Klabin Sa S/Adr

Good morning and welcome to ClubBeam's conference call. At this time, all participants are in a listen-only mode. Later, we will conduct a questions and answers session and instructions will be given at that time. If you should require assistance during the call, please press the star followed by zero. We kindly ask that, for the benefit of time, each analyst asks a maximum of two questions. As a reminder, this conference is being recorded and also being transmitted simultaneously via webcast, which can be accessed through ClubBeam's investor relations website where the presentation is available. Any statements eventually made during this conference call in connection with ClubBeam's business outlook, projections, operating and financial targets, and potential growth should be understood as merely forecasts based on the company's management's expectations in relation to the future of clubbing. Such expectations are highly dependent on market conditions, on Brazil's overall economic performance, and on industry and international market behaviour, and therefore are subject to change. Present today with us are Mr. Cristiano Teixeira, CEO, Marcus Evil, CFO and IRO, and the company's officers. Initially, Mr. Cristiano and Mr. Evil will comment on the company's performance during the third quarter of 2023. After that, the officers will be available to answer any questions that you may wish to formulate. Now, I will pass the call over to Mr. Cristiano. Please go ahead. Thank you and welcome everyone to our earnings conference call for the third quarter of 2023. Well, in this opening remarks, this talk with you, I'm going to try and do something slightly different. I hope I'm a little less bureaucratic with you. Instead of reading, I'm going to show you two slides. The first is a slide that is filled with facts showing the distribution of volumes and the markets of clubbing in the third quarter specifically. And then I will show you another slide, a second slide, where I'll talk a little bit about the trend for the fourth quarter, including in terms of demand and price. So talking a little bit about the third quarter, I'd like to go over with you through our segments that you know. Maybe I'll bring more qualifications, maybe more repetitive for some of you, less repetitive for others, but I'll go through each one of these parts in the market where we act. Of 967,000 tons of tons shipped in the quarter, we highlight, as we said in the beginning of our material, Our record shipment of fluff pulp and the second best shipment of short fiber since the beginning of the Puma unit. So bringing these highlights of fluff in particular. When we talk about future projections, long-term views of the company and factual terms you can see that in the order we've been dedicating our efforts a lot to this specific product in the long fiber fluff noting that we already start to also work on the mix of fiber and the short fiber is in the focus of our fluff but still preserving a lot of our fluff volume in long fiber but that's a trend that's our focus for the future and then we highlight the shipment, record shipment for the quarter and of not only short fiber probe, but also long fiber probe. Now talking a little bit about papers at clubbing. I'd like to pull then the board area. And then I have a mark here in the volume of cards, 160,000 tons. To remind you that at the end of the ramp up of machine 28, we should reach about 300,000 tons, maybe a little bit more than the coated board volume at Calbeen. And in previous calls, I was saying that decreasing our share in the coated boards area in the United States, we call this area consumer with a direct relationship, and I had other calls with other companies, so it's a relationship with graphic packaging. Clubbing trends to increase its share as machine 28 ramps up. Also, still on paper, we're talking about packaging paper, in particular, Craftliner, the volume dedicated to the market was 102,000 tons. And the remainder, as you know, And as the cost of opportunity to export is not better than to integrate, we'll integrate more papers into the domestic market. Then moving to the last block here of the rectangles in the packaging area, we converted our record volume of integration at Klabin for the production of the papers we made for corrugated boxes. We integrated the highest volume since we began especially now with machine 27, reaching as you can see in the pie chart right on the side, we've integrated 69% of our packaging papers into Klabin's own packaging. Reminding that this volume that we mentioned and the packaging produced by us of corrugated boxes and industrial bags over the last five years, since the pre-COVID period, during and now post-COVID, it has been performing expressively above inflation with very stable volumes. And with that, we close the third quarter of 23 with this breakdown in Klabin's results. Obviously, part of it goes to the loss and the Pope prices and the other papers that Hope tends to recover in part its share in the results as the prices start to go back up, but we also tend to have a higher share of the company's results in the packaging papers as machine 28 ramps up. So we close the third quarter considering the complicated context that we've been through Maybe this transition from the second to the third quarter was one of the worst periods that we saw in many years in the pulp and paper segment, with prices dropping in all segments except for packaging and conversion. But considering this scenario, Fabin was able to perform, in my view, quite well with margins around 30%, 31%. and its global overall context, looking at all of our product mix. We already see the next slide that refers to the fourth quarter. A few brief comments talking a little bit about the trends we face in the market. Of course, at the end, we will have the Q&A session and the directors of each one of these markets will be able to answer directly to whatever questions you may have. Briefly, what's new here is that we've listed our three divisions, pulp, paper, and packaging that we convert. We then have the products a little bit more specified, and then we show this indication of demand and prices as we see it. So on the first line, short fiber. Of course, we've been monitoring closely the trend of recovery of inventories since the post-COVID period. Maybe we're seeing the greatest recovery of inventories, but it's not only that for short fiber. There's also some indication of demand, at least now in the beginning of the fourth quarter, we'll be able to compare data from China, consumer, and the shipment data to be able to state that in addition to the recovery of inventories, we'll also see recovery of consumption itself. But in our viewpoint, considering the shipment of pulp, especially to China, we see a trend of improvement now, especially in the beginning of the fourth quarter, bringing an effective recovery in prices, which was already expected. Bluff, it's the same thing, and here I want to add a comment for both types of fibers. But I can also transfer this to coated boards and liner, and I'll be more specific, but in these four products, both for short fiber and fluff, as well as coated boards and craft liner, as I just said, when we were talking about the third quarter, this transition from the second to the third quarter was one of the worst moments in terms of price. Always taking historical prices and updating it for the American inflation. That's the methodology that a lot of people use. We may have faced the worst worst price phase for these markets. And I also referred that even during this transition from the second to the third quarter, we were able to perform relatively well, not only due to the volume, but also because we faced head on seeking efficiency by reducing fixed costs. But now during the same period, we saw manufacturers around the world, especially in the Northern hemisphere, with a lot of difficulty generating margin in this transition of prices that we saw from the second to the third quarter. What shows that Klabin, at the end of this period, has been performing, performed at a margin of 31%. I'm talking about overall terms, not specific, but some products margins were even higher than that. But that shows the resilience of Klabin's cash costs. Reminding everyone that we are still going through the period of that wood that we're going after at a little further distance. And then we're bringing our own wood on a second rotation. So structurally, Fabine's cash cross tends to improve even more in coming years. So we note the resilience in this very low price transition in this period, in particular now at the end of the second quarter and the beginning of the third. Coated boards, we see that the market remains stable at this time. Crepliner is the same. Here there's a little bit of seasonality as well. The volumes, especially for the celebrations at the end of the year, the holiday season, we see a peak around the world in the month of October. So we see that first there was a stabilization of prices. And now we have to look at how the seasonality will unfold in the beginning of the fourth quarter to be able to project the next year. But right now we see stability in prices of coated boards and crepliner. The price recovery of fluff itself, that's the raw material for a lot of coated boards and pectors in China, with this price recovery also tends to get the board's price to stabilize, and then we'll be able to discuss this more in the next call to see what the trend is, whether there's a trend to improve or not. In the packaging area, also talking about seasonality, we begin the fourth quarter where all of the preparation, I'm talking about the domestic market, but the preparations for the end of the year took place during the month of October and we'll probably see in the fourth quarter now, especially in November and December, a reduction of demand precisely because the peak of production for this period has already occurred. And we see stability in terms of price for corrugated boxes in the last quarter. Industrial bags, it's the same trend as corrugated boxes, both in terms of demand and prices. Well, I hope that I was less bureaucratic than I would have been if I was literally reading our beliefs and then showing you a little bit about this qualitative view for you. And I'll turn to Marco Vivo and he'll go through all the figures and we'll come back in the Q&A.

Thank you, Cristiano. Good morning, all. Page 5, talking about net revenue. Net revenue this quarter was 4.4 billion BRL, a reduction of 20% year-on-year. This drop stems from reductions in pulp prices and craftliner prices, the lower sales volume, and also appreciation of the Brazilian BRL vis-à-vis U.S. dollars. Adjusted EBITDA this quarter was 1,352,000,000 BRLs. An EBITDA margin adjusted of 31%. Moving now to page 6, pulp sales volume was 426,000 tons this quarter, 4% above the same period of the previous year. A highlight fluff performance, Christiane already talked about it, sales volume was record for a single quarter, reaching 92,000 tons. Average price of long fiber and fluff, driven by fluff, was $948 per ton this quarter, accounting for a spread of $410 over short fibers. The cash cost of pole production was 1,314 BRLs per ton in the quarter, down 7% compared to the same quarter of 2022. On page 7, in the paper and packaging segment, the highlight is the resilience of our results. As a result of Klabin's positioning, which is closely linked to food and beverages and its integrated business model, a bid up per ton of paper and packaging, excluding the effect of maintenance stoppages, reached 1,876 BRLs in the third quarter, up 3% year on year. On slide eight, total cash cost per ton was 3,042 BRLs in the quarter. This accounts for a reduction of 6.3% compared to the previous quarter and the same period of 2022, respectively. Year-to-date, total cash cost per ton was 3,181 BRLs, an increase of 5% year-on-year, below the indication previously given by the company. Going now to slide 9, adjusted free cash flow, which excludes discretionary factors and expansion projects, was positive at 616 million BRLs in the quarter. In the last 12 months, adjusted free cash flow reached 4 billion BRLs, representing a free cash flow yield of 18%. Moving on to page 10, At the end of September, Klabin's net debt was 20.9 billion BRLs, an increase of 1.4 billion BRLs compared to the previous quarter. This increase is mainly explained by the negative effect of the devaluation of the real against the dollar on foreign currency debtness, with no material cash effect in the period, in addition to the negative free cash flow in the quarter. With that, leverage measured by the net debt over adjusted EBITDA ratio in U.S. dollars ended the quarter at 3.2 times within the parameters established in Klabin's financial indebtedness policy. Moving on to the next page, Klabin's liquidity remains robust and ended the quarter at 10.4 billion BRLs. This liquidity Sir, please go ahead, sir. Please hold while we connect the line again. I apologize. I apologize for those who are following us. We are back. So resuming now on page 11 of our presentation. About the company's liquidity, it remains robust and ended the quarter at 10.4 billion BRLs. Out of the total, 7.9 billion RLs is cash and the remainder in a revolving credit facility. The company's cash position is sufficient to amortize the debt maturing the next 47 months, and the average maturity of the debt is a little bit more than eight years. On page 12, according to the notice to shareholders published yesterday, the company approved the payment of interest on capital in the amount of 319 million BRLs to be paid on November 14. On an accrual basis, shareholder remuneration paid in the last 12 months totaled 1,358,000,000 BRLs. This amount accounts for a dividend yield of 5.9%. On the next page, the second phase of the PUMA II project, Machine Paper 28, evolves through its learning curve as planned. In the quarter, the production of Machine 28 was 71,000 tons, which reaffirmed the expectation of producing approximately 165,000 tons in 2023, including craft liner and coated boards. Since the beginning of Project PUMA 2, 12.4 billion BRLs have been disbursed, of which 399 billion BRLs in the third quarter of 2023. On page 14, I bring an update on the FIGATA project, Klabin's new corrugated box conversion site. The works continue to advance according to schedule with 39% completion so far and startup plan for the second quarter of next year. Since the beginning of the FIGETA project, 0.4 billion BRLs have been disbursed of the total capex of 1.6 billion BRLs. On page 15, during the third quarter, clubbing was classified in the Platinum category by Ecovades, ranking among the top 1% of suppliers with a good evaluation of their sustainability management system in the world. In addition, we launched our Climate Transition Plan, which includes a new, more ambitious greenhouse gas reduction target that considers scopes 1, 2, and 3, as well as a net zero target. Lastly, I invite you to attend Clubbing Day 2023, which will be held on November 30, in person, in Sao Paulo, and will also feature a live broadcast. Now Cristiano, the other officers, and I are available for the Q&A session. Thank you. We'll begin now the Q&A session. If you want to ask questions, please press star 1. If you want to remove your question from the queue, press star 2. Please hold while we take your questions. Our first question is from Rafael Barcelos with Santander. Good morning, everyone. Thank you for taking my questions. My first question is for Cristiano. Cristiano, recently, other companies, other giants in the industry in Europe and the US are following a consolidation move. I'd like to better understand how this movement changes the long-term strategy at Klabin, and particularly the potential international movement for the future. My second question. is about activities in Europe and the craft liner market. It would be interesting to have more color on demand for pulp and craft liner in Europe, and more specifically for craft liner if you already noticed some signs of improvement in price and demand moves for the coming months. Thank you. Thank you, Rafael. Look. When it comes to consolidation, this is well taken by the company, at least as I see it. I always like to mention that the top 20 companies for pulp and paper in the world with a market cap around $130 billion, I guess this is too low considering particularly what the South Hemisphere producers, and more specifically in Latin America, and also considering Brazil's competitive edge, we hold big forests with high yield. I guess the market cap is low. We have to consider your evaluation, not only mine, naturally. But I think considering this, consolidation is important. This integration process is valuable. Westrock has a long record of pulp and smear for short. And if we add them up together, they can become the largest company of corrugated box in the world with a footprint in nearly 50 countries. It's a company that runs business very well and certainly will add a lot of competence and market reading and efficiency for both companies. At the end of the day, this may become one of the main players in the world, not only for packaging, but also for the whole volume of more than 400 million tons of the pulp and paper market. So I see this a positive move. I think it's important and it brings even more value to our companies. More specifically about Klabin, Klabin is a player with strategy for many years. And recently for the last six or seven years, we have annual rounds involving our board of directors working on projections and outlooks of what we consider to be the best solutions for these years ahead. Not only in terms of organic capacity, low cost, always looking for the first quartile of competitiveness in the world, and also envisaging the creation of value in the midterms. and possibly a partnership, but certainly this will be better assessed after this period of organic growth that we intend to do with the company right now. So yes, I consider this as a feasible opportunity for the company's future. However, today, as we are today in the products and markets where we are, Klabin is extremely competitive. Maine, perhaps one of the most competitive companies in pulp and paper in the world. So for the moment, the strategy is doing well. And now I invite Soadis to tell us more about the craft markets in Europe. And Nicolini, we also talk about pulp. Good morning, Rafael. Thank you for your question. You asked us to address the European market. By and large, we see during this quarter more balanced levels of inventory. We used to have oversupply in our chain, not only in Europe, but this process happened nearly worldwide. And this is becoming more normal now. We can see clients with levels of inventory, which allows them to start buying again. As a result, we can see a slight improvement in Q3, volumes beginning to be replenished, inventory levels and activity getting better as well. Likewise, for the fourth quarter, we also envisage a slight improvement in demand. This process started more faster in Latin America. And now we have group bags for the first quarter of next year. So in Latin America, the process is moving on. As for Europe, it's slightly more challenging. However, with slight signs of demand. As for the U.S., U.S. also showing signs of improvement. for cash year-to-date was minus 1.8%, and today is minus 4%. So we can see an inverted trend. So this is the picture for Kraft Liner now. Nico? Good morning, Rafael. Thank you for the question. When it comes to demand in Europe for pulp, The first eight months of the year were marked by a pent-up demand in Europe in terms of pulp use and also paper. Many capacity facilities shut down, machines shut down, and also massive destocking for finished products. As of September, if we consider what happened in Barcelona event, clients began to show improvement in the order book and machine use. This used to be a concern, whether this was a trend that would come to stay during Q4 or if it would only be something for the moment. But now the trend was confirmed and demand in Europe is improving. Naturally, not as the same level that we see in China or in other countries in Europe. Pacific regions in Asia, but also related to higher pulp use. We don't see any problem in our outflow for pulp. It was a reality in Q3, and in Q4, we already have volumes confirmed. Tissue paper naturally performs better than other segments, but we also see improvements both for printing and writing and also specialty. Thank you. Our next question, Caio Grenner, BTG Pactual.

Hello, good morning. Thank you. I have two questions. First, I'd like to talk a little bit more about your paper markets, especially looking at the sales. I mean, although you have the two machines at Puma too, the volumes go down year on year. And you've been saying that the container board market and the coated board markets are more challenging, as Cristiano even said in the opening remarks. And I think at the same time, you're trying to ramp up machine 28, putting even more volume in markets that are already challenging. So I'd like to understand your strategy for this ramp up, especially in two views, on the short term, How do you intend to allocate those volumes, both for container board and coded boards from machine 28? Will you continue to have stoppages in other machines? I'd also like to hear your opinion looking towards 2024. Are you preparing for another year as challenging as 23 without any increase in sales or not? Can we already consider some growth And I mean both for coated boards and container boards. And my second question for Pop, I'd like to hear more from you, how you see this short-term movement in terms of price. I think it was somewhat clear that this experiment that we saw a few months ago of the price under $500 per ton, so to buy yours did not work. It went back very quickly and it seems that this new value will be implemented. But I'd like to hear from you. If it gets to 680, it already shows that. But I'd like to hear from you what you expect from here on out, how you're seeing this market on the short term. If you can give some more color, especially in terms of China, I think we've already addressed Europe. And whether you believe that there's a chance we'll see another increase maybe this year or in a few months and the market's still tight enough for that? Or do you believe that now the short-term demand has settled and the levels that we're seeing slightly above $600 per ton is the level that we'll see and have some stability from now on? Thank you. Thank you, Caio. We'll start with Soares. talking a little bit about the challenge with the ramp-up of machine 28, and then 24, and then Nico will talk about Pope. Good morning, Caio. Thank you for your question. For the point that you mentioned, we're coming with an increasing capacity, and this was a challenging quarter. However, machine 28, in the first months of ramp-up, the yield's very small, so it was not fully put into the market. We are in the process of qualifying the machine still. In Craftliner, it responded very quickly. It's a machine that's been doing surprisingly very well on the production of craft papers. For coated boards, we've already made progress. And the simpler products to manufacture, so to speak, the folding coated boards, And now we're moving towards the more complicated coated boards, the multi-coated boards that are the QR boards for the beverage market. And now we're starting the process to qualify the coated board for liquids. That's a longer process. Until we get to the point of sale, this process will take four to six months. And best case scenario, it's a slow process because it involves risks to consumers. the package must have high safety levels. So at this time we're using the machine for craft liner, reducing white top liner. We launched a new product halfway along the way that's a white top liner that is coated. It's a light paper for boxes in general of corrugated boxes. But it's also a product that can be used in a coupling for customers that buy it for electronics or small boxes. And that will increase the quality level of the products. They use micro corrugated boxes. And we're using the machine not only with pipe liner, but making this white top liner, the conventional white top liner. And we're also in this process of bringing to the market the white top liner that is coated and producing the more conventional coated boards. As we've already said in previous calls, we have contracts and MOUs with multiple customers. And now, of course, we're in the process of qualifying the product. So it Initially, it's going to be a reel, then a container, and then the volume will slowly begin to grow. And this news net will start to see more in the first quarter of next year. And at this stage right now, clients, the customers are receiving the first shipments for tests. And that's how we're going to run the positioning of this machine in the market, making sure Craftliner, white-top liner, the more basic coated boards, we already have the process of transferring from existing machines to the new machine. Machine 7 and 9 are already starting to migrate products that are already qualified on machine 28, and then gradually we'll transfer products and releasing machines 7 and 9, the current machines, to products that are already qualified, the LPV and carrier boards. until we get to the point where we have those products qualified on machine 28 for the final customers. Just to follow up before Nico, I think it's clear you're talking about all the contacts we're getting with your clients. Maybe there is room and the volume should grow for next year. And for container board as well now, Do you see that there's room for growth because machine 28 will also make container boards in the beginning, right? So looking at papers in general, do you believe there's room for us to grow in volume next year? Well, actually, we reduced our share of the international market during the pandemic. We exported... 40,000 tons per month at one point, and we brought this down to 15,000, 18,000 tons during the pandemic to benefit the domestic market and our own integration. Now, we're in the process of reversing this. We're already going back to export levels of 30,000 tons, and we'll get to 35,000, 36,000, 37,000 tons. So that's the objectives. Of course, as said in the first and second quarter, it was very hard to do that. But now, with the process of a more balanced market, our customers go back and they have room again to increase exports, and that's what we're working on. We're seeking now this opportunity to resume our presence in the international market to the levels we had before the pandemic. Great, thank you. Nico? Good morning, Caio. Thank you. Caio, look, we have a situation in China that's quite peculiar in a positive way. That's this capacity to react to abrupt market movements as we saw halfway through April and May when the prices went down to $470 per tonne. the level of 630 that I can confirm has already been implemented. It brings a price level that's more palatable for pulp producers, but also paper producers. Our concern is always in the sense of understanding how fast paper producers can transfer this pulp increase or this price increase to pulp. This has been happening. You've been seeing a lot of announcements of price increase by paper producers. When we look at the demand in China, It is a demand. In fact, it is consumption despite volumes that come in inventories in China. Inventories coming in, but it's also going out. So that shows that it is being consumed. The rate of conversion in China remain at higher levels. China's exports for other countries have also increased greatly. So the order book of Chinese producers has been increasing. And we see this price level as a sustainable price level. It's not the same price level we saw in the past. It got to 860, but not being repetitive. These are more palatable price levels for the current scenario. It's a price that is sustainable. For the short term, we don't see any significant change in terms of price levels. And then, of course, next year, we'll try to understand how the market dynamics is going to work. I think the same thing goes for Europe. I said earlier that we had the first eight months of the year that were very difficult in terms of demand due to the high inventory of finished products. But now there's a slight increase in terms of consumption with pulp in general. That also translated into this price movement. The first two announcements made $50. If you look at Europe's FX, you'll see that the prices have been materializing this first 50 increase, and now we're going to stick the 80 increase that have been announced for next month. Thank you, Nico.

Next question, Caio Ribeiro with Bank of America. Good morning, everyone. My two questions are more related to market trends. Firstly, about pulp, it is clear that in recent months there is a trend to recover prices. There is some concern by the market with the latest increase. more than $600 per ton for short fiber in China, which would incentivize more integrated players and higher costs to try to reintegrate some lines and stop buying market pulp, and at the same time putting pressure on paper producers, particularly tissue, where price increases are more challenging. My question is, do you see any signs of these risks coming true or not. Secondly, about the container board market. Prices have been under pressure over the last year. However, there is some spread in the price in Europe and also the domestic market. The price in domestic markets are higher in Brazil, for instance. So could you give us more color on how you expect this to evolve in this price gap in the coming months? And if you see any reason for this premium to be maintained in foreign markets? Thank you. Thank you, Caio. Nico, would you like to begin? Hi, Caio. Like I said previously, we don't see in the short term any significant change when it comes to behavior for integrated products. We don't have any information yet in the sense that they stopped buying. Any volume in China today can be sold. even at 630 levels, which were already concluded, or despite shipments in November. So the speed for these prices to be used actually shows that there are several forces that are driving this move, like destocking process, for instance, or consumption, or higher prices. rates of machine use are more positive, order book exports in China going up in general, and also flagged to a depreciated U.S. dollar vis-a-vis the yuan. But I say again, we don't see any move, any significant change by year end. Obviously, it is more challenging for us to see what will happen starting first quarter next year. But I would like to underscore that when we check the price curves by analysts, particularly for the first quarter of next year, there is a big mismatch vis-a-vis these prices for analysts and current market prices. And I believe this average price will be revisited and possibly there will be an increase starting first quarter next year. Aris, Caio, when it comes to price, you asked about price like Cristiano showed in the second slide in the beginning of the presentation. Our scenario is stabilized prices, flat prices, prices dropped a lot. I think we had a valley in the second quarter and now we have more balanced inventory levels. Demand is improving. So today we can see stable prices. Maybe we might see some market in Southern Europe, more competitive markets like Spain and Italy. There is still a recent reduction of 10 or 20 euros. But as for the remaining markets, prices reached a floor. And the next step is to try to understand. I think you've been following up some capacity facilities shutting down in the U.S. and recently another announcement of closing capacity as well. So now we hit 1,600,000 tons of crap liner capacity in the U.S. closing down between 22 and 23. So this is a very significant number. The U.S. was exporting around 3.3 million tons in 2022. This year it's about to follow these numbers up to August, coming close to 3 million tons. Therefore, this capacity or shutting down of capacity may affect supply in the international market. And maybe this is the first trigger to have an impact on price next year. Your question about domestic market and spread in Brazil vis-a-vis Europe This market never had this connection between price, domestic market versus Europe. The level of service here, the level of inventory, the weight and grammage we work with. The client gets a product that is almost ready to be delivered compared to imported products. So the important thing is the spread between imported paper and craft liner. Our scenario is stable prices also domestically. There was a slight adjustment in prices, nothing so significant. And we work with a scenario for 2024. maximum IPCA. We don't see any possibility as we speak of significant price improvement in the future, precisely because prices today are maintained in the levels that you see today in our reports. Perfect. Thank you, Nico Enzoadis. Crystal clear.

Next question, Danielle Susson, Itaú BBA. Hello, everyone. How are you? Can you hear me well? Yes. Thank you. I'm sorry. I had an issue here with the phone. My first question may be related to capital allocation. Going back to your opening remarks, Cristiano, you talked a little bit about the focus on fluff that the company has, and with the conclusion of these decisions and discussions, become more relevant again. We have the refurbishment of the boiler in Montalegre. We have 1.2 billion that you mentioned that remain for the Figueira project to be invested. So how can we think here about that? bigger project in Santa Catarina that you had already started to discuss or look into in a preliminary basis? I mean, how do you see the window for this potential new project, especially thinking about fluff? Does it make sense to run a smaller project maybe than what you were imagining first due to the increase in CapEx? Or is it something that does not cross your mind yet. And my second question, if you can help us think a little bit more about the evolution of costs in 2024. We saw on the side of Pope at least a strong decrease on the cost of chemicals, quarter on quarter. On the other hand, oil at a slightly higher level may be a hurdle. So if you can help us think about that metric that you always talk about, the total cost per ton for the company combining paper and pulp. I think that would also help us. Thank you. Thank you, Tasson. So I'll start talking a little bit about capital and then I'll get Marcos to help me, Marcos Ivo to talk a little bit as well. So Tasson, I think Your audio is probably open, so if you can close it for a moment and you can open again later. Thank you. So let's remind that I've been saying for at least two calls now. Club in, and this is not that we closed ourselves down, but we're actually focused on efficiency. We've had very strong focus on the ramp up of machine 28. Reminding you that this machine went in at a site that now has 2.5 million tons that was running machine 27, already a very innovative product in the context of eucalyptus for craft liner with that productivity that we talked about, and also running machines 25 and 26, making market pulp and short fiber pulp and fluff. This plant also had the inclusion of a BTC every unit. So the full Puma site today with all its phases concluded and with all of the complexity of chemicals production and innovation in terms of energy generation with the biomass gases makes this one of the reference sites in terms of technology in the world today. And not only in technology, but also in terms of size, because it concentrates in one single site. And all that search for reduction of cash costs, being able to conclude its total capacity for volume at this site makes the reduction of fixed costs maybe the biggest gain that clubbing can achieve during the ramp up of machine 28 and the following months. So the company's big focus today is to get the capital allocation that has been made so far, generate the highest value creation possible in the following months. So without a doubt, this is our focus. There are other opportunities that we've been working on. We've worked a lot now. on efficiency opportunities, especially in GNA, getting us to become more and more productive in the sense of supporting our production areas with a modern ERP, bringing, making it easier and less bureaucratic for us to work. And finally, the focus that we seek and that's connected to what Marcos is going to say next is the reduction in the cost of fiber, as you well know. We've been very clear with you that the investments made on machine 28 and the focus in the first years were for third-party wood and the use of forestry areas close to clubbing That would make us, as we planted those areas, the first harvest rotation would get us to have a reduction on average distance. And during this period, there's still a couple of years, and Marcos will talk about this a little bit more, but during this period, we're always seeking opportunities to reduce this purchased wood And we see a lot of opportunities to increase the efficiency of cash cost per ton for clubbing. A simple quote about the Santa Catarina project with this explanation that I just gave you, I would say that within the company's roadmap, strategic roadmap, yes, there is a fluff unit included as there's also future investment in recycled paper machines, as well as other projects that we may develop in the next 10, 15 years. But at this time, Klabin's absolute focus is seeking efficiency. Marco? Just also adding to Cristiano's explanation, first on the short term, in the last quarter of the year, we see cash costs both for pulp as well as total cash costs per ton of product. The same level we saw in the third quarter, which may be a downward trend, especially considering the ramp up of machine 28 and the consolidation of actions that have increased their efficiency throughout the year, and that will start to bring results. When we look at 2024, we're in the beginning of our budget development process. We'll share it with you. We'll give you more information on clubbing day on November 30th. But I can say right now that we have factors next year that help us in terms of cost management. The first and most important is what Cristiano mentioned is the highest production volume with a ramp up of machine 27, machine 28, still to dilute, helps dilute fixed costs, we will have 12 months of the actions that have been done specifically on DNA benefiting our results. And we'll also have 12 months of this new level of freight costs, chemicals, fuels. And if we add all of the raw materials here, and I'm putting freight together in the bill because freight, fuels, and chemicals increased a lot during the pandemic, but now they are at a more normalized level. But that happened throughout this year. The first three, four months of this year still showed a very high level of prices for these items. I'm not making any projection for oil here. I'm simply adopting the assumption that these items will be on average around the same levels as they are today. And all of that helped us achieve a good cost, which means that I do not expect our costs next year to be any different from the levels we had this year. And we'll bring you more detailed information on how things are. As for the wood, Cristiano already talked about it, and we're following that path that we announced in 2019. You can compare what we announced then and what we've been doing. And every quarter that goes by, we get closer to the moment when we'll start to reduce the cost of fiber. Noting that 2025 will have that first step, but in 26, 27, that's going to be very relevant. And we'll go up to 2034 year by year, reducing our cost of fiber. And until then, we'll be seeking opportunities to try and bring this curve closer. Excellent. Thank you, Cristiano and

Next question, Camila with Brady School. Good morning, everyone. You already mentioned short-term trends for pulp, and I'd like to learn more about stable move in the long run. As for craft, When do you expect to see reasonable prices to begin to recover selling fluff in the market and considering short-term integration? I believe we'd like to have more color in terms of reasonable prices to begin to recover these sales more strongly. Thank you. Camila, thank you for your question. Maybe I'll go through a different avenue just to make it simple, because we already talked a lot about the trends for pulp and craft. If we think about a more structural, long-term process, I think we should focus on the return on invested capital at these companies. Companies with which Brazil and Klabin and other Brazilian capital intensive companies fit in. In these companies, there are premium on the cost of capital that is expected to be returned. We are below the reasonable level. So if you think about the return aspect, this has to go back to balance. But the market is not only owing to what you wish for. but it also affected by product supply and demand. I'm answering in more general terms. And remember that we discussed extensively market by market. So first return at these companies, these companies have to come back to balance. So these investments are announced again and the world begins to be more competitive. which is brought particularly by Brazilian companies in the pulp and paper business. As for markets, we mentioned, Suarez already mentioned about Kraft, and I also bring information on pulp. 2.7 tons of production were released early second quarter. This output reached cash cost levels that are historically very high, considering inflation rates. that is faced by the whole world post-COVID, and this inflation rate hasn't come back to normal yet, particularly considering macroeconomics in the U.S. So there is a reaccommodation of price, and rest assured that the current price levels tend to be recovered either by supply and demand, well, demand-wise, because these are staple products, and also supply-wise, Why is because high cost suppliers will have to make something about their investments and considering the productivity gains that we had in the last 20 years coming from Brazilian suppliers, this tends to happen. Historically speaking and economic data prove it to us, Latin America is the big champion when it comes to productivity and yield and public paper in the world. I'm sorry for this generic answer, but I just wanted to give you another context in addition to what we already shared about different markets. Thank you for your question. Thank you.

Excuse me, if there are no further questions, I would like to turn the floor to Mr. Cristiano Teixeira for his final remarks. Thank you. So now I bring you our perceptions for the fourth quarter. Already somewhat qualified in the beginning, but now it's just a more formal reading. So we'll still see uncertainties and challenges for the industry at clubbing. The fourth quarter will be leveraged by the recent price increases for softwood and hardwood fluff pulp and the production ramp up of machine 28. That was widely discussed by all of us. In addition to the trends that I mentioned, for the other products. And as a result, we expect EBITDA in the fourth quarter with a high single-digit growth versus the third quarter of this year. In addition to the 150 million BRLs of a reduction in GNA costs, as I also managed to annualize GNA, we continue to seek to maximize operational efficiency in our plants and optimize costs especially in the forestry business, which produces Klabin's main raw material. Thank you all very much, and I'll see you on the next call. Klabin's call is ended. I thank you for your participation. Have a great day. Thank you.