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

Good morning, everyone. It is a pleasure to open Klabin Day. Welcome. I am Gabriella [ Vog ], Corporate Finance and IR Officer, and I will be your MC today. This year this event is being broadcast online via YouTube and we are broadcasting from our unit, Piracicaba II, known as Figueira Project. The event is being translated into English. I'd like to thank all of you for coming to visit, and I'd like to thank everyone joining us online. 2024 was an impactful year for Klabin. We celebrated many achievements reinforcing the resilience and the efficacy of our business model, which is integrated, diversified and flexible. We will start today's agenda with the opening by our CEO, Cristiano Teixeira, who will bring you an idea of our strategic planning and the current moment of Klabin. Then, Marcos Ivo, our CFO and IRO, will be presenting the financial performance of the company and our process of capital allocation, also providing some of our financial forecasts. Marcos will be followed by our Packaging Officer, Douglas Dalmasi, who will speak about corrugated boxes, its performance, and will give you more detail on Piracicaba II unit known as the Figueira Project. At the end of the presentation, our executives will be available for a Q&A session. [Operator Instructions] Now to officially open our agenda. I'd like to invite our CEO, Cristiano Teixeira.

Good morning. I would like to greet you all and it is a privilege for me to welcome all of you here, and I hope it is a privilege for you to get to know our facilities. And I'd like to greet everyone who is online because putting together those who are here who are following the event and those that can watch this event later. This event will reach out to thousands of people. These events can be communicated to a lot more people. I would like to start with the first slide, presenting to you the process of development. Since we began and how we go this far. Starting in 2018 when we had our first vision chart -- and I would like to present and discuss our process, how we at the management and in the Board of Directors approved and execute on the plan. This is a 7-year period. My term started in 2017, my year 1 was 2018. And back then, Klabin already had a strategic planning process at the company, but we kind of changed the format with the management. So back in 2017, we had our first version of what we call a vision charter. What is the vision charter? That's the strategic planning of the company, always looking at the next 10 years of the company, what we expect to realize. This discussion involves a number of themes, which you will have an opportunity to understand from capital allocation to the main consumption trends. Where can our market go? What are the strengths of our business? What sets us apart from the other players? What do we want with the controlling shareholders and the Board of Directors? What we want to realize, what we expect for the coming years? Do we want stability? Do we want to generate cash as fast as possible? So all of these are questions that I answered during the strategic planning process. And then back in 2017, when we started this process, the idea was that we would have 1 year with the help of a consulting firm, 1 year without it. So every other year. Why not every year, because data don't change in such a relevant way. Sometimes we need consulting about macroeconomic data, and that's the kind of consulting we use every year. But we had 20 consulting sessions for each one of these works. So back in 2017, at the management level, when we started discussing the points I mentioned, the attributes I mentioned, what drew our attention was a piece of data that was actually confirmed later. So back then, there was a difference between the value of the fibers. I quite remember some events that I attended. I attended the event and then some companies was speaking about a phenomenon which we call fiber to fiber. That's the term that is used in Portuguese as well, we use the English term. It's when you replace a fiber by another. And I always remember this, Klabin was a pioneer in the fiber to fiber process when people didn't even use this terminology. In the beginning of the 1980s, Klabin got a product containerboard which at the time was prepared from long fiber pine and this product needed a structure. It's a product for the Nordics and the Americans. And at the time, Klabin started adding a little bit of eucalyptus. So short fiber. So we've started that fiber-to-fiber process. And we did that until we got to a product that was patented and you probably know, which is Eukaliner. It is a product manufactured 100% with eucalyptus. So we don't deny the fiber-to-fiber process. On the contrary, Klabin is a pioneer in this process. When we got to this product in Paper Machine 27, we didn't exactly know the performance of this product in the corrugator. This plant was made to have 2 corrugators and using the paper of this machine made of 100% eucalyptus. So what's the property of this paper? Well, the paper makes the corrugator work with less energy, with less chemicals, so printability has improved. The cost of this paper converted here at the machine mainly due to the structure of the paper have less fiber per square meter, less timber, less trees per square meter of paper, all of these attributes made Klabin study this paper back in the 1980s. And here we are. We were very disruptive with this paper, which is 100% made of eucalyptus and now other companies are following in our footsteps. Will all boxes be made of eucalyptus? No. And that's where we have the great attributes that Klabin can offer. Klabin understands this market thoroughly. The biggest producer of red, white fruit in Brazil eggs. We know about food exports. And all of these players are Klabin's clients. In the world, there are Klabin competitors, which are Klabin customers outside Brazil. And when our paper was tested, the fiber to fiber when it was not even called fiber to fiber, when we adopted that process, we sent samples to be tested in several countries of the world. And how did we come to manufacture this paper? We manufactured it in the state of Pernambuco in a plant that we have in the Goiana municipality, a super technological machine. We got fiber from Parana state, brought it to the site, produced this paper, got some reels, sent it all over the world to test it and to prove that the fiber to fiber process for the segment was successful and it was. And now we gain in terms of amount of wood used per square meter in the corrugator. I use 10% less wood that I would use in a normal process. So that improves the ROIC. Fewer trees per square meter of boxes. So we are a pioneering company. We invest, we study a lot. We have a technology center, and we're always keeping eyes and ears open. Why is this important? And I'm coming back to my initial point, because back in 2017, when we started studying this, we came to the conclusion that long fiber -- softwood, given the value of eucalyptus, well, we know eucalyptus. We operate well with it. But what sets Klabin apart from any other company in the Southern Hemisphere, perhaps not in the Northern Hemisphere because in the Northern Hemisphere, they have pine. But in the Southern Hemisphere with the quantity and the embedded technology in long fiber, Klabin, in my point of view, is a big star globally. When we identified that our differential was one when we would have long fiber in a tropical country, the most competitive long fiber in a tropical country and in the world, we said no, let's devote ourselves to increase the capacity of using long fiber. But then, we had one piece of information, important data point. Remember, I said we use on average 20 consulting sessions. We have data, such as the average age of the recovery boiler. And if you don't know the recovery boiler, when we talk about a pulp and paper plant, the heart of the factory is cooking the fiber and the recovery boil that recovers all "the liquid biomass", which is recovered in the boiler and with that, you generate power. That's the heart of a paper plant. When you want to measure the technological age of a facility, you look at the age of this piece of equipment, and we'll speak about it. We are investing in one in Monte Alegre, we'll speak about that. But back in 2017, well, this was known information, and we realized that most of these pieces of equipment that were old and about to be replaced were for long fiber. What were Klabin's attributes back then? We had pine in the tropical country. and a product which in the following years, will sell more than short fiber. So let me give you another piece of data. From 2020 to '24, on average, we had 900,000 tonnes of long fiber from plants around the world, 900,000 tonnes. When we look at short fiber on average in that same period, 160,000 tonnes. Now you do the math. How many long fiber plants came to the market in these 5 years and how many short fiber plants came to the market in the last 5 years. Short fiber, millions of tonnes came into the market, much higher volume coming in than going out. In long fiber, we didn't have practically anything coming to the market. So at the time, we thought there is a premium and this premium will increase from long and short fiber. So this is one of the first points that we valued in 2027. We thought let's value pine at Klabin. When we designed this map in these 20 consulting sessions, what did we study with those? Consumption trends. I was talking to a Klabin investor just now and he asked me, "Listen, I heard that so and so is going to invest in sugarcane bagasse fiber to make paper." I said, "Yes, Klabin did that in the 1970s in the Goiana unit." That's a unit in the state Pernambuco. We have tested this product. There is one manufacturer in São Paulo using part of your sugarcane bagasse. So we follow all pulp fibers. We follow everything up close in our technology center. So we -- so we look not only at consumption and behavior trends, what's the likelihood of having single-use plastic being reduced in per capita consumption. How much will consumers be paying in terms of a premium payment if we have a product that is recycled. So we wondered about these things. We understood and translated that into products. So those boxes you saw outside, those are boxes for global brands. And we looked at the trends of consumption for those: beer, milk, cereal and 70% of the packaging produced by Klabin go for food, food stuff. So we study trends. That's number one. I spoke about our strengths, long fiber, technology. So everything is analyzed by the consulting guys, and we understood, yes, these are our strengths. We took those to the Board of Directors for the first time in 2017 in the new format. And the Board got back to us and said, "Well, they wanted out of company what they expected from the company." They said, "We want a company with multiple premium compared to the others or do we want a company that has cash generation and EBITDA to ensure a certain percentage of fixed dividends." So there was several attributes that the Board of Directors and the controlling shareholders gave us a feedback based on a database that we put together. The risks, our strengths, et cetera. So we submit things. We got the feedback from them, and we produced the first vision charter. And thinking about long fiber, as I mentioned, some of you who attend the earnings call, you know that back in 2017-'18, perhaps that information was not taken as seriously as we thought it should back then. So we do this process every year. And in that first vision charter, that's what we did. Here I bring you just the big achievements. But in producing paper and pulp, you know that in addition to manufacturing facilities, there is investment in infrastructure, for example, a port, highways, roads and other investments in addition to investments at the manufacturing facilities, but we'll bring you the main achievements. Of course, the peripheral ones are part of this 10-year vision. And back then, we knew that we needed to strengthen our packaging capability, we needed to have more packaging to support our paper capacity. The second machine, PM28, you will remember that the coated board market is relatively small compared to other markets in the world. The whole pulp and paper market have 400 million tonnes. The corrugated box market, the paper used for those boxes is what we call containerboard market. And it is a market of 50% of this 400 million, 190 million of containerboard, which is kraft paper or recycled paper. So we needed more conversion capacity. So we went to Ceara state. We built this unit where we are. We have PM27, and PM27, I'm going to tell you something about it. These paper machines, we'll look at them by their shape. This is how we compel to think about the future. Here, we have 3 big paper reels in this machine, these 3 big paper reels produced in Parana state. They are compatible with the 2 pieces of equipment we have here. We have 2 corrugators, 280. And in the future, this plant can accommodate a third corrugator of 250. And we call this closing the machine. That means the machine would be totally converted and integrated with the unit. And all of that has to be considered because there are a lot of risks, market risks. We sell the paper to the global market, as I mentioned. But in certain periods, where consumption increases due to government policy. Every administration has a different characteristic. When that happens, we need to look at the domestic market, and we have to shut down the machine or close the machine. And we have to consider that and this other machine. I said that this market is very small. In the first years, this machine works with containerboard, kraft paper. Only later will start producing coated board, which is more sophisticated, it's the high end of the sector. The high end is the most sophisticated technological paper. That's what we are going to manufacture here. It's called LPB. So that's the whole concept. I spoke a little about the process. I spoke a little about the merit of each one of the investments, how we deliver that. We knew about the value of long fiber for all that. Please remember that this whole machine is long fiber, only a small percentage is short fiber. This is eucalyptus and here pine. And we had already mapped regions in the areas where we wanted to acquire long fiber in Parana. There is no other company in Brazil. And not in South America, not in the Southern Hemisphere. There is no other company in the world with a volume of pine that we have today with the differential that we have today, given our portfolio of products. Because long and short fiber, it's important to have a portfolio. You have to manufacture products, that needs long fiber. And I mentioned LPB, the product for beer packaging. And I mentioned fruit, several refrigerated packaging. So all of these are products that need long fiber and where we can use short fiber through a research and development process, we insert the fiber-to-fiber process. So we also do that. So we knew that we would need pine and the pine market in the south of Brazil starting in the south of São Paulo up to the north of Rio Grande do Sul has a lot of pine, but these are smaller properties. We knew that in the beginning, we could purchase this wood from third party that were far away. And we know that at some moment, we were able to purchase a large area, and this is what happened now. And then we would be would be able to bring in this forest to this machine. I'm telling you all the story because the strategic planning process at Klabin has a deep and long debate and you will understand beyond the merit and obviously, the process itself, which are what is the math that is done? And because you know that when we add this -- well, sometimes it seems too much. But yes, we are asking ourselves if we rather buy back the shares or reinvest. You will understand that. This is not a taboo for us. This is what we do all the time. This was a very enriching process and very fruitful. We just produced now I have one piece here so that you see how it looks like. I do value a lot of this document among the different chapters. And you can check it. If you want, I have a few copies here. We have here capital allocation. We have this 10-year map. Everything that we have been doing since 2017 with a lot of work, a lot of debate and also with a lot of consulting services, helping the decisions of the Board and also of the management of the company. So all of this that we have designed in the past had the objective of bringing 1 million tonnes in the company. We left to 3.5 million to 4.5 million tonnes. And this portfolio that in a not very organized way, I tried to bring to you just so that you could have a material idea. And we did have a purpose here, which was to have -- and now remember, we had just invested in short fiber eucalyptus and Puma I. And the objective there, what the Board told us was, "I want a company that is as sound as we have always been and discussing the company, but we want a company that is more stable." The next cycle, which is this one, is going to deliver us a stable company. We designed a company and some of you will remember that we have been talking about this for a few years. We wanted 1/3 of fiber, 1/3 of paper, 1/3 of packaging. And this is the company that we are delivering after 7 years, we had a road map of 10 years. We have been able to do it in 7 and now we have a more resilient company, more flexible company, and we can talk a little bit about this as well. And especially a company that's protecting the company's ROIC. This is a discussion. And it's something that we've been talking, we have been saying, and it looks like we are being heard. We have a forestry base of 460,000 hectares that are useful. If you do the math and you check how much land is worth in Brazil and how much forest is worth in Brazil, you will come to the conclusion that Klabin's asset of forest and land is more valuable than the company itself. But what is the use of having that? And I've been following this topic for over 30 years, I'm working in this industry for 30 years. So there is no use having the land with forest in Brazil with no industrial assets on top of it. And it's not for a discussion here today, but I've been following this topic for many years as I mentioned to have forest for energy and so on. So these assets are still not remunerated. You do not have ROIC. So with the standing trees, you do not meet your ROIC, not with any other company other than pulp and paper. This land in Brazil would have turned into agriculture if we did not have all this technology associated. So this is an agribusiness sector, of course. But in fact, this is the area -- that sector of the agri business that is greatly integrated in Brazil. You obviously know the upstream and downstream concept that is more associated to the oil and gas industry. But let's understand it. Most of my assets are here. A large part of my assets are here in the forest. And then we have a lot of machinery here in the middle of the process. And then we have less machinery in the conversion and what is the good thing about the conversion. The thing is that when I invest in fibers to improve the return of my forest asset, I am then exposed to a commodity, and the result of this business, and this is exactly in the right order here. It then has a [ sinusoidal ] profile that is very steep. As you deliver products that are closer to consumption up to the downstream stage, you then reach a price level that is more stable. For instance, all of these prices here in the last 6 or 7 years, we have been able to increase the volume. And you see that in Douglas presentation, we improved the volume at a rate higher than the Brazilian GDP. So we have increased the volume higher than the Brazilian GDP and the price is higher than inflation. So we are in the seventh year in which -- in this final block here, we have been able to define prices that are above inflation. So this is the stability. When we turn to paper products, here, we also have niche products, as I mentioned in the beginning, more sophisticated products. These are 3- to 4-year contracts. Just as the same, these are stable products because we have a fixed price for those 4 years. Again, stability. That's why we talk about our product portfolio. Why do we have that, long fiber. Now when you turn to fibers, remember that our capacity here is 1.6 million tonnes, 1.1 million tonnes is eucalyptus pulp that goes to tissue market or personal hygiene market. But 550 million of this 1.6 million, 1/3 of Klabin's 1/3 is done with long fiber fluff. You have seen it outside. We have elderly diapers. And when I look at studies of consumption trends, remember, the consulting services that I mentioned, the elderly diapers that is the adult diapers, that is increasing in 2 digits. The population is becoming older and that is increasing the consumption of adult diapers. That's why we're focusing on long fiber. We cannot manufacture that product with short fiber. But didn't you manufacture containerboard with short fiber in the past? Yes, we did. We were pioneers and we use that market that. We know very, very well for short fiber. But here, we know that and we are making sure that long fiber is the right product for elderly diapers, especially for high income population. That's why the stability improves and maintains our ROIC. It is protecting the ROIC of our forests. I could eventually, if I did not have this area, I could have -- from time to time, I talked about the curve, I would -- we could have better periods of time of ROIC. But in the long term, Klabin has always understood that. We see in this integration and this conversion the whole business. So that's how we will be thinking about this business. From time to time, we will be investing in nonintegrated or nonconverted products, Yes. In the strategic process, yes. But to do what the Board of Directors asked us to do and what we delivered is bring 1 million tonnes. Okay, we want Klabin to divide that into 3/3 and to try to use -- or try to always have a competitive advantage in the long fibers. Long fiber stability and to balance prices to protect the company's ROIC. This is our history. And this was the 7-year process that we have been able to convert. So once we deliver the strategic planning, we started designing a new one, that is being submitted to the Board for the next 10 years. And for the next 10 years, I will tell you just about 2 next years, okay? For the 2 next years, we want, yes, to show the cash creation capacity of the company. And we have been talking about this for a long time, and it shows that we have been very assertive in choosing machines and products. But now we have to come up with free cash flow. So for the -- the bottom line will be free for a while because we want to deleverage the company. We want to reduce gross debt and the company's leverage and Marcos will go over that and bring in the figures. But well, why -- I'm telling you about my responsibility and how we are operating the company with the same discipline that we had over the past 7 years that I just talked to you about and the strategic plan that was highly debated. So now we want to deleverage the company. We could go over the reasons and obviously, my time is up already. I'm not going to go into the details, but I think no one here has any questions that there are uncertainties in the world. This is a moment when we have to look at our abilities, capacities, efficiencies and we are going into it in between seasons here. We are sure about the studies and about what has been done in terms of product portfolio choices, not because it's a dogma. We are not dogmatic at all, but since 2017, when we started and the products that we wanted to deliver those 3/3, there is -- there have been no changes. Maybe slight change, one degree to the left or to the right, but we made no mistakes in the major decisions of the company. So I believe and I wanted to stress that to you that right now, we are not going to be talking too much about the company's future, but I would like to ensure you that the company's DNA is still of a growing company and its history in these 125 years of Klabin, that's how it has been. But in the past few years, strong growth that we have seen. But yes, because of the circumstances, we are in a more conservative approach, focusing on the free cash flow of the company and also in reducing our leverage. I think that's what I had to bring to you. Did I go over my time, way too much. Okay. Thank you very much.

Thank you very much, Cristiano, for your presentation. So now to move on with our agenda, I would like to bring to the floor our CFO and IR Officer, Marcos Ivo. Marcos, please.

Good morning, everyone. It is a pleasure to have you here at Figueira, special good morning for those of you that are with us online. I have 2 main messages to share with you today. This is always a very special important day for us at Klabin Day because I see in it a single opportunity in our yearly agenda to go over how we see the company, what we think for the company, Cristiano was already very thorough in that, and also to reduce information asymmetry between the company and the capital markets, this is a constant challenge. We have been investing in a lot of our energy in that in the past few years, and we'll just move on in this talk today. I will talk about 2 topics. The first is about the capital allocation process, very much related to what Cristiano already said. And second, I will be touching upon the projections for 2025, which is something that the market always expects us to do. Now talking about the process for capital allocation. It is routine and very common in our talks to get answers about this. So here, you have a structure of what we constantly tell you. And this is exactly what Klabin does. The difference is that we have this in the chart today, maybe it makes it easier for us. So all the cash generation from the company and that can be applied for Klabin or any other company or experts, you know that can be used basically in 3 main ways and we can break those down in other ones. So it has to do here to start with the capital structure, Cristiano well said it, we are now in a harvesting time, Klabin for the next 2 years. We will be concluding the ramp-up of its projects and synergies of and so on. So we'll be generating cash based on everything that you already know and public information. For that cash creation, part of that is going to be directed to pay debt. When the market asks us, what is the size of the debt that Klabin wishes to have? What type of leverage considering that this is a very important element in the capital allocation process? And exactly because of this effort and this journey that we are on to reduce asymmetry between the market and ourselves about our capital allocation process that in 2020, we approved for the first time a financial indebtedness policy, which has been recently reviewed and I'll go over it shortly. But the idea here is that there is full disclosure. Klabin has a policy. The policy determines the parameters, and we will be operating according to them. Just as the [ same ] proceeds, which is another important topic in terms of capital allocation. Just as we talk about financial indebtedness, in the same period in 2020, with the objective of communicating in a very assertive fashion with the capital markets, we also have approved a proceeds policy, which has been reviewed now in October. Therefore, in these 2 elements, debt and proceeds, we have specific policies. And for the last 4 years, we are operating according to these policies, and that's how we intend to keep on doing. So let's move on for something that usually we get more questions on, growth and shares buyback. This whole process has 2 very important guiding principles. The strategic planning process explained by Cristiano; and second, financial discipline. We'll only speak about growth. If the leverage level is according to what is defined in the policy, if growth is aligned with the strategic plan of Klabin, every now and then an opportunity arises to invest in something that looks very profitable, but it's not Klabin's business. And Klabin is very disciplined, we recognize where we enjoy competitive advantages, where we know how to operate manufacturing, operating, delivery and when we see good opportunities. And that entails a lot less risk than companies that look for diversification. Not in our case. We like our business model. We like to operate in this sector, which offers good opportunities. So growth, is it aligned with the strategic planning. Yes. So let's look at the return. And here, we ask ourselves frequently the same question. What is the minimum IRR of a project for Klabin so that it can be discussed, submitted for approval and actual implementation? We have a minimum internal rate of return. The cost of the company's capital WACC plus 4 percentage points, a deleveraged internal rate of return. And it is important to stress, a deleveraged IRR of WACC plus 4 percentage points. If I look at the average WACC of what we normally speak to you about, you estimate an average WACC of Klabin at around 10, 10.5. So we are talking about the deleveraged IRR between 14% and 15%. If we increase the leverage, given Klabin's capital structure, we have a target structure of 60% own capital, 40% debt. If we get that target capital structure, and we leverage it, we are going to find a nominal IRR of around 20%. So this is quite well established at the company. There's a project aligned with strategic planning, delivers the minimum IRR. Does it mean it's going to be actually executed? No, not really. We have to have a low leverage at the company, and we can compare. And we should compare with other alternatives. We have in share buyback is always an available alternative. At these moments when we have to make a decision of making a big investment for the company, we compare the IRR of the project and -- the IRR of the project with the IRR of share buyback, we always do that calculation. And at this moment, we look at strategic points. Let's suppose that the project has a leveraged IRR of 25, share buyback will give us 26, 27. And then we wonder, okay, but if I don't implement this project now, I will miss some market opportunities, market windows. I will not serve some customers. So these are things related to the strategy and positioning, and they are also taken into account. So this is a very well-established process at Klabin. I stress the company's effort of showing this and giving the market total clarity regarding the way in which we work. That's why we approved these 2 policies. And we are now looking at this bottom part of the slide. I spoke about the guiding principles, strategic planning and financial discipline. And what is the ultimate goal? What is the focus to have a lot of clarity in terms of maximizing value creation to our shareholders. We don't get distracted regarding that point. We have to know what path will create more value to our shareholders based on what we are seeing at any given time. Moving forward, this is just to remind you of these financial policies. I mentioned the history. They were approved in June 2020, exactly, so precisely so that we could communicate with you with more clarity. These were revisited in the month of October. And this revisiting is very consistent with the moment of the company -- in this moment of reaping the fruits or harvesting moment as we call it. And basically, what did we do when we reviewed the policies? In the financial indebtedness policy, we didn't change the leverage level measured by target net debt over EBITDA, which is at 2.5x to 3.5x, but we reduced the maximum leverage in periods of investment cycle, which increased to 4.5x and now they are down to 3.9. Likewise, we updated a CapEx that puts the company into an investment cycle. And these are big, big projects. And we reduced the time frame in which we could stay at this net debt over EBITDA of 3.9x. So we tightened the metrics of our indebtedness policy. And in terms of dividend policy, we made a change. Our policy was to pay 15% to 25% of adjusted EBITDA. Now it is 10% to 20% of adjusted EBITDA for dividend distribution. On the slide, we have here 12 years broken down by quarter, and we can see the leverage curve of Klabin in the last 12 years measured by net debt over EBITDA in U.S. dollars. In 12 years, of course, the company changed a lot. We lived through many projects. Puma I, Puma II, Figueira, the acquisition of Caete asset. So it's a whole new company now. But my take home message with this slide is the gray part of the slide. That's the period of this first financial indebtedness policy that was approved in June 2020. The world in June of 2020 to date, well, the world underwent a lot of volatility. We faced a pandemic, the pandemic was just starting. We had all the effects of the COVID pandemic, an impact on inflation, on interest rates, on the exchange rate. And there was an opportunity such as the acquisition of the Arauco asset. That was a big investment. And Klabin remained within the established metrics of the financial policy. So my take-home message to you is we will continue being disciplined. We had discipline in the last 4 years, and we will continue to be so. On this slide, we move to the second topic of my presentation, which is the forecasting for 2025 for Klabin. The year of 2025 will benefit from a higher production volume. This greater production volume results from 4 factors. First, the ramp-up of the Puma II project, a theme that is well known and followed by you. PM27, PM28 will bring an incremental production in 2025 compared to 2024 of about 88,000 tonnes, additional tonnes. In addition to this, which is a structural factor, there is a factor linked to general shutdown calendar, our paper and pulp facilities having general maintenance stoppage every 15 months. So for 5 years, the company didn't have a general downtime. But this will happen with Monte Alegre in 2025. The Monte Alegre facility will not have a general stoppage. If you get the capacity of the plant to divide it by days and if you find a period of 10 to 11 days, that's the general downtime. You will find between 30,000 and 35,000 tonnes of incremental production in Monte Alegre in 2025. In addition, as reported in the earnings releases, we had 2 nonrecurring events in Ortigueira this year, which brought us a pulp production loss, particularly short fiber pulp production. But this has been totally resolved. The plant is working normally, we don't expect to have this kind of loss next year. That will bring us an incremental volume of short fiber pulp to be sold in the market. And lastly, with Klabin's flexibility, and that's another theme that we try to explain to you and show the value of the kind of flexibility that we have. In the last 3 years, we lived through very different scenarios in the kraftliner world, 2021-'22 with very high demand at very high prices. 2023 was a very difficult year, a very challenging year. And then in 2024, a recovery. And Klabin is reacting to that. In 2023, we stopped the production of recycled and kraft papers. We integrated more paper in our boxes. And as the kraft market resumes momentum when we do the inverse movement, we start working with recycled paper. We convert it in corrugated boxes and export kraft. So we've been reporting this over and over in earnings releases. But sometimes when we are modeling for the following year, we don't remember that. In January of this year, we turned on. We started up the kraftliner Monte Alegre machine, machine 1. And in the second half of 2024, we resumed the production of Machine 17 in Goiana. So next year, it will have a full year. This year, it worked for only 6 months. And given the market conditions we have now, our budget for next year, demand for corrugated box and kraftliner. And the price curve for these 2 products, we are studying the process of resuming production at [ Polina ] which was -- the recycled paper unit that was stopped. And the expectation is that by mid-second quarter of the year, it will start production again. So you put it all together and everything I'm saying here is data disclosed to the market. And if you do the math, you will find an incremental production slightly over 200,000 tonnes in 2025 compared to 2024. And this will naturally convert into -- or will be translated into higher sales. Now moving to my last 2 slides, and I'm still talking about the forecasting for 2025. I am happy to show you this cash cost since the mid-Puma II project, we started PM27, the cash cost of Klabin increased. We had intense conversations with you explaining the [ word ] curve that the cash curve would drop now. And we're seeing that in our numbers. Klabin has a cash cost per tonne, total cash cost. By the way, total cash cost including downtime costs, several of you said is this with or without the downtime. This is total cash cost, including downtime and stoppages. This nominal cost has been flat in the last 3 years, and we expect this to remain unchanged in 2025. So this was filed with CVM just like we did last year. you can easily see that we are absorbing the inflation rate of this period. In other words, the reduction of total cash cost per tonne actual is happening. And this results from synergies of Caete project, which have been fully included in the company's results. This comes from the benefit of a higher production volume in addition to several other actions that were taken, particularly in the year 2023. So here are some brief comments on 2025. We have maritime freight charges under pressure for freight using containers. If it weren't for this external factor, cash cost would be lower, just like the price of OCC, which is much higher today than in the beginning of the year. And we maintain this expectation for next year, which, by the way, is very positive for Klabin because my competitors of corrugated boxes are substantially producers of recycled fiber. Klabin is the opposite. So this is good. The creates good conditions for the corrugated boxes business. I reinforce our commitment with this number, just like we had last year, and we're showing it to you today. This does not depend on any special action by the company. This is simply maintenance of what is already done. Last, but not least, we have our CapEx forecast. Again, I want to link this with what was presented last year. This is the first time that Klabin provided a CapEx guidance to the market. This was then formally -- this was filed in our reference form. Compared to last year, we spent BRL 200 million below the forecast. And this was a carryover in 2024 we will spend exactly what we forecast. But this BRL 200 million that were not spent in 2023 were carried over to 2024 and part of it to 2025. When we add these 3 years 2023, '24, '25, we are exactly on the target that we had projected. I'd like to remind you that approximately 25% of the maintenance CapEx of Klabin, maintenance means operational continuity of our plants, plus the forestry spending. Approximately 25% of that is dollar denominated. So there is some impact of the exchange rate fluctuation. But my take-home message on this slide is that we are committed and we're disciplined in having our CapEx, our capital expenditures in line with our forecast given that this is an important variable for the free cash flow generation that the company is pursuing, the deleveraging that we are pursuing and in keeping with everything that we have communicated to you. So I'll stop here. I went just 1 minute beyond the time allotted to me, but I did better than Cristiano. Thank you.

Thank you, Marcos. Before we continue, I'd like to remind you that all of you who are following us on YouTube that you can send questions. Now we'll watch a video of the Piracicaba. [Presentation]

So now moving on with our agenda, and I would like to bring to the floor, Douglas Dalmasi, our Packaging Officer, and he's going to talk more about the project and the packaging market.

Good morning. I'm very happy to be here with you today. This is the nicest presentation of the day. It's to have clients with us. Without clients, we would not be here today. When I look at the project, the first thing that I would like to tell you is to stress Klabin's ability to deliver projects on time and on budget. Now if you analyze the project, you know the first stake that we added here was in April of 2023. The start-up was April '24. In a year, we were able to execute and deliver the project. I have 3 objectives in my presentation. I will talk about clients, as I said in the beginning. I will talk about the importance of conversion and integration and then because it protects our ROIC as it has been said, and I also will talk about the projects delivery. We always said that those that want to know more about Klabin, that want to learn more about Klabin. You just have to go to the supermarket. I love going to the cash and carries because that's where we see Klabin's packages. We package products that get to the point of sale or the products that are at the shelves, the displays and the products that are in the shelves themselves. Our products are in all of the aisles, all of the areas, all the sectors, all of the shelves. If you see yourselves in the supermarket, in a grocery store, you look at Klabin, what Klabin is delivering today. But also, there are a number of possibilities ahead. How many more materials we still have in the supermarket, and we will go into a changing process and all those materials will be turned into paper. Now going to the supermarket, for instance, if we go to the food area, chocolates, cookies, chocolate powder, among other products, we have clients such as Nestlé. Nestlé is our client for a long time. We provide them packages. I would say, around 90% of Nestlé's boxes are from Klabin. If we look at pasta in the supermarket, we will see clients such as Adria, Adria's Pasta, which is M. Dias Branco. Also, they are our client. We have a high stake with our packages there. Now turning to refrigerated products, proteins. We will find a large protein producer. And proteins to get to the supermarket, we have Friboi, Seara, JBS. JBS is the largest packaging buyer in Brazil. They are a great client. We have 50% of share of JBS packaging. And proteins draw my attention not only because we have a supply to the domestic market, but also to the foreign market. Because we have virgin fiber, we provide 100% virgin fiber packaging to clients such as Minerva and Marfrig that export that protein all over the world. There's still in the supermarket in the refrigerated areas, BRF and Perdigão Sadia, where we also sell the packages. We have a great stake there. And also coated [indiscernible] that we also sell to a printing company that will supply to these clients. So Klabin is wise in the point of sale now. Still moving on to the grocery store, drinks and beverages, we have 70% of stake at Ambev with a lot of resilience for food and beverages. Now hygiene and cleaning products, we have OMO, also [Twice], that is a washing powder. We have the box that is transporting the product up to the supermarkets. We also have Dove, the soap. We have another type of soap, of dishwasher soap. Also [indiscernible], another type of soap for dishes. And all clients, Ramundo Fonte in the northeast with all of their brands, we provide our packages and we have a high stake of the client as well. Now moving to electronics. Okay. We have TVs. There are plants in Manaus, and we have to develop a very sophisticated machine. We take our reels and paper to Manaus. We have 2 factories in Manaus to manufacture the packaging to transport TVs, the brown line. In air conditioning, we have clients such as Samsung, LG. So it's a huge diversity. Manaus Bikes, they are assembled -- they are also our clients. Now in the northeast, fruits and vegetables in the supermarkets. Fruits and vegetables as well. Fruits, vegetables, we provide virgin fiber packages for the northeast of the country, corrugated boxes to San Francisco Valley for melons, grapes, mango. Also Rio Grande do Norte, melons there. We do have a high market share in that market because we have the virgin fiber, Kraftliner and Eukaliner. And both for the domestic market and the domestic market -- in the supermarkets as well as in the foreign market, our fruits, especially in the Northeast, they are increasing market share in the international market. They reach a number of countries. And we have our technology, our plants in the region following up the growth of this market. Also Espirito Santo's papaya that also has our packaging. Fruits and vegetables for the midwest, apples in Santa Catarina and Rio Grande do Sul, we package those as well, and they are then sent to the domestic and international markets whenever possible. And a number of other areas, white line, Brastemp and Consul, we have 80% of market share at Whirlpool. So we are supplying all the sectors, all the industries. If you walk in the supermarket, you will understand our resilience, our strength, and we are very close to the consumer market. And in the past few years, e-commerce is improving and also increasing in retail. E-commerce in Brazil already represents 10% to 15% of the market. It's growing on a yearly basis. We have clients such as Amazon with half of market share there, of the packages that Amazon buys here. Mercado Libre, 80% of stake there. And then I can tell you, clients, we have 5,000 clients in corrugated boxes, 5,000. I just mentioned a few when you go over the grocery store, 20,000 products. This is what we always mentioned in terms of diversification and our ability to be in different sectors and follow up a strong growth, stronger than what the Brazilian economy is and the GDP in Brazil is. And where does this capacity come from? We have a penetration as we usually say. This is the map here. To the right, you see where our plants are. They are in all of the regions in the country, and that allows us to cater the large clients that are present all over the country, Nestlé for instance, JBS and others, that are throughout all the countries, so we can negotiate with them and cater them in different regions. Also local clients that are present just in a single region. And also the seasonality products, where we have the fruit in the northeast, the fruits in the south. In Manaus, we have the free trade area. So we are able to cater to all of these markets that I mentioned. And we are following a growing path as Cristiano and Marcos just said, 1 in every 5 corrugated boxes in Brazil is from Klabin, and we are moving towards 1 in each 4. We are gaining market share. We had a market share of 17%, and we are now at 22%. And the sector is consolidating itself and Klabin is leading. If you consider Puma II, Machine 27 paper availability, there was an opportunity of generating more value with the acquisition of the international paper plants in Brazil. We did it, we did the acquisition and we grew. Other players are also consolidating. Therefore, reducing the number of players in the corrugated box market. This slide has a few messages that we have already brought to you. And here, I can talk about the industry's performance and ourselves. In the blue line, we have the GDP. In the green line, we have the performance of corrugated boxes. And the black line shows our growth over the years. So we have the CAGR, the average growth and also the year-to-date. This industry is growing higher than the GDP. If we check the history way back, the rationale won't change. It is growing at 1 percentage point higher than the GDP. All this diversification that I talked about, the e-commerce and everything that you see in the supermarket, Klabin has grown an average 8%, considering our acquisitions, our capillarity and our national footprint, and we can grow higher than the market. What about prices? Well, for the same reason, here you see inflation in blue, the growth, here in the last 7 years, are way higher than the inflation. The average growth of IPCA or inflation, how was the sector this year in green and Klabin's growth over the years? So we have grown 18% average CAGR from '18 -- from '19 to '24, with an inflation of 6% in that period. Of course, that is thanks to price transfer. And also because we have all fibers and we have a footprint in all of the sectors, we have a high share in sectors, not only because we have the virgin fiber or a product that they need the packaging or because it's an exporting sector because technically, they need virgin fiber packaging and then we can add more value and add price to the packaging. So we can transfer price above the inflation. And I'll spend some time on this slide. And this is a model that we have developed over the years in the company. And we improved it with consulting services that helped us to turn it more robust and also with a constant progress. And it shows us the integration or conversion value creation. In grain, we have, Klabin today, we get all our containerboard production, Kraftliner, Eukaliner, recycled paper. And today, we convert 70% and we produce corrugated boxes with this paper. And to the other side here, it is as if we did not have corrugated boxes, it is as if we were to sell commodities, that is to be subject to the volatility of the paper market. And here, we have 2 important pieces of information. The width of the bar shows how large the volatility is in a scenario with no corrugated box. With corrugated box, the volatility is much lower. It goes from 0.7% to 5% of standard deviation. And there is another important information here, which is ROIC. Here, we have a walk. And here, we have the average ROIC of this projection, exactly here if we did not have this conversion. And we have here the current scenario with the conversion, the ROIC. So that conversion, that ROIC protection, is exactly this. Lower volatility, this is an economic mathematical model with deep details developed over years, and we were improving it year after year with the help of other companies, and that's what we use in our short-, mid- and long-term planning. There are different levels of conversion here that we have simulated to come to this current model and we always ask ourselves, we always analyze it so that is to prove that this conversion, this integration, really creates value for the company. And finally, I have here some information about the project, and you will see it in person. I'm very happy to be able to show you a project that is now real, it is operating. So in the first stake, it was in April of '23 startup, it was April '24. The pieces of equipment started arriving. We started with a corrugated and a printer in April of '24. And then we received the other pieces of equipment, and we will be reaching 100% at the end of '25 and beginning of '26, a year ahead of our feasibility study of the project. The project would reach 100% just by the end of '27 -- actually, by the end of '26 and we will be reaching it by the end of '25. That will be the total capacity for this project. This was -- thanks to the excellent work of our project team, of course, but especially because we dedicated a lot of time to bring in experienced prepared people to this factory. This is a new factory. We had an internal recruitment in the company. We have other 15 factories in the company. If we got the most important positions like operators and so on, 95% of the operators came from the company itself. These were people with great experience, and they came to the project ahead of time. We had new people in the current operations and, let's say, old operations, but the operations that we're already running. And we brought these people here 6 months ahead of time so that we could prepare them for the new equipment in order to get the best ramp-up possible for this factory. Some of the operators here went to France to learn how to operate, they went to Japan, to Germany and that -- these are the origins of our equipment so that they could operate here. And this is a factory of 240,000 tonnes, 421 million square meters. We are delivering another project. We are very proud about it, and it's being delivered on time and on budget. This is a state-of-the-art plant. It's yield is 2x higher -- it is 2.5x higher in terms of productivity when compared to any other factory. So our most productive factory in Sao Paulo, if we compare that, this factory here is 2.5x more productive. It's the most modern and productive in Brazil because we do not know all of them in the world, but I would dare to say that this is the most productive factory in the world, but it is Brazil for sure. It is fully focused in operating efficiency, and it has a very low conversion cost. The cash cost for conversion, the fixed or conversion cost, it is over 50% lower than our best conversion cost, of our best corrugated box factory. We can get our best factory for corrugated box. This is 50% lower in conversion cost. It's fully automated. You will see -- you will understand what I'm talking about, that allows us to be very competitive and also brings results and return. This is what I had to bring to you. Now I have a spoiler of what you will be seeing as a productive processes the corrugator up to the final packaging process. Shall we... [Presentation]

From Puma II, the 2 corrugating machines with 280 width. This is where we have the corrugated boxes. And also the filler, the capacity of 420 million square meters. This is a pioneering, this is vertical inventory, a number of positions here. We have the printers, the 9 printers, 5 of them are flexes of 4 colors. Fully automated. Nobody touches the packages. Here, you see them folding and cutting. Very high level of automation. It's fully robotized at the end of the process. So the package leaves the factory ready to our end client. You see that everything is automated. This is a factory that was designed to have a high productivity process. These are the shipping docks. That's all I had to bring to you.

Thank you, Douglas. We are very proud to see this beautiful project materialized. Now with the presentations made, we'll try to catch up, recover some time. We'll start the Q&A session. [Operator Instructions] Now I would like to invite on stage the officers that will be participating. Cristiano Teixeira, Marcos Ivo, Douglas Dalmasi. You've heard them already. And I'd like to invite Sandro Avila, our Forestry Officer; Alexandre Nicolini, Pulp Officer; Jose Soares, Paper Officer; and Ricardo, Industry Officer or Industrial Officer. Welcome. And so we begin. First question?

Congratulations on the event. I have a couple of questions for you, Cristiano, more long-term questions. The first is regarding internationalization. I know that this has been a big topic of one of your competitors. Clearly, this is not a discussion for you, but I'd like to hear your take on this. What do you think of an eventual internationalization process of the company given Klabin's size and when you deplete growth options in Brazil? My second question is you spoke about 1/3 fiber, 1/3 paper and 1/3 packaging, and that you delivered this plan over the last 10 years. Now thinking about the next 10 years, how do you see this mix of product? How do you see this?

Well, thank you. Now I'll start with the future portfolio of products, and then I'll speak about your first question, internationalization, because the product portfolio needs some explanation. In this 10-year vision, like I said, we are looking at this post-leverage period, what paths to follow will continue on the path of long fiber. We have looked mainly at opportunities in the south of the country, opportunities to expand our plantation work in that region. And there's a product for which we see a great differential, which is fluff. This is a 6 million tonne market. There is one global manufacturer with 35% global market share for this product and the cash cost of this manufacturer is high, which sets a lower threshold of price. And with this level of pricing, Klabin can have extremely profitable results. So undoubtedly, the next investment should come. And of course, we should never be dogmatic. This number will be revisited every year. But today, the investment would probably come in fluff and long fiber. So this would be the portfolio for the future post the deleveraging period. Regarding internationalization. You see, at least in an important period in Brazil, some opportunities to grow our planted area. We speak a lot about a shortage of wood in Brazil. But this shortage of wood means that we are not planting. Because if we plant, in 7 years, we have eucalyptus. In 14 years, we have pine. We do have land available in Brazil. I always mentioned we have 180 million hectares of pastures in Brazil. We have very low productivity of pastures below 1 capita head. And Brazil has less than 10 million planted hectares. Brazil has a potential to have doubled that, at least 2x that. So there is room for organic growth in Brazil. We can create a lot of value in Brazil based on this. There's consumption. There's the organic growth for tissue and for packaging, global demand. And going to the Northern Hemisphere or internationalizing the company, if this will intervene my cash cost ability, we want to offer the lowest cash cost in the world in our core business. So Klabin will not go international when we still have opportunities in Brazil. So not if this is going to impact our cash costs. Our investment in forestry, in pulp and paper will be in Brazil. Now in the future, there are 2 possibilities. One possibility is conversion, corrugated box plant, industrial bag plant can be done in the future. Eventually, this can happen. And another internationalization possibility would be through merger and acquisition. This we need to take into account all of the benefits that Klabin has in terms of competitiveness now and in the future, considering a premium. And we need to consider the discount that some Northern Hemisphere producers will need to have. So Leo, I don't envision this opportunity for Klabin in the next 5 to 6 years. I don't see Klabin considering that. Anybody else? Yes.

I am Marcelo with Itaú BBA. My question is, I'd like to understand what the company is thinking now that you have the projects being executed? I think that it became very clear in the presentation. What do you think about the Kraftliner market in 2025 and the packaging market next year?

I think that Jose and Douglas can address your question. Let's start with Jose.

Speaking about Kraft, what we have seen, and this was mentioned in the presentation, we had a 2023 that was very, very hard. The company was overstocked. Because of the pandemic, everyone was consuming a lot, and that was over. So for 2023, we corrected these inventories. The clients practically zeroed their inventories. And along 2024, we saw the client buying again, the economies of the world kind of reacting and kicking back, except for Europe. Europe is growing very little. And Europe continues with low growth. But we see some reaction in the U.S. market. The whole Latin America recovered. In Asia, well, up until recently, they were doing well, China. And the fact that Russia left the international market was quite helpful. Russia was concentrated in offering Kraftliner to China, and that opened an opportunity for Brazilian Kraftliner. And with this, we had an opportunity to recover prices. We sold prices at $450. Now it's close to $600. So it was a very important recovery. And now we see some stability. The market is quite stable. The market underwent this correction, a quick correction, and we see demand for next year being stable in Latin American countries. Of course, there's the Trump administration, what's going to happen with the tariffs. There's a question mark regarding how trade will change if it does half of what he is claiming he'll do. And there might be some opportunities for us given this geopolitical change that is about to happen. Here in Brazil, we see clients quite optimistic. As Douglas mentioned, normally, we run 1% above the Brazilian GDP. So if we expect a GDP of 2%, 2.5%, we will be growing 3.5% in paper. So it's quite favorable for us.

In corrugated boxes and industrial bags, this was mentioned. If the economy remains as it is, low unemployment, good income, social incentives continuing, we envision growing above the GDP this year. It was a very strong growth. Corrugated boxes growing more than 5% year-to-date. We saw industrial banks in the civil construction market posting great recovery in the second half of the year. So this is what we're envisioning for next year. If the economy remains as it is, we'll grow above GDP for both.

Thank you. Any other questions?

I am [indiscernible], a shareholder of Klabin. I purchased shares since when the company democratized its capital. And I have been very lucky because all over these 50 years, I did see that Klabin expanded. It grew. Nevertheless, I was surprised to see that you projected a future far from what I am foreseeing. My feeling is that the world is no longer growing as it is growing. Brazil is not growing, China is not growing that much. Argentina is not growing. Most of the countries are not growing. And what I see is that the purchasing power is leaving the pockets of the population. So my question to you is, even with this type of scenario, kind of drastic, do you still see room to grow? And do you think that the growth could be at the same speed as we have been seeing it? And why am I asking you that, because I want to keep on purchasing Klabin's share, and I also want the shares to be appreciated. So I would like to hear from you. This growth perspective, can it be real? Well, I am not so sure because of the reasons I just mentioned, so that's what I would like to hear from you.

Well, thank you, Mr. Luiz. It's an honor to have you with us. You are greatly respected by us and the top management and also by the Board and the shareholders. Well, we do have a lot of opportunities, and I will start talking about Brazil. Brazil has a per capita dollar-denominated income that is very low. Brazilian purchasing power is still very low. So I think we should foresee that if we had Brazil with 50% of the per capita dollar-denominated income of Europe, this would be a different country. And this can be applied to the whole Latin America. So we have a per capita consumption considering a dollar-denominated per capita income that is higher. Obviously, that we have to have a number of social policies, public investment, private investment. And this is a whole deep discussion. But I have to believe that Brazil, when we look 10 to 15 years ahead, Brazil will have a higher per capita in dollar-denominated per capita higher. So yes, the per capita consumption of a number of items in Brazil is very low. How much Brazilians use of toilet paper, milk, coffee, beer, shoes, everything, all of that is very low, and that can be applied also for Latin America. When we talk about the mainstream countries, the large economies in the world, the consumption base is already strong. And in that consumption base and a percentage over a larger base, you also get a larger number. But what happens is that, because of competitiveness, a lot of manufacturers of the mainstream countries, the North Hemisphere specifically, they are reducing production. That opens up opportunities for us. And finally, what is most important to me is that if we look -- if we run a global analysis, we have a number of countries in the world with a very low per capita consumption, either because of income or infrastructure. And I could mention today Vietnam that is growing at an accelerated pace, our pace for the '80s. Vietnam, Malaysia, Indonesia, India, there are great expectations about India. There are dozens of countries in the Southeast of Asia that also represent great opportunities. They are peripheral to China, but they have a strong growth. Not to mention Africa, the North of Africa is starting to come out, especially in Nigeria. So we have a lot of opportunities there. So you may remain optimistic. Thank you. So now let's turn to Rafael.