a commodity company, but we know that value is 1 thing, and price is another. Even in your models, most of them apply a value to Klabin that is much higher than the shares priced for today. So we'll keep on working, and I count on your help. We are here to hear from you, to hear your suggestions so that we can explain even better. And so that the market can understand us and apply to us the correct value so that we can get closer the value of the company to the stock price.

Okay. Thank you, Marcos. Let's move on because we also have questions from our remote audience. I will start with David Guglielmo from Super Graphical Products. I would like to know if Klabin should migrate to Novo Mercado and only have preferential shares.