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

[Presentation] Good afternoon. Thank you very much for the opportunity to be with you here. I would like to make a very broad presentation about our perspective for the long-term results. Before that, I would like to ask for a counter. We are going to see several times during our presentation here, so I would like to see the counter here on the screen. You are going to see that we are, all the time, we are planting trees and we are absorbing CO2. We are planting 500,000 trees every single day. And we are going to see in the counter that -- I don't know the reason that is not in the screen yet. We trained a lot, but it's not on the screen. It's showing that during the presentation, the number of trees that we are planting and the tons of carbon that we are sequestrating, that we are absorbing. You are going to see during the presentation several times these numbers on the screen. Before I start showing to you about the future of Suzano, I think it's very important to make a recap from what we did on the last many years. I think we have been delivering value to the shareholders during all of this period. First, we have delivering growth. We have been organic growth, just on the last few years, we had 2 new plants, pulp plants, that have been commissioned on our operations, Três Lagoas 2 and Imperatriz. We have been in organic growth, and I'm going to give -- an example on that is the merge between Suzano and Fibria that make our dream come true in terms of creating a very robust company and prepared company to play in this industry for the future. But we have been doing other things as well. On the governance side, we have been migrating to a single class share with no premium to the controlling shareholder. We have been working on different dimensions to create value to our shareholders. We have been a very robust financial policy during these many years. And the conclusion of everything is that our share price have been evolving year after year. We have been evolving from BRL 4 per share. Right now, we are roughly at BRL 40 per share on the last 7 years. This is what have been delivering. This is showing our commitment on transforming ourselves all the time. It's our commitment that all the time, we want to be a better company that impact all the stakeholders and impact the society as a whole. Today, we are going to be very proud to present to you what is going to be the next steps of Suzano and how we are going to operate on this scenario. But before we do it, I would like to invite our CFO, Marcelo Bacci, that is going to present to us the results of 2019. Thank you, Marcelo.

Thank you, Walter. Good afternoon, everyone. We're going to be showing you the results of year-end that we published last week, starting with a very important number, which is our EBITDA and cash flow generation. We had a very difficult year in terms of pulp prices that we're going to see in the sequence when we discuss the results of the pulp business unit. But in any case, over the year, we have generated a significant amount of cash from the operations, reaching BRL 2.5 billion of EBITDA and BRL 1.5 billion of operating cash flow, defined by EBITDA minus standing CapEx in the last quarter, totaling BRL 7.1 billion of operating cash flow last year with BRL 10.7 billion of EBITDA, which was significantly lower than the previous year, but in a very difficult environment. And this shows the resilience of the company. Even in a very difficult scenario, we are generating operational cash flow of BRL 7.1 billion over an asset base of BRL 100 billion, which is not a great result in terms of value creation, but in an asset market scenario, shows how robust and resilient the company is to deal with this scenario. And we have to make a note here to remember to all of you, to emphasize that some of our competitors in the high-cost scenario are running at negative EBITDA in the last 2 quarters of the year or at least in the last quarter of the year. And we keep generating a significant amount of cash, showing how the low cost producing feature of Suzano can make a difference, even more different in a more asset scenario. We had a very, very good year, and I think this is maybe a surprise to most of you. We had last year the best year in our history in the paper division. In the paper business, we have been operating for several years at full production. We produce everything we can, and we have been selling this production more in Brazil and a little bit of exports. And our ability to allocate the volumes to Brazil and to export gives us the chance to maximize the results over the years. And especially, this year, we have made very, very important progress in the volumes during the year allocating tactically the volumes better to the different regions to maximize the results and to be sure that we optimize the assets, the asset base that we have in the paper business. So last year, we sold 1.16 million tons of paper products, which is basically everything that we produced, with a very sizable number in the last quarter. And more than that, we have been able to increase our average price over the last years with our ability to allocate to different regions, to different clients, and also the continuous advancement of our program called Suzano Mais, where we have about 30,000 clients, active clients, in Brazil. So our ability to reach the final customer has been helping us progress with prices over time. And with that and a good cost control, we have reached a record-high EBITDA for the paper division last year in a scenario, especially in Brazil, that was not very good. So this has a lot of merit in our view, so we are here to celebrate BRL 1.37 billion of EBITDA in the paper division, which is something very special for us. Pulp is most of our volume. So the results of the pulp business unit, of course, drives the result of the company. We had, last year, as you know, a very difficult year in terms of pulp market scenario. And the line in this graph is showing how the prices behave during the year. So we started last quarter of 2018 with the prices in China, $760, and we reached an average price of $471 in the last quarter. And we had to change our commercial policy during the year to cope with this imbalanced situation between supply and demand, especially given the huge destocking process that China went through and also the low economic activity in Europe. We had to change our commercial policy during the year. And in the second half of the year, we privileged the volumes and, of course, we saw the results on the prices. But taking advantage of the fact that we are the low-cost producer, we kept selling, and we reached record-high sales in terms of volumes in the fourth quarter with 2.9 million tons. And with that, we reduced our stocks by 1.1 million tons in the second half of the year, delivering something that we have been discussing with the market, saying that it was important for the recovery of the pulp market in the year of 2020 that the stocks be reduced significantly, and we delivered on that. And we were going to keep delivering the stock reductions this year. On the cash cost side, you see that, over the years, we have been working to reduce our cash cost and we have been delivering a very robust performance of cost reduction. The year of 2019 was also a very difficult year because we had to adjust our production to reduce our production in some units to deal with this more difficult asset scenario on the pulp market. Therefore, in the first half of the year, our cost performance was not the ideal. But adjusting the operations to a more flexible way to operate, we, again in the second half, we are now, again, in the trajectory of reducing the costs. And although the average cash cost for the year was higher than the previous year, we are in the direction of keep reducing. And we are going to see in this presentation later on how much we are willing to reduce and what's the expectation that we have in terms of cost management, which is very, very important for us and a key part of our strategy. This more difficult scenario on pulp brought us the importance of keeping our balance sheet robust and continuously enhancing the profile of our debt. And we have achieved important results in 2019 in relation to that. First, envisioning a more difficult scenario in the beginning of the year, we worked with our financiers and the capital markets community to do 3 things. First, to exclude all the financial covenants of our debt, and we made that by renegotiating part of our debt -- excluding that feature, or in other cases, where the financier was not willing to take this out, we prepaid the debt and got rid of all the financial covenants. That gave a lot of flexibility for us to work in the most difficult scenario of the second -- especially from the second quarter onwards. So that's probably the most important thing that we did last year in terms of guaranteeing that our commercial decisions should not be impacted or restricted by the financial policy -- or the financial situation of the company. In addition to that, we decided to increase our liquidity. Envisioning a more difficult market, we decided to work with much more cash than we had before, a lot more cash than what we need, but to give us security and flexibility to work on the commercial side. And third, we have been working, taking advantage of a more benign scenario of interest rates and liquidity globally. We have been working to further enhance the profile of our debt, working to extend the debt maturity profile of our portfolio. So we closed the year with a very robust balance sheet profile in terms of our debt, with a liquidity position that is enough to pay for more than 2.5 years of current debt that we have, plus a profile over the years that was further enhanced with the transaction that we just announced to the market of $850 million. That brought even more of our debt towards maturities above 3 years. And today, we have 86% of our debt maturing in 3 years and afterwards. We have an average maturity profile of 87 months, which is very, very healthy and gives us, again, flexibility and robustness to deal with the market situation. We closed the year with $13.4 billion of net debt. Showing that we generated cash, the net debt measured in dollars went down through the year. And of course, net debt-to-EBITDA went up because EBITDA was going down faster than our debt. But because of that, we announced to the market in the middle of last year some measures that we were taking or we intended to take to manage this situation or to mitigate the situation of the trajectory of our EBITDA. And we said to the market, to the whole financial community and our investors that we would do 4 things: first, to reduce our CapEx program in the year of 2019 and for '20; second, to monetize part of our excess inventories; to sell some nonoperational assets during the year; and also, to accelerate the synergies. And we have been delivering very well in these 4 aspects. We have reduced our CapEx that was initially planned to be BRL 6.4 billion in 2019 to a final number of BRL 5.78 billion. And we also announced to the market our CapEx budget for 2020 for BRL 4.4 billion, which is basically the sustaining level, plus the carryover of the investments that were already underway. On the working capital side, as I said before, 1.1 million tons of reduction in inventories that contributed to accelerate the cash flow generation. We also are delivering on the sale of nonoperating assets that we said that we would sell about BRL 1 billion over the next years, and already in the first 6 months, we sold BRL 400 million of nonoperational assets. In addition to those measures here, we also announced last week that we would -- we're going to pay 0 dividends in 2020 related to '19, which is an additional measure to further enhance our financial situation. And on the synergy side, I think we have very, very good news to share with you. One of the points of this plan here was to accelerate the synergies. And in the year of 2019, we had promised, and we had anticipated to the market that we would be delivering -- I went one too fast. We would be delivering this profile of synergies here. Total estimated synergies for 2021 between BRL 800 million and BRL 900 million, with a capture of 40% of that in the first year, which would mean about BRL 300 million of synergies in the year of 2019. And now we are not only informing the market that we reached BRL 763 million of synergies in the first year, but we are also revising the estimate upwards for 2021 for a range that was previously BRL 800 million to BRL 900 million to now BRL 1.1 billion to BRL 1.2 billion. That's a significant change, and it shows how committed we are to keep delivering on efficiency. So on the synergy side, we not only accelerated the delivery of synergies, but we also increased the potential of the synergies along the year. There are some additional features that will accelerate our cash flow generation in the coming years. We're going to come back to that. But in mergers of the nature, of the one that we went through, it is normal that companies come to the market and say -- after 1 year, come to say and to explain why things are not going according to the expectation. You saw here that synergies were going better than expectation. But the merger like this is not only about synergies. It's also about creating a single company, creating culture, creating systems and processes. And we also want to show to you how we progressed over the year in all those aspects. 14th of January of last year, we put the 2 companies together with the closing of the transaction. But we had 1 company that was working, of course, with different cultures, with people coming from 2 different companies with different systems and different processes. And along the year, we achieved significant results in terms of those 3 aspects. On the cultural side. We decided to create and implement in the company a new culture that could bring the best aspects that Suzano and Fibria had in their single cultures. And we worked throughout the year to implement this new culture. And we have, according to a survey that was done with all of our team at the end of the year, 91% of adherence of our public to the cultural aspects that we defined. People that inspire and transform, create and share value, and if it's only good for us, if it's good for the world. Those are the 3 cultural pillars that we started to install in the company. And today, 91% of our group, of all the employees that we have in Suzano are feeling adherent to these 3 pillars. That's a big victory for us. We also advanced significantly on systems and processes. We worked throughout the year to prepare the company for a big bang at the end of the year, changing everything to a single system and unifying all the operational processes of the company. And we did that without any turbulence. Since January 1, we are working under a new system and a new process without having to stop invoicing or paying or receiving for a single day. So today, Suzano, who is 96 years old, is better prepared for the future than ever. So let's talk a bit about the future. [Presentation]

On top of extracting the synergies from the merger, on top of integrating for a new culture, that was a very challenging experience for all of us because we adopt the concept not to have one culture or other culture, but create the third, a new culture, that need everyone to adapt for the new situation. Working on integrating and harmonizing process and systems, we prepare a new strategic plan for the company that look for the ambition that we have for the future. And to do this, we need -- we work to discuss what would be the megatrends. And we can discuss for hours about the megatrends, we have been discussing every single day with friends, with colleagues, with other experiences. What would be the megatrends for the society? And we know the digital, we know the urbanization, we know everything that have been going through on our society for the next coming years. Suzano looks this on an opportunity. What these trends will lead us for new opportunities for the future. And here are some of the opportunities that we list for the future. On our perception, what we are going to see in the coming years, it's clear that we are going to have less plastic on our society. The society is claiming to have less plastic in the oceans, to have less plastics on the landfills. It is something that we are working on this direction, and I think would be very clear that it's no way back on this process. It's very important that we need to have renewable materials. It's quite critical that with these materials. And Suzano, and our industry, is one of the few industries in the world that our products are renewable, are recyclable and biodegradable. And the combination of everything is going to become critical. And CO2 emission and greenhouse climate change is going to become more and more and more relevant for our society. We believe that we are very well prepared to deliver a strategy that we are going to share with you right now that could lead to use these megatrends and these opportunities for the future. The first part of our strategy, and this is very important part for us, is to become even more efficient. We believe that efficiency is critical, and we will work on this direction. I think you realize that the second pillar of our strategy is to create and share value. Create value for us is to increase our efficiency all the time and change our business model all the time. It's a combination of both and something that we will continue to do in our operations. Then if you see efficiency, if you see profitability and sustainability, they are critical on our strategy, and we continue to go in this direction. The second part of our strategy is to expand our business to have a more addressable market. We want to expand -- if you see Suzano today, we are producing pulp. From the pulp, we are going to the paper or to sell pulp. But a large participation, almost 95% or more than 95% of our volumes are to the paper-grade industry. And we want to go for new markets. And this is -- we will expand utilization of pulp and expand utilization of the Lignin for different dimensions. Today, from the tree we extract basically fiber and energy, and you are going to see during this presentation, new opportunities that we can do together. And the third and more important, it's about innovability. It's a combination of innovation and sustainability. And this third part of our strategy is showing that the combination of both could transform society -- transform Suzano and impact the society. And we will work on this dimension. We could provide services on the climate change that could address this situation, and we are going to share with you. But from this strategy that we discussed and we shape internally, we go for the next step. What would be the avenues to reach this? And we choose 5 different avenues that we are going to share with you right now. The first avenue is to be the best class on the pulp market. We want to -- and we are going to show the numbers with you how we can be even more efficient in the future. How are the drivers to be more efficient in the future? How we are going to work on this dimension. The second part of our strategy is to be? Relevant on the pulp market, and we are going to share some of this information with you. Sorry, my mistake. The third dimension that we have is to go and advance -- to be close to the end customer. The fourth dimension is to expand to new markets, and the fifth dimension is going to discuss how we are going to operate on this scenario with sustainability, how sustainability can create value for the society and for Suzano. To share the information about how we are going to be the best class, I'm going to invite our colleague, Aires Galhardo, that is responsible for all the industrial operations of Suzano and engineering as well. Difficult questions to him, please. Thank you.

Hi, good morning, everyone. Thank you, Walter, for this opportunity. As Walter said, we have 3 different strategies to the coming years. And to support these strategies, we have developed 5 different avenues that we will start to deploy now. One of these avenues, Suzano wants to consolidate its position as best-in-class in terms of total pulp costs. Bringing more color and explain what we understand as best-in-class in terms of total pulp costs, it's important to clarify what we consider in terms of figures. We call total pulp costs our total operation disbursement, including our sustaining CapEx, our SG&A and freight, and our production cash costs. Even consider all these components, our total pulp costs in 2019, it was around of $400 per ton. And Suzano wants to reduce the total pulp price -- the total pulp costs in $70 per ton by 2024. In terms of value creation at the current production rates per year, that means around $700 million annually. And the most relevant actions that we have to support this plan are we are going to consolidate our synergies and optimize our labor force. We're going to increase our energy surplus and reduce our continual consumptions. We will increase our efficiency in logistics systems, automization, forest costs in the sustaining CapEx through digital technology apply in the forest management. And the last, but not least, we will reduce our average distance from forest to mill. Now I will give you some more details about these actions. First, talking about the most relevant point that we have in our plan to increase our cash generation in $700 million. Well, we have -- Suzano will reduce our current -- just an average distance from forest to the mill, that is in 228 kilometers to 156 kilometers. A reduction of more -- 30%. What are the actions that will support this reduction? The first one is that we are going to consolidate our synergies. Remember that 2019 was our first year after the merge, that we haven't had enough time to consolidate all savings in this way. The second one, as you know, Suzano has bought and listed new areas closer to the mills. These new areas will be ready to supply our mills in the next years. And the third reason, as we have preserved our own forest by not producing our total capacity, and every cloud has a silver lining, we have more forest, all forests available to the next year closer to our mills. As a result of preserving our own forest, we will be able to reduce our outsourced woods that sits 37% in 2019, down to 23% by 2024. Another important action to support our plan is connected with the advantage of new technologies like big data, digitalization and biotech and other important innovations. Their applications will allow us to produce more forest at less costs. For example, we were able to increase our MAI in range, our clonal allocation matching the best-quality trees with the appropriate land. We improved our wood quality, increased the tree resistance against the disease and pests, and also increase our environmental stress tolerance in our plants. As a consequence of an impact of these new technologies, we will deliver a higher rate of productivity, a reduction in cash costs and also reduce our risks. Another important action that we have in our plan is connect with our logistics systems. Here, we have a photo of our new port, Vértere. This port will be ready to operate in the coming April. It's, in part, to our strategy to decrease our costs in vessel and port systems. Moving to the left side of the port distance we will be in deeper waters, which will save time and money with less docking competition. This port will be served 100% by rail, and our semiautomatic system of loading and unloading will bring down costs and our necessity of labor force. Finally, this port of 4 million tons of capacity per year will help us to support our building of our new products in the coming years. We are very confident that our actions will support and deliver our targets in 2024 and consolidate Suzano's position as best-in-class in the total pulp costs. Now I would like to pass the floor to my colleague, Carlos, our Commercial Director, that he will continue to explain other avenues. Thank you very much.

Thank you, Aires, and good afternoon, everyone. I'm very glad to be here again with you. Maintaining relevance in pulp. What does that mean? How does that work for us? We are playing in a market that is growing. The demand cake will go on growing. The demand can be positively impacted by the megatrends, growing demand by renewable material, urbanization. But not only that, we believe that as the market leader in terms of technology, research and development, being a paper maker, we can go beyond. And I want to bring to you guys later today our fiber-to-fiber concept, how we're going to work to enlarge our pipe. How we're going to have a larger cake to be enjoyed by the whole industry? Let me start to share with you the 2 major components of our relevance plan. The first one, demand organic growth (sic) [ organic demand growth ]. We don't have the final figures for 2019, but the demand should be around 60 million tons, a minor growth compared to '18. We're going to see growth for softwood, we're going to see growth for hardwood. Actually, more hardwood, more eucalyptus. Where does the growth come from? By geography, the growth will come from the emerging markets. Asia will grow, Latin America will grow, Africa will grow, Middle East will grow. The mature markets, we expect to have a flat demand for the coming years. By grade, the growth will come from tissue, specialities, packaging. Those are the grades that have been sustaining the growth over the previous years. Combining all that, emerging economics growth, grades where we have high-exposure growth, we believe that the demand will grow for the coming years in the range of 1.1 million, 1.5 million tons. That compares to about 1.3 million, 1.4 million tons over the last 5 years. So as I said, the cake is growing and that we are ready to enjoy the growth of the cake. We believe that we can have another 0.5 million tons coming from something that's very exciting. And here, again, we can play a different role. Suzano was the first company to use eucalyptus to produce paper back to 70 years ago. In the middle '50s, we were the first company to produce paper in Brazil from eucalyptus. And we see a growing opportunity. We see space to repeat that. And again, having the technology, having the biotechnology, knowing how to produce paperboard, some grades using only eucalyptus, I think we have an important challenge to enlarge, again, the cake. And the cake can be enjoyed by the whole industry, not only Suzano. And I am talking about 0.5 million tons of the demand for the coming years. Of course, we should see growing curve. They do not come right away, but we should see growth for the coming years coming from that. So how does that work? I would say that we have 2 major components in what we call fiber-to-fiber strategy. I mentioned to you that we have a contraction in the graft papers in the mature markets. That is happening right now. At the same time, in most part of the world, the collection rate has already hit the top. There is very little space to improve collection, waste paper collection. Growing demand, less waste paper, less recycled fiber availability that will create a gap. And we believe that we can fulfill part of that gap. And that is happening right now. That is happening right now in China. China used to import 5 years ago 30 million tons of waste paper. Last year, it was only 11 million tons. And how does that impact our business? A very good example, paperboard. In China, we have been seeing a growth in the demand for what we call ivory board, high-end product, mostly used in the consumer goods industry. And that grade is gaining share of another grade called duplex board gray back. That is a grade produced from wastepaper. So right now, in China, a grade that use more market pulp, that has used more eucalyptus, is increasing its share over the share of recycled paper-based paperboard. So that's a good example, an actual example of what's going on there in China. The second component, and that is the most exciting, and again, that is where we believe that, once again, Suzano can make the difference. And that is happening right now. We are talking to our customers, and they are integrated paper producers using long fiber to produce some grades, especially packaged grades. And the conversation that we have had with them is about how we're going to work together in a win-win partnership to help our customers to replace softwood by eucalyptus, to replace softwood by hardwood. And again, doing that, we believe that we can enlarge the pie. We can have a much larger demand cake. In the same direction, and it's happened now again in Asia, for the coming years, the expectation is that we are going to see less and less availability of wood chips. And that is driving some integrated producers to use more market pulp instead of wood chip to be self-integrated. So again, we have examples that are happening right now that, in our view, will take us to have in the future a much larger pie for the market pulp. 1.1 -- 1.5 million tons organic growth. 0.5 million tons, a new addressable market, a larger pie. So that could take us in the future to have a demand growing up to 2 million tons. The growth is there. We know how to enjoy it. Our customers, they count on us to be a relevant supplier. And having that in mind, we are preparing ourselves for the next growth cycle. We already have the permits. We already have the conditions to build a new pulp line in the state of Mato Grosso, in a place called Ribas do Rio Pardo. That can be a 2.2 million, 2.5 million tons new pulp line. 2.2 million, 2.5 million tons. Average radius between the forest and the mill, 50 kilometers. Can you imagine how competitive we're going to be with that mill? Can you imagine the cash cost of that mill? We have the permit, we have 100,000 hectares of land that we have already acquired. And as my colleague Aires mentioned, we have the logistics solution. We're going to have a new facility and a new port to receive up to 2.5 million tons. Important to say, this is a potential project and we'll need to deleverage before starting the execution of that growth initiative. Moving forward to the next avenue, how to advance in our chain? How to go on creating more value to our shareholders? And then the next story is about what we have done with our consumer goods business? 2017, only 3 years ago, that was only a PowerPoint. That was only a business case. One year later, '18, we had already launched of our first brand very successfully, the Mimmo brand. In 2019, we already have 6.5% market share in the Brazilian tissue market. '17 business plan, PowerPoint; '19, 6.5% market share. Not only that, those tissue facilities are located in the northeast and northern part of Brazil. In those areas, we already have a much higher market share. The northern part, 57%; in the Northeast, 22%. And we want to go beyond. We are already working to add more converting capacity for our tissue business in the State of Espírito Santo, which is close to our Aracruz mill. We're going to add converting capacity -- taking advantage of the VAT credits that we have in that region. Now I would like to invite my dear boss to talk to you about the next avenue.

Carlos, thank you for being here. I would like to present to you now how we are going to expand our addressable markets. But before that, I would like to ask [ Sandra ] to present to us the number of trees and the number of tons of carbons that we are sequestrating at this point of time. I think doing this, we are showing that just on a matter of 52 minutes, we planted 20,000 trees. Gentlemen, that's 20,000 trees in 52 minutes. And we are doing every single day this. Every single -- in 365 days, we are planting 500,000 trees. Can we imagine any other company that's doing this in the world? Can you imagine any other company that is sequestrating just on a matter of 20 minutes, 370 tons of carbon. It's something that is not replicable. And then I think it's very important to mention. Thank you, [ Sandra ], for showing us that. Gentlemen and ladies, you received a small gift that we gave to you. This gift is showing how we can use other utilizations of the trees, how we can do different. The small package that you have over there, the small plate that you have over there is with 20% pulp on this -- on that product. And the honey that you have over there is the honey that we are producing in our forests, and we use this honey to help income of the communities that we are around. We are one large producer of honey. 100% of the revenues from this is going to our communities. And I think it's very important to show that we have a very broad spectrum on our operations. This is a little bit what we have today in terms of how we use our tree. From the tree today, we extract 2 major things, and you can see in the green here, we have the market pulp, we have the energy, we have paper and we have fluff. These are the products that we have today. This is how we operate today. But we can do much more than that. And this is the fourth pillar of our strategy, it's how we are going to expand our addressable market. And we are going to share with you a lot of new opportunities. Talking about lignin, talking about dissolving pulp, of MFSC, biocomposites, nonwovens, and pirolysis that we can produce bio-oil from the tree. And we are exploring all of these avenues. And it's very important to mention that we have one critical factor to discuss any of this avenues for the future. This is scale. We are not going to invest in anything that could not bring scale to us because we are a very large company. We do not have a lot of small business. We want to have large business for the future. Could be started as a small business, but we want to enlarge this business and to grow this business. But how is the size of this business for the future? How we can have this business creating a lot of value? And then we are going to share a very important slide to you, how big is this market. We do this analysis, and we do this partnership through partnerships and how we construct the partnerships with universities, with start-ups, with several other initiatives. This is very important to us, how we build these alternatives for the future, and all of these businesses representing $50 billion. Just to give a ballpark number to you, 60 million tons of pulp today is representing $35 billion, $40 billion. We are -- we have an addressable market. There is more than double from the total market pulp today that we want to enter. And the tree, it would be even more competitive for the future. I'd like just to mention one number to you because it's very important and it's very impacting number to you. Our cash cost today is around, as you saw, $140, $150 per ton and is going to be even lower in the future, as Aires mentioned to you. Cash cost from other players in the industry on the softwood market is around $555, $560 per ton. Then as Carlos mentioned to you, we can replace fiber-to-fiber. There is replacing long -- short fiber to long fiber. We can replace long fiber with short fiber, and this is something that we will continue to work. As you may know, the hardwood market is growing a much faster pace than the softwood market in the last many years, and we continue to do so. We will enhance the features of the products -- of our products that would allow to grow on this market. But we can not only replace fiber. We can replace plastics. And we are going to show 3 major examples to you where we can replace plastics and how we can do it. The first example that I would like to show with you is what we call plastic substitution, it's what we call biocomposites. Through adding pulp into polyethylene or polypropylene on injection molding, on thermoforming, we can do products that can replace plastics. And this is some of the examples that we are doing right now. We can use for households and for many other process that we can operate. And, of course, we will have this opportunity to do it. The small gift that we gave to you is just a small example of that. We are working on several different utilizations of this. I can assure to you that the future of the products that we have with auto parts, that we have with household appliances, can be even better with utilization of pulp replacing plastic. Now we are going to the second specific market that we can use, the textile market. These numbers are showing to us how the urbanization and how the growth population is demanding more textile. And you can see on this graph here that cotton is not growing. And what is growing on a very fast pace continue to be fossil products, and we are talking about polyester -- mainly polyester. And you can see that we can -- the wood market are growing on a very fast pace but a very small base. We want to be part of this market. We want to use technology that could replace polyester with our products. And we can do it through 2 different ways, this technology. The first technology that we can use is dissolving pulp. It's very well known. Everybody knows this technology. It's very -- technology readiness level is very high, but we are developing a new strategy as well. We can use dissolving pulp but we can use MFSC as a new technology. And this is how we operate today. On the white side, you see everything that we have today. We do have everything there is in the white side. But now I'm going to show you what we did on the green side. On the green side, we do have a partnership with a start-up -- Finnish startup called Spinnova where we do have 25% ownership on this company to develop this technology. And then we are very proud to tell you that we are ready in terms of end products that we can use. We have very close discussions with a company that use these kind of products that they want to have much higher volumes. I'm going to give 3 examples of products that we are using right now. One of them is the fiber that we have right now. You can see on the wall over there -- on the wall -- no sorry, on that area, the lounge over there, the products that -- this product. You can see the fiber, you can see the product that we already produced with our technology and with our fiber. This filament that you can see over there is used with our products. The second, and it's very important, is this lady here is a Minister of -- Environmental Minister of Finnish that was in one of the events. This dress is 100% made with our product, with pulp. 100% made with pulp. It's very interesting, it's Spinnova technology. And this, you can see it's -- this product, there is outside as well, made 100% with pulp as well. This company called Bergans, you can see on their website, bergans.com, you can enter over there, they are calling the future collection. Of course, we don't have volume but we have the products as well. What is the major issue that we have here since we have the business readiness level? This is we need to scale up volumes. To grow in this technology, we do not have anything more related. We do have the technology, but we need to scale up the plans to produce this product to gain volume. This is the challenge that we have at this point of time. And the third, I mentioned about biocomposites. I mentioned the textile business. Now I'm going to be talking about single-use of plastics. I think everybody knows, this is well-known all over the place. We know that 127 different countries, 127 now, they have policies that you are not allowed to use any more plastic for disposable products. We are talking about straws, cups, plates and other products. And this number is growing every single day. And this would be replaced by other materials. Paper is one of this material. But you know as well that you have 87 million tons of packaging that will be replaced. You know the new policies in Europe, 2025. In China, 2023, that you are not going to use any more plastics for single-use packaging. And this would be replaced, and plastic is just one of the opportunities. And just to show a very small example. If you see the number of billion of plastic bags that you have and cups that you have, just 20% of that would be replaced for plastics -- for paper, sorry, represents one pulp mill of 1.8 million tons, then only 20% of that. Then it's a huge opportunity that we can use. These 3 examples that I showed to you, single plastics use, biocomposites and textile to expand our addressable market. We will continue to grow, not only on paper grade, but in other areas as well. Then just to show how we are working. Carlos showed to you what would be the size of the market today, and we are growing on this market. See, we had the current demand, the organic growth fiber-to-fiber. And now we show you the expanded potential market that we have, showing that we have future demand with much higher growth. I have no doubts, gentlemen. I have no doubts to tell you that fiber will grow. I'm not talking about if it's hardwood, if it's softwood. I'm talking fiber will grow in the world. Nobody can compete. Nobody can compete with the cost of biomass that we have access. So if you have a production of a certain specific product with $140 per ton, who can compete with us. Plastic cannot compete with us. Other biomaterials, such as straw, bagasse, bamboo, they cannot compete with us. Sugar cane, nobody can compete to be $140 per ton, that we are the most competitive company in one side. In the other side, we can use all the sustainability assets that we have to increase value as well. And I'm going to show it to you right now how we are going to do the fifth point of our strategy, to play a key role in sustainability. And I'm very proud to present to you and to share with you our targets for the next coming years. And we divide the targets on 2 different levels. One of them is something that we can do on operational level. There is transformational, but it's very important. We are going to present to you every single year, from now on, how we are evolving on these metrics here. And we have the climate change that we want to reduce 15% our CO2 emission on our operations, and this is not related with expanding our forest base. It's just CO2 emission. On water, we are working on every single area that we are to have the 100% of the critical watersheds that we are working and to reduce 15% of our water consumption on our operations. In landfill, we want to reduce 70%. We are going to use this material to go back to the forest, it's 70% our materials waste that we have. In energy, as you may know, we are exporting energy to the grid, and we are going to retrofit our facilities to expand our energy sales in 50% during this period. Gentlemen and ladies, this is the clean energy. This is a completely different energy. It's 100% clean, and we are going to expand our exports of grids to -- our exports of energy to the grid. I'd like to talk a little bit diversity that is quite important. And we choose 4 different groups on this. The first -- the 2 groups is LGBTI+ and the disability people. From these 2 groups, we want to -- them to feel 100% inclusive on our operations. We do not have numbers for that. We want to have inclusiveness for that, that for us, it's quite important. And for 2 other groups, there is black people and women. We have, in the year 2025, at least 30% of which -- of these groups in the leadership positions of the company. This is an important challenge for us. We are working on this dimension. I think it's very important to tell you that the diversity is a value for our company. Last but not least, I would like to talk about the education. We want to increase in 40% the quality and the grades of educations of the students and our influences on investing on education of the people there is around our operations. We talk about certain specific operational issues. But I'd like to invite you to think a little bit more than that, and we'd like to have inspiring numbers to you. Many companies are coming to the market, to the press and to release their numbers, not right now in the first quarter, and we are talking in the reaction of Mr. Larry Fink's letter, they're showing what it is going to be their ESG targets. And many people are talking about be net 0 or carbon neutral. I think you have heard this every single day on the last, probably 30 or 45 days. Ladies and gentlemen, Suzano is not net 0. We are negative. We are, today, negative. Very few industries in the world are negative. We are negative scope 1, 2 and 3, but we want to do more than that. We are announcing today to you, and we are going to follow very close these numbers, that we want to be even more negative for the future. And we are going to have 40 million tons of carbon should be sequestrated on the next 10 years. 40 million tons of carbon. This represents 2.5 million cars that we are going to be neutral from our operations. This is part of the climate change issue. We have another target that is quite important on this -- the same dimension is that as we are going to expand our addressable market, we are going to replace fiber to fossil -- fossil to fiber, sorry. And to do it, we are going to take out of the system 10 million tons of plastics during this period. 10 million tons of plastics, gentleman, is equivalent to 500 billion polyester PET bottles, 500 billion that we are going to take out of the systems, out of the rivers, out of the oceans, out of the landfills. And something that we are working on this very ambition target that we have on this. And more than that, on the social target that we have, we want to take 100% of the population around our influence zones out of poverty. As you may know, income distribution in Brazil is one of the main challenges that we have in our society. Then the quality of opportunities is the main challenges that we have, and we want to take 200,000 people out of the poverty in the regions where we are. How we are going to do it? Through 2 different dimensions: income, and honey is just an example of that. It's not the only example. We have several other initiatives, and you are invited to join us and to know about this, to visit us to see that. But it's one of the initiatives. It's the income -- sustainable income to this population and education. They are the 2 challenges that we have to this population. How we are going to transform their lives and their future, it's very important for us. We'd like to share with you what is going to be the summary of what we discussed today before we start the -- our Q&A session. First, I would like to share with you 2 major targets that we have been working. There is efficiency and bigger addressable market. Efficiency is in our DNA. As Marcelo mentioned to you, we have been going down south on our cash costs for many years, but it's not enough. We want to be more and more and more efficient over time. This is part of the DNA, and we will continue to do it. The second part that is quite important in our strategy is to show that we can do more. We are not only the most efficient company in the paper grade markets, on the pulp paper grade markets, but we want to be more than that. We want to show that we can grow for new markets and change the society and change our business. We do have the truly triple bottom line, that is economic, social and environment that is quite important for us. We want to have the leadership on sustainability. And on the base of everything, it's a very strong financial discipline. This is very important. We announced our policies, our financial policies and our financial -- how we are going to work on this. We are going to be very strict on that. We know that at this point of time, we are higher on EBITDA -- sorry, high on net debt-to-EBITDA leverage at this point of time, but this number will go down. We are very -- we are -- we know that before the end of 2021, we are going to be below 3. And the reason is that EBITDA is going to grow since price will grow. We have no doubt that the price will go in the next coming months. I don't know when, and I don't know for how much, but it's unsustainable the price level that we have today. And this will allow us to have higher EBITDA. And then we are going to have a better leverage in the near future. With this, I'm going to conclude our operation -- our presentation. Before we start Q&A, just, [ Sandra ], show us the last number that we have in terms of carbon and trees, please. We have close to 30,000 trees during this period, we had 129 tons of carbon that we do it. It's just to show, and these numbers are very important, it's just to show that we will transform. We will transform ourselves on a better company. We will transform this company impacting better the society, impacting better the Brazilian communities where we are located, impacting and transforming and replacing products like -- such as plastics, there is -- using our oceans and landfills. And more, we are going to be part of the solution of the greenhouse emission and climate change. Thank you very much, gentlemen and ladies. I'd like to invite now our colleagues to join me to answer your questions. Please go -- let's go on this direction. Thank you very much.

Please, if you want to make a question, please just raise your hand. And we are going to have the mics going around.

Carlos De Alba with Morgan Stanley. Couple of questions. One on the future. Walter, maybe can you explain when do you see all these very interesting businesses that you are starting to look into really becoming meaningful or more meaningful for the company, for Suzano? And how do you define that a business opportunity is sizable? Because you said you don't want to -- basically loss -- lose your time or spend time in something that is not going to be relevant. How do you define that relevancy for the company? And then more in the present, maybe Carlos, can you talk about the supply dynamics of the pulp market? You elaborated very eloquently about the demand potential and future growth. But what about supply? How do you see the market balancing in the next few years?

Carlos, thank you very much for your question. First, let me start with the size. As I mentioned to you, our target is to have at least 10 million tons of replacing plastics, meaning that we are going to have at least 10 million tons of pulp on this -- during this period used by other -- and to replace plastics by other materials. Let me share with you that we do have technology readiness level. We have certain specific products with high-technology readiness level but with lower business readiness level. And we have other products such as textile, where the business readiness level is done. It's 100%, but we need to scale up the volumes. The 3 initiatives that we showed to you is in different business or technology readiness level. We are working in 3 of them at the same time. Not only that, we are working in pirolysis as well on bio-oil, but we are working all the time to be better prepared. We are not going to give guidance to you for each year, but you can use as a ballpark number that we are going to have, during this period, 10 million tons of pulp with -- to replace other materials.

And can I just complement on that. The -- when we talk about these different technologies and business segments, all of the -- each one of them has a total addressable market above $1 billion, each one of them. And in total, $50 billion. That's the size of -- which is larger than the current market for market pulp.

And many people are asking me what would be the impact of this on the textile business and other business. We have to think broadly, what would be the impact if you bring 5 million tons of new volumes to the pulp market on the pulp price. We have to think about the contamination of this expansion on the actual market that we have right now. I think it's very important to mention that.

Carlos, thanks for your question. And let me start answering that, taking into account the comments made by Walter a few minutes ago. We believe that we are approaching the turning point. We believe that the price should change direction soon. We don't know exactly when. And we still don't know the intensity of that recovery. And I'm putting the coronavirus issue aside. So we are confident that we are approaching the turning point. And why is that? We believe that 2020, we're going to see more balanced markets. We're going to see improvements coming from the supply side. And actually, that is already happening. So as we speak, I was reading a recent report yesterday, and they're saying that end of Q1, we might have downtimes amounting as much as 0.5 million tons. That comes from where? Strike in Finland, we had the announcement of 2 major mills in Canada, one that stopped operation mid of Jan due to environmental reasons, 280,000 tons. Last week, one more announcement, 380,000 tons of softwood. That mill will shut down for one month starting March 1 due to wood availability. And I would go a little bit beyond that, wood cost. With the current profitability in some regions for some producers, we believe that market-related downtime might happen in intensity higher than anyone could expect just a few months ago, and that should start now end of March and during the second quarter. So we're going to see a different scenario in terms of supply for the coming quarters. And in our view, that is going to support what I said before, that we are approaching the turning point. Looking at the medium and long run, we are expecting a kind of balanced market. As I said, we could have the demand growing up to 2 million tons. And that we're going to have, as we speak, 2 projects that should be more effectively in the market, '22, '23. So we have a positive view for the balance -- the market balance for the coming years.

Joe Kogan from Scotiabank. My question is related to...

If you -- Joe, if you don't -- don't worry.

Joe Kogan from Scotiabank. My question is somewhat related to Carlos, is about the timing of the investments and that you presented a rather defensive financial strategy with high liquidity and limited CapEx, but you also have an optimistic view of the industry in the long term. So I'm wondering what signs you need to see in the pulp industry over the next couple of years to become more aggressive in your CapEx plans? Is it just a certain increase in pulp prices you're looking for? A certain stability? Is it more plants shutting down in the higher cost competitors that would make you more comfortable with the industry?

We need -- first of all, we need to see our leverage reduce, and we have a plan that takes us in the direction of reaching a net debt-to-EBITDA ratio below 3x during the year of 2021. So that's important for us. And that, of course, restricts some of the investments. But when you talk about the long-term prospects and these new lines of products, all the bio strategy that was described by Walter, the investments that we need to make today to make that happen are being made. We today invest in R&D, close to 1% of our revenues, a bit more than 1% of our revenues. And most of these projects here don't have the readiness from the technological or the business point of view to be subject to big investments at this point. So the fact that we're running at a higher leverage today is not impacting the pace of those projects. At some point, we're going to have to make bigger decisions in terms of investing in larger facilities but we haven't reached that point yet. So far, no restrictions in our investments have affected our ability to develop the new business. Of course, when we talk about building a new mill like the alternative that Carlos presented, then we should be, in that case, discussing investments north of $3 billion. Then, of course, those will be subject to a better financial condition. But the other ones have been preserved, and we continue to follow the necessary pace to develop them.

Adam Josephson with KeyBanc Capital Markets. Thank you for putting on this presentation. Two questions. You mentioned nonintegrated paper producers importing more pulp in lieu of woodchips. I'm just wondering if you can elaborate on how much do you think that has contributed to pulp demand or pulp demand growth last year, 2018, for that matter? I'm just trying to understand if you're expecting more of a boost from that in '20 and '21 compared to what you've seen in recent years. And then on the reais, I think, in some of your presentations, you talk about the sensitivity to your EBITDA from changes in the reais, and obviously, the reais is hitting record lows against the dollar. So that's all else equal, good for you in terms of your cost being almost all in reais, and you're selling pulp in dollars, but obviously, it makes the pulp you're selling that much more expensive to your customers. So what impact do you think the stronger dollar is having on global pulp demand? And consequently, how does that all show up in your income statement if pulp is becoming more expensive, and that's adversely affecting demand to some extent?

Do want to answer that?

Yes, I can take the first one. So on the woodchip issue there in Asia, I can say that China imported last year, the equivalent to 6 billion tons of pulp capacity. And definitely, we believe in the future that the availability will be much lower. So part of that, part of 6 million tons of integrated production capacity will switch to market pulp over the coming years.

On the FX, we have, of course, 80% of our revenues are dollar-denominated, and we have basically a cost base in reais. And because of that, we take some measures to match the FX situation of the company. And the main one is to keep 100% of our net debt also dollar-denominated. When we talk about sensitivity, $0.10 change in the FX rate increases or decreases our EBITDA by about BRL 500 million. About 15% to 20% of our costs and CapEx are dollar-based, 80% of the revenue. So when we look at the net cash flow generation, it's more than 100% dollarized. We try to keep over time a match -- a perfect -- the most perfect possible match between revenues and disbursements in terms of currency. But we are structurally long dollars, short reais. And we try to manage that with the debt, and in the short term, short term being 18 months, with derivatives that we try to use to increase the predictability of our cash flows in the short term.