Suzano S.A. (SUZB3) Earnings Call Transcript & Summary

Good morning. Today is a very special day for Suzano. This is our future perspective. We'll be showing you what's going on at Suzano and we'll be looking at the future with our potential. The entire executive team is with us today. At the end of the session, we'll have a Q&A for all of us so that we can discuss our future perspectives. I'd like to kick us off about the future of Suzano. But before I do so, I think I have to talk about the past to give you our historic view and how the company has been performing. Let me go back 10, 5 years. We delivered growth, organic growth through building new pulp plants, such as Tres Lagoas 2 and Imperatriz, increasing our capacity by over 40%. We have delivered inorganic growth as well. We have built the dream. We wanted to fulfill the merger between Suzano and Fibria. It's a giant that is prepared for the future. On top of growth, we've also delivered governance. The company evolved in every aspect. We are dual listed. We are SOX-compliant. We have committees that are better prepared to deliver results. We have grown and perfected every control within the single system within the company. That, of course, provides shareholder value. We shouldn't forget that our share price was at BRL 4. Today, it's at BRL 40. And we can do much more, and that's why we're here today. The foundation of all this is the people. That's our #1 cultural pillar. That's people, people that inspire and transform. And we also transpire. We inspire, transpire and transform. This motivated leadership and well-prepared leadership will conduct this transformation journey into our future, building a completely new company, impacting every stakeholder, providing society with value and also generating value for every stakeholder. I'd like to invite you to this future. Let me show you what the journey will be like, but first, I would like to talk about what happened this first year of our merger. Let me show you the results now. Let me start by talking about the company's resilience. Despite unfavorable market deviations, the company has always generated cash. Q4 was the lowest pulp price in history, and the company had an EBITDA of BRL 2 billion and BRL 1.5 billion of free cash flow. We had BRL 7.1 billion of cash generation this year. That is proof that Suzano is prepared despite the unfavorable environmental conditions to generate cash at all times. We are the lowest cost pulp producer, but we want more. And that's why we are here today. I'll turn over Leo Grimaldi that has had relevant results for our paper operation, and he will be showing the 2019 results. Welcome, Leo.

Congratulations. Thanks. Good morning, folks. I'd like to start off with a question. Do you know what was the best year for our paper business? Do you know, Pablo? What was the best year? That was 2019, last year, our best year in history. Let me show you how we managed to pull that result off. Let me talk about sales in Q4. We sold 341,000 tons of paper that excludes tissue, 18% above Q3 of the same year, 2019, of course, as a result of the seasonality of the Brazilian marketplace. Nonetheless, we can identify growth, 4%, when compared to Q4 2018. We sold 1,180,000 tons of paper and cardboard. 100% of our production was sold. And here's what we did: we tried to extract the most -- the maximum result as possible. That's why we were hunting for opportunities in over 70 countries to which we export. And that's because of our Suzano Mais program, distribution and getting closer to customers in Brazil. Prices are on the rise last year, BRL 3,773 per ton, an 8% increase in reals in a very unfavorable marketplace as you all well know. When you take sales volumes and higher prices, once again, margins are up. Our EBITDA margin was BRL 1.373 billion of EBITDA in 2019. I will turn over to Carlos Anibal to talk about the challenges in the pulp market.

And tell me about them. These are huge challenges. Thank you, Leo. Good morning to all of you. 2019 was a year marked by very adverse market conditions. There was a major imbalance between supply and demand. Quarter-on-quarter, prices were down. That imbalance that only grew throughout the year explain why we had an average price of $470, one of the lowest prices on record. In the second quarter -- or the second semester rather, we were questioned about our inventory levels, and we told you that we would bring them down. Throughout the year, in -- especially in the second semester, we would leave no stone unturned to achieve that goal. 450,000 tons went down; Q4, 650,000 down. At year's end, the total drop in the second semester was 1.1 million tons. Inventory levels in late 2019 were below those of 2018. We looked at sales, inventory, but we took cost into account as well. We are obsessed by cost reduction, efficiency. That's part and parcel of our DNA. In recent years, our numbers show exactly that. Between 2015 and 2018, year-on-year, we managed to reduce our cash costs. 2019 was an unusual year because of the decisions we made to reduce production. There was a peak of our cost -- cash cost in Q2. And for Q3 and 4, we began to reduce once again. Our plan is bold: to bring that cash cost down. The plan is supported, and it will take place as we extract the programmed synergies that we are going to capture in the next quarters. We had a great year for paper and major challenges for pulp. As I said, the market was very unfavorable, but that market adversity requires a lot of rigidity -- care in our financial health. To talk about our budget, our balance sheet, I would like to invite Marcelo Bacci. He holds the key to the company safe. [ Sandro ], show us how much we plant on a daily basis, how much carbon tons we collect. This counter was reset when we started. I should have introduced that counter before, I'm sorry. Here's the counter. How many seedlings we've planted so far? How many tons of carbon we are sequestering during this event? Marcelo, the ball is in your court.

Good morning, folks. The box counter is not there. We are obsessed to reduce cost and to increase efficiency, and we are also obsessed with financial robustness. This is key to keep on doing what we have been doing and to fulfill our dreams for the future. Our balance sheet had to be supported to face these adverse market conditions, especially in pulp. We've listed 3 priorities early last year so that the company could operate normally, not to reduce its financial budget. We excluded every financial covenant, but we have more financial flexibility to operate throughout the year. We chose to increase the company's liquidity, in late last year our liquidity between cash and short-term loans amounting to 2.5 years of our debt. So it's a very comfortable situation in which to operate. And number three, we decided to increase our average deadlines or our average terms to take advantage of favorable credit scenario. We therefore managed to have a very comfortable debt profile. We are improving even further, bringing in a new operation that is being concluded as we speak. We're taking 158 -- USD 850 million for 2021 and 2022, and we are postponing them to beyond 2025. Our average deadline was 75 -- 82 months. It will reach 87 months, and 86% of our debt is at least 3 years down the road, again a very comfortable situation in which we can manage the current scenario and to have some margins for the company's future. That leverage of 4.9x is a leverage that had the driver to reduce the EBITDA throughout the year when compared to late last year, adjusted by the Fibria transaction. Our debt -- net debt in dollar was smaller in absolute terms but a higher net debt to EBITDA because especially, the lower EBITDA. So we decided to take some action throughout the year that was -- that were announced to the marketplace to manage this more adverse situation. We've announced 4 things. We're going to have a more limited CapEx. We are going to monetize our inventory. We would sell nonoperational assets and the synergy. And here's what delivered: a CapEx reduction throughout 2019. The initial guidance was BRL 6.4 billion. We ended up having BRL 5.78 billion. We also delivered a budget for 2020 of BRL 4.4 billion, maintaining -- and it's important to say every maintenance program, replanting the entire operation of the company remain intact, just dealing or managing that discretionary CapEx. As to monetizing inventory, just like Carlos said, a 1.1 million ton pulp production. The same thing applies for paper. And now we have a very expressive reduction of our working capital. We announced we'd be selling BRL 1 billion of nonoperational assets. We've already sold BRL 400 million -- in 5 years, that BRL 1 billion. But for 1 year, we've already sold BRL 400 million of that BRL 1 billion. That's the operation we announced recently, a couple of months ago. Others are soon to follow. We've also decided not to distribute dividends this year for 2019 as a means to reinforce our financial robustness. And as to synergies, I think we should pay close attention to them. Mergers, just like the one we've gone through. It's only natural that once the transaction is finalized, companies and stakeholders say, well, everything we planned was not exactly what we thought it would be. And we are reviewing our synergy but with an upward trend. From BRL 800 million to BRL 900 million worth of synergies, steady-state. We are bringing the number to BRL 1 billion to BRL 1.1 billion. We've already delivered BRL 773 million in the first year already, and we have plans to deliver 90% of this new number already in 2020. So everything is going according to plan. So that indicates a cost reduction trajectory. And I'll be talking about that later. A merger of this magnitude cannot be based on synergies only. In order to conclude such a huge business and to be able to say we are working together, some steps have to be made. Synergy was one of them. We had to merge, join the 2 companies, January 2019, to come up with a single culture and to have single processes, and we have moved a long way at every step of this plan. In terms of culture, we try to extract the best examples of culture based on the 3 pillars: People that inspire, transform and also transpire. It's only good for ourselves if it's good for the world to generate and share value. In a recent survey we conducted with the entire team, 91% adherence to these cultural pillars. That means we have moved a long way in building that culture. But that's not all. We decided to operate the first year with separate processes and systems to speed up synergies. And we have just turned key in processes and systems when we started 2020. The entire company is using a -- single processes, single system with no problems. We kept on selling, receiving, delivering goods every single day. So it's a very seamless project. By maintaining separate systems, we managed to get the SOX certificate with no major hiccups. So it's a huge victory. We can now say we're a single company with a single culture, single processes and single system. 96 years old, our company has never been so well prepared to face the future. And let's talk about the future now. [Presentation]

Good morning, everyone. My name is Christian. I'm in charge of our strategy, digital transformation, people and communication. Indeed, they were all just going through a huge transformation. Not only the digital transformation and data, we all know about that. But more recently, we see a big change in our society, the relationship of people in the society, the relations with our government, with other people, with the place we live and our planet which places big challenges to all of us. Climate change, social inequality which is now growing, and these challenges also exercise pressure on Suzano. However, at Suzano, we view these challenges as great opportunities, opportunities to grow and to be better because we believe we are certain that we have today the most competitive biomass on the planet. Our cost and our scale are the most competitive. Our products can meet the needs of this consumer who is looking for bio products, renewable products. And we are the company that does the most CO2 sequestration in the world. [ Sandro ], tell us about it.

This is our counter. This is the Suzano we have today, and we will make increasingly better. These opportunities, they are translated into our strategic vision. Our long-term vision is based on 3 basic pillars. The first, Carlos has already mentioned. It is our obsession to continue to be a reference in efficiency, profitability and sustainability. And it's not one or the other. These 3 things go hand in hand. They are our obsession that will continue now into the future. The second pillar of our strategic vision is related to growth. We outpaced the market in terms of growth. At Suzano, we believe in our great potential, and we will be transformation agents in our industry to create increasingly more markets for our biomass. Thirdly, the third pillar is related to innovability. That is sustainability plus innovation both together, applied to our daily activities, from the forest to the customer, providing innovative solutions to transform bioeconomy into a reality using environmentally friendly solutions. These are the 3 pillars that guide our long-term vision. And this vision, these pillars are not just an idea. We have plans. We have action plans throughout the company. And today, we will be sharing some of these plans with you. Our vision can be translated into 5 main avenues of action. So from efficiency in our total cost, which is not only pulp but also the forest, from the forest to the end customer. And it also includes maintaining our relevance by launching new products, making progress and being competitive throughout the supply chain. As we had in 2019, a record on paper, and you will see some of our consumer goods units. We have to be audacious or bold in expanding our markets for biomass, and we have to be protagonists in sustainability. But what does it mean to be the best-in-class in the total pulp cost? I'll help you understand this concept. You already know our cash cost. Today, when you look at our cash cost, as Carlos mentioned, and you add our downtime, we get to BRL 700 per ton, about $180 per ton. We look at this cash cost but we also look at the total operational disbursement, which we add the freight, our D&A and our CapEx sustained to continue operations. When we add it all up, we are talking about a total disbursement of about BRL 1,600 per ton, around about $400 per ton. Today, in the company, we have very concrete plans that provide certainty that this cost will come down to BRL 1,300 per ton -- per metric ton in a horizon of time of 5 years. This reduction in the total disbursement implies an additional potential of BRL 2.8 billion. These BRL 2.8 billion do not depend on what may happen to the price of pulp because these are internal actions that we already have planned for. What are these plans then? Well, let's have a look. Let's begin from forest planning. The forest is our main asset. And today, the distance between the forests is about 228 kilometers. Our ambition and our plans is to reduce the average distance to 156 kilometers in the next 5 years. At the same time, we will reduce our dependency on third-party forest. Why? Because this has a direct impact in our cash cost and also a direct impacts -- impact in our CapEx sustained, and it contributes for that BRL 2.8 billion I just mentioned. But this is more than structural costs. In the forest, we want and we are already introducing digital technology and we are also making progress in our biotechnology. Today, we have a specialized group of data scientists who have fun all every day with our 3 trillion data records so as to become -- to make our forest more productive. That is we'll produce more with less. They have mastered the DNA of our trees to make them more resistant. So our trees will resist ants, other pests, other agents. So this is going to be a hedging protection to our forest assets. And this will also contribute to reduce our structural cost. But we have initiatives beyond the forest. This is a clear example in our logistics. This is the Vertere project in Santos Port. This is a port terminal that will start operations in April, and it will increase our capacity to 4 million tons a year. And these are only just a few examples of the initiatives we are conducting in the company, which provides certainty that our structural disbursement reduction will be attained. So these BRL 2.8 billion are a very concrete reality for us. However, our strategy goes beyond cost. We also have new business opportunities. Let me invite Carlos to talk about the opportunities we have in the pulp market. Carlos, you have the floor.

So how to maintain our relevance in the pulp business. Well, there are 2 main initiatives, one complementing the other. So the first one is that we have to make the most of the organic growth of demand for pulp, which is going to grow. This demand is going to continue to grow because it has a very good yeast so it will continue to grow. And the second initiative again is a project where Suzano will be a global protagonist. We're the first global company to you -- we were the first to use eucalyptus to produce pulp back in the 1970s, and now we have identified a fantastic opportunity to grow, to increase the size of the pulp share on the market. This year, the demand will be about 60 million tons, and we project that the growth trend will continue first in emerging markets. Asia will continue to grow, led by China. Latin America will also grow. And when we look at the grades, who's going to lead this growth? Tissue paper, packaging and specialty paper. So this combination makes us believe that we will have, in the next few years, a growth of 1 million 100 up to -- [I'm sorry. He said] 1.1 million to 1.5 million metric tons a year. In the last 5 years, the demand for pulp has grown approximately 1.4 million tons. In 2019, we were asked we could see a concern because there was a drop in the demand for print paper, especially in Europe. And today, I'd like to share with you our understanding of what happened, our view about this. The world of printing paper is a market where 40 million tons are mechanical paper or newsprint. This paper does not really have any content that is -- it does not contain pulp. So the world of printing paper is reduced to only 60 million tons. Now in these 60 million tons, we have 2 types of paper we call wood-free, where we have more participation of pulp. But it's 40 million tons of white paper, A4 paper, such as report or copy max paper used to make notebooks. And we have coated paper, about 20 million tons; white paper, 40 million tons. And the expectation of demand reduction in the next few years is 0.5% less or a flat demand. Mature economies will have a decrease in their demand, but that will be offset by emerging economies. Now in coated paper, or couche paper, it's 20 million tons. And here, we do have a more significant drop in terms of the participation. I'd like to speak about Europe. In Europe, we had an atypical year. And we believe that in 2020, we will again see a drop of approximately 5%. 1% drop in the demand for printing paper for writing paper in Europe translates into 15,000 tons of hardwood and 20 million tons of softwood. So the reduction in the demand produces a small impact. Fiber to fiber. This is the concept. This is the market where we believe we have a huge opportunity to be protagonists. Now what is the concept here? The concept here is for us to work to again expand the size of the market for pulp. Now there are 2 ways to do this. The first way to do this is to replace recycled fiber. We believe in the next 10 to 20 years, there will be a significant drop in the availability of wood chips because of this drop in the demand for mechanical paper and newsprint. On the other hand, in most countries, we see the markets are saturated in terms of the collection of wood chips. So if we have less availability, if we have less room to collect these wood chips, it means that there will be space. And this will be occupied by virgin fiber. That is if we have less recycled fiber, then we will see more virgin fiber. And this is already happening in China because of the restrictions in imports. We've identified, in the next 18 months, a growth of 1 million tons in the production of cardboard, hybrid board that uses virgin fiber and which are gaining market participation especially in the production of consumer goods especially to replace the cardboard that used to be manufactured with recycled fiber. So now we have again an opportunity to make the difference because of the integration. We have been talking -- we have been exchanging experiences with customers and prospects, integrated producers of packaging who use softwood fiber. These are companies in the Northern Hemisphere who use the conifers for producing paper. So here, the concept is that we can provide a solution to replace that softwood fiber for eucalyptus pulp. We know how to do cardboard, we know how to do packaging. We know our fiber, and we believe that we have here a fantastic potential, a tremendous opportunity to grow and to increase our market share in this production in this integrated production providing pulp. There's something else happening in Asia, especially in China today. Most of the Chinese industry is integrated based on wood chips manufactured in Asia. And the expectation is that there will be an expressive reduction, and that will imply a process of disintegration because today, all of this capacity is integrated but they will be migrating to market pulp. In China, we already have 3 million to 4 million metric tons -- 3 million or 4 million tons of paper production from nonvirgin fiber that is from recycled fiber. And again, this is happening, producers of writing paper or newsprint. Today, we see a boom in the consumption of uncoated paper in China because they're replacing other recycled fiber by market pulp. So this combination of integrated pulp plus this potential we have to increase the size of our market makes us believe that we do have space to sell 500 million additional tons of pulp. Of course, this is not something that will happen from one day to the next. We have to build this opportunity. But if we can combine these 2 things, that is expansion of our market, we are talking about a growth of 2 million tons. And it is considering this growth potential that we are now preparing ourselves because we want to be present, we want a portion of this growth. And that is why we are now positioning ourselves for that. We already have all the licensing to install a potential paper mill for 2.2 million or 2.5 million tons in the state of Mato Grosso do Sul. So we're already working on this project. This is a fantastic project, structural average radius of 50 kilometers. Can you imagine what the cash cost will be for this mill? Now we already have a property of 100,000 hectares. We've already bought this land and we already have the logistics. We have just heard about Vertere. So we will have between 2.2 million and 2.5 million tons additional capacity, which we will transport via Vertere. So we just have to continue in this process of unleveraging our company. And after we can do that, we will begin this new project for organic growth. In conclusion, 2019 was a very special year for us. This was the year when we took off in our consumer products business. So let us now invite the pilot of this falcon, who will, of course, one day become a 777. Let me invite now Luiz Prado to speak about what we've done with tissue paper in 2019.

Thank you, Carlos. Good morning, everyone. Another avenue of growth we have is to advance in other bonds in other parts of our supply chain, provided that we have a competitive advantage. Precisely what happens in tissue, our business of consumer goods? This business is a -- has a 3-year history. It all began from a PowerPoint presentation. Yes. It all began from a PowerPoint presentation and lots of Excel spreadsheets, as you can imagine. Then in 2018, we developed products. We launched new brands. We grew our distribution channel, and we had our industrial ramp-up beginning in 2018. However, this was not the end because concurrently, as we're building this new company, we acquired another company. And this acquisition brought to us 2.6%, let me go back, 2.6% market share. And in the last 2 years, organically, we grew 3.9% of market share in Brazil, and we attained 6.5 percentage points market share. Now these actions allowed for us to become leaders in the north and northeast markets with 57% market share in the north of Brazil and 22% market share in the northeast. Now as we look into the future, we now have a new plant that was announced 1 month ago in Espirito Santo state, and this is really important because we've been able to monetize our ICMS credits in that state. And it will bring to us even faster growth in our consumer goods business. In total, we'll have 5 plants in Brazil, 4 in the north and northeast and now our fifth plant in the southeast. This is a good example. I mean, it's one more good example of Suzano's capacity to implement, to execute and deliver our strategies. That is we have been able to develop projects, build a brand, leverage distribution channels, industrial ramp-up, plus inorganic growth, everything at the same time. And it all began from a PowerPoint presentation. But we also have other avenues of growth for our business in Suzano. And now to talk about new markets. I'd like to invite Fernando, our Innovation Head; and Vinicius, our new Business Head.

Thank you, Luiz. Now we're coming to a very important moment in the Suzano Day, when we'll be talking about transformation and protagonism. We have fantastic results to show, a clear strategy as we've just described. However, we're restless because we want to be protagonists in the transformation of our society. We want to go beyond. So we now have this avenue of growth. And I'd like to invite you to come along with us, let us walk on this avenue, so that we become bolder in the expansion of our business. And this is not only a dream. It already has anchors on reality. But before we talk about that, let us look at our counters. How many seedlings have we planted? How many tons of carbon have been -- is sequestered? Well, we've been here for less than 1 hour. And while we're here, our people have already planted 17,000 seedlings, and we have already sequestered 318 tons of carbon. It is our force working for a better world, for a society that will be able to build better solutions for our planet. This is the beauty of our strategy, and that's why we think beyond. That's why we want to go beyond what we've already done. We know this history. You all know this history. On the last Suzano Day, a year ago, we spoke about our assets. Our unique assets, our forests -- our state-of-the-art forests, our highly productive mills. And you've heard here that we continue to work hard in the digital transformation, developing biotechnology, forest management to have the best possible control of fertilizers and control of pests. Our forests have become more productive and more resilient, even facing climate change. And the quality of our wood is higher and diversified for different applications today. Thanks to the merger, we have the largest collection of eucalyptus outside its origin. The largest collection of eucalyptus in the world. So we have great diversity that we can explore for these new avenues, these new products we will be developing. But our history has brought us here today. We deliver these products, market pulp, energy, fluff. These are very successful businesses, and they deliver significant results. But now we are doing more, not only a plan, we are building a road. We're building a path towards the future with a lot of discipline. And today, we'd like to talk about that. Let us have a bigger screen, so we can understand what we're doing at Suzano today. Now the difference about Suzano is that we are the company of and. We are not the company of or, either, or. So all of these businesses, even those in green, we are delivering great results. So all the businesses we have today will continue into the future, highly competitive and with all the discipline that we use. But everything you see in white is brand new. We're talking about biochemicals based on lignin, resins, textiles based on microfiber pulp. We're talking about replacing plastic, as Walter mentioned. And here, on paper, it is not here, but we will transform the paper business. And this transformation will help us go beyond the products we already have. So we will have primary and secondary packaging, we'll develop barriers in the chain of pyrolysis with partners. We are developing biofuels and biochemicals. So this is our strategy today. We want to go beyond. We want to expand into new markets. In this strategy of doing well what we do now, and at the same time, we will build a much better future in line with what we see in big markets. We're not talking about small actions. We're talking about big things.

Yes, Fernando, there are many opportunities. Now let me talk about a key aspect that we have in our business, partnerships. FYI, we have hundreds of technological and application partners. And why do we need them? Because there are way too many markets. When you add all this market potential, you get to [ a $50 ] billion a year. Put that into perspective for a second. Short fiber, long fiber pulps, it's more smaller than that. Bio business is more than doubling, the potential to generate value for this company. Let me show you some specific examples of what we're doing. This is what moves us. Execution, not potential only. We have to move away from the R&D scale and then to the pilot and then to the business scales. Three concrete examples now. I think you've seen one of them, here in the hallway. Replacing plastics. We believe we are on the right side of that equation. We plant forests. We've plant seedlings on daily basis. So that's the potential to be an agent for transformation. And actually replacing plastic, a huge problem to the planet, we're doing it using our pulp. Here's what we're doing. We're producing biocomposites, moving away from traditional plastic to replace these fossil raw materials to something that is splinted, not only for Suzano, but for the planted forest industry in Brazil. We're doing it on a daily basis. The replacement rate can get to 60%. There are several tested applications, textiles, toys, auto industry. This is part of our daily lives today. This is real. They're moving away -- they're moving on to the bioplastic. A minor example was the gift you were giving. It's just a symbol, but it's important because this small container contains 20% of pulp. It's no longer conventional plastic. Plastic becoming sustainable from fossil to renewable. And it's competitive. Our pulp is competitive when compared to fossil solutions. They have been proven, and we're contributing to reducing the CO2 footprint in the scale that Walter mentioned early today. But that's not all. Opportunity number two. The textile industry. But before I say that, let me give you some market data first. The textile market accounted for over 100 million tons of fibers. When you bring that to 2023, analysts forecast that it's in a growing trend. But where is it happening? Synthetic fiber. Cotton is now growing. And even the top portion, which is wood is growing slowly because that's what the world wants, less water consumption, less carbon emissions, more recyclability. That's not the picture. We are seeing on the left that we'll be able to deliver what the world wants. That's the solution we would like to present to the world. We are amongst the top forest planters in the world and our raw material is completely renewable. We have to take that key role, and we should not be comfortable when the textile market grows based on synthetic fibers. So we believe we have the opportunity to develop renewable alternatives. The challenge, we decided to embark on some 3 years ago, can we produce textile fibers? There are other options, dissolving pulp, but we wanted to go even further. The solution that would consume less water, chemicals, not using hazardous chemicals. I think that some of you have had the chance to come to our microfiber pulp plant in Santa Cruz. It's a state-of-the-art, the microfibrillated cellulose, MFC. We have invested heavily in R&D to refine the pulp to come to that top-quality microfibrillated cellulose. So here's the challenge. How can we combine MFC with textile fibers to have a true impact in the market? And then Vinicius mentioned it, partnership. You cannot innovate without partners. We have to be humble enough to look for those who can pull the trigger that can actually make things happen and speed up processes. We identified a start-up in Finland, Spinnova. It's no longer a start-up. It's a company that's growing. After 15 years with the development in Scandinavia, Spinnova managed to combine these 2 fibers. Something that spiders do, just nature at its best, taking the MFC and making the textile fibers. It's a patented process. It's a very well-developed technology. We're moving that up to scale at the industrial plant level. It's important to say that we use MFC, a little bit of chemicals, but it's a green chemical. These are not hazardous chemicals, like the ones you see in similar processes. Water savings is 5-fold when you compare it to cotton and synthetic fibers. So it's a solution that can actually revolutionize the industry. And it's a concrete example. You just saw that sample. It's very small, but it's a very important step. Everything that you see in white is pulp based on our planted forests. The white yarn, you can see, it's textile based on our pulp, then it becomes MFC. And then it becomes these new textiles, a true revolution. In December, Spinnova made this dress to this Congresswoman in Finland for their celebration of independence day. This is a backpack, a very nice backpack. You can feel it. A Norwegian retailer introduced it, and they put it up on a website. Come take a look, bergans.com. It's in Finish, you can switch to English. Feel free to do so. There will be a link, Collection Of Tomorrow. This is a fantastic name. You get a lot of information from the Spinnova fiber. This moves us. That's the result of years of hard work, and it's becoming a commercial product. Think about the potential when you take that to several other product lines. Let me talk about the third initiative. Replacing single-use plastics. I don't know whether you are aware of it, 127 countries in the world have some sort of restrictions on single-use plastic. 187 million plastic containers in the world today -- exist in the world today. Take 500 billion plastic bags in the world. Let's take 380 billion plastic cups per year. Let's suppose you can replace 20% with paper. This pulp demand to be generated will be 1.8 million tons, one new plant, a pulp plant, by replacing 20% only. Think about the potential we have in this new world that Christian and Walter talked about. Let's try to combine everything together. Current demand is right there. Organic growth, Carlos put it brilliantly. We keep on growing. It's a healthy market, and we can replace fiber from fiber, getting into new markets. But we can go even further, fossil to fiber. It's a huge potential there. When you add all up, the future demand is a couple of times greater than the demand we have today. The potential is huge to be transformational in society whilst develop or generating a lot of value, and sustainability is the foundation. It's the basis of everything. And then, Walter will come back to stage to talk about this topic.

It makes us very proud. You just feel proud when you think about the impact you can generate in society to replace fossil fuel-driven products. But there's something else. I'm representing Malu, representing her. It's up to you, Walter, to show these slides. Sustainability is so important. It's at the core. And it's up to you to show these slides. If there are any hard questions, you can ask her directly, but it's important to prove that it's part and parcel of our company. It's part of our DNA, and this is on our day-to-day routines. Being or playing a key role is to go -- you have to go to the mat and fight, you cannot sit on the sidelines. These are daring goals, but very feasible. But that's not all. Since these are objective goals, we'll be showing you, on a yearly basis, how much we have progressed. This is one of our commitments to transform ourselves and to be even more impactful in society. These are more operational goals, but we have several other types. Let me talk about climate change. We want to change consumption of CO2. For every ton of pulp, we want to reduce our emissions by 15%, especially in our industrial area. Water. We want to reduce our water consumption by 15% between 2020 and 2030. We'll keep on tracking 100% of our critical water basins to make sure we are replenishing underground water. Our goal is to reduce by 70%, once again, 70% industrial waste, reusing industrial waste in our forests. And by doing so, we'll be reducing the use of fertilizers. But that's not all. Let me talk about energy, we want to increase by 50%. And I mean, 5-0, 50%, our energy production by providing an even cleaner energy matrix. Let me talk about diversity and inclusion. And we are -- we picked 4 stakeholders. These are goals for 2025. In 2025, we want to have more PCDs and LGBTI. This has started already, but we want to go beyond for women and black people, we'll be having 30% of women and black people in their leadership roles. It's a daring goal, but it's a feasible goal. It has been agreed upon by the entire executive team. And finally, last but not least, education is the only transformational factor. That's the only alternative to create a better society in the future. No country in the world has become a developed nation, not taking education into account. We are investing in education in the communities we operate. Our goal is to increase by 40% the IDEB indicator in these communities. We are investing to have better people in the future. Let me talk about even more daring goals. Goals that have been agreed upon and they are transformational as well. That's CO2. Many people, I'm not naming any names, you read that in the paper. I want to be a net zero company. I think you've heard that thousand times. Well, I want to be carbon neutral. I think you've heard that a lot. And they say, I want to be this in 20 years, 30 years, people say, 2050. And I'm telling you, we are not only net zero, we are carbon sequesters. That's what we are. The Brazilian forestry industry represented by other companies too, we are also sequestering carbon. We play a significant role, but that's not enough. We want to do more. And we are establishing this very daring goal to sequester an additional 40 million tons of carbon. Between 2020 and 2030, we want to sequester an additional 40 million tons of carbon. [ Sandro ] show us table or the score rather. We're not at the pace. We have to take action to increase our forestry basis, reducing specific consumption. There's a lot of work to be done, and we're going to contribute and transform society. And then there's a second goal, just as important. I forgot to say something. I want Christiano on my back, 4 million tons a year. It means 2.5 million vehicles, the total vehicle fleet in Denmark. Our second goal is a very important goal as well to replace plastic and fossil fuel products. It's a very daring goal, and I'm very proud to be a part of the project. Fernando and Vinicius talking about several initiatives moving from fossil fuel products to fiber. We want to replace 10 million tons of plastics through these several initiatives, 10 million tons of plastic. Let me give you some figures. 100% of use of plastic of a 500,000-habitant city for a year, 500 billion plastic containers or 20 Maracana stadiums filled with plastics to the ground. And we're doing that by converting plastic to fiber. We have 10,900,000 tons of fiber a year. We'll have more with the Ribas do Rio Pardo project. Let me assure you that we're doing something that is equivalent to about 10% of that volume that we'll be converting in other initiatives a year. It's a very daring goal. We believe in it, and we're going to work hard to make it come true. And now the third bottom line. We talked about the economic, the environmental. Let me talk about the social bottom line, and it's very dear to us. We believe there is a problem of wealth distribution, and inequalities are on the rise. We want to be an agent for transformation in that arena as well. We are reducing or removing 100% of the people in the next 10 years. People are going to move away from extreme poverty. 200,000 people that will be moved away from the poverty -- from poverty, based on 2 main actions. Number one is income. We want to provide income, it's not charity. You'll be getting some honey sachet, apiculture is very, very favorable in our forests. We can resort to sustainable apiculture. Things that can help people get sustainable income. And on top of that we want to generate education. You see before they would like to give these young people education. We believe that for this generation, people have to move away from poverty. These 200,000 people with some income, but we have to prepare the next generation. The next generation will take care of itself with education. These are 3 major goals. On top of the previous goals, we presented all these goals will be tracked or will be monitored by all of you. We want to keep on working and being agents for transformation. It's a huge potential. We're very proud to announce it, so that we can actually be impactful to have the triple bottom line: economics, environment and social. All right. Let me wrap things up. But before I do so, [ Sandro ], show us the score, again. 27,000 seedlings have been planted throughout this event. 500,000 a day. Who plants 500,000 trees a day? Who sequesters 4 million tons of carbon a year? Suzano is a very special company, and it can be even more special, and that's what we're trying to do. I started out -- thank you, [ Sandro ]. I started by showing you a little bit of the past, and I've given you several examples. But let me summarize it. Number one, efficiency is key, and it's on our daily practice. I don't know whether you remember the number, the number that Christian put up. We have BRL 2.8 billion a year to capture inefficiency, BRL 2.8 billion. How much value can we give our shareholders? What about share price? This is huge, and that's the way we're going. The second thing, we are competitive, we have access to biomass. We are very well-structured and positioned, but we want more. We believe that our biomass can be more than pulp and paper only. We want more and we'll do more. The addressed pulp market is much greater, and we're going to expand the pie. We will benefit either producers will benefit as well, but this is a collaborative world. We're not concerned about it. This is, of course, very important to us. But there are 2 basic and fundamental conditions that have to be met. Number one, sustainability. We'll be doing it, but improving the sustainability on our planet. And number two, always with that financial robustness. We are conservative in that sense. People ask me, are you concerned about 4.9x EBITDA? It's a long-term debt, it's cheap, but we will be disciplined. Can you do other things? Yes, we can. But before we must deleverage. Financial robustness is very important to us. This is the overview I would like to show you. I would like to thank you for being here. I'd like to thank the entire executive team. And now we can start our Q&A. Thank you very much for coming. I'd like to ask the executive team to come to the stage. In 20 seconds, they can place all the chairs on the stage, and then we'll be available.

[Operator Instructions]

You have to speak into the mic and you can also submit your questions in writing. Are you coming over folks? Hard questions are all addressed to you. Carlos, you have to sit next to me because almost half of the questions will be asked to you, anyway.

At your service, I'm here, on your left. Should I stand up? My questions are about innovation. You mentioned a couple of initiatives. When you look at all these initiatives, Walter, where should we start? What should we look first? Which one has more potential, still on innovation? Can you give us an indication of how much CapEx you'd be investing in that area? And my third question about the long term. For about 10 years, do you believe that one of these initiatives can account for more than 5% of the company's cash flow? Just to give us some indication as where to start studying.

Well, thank you for the question. We always consider a basic criterion, which is scalability. We will not do business, which is not scalable or significant. So all of our initiatives have to bring in a significant volume in terms of cash flow and the timeline. Now Vinicius and Fernando spoke about 3 initiatives. These are the ones that had the highest technology readiness level and business readiness level. The initiatives on the textile market. This is a big market. We are already growing scale with Spinnova to reach this market. In my personal view, I believe, this is more related to technology than it is to business really because Spinnova is talking to many global companies that use fabric. I cannot mention their names, but I know these companies. You all know these companies, and they are looking for more volume of production. So as soon as we have this volume of production, we'll have a market to supply. So we must have industrial scale. And this is what we're working on now. The second initiative they mentioned is biocomposites. Today, we are already testing applications for biocomposites, using different percentages of pulp, between 20% and 60% replacement, as you saw on the chart. Environmentally, this is not a final solution. Why not? Because this is not a fully renewable, degradable and recyclable product, but it is a solution that can partially address biodegradability. The third initiative, [ Sullivan ], you mentioned is the single-use plastics. Now Leo has been working on this, and we already have a few initiatives. Today, we are the great producer of paper for drinking straws and paper cups, but we can go beyond. For example, if you enroll to run a track and field race, you will see that all the cups used in the race are made by Suzano, the bio-cup. It's 100% degradable. So we're already producing this product at commercial scale, and it will grow. Cities such as Sao Paulo or regions, such as [ Era Bazudo ] have banned single plastics as of 2021. So this is going to help increase consumption. It will begin with single-use products, and then it will migrate to packaging, which would be the next step. On packaging, we are working on barriers for primary and secondary packaging. So we have -- we cannot yet talk about the magnitude of this business, [ Sullivan ]. But, as you saw, the overall dimension would be 10 million tons of plastics in this period -- in the whole period of time.

Antonio Heluany from the Bank of America. First, congratulations on your presentation. It's very interesting, the details you provided on the future potential. The first question to Bacci. Could you talk a bit more about the synergies? Last year, you spoke about BRL 800 million or BRL 900 million a year, then you revised it up to BRL 1.1 billion or BRL 1.2 billion. Where does this additional portion of synergies come from? What are you looking at? And your number of Zero Cost Collar, the double of the range is below the spot price. So is there anything we can do in 2020 to be able to capture this foreign exchange rate? And then a question to Anibal, talking about pulp. Do you expect strong sales for the fourth quarter 2.9 million? But the question that comes to my mind is, how much of that is related to replenishment of inventories in China? And what can you say about demand for 2020 now, especially with the new coronavirus? And you also mentioned in your presentation, Tres Lagoas 3. Can we talk about any timing or CapEx for Tres Lagoas #3?