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

[Audio Gap] here. I hope everyone is health and safe. Welcome to the 2021 Suzano Day. Before we start, I would like to share with you some additional information related with our future. We're happy to share with you our divestments and our visions of the future. As you may know, we have 3 major pillars on our culture. The first is related with people that inspire and transform. The second is create and share value with all stakeholders. And the third is only good for us, it's good for the world. We had a major stress test last year. During this pandemic situation, we are able to -- with resilience to show what we are doing in all of these journeys of our culture. And today, we are going to share with you some information related to that. I'm going to start talking about what we are doing at the society level. And we have been at the society level working on different dimensions. We have been protecting our people in one side. And working towards the society to improve the sanitary conditions, helping to increase the number of ventilators, helping to have more hospitals. And now with a very important point, we need to increase the level of vaccination that we have on the Brazilian population, and we are working with many other companies with this target. In addition to that, we have been working with small suppliers, and we have been working with all the communities to ensure the quality of life -- the minimum quality of life and to mitigate the pandemic, the COVID-19 impact on their lives. But we have to think about the future. In the future, we have to reduce the inequalities. It's critical that we reduce the inequalities on our society. And we have to improve right now the quality of education that we have to the next generation and to provide sustainable incomes to the society that we are right now. At the company level, we have been working with resiliency with supportive and competitiveness to -- and capacity to adapt on different scenarios. We have been working. And a very good example that we are doing right now is what happened on our paper business. On the paper business, we have been working to mitigate the impact that we lost the volumes in the second half of last year -- second quarter of last year, sorry, and we had a V-shaped recovery on the second half of last year, outpacing our competitors. And we did that, increasing the volumes that we have with our e-commerce. We had 8 full times the volume that we have 1.5 years before. And we have been improving on that, targeting 54% of our direct sales on the e-commerce. In the society level, we have been working guided by our purpose. Our purpose is critical, and we have been working, renewing life, using trees as a base of that, planted trees. And we believe that we have several categories that we are working, and we are going to share during this presentation we are doing. And I'm sure that the message will come across to all of you during this presentation, but it's much more. We have been working using trees as a base of the future to replace other materials, to do many other products, and we are going to share with you with trees. And this could be a major impact on our society. And this everything is based on our purpose. And now I'd like to invite you to watch a video about our purpose. [Presentation]

Since we started this presentation, we have been capturing carbon. And I would like to share with you how many tons of carbon we have been capturing during these few minutes that we start this presentation. And this counting is going to go through all of our session today. At the end of the session, we will come back to that to show you how many tons of carbons that we have been sequestrating. In addition to that, we have been planting trees. And you are going to see now the number of trees that we have been planting since we started this presentation. It's very impressive, the number of trees that we are planting every single day. We are planting 500,000 trees. And since we started that, it's more than almost 3,500 trees that we have been planting, every moment we are planting, 365 days on a year. We would like to go for the agenda for today, where we are going to share the major topics that we are going to bring to you. First, we are going to address our strategy. And then we are going to the financial management. In the end, we are going to give the outlook to you about the future. Everything guided by our purpose. On the first -- on the avenue -- our strategy is based on 5 different avenues. The first avenue is related to be the best-in-class. It's part of our culture, it's part of our DNA, to work, to get efficiency all the time. And I'm going to share with you today, with our colleagues of the management committee, what we are doing right now to enhance our competitiveness for the future. The second point is that we want to be even more relevant in the pulp market. We have very good news to share with you about our prospects on this area. We want to advance on the supply chain, but to do it, we need 2 major conditions. That is the third point of our -- third avenue. The 2 major conditions is scale and it's to be the natural owner of certain specific markets. And we are going to share what we are doing and some perspectives for the future. The fourth avenue is related to enlarge our addressable market. We are going to share with you several avenues where we are working to bring new alternatives to use based on our planted trees. And sustainability, this is core of our business. This is core what we are doing. And we are going to share what we are doing right now and our vision for the future. Now I'm going to pass to Fernando, that is going to bring to us the first alternative -- the first avenue that is related with the -- to be the best-in-class. Fernando, the floor is yours.

Thanks, Walter, and good morning. It's a pleasure to be here. Hope you are all doing well even in these trying times that we're facing. Some of you should remember that at Suzano Day held in 2020, we talked about digital forest and biotechnology. After 1 year of work in these areas, I'd like to share with you 2 outstanding examples of the progress we have achieved during last year. The first example deals with new digital system called Tetrys. This system is a digital groundbreaking tool for the forest sector. And what is so special about this tool. It allows generating numerous scenarios to define the best clone environment match. In other words, now we have a much more precise tool to allocate our clones, the right clone at the right environment. This is a powerful action to reduce the risk of forest plantations related to climate change. Using analytics and big data tools through Tetrys, we are now able to anticipate and mitigate climate change risks. At the bottom line, we are reducing the potential volatility in forest productivity, which is very, very important, as we all know. In addition to that, in the 2021 plantations, we estimate gains of around 2% in forest productivity, which is meaningful, considering that our productivity is already quite high. Of course, such gains are another big contribution to reduce our average forest-to-mill distance. Beyond that, this is an action anchored in our purpose of producing more using less natural resources. The second example of technological progress has to do with something very advanced in forest biotechnology. We're talking about bioinformatics and molecular markers. It's worth mentioning that this is a new milestone in forest breeding. As you can see in this animation, we work to map the DNA of our main clones and identify molecular markers that correlate with traits of commercial interest. Just to give you an idea, we currently have about 300,000 candidate trees for cloning in our field trials. This is a competitive differential for Suzano, as we probably have the largest eucalyptus genetic improvement program in the world. The question is how to select the best trees among so many options. Molecular markers are the answer for this because they are a powerful tool for that as we can, for example, fast eliminate inadequate candidates. We can also make a better selection of the trees that will be the fathers and the mothers of the next generations in our tree improvement program. And of course, we can apply a much more accurate selection of the clones that will be used for commercial plantations. Do you want to see a practical example of this, we can see in this next slide. Maybe some of you could remember, a serious problem that affected forests planted by Suzano in other -- by Suzano and other companies in Espírito Santo and so then Bahia about 10 years ago. That problem was called physiological disturbance. That was not a disease, in fact. It was the result of poor adaptation of some clones to climate changes. At Suzano, recently, we have identified molecular markers associated with physiological disturbance of eucalyptus. With this discovery, a breakthrough in eucalyptus, we have to say that, we are able to select the most resistant clones and even more important, we can anticipate the elimination of susceptible clones that can bring problems in the future. And we are able to do this with 80% of accuracy, which is an excellent number for woody plants -- wood plants. These examples, Tetrys and molecular markers, are new tools to increase and strengthen our forest competitive advantage. Taking care of our plantations, we are sustaining not only the current products that we have in our portfolio, but also the new products that are coming from our biostrategy, as Vinicius will present later today, aligned with our purpose of renewing life inspired by trees. Now I'd like to hand over to Carlos that will share with you how these technologies are being transformed into concrete value through the management of our planted and native forests. Thank you.

Nice, very cool indeed. Thank you, Fernando, and hello, everyone. As Fernando has just covered, forest technology is in the core of our business since Suzano competitiveness is directly related to our ability to best plant and manage our vast and nationally broad forest base of 1.3 million planted hectares that is about 3.2 million acres paired with another 900,000 hectares, around 2.2 million acres of native areas maintained for conservation purpose only. The continuous improvement of our top-notch forest technology contributes to 2 of the main pillars of our competitiveness and optimize the genetic base that is constantly increasing our wood productivity and better copes with climate change related risks, result in a more resilient forest. Digital technology, big data analytics have played a big role on that, and we remain doing so. On top of that, looking towards the total operational disbursement guidance for 2024, we do see other sources and possibilities to increase our forestry competitiveness and to improve our environmental footprint in convergence with [ long-term ] goals. One of the top initiatives that we have been focused is on the continuous enhancement, improvement of our civic culture practice. And last but not least, it is very important to mention that we also have been working to reposition our plantations, moving into new regions closer to our mills and by so, reducing the average forest-to-mill distance with better soil and better climate conditions. But just to reduce this average rate is not enough. So what else are we doing. Well, we are looking for energy efficiency that will positively impact our cash cost and our carbon emissions. Let me bring you here, as an example, the 6-trailer truck, currently running at our Três Lagoas mill and which will be soon expanded to our Mucuri operations as well. We are the only player, the only player in our industry with this type of truck to transport wood. When compared to the traditional 3-trailer truck, the 6-trailer transports more, more than twice the amount of wood per trip. So here, we are once again proving that it's possible to combine cost reduction with environmental benefits, lower CO2 emissions, supported by more efficient trucks and with a lower operational cost. But that's not all. We're also expanding our lighter trailers fleet and develop new ones with more transportation capacity. Alternative fuels like natural gas and electric trucks are also being studied and developed, not to mention the autonomous vehicles, which could also become a reality in operations. This future is quickly coming to our forest as well. It's all about innovation. And talking about that, let me share with you what we are developing in terms of digital tools using agile methodology. Let's take a look at that. Combining harvest planning and logistic algorithm has allowed us to better feed our mills with the optimal wood specification, better harvest sequence and more efficient routes from the forest to mill. The benefits, lower cost, lower wood consumption and an improved environmental footprint. And to execute all those operations, we are currently developing control tower to remotely monitor them, getting all major equipment, all major machines connected with our system. What does it bring to us? It's real-time data for a very fast reaction when faced with unexpected operational conditions such as mechanical failures, road accidents, subpar equipment productivity or an unbalanced logistic flow. To finalize, our forests are the source of life. Our people, our passion, paired with the best-in-class civic culture practice, technology, innovation and sustainability mindset will continue to support our top notch productivity. Our purpose is to renew life inspired by trees. This is what we do every day. With that, Aires, what can you share with us about our modernization projects.

Thank you, Carlos. Good morning, everyone. I hope you are well in this difficult period we are facing. Continuing the avenue of being the best-in-class in the vision of total pulp costs, another important competitive action is the industrial modernization projects. Suzano currently has a portfolio of 32 projects to modernize its plants to improve pulp cash cost competitiveness towards the 2024 guidance. In general, these projects aim to increase energy surplus and reduce chemicals consumption. The estimated investment for the total portfolio of these projects, it's approximately BRL 2 billion over the course of its implementation up to 2024, contributing with BRL 46 per ton reduction in Suzano's cash costs. We highlight here, as an example, the modernization of Jacarei mill. This project aim is to replace the existing bleaching system with a more modern one, reducing the consumption of chemicals and generating greater efficiency in the use of the [ steam ] generated in the process, which associated with retrofit on the power generator park will reshape the Jacarei mill from net consumer of electrical and natural gas energies into a net energy exporter. Therefore, this is a product that in addition to clear financial returns also brings an important benefit of environment, reducing our carbon dioxide emissions and increasing our export of renewable energy, be an example of how we intend to achieve our long-term goals. Suzano is constantly evaluating opportunities to implement modernization projects, always expecting our financial policy and the best capital allocation decisions. Looking more specifically on how Suzano is advising on its competitiveness in the pulp business, let's move to the next slide. When comparing the total operation disbursement of 2020 with the previous year, we are able to achieve a reduction of 6.5% or BRL 102 per ton despite the FX pressure of BRL 142 per ton based on 30% depreciation on the Brazilian real against U.S. dollars, which in return mostly impacted the freight and SG&A component. In addition of these factors, in 2020, we were also affected by costs related to protocols for the protection of our operation staff and costs involved in our downtimes, effects by COVID-19, which should not occur in a recurring basis for the future years. Moving now to the next slide, we present the update of the total operation disbursement for 2024. Since our guidance in real terms, when adjusting the last year's guidance for 2020 level of FX and inflation, we have a negative impact of BRL 160 per ton. Nevertheless, we have the ability to partially offset the BRL 60 per ton, the pressure by exogenous factors, through management initiatives, mostly on the cash cost and sustaining CapEx, resulting on a net impact gain on the freight and SG&A only ended bringing our updated guidance for 2024 to BRL 1,400 per ton. However, when we analyze the total operation disbursement in dollar basis, the figure per ton shows a significant reduction of more than 17%, reaching $272 per ton in 2024. Therefore, we remain focused in constantly search to increase our cost competitiveness. Moving now to another very important topic for Suzano. I kindly ask for a license to switch my speech into Portuguese to talk to Suzano's employee about diversity and inclusion. I am proud to be a sponsor of the LGBTI's group at Suzano and very happy to call your special attention at this moment. [Foreign Language] Back now to English, I give the floor to Leonardo, who will follow-up on our presentation.

Thanks, Aires, and it's great to hear about your initiatives with the [ law ]. Good morning, everyone. I would like to explore with you one of our strategic avenues, which is maintain relevance in pulp through good projects. This time, I will present our supply and demand forecast for hardwood pulp as we would like to share some interesting dynamics, which will affect this market. Looking at hardwood globally. The starting point of our forecast is 2020's demand, which totaled 36 million tons. We expect this demand to grow organically by 4.6 million tons in the next 5 years, supported by positive perspectives for most paper and packaging segments, which will present growth during this period. It is important to notice the relevance of tissue for hardwood pulp, which despite being 10% of the total paper and packaging market, represents almost 50% of the global hardwood demand. We believe that tissue demand will continue to grow at solid rates and in all regions, supported by improved hygienic habits, especially post COVID pandemic. But there are some additional factors, which we believe will boost hardwood demand in the future, which we present as fiber-to-fiber and fossil-to-fiber initiatives. The impact of these factors in demand will increase gradually over the years. Hardwood pulp has been gaining relevance over softwood pulp during the past years. And in 2020, represented 58% of the bleached chemical pulp market. We would like to highlight 4 pillars which supports this growth. First, new paper and paperboard production machines allow for more flexibility between fiber usage. Second, technical improvement of the hardwood fiber. Third, limited investments in new softwood capacities, while most capacity expansions are taking place in hardwood fibers. And fourth, the intrinsic cost competitiveness of the hardwood fiber, which translates to the whole production chain in more competitive, thus sustainable alternatives. Now taking a look back into fiber improvements. One of the most important attributes for tissue production is the tensile index or the resistance of the pulp. During these last 5 years, through R&D improvement, the tensile index of Suzano's pulp has increased 25%, getting closer and closer to softwood pulp alternatives. Just repeating, 25% in resistance in 5 years. Just out of curiosity, every 1% of hardwood versus softwood in tissue production will generate an additional 90,000 tons per year demand in hardwood. And as a highlight, some markets like Brazil are producing high-quality 2- and 3-ply tissue from 100% hardwood pulp. There are also some factors which will increase the addressable market for hardwood. First, the decline in demand of printing writing, and more specifically office papers, will impact the availability of recycled fibers and sorted office papers, which are a relevant furnish to tissue producers globally. Second, as we have noticed in past cycles, non-wood pulp production in China, such as straw and wheat will face further closures due to governmental pressure as a major industry polluter. And third, we see further the integration due to the lack of wood and wood chips availability in Southeastern Asia. This will all add up to an additional 1 million tons of hardwood demand in the next 5 years. But we also see potential for demand growth coming from a second initiative, which is fossil-to-fiber. Let's watch this quick video. [Presentation]

And this is all impressive. And really, it's just the beginning. Brand owners are taking the name to reduce their plastic footprint and consumers are demanding more sustainable products, which are supported by government legislation, taking steps against single-use plastics, which represents 190 million tons a year. Can you can imagine the potential, 190 million tons a year to be substituted by more sustainable alternatives. The first estimates account for paper addressing 32 million tons of plastic substitution in the next 20 years. Such being the case, we are considering in our demand models, a 4.6 million tons organic growth and an additional 1 million tons of fiber-to-fiber opportunities, reaching 41.4 million tons demand by 2025. In our estimates for 2025, we have not considered any incremental demand from plastic substitution, which can certainly unleash future potential demand for pulp. Now looking at the net hardwood capacity and considering the confirmed project so far, we estimate that there will be approximately 3.4 million tons of additional capacity in the next 5 years, being the 3 main projects: Arauco MAPA, Arauco, UPM Paso de los Toros and Bracell Star, for which we consider 30% paper-grade pulp for up to 2025. Our estimates also take into account further closures in hardwood production as we have seen in past years. Here, I would like to call your attention for some risk factors, risk factors, which are generally not considered and which can affect the balance of the market. These factors are climate changes impact on wood availability, high technical age of some critical equipment, limited maintenance and modernization CapEx, especially in this last cycle, high-cost producers continuing to challenge and fiber availability impacting pulp production in British Columbia and Southeastern Asia. These unplanned stoppages are increasing over time and will further affect the dynamics of our market. To wrap up my presentation. When we factor in the presented numbers, looking forward, we see a tight supply and demand market. And our forecast for 2025 shows that hardwood demand will exceed confirmed net capacity increases by more than 2 million tons. Before inviting Aires back to give us more details on Suzano's new pulp project, I would like to move back to Portuguese to tell you guys about the initiatives of our Affinity Group for gender equality, for which I am a very proud sponsor. [Foreign Language] Now as we have a very positive supply and demand scenario, which I presented before, let's invite Aires back so that he can give us more details on Suzano's new pulp project.

Thank you, Leo. As Leonardo just presented, our view on supply and demand dynamics ahead, maintaining pulp relevance through good projects is our strategic avenue for Suzano. It is in this context, I would like to provide you an update of our greenfield project optionality in Ribas do Rio Pardo. The annual capacity will be 2.3 million tons per year with an average distance from forest to mill of 60 kilometers, in which we already guaranteed 85% of the wood needed for the first year's of operation, and we continued with the forest expansion plantations. This project will have a great energy efficiency with our energy surplus of approximately 180 megawatts with a low generation of solid residues and fossil fuel free, reducing the consumption of natural gas and fuel oil through a new technology of biomass gasification process, which will allow us to have 100% renewable energy matrix. We are currently working on several initiatives to increase our properness and so minimize the execution phase of the project in the future. We estimate that in the start-up will take in place in approximately 30 months after the project's announcement, which is expected to happen when our balance sheet allows. Moving to the next slide. We can see here our sensitive analysis of the projects returns to different pulp price and exchange rates. See that even with challenging price and exchange rate levels, the project proves to be quite attractive. We will be constantly evaluating the best time to seek approval for Ribas do Rio Pardo projects, always inspecting our financial policy and market opportunities. Now I pass the floor over to Luis Bueno, who will continue the presentation. Luis?

Hello, everyone. I hope you're all safe and healthy. Now we are going to discuss the consumer goods business, the tissue market. The tissue market is going through a premiumization process, and this has been happening throughout the years, and it's expected to continue this trend over the coming years. This can be seen on the left side of the slide with the migration of the 1 ply segment to 2 ply and 3 ply, especially in the North and Northeast regions of the country. Another interesting point is the market consolidation, not only through M&A activities among the top players over the last years, but also a market participation reduction of the bottom 50 players, represented by the gray bar on the chart. Now I would like to highlight our journey. We have increased our market share position since 2018 and gained 2.5 percentage points over the previous year. And what's next? As you can see, we continued to advance with the start of our new plant. This is the 5th plant that we launched, and the launch was made this month in the south of the Espírito Santo state. This new plant will increase our total output by 30% and bring new products to our portfolio with the introduction of the 3-ply product. But we also have 25,000 tons of extra paper production that nowadays we export to Latin America and can be directed to feed a new conversion plant in the future. With this new footprint of production across the country, we will be able to protect and increase our leadership position in the North region with 61% and also in the Northeast region with 28%, but also, we are going to increase our overall market share in the country. And now I would like to turn to Fabio, who will discuss our paper and packaging business.

Thank you, Luis. Good morning, everyone. Let's now explore the avenue of growth through new markets. First of all, I'd like to start saying that I'm really happy to be back to the paper and packaging business of Suzano. As Walter commented early on, we have a very resilient and competitive business that despite marked and macroeconomic conditions during COVID-19 pandemic, has had an unmatched performance and contributed with strong cash generation to Suzano. Now let's look into the future of this business. Today's consumption of wood-free print and write papers, carton board, flexible packaging and cupstock papers is around 124 million tonnes per year. Although print and write papers addressable market will continue to shrink due to digitalization, packaging papers demand will grow at a faster pace and will more than offset the print and write decline in the long run, driven by changing consumer habits and sustainability appeal of paper-made products. As Leonardo mentioned during his presentation, the ongoing trend replacing package made of fossil fuels with package made of renewable, recyclable and biodegradable raw materials present an exponential growth opportunity for paper products. The opportunity for paper replacing single-use of plastics alone could add more than 30 million tonnes of demand by 2040. As you can see here, we are actively working in our research and industrial facilities to bring market products that will meet brand owners' needs and consumer demands for a more sustainable world, addressing the fossil material substitution that I just mentioned. From paper bags to cupstocks, from consumer products to flow packaging paper solutions. Suzano will be there, working together with national and international partners to make the paper revolution a reality, anchored in our competitiveness and proposed to renew life inspired by trees. Now my colleague, Vinicius, will talk to you about how Suzano is advancing in other new business to enlarge our addressable markets.

Fabio, thank you, and good morning to everybody. As you know, our goal in new businesses is to guarantee a bold entry in new markets for our biomass. But how do we do this in practice? Let me show you. Let me recap our vision of future for Suzano. So basically, what we do, we leverage on our current business model's success. We have key assets and competencies that we want to leverage on. Productive forests, scale of our operations, sustainability positioning and practices. So what we are doing here is focusing on key technologies and strong relationships with multiple partners to enter in multiple large markets. Last year, we presented an estimate of this addressable market to be more than $50 billion. So this is a huge opportunity for us. So today, let me just give you an update on 2 of these lines that are advancing the most. First, our textile initiative. As you know, we are developing a disruptive and highly sustainable textile fiber. As part of these efforts, we announced the JV with Spinnova. But what is this JV? Let me remind you, our business model is formed by 2 parts. First, the production of MFC by Suzano in a dominated technology. Second, the staple fiber production inside the JV. Suzano is the exclusive supplier of MFC to the JV. We have also rights to participate with 50% in any staple fiber project worldwide. And inaugurating this development, we are already implementing one MFC project in Finland. And the start-up is expected for beginning of next year. And our first staple fiber project also in Finland is started up in 2022. Now most important than just showing you process is that we are now building partnerships with several global retailers. These partners will guarantee a bold move for us. Let me remind you, we are talking about a market with more than 100 million tons in demand. This will allow us to somewhat advance in scalability for new projects. And I would like to share with you the video that was launched during the beginning of our JV with Spinnova. Please? [Presentation]

So as you could see, very disruptive, very sustainable. We are really glad to have this JV formed. The second line I want to explore with you today is on our carbon initiatives. So let me show you this map. More and more countries are building regulations and trading platforms. If we see here in green, these are the regions and countries that have already implemented trading platforms, carbon programs. And if you see in orange are those that are considering to do so, Brazil included. But what is exactly the potential that we have in this market. So let's take for a minute here. The current stage of carbon credits transitioning in the market today, around 100 million tonnes of carbon per year. When we just take into consideration commitments made by large companies, we see that we have up to 2 billion tonnes already committed until 2050. And if we consider experts survey, we see that this can go up to 4 billion. So we are talking about 40x what we have today in the market. And Suzano is ready to contribute with projects to address this demand. We have projects that help to avoid nature loss, remote nature-based solutions, projects that reduce emissions in our value chain. So to play in this market, we defined a structured project. So last year, we set up an internal task force to learn about carbon markets, to understand the regulations and methodologies. This was very, very important to define our advocacy process. This advocacy process aims basically to explain the competitive advantage of our sustainable model and the fact that, for example, we are expanding in the graded areas. We are protecting biodiversity, really restoration of areas, generating expressive social benefits. In parallel, we are advancing in our screening process. To date, we already identified a potential of 22 million tons of carbon credits. But implementation is complex, takes time. So we are bringing partners willing to co-develop projects with us and trying to divest the monetization of these credits. And since we are talking about carbon sequestration, now I think it's a great moment to check how much carbon we have sequestrated since the beginning of our arrival, please. So great numbers. Now I call Walter to talk about our next avenue. Walter, please.

Thank you very much, Vini, about your presentation. I think we have been seeing a lot of E&S initiatives during this presentation. I think it's very clear that it is embedded in our process, ways to mitigate carbon emission, ways to sequestrate more carbon, ways to increase and address the problem of social problems that we have, the inequality problem that we have in our society. And we have been touching as well different groups of -- specific groups such as -- and we will address the other one, black, women, LGBTI-plus and people with disabilities. And then we are trying to do everything very connected on our business. This is the reason that we have been going through the E&S during the presentation. And now I'm going to touch the G with you. And the G, it's very important that we have been improving a very robust governance on our sustainability criterias. We have been working starting with the Board of Directors and working with the other levels and layers of the organization with very robust communication. In addition to that, we have been working and I'm very pleased to mention to you that every single top management member of our administration has at least one KPI on their variable compensation. Everyone, at least one. Many of them have more than one, but at least one. We have been working this since 2020 and 2021 is the same. Then this is part of our governance to do it in the future. Now I'm going to share with you how we are doing with the ESG rating agencies. Since we merged, we did not answer many of the questionnaires of the rating agencies. But in 2020, we have been dealing with this issue, and we have been very clear, improving our rankings and our ratings on different agencies. I'm going to challenge these agencies right now, because we want to have more clear on their metrics and their -- and more uniform criteria to be done. But even so, our target is to be the benchmark, and we will work on this goal to be the benchmark of the industry. Looking for our long-term goals. We have been working on several dimensions and with full transparency. You can go in the Internet right now and check on our web system, all the metrics that we have, all the evolving that we have on every single specific metric and the targets that we have for everyone. And now I'm very pleased to announce to you that we are going to have an additional goal on the next ESG call, that in the coming weeks, we are going to have an ESG call that we are going to announce our target on biodiversity. That is a very important criteria that we have been seeing, that we are enlarging the number of criteria that we are doing, and we are going deep and deep more to have better metrics and to have better KPIs and to full transparency with the public. Now I'm going to pass to Marcelo Bacci that is going to present to us the financial management. The floor is yours, Marcelo.

Thank you, Walter. Good morning, good afternoon, good evening, everyone, depending on where you are in this very complex world. I hope you are all safe and healthy. As my colleagues mentioned before, we have a firm belief that sustainability and efficiency are convergent. Our developments in sustainable finance are a clear example of that. Since the beginning of our journey back in 2016, we have been pioneers and protagonists of sustainable financing, developing new ideas the whole time. Today, sustainability-linked instruments that had no role at all in our portfolio in 2015, already respond for 30% of our total debt. That's quite an advancement. And what is the value that, that is creating to us? More recently, as a result of this very robust structures that we've been putting together, we've been offering to the market several commitments to improve various ESG-related KPIs. This has been allowing Suzano to commit significant negative premiums on our cost of capital, what is -- the market is calling the Greenium. Today, our sustainability-linked bonds are trading on average 25 basis points below our original cost of capital curve. It is part of our strategy to keep improving our cost of capital. The following table shows that our recent sustainability-linked bonds are trading significantly better than our Brazilian frequent issued peers. We still lag behind some players from other jurisdictions, and our goal is to have the best cost of capital in our industry. We believe we deserve to have the best cost of capital in our industry, since we have the best possible position in terms of operational costs that puts us in a very positive position to manage the cycles of our industry. We are very happy to see that our efforts are being recognized by the market and also by the rating agencies. Today, we are a solid investment-grade from all the 3 major rating agencies with a stable outlook. So where we're headed to. We've been improving our credit metrics on a robust way, even in low price scenarios. If you look at what we did in 2020, we had a very low price of pulp during the year. And even so, we reduced our total debt by $1.2 billion and also reduced our leverage. The year of 2021 is said to be a very important turning point for us. More benign pulp market scenario, combined with the depreciated currency, are boosting our cash flow generation, leading us back inside the limits of our financial policy, both in terms of leverage, and in terms of nominal debt. We are approaching the $10 billion mark, $800 per ton, which is the number that we guided for in the past. We are fully committed to our financial discipline, and we will continue to run the company within investment-grade standards. The robust cash flow we're generating this year will allow us to deleverage and also to develop a new growth cycle. Free cash flow will be first directed to reduce [indiscernible], but will also be sufficient to finance our plans showed before by my colleagues on the 5 avenues of growth that we have and hopefully, also allowing us to resume payment of dividends in the coming years. All based on a very robust and strict financial discipline. Before turning back to Walter for his closing remarks, I'd like to switch to Portuguese for a moment to touch on a subject that is very dear to me, [ race equality ]. I'm the sponsor of this affinity group at Suzano, and my colleague, [ Ananda ], is the group leader. [Presentation]

That's it, Ananda. This is very important for all of us. With that, we conclude this part of the presentation and I turn it back to Walter for his closing remarks. Thank you.

Thanks, Marcelo. And sorry to you and to the audience about the minor tech problems that we had during your presentation. This is when we make an event live, this is what could happen. Sorry about that, ladies and gentlemen. We believe there is a bright future ahead of us, that Suzano can be very well prepared for the future, and we want to be the protagonist of this future. And I'm going to show you right now how we are going to summarize this presentation. We have 4 major points where we can bring to you value creation during the next coming years. And these are the main levers that we have right now. The first point that we have right now is using the benefit of the better pulp prices right now. We will deleverage at a very fast pace. And that deleverage at a very fast pace will allow us to have a much better situation and convert that to equity. And this would be very positive. As you may see during the very dense presentation that we made to you, on every single avenue for the future, we have several value creation projects. And these projects will bring with our track record of -- operational track record that we have been doing for many years and our very financial robust balance sheet that we have right now, we will be ready to proceed with these projects and have a major value creation to our stakeholders. The third and not less important is that we will enlarge our addressable market. As many of -- Luis Bueno, Fabio, Vini made the presentation, we will enlarge our addressable market for the coming years. And with that, we would be able to have a much broader perspective in terms of growth. And last but not least, we want to have a cost of capital reduction with our financial discipline, with our policy of looking for amplifying our leadership and our constantly targeting on ESG greenium market. As Marcelo Bacci presented to you, we will be able to reduce our cost of capital, and hopefully, with better work, we will have higher multiples and create value to our shareholders as well. Then with all of that, we have a very strong basis and the basis of our purpose, renewing life. Now I would like to go and to revisit our carbon sequestration during the last 1 hour and 10 minutes. Let's see how much was our carbon sequestration. And these are the numbers we have, almost 1,300 tons of carbon in the last just 1 hour. What we are doing, we are carbon negative, and we are going to be even more in the future. And let's see the number of trees that we planted during the last hour. And it's very important, the numbers of trees. As I mentioned before to you, we have roughly 500,000 trees a day, 500,000 trees a day that we are planting every single day. A lot of people are telling that their targets for the future is to be carbon-negative or carbon zero or carbon neutral, we are carbon neutral today. We are very happy to tell you that we are contributing to the society, contributing to everyone. Now let's go for our Q&A session.

My two questions are more from a strategic standpoint. Walter, I'd love to understand about the balance of bargaining power in the industry, how you think about it. I remember that a couple of years ago, you mentioned that maybe it would be positive for producers if you were able to hold on to more inventories so that your customers would be less likely to pressure prices down in moments in which they are overstocked. But your inventory levels declined meaningfully over the past quarters and are below historical levels. So is it a sort of concern that you have that if your customers restock over the next months, especially in Asia, that you could see again significant pressure on pulp prices or the situation is different versus 2018? And then my second question, also strategic-wise, I think about your new growth avenues. We are seeing a few companies moving ahead with swing capacities for the dissolving pulp and paper-grade pulp. Clearly, I mean, the size of the dissolving pulp market is much smaller, but there are also good fundamentals looking to the medium to long term. Is it a market that you consider entering at some point? Are there restrictions or points in which you wouldn't have a lot of synergies with your current operations? How you see the dissolving pulp market?

Thank you very much, Daniel. It's a great pleasure to be with you here. Let me answer both questions that you raised. The first question that is related with the demand and balance and supply balance right now. Our vision is that the market is very end balanced situation to our side. We are seeing a demand growth at this point of time. We are seeing a very low new offer on the supply side with some certain specific disruptions that we are seeing on the market. And the inventories are very low at the producer side. And we do not believe that they would be able to increase their inventories during this year. After the new projects coming on stream end of this year, perhaps the situation is going to be different. But during this year, we are very confident that if we do not have any specific disruption in terms of demand related with several waves of COVID, we will be able to have a very good market during this year. The second point that you raised is related with the dissolving pulp. We could consider the possibility to enter in this market. This is not something out of our radar. It's not our priority at this point of time, but we could consider to enter in this market. As you know, our major priority that we have at this point of time is related with the Ribas project that we have that we want to implement. And we are preparing all the precedent conditions to announce this project, and we hope to do it sooner than later to announce these projects, and we will be able to have a major value creation to our shareholders. Then dissolving pulp, we believe that we continue to grow and this will allow us to have another revenue for the future. But this is not our main priority, but it's not on our radar at this point of time.

Caio Ribeiro here from Credit Suisse. So my first question is on the impact of the low availability of shipment containers that started to unfold over the last quarters. I just wanted to see if you can talk a little bit about whether that has been generating any impact for [ break bulk ] vessels as well. And if you can talk about how your average freight rates have been evolving lately, that would be helpful. And then secondly, it seems like there's a lot of talk of new pulp projects being developed in China over the next years in order to reduce the dependency of raw material imports. A lot of these projects, they seem to rely on wood chip imports to produce pulp. So I just wanted to get your perspective on how you see these projects impacting supply and demand and the cost curve ahead. And what potential challenges you think that these projects could face to unlock this capacity?

So Caio, thank you for your question. Coming into the logistics constraints, we see indeed a very challenging supply chain at this moment, a very difficult operational condition. Continuing to be a burden for our global trade due to the shortage of containers, congestion in ports and also including congestion in transshipment ports throughout the world. And this has been increasing the freight rates for our containers and also the lead times. At the beginning of the year, this was kind of exclusive for containers. As of March, we start to see the trading break bulk also getting affected. There is obviously a migration of the demand from container customers to break bulk as well as port congestions, as I mentioned previously, and this is making our cycle times longer than before. And in our view, this situation with containers and break bulk vessels should be maintained as they are until the third Q of 2021. This is a big challenge for us. As you know, our stocks are low. So the constraints in logistics is making us really have the best efforts in order to minimize the effects to our customers globally, but it's a big challenge as we speak. Maybe Carlos can comment a little bit about freight rates?

Yes, sure. On the freight rates, break bulk, we have long-term contracts. And therefore, we do not expect any impacts in the short term. On the container side, we may have some contracts to be renewed along this year. And when that happens, we might see some pressure. But again, that's not the case as we speak.

And now maybe coming back to me, so that I answer Caio's third question. Yes. Okay, you ask regarding future projects and woodchip availability. Obviously, this is a big question mark for us as well. We monitor wood chips import very closely. We have seen a peak in December. Our thesis was correct. We are also following that in January and February, we have got the first numbers for that. And imports are back to what they were before in January, February last year, indicating that there is no additional availability or supply at least at this moment to supply additional pulp production in China. So we monitor that closely for the short-term and also for the long-term projects, but it's [ a big definition ].

And Caio, just to complement my comments are related to the rates. When I talk about Brent and [ bunker ], definitely, you're going to see the impacts in our contracts. It's a different situation.

Rafael Barcellos here from Santander. I guess my first question is regarding your plans for the tissue business. I mean how relevant do you believe it could be in the long term and whether or not you could analyze M&As in the segment? And secondly, just a follow-up question regarding the Ribas do Rio Pardo project. I mean could you please elaborate further on its expected cash cost?

Rafael, thanks for your question. Our main focus now is to maximize the returns over the investments we've made so far. We've invested in this business close to BRL 1 billion in M&A and also building new plants. So our main focus now is to maximize the -- running all these assets. But we are constantly analyzing options to grow in the Brazilian market, be it organically. We also have options to grow organically to increase our reach in the country, but also inorganically. So we are constantly monitoring those 2 options to be able to grow even further in the country.

Rafael, thank you very much for your second question. I'm going to bring to you 1 additional information related with the project in Ribas. I'm very pleased to tell you there is going to be the lowest cost of our system. We are not going to give guidance to you, but it's very easy to get the information. Our average distance from the forest to the plant is going to be around 60 kilometers. That is completely different from the 156 kilometers that we have on the structural future basis of our operations right now. In addition to that, we are going to have a high-power plant and we are going to export a lot of energy, much more average per ton than other plants. And it's going to be a free fossil facility, then we are going to not have the cost of oil that sometimes impact on our costs. It's going to be extremely low cost, the lowest on our system, but we are not going to give guidance on that. Thank you, Rafael.

George Staphos here. Really appreciate the presentation and the details. My two questions. First, I wanted to go back into tissue in terms of the demand outlook for pulp. How much from your analysis will tissue contribute to the 5 million tons of growth through '25? And what has your analysis, your consumer studies, shown about the willingness of the consumer to keep using tissue at higher rates and why we won't see some pullback demand after 2020 with COVID? That's question number one. Question number two, if supply demand is as tight as you are projecting, what gives you confidence that, for example, the Bracell project might not be more paper grade pulp, that there might not be more supply that comes into the market, given that deficit. Relatedly, realizing Ribas is your primary project and objective right now, would there be any ability to use some of the pulp in your integrated mills making paper if the market is that tight to supply the market during that time?

Thanks, George. This is Leonardo here. I will try to answer both questions. First, related to the tissue demand. Just giving an overview of what we're seeing at the time being and then telling you about our forecast, right? Tissue seems to be very strong in terms of demand in all markets, North America, Europe being pushed [ by at home ] products. In North America, specifically, we see a very strong demand for branded products. All major tissue producers in the U.S. are running at completely full capacity as we speak. In China, last year, tissue grew 6% to 7%, and growth is still happening in the beginning of the year. And we see a market share dispute in Chinese local markets among big, mid and smaller-sized tissue producers. But in terms of demand, we see a positive demand. It's also important to note that in the second half of last year, almost 500,000 tons of new equipment -- of new tissue equipment started in China. And this year, there is a forecast of more than 1 million tons to start as well. So our analysis is that, obviously, there are several [ mills ] and groups supporting and very positive regarding this growth in demand for the future. And in tissue as well, it's important to consider fiber substitution. And that's where we see most push from our customers trying to use the advantage of the long spread between fibers to substitute their softwood supply by hardwood. And this is also helping our demand a lot. In the model that I presented in my presentation, roughly 70% of that growth comes from tissue and we are not considering new consumer habits. We are just considering regular growth base, organic growth rates for tissue. So even though we understand and we think that the consumer and that we, as individuals, will have stricter hygienic habits in the future, that was not factored in into our models. You asked us about the confidence about Bracell moving back and forth from dissolving pulp. Today, we see a very favorable market for dissolving pulp with very interesting price levels. We forecast that this shouldn't change for the short term. Therefore, we expect that 30% output of this mill will be affecting the paper grade hardwood market. And last but not least, you asked about the -- if we could further integrate to increase paper production. As we speak, all our machines, all our paper and board machines at Suzano being printing and writing, paperboard and tissue are fully integrated and at full speed as we speak. So there is no additional capacity of paper production or board that we could do and take advantage in our system.

This is Jon Brandt from HSBC. Thanks for the presentation and for taking my questions. Walter, first, I wanted to ask you about profitability has improved significantly with the recent price hikes. You've spoken a lot about the need to earn a return above your cost of capital on a sustainable basis. And presumably, with these prices and this level of FX, you're happy with the returns that you're generating at the moment. But over the last, say, 3, 4, 5 years, we've also seen a lot more price volatility than we have historically. And I suspect that's less than ideal for both you and most of the customers. So I guess I'm wondering, what are your expectations for [ pulp ] prices going forward? Is this sort of the new normal that we'll have to get used to more volatility? And what, if any, sort of responsibility as the market leader do you have to try and decrease this volatility? I guess my second question relates to the tissue segment. Previously, you said that, look, you're not in the business, to be in this division, just to be there. It needs to be relevant. So I guess, how big do you think this division could get? Obviously, you're growing pretty quickly. And if you look at tissue companies globally, returns tend to be very strong, very stable. Valuations tend to be at a premium, at least compared to sort of pulp companies and more cyclical companies. So I guess, are there any plans for you to break this out? I mean we've seen where companies that have really valuable divisions, but the market doesn't necessarily give them credit for this. So are there any plans to -- or I guess, what are the plans for the tissue segment to really be able to realize the valuable asset that it is?

Jon, thank you very much for your question. I think it's a very relevant question that we have been bringing to you right now is related with the volatility that is not very good for anyone on this industry. We have been showing to our customers that pulp volatility prices did not have benefit to the papermakers when they have some lagging and some benefit when the prices are going down. But when the prices are going up, they have a huge difficulty to pass through cost increases that they have through the pulp business. Our intention and our ambition is to mitigate this volatility for the future. We have been working on different pricing structures that would allow to our customers to have a much better visibility for the future and much lower volatility. This is our aim. When the prices were at $460 level, everyone came back to me and said, Walter, you are talking about that, but you are biased because it's below the average price. Now the average price of this industry in the last 10 years is $610, and now it's much higher than that. They announced yesterday a price of $780 to April, then it's much higher than the average. It's not -- of course, we are going to have a huge benefit on the short term, but it's not beneficial for the market on the long term. That our aim is to reduce volatility, continue to be reduced volatility that would be much better for us and for our customers. Now I'm going to pass to Luis Bueno that is going to touch the second question.

Jon, thanks for your question. Even though we want to build a scalable business, which is going to be relevant in the long run, the way we see it as we go generating value step by step, we started the business focusing on the north and northeast regions of the country. Now we are expanding to all the regions of the country. So now our main focus, as I mentioned before, is to maximize the return over the investments we've made so far, and the focus is on Brazil. But we are always looking as in ways to unleash value in this business in the future. And we will consider in the future, ways that we can have a better valuation for the consumer goods business, as you mentioned before, with the multiples that consumer goods business have and how can we unleash this value for the Suzano group. This is on the table. We are analyzing this. And in the right time, we will make some new actions.

Can you hear me well?

Yes, it's perfect. Thank you, Thiago.

My first one to Leo. Leo, could you -- just going back about the sustainability of the current cycle. We are seeing some paper mix increasing prices and -- but we are seeing particularly the tissue [ producers ] not being able to increase prices at the same speed that you guys are, right? So could you comment on what you're seeing there on the affordability of those price hikes that are really aggressive. I would say, of course, it seems the market [ is right ] in the short term, but the $100 or $60, $100 for price hikes per month have been quite aggressive. So just want to hear your thoughts about that. And then the second question for Carlos. Carlos, the average [ distance starts ] in 2024, 156 kilometers. Does that involve any large CapEx due to land acquisitions or that is strictly due to productivity? And if it does, I mean, is that already in your account estimates? So how should we think about the trend and the initiatives towards the target of 156 kilometers?

Thiago, thank you for your question. We're going to try to be -- to give you a short answer, but I will have to walk through our view in demand and then supply and then in paper pricing as being announced by producers to be clear in our view. First, starting with demand. Demand is very solid and in accordance to all our expectations for all markets, right, in line with consultants like Hawkins Wright [indiscernible] test markets, which all share the same view as we do. And I would like to highlight some specific demands on some paper grades, such as packaging, which is going extremely well in all continents. And in China, specifically ivory boards, which is a big consumer of bleached chemical pulp. Specialty papers are also booming in terms of demand everywhere across the world. And we believe tissue grades are being benefited by the spending in nondurable goods, e-commerce as well as the beginning of the plastic substitution, which I mentioned in my presentation. Print and writing producers have been doing better and at higher operating rates than they had and did in 2020. And in China, the outlook for print and writing is positive, as the economy already started growing. We have the increasing demand of print and writing. And also, there is a huge expectation for consumption of print and writing paper due to the Chinese Communist Party's 100 years anniversary this year and all the publicity and public material or advertising material which is printed. Going into tissue, maybe the most relevant for our pulp. As I mentioned before, demand is very solid worldwide. We see demand keeping up to what we saw last year. And in our view, this specific situation in China, which is important to understand so that when we talk about pricings we kind of linked to that, it's that we see a very fierce market share competition in the local market between small, mid-sized and big producers. We don't think it's a matter of demand, but much more of this competition, which is going on. That's why we listen and we read about 1 or other producer having higher or lower operating rates at the time being. In terms of supply, we saw last year in the fourth quarter, a huge adjustment in terms of production due to unprecedented stoppages in softwood mainly. And this is continuing into the beginning of 2021. We saw the Arctic blast in North America and the effect that, that had on American producers and Canadian producers as well as unexpected operational problems in Europe, Russia, South America and also in Southeastern Asia. So this seems to be a new trend that keeps coming on. And in our view, this is due to old equipments operating for a longer time, strict COVID protocols, the lack of and restrictions to specialized labor to be coming into the mills and operating this maintenance, unexpected issues found during the maintenance, which we can only see and observe once the mill is actually stopped and unfinished procedures that were done industrially throughout 2020 with all the restrictions that they were last year. Now we're going to enter the spring maintenance downtime period for the Northern hemisphere. And we expect that the maintenance schedules will be longer or will take longer than historically they did as well. So there is a big challenging supply issue, which when we add the logistics constraints, which I already talked about, makes all this even worse. And just in terms of supply, it's important to highlight again that as a hardwood producer, we are facing a very positive moment that we are actually being loaded by customers' request, not only tissue customers, but across the board, across all users in terms of how to increase hardwood over softwood in terms of their furnish. So this is also very positive in that sense. Now looking into paper -- in our customers, who are in paper and paperboard pricing to understand how sustainable this chain is. There were a very strong pulp increase announcements in China, as you all know. Ivory board now has reached the highest price ever in China. Specialties has also gone up impressively and all printing and writing grades also have been going up impressively over these for first months of 2021. And the only segment which is lagging behind is tissue for -- in our perspective due to that reason, which I explained, about this competition and promotion that's going on vis-a-vis the intent of 1 or other player to acquire bigger share in the local market. In Europe and North America and in Latin America, most producers have already announced price increases across the board for printing and writing, tissue, specialties and paperboard. So we see that movement happening. Now we really have to watch, as Walter said, the impact that an eventual slowdown in demand due to a new wave of COVID or how actually effective these producers will be in terms of price implementations to monitor their margins, and therefore, their ability to support the increasing pulp prices. But in terms of [ fundaments ], the fundaments are all out there. And we see a very supportive moment for this new price increase, which we just announced yesterday to be implemented in full as well.

Thiago, to reposition our forest bases, we do not foresee [ as to speak to ] any major CapEx, some expansion, but not major.

This is Gabriela [indiscernible] from [indiscernible]. I hope you're all well and safe. And thank you for the presentation. So we see that many different factors converged for the favorable scenario of higher pulp price we are observing now, including stronger demand and also supply shortage, but also the appreciation of the renminbi against U.S. dollar, which lowered import costs, also contributing to the price implementation. So as vaccination spreads around the world, and especially in the U.S., and the U.S. economy recovers at an incredible speed, we might see the opposite movement and U.S. dollar gaining force against emerging market currencies. So how could this movement impact the pulp price? And how do you see that maybe putting pressures on the pulp price and then maybe a reduction in the midterm? And the second question would be, again, as vaccination increase, we expect lower lockdown measures and capacities returning to the market. Besides the probably new capacity is due to higher pulp price, our Chinese pulp consultancy is expecting around 7.2 million tons new capacities coming only this year, especially for the second half of 2021. So what could be the effects on that on the market dynamics, in your opinion? I would love to hear about that.

Thank you for your question, Gabriela. I'll touch on the first part about the currency. The currency is one of the factors that actually helped the price implementation, but it's not the only one. It's a combination of several different factors related to supply, related to demand, related to logistics and many other things. So we don't believe -- although there's a lot of uncertainty of what can come in the future in relation to interest rates and currency, depending on the relative recovery of different countries in the world, we don't believe that this factor isolated could respond for a different trend on pulp prices.

Can I just add to what Bacci said? Gabriela, also when we monitor the positive effects of vaccinations, we imagine and we expect that a bigger consumption will occur of all kinds of goods, nondurable goods. And several of these products are very directly related to the products that our customers produce and that we also produce in Suzano. So we also see a positive effect in a global demand standpoint once we have vaccinations done and consumers back to offices and back to more regular activity, okay?

And in addition to that, Gabriela, it's very important to mention to you that at no moment during the COVID period, the operational rate of the several plants in the world was highly affected. And we do not believe that we are going to have additional supply this year comparing with last year. Of course, end of this year, we are going to have the new projects coming onstream, as was presented by Leo. But at that -- even that point of time, we do not believe any major increase on the supply in the market.

Can you hear me?

Yes. Thank you, Leo. We hear you.

Okay. Perfect. So thank you very much, everyone, for the presentation. I have a couple of questions. First, on the hedging strategy, right, bringing back Marcelo to the discussion. This has been a very controversial topic over the past couple of years, right, Marcelo? The -- I mean, clearly, some of the movements on the currency, at least regarding the hedging strategy haven't worked out. We're in the middle of a lot of volatility, politically in Brazil, and we're heading into elections 2022. Apparently, the electoral debate has been heating up again with 2 candidates already in premarketing campaigns. So I just wanted to hear your thoughts on if anything changes going forward with Suzano's hedging strategy or we should still expect a similar policy and similar levels of cash flow protection from previous quarters? That's my first question. And the second question, more strategic. There has been a lot of debate, at least during this conference call, during this presentation on tissue and the strategy behind growth in tissue. I wanted to ask specifically about Suzano's paper division, the legacy printing and writing division, right? I mean if we consider the fact that Suzano is all-in in pulp and that new growth will be coming from pulp with Ribas do Rio Pardo, I just wanted to understand what exactly is the strategy. I mean some people may consider paper, at this point, a bit of a distraction given that maybe going forward, the paper division will represent less than 5% of EBITDA. So if we can just talk a little bit about the strategy on paper going forward, especially given how big and the growing importance of pulp to maybe 95% of EBITDA. So those are my questions.

Thank you, Leo. Let me touch on the first part about the hedging strategy. It's important to have consistency in terms of financial management. And I think the robust way we've been looking at this point is an important part of the fact that we, for instance, are considered an investment-grade company. Our hedging policy has 2 components. One is to keep our net debt in the same currency in which we generate cash. This is very important for us because of the long-term nature of our debt. We cannot foresee where the currency is going to be in 5, 10, 20 years down the road where -- when the debt is going to come due. And it's very important that we keep the debt in the same currency in which we're going to generate the cash flow that we will allow for the debt to be repaid. The second part, which is the cash flow hedge, relates to making sure that the company has enough reais to pay for its short-term obligations, being CapEx, costs and expenses. This is also important since the real-based, BRL-based cash flow that we have is a negative one. We generate less BRL cash flow revenues than expenses. So we will keep the same policy. Of course, when the pulp prices get higher, the relative proportion of the hedges get lower, which is what we're seeing right now. But we intend to keep the same policy. And also, it's important to emphasize the volatility is good for us. We've been using zero cost collar. We've been using this option structure to take advantage of the fact that in Brazil, we always have relatively high volatility and relatively high interest rate. Although the fact that the interest rate is a lot lower today, but tends to get higher, this favors the strategy of using options where we can lock the downside and give up a small part of the upside. So we will keep using a similar strategy. We review this strategy on a yearly basis with the Board, and the decision so far is to keep the same and to operate it according to our view of the market.

Leo, related with the paper business, I would like to share with you some information. When I joined the company 8 years ago, the paper business had an EBITDA of less than BRL 400 million. Now EBITDA last year on the very, very difficult scenario -- market scenario, we had more than BRL 1.3 billion, and I'm sure that this year is going to be even better than that. Then at that time, they were asking exactly the same question. Why we are keeping this business? There is no growth. There is a secular decline in terms of consumption. But at that time, Carlos, and after, Leo, and I'm sure that Fabio now, will create ways to lever and to create value to our shareholders on that specific business. Of course, we have a plan B prepared if we have a major decline in terms of consumption of paper to find other ways to generate value with that specific asset base. But at this point of time, we believe that we are very well positioned. We -- the other day, we are presenting -- Leo to our team about the paper business -- packaging paper business, and I was telling them that it would be one business unit as a single company completely spin-off from Suzano, that would be the 62nd company in terms of EBITDA in Brazil. Then it's a big business. Of course, it's not comparable with the pulp business, but it's a big business. We have a very good return to our shareholders and with a positive prospect for the future as well. Then we are not -- have no intention to leave this business.

This is Marcio from JPMorgan. Thanks a lot for giving me the opportunity to ask questions. My first question, maybe to Leo Grimaldi. Leo, we have been quite surprised by the recent price movement over the past years, not only the recent recovery since December, but also the decline in 2019 and also, the recovery back in 2015 and '16. So the question is, what can Suzano do or has been doing to try and anticipate these kind of movements and reduce surprises? I remember you once mentioned that you'd like to have more control of inventories, offshore clients, to understand better the supply chain or maybe invest in more business intelligence and analysis. Anyway, how can Suzano anticipate these kind of movements? And the second question, maybe to Carlos. Carlos, we have been reading about the long-term challenges in the Mato Grosso do Sul state with regards to the availability. I know you have secured most of what you need for the expansion. But I mean, it sounds like there is a more challenging competitive environment in Mato Grosso do Sul, and I just wanted to understand how can it impact your operations, both in Três Lagoas and also the expansion. Maybe to Carlos or to Aires, I mean, up to you.

Thanks, Marcio, thank you for your question. I think that we have 2 targets to try to tackle the volatility or high volatility of the prices. First, you are completely right. This market intelligence, this is something that Suzano has been investing for a long time. During the last few years, we enhanced investments in that direction. And believe that as much more information that we have in terms of anticipation of what's going to happen or of the demand of our customers' products, that will give us a leap start and help us make better decisions for the future. Second point that we also consider in terms of trying to minimize volatility, as Walter has explained previously, is offering our customers differentiated pricing structures for their agreements with us. We have been saying this for a long time. This slowly has been perceived as our customers as something that will add value. And today, we have a portfolio of customers that already have different pricing agreements than we had a couple of years ago, but unfortunately, due to compliance reasons, I cannot give further details on these agreements.

Okay. Marcio, I will answer your question. We believe that the timber market in Mato Grosso do Sul is still surplus with excess wood. But obviously, the announcement of new pulp production capacities may change this scenario in the medium and long term. However, Suzano is supplied with this [ all wood ] forest partnerships and the need for the market with acquisitions is occasional business and is evaluated as strategic decisions all the time for our team.

Thank you for taking my follow-on questions. George Staphos here from BofA. First of all, if we could go back to tissue demand in China and the market developments there, I think, Leo, you had mentioned that the market remains very strong. Looking back in the past, when there have been some market share issues between producers in China on other grades, it's been a sign perhaps that demand was slowing, that producers overshot their supply, and that's why they got into a market share battle. What gives you confidence that this is purely an overshoot on supply, not a reflection of a slowing of demand in China? And can you talk to what kind of growth you're seeing in tissue demand in China so far in 2021? The second question I had in terms of carbon sequestration and how you ultimately hope to monetize that. Thank you for the details, by the way, in the presentation that you shared thus far. What, in your view, should we look to as catalysts for when you'll actually be able to monetize the 1,300 tons or more now that you sequestered during this presentation, and that will actually be able to create value that we can calculate and look to in Suzano's valuation down the road?

Okay. George, let me get again back into tissue and in China. In our view, this time, the competition or dynamics is a bit different than in the past due to how well or how differently prepared the producers were before coming into this first month of 2021 and competing against each other. We understand that the bigger producers usually carry higher stocks in their system. We saw the stocks building up last year. We have been also observing that the stocks have been reducing since December and into the beginning of 2021. But still, they carry in their strategy, an amount of inventory of pulp that will give them a different approach to the midsize and the small-sized tissue producers, who usually don't carry stocks at all. So it's a competition in a moment where you have, in one side, a specific part of the market with a lot of competitiveness because due to the stock position and obviously, as prices moved up so quick, there's still an average lower there's still an average lower prices than the midsize and the lower-sized guys do in the market at this moment. So I think in this perspective, it's different than before. And again, we repeat that we are supportive that demand is holding strong in China. Unfortunately, I'm not able to share with you our Suzano specific demand numbers for China, but most consultancies are seeing a 2% to 4% growth in tissue in Asia or in China for 2021, slowing up a little bit related to last year considering that there will be no [indiscernible].

Okay. George, thank you for your question. It's important to mention that the carbon business is an important avenue for us. This is a long-term capture, okay? We are still analyzing, running screening. We have a number of partners that we are negotiating with, trying to anticipate monetization. We have a very positive forecast for pricing in the future. But right now, we still do not know what is the level of price that we are going to be able to capture at this moment with this amount of carbon credits that we are identifying. Important to mention, different carbon credits coming from different origins, from different conditions command different prices. So this is everything that we are doing today, we still need to implement and create conditions to really capture value. So it's really difficult to give any number related to pricing, for example, right now, okay?

Could you please elaborate a little bit more on the CapEx forecast for the company? I don't know if you have any rough estimates or preliminary estimates for the Ribas mill. And also in terms of the BRL 2 billion CapEx for the modernization projects between 2021 and 2024, is there a sequence that you can maybe speak of -- and that will help us to better forecast the cash outflows for the company? And then the second question is related to that BRL 60 per ton company initiative reduction that would have mitigated some of the negative impacts around the inflation and FX. Do you have, again, a specific timing for when those kick in, given that the bridge or the forecast is until 2024?

Thank you, Carlos. The CapEx forecast that we have for this year is kept because we haven't made any decision in relation to the new project in terms of its implementation when it's time to do that. So far, the actions that we're taking are minor and preparatory for project readiness. They don't impact in any material way, the CapEx plan for this year. In terms of the modernization projects that Aires touched on his presentation, this BRL 2 billion will come gradually in the coming years. A small part of them are already considered in the 2021 CapEx, but we're not ready at this point to share the specific timing of those projects, and they will be accelerated or not depending on our capital availability.

Marcelo, in terms of the -- sorry.

Go ahead.

Sorry. Yes, in terms of the Ribas project, do you have any preliminary range of potential CapEx?

We do have, but we're not ready to share yet.

Carlos, the BRL 60 that we updated for our -- previous to 2024 is related with the management initiatives that are in the improvement of our [ elections ] previous planned on the performance of the indicator in 2020, mainly with regard to cash cost and achievement of our synergies. We are constantly update our practice and analyzing if you can share between our mills and updating this number constantly.

Okay. So just to understand, the BRL 60 per ton has not been materialized yet? Or is something that already happened in 2020 for the synergies?

Material CapEx is a price that we have in other plans, and we are not sharing and introducing new plans.

It's something that [indiscernible] in the future. We have several initiatives on that, but it's not part of our cost yet, yes.

And is this more -- should we understand this as more back-ended towards 2024? Or it's something that you expect to be a little bit consistent delivery in the next 3 years?

I understand your question now, it's a part that we will deliver year-by-year, the [indiscernible] is the total amount.

Thank you very much to all of you. We are getting to the end of our session. I would like to thank you for participation with us on the 2021 Suzano Day. I think we have been going through a very complete presentation to you about 2 major issues about business and society, and we believe that 2 issues have to go together. We can go now presenting the number of trees that we have been planting during this session. But more important than the trees that we are planting is what we are doing with them. We are renewing life. We are all the time creating ways to create value to all the shareholders, all the stakeholders. This is part of our strategy. We are increasing the return on capital employed to our shareholders. It's incredible, the value creation that we have been delivering to our shareholders in the last many years, but it's not enough. We have to think about the society as well. How we mitigate the impact of COVID-19, how we think to address the structural problem for the future to solve the inequality problem that we have in the society or to mitigate at least that. This is something how we are going to work with diversity, how we are going to work on climate change. Suzano is embedded on the way to transform and impact the society. Today, we reached 2 billion people during every single month in the world, but we can do even much more than that. We can have [ other ] society. And this is our spirit. This is how we are all the time working every single day to change the company, to improve the quality of the company, to improve our business and to better impact our society. I would like to invite all of you to be part of our journey. Thank you very much. I hope everyone stay well and safe. Thank you.