Suzano S.A.

Ladies and gentlemen, thank you for holding and welcome to Susana's conference call to discuss the results for the fourth quarter of 2024. We would like to inform you that all participants will be in listen-alone mode during the presentation that will be addressed by the CEO, Mr. Beto Abreu and other executive officers. This call will be presented in English, with simultaneous translation to Portuguese, and you can change the audio by pressing the globe icon located on the lower right side of your Zoom screen, and then choose to enter the Portuguese room. After that, you can select mute original audio for a better experience. Before proceeding, please be aware that any forward-looking statements are based on the beliefs and assumptions of Susano's management and on information currently available to the company. They involve risks, uncertainties, and assumptions because they relate to future events and, therefore, depends on circumstances that may or may not occur in the future. You should understand that general economic conditions, industry conditions, and other operating factors could also affect the future results of Suzano and could cause the results to differ maturely from those expressing such forward-looking statements. Now, I'll turn the conference over to Mr. Beto Abreu. Please, you may begin your conference, sir.

Thank you very much. Hello, everyone. Welcome. Thank you for attending the first quarter call. And before going through the results, I want to say that I'm very proud about what the team has delivered in the first quarter, and also in 2024. The name of the game in this last quarter was Flawless Execution. And I want to recognize the operational excellence forward and the power of the team, the power of this organization, when we decide to deliver together something. We reach out recording sales for the fourth quarter and also, of course, for the year. Leo, the Outbound Logistics team did a tremendous job. And Hibas, with its impressive performance, reached in 2024 900,000 tons of production and 700,000 tons of sales. And let's remember, this is fully in line with the guidance that we have shared with you after the startup in mid 2024. Moving to cost, in the first quarter 2024, we were also able to set up for ourselves a new baseline of cash costs for our operation. The combination of those figures was a strong EBITDA of 23.8 billion for the year, bringing our leverage in dollar chains for 2.9 times. I want to highlight this one since leverage is a key metric for us and guide us our capital location decisions. Having said that, I want to invite Fabio, now also in charge of our Suzano packaging business in US to share his insights of our paper and packaging business. Fabio, I'll hand over to you. Thank you very much.

Thanks, Beto. Good morning, everyone. Let's turn to the next page of the presentation. We have finalized 2024 with a strong operational performance for our Brazilian operations and significant advancements in North America. The assets we have acquired from Pacted Evergreen will be referred from now on as the zone package in the U.S., and their results are incorporated into our paper and package business unit results. During the quarter, we happily welcomed to the Suzano family around 870 colleagues that work in Pine Bluff and Waynesville. Looking to the Brazilian market, according to IBA, print and writing demand, including imports, increasing by 11.7% in the first two months of the fourth quarter, compared to the same period of last year. Sales from domestic producers grew by 12.5%, while imports moderated and grew by 4% on the same basis. Demand for uncoated paper was bolstered by the federal government's purchase of textbooks. For coated paper, although demand is lower than a quarter with the end of the election cycle, it remains stronger when compared to the same period of last year. Markets outside Brazil performed differently. In North America and Latin America, elections and inventory built positively influenced demand, supporting growth demand in 2024 compared to 2023. However, in Europe, the situation has become challenging as demand positive effects have diminished and paper consumption has returned with declining historical rates. Demand for paperboard in Brazil remained robust, increasing by 9% in the first two months of the quarter, compared to the same period of last year. This growth reflects the performance of the Brazilian economy in consumption levels, despite some cooling in certain segments over the last quarter. In the U.S. market, a focus region for Suzano packaging operations, according to Numera, there was a 21% recover in SPS demand in the fourth quarter of 2024, compared with the fourth quarter of the previous year, driven by strong performance in the food service sector, falling as lower than expected performance in 2023 and the first half of 2024. Looking at Suzano figures, our total sales volume in the fourth quarter was 15% higher year-over-year and 24% higher quarter-over-quarter as a result of the incorporation of Suzano package in sales. Regarding our Brazilian operations, we had an increase in sales compared to the last quarter, pushed by higher sales to the Brazilian market, while export reduced to continue unfavorable logistic conditions. The 4% net price growth over the last quarter is attributed to the impact of seasonal packaging and FX effects on pricing shown in reais. Compared to the last quarter of 2023, there's a 7% increase driven by the same factors just mentioned. Looking at EBITDA, there's a 7% reduction quarter over quarter and a 3% reduction versus the fourth quarter 2023. When compared to the full year, we also have a decrease, in this case, of 16%. Such performance reflects the impact of the incorporation of internal packaging in the U.S. That you all know, it's a turnaround case, as well as lower prices on both the Brazilian and external markets of our operations in Brazil. Now I want to provide some follow on Susano package. The integration of our new employees, assets, customers, and suppliers are on track and reflect our expectations prior to the acquisition. During the fourth quarter, we have successfully renegotiated all commercial contracts, securing much better terms for Susano in 2025 and onwards, and secured synergies on raw materials and logistics. Better prices and lower costs will positively impact Cezano Packing results in 2025. The industrial turnaround as shared with you on the last Cezano Day, as well as CapEx plan, are progressing as planned, and we remain optimistic about the expected future value creation. Considering only our operations in Brazil, our business unit delivered the best quarter in terms of EBITDA of 2024, a result of improved sales levels, effects, impacts on prices, as well as cost reduction efforts. We end 2024 with lower cash costs compared to 2023. Looking ahead, we anticipate strong demand in the Brazilian market for uncoated and paperboard lines during 2025. Outside Brazil, we anticipate the return to the structural decline in demand in developed regions and less so in Latin America. In the U.S., paper board demand is expected to remain strong throughout 2025. Polk prices announcements early in 2025 could offer support to higher paper prices. In terms of logistics and input costs, we expect some stability on the absence of trade disruptions and geopolitical turmoil. Now, I'll hand over to Leo, who will present our Polk business results.

Thanks Fabio and good morning everyone. So now moving to the next slide of our presentation, I would like to begin by sharing some facts related to our full business unit during this past quarter and as well for the full year 2024. The fourth quarter 24 was marked by lower prices as a consequence of monthly reductions in Europe and Americas, closing the gap to Asian prices, which also declined in the quarter, but presented a flattish curve as of from the end of November, with low levels tagging below the marginal cash cost of whole producers. Q4 was also marked by healthier operating rates from our Asian customers, as well as their improved margins, resulting in a positive market sentiment. It is important to note that a significant unexpected event The first partial and later a complete operation cease of a major Chinese integrated pulp and paper producer changed dynamics in the region quickly, favoring most of our non-integrated customers. During Q4 24, our sales, including the new volumes coming from Rebus Mill, were performed as planned and allow us to set an all-time high volume for our quarter. As a consequence of these record sales, our inventories became tight and this picture will bring us some challenges ahead to serve our customers, which I will share with you a bit later in my speech. Despite lower prices in Q4, the combination of higher volumes and favorable FX resulted in a resilient EBITDA of 5.7 billion reais. For the full year 2024, higher prices in US dollars, higher volumes, and the FX levels resulted in a 37% increase in the EBITDA, which reached almost 21 billion reais with a 56% EBITDA mark. Now looking forward, I would like to highlight the following points. Coming into the current first quarter of 25, let me now better explain why I see a challenging scenario to serve all markets with both volumes. The addition of factors such as Suzano's low inventories at year end with a very healthy order entry during these past months, January included, and our lower production volumes, in turn due to a concentration of scheduled maintenance downtimes, would already mean alone a tough quarter for our logistics operations, but we had prepared ourselves for this scenario. However, on top of we had planned for the occurrence of new and recent unexpected events, such as the conversion of a key competitor to dissolving pulp during all of Q1, strikes and filling, and operational problems at competitors' mills, all affecting the supply side of the equation, and the ongoing halts of the already mentioned major integrated player in China, have all tided significantly the S&D fundamentals in the short term. Just to bring you more color, every month that such integrated player is down, the S&D fundamentals are affected in two ways. First and directly, there is the impact of the cease of production and the benefit that this creates to our customers, mostly Chinese customers, who have been increasing their paper and board production levels and also their prices in the market. We estimate that every month that this player is down, over 200,000 tons of new hardware demand is generated in China alone. There is also secondary effect, as quite often, This player also used to sell the excess hardwood pulp in the market, especially when paper margins were not positive enough. This has obviously ceased completely as well. I anticipate that during most, if not all, of Q1, we at Suzano will struggle to recover our delivery performance to Middle East, African, and Asian markets, all markets that are serviced directly out of Brazil, as our sales during these past months exceeded our regional expectations, resulting in the creation of backlogs in our system. Our January price increases were all fully implemented, as planned, and the February hikes are also expected to come. Such positive dynamics for the first few months of the year paves a constructive sentiment for pull prices in the upcoming month. This short-term momentum clearly is a reflection of unplanned events on pull fundamentals, which as I have been constantly stating in our calls and events, such as the latest Susano Day, are playing a bigger and bigger role in our markets. Last but not least, the price gap between hardwood and softwood, as well as an unclear scenario in terms of softwood availability, keeps favoring demand for our pulp, and most importantly, are setting a new record, a new record in number of projects and engagements with our customers, who are willing to deeply participate in fiber substitution projects, a game changer for IOCAPOPE demand growth. With that said, I would now like to invite Iris to address with you the cash cost performance of the quarter.

Thank you, Leo. Good morning, everyone. The cash production cost in the fourth quarter of 2024,

Recording in progress.

In turn, due to a closer average distance from forest to mill. Two, the outstanding performance of REBUS, benefiting the deletion of fixed cost and energy sales. And finally, the lower cost with inputs, both in price and consumption. The latter due to the greater operational stability of some mills. Lower costs with wood and inputs, as well as the positive effect of Rebus milk, also explained the better performance of the cash production costs compared to the fourth quarter of 23, which was virtually offset by a FX depreciation of 18% in the pure. Although a higher FX always benefits the company's cash generation, It is worth mentioning that about 23% of the cash production cost is dollar-linked. Now looking to 2025, in the first quarter, we expected the cash cost X downtime, consider here an FX level at 5.8, will come with a low recurring increase of mid-single-digit. due to the concentration of schedule maintenance downtimes in the quarter of our largest high competitive energy exporting mills, such as TransBagoas and RIBAS. Even with this one-off increase in the cash cost in the first quarter of 2025, the average cash cost excellent times for full year of 2025, here again, with the same effects of at 5.8 should be flashed when they compare to the fourth quarter 24. As I have already clarified, a lower FX ahead would allow us to print an even lower cash production cost for 2025. Moving to the next slide, on the last Susanna Day in the mid-December, I share with you the company's view that Rebus Ramp-Up would be completed in January this year. In other words, in just six months and not in the nine months initially planned for this type of project. But the outstanding performance of the new mill in its first months of operation allow us to deliver an even better result. As we were able to conclude the learning curve at the end of 2024. I would like to also share with you that in the last January, Rebus Mill already had the best cash production cost in our assets portfolio. And after it's scheduled on time now in February, the operations will resume with even better performance. Regarding the caps related to Cejado project, there is no change to Suzano's guidance. In 2025, the final balance of 150 million PIs is expected to be disbursed. Now, I invite Marcos to continue the presentation.

Hi. Good morning, everyone. Thank you, Iris. I'll start on slide number eight. talking about our net debt evolution throughout 2024. We started the year with a net debt at $11.5 billion. We generated $1.8 billion in cash flow after paying our maintenance topics, financial expenses, taxes, and working capital. We also invested $1.5 billion in growth projects, mainly at Cerrado, but also in other projects. So we would end the year following these events with a net debt of $11.2 billion. However, we also invested money in other acquisitions, mainly in the forestry assets in Brazil and also our acquisitions outside of Brazil, the Lansing Stake and also Pacted in the U.S., and we returned to shareholders $0.8 or $800 million in buybacks and interest on equity. So our net debt ended the year at $12.8 billion. The good news here is that we continue the leveraging process, and we ended the year at 2.9 times net debt to EBITDA when measured in dollars, and that's the trend that we will continue to pursue in the coming quarters. For the amortization schedule, we continue to have a very comfortable one with an average cost of debt of 5% in dollars, and an average maturity of more than six years with no significant maturities in report. Moving to slide number nine, our financial results came in at negative $15.6 billion, mainly an accounting issue caused by the negative FX impact on our FX variation impact on our debt in dollars and also the market-to-market of our cash flow hedges. We continue to have a very solid and robust portfolio of hedges, with our zero-cost callers totaling, at the end of December, $6.9 billion, with an average put and call at $5.36 for our puts and $6.16 for our calls. So we remain well protected against any risk of URL appreciation over time. Moving to slide number nine, I would like to highlight the company's strong shareholder remuneration in 2024. As I mentioned, we bought back 2.8 billion reais in shares throughout the year, and we also paid 1.5 billion reais of interest on equity in the beginning of the year and announced it by the end of the year, another interest on uncapital payment for the beginning of 2025 of 2.5 billion reais. So in total for 2024, we return to shareholders 4.3 billion reais, which is equivalent to a dividend yield of 6% for the company. Now I'd like to pass the world back to Beto for his final remarks.

Thank you, Marcos. So looking ahead, let me start with supply and demand balance. The supply side for the first quarter, We will have constraints, as Aris mentioned already, of volumes availability on the back of significant concentration of maintenance downtime. On the demand side, we are seeing a favorable moment for pool price, which reinforce the impact that unplanned events brings to our sector. It's also worth mentioning that Leo and the whole technical team we'll have as first priority the fiber to fiber projects with our customer. This is a key part of our customer value proposition, and this is also part of our customer needs. The first quarter cash cost, as I mentioned, is a new reference for 2025, despite the uptick in the first quarter of 2025. at Suzano Packaging US. The turnaround has started, and I want to congratulate Fabio and the small team that moved to Little Rock in Arkansas to lead this process and lead the whole team at Pine Bluff. So, Fabio, so far, so good. And finally, as Marco said, our plan is to keep deleveraging in 2025. Having said that, let's now proceed with the Q&A session. Thank you.

We'll now start the Q&A session for investors and analysts. If you wish to ask a question, please click on Raise Hand, and if your question has already been answered, you can leave the queue by clicking on the same button. Wait while we pull for questions. Our first question comes from Daniel Sasson from Itaú BBA. Please, Mr. Daniel, your microphone is open.

the new government changes anything in terms of your capital allocation decisions in the country. And my second question maybe to Leo. Leo, just to confirm, you said that the capacity that left the market in China has translated in 200,000 tons of additional demand per month, right, from these non-integrated players that are basically taking over the room left in the market. Do you have any views or can you update us on the current situation of that specific player or the current market situation if you think this is something more temporary and that should revert at some point? Or do you think that this could actually become more structural? in the market, and if you're feeling comfortable enough with your inventory levels that you said were – or ended the year at low levels, if we should think about a recomposition of inventories throughout 2025. Thank you so much, everyone.

Hi, Daniel. So, starting with your question regarding the U.S. and if the recent – The recent moves changes our strategy on capital allocation. I would say that it doesn't, okay, because when we're looking to a capital allocation, we're looking to the long term of that decision. We continue to see the U.S. market as a market that has robust growth. It's a market on the paper side also that has a quite concentrated market in terms of the leading players, and also it's a market that is somehow more protected against imports, and the recent news are also in that line. So this doesn't change the attractiveness of the market for us, okay? Regarding tariffs, just to give you a brief overview, first in looking to the history as a reference, in the past years and mandates, we haven't seen any tariffs on pulp. which is our biggest business by far, right? There has been tariffs on the paper side, and we actually are enforced by that as well when we export to the U.S. So that is something that you should bear in mind. We also believe that the U.S. is short in terms of hardwood pulp, right? And there is no incentives for new plants in the U.S. There has never been – there has not been incentives for new plants in the U.S. in the previous years. So it doesn't seem to be economical for the U.S. to be implementing tariffs in the pulp industry. So I think that's it on my side.

So, hi, Daniel. This is Leo here. I'm going to try to answer your question on the impact of the Chinese mill, which we obviously all know I'm talking about Chenming, which is also a state-owned company. This is a very complex situation. They are a major paper board and pool producer in China, totalizing over 4 million tons of paper production, 2 million tons of board. over 2 million tons of hardwood pulp and then over 1 million tons of thermomechanical pulp as well. We calculate that every month that they are down, as I said, over – it's not 200 – it's over 200,000 tons of new demand for hardwood is created by our customers, mostly non-integrated customers who are obviously – accelerating or speeding up the operating rates and recovering and this market share left by by shaming in the market. What we hear on the ground in China is that clearly, the government is eager to find a solution to the meal. But it's quite complex because it's not only about the sales of the equity of the meal, but it's related to that cash flow, and also the quality of assets that make up this huge paper and producer in China. So Our estimations, obviously, we run several different scenarios on that, and how we play and position ourselves in the market depends, obviously, on which scenario we'll roll out, and this is quite sensitive to our commercial strategies, so we cannot share exactly what we believe will happen. But I can say it's quite complex. Indeed, every time that we talk and get deeper and deeper into the discussion, it seems the issue is harder to be solved. Despite all of that, I believe it's temporary. I think a solution will be found. I'm not sure when, but it will be found. But it's important to mention and to say that, obviously, every month that they're down, whatever they left to our customers will not be recovered. So we are monitoring as we speak the situation in China.

Thank you so much, Marcos and Leo.

Our next question comes from Leonardo Correa from BTG Pactual. Please, Mr. Correa, your microphone is open.

Yes, we can hear you.

that you were expecting the cash cost number for 2025 to reduce about low double digits from the level in the third quarter, right, which was about 860. So at the time, we were thinking something, assuming that map, we were thinking something in the range of, let's say, 770, 780 guys per ton as a bulk cash cost. Now, to see if I understood exactly what the new, let's say, the revised guidance is, you're indicating that the levels in the first quarter for cash costs will increase a bit, right, given some major swappages. And for the year, for the full 2025, you're expecting pulp cash costs to be, on average, flattish, versus the fourth quarter, which is about 800 reais per ton. So, basically, over these months, We're seeing a small creep up in, let's say, the official guidance for Suzano from, let's say, 770, 780 to about 800 highs based on the relevant changes in parameters over the period. So I just wanted to double-check with you if my understanding is correct or if I'm missing something. And my second question for Marcos, again, Marcos, I mean, the level of free cash flow generation, is quite substantial, right? There still is a bit of capex, of growth capex in the numbers. If you look at it on a maintenance perspective, I mean, the free cash flow is even higher, right? I mean, we're talking about relevant numbers. At the same time, you stopped buying back shares, right, I think, over the past months, given the share price appreciation. Suzano stock continues trading at... very derated levels versus global peers, right? I mean, we're seeing something which seems a bit dysfunctional or it seems abnormal to see Suzano trading at the lowest multiple in the entire coverage universe, thinking regionally and thinking globally. So I just wanted to pick your brains a bit on, I mean, how are you thinking this derating? How are you thinking buybacks in this context of still a very derated stock? where the market seems to be very skeptical still on capital allocation going forward. Those are my two questions. Thank you, guys.

Hello. Good morning. Thank you for your question. That gives me an opportunity to clarify the information about cash costs. You are correct. When you presented the results of 34, I said that fully at the average to 2025, we would decrease our low single-digit. But at this moment, single digital, double digital, sorry. At this moment, we'll consider FX of 5.35 to this year. And now I present a predict with 5.8 for FX. As I mentioned, our costs are linked at 23%. with dollar, what represents that every 10 cents that we increase in the fax, we have an impact of four reais per ton in the cash cost. That's the only difference that we consider here in this new guidance. And now I said flourish because I'm compare comparing with the fourth quarter, not only more with the third quarter. It will be 7%, 8% lower than the third quarter. All the difference is connected with dollar base.

Hello. Thank you for your question. Yes, I agree with you. We are... running the company with a very strong level of free cash flow generation. The buyback, we always compare the buyback with the other capital allocation alternatives that the company have, and we also look at our leverage policy as well. So we will need to find the right spot between the two things, the two variables, in order to do the buybacks or to be more active on the buybacks. As you know, we have an open program until the beginning of next year, but we could do that if we find the right moment to do that. Again, comparing the other alternatives that we have for capital allocation and also aiming at continuing the leveraging the company, okay? Regarding the due rating that you mentioned, we also agree with that. We believe that this is something that is not only for Suzano that is happening. I think this is probably also related to interest rate levels not only in Brazil but also in the world, and at some point in time should revert.

Our next question comes from Marcio Farid from Goldman Sachs. Please, Mr. Farid, your microphone is open.

I get there has been any change in terms of that understanding on where you want to be in terms of balance sheet leverage. Thank you.

Thank you, Márcio, for the call. Let me start talking about your first question related to capital allocation and strategy. As you know, we do not comment any specific M&A initiative, but I want to reinforce what I said in the last call and what you just mentioned that we are not considering any transformational deal. Maybe your next question to me would be okay, what you mean about transformational deal. And I think a good way to summarize this is that we are not planning and we do not have in our screen anything that could impact our due leverage plan. I think that's the best way to summarize this. The strategy is the same. We're going to keep looking opportunities in the downstream. But since it's generating value for us and since we can differentiate ourselves against any other opportunity. So we are keeping the same strategy as mentioned before. Let me hand over here to Marcos to present. Over to the other question, Márcio.

Hi, Márcio. You mentioned about $800 per ton target for net debt. That continues to be the case. If you do the math with our full capacity, including our full capacity that is integrated into our paper capacity, that number will be closer to – it will be between $11.5 and $12 billion. That's a good reference. All right. Thank you.

Our next question comes from Rafael Barcelos from Bradesco BBI. Please, Mr. Barcelos, your microphone is open.

Thank you.

Rafael, let me start with the second question, and I'll hand over here to Iris, but on the regarding the preference of where to allocate the CapEx or any specific line of business, we are agnostic about that. The drivers are really doing something that we can scale up in the future, doing something that we can differentiate ourselves. Again, adding all the competence, and knowledge that we have in the business, and also doing something that we can fit completely with our strategy. So we are really thinking about generating value. So there's no preference for a specific line of business on the capital allocation strategy. Let me hand over to Iris.

Rafael, thank you for your question. I believe it's so early to talk about any bottleneck in Uribas. Of course, we are very optimistic with how robust our S's are presenting performance. When I said that we achieved the total line curve at the end of December, It means that we performance for 30 consecutive days in an average that should deliver us a nominal capacity. And you get to do this with only five months and 10 days. Then the perspective is good, but we are finish our previous might head down in the rebus to check if everything's okay. And then probably in the common quarters, we'll be able to talk about any bottleneck that you will identify at the mute.

Our next question comes from Caio Ribeiro from Bank of America. Please, Mr. Ribeiro, your microphone's open.

Thank you.

Hi, Caio. So, as you know, we have guided the COPICs for the full year 2025 at 12.4 billion reais and our maintenance COPICs at 7.8, which is a number that you should bear in mind as a regular COPICs for the company going forward for existing operations. The additional COPICs or the discretionary COPICs will also depend on the deleveraging process of the company, and also depends on the returns that these projects would have, right? All minor projects that we have approved recently at the company, such as the expansion of the tissue business at Espirito Santo State, and also the new flood capacity at Limeira, for example, are projects that yield very good returns for the company.

Caio, regarding your second question, if we are considering poop extension as part of our strategy, as you know, we own today one-third of the market poop for hardwood, and it's also a clear part of our strategy keeping the level of relevance that we have in this market. So that's the way that we will analyze a poop extension, mainly in the medium and long term.

Our next question comes from Alfonso Salazar from Scotia Bank. Please, Mr. Salazar, get my phones open. Yes, we can hear you.

Hi, Alfonso. This is Leo here to answer your question regarding where we are seeing the future demand for pulp. As you know, we are quite bearish and optimistic on that and very constructive looking forward. So first, we have been looking and analyzing trends that are not only China-related, right? So we see tissue demand growing in several markets, mainly non-developing markets, And we're seeing regions like Southeast Asian markets, for example, gaining extreme relevance and rhythm of growth compared to what they were before. So we see not only a concentration of this future growth in China, but in other markets as well. Second, as I have mentioned during my Suzano Day presentation, there are markets like specialty papers, which are now already bigger than old markets, markets that were really relevant for pulp consumption, like printing and writing papers. Now we're presenting more than a fourth of all the furnish of hardwood pulp. And last but not least, our view comes from the movement or migration of consumption trends from softwood grades or other kinds of fibers to hardwood grades like our Ilka pulp. Maybe you remember in Suzano Day we presented that in the past, despite we have a very consistent trend of hardware gaining market share over software, that really was roughly 0.5 percentage points a year of market share, and that increased now to 1 percentage point of market share gain every year. which if you translate that into volume, that by itself, as we speak, is 600,000, 700,000 tons a year of additional demand to hardware coming from software. So adding all these factors, which kind of dilute the concentration of China, we are extremely bearish looking forward in terms of bulk demand.

Our next question comes from Lucas Laggy from XP. Please, Mr. Laggy, your microphone's open.

Hi, Lucas. Marcus here. So reminding you of our FX hedging strategy. We get all of our revenues, which are mainly in dollars because of our poll export nature of the business. We subtract all of our expenses that we have in dollars. And as I just mentioned, we have 23% of our cost, which is linked to dollars, which is a minor part of it. We also subtract from that whole amount all of our financial expenses and eventually maturities in dollars and even other payments as well. So we get to a net exposure of dollars. So the company always has a net exposure to dollars. What we have today in the market is basically two things. Theoretically, we had a very quick and sudden depreciation of BRL or appreciation of the dollar in the market, which was clearly seen in our quarterly results. At the end of the third quarter, we were at 545. At the end of the year, we were at 619. Whenever we had a weaker BRL, it's it's better for you to hedge, right, because you're hedging at a higher level. And besides that, we also have a unique combination, which is we have a very strong interest rate differential between Brazil today and the U.S. rates. So that also impacts the forward level that we can hedge in the future. So given these two conditions existing in the market – I would say that they're good for you to continue being at a higher end of the range. I cannot give you a guidance how we will operate in the future, but that explains why we ended the fourth quarter at the top of the range, okay?

Lucas, thank you for your questions. This is Fabio here. I'm going to address your second question regarding PACT-F. My comments during my speech, we were able to renegotiate the commercial contracts. We got a double-digit price increases with our major contracts. This will come into effect, half of this impact is going to come into effect in the beginning of the year, and we have half of the impact in the second half of the year. So it's spread out through the year. But we also were able to negotiate our major raw material contracts and logistics, and the impact of that is already seen in our costs as we, you know, renew our inventory levels from the raw materials. We have a major annual maintenance that's going to happen in April this year, so we're preparing for that. It's an oatmeal, as you know. So I would say that you should see more impact on the turnaround in the second half of the year.

Perfect, guys. Very clear. Thank you. Our next question comes from Ricardo Monegadlia from Sapra. Please, Mr. Monegadlia, your microphone is open.

Hi, Ricardo. This is Leo, and I'm going to answer both of your questions. First one, wood chip prices, starting with the last one. We follow all the prices going into this non-integrated producer, especially the Asian producers who are verticalizing into Pope as well. And what we see is that prices are not upticking as they were two years ago. So I believe they are competitive in that sense. Also, this effect that chain mint has, which is a positive effect on the paper side of the business and the consumption of pulp, has obviously a negative effect on wood, right? Because there is more wood availability in the region as they are not running neither their hardwood pulp mills, or their mechanical pulp mills as well. So there's a little bit of, I would say, oversupply of wood chips. As I have mentioned in other calls, we also have been monitoring. There's a bit more wood available in China due to the housing market effect. Plus, this is the final year where we see the government stimulating that some of the woodland with hardwood trees to be converted to farmland. So we should see that over by the end of 2025. So in the short term, I would say I wouldn't expect, unless something unexpected happens as well, any uptick in the wood prices to China, meaning that this competitive level that they have today should be kept unchanged. Regarding your question on consumer pulp inventories, we see that there is not really a stock formation at this time. We are monitoring the inventories in China ports, and they have been trending below what we believe is a completely balanced view. I personally believe that Chinese customers specifically have stock pulp in the 2023 cycle. And a lot of this reduction in consumption of pulp in China in 24, despite a strong year in paper production, comes from the stocking of the chain in general. So I think that the base point in terms of pulp stocks, either in port or in the hands of the customers, is either balanced or below a balanced level. which brings a challenge in the short term, right? Because as you can believe, every customer is trying to quickly increase their operating rates to get part of this market share left in the market by shaming. But obviously the Pope is not there at the speed that they would like the Pope to be. I mentioned my case in my, our case in my speech that we are running with backlogs here, and I don't expect this to be resolved before the end of the first quarter. So, I see a tight scenario in the short term, obviously created by unexpected factors. But the fact is that the market, as we speak, is quite tight and positive for our short-term numbers and commercial tactic as well.

I'd like to thank you for being here with us.

I'm sorry, Beto. The Q&A session is over. We'd like to hand the floor back to Mr. Beto Abreu for his final remarks. Please, Beto, now you can proceed.

Thank you. I'd like to thank you for being here with us today and for your interest in Suzano. And as always, our team remains available for any additional questions you may have. And I wish you all a great day. Thank you very much.

The Susanus SA Fourth Quarter of 2024 Conference Call is now concluded. The Investor Relations Department is available to answer further questions you may have. Thank you and have a good afternoon.