Suzano S.A.

Good morning, everyone. It's a great pleasure to have you all here. We'd like to have one investor day, one more investor day. We are very happy to be here with you. I would like to mention the presence here of a lot of analysts and investors, and as well, the president and CEO of the Federação das Indústrias do Espírito Santo, Cris Amorini. Thank you very much for joining us here. It's a great pleasure to discuss with you what would be the future of Suzano. We have been talking to you several times about our vision of the future and we are going to be in more details today how we are going to operate, how we are going to have capital allocation for the future. Our agenda today is that we are going to discuss about the highlights of 2023 third quarter results. After that, we are going to talk a little bit about business strategy. Every single C-level of the organization, except Pablo, there is in China, is going to join us here to present their specific area and what would be the potential implication for the industry in the future. And then Marcelo Bacci will come here to present to yourselves about our financial management. It's very important to mention on the third quarter results that we reinforce our operational performance, excellent operational performance, and how we navigate on a situation of rough seas. We deliver at this quarter a EBITDA of 3.7 billion reais, meaning that even on a very difficult market scenario, we are performing very well comparing with our peers. And this is bringing our competitiveness to the surface. How we are doing on a much better result than the average of this industry. It's even, I'd like to reinforce another very important point. It's the operational performance of the company. We have a deflation on our cost during this quarter. Our cash cost, and Iris is going to tackle on that, was 861 reais, much lower than the previous quarter. And this to improving on certain specific areas that he's going to detail for us. I'd like to bring one more point point that is quite important. We are on one of the major capex of our history right now. At this quarter, we had 4.4 billion reais, meaning roughly 900 million dollars of investments during this quarter. investments on modernization, or investments on expansion of our business. And even with this scenario, we had just 0.2 billion dollars on increase on our total debt. Our net debt was 11.3 billion reais, now is 11.5 billion reais, meaning that we invest 900 million reais, and even so, with interest and other things, we have been increasing our debt in 0.2 billion reais. Our net financial situation is very well prepared for the future. We have a very strong liquidity position right now and we are very better prepared to our next level of investment. I would like to share with you about our business strategy. And it's very clear that we have a very good capital allocation. I think it's indisputable that we had a very important capital allocation in the last years. We merge with FIBRA. We increase our land banking. When everybody was talking, was discussing, was leasing, we are buying land at a very much lower cost than we have today. We are increasing value and preparing for the future. Carlos is going to discuss with you about our strategy on that area. We enter in the consumer goods that at that time was absolutely no relevant in the company and we are gaining relevance on that. Yesterday we announced a new investment of expansion on this business. Louise is going to discuss about that. We changed completely the business scheme of the paper business. Some years ago, they said, no, this is not a good business because we are going to have lower volumes in the printing and writing. We are performing extremely well on this business. We are entering on new areas, on new dimensions. Fluff is one of the examples. Five or six years ago, when we decided to enter on that, everybody was telling, no, this is not a good business. Why are we going for that? Now we are showing that we are going to have a very good journey for the future. Then... But we are very humble to recognize that our track record that is very good is not enough to justify our future. We need to be looking how we are going to operate better. And we have two things that we are devoting our efforts and our resources right now to prepare the future. One thing is capital allocation. Very disciplined on capital allocation. We are going to discuss about this issue. Marcelo is going to go in more details on that. But this is very, very important. How we are going to allocate capital for the future in the company. And the second thing that is quite important as well is the fact that we are a startup company, 100 years startup company. We are going to turn 100 years now in January, in three months from now. And we want to have this entrepreneurial spirit. We want to attract people. We want to develop people. We want to retain people to be better prepared for the future. And it's very important to have that our organization structure is well prepared to deliver results all the time to the company. We are very proud from what we are doing. But culture is a quite important issue that is not only related with HR. It's related with all the single areas of the organization. And I would like to bring to your attention the discussion of the culture. I'd like to invite Carol Carpenedo that is going to discuss a little bit more in detail with you. Thank you. Thank you, Carol.

Thank you, Walter. Good morning, everyone. It's a pleasure to be here with you. So we believe our value creation comes from our human capital and our strong culture. So the DNA of our culture comes from the founders and has evolved, making us arrive in these 100 years. And we are going to continue to plant the seeds for the next 100 years. You all know our purpose, renewing life, renewing life inspired by trees and also our three main drivers. We are people who inspire and transform. We want to create and share value. And it's only good for us if it's good for the world. And we are constantly reinforcing them and making sure decisions are made, taking them into considerations based on them. But we also know that when companies grow, they tend to become slower and excessively bureaucratic. As Suzano is a company with growth, we tackle such trend and make sure we act investing and making sure our mindset, our entrepreneurial spirit, our agility and our innovation are embedded in our culture. We have been in 2023, we started a culture journey with involving all our team members. So we host dialogues with our operation. We look to identify what were the improvement opportunities. We also train all our over 900 leaders And we train them for today, but mostly important, for tomorrow. We invest time in our people to forge Suzano's future. So, and as Walter said, this is not, it can be an HR only topic. This is the whole leadership responsibility. It's a mission undertaken by all our leaders. And we follow and manage this closely. So we measure, we have a quarterly assessment, and this is impacting the variable compensation of our leaders. who are making sure we are spreading this and living throughout the whole organization. So now I would like to invite my colleague Christian to talk about our new ventures.

Thank you, Carol. Good morning, everyone. Pleasure to be here with you. As you know, Suzano's strategy is anchored in five avenues. I will start with you explaining a little bit more how we're evolving in the second one, how we're expanding the pie, expanding boldly into new markets. In fact, there has been a lot of progress over the last 12 months, more than inaugurating our cellulosic fiber plant in Finland earlier this year. We also inaugurated our pilot plant in MFC here in Limeira. We are growing our lignin business, almost tripled our sales volumes, still small but very promising. We continue to develop not only commercial applications but also commercial agreements with global partners in our bio-oil and green energy field, a very important field in the future for Suzano as well. And we continue to certify new carbon credits and take them to the market. And finally, also important, we set up the Biomas project together with our partners, not only to take care of the native forests, but also to restructure them as well. So a lot of progress in multiple fronts. And at the core of that, the essence of that is a word called innovation. Innovation for sustainability. And this is driven by a strong network of people pushed by Suzano Ventures. Suzano Ventures and our three R&D centers in Brazil, Israel and Canada. We also inaugurated this past year our Innovability Hub in China, which is connected to a very dynamic, innovative ecosystem in the Asian market. And this is allowing us to connect to a very broad set of entrepreneurs, startups, academia, and different players that are driving innovation not only in our industry, but in the much broader world as we try to bring sustainability to the world. And we are very proud also to see the first effect of that, of being elected the number one most innovative company in Brazil this year. We are very proud of that. As Walter said, we are a 100-year startup. And to keep this mentality, this is a clear sign of the market that we're moving in the right direction. More specifically on Suzano Ventures, there was a lot of work this past 12 months. We assessed more than 350 startups all over the world in different geographies, all anchored in our four key verticals, biomaterials, packaging, forest tech, and carbon. We decided to invest in three of them. Two of them already signed off, one in the UK, around eucalyptus biomaterials, the other one in Israel around forest tech, and we're finalizing the third one as we speak probably still this year in the Nordics. So this is how we are pushing innovation and sustainability into the company, but I know you all want to know how we're doing in the wood side as well. So I invite Carlos to take you through that. Carlos.

Very exciting. Thank you, Chris. Good morning, everyone. I'm happy to be here again to bring you an update about our forestry business. I want to start this session with a question. Before, I would say this is a $1 million question, but given the current wood prices, this is just a truck of wood question. Truck of wood question. What is the question? The question is, in the future, in the long run, Worldwide, will there be enough wood? Will there be enough wood? The best way to answer that is to look at the wood supply and demand fundamentals. On the supply side, growing restrictions. On the demand side, growing markets. Let me bring here just one single example, which is Canada. Canada produced about 8 million tons of market pulp. 8 million tons. In the last five years, 3.5 million hectares of forest were burned. 3.5. 58% of the commercial trees in British Columbia were killed by the mountain pine beetle through 2021. 58%. In Canada, they have what they call annual allowable cut area. That number peaked at 90 million tons years ago. Nowadays, it's 60. 60 million, sorry, 60 million cubic meters. So it is hard, it is a bit challenging quantify all that, but for sure, the wood imbalance is there. And that situation can be even more severe in the future. Has that situation been different here in Brazil? Not at all. In Brazil, Yucca planted area, Yucca farms grew 10% between 2018 and 2021, which is the latest information available. In the same period, wood consumption increased by 26%. What is the outcome when you combine supply restrictions with growing demand? Wood market price have been rising. It has doubled since 2018. It has doubled. We have been anticipating all that, recognizing all that in advance. We have been leasing more land and leasing at lower prices. We have been buying more land. We bought parquet, we bought caravelas, we have been planting more. We have been preparing ourselves to better face this very challenging situation on the wood side. We have been planting the future indeed. But not only planting, we are pursuing a productivity growth, yield growth, MAI growth. Between 20 and 24, we will have grown our planted area in about 22%, reaching almost 1.7 million hectares. I'm gonna repeat that, 1.7 million hectares. This is what we are planning to do. We have put in place a very solid, a very robust wood productivity growth plan. We came up with a baseline curve with a growing yield. On top of that, we defined one ambition curve and one aspirational curve. Why is that? Climate change will be there and we need to deliver a growing MAI, regardless what is going to happen on the climate side. And we know how to do that. We have an in-house great achievement, which was Imperatrix. Since 2015, we increased our MAI Imperatrix in almost 92%. We increased our MAI in para trees 92%. We know how to do it. How did we do that? Better genetic materials, better knowledge about the climate, about the micro zones, better civil culture practice. We are leasing more land. We are planting more. We are growing our productivity. What does that take us to? radius, average radius between our Yucca farm and the forest reduction. Not only that, we're going to reduce our exposure to the 30-part market. So radius, as you can see, is going to come from the current 200 kilometers to 150 by 2030. Our exposure to the 30-part market today is about 36%. and that will come to only 13. In that 13, we're gonna have only 6%, only 6% exposure to the spot market, which we consider to be a very health number. Last but not least important, let me bring you an update about Mato Grosso do Sul, where in Cerrado, we have a showcase, a showcase of wood competitiveness. Yucca Farm Land Bank established we have all the land that we need for our plantation program. Our plantation program is going to be concluded by late this year, early next year. And we are also heavily investing in broadening our experiments to improve our silviculture practice, to improve our genetic material, to again in the end of the day, gain more productivity. I wanna highlight some uniqueness of our Cerrado project. Average radius between Yucca Farm and the mill, 65 kilometers. Six trailer trucks. We are planning to have that amounting 50% of our wood supply. And we are also innovating. We are taking advantage of the flat landscape to maximize, you know, or to launch the use of our mechanized process. We are mechanizing the plantation process there in Mato Grosso do Sul. With that, I want to invite my colleague, Ayres Gallardo, who is leading this fantastic, this absolutely great project, Cerrado, to give an update starting about our competitiveness. Iris, the floor is yours.

Thank you, Carlos. It's always a challenge to present after you. Hi, good morning, everyone. Suzano has invested in its all-value chain from the forest to outbound logistics. The investments reflect our focus on continuous expanding our structural competitiveness, seeking greater efficiency, especially in face of strong inflationary pressures. We are now announcing a new investment on the new power boiler in Atacruz Mill. an investment of around 500 million reais, which will contribute in the mill's maintenance capex and cash costs in the future. Some of the investments that we have made have already begun to benefit the cash cost performance, such as energy master plan in Jacareí Mill, which benefit the cash costs in the third quarter that achieve 861 reais per ton. We are seeing for the fourth quarter a new decrease in the cash costs of approximately a low single digit. Finally, in the export logistics of pulp, Suzano will be the only player in Brazil to maximize the benefits of efficiency, provides a new generation of 77,000 tons vessels that will soon enter the market. Only Suzano terminals in the left side of Santos and Itaqui ports have operational condition to load this new generation of vessels fully. Moving now to another important avenue, strategic avenue to Suzano, maintain relevance in Pope, we have the Cerrado project. In the Cerrado project, we have some important de-risking to share with you. First one, We are already preparing for the startup that will take place soon. It's a reality, it's coming. Number two, a successful execution of the estimate project evolution curve. Number three, the total project capex remains as previously disclosed. Another one important, that's the financial progress runs below of the percentage of physical execution, reducing risks and benefiting the project returns. And finally, the structural and post wrap up cash cost guidance continues as previous disclosure is here. Now, I invite you to watch a video about Cerrado Project.

We are always preparing for the future. In October 2021, we approved the Serato project, which involves building the world's largest single-line pulp mill whose structural competitiveness cannot be replicated. The ambitious project was meticulously planned in order to be executed on time and on budget, leveraging Susano's vast experience in similar projects. The project, located in the municipality of Rivas do Rio Pardo in Mato Grosso do Sul, sits on an area that is slightly smaller than the municipality's urban area itself. In an unprecedented move in the pulp and paper sector, Susano has announced in advance its project schedule, thereby demonstrating the level of confidence in its planning. Currently, with more than 10,000 professionals in the field, the works are in the final stages. recovery, balance of plant, water and wastewater, and energy. The same is happening outside the mill's boundaries with a new export logistics structure on schedule for startup. The new mill's facilities will have metal structures equivalent to five Eiffel Towers, 40 kilometers of concrete pipes, and a water treatment station capable of supplying a city of 1.3 million people. One of the largest private investments in Brazil that is currently underway is about to begin a new cycle of robust value generation.

This video is amazing, I love it. As seen at the video, we have disclosed the project's evolution schedule in advance every quarter. Once again, confident in our results, we are disclosing our Plants Roundup Estimated, which reinforces our commitment in not only starting up successfully, but also ramping up successfully as well, which we consider crucial for projects' returns. As the Investment Cerrado project represents Suzano's vision that the demand for pulp and paper will be higher in the future, I invite Leo Grimaldi to address you with our forward-looking view on pulp and paper sector. Leo, the floor is yours. Thank you.

We accept the challenge, Iris. Hey, good morning, everyone. So nice to be here. I'm excited to share with you some new information regarding our view on hardwood pulp and the bleach chemical pulp fundamentals as well. I'm going to start my presentation by reviewing our five-year forecast for demand and supply in Hardwood Pole, which is very similar to our review presented last year. On the demand side of the equation, we forecast that additional to organic demand coming from usual uses of hardwood, we are also already perceiving an increasing demand coming from fiber substitution. And it is our view that by 2027, demand for hardwood will reach 44.4 million tons. On the supply side of the equation, new projects like Cerrado will bring approximately 6 million tons of additional capacity. So considering this information, the demand to capacity ratio that we forecast for 2027 is 93%, which is quite healthy. And this does not consider three opportunities. First, additional fiber-to-fiber demand coming towards hardware. Second, demand coming from fossil-to-fiber initiatives, as we have mentioned in the past. And third, The upside risks, upside risks coming from unplanned downtimes that have been increasing year over year. This year I'm going to share with you a broader view on fiber to fiber, which is our view on what's going on on the softwood market in general. If you look at the graph, you will note that hardwood or BHKP has been gaining share throughout the years and today already reaches 61% of the demand for bleached chemical pulp. Now I'm going to share with you a new graph. Probably you have not considered this. And I ask you the question, have you seen this before? Our team has put together all the capacity that has come or that will come on in terms of software globally. At the same pace, we have considered here all the already announced definite closures of software mills. Definite closures. And that brings us to a scenario of a net negative capacity change in the softwood market. Net negative. In the last three years, more than 2 million tons of net negative capacity. And already today, with the announced closures, definite closures for 2023 and 2024, we come up to almost a new 1 million tons of net negative capacity change. More and more demand of fibers will be redirected to hardwood grades. Hardwood is increasing its furnish, not only in tissue, but also in packaging, as I have mentioned last year, and also in specialty papers. This is an absolutely huge opportunity for us. Huge opportunity. Now I'm going to go to the supply side of the equation and share with you our sales plan for Cerrado in 2024. Iris has just shared with us the ramp-up curve for Cerrado. Taking into consideration that ramp-up curve and the inventory build-up that we need to do in order to guarantee optimum operational levels, as well as the supply chain commitments to our customers, we are forecasting to sell 700,000 tons of Cerrado pulp in 2024, with the bulk of this volume reaching markets in the fourth quarter of the year. We know, we understand that volatility, price volatility, should happen throughout this next five-year period. But as has seen before, marginal cash costs serves as an anchor to these price valleys. You can see that clearly on the graph that we are presenting here. And we have just reviewed, together with Hawking's Right Consultancy, the marginal cash cost estimates for 2024. Based on this study, one month ago, the new forecast for marginal cash cost for 2024 reaches $560 per tonne by year-end. $560. And this does not include, obviously, volatility on commodities or wood availability or wood cost and how this can influence further this number. With that said, we have been noticing a lot of pricing trending below marginal cash costs for the last months. And as expected, there is a lot of unplanned downtime. In hardwood, We already see 1.4 million tons of unplanned shutdowns this year. 1.4 million tons. This is a new record year for unplanned downtimes in hardware. And 60% of that are market-related decisions due to obviously prices below marginal cash costs. This helps obviously the market balance itself. With that said, now I'm going to move to a new chapter of my presentation. I'm very glad and proud to present to you for the first time our view on the fluff pole market globally. Fluff is a growing market and is expected to grow at a 4.2 kg for the next years, reaching almost 8 million tonnes by 2027. So this is the size of the addressable market in terms of fluff pole. The two main drivers for growth in fluff pole are adult incontinence products, and also the growing demand for hygiene products in Asia, which represents almost 50% of the demand for fluff pulp products. On the supply side of the equation, it's very interesting to see that only three North American producers concentrate almost 80% of the global supply. As an example of innovation, or innovability as we like to say, we have launched in 2016, as Walter mentioned, our Ilka Fluff, which is the first fluff pulp in the world produced from planted eucalyptus trees. There were a lot of questions originally, and ever since the launching of this grade, and with partnerships with customers and also machinery manufacturers, the product has proven itself. There are several advantages to Elka Fluff. I would like to mention two. One is that it brings more comfortable products, and at the same time, it brings a huge advantage in terms of cost competitiveness. Already at this phase of Elka Fluff, we are already positioned among the lowest cash cost producers in the world, in phase one. So today, we are very glad to announce a new phase of growth for Ilka Fluff at Suzano. We have disclosed yesterday night a new investment at our Limeira mill pipeline. We're converting it into a flex line that will produce Ilka fluff for BHKP. This will give us an additional 340,000 tons of fluff, bringing our total fluff capacity to 440,000 tons. And the startup of this new machine is expected to be on the fourth quarter of 2025. This will also improve our cost comparativeness even further. What we see here and what we are confident is that the trend that we have seen in these few years of existing in Ilkaflav is exactly the same as we have seen in the last years with paper grade pulp. Led by Susana. Hardwood is disruptive and will be gaining more and more market share from softwood and other grades as well. With that said, I would now like to invite Fabio to share with us a little bit about our paper and packaging initiatives.

Thank you, Leo. Good morning, everyone. It's a pleasure to be here with you today. After this exciting news about the UCA fluff, let's talk a little bit about another anchor of our strategy, which is advancing on the value chain. Let's look at the paper and packaging business unit. As you know, after the euphoria with paper demand during and post-COVID, and after also a strong process of destocking that happened afterwards in the past 12 months, we're now seems to be back with demand of paper, back to the historical trend, which is shrinking demand due to digitalization. As can be seen here in the screen, demand for uncoated wood-free has shrunk 18 million tons since 2016. And capacity has matched demand accordingly. I want to talk with you today about two things, two competitive advantages that sets the Suzano paper and packaging business aside from its competitors. First one is our cost competitiveness. As can be seen here in the graphic, Suzano has the lowest cash cost for uncoated wood free of the entire industry. And why that? We have very effectively integration between our forest, our pulp mill, and our paper mill. We have also run our paper mills very efficiently, and we have a relentless focus on cost and productivity. That's through different business cycles, and we are gonna continue to do that in the future. Secondly, I want to share with you here today what we're doing. It's our business model, getting closer to our customers. And we have been doing that throughout the years. As you can be seen here, we're using technology and also logistics. We have advanced it. We have gained more than 3x the number of customers that we reach directly throughout the years since 2014. And this year, we're going to be serving here in Brazil more than 45,000 customers directly. And why is that important? Because by serving these customers directly without someone in the middle of the chain, we bring higher margins for Suzanne while also diminishing the credit risk, which is something really important in the paper business. With that combination of very cost-efficient meals, low cash cost, and innovation, here we bring with you our challenge of reaching 60,000 tons of innovative products to market that we talked about in the last seasonal day. We accomplished it at the end of 2022. plus our focus on our go-to market, we have advanced our EBITDA throughout the years to historical levels, and we're going to continue to do that in the future despite different market cycles. And I also want to highlight here, after my colleague Luis Bueno, which we're going to be talking to you about the consumer goods, why it is important that the importance of our business model. We're replicating this business model in other countries of Latin America where we are also selling our paper and packaging products. And this brings a platform that can be applied to our consumer goods products in the next years. So with that, I want to share with you. Luiz is going to be sharing with you some news about our consumer goods products here. Thank you, Luiz. Thank you, guys.

Thank you, Fabio. Good morning, everyone. Regarding Tissue, we have achieved market leadership with 24% market share after the KC acquisition. We are also very pleased with the synergies implemented so far, which goes beyond our initial forecast. But more important than that are the competitive advantages we have built over the years in this business. As you might know, distribution is a key success factor for consumer good companies. And we have achieved the biggest weighted distribution in our sector. We also have six plants spread all over the country, which gives us a way and allow us to serve our clients with lower logistics costs and quicker. We now have complementary brands and categories, and we now can serve our clients in all of their needs, regardless of the price segments. We have modern plants, some of them integrated to pulp mills, and they are very competitive cost-wise. When we put all of this together, This gives us the confidence to continue to invest in this business. And that's why we are announcing today a new investment on a tissue mill located in Aracruz, Espírito Santo, integrated to our probe mill with additional 60,000 tons of capacity. And this will allow us to better serve our customers, mostly on the Southeast region. but I imagine that you're also very eager to know about our sustainability program. And I would like to invite my friend Fernando, who will share with us all the news on sustainability. Fernando.

Thank you. It's all with you. Hello, everyone. It's very good to see some good friends here. Sustainability is not a separate strategy for Suzano. It's intrinsic to our business as we have just seen in previous presentations. In the previous years of this event, I have been here to talk about innovation. But today, I'm glad to be here to talk about sustainability, mainly about delivers, results of sustainability. I assume this area accumulating alongside innovation in order to boost, to accelerate our innovability strategy, the powerful combination of innovation and sustainability. As we all know, in 2020, we launched our commitments to renewing life. Since then, we have been working hard in order to deliver our commitments. We have been implementing actions in order to accelerate the capture of our commitments and the capture of our positive impacts. As you can see in this slide, Suzanne is fully focused on material themes and delivers. And my focus today is to talk about results. And I'd like to share with you how we are evolving in three very important ones. The first two ones are related to tackling climate change, as you can see. So we have already reached half of our goal of removing 40 million tons of CO2 equivalent until 2025. If you go to the next goal, we have a similar performance when you take into account our goal of reduction greenhouse gas emissions. Good to see that we are evolving. And another very important goal, it's a very ambitious and very important one, is related to a social transformation. So we want to decrease poverty, lifting 200,000 people above the poverty line. And we are evolving as planned, as we have already, as 29,000 people have already left the poverty line. Good to hear that. Good to hear that. We know that we still have a long way to go, but we're expanding our programs and attracting partners to be part of this journey. Also, I'd like to talk about other very important commitments related to conserved biodiversity. In this case, we want to connect half a million hectares of priority areas for conservation in three biomes, Cerrado, our savanna, Atlantic Forest, and Amazon. The execution plan has already been designed and we have started the implementation of biodiverse corridors in order to connect some fragmented areas that we have, fragmented native areas that we have in our operations and also with our communities. There is one important learning that I'd like to share with you in this journey. Partnerships are very, very important. So we want to go beyond our own actions. We want, and we're acting as mobilizers in order to attract other actors to be part of this journey. And we are all, you are all invited to come with us to transform the society. Moving ahead, I'd like to call your attention to a real-life case related to the Cerrado project. We all know that this is a great project, but Cerrado project goes beyond pulp production. As you can see in this table, we're doing a social transformation, social and environmental transformation in the Ribas do Rio Pardo region. And we have prepared a video to show you how we are connecting the delivers of Cerrado project with the sustainable development goals agenda from United Nations. So let's see the video. And after that, I will hand over to my friend, Marcelo Bach, that will talk about our financial management. Thanks for your attention.

SUSANU has the daily ambition to positively impact society, and it does so guided by the UN Sustainable Development Goals and inspired by its commitments to renewing life. Brazil has immense social challenges, and Mato Grosso do Sul is no different. Since the beginning of the CEJATO project, we have joined forces with the local government and civil society to work together in a structured approach to mitigate the region's main bottlenecks, applying our learnings in social innovation. The municipality, which lacked intensive care beds, now exceeds the World Health Organization's recommendations five-fold and has twice as many nursing beds. A 300-kilometer highway now has full radio communication coverage, a new base for the highway police, a police station, and new patrol vehicles. Entrances and main roads in the city are now monitored by security cameras. We invest in building houses for families registered in the public service, as well as housing for the new employees. Our initiatives go beyond the obligations resulting from project licensing because we assume our role as agents of social transformation. In urban areas where a significant portion of people lack basic education, an extensive program of adult education and professional development contributes to the creation of a new social layer that strengthens the service sector, energizes the economy, and creates citizens who are more capable of building a better future for themselves and their families. we have implemented comprehensive programs to prevent domestic violence and abuse of vulnerable individuals. In the surrounding region of the city, training and income-generating programs already benefit more than 40% of the rural population, increasing territorial resilience. The planting of eucalyptus in previously degraded areas, combined with areas exclusively dedicated to conservation, contributes to the company's commitment to global challenges such as carbon removal from the atmosphere and biodiversity. The Sehatl project was designed to be the world's most competitive pulp mill, but also a powerful instrument for improving people's lives. We believe that it is only good for us if it is good for the world. We want to inspire, transform, generate, and share value because together we plant the future.

All right. Good morning, everyone. It's very, very good to be with all of you here and all the people online as well. Very challenging to come after this very inspirational video, but I'm trying to do my best to talk about these mundane things like returns and capital allocation. We just saw a great example of creating and sharing value, which is the Cerrado project and the consequences that we have also on environmental and social issues. I'm going to be talking to you today about two different ways also that we use to create value, financial management and capital allocations. In terms of financial management, it's important to communicate to all of you that we have been, over the years, tackling different sources of funding to optimize our cost of capital. We have been successfully tackling the bond market when the yields were very lower than where they are today, doing transactions that proved to be very accretive to the company over time. More recently, the bond market has changed to a different level in terms of rates, and we changed our strategy to look at and to seek funding opportunities in other markets, like bank loans, multilateral agencies, and also the domestic market. And this has proven to be very efficient for the company, constantly reducing our weighted average cost of capital. In addition to that, we have, over the last two or three years, decided to hedge our interest rate risk, fixing the rate for all the variable rate-related debt that we had. And that has created a situation where today we have a positive or a negative carrying cost of our cash. which is a very unusual situation to be in. Today we invest our cash at a higher rate because these rates have been increasing over time, whereas the cost of that has been more or less flat because we hedged the interest rate risk and because we anticipated the funding needs when the markets were a lot more efficient than where they are today. So this is a very important contribution to value creation through reducing cost of debt. In terms of capital allocation, I'd like to discuss two different things here. The first is how we put together our strategy in terms of ESG and our financial returns. We have incorporated into the ways we look at modernization projects, bringing the contribution that these projects can have to our long-term goals in terms of sustainability to the project analysis. Of course, the financial returns are determinant to a decision in a project, but we also bring a 25% weight to the attractiveness of the project related to how they contribute or they go against our long-term goals of sustainability. This is an innovation and this is to show very clearly that the financial returns have to be aligned and the company has to be working proactively all the time to seek how to deliver the results that Fernando just showed to all of us. Another important thing is to leave very clear to all of you how we decide about capital allocation. This is a question that we get all the time. So we decided to bring here a very clear scheme to show you how we do it and to show you the track record of this decision-making process. Starting with the avenues of value creation that all of my colleagues discussed here, within the perimeter of those avenues, we have several different opportunities that we face every day. Modernization projects, expansion, organic expansions, M&A. And when analyzing all those opportunities, we ask ourselves a series of different questions that you see here on the green boxes about profitability, about fit to our financial and indebtedness policy, fit to our sustainability policies, growth, scalability, profitability, If the answer is yes to all of these questions, this is a project that we should pursue. If the answer is no to any of these questions, we will not go ahead with any project, being an M&A or anything. And if the answer is no, we will prefer to allocate this capital either to debt reduction or to cash returns to our shareholders. Of course, we take into consideration also the strategic features like diversification and other things, but this scheme is very clear to all of us in the company, and we follow this in a very disciplined way. And this has brought us over time to a track record that you can see here. And we bring here the data since the merger with Fibria. We had a first phase in the first two years where we allocated most of the resources that we generated in our business to debt reduction. And that was because we were in a situation where our debt was outside the limits of our indebtedness policy. So the priority was to bring the company within the limit of our indebtedness policy. And then we had the second phase after 2021, where we generated first more resources than in the first phase because we had an abnormal return, especially in the last two years. And having the company already inside the limits of our financial policy, we had the opportunity to allocate more capital to growth in projects like the Cerrado or M&A, like the KC acquisitions. But we also had the opportunity to return cash to our shareholders because our capacity to generate good projects that will respond to, yes, to all the questions that I showed to you, was not enough to take care of all the capital that we were generating. So we don't have a need to allocate the capital inside the company. If we don't have the good projects, we will return the capital to the shareholders like we did in this last period. So we returned $1.4 billion to our shareholders through dividends and share buybacks. And finally, I'd like to say a word about the performance of our share buybacks. We had three programs in the last year and a half with an average tenor of about a year, less than a year from today. We generated 17% return at current prices to our shareholders by buying back shares, 60 million shares at an average cost of 46 reais. This has been an incredible source of value creation to our shareholders as well. So thank you very much. I'll turn back to Walter for his final remarks.

It's very clear to us that what takes us today do not represent what is going to be in the future. We have been transforming the company all the time. But I'd like to bring some special words that is representing us. One is innovability. We are always looking for innovation with sustainability. I'm very pleased to see my colleagues here presenting our future here. This is representing the energy that we would like to have in this company. Always transforming, always challenging ourselves. This is critical for ourselves and not only inside the fence. We are looking for how we are going to impact over the fence as well, looking for the communities and the society. Second point that is quite critical for us is discipline. We have financial discipline. We are very clear on this positioning. I'd like to reinforce that financial discipline, there is our policy, have been following very closely. But in addition to that, we have capital location discipline. I think it's very clear that the track record that we have been delivering to you, it's very good. If you see the video of the company, Comparing what the company was 5, 10, 20 years ago is a completely different company. And this is regardless the environment that we are facing, we are always, and the word that was used today several times, relentless working to improve the company. And we have been doing every single time on that. We have been working on market expansion. Market expansion for us is critical. Fiber to fiber, fossil to fiber. We are always looking for expanded pie. And the combination of doing this and looking for differentiation can be cost, can be service, can be product. We are always transforming the society. that I'm very pleased to deliver to you. A very good company that we are doing, but more important than that, as Carol said to us, we are preparing our future. We are planting our future all the time. When you're looking for Cerrado, We are looking for the expansion of our land banking. When we are looking for consumer goods, we are looking for fluff, we are looking for paper, we are looking for new business that we are working, we are always preparing the company for the future. Thank you very much for the opportunity to be with you. Now, we are going to have in one minute from now the Q&A session. Thank you.

we are ready for for the questions please feel free to to proceed just raise your hand here and we'll do hi good morning everyone thanks for the opportunity and the presentation congrats on the results my first question leo i'm sure you get questions on the pope trend soon so i'd like to focus more on on fluff if you allow me to Can you please share with us the potential limitations that you see for the OCA fluff product versus the maybe more traditional softwood fluff? I know that you've been making tremendous advancements in terms of applications, technologically related. But if you could comment on that and maybe more qualitatively how margins for the eucalyptus based fluff compared to the softwood fluff, that would be great. And maybe my second question is if you could comment a bit about maybe the biomass boiler is the project that we have. less visibility in regard to the potential impacts for the overall results or costs in the Aracurus plant. If you could talk us through the relative gains or benefits that you expect to reach versus the older boiler that you have now in your plant, that would be great. Thank you, guys.

Thank you, Daniel. I'm glad to see the first question coming for Fluff. They told me here that there would be no questions on Pope today, just on Fluff, so I'm delighted to see that. Yes, obviously as an innovation product, we had challenges on our path during this last five, six years. There were a lot of questions from traditional competitors. As you know, the market was dominated, is fully dominated by pine fluff, softwood fluff. So this was a challenge but a very exciting moment because customers who were willing to try to get out of that situation where there's a huge concentration of supply in the hand of three producers. at the same time seeing the advantages that the product brings due to the fiber characteristics it's much thinner so it's more comfortable it has a greater re-wet it's a drier product and it also brings all the cost competitive advantages that i mentioned so that made customers engage with us very energetically and also machinery manufacturers engage with us to make sure that this would bring a solution a sustainable solution for customers who are producing all those grades like diapers, pads, feminine hygiene and adult incontinence products. Today, most of the products are blended. Customers are blending Ilka Fluff to Pine Fluff. But there are several customers from global companies, key brands, that are already made from 100% Ilka pulp as well. We're very glad, as we have been saying, we have been oversold in this machine for the last two years, so we really believe it's the right time to start and to announce this new cycle of growth for OkaFlood.

Thanks, Daniel. And just to talk about the technology per se regarding FLUF. Of course, we started with some easier markets, but we have a team dedicated to develop the quality of the fiber, the quality of the pulp. And we have a lab dedicated to that in our research center in Limeira. And now we have what we're calling an education team that works together with our clients in order to develop the application. So it's not by coincidence. It's a result of some years of true research dedicated to that.

And just to complement that, it's very important to mention that we have a premium on the fluff market over the paper grade market. We are going to have a little bit higher cost as well. But the difference that we have is more to justify the investment that we are doing right now. It's very important to mention there is a 7 million tons market that right now is almost nothing in hardwood. I can guarantee to you that the years to come, I don't know if it's five or 10 years to come, is going to be a 30, 40% market that is going to be representing on the short fiber. That we are going to creating a market that is going to be two, three million tons of pulp in the future. This is a huge opportunity for growth that we are facing. This is just the next phase, not the end game that we are facing on the pulp market.

You see, we are very excited about Fluff. Everyone wants the microphone, right? And Fernando is a huge partner in this run that we're having as well. As Walter mentioned, Fluff is tagged to SBSK plus a premium. And as I shared my view that there's going to be less and less software, so the price premium or the price differences between fibers we see as increasing over time. So the benefit that we already see today, due to the fact that it's tagged to SBSK plus a premium, we see as increasing and increasing over time.

Thank you, Daniel. Normally, we have a maintenance plan for five or seven years. And when we constantly evaluate our equipments, and we noticed in recent years that our two power boilers in our crews probably in 2026, we'll achieve a level of confiability and performance that will increase a lot our CapEx expense maintenance there. Something as 40, 50 million per year. Then we have this opportunity of negotiation with some suppliers and took place to replace these two equipments for a new one that will reduce the mills maintenance cap and probably we have more confiability and less stoppage in the equipments where we all have more available steam to produce more energy decreasing the cash cost.

Okay.

Hello, good morning. Thank you very much for the presentation. Rodolfo Angeli from JP Morgan. I want to start by saying that I love to see the chart that you did on capital discipline. It's very, very clear. And that's the one question I've been getting a lot from investors. So I want to explore a little bit the theme. I am positive on the pulp market as you seem to be. And I think looking forward, this company will have an interesting problem, which is to have a lot of cash to be allocated within the options that you will have. So, I wanted to understand a little bit better, how do you think about where these opportunities are? We saw interesting organic growth being announced yesterday, so that's, of course, one of the alternatives, but where do you see the main opportunities for growth in the future? That's question number one. And the second question is another question we got a lot from investors. What is the view from the management team on the opportunity on the carbon side? And that's it.

Thank you.

Yeah, I'll tackle the first question. We continue to see opportunities on our core markets, having this view that Leo showed to us in terms of growth, and accelerated by the fact that we're going to see more and more substitution of fibers. We also see opportunities on the tissue market. and on the new businesses in general. And as Fabio said, in growing or bringing our strategy, our go-to-market strategy on the paper and packaging business also potentially to other geographies. So there is a combination. I think we have a lot of opportunities in front of us. That's why it's very important to be disciplined in terms of how to decide about the opportunities and not you know, go after the one that is ready first. That's the main thing that we're worried about because the level of maturity of the different opportunities is different. So we need to avoid the trap of having to decide on whatever is ready and mature to be discussed first, but having a more structured approach on the opportunities. But this is basically how we see it.

When I'm meeting analysts or investors, the first question is how much is going to be the pull price on the next quarter? And the second question is how we are going to allocate the capital they are going to generate. The two questions always that we have. The first question I'm going to leave to Leo to answer to you. The second question that is quite important that I'd like to mention to you, it's that first, we are agnostic about organic or inorganic. This is not an issue for us. The second, that we are very disciplined. I think the word discipline is critical for us. We are not going to be in a position that if we have excess capital on generation, we should invest on new business. We are only going to invest if we are going to deliver shareholder value because our philosophy is to create value and share value. We are not going to be here to destroy value to the shareholders on a matter for growth for growth. Rodolfo, we do not have this mentality. We never had this mentality. We are always focused on value creation. We have been very deep analysis on every single project that we present to you today. How we are going to build value on that specific project. And you can ask me, but Walter, this is not critical. But what's critical on Cerrado We made huge analysis on the potential value creation risks that we have on Cerrado. We had a huge analysis how we are going to buy or lease land, what would be the best opportunity for us. We are always looking for the future. We are not planning the next quarter. We are planting today 1.2 million trees a day. When you are planting, we know that the trees are going to be harvested in seven years. But we are seeing on the graph that Carlos shows to us that we are going to reduce a lot our dependence on third party wood. We are going to increase and reduce the ratios that we are going to have. Every single project that we are doing, we are looking for value creation. We are disciplined on that. Be sure, ladies and gentlemen, that we are not going to make investments that is not creating value for the shareholders. Perhaps we are going to have some mistakes. This is a risk that we have always on capital allocation. But I think due to the fact that we have been discussing a lot on the C-level of the organization and with the board level of the organization, the risks that we are going to have major mistakes on my perception is very low. second issue regarding carbon is just to let you know that we keep working on certification of our carbon credits we are working on that we are waiting for a better view on regulated market and our voluntary market we know that this is a long-term value creation we are not in a hurry but we are on the right track we have been certifying our carbon credits and we'll keep doing that And sometime in the future we are going to sell some of these credits in order to monetize value. It's very important that in our accounting system the value of these credits today is zero. Then it's always an addition from what we have today.

Rafael Barcelos from Santander. Thanks for the event and for taking my questions. It's really interesting to see Suzano investing in niche markets like fluff, particularly replacing a less efficient hardwood pulp production with fluff capacity. So my first question here is really to understand whether or not the company can replicate this movement that you announced in Limeira in other meals. And the other question would be whether dissolving pulp could be an option here as well. And the second question is about your paper division. I mean, what are your long-term goals for the division? What is your ambition in terms of size of the division and so on? Just understand your thoughts on your long-term goals for the paper side.

Thank you. Thanks for the question. I'm going to start with the fluff part of it. In order to approve this investment in Libera, we addressed absolutely all assets of Suzano, not only pulp, but paper assets. Just to remember, the first conversion was the conversion of a paper machine. So yes, it is possible. The decision was based more due to the optimum return that we would have in that specific asset, but it can be scalable with conversions of other assets as well.

Thanks for the question. Regarding the paper division, we still see lots of value that we can still capture with the current assets that we have, the current business model that I showed you today here. You have seen the evolution of EBITDA for this business from 10 years ago was less than half of what it is right now. And we still, we were serving just, you know, in the early 2010, 2011, we were serving 10,000 customers. Now we're serving 45,000 customers with higher margins. So there's still value to capture with the current business model. And we're looking at innovation as well. as a piece of transformation for this business using our current assets and trying to bring products that bring more value in the same assets that we are producing in print and writing. Remember that we have also a very low cost position in print and write. We're very cost efficient. Even with what's going on in the market cycles, we can still capture value by just being very focused on the cost side. But as Walter mentioned here, we're relentlessly studying also opportunities, organic and inorganic, and at the proper moment, we're going to bring them and share with you.

Just to complement that, packaging is one of the verticals that we believe in the future. We will keep investing on packaging for the future. And regarding the fluff retrofit that we can do it, we did it because Limeira was the sweet spot because we are going to work on a flex machine, a swing machine, that can produce both, but we are facing and discussing other opportunities of this for the future as growth. As you mentioned, dissolving is another important thing that we are studying as well. I think it's very important to mention that All the grades of paper are moving in the direction of hardwood. If you see the growth of hardwood, the kegger of hardwood, it's much, much harder than softwood. This will continue in the coming years and will face new opportunities for us. The combination of expanding the pie in one side and the other side, the organic growth of our tissue market will allow us to... to keep growing the organization for the future.

Hello. Good morning, everyone. So, thank you, Suzano, very much for the great presentation. Leonardo Correa from BTG Pactual. Yeah, so, two questions. The first one on capital allocation, moving back to the... the investor obsession, right, Valter? More specifically on the geographical expansion potential, right? I know there's nothing confirmed. Some months ago, Suzano was, as per media reports, analyzing a potential deal in Asia, right, of Vinda. Nothing new. More of a fiduciary duty, I would imagine, right, to look at all opportunities, as you mentioned. But, I mean, looking at companies and looking at corporate history, geographical expansion historically has been very challenging, right, for several reasons. Regulatory... different market structures, cultural issues. So I just wanted to, again, ask you about this potential. I mean, how do you see geographical expansion at Suzano? So maybe a little bit repetitive. But the second question is maybe for Leo. I'm gonna keep the promise on not asking about poll prices for the next month. But looking into 2024, I appreciate the data that you gave on the ramp-up of Cerrado, very useful, and the amount of volumes going into the market next year is relatively low, right? 700,000 tons. This year, you guys came out with a surprise cut of 4% of capacity in response to lower prices. I think many doubted that Suzano would move in that direction. And you, to a certain extent, disciplined the markets, right? So, in this ramp-up phase of Cerrado, assuming markets continue volatile, Would it be fair to assume that Suzano will continue disciplining the market and potentially adjusting its higher cost operations to accommodate for this new incoming supply? Those are the two questions. Thank you very much, Suzano, and congratulations on the fantastic presentation.

Thank you very much, Léo. It's very important that we have, it's a must to have two precedent conditions to invest on new projects in the company, organic or inorganic. First, and it's very important that it's scale. We just want to be in the business that we can have scale. We are not going to be in business that is not going to represent, to move the needle in the company. Then I'm going to give an example on consumer goods. We start from very small participation in the market, market share, but we have been growing that because it's scalable, the market. The other thing, it's fluff. We start a very small operation, but now we are scaling up. Scale is very important for us. And second thing that is very important for us is differentiation, is competitiveness. how we are going to play a different role in the market comparing with our peers if we the answer is we do not have any kind of differentiation we do not want to be in the business this business we do not want to be in the mid pack on the on every one in any of the business that we are we always want to create differentiation Then if it's going to be local or international, organic or inorganic, on the verticals that we want to invest on consumer goods, on packaging, on textile market, on the pulp market, and could be fluff or dissolving or paper grade, this is completely agnostic. we are always going to be in this process of value creation we are not going to expand internationally just to say that we are going to do it if we do not have scale or differentiation we are not going to be in these markets and we recognize that growing international is going to be a cultural change in the organization that we need to be better prepared. We are working on that. We are preparing ourselves to do it when and if necessary in the future in a way that is going to be very smooth. We believe, and I just reinforce that, that we cannot make major mistakes on capital allocation. And the tickets that we are going to invest on international growth, when it happens, it's going to be with minor risks for us. This is very important to mention to you.

Thanks, Leo. I'm going to address the production side of your question. First of all, our decision to reduce production this year lasts until December. It's unchangeable at this time because obviously it demands a lot of planning together with Zairis and together with Carlos. And therefore, we're going to keep it until the end of the year. We are still in budgeting season, so we haven't made a decision what's coming ahead of us. But it's very important to share our view that the reason for this decision is not related to your comments. Actually, you said it twice to discipline the market. It's based on our view of what's best for Suzano. We do not do our accounting or our financials or our decision process. by considering our average cash costs. Every month, every month, we look at individual cases and see if those make sense or not. And we are going to keep doing that. Keep doing that for the future as well.

Hi, hello, and thank you for the opportunity. This is Alfonso Salazar from Scotiabank. The question that I have is regarding the long-term outlook for the market, for the pulp market, because the impression that we have is that the demand is coming from Asia, supply is coming from Latin America, But how do you see this changing? Is there anything that we are not considering in this analysis? How can this be different? Especially, you know, you asked the question, will there be enough good? So at some point we need to think of new places where you can source the wood on the supply side. But in the demand side, today is very concentrated in China. China, on the other hand, is facing a situation in the population. On one hand, it's aging, but there is a secular downtrend, and it could be fast because of the one-child policy. It couldn't accelerate. So, Asia demand, how do you think that's evolving over time? And how do you think it's going to diversify geographically to other countries apart from China? So, that is the question that I have. Thank you.

Thank you very much for your question. I think I got most of it here virtually. We analyze demand in Asia in a broader view than what most do. When you analyze only organic demand, obviously most of it is forecasted to come from Asian markets. But we also analyze it in a broader view in terms of seeing the potentials coming from other fibers. And just to quantify, software today represents roughly 20, 25 million tons of demand or opportunities for us to grow on. And then there are other fibers, recycled hundreds of millions of tons also of recycled grade. Several of those are using the products that also use hardwood like tissue, for example. So there is a lot of additional space for demand growth, not only from organic demand, but also from additional opportunities. And that's why our view for growth, for demand growth in the future is so bullish and so positive, because we see that as a reality. As Fernando said, R&D and sales and also product engineering are working together to develop more and more space into these niches or markets, not niches because they are huge markets that before we were less active.

Good morning, guys. Can you hear me? Hi, good morning, everyone. Thanks for taking my questions. I have two quick questions. The first, Walter, on the tissue business, you did mention that you want it to scale. It does fit strategically, but I'm just wondering, because even after the expansion that you announced, It's still very small in the life of Susano. So could you just maybe talk a little bit about what your medium term view is or longer term view is? How big do you think this segment could get? What are the medium and longer term goals? And would you consider a spinoff at some point to perhaps get a higher valuation than sort of the rest of the business? And the second question is really, Carlos, for you on the wood productivity plan that you outlined. Could you just give us a little bit more details on sort of how you expect to increase wood productivity, particularly given, you know, sort of the climate issues that we're facing where, you know, we're in La Nina or El Nino, there's more rainfall or less rainfall, that must be very challenging for you. And sort of, do you consider, you know, the role of GMOs in some of your wood productivity plans? Thank you.

I'm just going to start on the tissue question. When we look at the Brazilian market, there's still a lot of room for growth in this market. The tissue market in Brazil has a per capita consumption still very low compared to our neighbor countries, Argentina or Chile. and extremely lower than Europe or the US. So looking ahead is a market that is growing for the last 10 to 15 years, and we project that this growth is going to continue. And looking inside Susano now, we have the combination of strong brands, We have the iconic brand Navi, which is the only brand in Brazil that is able to charge a 20% to 30% price premium in the market. So we have the combination of strong brands, a very robust distribution channel, which is extremely important. It takes time to develop in the consumer goods arena, and also very competitive plants in terms of costs. So we believe there is still a lot of value generation that can be done here in looking at the Brazilian market. And we expect that as time goes by that the multiples that usually consumer goods companies are traded will be perceived also for our investors and will also be valued on our stock price as well.

Thank you, John. I think you caught very well what we are doing on the forest side. It's not only about planting. It is planting, pursuing, growing productivity. And we have three major working lines. We need to produce new clones that are more productive as well as climate resistant. We need and we will deliver a productive growth regardless the climate change. So we are working to improve our genetic material, to improve our clones. The second line has to do with our civic culture practice. We are investing a lot to develop the best civic culture practice to each area. And the third line has to do with technology. We have been spending and investing a lot in data analytics to better understand each microzone where we operate. What are the soil characteristics? How is the climate? What is gonna be the climate trend in the future? So combine all that, we are very secure that we have a very challenging baseline curve and we have all the tools to reach our ambition and our aspiration as well.

Thank you for the opportunity to ask the question here. A quick question for me. I think most of my other questions have been already taken, but first one for you, Léo. I'm sure Suzano doesn't plan to have a 5% market share on Fluff. when competitors have at between 20 to 30%, right? So I think the question is, what's the path to get there? And I think most importantly, forgive me if I'm wrong, but my understanding is that the main difference between paper pulp and fluff pulp is basically that one is payload and the other is road. I understand that the partnership we have with our clients now, but I think the question is, how do you make sure that the partnership that you've created with your client is not taken by competitors on the hardwood side that also try to develop a similar project than yours as well? How do you make sure that you have a long-term relationship that allows you to capture That market share, I think Walter mentioned, could reach 30% to 40% in the midterm, which I definitely agree. And then maybe... Again, I'm sorry, I think we talked a lot about capital allocation here, but Walter, you did mention that the company is preparing itself for a potential internationalization. I know, I mean, it seems like there's a clear advantage for Suzano to invest in downstream in Brazil specifically, especially in the context of better ICMS credits for those investments or even Pope integration as well. so the question is um i know it's probably potentially early days i know it's a work in progress but how do you how do you see you potentially delivering um you know value uh on downstream outside of brazil what would be the source of that value generation uh if anything at all As I think you've mentioned before, the intention to eventually go to international markets, right? And last but not least, I mean, if anyone want to take a chance and maybe provide some outlook on the wood chips availability and supply and demand conditions in Asia, that would be great. Maybe to Carlos and to Leo. I know there was a conference in Asia recently. If you can share some feedback, that would be great as well. Thanks and sorry for the long question.

Thanks, Mastro. Thanks for the question. I would like to start saying that we do not have the objective to be the sole player in the hardwood fluff market. Similar to what happened in Paper Great Pope, again led by Suzano, this market today has several other market players as well. And we see no problem at all with that. We see it as positive, actually, because it will only accelerate the growth rate of acceptance of usage of hardwood fluff. in customers. And the way that we see that we will protect our relationships, the ones that we have construction and building with customers, is through customer centricity. We have a very, very solid program in Suzano related to customer centricity. It does not only relate to commercial relationships, but also to supply chains. You have seen in previous cycles how we deal with our long-term contracted customers and how we favor them, even in moments that we could have in terms of paper grade, have better margin selling in spot markets. We do not do that. We favor our long-term contracts. And also, as Fernando mentioned, with the support of our bioservice team and all this technology and education that we are always sharing with our customers and developing projects, we believe that the addition of all these initiatives and several others make us very strong and very protected. But we are okay with competitors coming. We want them to come.

Marcio, thank you very much for your second questions regarding one thing that is very sensitive for us, there is differentiation. We are going just to be in the markets where we can face some differentiation. We start using on the pole market cost as a basic differentiation that we have compared with our global peers. Now, we are seeing that we are in consumer goods, not only with cost, but with distribution, with brands, with service differentiation. With Fluff, we are delivering to the end customer a much better product. then we are always looking for differentiation internationalization it's critical for us if we have differentiation in the future we are not going to be international to be in the mid pack if we are not facing how we can use this lever of growth in terms of differentiation, we are not going to go and to make investments on that. We prefer to have cash returns or to have debt to equity as our base. We have been very disciplined on that and we continue to be on this trend in the coming years. Carlos, the third question is yours.

I'm a Brazilian farmer. I would prefer Leo to talk about that.

The wood chips.

Carlos was very smart with this one. I didn't expect that, Carlos. Thank you. Actually, that question is for Carlos, myself, and Fernando as well. Obviously, it's key for us to understand what's going on in terms of wood availability in Asia. There are several announcements of projects which, in our view, exceed by far the availability of wood in Asia. We don't expect them to happen at all. We expect them to be dependent in wood pulp coming from other markets like Brazil, for example. Our team has been not only analyzing through consultancies, but also in the fields, in all markets that supply wood or that could eventually supply more wood for competitors. And we keep our view that there is not enough wood to cope with, not even close to the projects that were announced. Thank you, Fernando.

Thanks for the question. And I'd like to make a connection between this question and the previous one from John. I think Leo has already explained what's going on in Asia. It's difficult to explain what's going on there. So Leo has already explained that. But I'd like to reinforce what Carlos presented in his presentation today. We are doing our homework. Everything today is related to bio, bio products, bio business, bio everything. But where is the bio? We are doing our homework. We're planting 1.2 million trees per day, and we're improving the quality. It's not about expanding plantations, but increasing the productivity. As Carlos mentioned, we are improving our clones. We have today 10,000 clones under evaluation in the field. And we are always looking for the best match between the clones and the environments. So the climate changes are coming, are already a reality, but we are prepared for that, trying to have a better match between the clones and the conditions that we have in the field. So we are doing our homework. I'd like to emphasize that in order to support our growth in the future.

Hi, good morning, everyone.

Thank you for the opportunity. So you showed some very interesting slides, right, on the recent inflation of land prices, forestry assets, right? So I'm curious to hear your thoughts on how you see that that will impact the viability of Pope projects going forward. Are we reaching that point where wood availability is becoming an issue for new projects, even in LATAM, which is considered to be kind of the new frontier of the last few years in terms of Pope expansions? And if not, is the impact that you see here, you know, more via the incentive price, right, for a new hardwood pulp project, right? And in that light, I mean, what do you see as the long-term sustainable hardwood price? And then my second question, you know, looking at more the, you know, short-term trends in the pulp market, right, there's been a number of price hikes over the past months, right? And with pulp prices, you know, headed above $600 per ton in China for hardwood, right, I just wanted to ask about the risks, if any, right, that you see ahead. And specifically, if you see signs, you know, of higher cost integrated producers returning to the market, which has been, you know, one of the themes propping up demand as they've been purchasing market pool. Or any signs of paper maker margins, right, especially tissue being pressured, right, to the extent that shutdowns could be triggered, right? And how do you see that environment in December for another hike? Thank you.

I can take that. Thank you, Kai, for your question. As I mentioned to you, in the last few years, we have seen a minor growth in the yucca farms planted there in Brazil. And that has to do first with rising land prices, rising plantation costs, and a lot of uncertainty due to the climate change. Actually, we have seen in some regions a yield loss, and that has made some producers a bit more skeptical about what they're gonna have in the future. So that uncertainty has not changed. We see less people willing to plant yucca farms without a firm commitment. So in our view, that will reduce the future availability. New projects will need to rely on new plantations. And we haven't seen that much here in Brazil. And as I said, this is not a problem only in Brazil. We see that all over the places. growing uncertainties on the supply side, growing risks, and a growing demand, a growing market on the demand side. We have, you know, that question in mind, and as I said, we have anticipated that, and that's why we have been leasing more land, buying more land, planting more, and be more prepared for the future, a future that we're gonna see a much more unbalanced wood market, So as Fernando said, we have done our homework. We are very confident in what we have in terms of areas to be planted. And not only that, a growing productivity that we're going to pursue in the coming years.

But I think it's very clear and I would like to reinforce to you that higher wood cost, higher land banking costs, higher capex that we are seeing inflation on industrial capex as well is going to deliver lower return on capital employed for the new projects. Then I think the incentive for the new projects in the future are going to be lower if we keep this trend of higher wood costs and higher capex as well. I think this is very critical because higher interest, higher wood costs and higher inflation, I think is going to determine that the new projects are going to be much more tight in terms of return on capital employed.

Thank you for your question on the Pope short term dynamics. Rather than answering the risk, I will share with you what we track, what are the key tracking points that we keep on our radar to understand and analyze the market in short term. First of all, is what's going on in Europe and the European pulp demand recovery. Ever since August, we have seen order intake to paper customers and specialty paper customers, our customers, being recovered. already now at 2022 levels and this is the first indications of the end of the European stocking and again the recovery of pull purchases. This is something we track quite closely. Second is what's going on on China. China, just to share with you, has been posting very solid production numbers when it comes to paper and ivory board. had double-digit growth compared to last year. Their exports are increasing this quarter, past quarter. Exports increased almost 15% compared to second quarter. And through our market intel team, we also see and track downstream demand, and that's also growing at a positive rate, especially in tissue. And just remember, tissue in China represents more than 35, 40% of the market is facial tissue. handkerchief site that we use, especially when we are outside our home. So the recovery of the economy post-COVID is incentivizing a lot the consumption of away from home tissue and this facial tissue products as well. So the production is very solid. We keep tracking that very closely. We also keep tracking the Pope trade through the system. Our view today is that the new projects that started in 2023 are already absorbed by the market and by checking their financials as well. We can see that the rhythm is already close to the project's optimum levels. Customers obviously anticipate that, so we are feeling that effect. We felt it a few months ago. And when we add that, and the fact that it's already in the market with these unexpected downtimes. I mentioned in my presentation 1.4 million tons of hardwood, unexpected downtimes. In softwood, that number is 1.6 million tons. So this year, we already see in the bleach chemical markets 3 million tons of unexpected downtimes. 3 million tons. And obviously this is a huge influence to the short-term dynamics of the market as well. So we're always tracking this KPIs and having a close look at it. And we have obviously a set of different market strategies, commercial strategies to tackle whatever the market or whatever direction the market goes.

Hello, thank you for the very comprehensive presentation. This is from Morgan Stanley. I have three questions, basically. One is on the total operating disbursements. I think you didn't give an update on them. Can we assume that those remain unchanged? I think the last guidance on cash costs you were giving was around 700 reais per ton for 2027. Does that remain unchanged? The second question is on short-term pulp dynamics. Are you seeing orders from integrated pulp producers even with this last price increase, or are you seeing a slowdown from those customers buying market pulp? And lastly, my question on fluff. Is there any price difference between hardwood-based fluff compared to softwood-based fluff? And if so, how do you see that difference behaving into the future? Thank you.

I'll start with the total operation of disbursement. We see that the cash cost part of it is going down in the short term, and we expect this trend to continue at a slower pace in the coming quarters. Looking forward with all the investments that we're making, competitiveness, including the forestry investments, we expect the total operational disbursement to go in the direction that we have guided the market in previous situations. So we still expect total operational disbursement to continue to go down. Not so much in the short term, but after, you know, all the ramp up of the Cerrado project that will have a significant contribution plus the maturity of the forestry investments we're making, this will definitely be lower in the future than what it is today.

Jens, I'll take your question on the short-term dynamics for Pope. First, just to mention October, already starting now the last part of the year, order intake from China was extremely healthy. We actually had to break the order intake level. We didn't have enough volume to cope with all demand coming from Chinese customers. And same situation appears to be happening already in anticipation to November, with November. Our price increase announcements for November are already implemented, all orders we are already anticipating and taking already consider the new price points that you all know. Regarding your question on how are the integrated pulp and paper Chinese customers acting, yes indeed we see a bit less demand coming from those kind of customers than we saw in the second quarter when prices dipped, in our view, too much or too excessively. They still are existing, but less than before. And the main driver of demand today is not coming from them. It's actually coming from the traditional paper producers, being printing, writing, tissue, or ivory board producers, which, as I mentioned, have been growing their production rates double-digit. in terms of your question on fluff and the price differential obviously there is a price differential we offer to our customers of also competitiveness that gives competitiveness to their products and to their companies as well the range depends on the market segment or the region or the market that we're talking about so that's why we do not disclose exactly the range but yes it is a more competitive fiber which will help which will make our customers more sustainable

Hi, good morning everyone. Thanks for your fantastic presentation. This is Lan from CICC. I think most of my questions have been answered before, so only one quick question. As our net debt to adjusted EBITDA reached 2.7 times in the third quarter, although it's still below our target during the investment cycle, but how should we expect the leverage to evolve after we announced the three new investments with total capex of nearly to billing hires. Thank you very much.

Hello, thank you for your question. We have an indebtedness policy that has a limit of three times net debt to EBITDA, reaching three and a half times during investment cycles. And we expect the leverage of the company to be well inside those limits through this cycle, including the new investments that we just announced. Alright, I think that was the last question.

Well, I'd like first of all to apologize ourselves for exceeding the time schedule that we were prepared to do it. I promise that next time we are going to be better prepared in our rehearsal to have lower presentation time to allow for more questions. Sorry about that. I'd like to thank you very much for the presence of everyone here. It's very unusual, but I'd like to ask you a favor. Two favors. The first favor is to give a big applause to 40,000 people of the organization that are working every single day to improve this organization and impact not only our results, but our society. And I'd like to ask you for applause for 40,000 people. And the second favor that I would like to ask you is that we would like to learn. Always keep improving. Let us know how we can do better, how we can improve, how we can impact any a stakeholder on a better way. And we will keep working on this direction. We are on a journey. It's not something that is coming from one specific point. We want to develop ourselves. We want to improve ourselves. as a person, as an organization, as a society. We are always going to work on this learning process. If you see any kind of opportunity that we can do better, let us know. We will work on that direction. Thank you very much and hope a very nice weekend. Thank you very much.