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

Ladies and gentlemen, thank you for holding and welcome to Suzano's call to discuss the Cerrado Projects. We would like to inform that all participants will be in a listen-only mode during the presentation of Masters Walter Schalka, Chief Executive Officer; Marcelo Bacci, Financial and Investor Relations Executive Officer; Aires Galhardo, Group Operation Executive Officer; Carlos Anibal, Forestry, Procurement and Logistics Officer; and Cristina Gil, Chief Sustainability Officer. [Operator Instructions] We are proceeding. Please be aware that any forward-looking statements are based on the beliefs and assumptions of Suzano's management and on information currently available to the company. They involve the risks, uncertainties and assumptions because they relate to future events and therefore, depend on circumstance and may or may not occur in the future. You should understand that general economic conditions, industry conditions and other operating factors can also affect the future results of Suzano and could cause results to differ materially from those expressed in such forward-looking statements. Now I would like to turn the floor over to Mr. Walter Schalka. Mr. Schalka, you may proceed.

Hello, everybody. Welcome to the Cerrado project presentation. It's a great pleasure to be with you today. And with me, we have part of the members of the Executive Committee. On the end of the session, we'll be ready to have a Q&A session about Cerrado project. We are very pleased today. Today, it's a very important day in our history where we are going to give details to you about this project. That is transformational to ourselves. It's something that is going to create value to not only the shareholders but to all stakeholders. It's very important that is part of our strategy and is related with the 2 different avenues that we have. The first avenue that is related with our relevance on the pulp business worldwide. And the second and not less important, is looking for our competitiveness, how we are going to keep improving competitiveness for the future. And this project, as you are going to see, its remark in terms of competitiveness in the wood pulp market. We have economies of scale. That is quite important. This is a very resilient project in terms of return on capital employed. Even on very difficult and very stressed scenarios, we will deliver enough return to our shareholders. And it's going to improve our sustainability growth as well. As you may know, this is a very important part of our strategy, it is the fifth pillar of our strategy as to how we are going to impact the work. Just remembering, one of the points of our culture, it's only good for us if it's good for the world. And it's based on a very solid term, demand growth. As you can see in the fourth -- third slide of the presentation, we have right now one organic growth going on the market around 1 million tons a year, a little bit more than that. But in addition to that, we believe that Fiber to Fiber is going to have an incremental volumes every single year. We are gaining market share over softwood market from the last many years and we'll continue to do it. We are seeing some entrants right now on different markets, including containerboard. And this could be a potential new areas of growth of our Fiber to Fiber strategy. In addition to that, we have the Fossil to Fiber. We -- it's very clear that the wood is -- would be even more sustainable for the future. And we cannot think on the future where we are going to have single-use plastics or disposable products with plastic base or fossil fuel base. We are seeing in the future, textile market growing in the direction of fiber applications. Then we are going to see a lot of new possibilities coming, what we call new addressable markets that will create the future demand. And I'm sure that we are going to see that we are going to have high single growth percentage in the hardwood market in the coming years. This is a very relevant project to you-- to us. Our total investment that we are going to do is BRL 19.3 billion, BRL 14.7 billion in defense and we have additional investments that we are going to share with you related with forest and logistics and other areas as well. This is very important. It's very relevant. But as you may know, the last 12-month EBITDA of Suzano is more than BRL 19 billion. That is less than 1 EBITDA that we are going to invest on this project during the next 3 years since the start-up of this project is second half '24. This is going to be the lowest cash cost on our production base. You are going to see the numbers today how we would impact our competitiveness for the future. And we are going to have a nominal capacity of 2.5 million tons. In addition to that, I think it's very significant contribution that we are going to bring to our sustainability. And our Chief Sustainability Officer Cristina is going to share with you today some of these impacts for the future. Now I turn to Carlos Anibal. There is going to share with you some information related with forest and logistics. The floor is yours, Carlos.

Thanks, Walter, and good morning, everyone. I hope you're all well. So Page 5 of our presentation. So on the forest side, we are progressing, I would say, quite well. Cerrado project is unique in terms of forestry competitiveness and also optionalities to build up our structural forest bases. We already have 100% of wood needed to start our operations in the second half of 2024. Looking beyond that, we have already secured close to 90% of all the wood needed by 2030 when we'll be finishing our first forest cycle. But what about the size of our forest bases for that project? That will consist of around 600,000 hectares of land in Mato Grosso do Sul and that will fit our both sides, Tres Lagoas and Cerrado. In that area, in those 600,000 hectares, we're going to have wood coming from our own forest in 30 quarters, and that includes Cimber funds and local mark as well. I can say to you that we have in place a pretty solid plantation plan to be executed over the coming years by ourselves and by authority parts. So we are, again, on track with that. Things are moving well and we are, I would say, in a good shape. So what drives our forestry competitiveness in that region. So let's move to the following page, Page 6 of our presentation. One of our project competitiveness pillars will be the structural average radius, the distance between the forest and the mill of only 65 kilometers. Again, this is unique. That will allow us to bring the Suzano's current radius of 220 kilometers to a structural one of only 140 kilometers in the future. Considering the characteristics of our land bases in that region which is pretty flat, we also have good plans to increase our forestry activities, automatization, and that applies to silviculture and harvesting as well. For the inbound with logistics, we are targeting to maximize the usage of our 6-trailers truck also known as hexatrain. Just to remind you, we are the only player in our industry with this type of truck to transport wood. When compared to the traditional 3-trailers truck, the 6-trailers transports more than twice the amount of wood per trip. So here, once again, we are showing that it's possible to combine cost reduction with environmental benefits, lower CO2 emissions, supported by more efficient trucks with a lower operational cost. With that, I invite Aires to talk about the industrial side. Aires, you are the captain.

Thank you, Carlos. Good morning, everyone. I hope you are doing well. We are in Slide 7. Cerrado project will be the most value-added and resource efficiency solution inside Suzano's facilities. With a leading technology for all main process islands in the fiber production, chemical recovery, Cerrado project will be environmentally friendly also. With the annual production capacity of 2.55 million tons, Cerrado will be the world's largest plant with a single eucalyptus pulp production line. And Suzano expects to exceed the production of 2 million tons in the first 12 months of operation. White liquor plant with gasification plants enabling full fossil-free operation in the lime kilns with optimizing pulp mills carbon footprint. Regarding true energy efficiency, the combined recovery boiler and the biomass power boiler system, we will generate a surplus of roughly 108 megawatts of renewable energy. Moving to Slide 8. Suzano could only do a project like Cerrado with partners with solid experience in the pulp sector. Our main process islands in the fiber production and chemical recover will be built by Andritz as was done in the Horizon 2. The water and industrial effluent treatment islands will be built by SUEZ and Veolia. Siemens, Hitachi and WEG will be responsible for support the Turbogenerators, Electrical Systems & Engines. The chemical plants are issuing the negotiation process and we are -- and we do not have from Horizon agreements. This should happen within the next 10 days. And as soon as we have this definition, we will make this information public. Now I invite Carlos Anibal to come back and tell us a little about the logistics of Cerrado project.

Thank you, Aires. So now we are on Page 9 to explore the Cerrado outbound logistics. So the pulp will leave the mill by truck. And we will drive around 230 kilometers until a transshipment terminal located at a city called Inocencia. For Inocencia, the train will take the Maranhao and railway, which is a concession from Rumo and the we'll travel close to 1,000 kilometers until port Santos. We already have an MOU signed with Rumo, covering the railway transportation from Inocencia until Santos. [ Mirosh ], which is another local railway could be a possibility in the future as well. Once the pulp arrives at Santos, we are discussing for warehouse and vessel loading facilities options in both port banks, right and left. So just to remind you, Suzano already have a concession in the right bank called T-32, which could be used for Cerrado as well. And then we also have more than one possibility in the left side. So the discussions are taking place right now and we should have a definition soon. To conclude, I want to say that we are setting up in a very competitive and reliable outbound logistic for Cerrado. With that, I invite Mike to go over the financial figures. Marcelo?

Thank you, Carlos. Good morning, everyone. I hope you're all well and healthy. I'm going to start with Page 10 to give you an overview of the financial strategy related to the project. We will be spending in the next 3 years a total of BRL 19.3 billion, representing an inside defense CapEx of $1,100 per ton, plus BRL 4.6 billion of other investments, including forestry, logistics and other items related to a plant of this nature. The bulk of those disbursements will take place in the years of 2022 and '23. Only 5% of the total will be spent this year, including the disbursements that we already made so far. This investment will allow us to run a plant like Carlos and Aires described with an initial cash cost of BRL 500 per ton after the ramp-up, having the ability to reach over time, a potential of BRL 400 per ton, which is by far the most efficient plant in our operations. That includes, of course, the benefit of selling 180 megawatts of energy to the grid. The annual sustaining CapEx of this mill structurally will be BRL 700 million, representing BRL 270 per ton after the stabilization of the forestry base after the first forest recycle. Moving to the following page. I wanted to talk about the returns of this project. The return, as Walter said in the beginning, is very interesting, very high and very resilient to different scenarios, various asset scenarios. For any FX rate, below BRL 5 per -- above BRL 5 per ton throughout the life of the project, the project will have a return in excess of the cost of capital. The same will also be true for any pulp prices above $520 per ton throughout the life of the project. That would be the average forever. And bearing in mind that the long-term average so far has been around $600 per ton. So the project is very value-accretive and very resilient to asset conditions of-- potential asset conditions of the market. Moving to Page 12. I want to talk about liquidity and the effect of the project on our debt. The disbursements, as I said, will be concentrated in the years of 2022, '23 and above 20% in 2024. And those years are years in which our debt maturities are very low. We have been preparing the company and our debt structure for this project for a long period of time. And now we are in a very good condition to cope with this very high CapEx figures for the coming years. This will be -- will allow us to be very comfortably dealing with our liquidity. And the assumption here is that the cash position we already have which is about $3.5 billion, as you can see in the graph, plus the cash that we will be generating during the construction period will be able to fully finance the CapEx without the need for any additional financing. We, of course, may go for specific long-term financing for the project if some opportunities may appear and we may consider those interesting although they are not needed. Moving to the following page. The project will be implemented with Suzano continuing to be fully compliant with our financial policy. We expect the leverage to be below 3.5x during all times during the investment cycle that will be involved with in the coming years. And that will allow us to protect our existing investment-grade rate. We, of course, do have contingency plans in place designed for potential adverse scenarios as it is the case of our prudential financial management. So with that, I will turn to Cristina to talk about sustainability. Please, Chris.

Thank you, Marcelo. Good morning, good afternoon and good evening to all of you. As Walter mentioned, Suzano is driven by the belief that it is only good for us if it is good for the world. And it is exactly how we are building Cerrado. As Suzano grows, we have the opportunity to have more positive impact. When you think of the visibility of Cerrado where Cerrado is taking place, this municipality where 45% of the families are in poverty conditions. So we're looking at how to integrate and how to have shared value with our local community by hiring local talent and also by looking and favoring local procurement. We're taking a lot of action in skill building, for instance, a literacy program for adults and other ways to incorporate people into our value chain. And as you can see on the slide, we're also using our 7 key pillars to tackle poverty and reduce it in this particular area. In the first year, in 2022, the Cerrado project will help 4,000 people with income generation projects. That's only in our first year. Think of all the opportunity we have to advance our social cost and help the communities throughout the years with the Cerrado project. And when we move on to the environmental side, we have a lot of opportunities as well. In terms of eco-efficiency, you've heard it from Aires and Carlos and also from Marcelo, we're doing numerous things to increase the efficiency of our mills. We will use less raw materials, particularly some chemicals. We will also reduce water withdrawals. We will continue to have a close water loop cycle like in all of our plants, but this one will be even more efficient. And we're also harvesting rainwater to incorporate it into our process. Our waste generation will be reduced as well. And we will continue to be very responsible with climate. As you know, we announced that we're moving forward our very ambitious goal of removing 40 million tons of carbon dioxide equivalents from the atmosphere. Our original long-term goal was 2030. We moved it forward to 2025. And Cerrado is an important contributor to achieve this goal. And we're doing it in many ways, right? On the one hand, the biogas and renewable electricity and the surplus of 180 million -- 180 megawatts that was mentioned, but also a very high energy-efficient mill and low-carbon intensity. As you know, that very short distance from forest to mill also helps reduce emissions from transportation and logistics. The carbon removals, of course, through our forestry, but through the biodiversity area, the natural areas that we're protecting contribute to additional removals. And we're looking not only at the carbon side of things of being carbon positive, but also and other elements of biodiversity with the corridors that we're creating, the ecological corridors to connect different areas. As many of you know, Cerrado is a very threatened biome, a very important biome. More than 50% of Cerrado has been lost. So we will do our part to preserve those natural habitats and also to restore native vegetation and be a good steward of both the community and the natural resources of Cerrado. Back to you.

Thank you, Cristina. Now going to the last page of the presentation. I would like to present to you some very relevant points on this project. The first one is related with our track record, proven experience on this kind of projects. We have a very strong team and I'm very confident that we are going to deliver on time on cost project. There is a very good and a very good track record that we have. The second, as Cristina mentioned, is related with our sustainability goals is going to address many other opportunities that we have in terms of E&S on our equation and this is very positive as well. We are in a very robust financial position and we have a very financial discipline as well. We have been proving to the market that our financial discipline related with our policies are very well connected and we are doing that on a very strict way. In addition to that, I think it's very clear that we have been proving a very good cash generation on the last many years. And we don't need extra fund, but it's very important to mention that our cash generation has been very positive. And last but not least, this is going to enhance our competitiveness. It's going to enhance our bulk relevance on the wood market. We believe that we are in a very good position. And I would like to present to you a small video right now about this project that is going to share the size and the relevance of this vision to the local community and to the pulp market. Please, let's share the video. [Presentation]

[Operator Instructions] Our first question comes from Jonathan Brandt, HSBC.

I guess my first relates to the cash cost. It seems like most projects that have been announced over the past decade or so have been the lowest-cost producer. And yet, every time there's a new project, it seems to be even lower cost than the one before it. So could you just maybe walk me through how are you bringing costs down so low, be particularly interested in knowing how you're going to take costs from BRL 500 per ton to BRL 400 per ton? How much of it is due to the low radius diverse industrial efficiencies from newer projects versus just the scale of the project? If you could sort of help me understand what are the main drivers behind such a low cash cost? And if you see sort of this trend continuing with new product acts that will be announced in the coming years. Do you think it could be even lower than the cash costs that you've announced? Maybe not necessarily your projects, but just within the industry. And then, my second question just relates to the time line. We've already seen a bit of a delay from the first half of 2024 to the second half of 2024. And given sort of supply chain issues that we're experiencing, how confident are you that the mill will actually start in the second half of 2024? And then just lastly, if you allow me. So you spoke a little bit about the outbound logistics. But I'm also wondering if you need to secure more vessels. So I understand you have the rail and the port well established. But just from a vessel standpoint, what are the plans there?

I'm going to have your questions. Let me try, first of all, to share with you about how we build this project in terms of very low structural cost the idea is that the structural cost is going to be below BRL 400, sorry, after the first cycle of forest. And the first cycle, we are going to use more wood base with a position that we made in the last few months, and we'll be ready to proceed with that since the beginning of the operations. And during this first cycle, we are going to be below BRL 500 million as a cash cost. And the reason on the very low structural cost, Jonathan, that you raised is the fact that first, we are going to have very low distance from the forest to the plant. Having that with 65 kilometers using multi trailers as 6-trailers that we are going to have, have a very large part of our proportion. Our logging costs are going to be very low. Our transportation-- wood transportation cost is going to be very low. As our industrial cost is a single line with very large economy of scale of 2.55 million tons. And with very large export of energy, we are going to be in a position to be -- have a very low-cost of production. Then the combination of very low wood cost with very-- variable and fixed cost at the plant will allow us to reach this number that would be a wonderful number below BRL 400 as structural cost for the future. In addition to that, you asked me how is replicable this to the other companies? That would be possible but it's not be very easy. We are pursuing a project that is very difficult to replicate since we are going to have very low distance from the forest to the plant. That is not very easy to do it because only a few areas of the world, you can have this high productivity with low average distance. And in the terms of industrial costs, you can replicate, yes, in other parts on the new projects coming on stream. We-- you asked me about the competitiveness of this project. And this is one of the critical points, Jonathan, on our decision to proceed with this project. Since even as Marcelo mentioned to you, on a very potential asset scenario, we are very resilient in terms of return on capital employed over work, then we are very comfortable to proceed with that. Now I'm going to pass to Carlos, there is going to explain a little bit about the logistics.

So right now, we have an ongoing discussion with our shipping potential suppliers, and we expect to conclude that discussion in the coming weeks or months. As we always do, we are negotiating a long-term contract. And depending on the supplier or supplier that we're going to choose, we can have -- we can use existing vessels or new ones. Again, that depending on the suppliers that we're going to have selected not to work with us for additional capacity.

Our next question comes from Rafael Barcellos, Santander.

Could you please elaborate on the wood supply conditions in the state of Mato Grosso. So I mean, we have seen more players looking for wood supply in the region. So how is the competition in the region? And whether or not it may represent a risk of higher costs going forward? And my second question is a quick follow-up on the industrial equipment, which is basically a follow-up on Slide 8. I mean, could the current logistical constraints and even the recent shortage of industrial components represent a risk to the project schedule, I mean, do you see this as a risk to the current project schedule?

On the wood supply, I just want to remind you what I have said in my presentation, we already have all the wood needed to start our mill in the second half of 2024 and we have already secured 90% of all the needed by 2030. I also mentioned that we have a very solid plantation plan to be executed in the coming years and that includes our own forest and also 30 priorities. So although we recognize that there is a growing competition in the region right now to some specific demand event, we do not see that impacting our projects.

And I have to apologize with Jonathan to not respond at the other question that you mentioned about this potential risk in terms of scheduling of this project. We are very confident that we are doing the reason that we postponed one of the reasons that we postponed the commissioning of this project is related with the fact that we progressing the decision until we reach one adequate position with our suppliers and with our financial position that you remember, were precedent conditions when we approved the project on the first half of this year. And this is the reason that we are much more confident right now. And we have a very good track record. We do not believe that logistics issue that we have in place right now, the constraint that we have would be limited to have this plant commissioning in the second half of 2024.

Our next question comes from Carlos De Alba, Morgan Stanley.

The first one is if you could comment about details on how much -- or how many credit, CO2 credits will the project generate that would meet additionality conditions that could potentially be sold in the market? And if you have considered this in the economics that you have presented? Second question is related to some of the assumptions behind the numbers that you presented. What is the energy price and the pulp price? And I guess the [ BRL 5.50 ] something that is mentioned in some of the footnotes. But what are the energy and pulp price assumptions in the net debt-to-EBITDA remaining leverage remaining below 3.5x throughout the cycle-- in the CapEx cycle and also in the cash cost of the project, again, what is the energy price that you are assuming there? And then finally, what is the length of the contract that you have negotiated with Rumo? Is it renewable with a specific condition in terms of cost escalation? Does he have a cost escalation throughout the length of the original contract. And one more, sorry, if I may. Just what is the wood mix that you have contemplated for the project in terms of own and third parties?

Thank you very much, Carlos. We are going to answer this for questions that you raised for us. I'm going to start with the carbon issue. It's very important to mention that for sure, we are going to have additionality with this project. But we are not considering this on the return on capital employed. We are considering this as a 0. We don't know yet if Brazil is going to be part of the global regulated market or will Brazil would allow us to have participation on the offset marketing through a voluntary market, carbon market. That we are going to work in both directions, but we are very conservative on our projections on our forecast. And this is the reason that we did not make any carbon price on this project despite of the fact that we are going to have a very relevant additionality carbon on this project. It's very clear. There is a project that is going to create more biomass. We are going to be extremely competitive on this. And we are going to increase our forest base and this is very positive as well. In addition to that, we are going to have renewable energy, 180 mega going to degree. The combination of everything, I'm sure that is going to create one negative impact on carbon, we are going to have, even including scope 1, 2 and 3, we are going to have an ability to have additionality for the future. Now I'm going to pass to Marcelo.

In terms of the pulp price that we used, we haven't used a given pulp price. We have a range, as you can see in the graph that we showed, that we consider for the return of the project between 450 and $600 million being $600 the long-term average that we see in the industry. So the idea here is that for any price in the -- that we have seen so far in the industry, the project would be accretive. In terms of the energy price that we use, I'm going to come back to you with that information.

Just one clarification there, Marcelo, if I can. The same applies in terms of the pulp price range applies for the leverage, the net debt-to-EBITDA remaining below 3.5x?

Okay. No. Even for the projection of the leverage, we use the very asset scenario that we prefer not to share. Even in an asset scenario, we will be below 3.5x.

Regarding the logistics, as I said before, we are setting up a very competitive, very reliable outbound logistic for the project, but I cannot disclose the details of the contract due to a confidential agreement that we have in our contract. But I can say to you, again, it is very competitive, the solution that we have. Your question,

Any comments on the -- yes, the wood mix?

Yes. On the wood, we -- I'm not going to provide the details right now as this is very sensitive, but I can let you know in advance that we're going to have in the beginning, more third part wood. We're going to have a higher content of 30 RD in the beginning, and that will be reduced along the time. This is what I can say to you right now.

Our next question comes from Thiago Lofiego, Bradesco BBI.

Two quick questions on my side. What's the average radius in the first year? So I understand the 65 kilometers is only after 2030, correct me if I'm wrong. So what would be the average radius until then? And then, the second question on the commercial strategy. Should we think about the same volume breakdown in terms of regions for those new volumes? Or are you thinking something different here? Any long-term contracts to be signed with large clients or maybe more spot tonnages? So just a little bit more color on the commercial strategy.

So as I said before, in the beginning, we're going to have a higher commitment of third quarter bid, meaning that we're going to have longer radius in the beginning, but we cannot disclose that information for you right now. So it's going to be longer in the beginning, and that will be reduced along the time.

And just to have a complement on the Carlos position, I think it's very important to mention, Thiago that in the beginning, our cash cost is going to be higher. But even so after the ramp-up period is going to be below BRL 500 per ton. That even with higher distance that we are going to not provide details to you, we are going to be at a very low cost on the beginning. This is the reason that we share with you these 2 different periods. There is after ramp-up and after -- and when we have this structural cost. When you ask about commercial, we are looking for long-term contracts with our main potential customers. But in addition to that, we are not going to have the same breakdown for the future. We are going to have higher concentration on the Asian countries with these additional volumes for the future. Then we are going to increase the participation of Asia on our total breakdown for the future.

And if I may, about the spot tonnages. So should we think about more tonnages being sold in the spot market in Asia? Or is it like mostly contracts? What's the idea there?

No, we would like to proceed with the same way that we are doing right now. We want to have a large part of our volumes on the contract market. Just a small part on the spot market.

Our next question comes from Marcio Farid, Goldman Sachs.

The first one on the CapEx. You announced today BRL 4.6 billion incremental CapEx that is outside of the industrial CapEx that we had before. I'm just trying to understand how should we think about it in terms of logistics and forest? Because, Carlos, you mentioned you have secured about 90% of the total forest wood. So I'm guessing that the CapEx has been already spent? And if so, how much has been spent on the forest that we have built so far? And how should we think about the breakdown of the BRL 4.6 billion that you mentioned? And the second one, I mean, this is going to be probably one of the first -- one of the largest single lines in the world, right? It's close to 2.6 million tons CapEx a year. We're probably similar to one working in Indonesia and Brazil as Star project in Brazil. So just trying to understand here, what are the risks? And how can you mitigate or how confident or comfortable are you of a such a large equipment on the ramp-up and even on the first years of the operations as well?

I could not you very well. I'll try to answer what I understood. If I miss any part, let me know. But basically, in that BRL 4.6 billion that we have in for logistic forestry. We have included all the CapEx needed on the far side to run our operations until they start up. So all the Cap is included there. Regarding our structural basis-- forest basis that is not included in that number, and that will be informed every year in our annual guidance as we do and that is linked to our business strategy. So again, to make it simple, all the CapEx needed to run the forest operations until 2024 is included in that number.

Just a follow-up, Carlos. Can you provide us a guidance in terms of how much you have spent to form the forest that you had so far for the expansion?

Marcio, sorry, again, this is very sensitive as we have several discussions and negotiations taking place. We cannot disclose that information as we speak. Marcio your second question, could you repeat please?

Okay. Sorry. I just -- I was just saying that this is probably the largest single line in the world. We had a major recovery boiler as well, nearly 1.6 million tons, probably the size of [ 82 lowkey Bracell ] to start projects in Brazil. So just trying to understand how comfortable, confident you are of having such a large equipment, what are during the startup, but also in the first years of operations as well. And what are the assurances or how have been the conversation with the suppliers that this later boiler is going to be working out well on a major single line.

Since the beginning, we detailed the product monthly, month-by-month, how you attack the land to the assemble in the part by part of the project. Then we have we have -- we're checking in CIP details, all the bottlenecks that we have in our process Islands and recover chemical process. We are very confident because we have a center engineered team that have built other products with a higher success. We are confident in our partners that we decide to join us in these projects, especially because our last experience in Horizon 2, we had a very successful performance. We don't see how do I consider some between 30, 32 months of implemented product. Any risk of have any delay of commission and start-up and I don't see, at this moment, any risk of any problem in terms of inputs that we -- because of the logistics are the other reasons that we need to put in place as a product. The sum up, we are very confident that with our performance and with the lead time that we are presenting in this project.

So I'd like to complement the answer that was owing to Carlos, the about the energy price. The energy price that we considered for the cash cost is BRL 190 per megawatt, including the spread related to biomass.

Just to complement, the spread here is the difference that you have produce energy with some benefits, that's renewable. Then we don't pay the tools and any other tax that we included in the energy.

Our next question comes from Daniel Sasson, Itau BBA.

But I just wanted to make sure that your BRL 270 per ton that you guided for maintenance CapEx does include both the industrial and forest operations? Or if it's just industrial because it seems to be significantly lower than what you have today, right, in your current portfolio of assets. So just wondering, the BRL 270 million are, if they include everything or if there's something missing here?

Yes. The BRL 270 per ton will be our sustaining CapEx after the stabilization of the forestry base, and it does include the forestry CapEx that we're going to have after the first forestry cycle. It is a lower number when compared to our current average because of several factors, especially, the technology and the age, the technical age of the new plant when compared to the asset base that we already have.

Our next question comes from George Staphos, Bank of America.

I wanted to come back and ask the question that Marcio was getting at. In terms of what you may be doing differently here from a risk mitigation standpoint relative to other mills that you have, again, you've got a massive line in Cerrado, you're also shipping 1,000 kilometers to Santos port. We understand the efficiencies that you get from scale but that also means that there is greater risk if something goes wrong in the process or in distribution. So can you explain a bit more in terms of what you're doing differently, again, from a risk mitigation standpoint, if at all, to preserve the returns that you're expecting in the project? My other 2 questions, given the advantages that you have in wood here in Cerrado, is it safe to say whatever project you do at any time in the future will have difficulty competing on a cost per ton basis with this project? I know it's looking out a bit far, given that you haven't even started Cerrado, but nonetheless is curious about that. And then lastly, Walter, if we go back to one of the first slides, Slide 3, I believe, how important in your view is the Fossil to Fiber in terms of the demand outlook, that is, in turn, underwriting while you're doing Cerrado because we're still seeing plenty of single-use plastic being used. In fact, it's growing more quickly from what we're seeing in North America this year versus fiber. So how likely and how important is that shift to your strategy with Cerrado?

George, thank you very much for your questions. I'm going to take the 3 of us -- 3 of the questions that we have raised. Let me share in the other way around with the last one. I think it's very clear, George, that we are seeing right now. It's a major move of the society towards less plastic. And we are in a very good positioning to be someone that is going to replace these materials. We recognize that plastic is very important for the society. But we even recognize and understand there is not very good for the society to have single-use plastics to have -- we need to have only plastics for long use only duration, since they are not biodegradable. We need to do it immediately, and this is something that a society worldwide is moving on this direction. It's very important to know that is related with technology. That have very increasing maturity. That is very important. And on the other hand, competitiveness. We are improving on both sides, and we believe this is going to be a very relevant part of the equation for the future. I truly believe, George, that wood and biomass are going to be critical for the world. And we are very well positioning on that. As you know, we have right now 1.5 million hectares of planted areas. We are the largest player of planted forest in the world to pulp-use. And we are -- we believe that we are very well-positioned in terms of forest productivity and competitiveness to be a very low biomass cost. Talking a little bit in the second question that you raised related with risk management of this project. This is the first question, sorry. Yes, you raised this question. And my perception is that we are very well positioning since as Carlos mentioned to you, we have enough wood supply in the wood side, we are very well positioning. On the logistics, we are using exactly the same railroad that we are using to the Tres Lagoas to the port. And this is -- it's critical to Brazil that is not only pork its many different products going through that rail system. And we do a very long and good contract with Humo on that. And in the port, we have 2 different terminals on the both sides, then we are extremely well-positioned in terms of the port terminals as well. In the shipping capacity, as Carlos mentioned to you, we have several players. And right now, we are going on the discussions, who is going to have this additional volume that is going to operate with us, then we are very well positioning. And if you don't mind, can you repeat the second question, if I take note here, but I don't know if I'm right or not.

Just could you replicate Cerrado at some point in the future? Or is this the best mill you're ever going to have because of the advantage you have in wood? And just within the mill, are you doing anything else differently on a risk mitigation standpoint?

The potential new project for the future could be Cerrado 2 and this is going to be even better of this project. If we have the second line in Cerrado in the future, it's going to be even better in terms of competitive.

As there are no questions, I would like to turn the floor over to Mr. Walter Schalka for final consideration.

I'd like to thank you very much for the participation of everyone in this meeting. I would like to share with you some very important information. I think this project is going to create huge value to our shareholders, is going to be extremely compete -- competitive in the cash cost. But in the other hand, it's very important there is comparing with other projects, is going to be low CapEx per ton, lower CapEx per ton. And we are talking about 1,100 in defense. And you know that many companies are negotiated in the stock market at a much higher equivalent amount, then it's going to create value in any way of thinking of this project. We believe in addition to that, that we is going to increase our competitiveness since the SG&A, incremental SG&A that would be required for this project. It's lower per ton from what we have today. And we are going to have extremely good results on sustainability. As someone asked about carbon coverage not priced on this project, it's an additional potential benefit that we have for the future. Then we are very confident that this project is going to create value to our shareholders. But in addition to that, we believe that this project is going to transform lives on the region that we are going to invest on the communities where we are going -- the trade balance for Brazil, we are going to increase the benefits of the commercial trade balance for Brazil and we are going to create jobs, create better quality of life for many people in the future. And in the near future, since we are going to start constructing the project. We are very pleased to be a part of the project, very proud, and we know our responsibility to deliver this project. We have good quality and many of all the projects that Fibria and Suzano have been going through in the past. Thank you very much to all of you, and let's be in touch.

Thank you. Suzano's call has been finished. Have a nice day.