Klabin Sa S/Adr

Good morning, and welcome to Kapling's conference call. At this time, all participants are in listen-only mode. Later, we will conduct a question and answer session, when further instructions to participate will be provided. We kindly ask that, in the benefit of time, each analyst asks a maximum of two questions. As a reminder, this conference call is being recorded and being broadcast simultaneously via webcast and can be accessed through Klabin's Investor Relations website, where you can also download the presentation. Any statements that might be made during this conference call, in connection with Klabin's business outlook, projections, operating and financial targets, and potential growth, should be understood as merely forecasts based on the company's management and expectations in relation to the future of Klabin. Such expectations are highly dependent on market conditions, on Brazil's overall economic performance, and on industry and international market behavior, and are therefore subject to change. Present with us today are Mr. Cristiano Teixeira, CEO, Marcos Ivo, CFO and IRO, and the company's officers. Initially, Mr. Cristiano Teixeira and Mr. Marcos Ivo will comment on the company's performance during the fourth quarter of 2023. After that, the company officers will be available to answer any questions you might have. I now turn the floor to Mr. Cristiano Teixeira. Mr. Teixeira, go ahead.

Hello, everyone.

Welcome to our conference call to discuss fourth quarter 23 earnings results. In the last call, we tried to change a little the format, making it less bureaucratic. Stop reading a text on my end. So I will show you the slides. basically reporting on our markets, on Q4, and obviously the full year of 2023. And then Marcus Ivo will give you more detail on the financials. And at the end, in my closing, entering the Q&A, we will bring you what we call a panel of trends, or the trends, and then I will be highlighting those trends. So at the end, I will be presenting one final slide. All right, for starters, what do we see in Q4?

We can see the layout of the slide, which has to do with

what we try to explain to you, showing the several markets in which we operate. And then we have all of the company's officers here, and we can give you more detail on pulp, on paper, the different types of paper, and we can speak about the different characteristics of coated board and liner and packaging paper. We discussed this internally, whether we were going to totally change the way in which we communicate with you, taking into account how the US market communicates with the market there. They talk about the consumer market, as they call it, and then all coated boards and corrugated boxes integrated with papers and then the fibers. We discussed whether we should adopt that model, but we decided not to. So I don't want you to be surprised. We are not going to be doing this, not today, not in the future. So how do we want to communicate with you? We would like to adopt this format that you can see on the screen. So we have the traditional verticals or pillars of the company. Here we're not specifying the forestry area. given the characteristic of supplying these business pillars. It involves efficiency and cost. And here we try to give you more of a market view. So I think that this is kind of a debut. It reinforces what we tested in the prior call to start talking to you, talking to the market in this way. so that you can understand how clubbing operates in our one-to-one conversations. Our goal is to communicate with you. So this was the main comment regarding the format of the presentation. So let's start talking about the full year 2023. What I would say is despite the year of 2023, Despite 2023, we had a good performance in 2023.

The comment here is that there was an expectation.

Okay, now we have the 2023 slide on the screen. There was an expectation. But in 2023, we would have faced perhaps a U.S. economy doing more poorly. In the end of 2022, that was what was expected for 2023. So we were more concerned about 2023. But that didn't materialize, at least not in the American market. But when we go to Europe, perhaps. the European market was a little worse than expected. And I'm talking about expectations in the end of 2022. So we were thinking about a recovery from the COVID pandemic. But anyway, the U.S. market did well. And I'm being very matter of fact, as you know, Europe slightly worse than what we imagined. And China still with a lot of doubts. But A market that during 2023, they had to cope with average salaries, that attempt of deflation. more towards the end of 2023. And that gave us a result in terms of that first cycle of deflation of foods. And this was added to agriculture yield. So that caused the deflation more towards the end of 2023. So we started 2024. And Despite the year of 2023 being better than expected, at the end of the year, we were still very concerned. In the radio, we had fiscal or tax concerns in Brazil. But in the end of 2023 and forecasting for 2024 and our budget activity, with all that concern and with the U.S. market not yet feeling the recession that we thought they would go through, we thought, okay, the other ones have had problems. We still have in our radar some concern about Brazil and the United States. So in our budget, we considered all that. Thinking about the end of 2023 and start of 2024, what we see is the United States still like waiting in Brazil better than what we expected in the short term. So we have a positive feeling at this point. So now I'm going to try to address the slide on your screen. Volumes, as you know, this volume of 3.7, total sales, we started 2024 for the ramp up of PM28. There were difficulties in entering the presentation. you'll be able to see and ask questions about it. But the ramp-up of PM28, there is the production ramp-up for the machine that can also be used for craft line When you talk about 100% coated board, we have the approval of these products. We are at a very good pace of approval of these products. That will require more detail, but I'll leave that for the Q&A and Officer José Suárez will help us. There's this $1,095,000 for the paper market. If we look specifically at coated boards, 705,000 tons. We are talking about a PM that is not included in the snapshot. We have 460,000 tons of capacity. That's a little smaller than that due to general stoppage. But we have between... 440 and 450,000 of net sales on top of these 705,000 times that will start being produced by clubbing in 2024. And this is already happening. likewise now i'm going to move to packaging which is the third group we have one million six tons two thousand tons and here we can expect oh again i'll leave all the details for the q a with our officers okay but we started 2024 with a very positive expectation for the whole figuera project which is totally on budget, on time. It's all going according to plan. And this will add capacity for 2024. Like I said, I will make some comments more towards the end about the panel of traffic lights, let's call it. That's the trends we are identifying. Marcus, myself, with the management and the board, well, we want to be more and more transparent with you. We want to be more and more objective in communicating with you, showing the markets, where we operate. And as we improve transparency and as we improve your understanding of our business, we tend to be closer to you in terms of our expectations for this year and for the coming years. So I'd like to and this introductory part thanking our investors, clubbing's management, and the board for your support. I think that we had a year where we focused a lot on efficiency and productivity. We were still delivering some projects. we kind of set the stage for 2024. 2023 was a year to work for 2024. I mean, executing the year, but with 2024, with a strong 2024 in our radar in terms of efficiency and productivity. So we have a lot of reasons to thank all clubbing employees, our management, our board of directors for our success in 2023. And in terms of what we planned, executing 2023 well to have a 2024 even better, well, that expectation is materializing for us in the beginning of January due to market conditions and to our productivity. Things have been shown to be better than what we expected. I would like now to turn the floor to Markus Ivo to explain the financials in more detail.

Thank you, Cristiano. Good morning, all. Thank you for following our conference call. On page five of our presentation, net revenue in the fourth quarter was 4.5 billion BRLs, down 11% year on year. This drop was due to reductions in pulp and crap liner prices. as well as the appreciation of the Brazilian currency against U.S. dollars, which was partly offset by higher sales volumes. Adjusted EBITDA net of non-recurring effects was 1,620,000,000 BRLs in the fourth quarter of 2023, with a margin of 36%. Now on slide 6. Sales volume over 2023 totaled 3,666,000 tons. down 5% versus 2022. This reduction is explained by the market stoppages in container board production. Net revenue was 18 billion reals in the period, down 10% year on year. This drop is explained by lower pulp and craft liner prices, the appreciation of the Brazilian currency, and also lower sales volume. As a result, adjusted EBITDA in 2023, excluding non-recurring effects, was 6,259,000,000 BRLs, a margin of 35%. Slide 7. Pulp sales volume was 412,000 tons in the quarter. The highlight was fluff, which had record sales volume reaching 96,000 tons. The average price of long fiber fluff driven by fluff was $902 per ton in the period, accounting for a spread of $319 over short fiber. In 2023, this spread was $392 per ton, showing the high added value of long and fluff fiber. The cash cost of pulp production was 1,318 BRLs per tonne in the quarter, down 1% on the same quarter in 2022. In 2023 full year, the cash cost of pulp was 1,338 BRLs per tonne. On slide 8, in the Coded Board segment, we highlight the ramp-up of PM28. and the benefit of this investment on the company's results. In this context, the volume of coded board sales was 198,000 tons in the quarter, an increase of 11% year on year. Net revenue in the coded board segment grew by 18% compared to the same period of 2022, reaching 1.1 billion reals in the quarter. In 2023, net revenue from CODA Board reached R$ 3.9 billion, an increase of 11% compared to the previous year. Paper Machine 28 produced 162,000 tons in 2023. Of this total, 49,000 tons was coated board. For 2024, we expect and confirm total production from PM28 amounting to 350,000 tons. Moving on to slide 9, the total cash cost per ton was 3,000 Reals in the quarter. accounting for a 12% reduction compared to the same period of last year. In 2023, the total cash cost was 3,133 BRLs per ton, the same level as in 2022 and below the guidance previously given by the company. This result reflects the performance of COGS per ton and general and administrative expenses which fell significantly compared to the same period last year. As a result, we confirm the fourth quarter cash cost, the reduction in general and administrative expenses that we had shared with the market, as well as the positive impact on the increase in production volume of PM27 and 28, which contributed to the greater dilution of fixed costs. Moving on to slide 10, adjusted free cash flow, which Disregards, Discretionary Factors and Expansion Projects was positive by R$820 million in the quarter. In 2023, adjusted free cash flow reached 3.1 billion BRLs, with a free cash flow yield of 13.3%. Turning to slide 11, Klabin ended 2023 with net debt of 20.2 billion BRLs, a reduction of approximately 700 million reals compared to the previous quarter. This reduction is substantially explained by the positive effect of the appreciation of the real against US dollar on foreign currency debt with no material cash effect in the period. As for leverage measured by the net debt over adjusted EBITDA ratio in dollars, enter the quarter at 3.3 times within the parameters set in the company's financial debt policy. Moving on to the next slide, Klebin's liquidity remains robust and ended the quarter at 13.1 billion BRLs. This liquidity comprises of 10.7 billion BRLs cash and the remainder in an undrawn revolving credit facility. This cash position already reflects the funds in U.S. dollars that will be used to pay for the Cayete project, scheduled for Q2 2024, as mentioned in the material fact of December 20, 2023. It is worth remembering that the closing of the CAETE project still depends on the usual conditions precedent in this type of transaction. The average maturity of the debt at the end of 2023 was 94 months, and maturities over the next two years total 2.8 billion reals. Turning to slide 13, according to the advisory to shareholders published on December 14 and yesterday, the company approved the pavement of interest on capital and dividends, which together account for 363 million BRLs, to be paid on February 26. On an accrual basis, the proceeds distributed to shareholders in 2023 total 1,340,000,000 RLs. This amount accounts for a dividend yield of 5.7%. On page 14, I would like to highlight recent achievements on the ESG front, which make Klabin one of the most recognized companies in the world for its sustainable performance. In this context, yesterday we announced that Klabin is still on the CDP's trip away list and is the only company in Latin America to achieve such rating. For the fourth consecutive year, we have also been included in the select global portfolio of the Dow Jones Sustainability Index, as well as being part of B3's ISE. And now Cristiano, other officers and I are available for the question and answer session. And at the end, Cristiano will come back to comment on the trends for the first quarter of 2024.

Very well, ladies and gentlemen, now we will begin the Q&A session. If you want to ask a question, please click on the raise hand button. If you want to remove your question from the line, click on the lower hand button. Our first question comes from Rafael Barcelos with Bradesco. Mr. Barcelos, go ahead. Good morning, everyone. Thank you for taking my questions. My first question is about the boxes market. I'd like to get more detail regarding the demand for the year, what has been the strategy of the year until now, and Project Figueroa will start later on in the year. I'd like to understand how the strategy of the project can impact the market this year. and how the startup of the project can affect the cost of the corrugated boxes unit. Second question is about the craft liner market. We have seen craft liner prices suffering for a while now, and Klebin for a while now has been talking about the strategy of integrating more craft liner, some market stoppages. I know that you mentioned about the general feeling of the market in the beginning of the call, but it would be interesting if you could elaborate on the supply demand dynamics for Kraft Liner in 2024. When do you think we can start expecting a better price dynamics? Thank you very much.

Thank you, Raphael. Congratulations on your new employer. Well, you have a new company you're working with, so congratulations.

We have Douglas and Dalmazi here with us so we can speak about corrugated boxes, FIGATA. Rafael, this is Douglas. Thank you for the question. We saw domestic demand for corrugated boxes growing since Q4. of 2023. And when we see this kind of economic behavior, declining interest rates, income for consumption increasing, the population's income, level of confidence of consumers improving, we see the packaging market moving ahead. It is like a thermometer of the economy in January. That was the pace, a strong pace in January, and that's what we're expecting for the year. If the Brazilian GDP behaves in the same way in 2024, if we have the consumption economy getting stronger and consequently retail getting stronger, normally, historically speaking, the packaging market will grow above GDP, at least one percentage point above the GDP. And this is what we're expecting for 2024. As for the FIGATA project, it will start operating in the second quarter of 2024. On one hand, we're seeing that we got it right in terms of approval and startup date. We got it right, the right timing. It's our merit. It will start up in two stages, two corrugating machines. We have the expected number of tons. We could increase to 100,000 tons, but we don't want to have any stoppages. So we want to perhaps have 240,000 tons when it's in full operation. For Fugata this year, we're going to have only 70,000 tons additional because the second machine and some conversion equipment will start operating more towards the end of the year. And next year, yes, we'll have full capacity. So consequently, we won't see a relevant reflex of cost reductions of this year. because we won't have a full production yet we don't see this reflected in the conversion cost thank you douglas suarez good morning raphael thank you for the question regarding the prices we have been talking about stability starting in q423 In Q4, 2023, we started seeing some price stability and a slight demand increase. In the last call, we spoke about a balance between supply and demand. We started seeing a correction of inventories. In 2023, we did suffer with high inventories. So we got to Q4 with balanced inventories and a slight improved demand. This is the same process that we see in January. We have a portfolio of orders which is quite robust, advancing into March, which shows that the demand is showing signs of recovery. A part of that is for logistical reasons of some markets being difficult to be accessed. And this is opening up some additional opportunities for us. As for prices, naturally, As demand improves and with more aligned inventories, also regarding the U.S. economy, we have heard and seen some U.S. competitors also reporting improved demand and an expectation of growth in 2024. And I guess that with all of that, the impression we have is that Price increase is expected for Q2. The right conditions are there for us to start talking about a price recovery. Still at a modest level, but we are leaving behind a scenario of quote-unquote stagnated prices. We're leaving that behind us. This is what we're seeing, Rafael. Excellent. Thank you, Cristiano, Ivo, Douglas, and Suarez for the answers. Next question from Danielle Sasson with Itaú BBA. Mrs. Sasson, go ahead. Hello. Thank you. Good morning to all. Thank you for the opportunity to ask questions. I don't think we've spoken since the announcement of KIT project. So I'd like to congratulate the company on improved disclosure and increase the level of information that he communicated about the project. I think that's helpful for the sell side and the buy side. We can understand the real value of the product and consider that in our estimates. So thank you for being here. transparency that has increased. My first question is also related to that. The material factory disclosed yesterday the increased EBITDA in the coming years until 2027 of 3 billion compared to the last 12 months of Q3 of last year. If you could give us a little more color, perhaps you cannot really break it down how much of that could come specifically from FIGETA project and from PUMA to in full ramp up, but perhaps. You could speak about the assumptions in terms of prices for corrugated boxes or coated board that you're considering or effects for an exchange. And what are your main sources of upside and downside for your estimates? Always regarding these three billion that you included in the guidance. That's number one. Second question has to do with the pulper market. We have seen sequential announcements of price increases, particularly in Europe. Perhaps because of what you wrote in the release, the fact that the volumes were directed to China and not to Europe in the second half of 23. So perhaps there's this feeling of shortage of product in Europe that would drive up prices in that region with even a price gap compared to China. Do you share this view? And what kind of flexibility do you have to perhaps redirect some ships from China to Europe? Because historically, Europe has been more important to you than to your competitors. And it is a region that seems to have a better dynamic of pulp prices, at least in the short term. These are my questions. And thank you. Thank you, Cécile. Thank you for your nice words regarding this new formative communication and thank you for the questions.

So regarding the material fact, it's kind of curious because I would say that the material fact was very good for the company. Of course, this is reactive to something, but

It is a simple, quote unquote, a simple explanation. And there are a lot of mathematics involved, and you do the math better than us. So all the difficulties and the ramp up are public information. We just told you what the ramp up of the machine would be. When we talk about products and markets, we always talk about a mix per machine that we try to operate with in terms of conversion, et cetera.

When we talk about price trends,

We always get support from consulting firm input, and it's all public when we talk about paper and pulp, when we talk about corrugated boxes. We always mention boxes. Douglas Dalmaster has just mentioned a 1% premium over the GDP that the corrugated boxes market always offers. That's the characteristic. We don't have time to explain this in detail. But this rhythm of corrugated boxes in a country like Brazil will have a lot of statistics to talk about this. But it's not just about looking at the past. It really depends on income of the population, what's happening in practice. When I talk about income, I'm talking about income improvement, absolute per capita income. So taking all that into account, when we compare countries, we realize that there are some distortions. For example, why is it that Brazil, if you look at the region, I'm not going to say globally, because we don't follow all of the countries in the world, but if we talk about the main markets in the world and in Latin America, I would like to leave a question in the air. Why is it that Brazil dropped less the shipping of corrugated boxes than what happened in many countries in Europe and in Latin America? It has to do with the characteristic of income in Brazil. And we like to look at that a lot. We study that a lot. Well, my trend is not to avoid answering your question, okay? On the contrary. But reading the material facts, We have more details there. I would risk saying that that disclosure of information was unique in the Brazilian Stock Exchange. The level of transparency we have there, the level of transparency regarding the ramp up of machines where we get our price trends from, what's left? are assumptions related to some contracts that we cannot, will not, and we cannot disclose, and we cannot give you details on that. This regards everything that is always said about Brazilian inflation. We use market curves. We use public information or projected information about inflation. So in a very simple math of volume and curves, we get to the numbers that we've been talking about. The number that was disclosed in the material fact. We feel very safe about this. We wouldn't be saying these things if we didn't feel safer about this, if we were not supported by the partnerships we have and our long-term contracts. I guess that the material fact in and of itself is very transparent. It communicates a lot in addition to our presentations. So regarding the material fact, I'll stop here, and Nico will speak about the pulp market. Thank you, Cristiano. Sassoon, good morning. Thank you for the question. Sassoon, trend for the quarter. It remains very positive for all three fibers. You know that clubbing produces eucalyptus, long fiber, and fluff. So it's a positive trend in terms of demand or due to price realization that has already happened and others that will be realized soon. Our expectation for the quarter remains very positive. When I speak about demand, we'll look at what we already have in our portfolio for the whole quarter. Now, your question was also about Europe and our flexibility of moving volumes. We never denied that Europe was always a very relevant market for clubbing, just like the domestic market, which reflects the same price index that we have in Europe. So we have basically two thirds of our eucalyptus sales going to Europe and the domestic market. And our level of flexibility depends on contracts because all supply contracts set forth a tolerance of about 10%. So we can move volumes among regions. And also due to production gains or production or output gains is translated into allocation of volume in those markets that are more profitable.

Thank you, Nicolini. Super clear.

Next question, Marzu Faridi with Goldman Sachs. Please go ahead. Hello, everyone. Good morning. Thank you for the opportunity. I would like to have a follow-up question, maybe being provocative after Rafael's question about paper and packaging. Since 2019 or 2020 to date, basically, Massive investments in packaging and paper involved IP acquisition with slightly more than 300 million BRLs and almost 350,000 tons capacity. And obviously, the Puma 2 project with slightly more than 12 billion BRLs, plus something in forest assets invested as well. When we check the total volume sold, we can see some growth. Naturally, Puma 2 is not fully ramped up. The second machine, PM28, only got started up. However, we can see intrepid growth. More than 200,000 tons of paper for packaging and growth offset by other papers and sectors as well. So it seems to me, after all this investment, market conditions didn't help. However, we see nearly nothing reflected in total volume. Considering the future, the idea is to try to understand. Douglas mentioned that Figueira potentially will be in full capacity. Possibly there'll be a better demand scenario, but Klabin seems to be far from running full capacity considering the current capacity. So the question is, how do you expect to see volume growth being translated in the coming years in uncertain market, but with apparently access capacity, and certainly, well, sometimes see the impact of these investments that have been made recently. Reflected in the balance sheet, if I'm not mistaken, new capacity of West Rock in Brazil, so a better demand scenario, so possibly more availability, not only at Klabin, but also competitors. So that's my first question. Thank you. Thank you, Farid. Great provocations. I think they give us the opportunity or have a more transparent debate. I think, and I also respect your question and along the same lines and with full respect, it's curious how I can have a completely different vision on what you see on the same fact. So all clubbing's investment, no exception, small or big, Just a side comment, we don't do post-audit every day, but naturally we do follow the figures. All our internal rates of return are beyond what we had approved by the board or in any disclosure, so all of them. And rest assured, when we think about the period since 2017 up to now, there is no exception. of a better internal rate of return than what we said before. So when we go to market, I'm also happy to see and to show and share with you that first and second slides that I showed before where we break down our markets. Once again, I always go back to the mathematical simplicity of looking at that chart. In that chart, we all know the startup of PM27 and 28. PM28 hasn't been fully run, as you showed. But they always improve the mix of cash flow at the company. PM27 did greatly improve the cost mix of the company and also shipping more square meter rather than ton of boxes. So we ship the same unit of box, but by using less paper to manufacture the boxes. That's why I always like to show it in details, because now we can get closer to the mathematics that we use, closer to what you do. So perhaps I suspect that you're not disregarding third party purchases from the volume, we always share with you that we may run up to 300,000 tons additional with the company. When we purchase paper from the market, so if to any extent the market is favorable for paper purchase, we decide to buy this in the market. As a result, we improve our total capacity. from the practical standpoint, the only figure, if I just told you that all internal rates of return are better than what we expected, if I tell you that all our machines are running at a better efficiency pace than what we expected, the only difference that you have to subtract from the map is third-party paper. If I'm not buying today, is only because I'm better off using my paper, therefore improving the profitability, the results of the company and our actions. We talk about flexibility and we do believe this is being understood by all. But when you ask this question, Fadidi, this is great. It gives us a chance to explain things that maybe are not being clearly understood when we speak of flexibility. Lastly, about production of coded board in PM28 and invite Soares to tell us more about it. We're doing very well in the ramp up of product mix in PM28. We're very excited with our main clients. So now I'll ask Soares to give you more, to qualify the qualification time of these products. Hi Faridhi, how you're doing? For coded boards, we are in this fast track. We've been having an excellent cooperation from our partners, particularly LPB. We are very much advanced in the very stringent test period. In a year, we expect to have this process completed by mid-year. This will be a milestone in the process of qualification of an LPB coded board. At the same time, We already had a share in the foreign market with other partners of ours, and we are coming back to that. In the pandemic, we had to stop exporting to some markets or lower our volumes. And now with the capacity of PM28, we are at full capacity to recover, to come back to these clients and markets. And we've been favored by a logistic program so as Channel now ships and vessels, they have to use it and this is improving the transit time. We've been having an increase in demand. We've noticing better demand in Asia, which has been helpful in this first quarter. to improve our exports of coated boards. In the domestic market, we're also benefiting from the climate in the beer market. Demand has been good since November, above our expectations. So PM28 for year 2024, we imagine it will run about 60% of production for coated board. So that's our general outlook about PM28. Thank you, Swadis. Thank you, everyone. Thank you, Chris. Just a follow-up question. Your comment on use of flexibility at the end of the day strengthens the fact that Klabin is running below what it could deliver in terms of total volume. So my question is, considering the future, are you running about the same sales volume compared to 2019? Clearly, you can use of the flexibility of recycled products to have better market conditions. So the question is, should we expect to see Figueira more competitive, ramping up? Or could we also consider underused capacity wrapping up at a higher cost and therefore less dilution of average cost in a scenario of more favorable demand? I don't know if my question was clear, but that's my follow up question. Thank you. Thank you, Faridi. I would love to be running full capacity and buying third party paper and having a trend in the market. This is not happening and I don't see this happening according to the current scenario. Having said that, you mentioned fixed cost dilution, right? This is shown in our earnings. We do have gains in productivity, like I said in the beginning. We are managing, therefore, per ton, we've been managing to lower the company's cash cost. And this is not only related to volume, but also with efficiency. I mentioned an example, which is square meter. So less fiber per square meter with the same product resistance. And other efficiencies that we are pursuing. and I cannot give you all the detail right now, but coming back to your question and agreeing with you in your last comment, it's true, I'd love to dilute even further our fixed costs, but in order to make it happen, it takes a market, and for the moment, it is not there. How should I put it? We've been relatively patient accommodated in the pandemic peak, except for some humanitarian problem. We had a commercial thing, but except for that, we were accommodated because particularly in the second half of the pandemic, consumption with all that liquidity. And by the way, this acceleration is not only in the packaging business, but nearly all non-durables in the world. Those who were really affected were durables. But it happened over the pandemic. And my perspective, which is what we see today, is that after the pandemic, now we got into reality. Reality check. We adapted our fixed cost, our production, absolute numbers. And when we check per ton, in our case, something comes up, but not the full potential yet. And I agree with you that from the moment all the volume comes back, we'll improve even further the company fixed costs. But I conclude by thanking your question, and I'm really happy with the volume we're delivering today. And all these investments include FIGATA, which is a brilliant project for the company, just as the IP acquisition. All these projects will, well, as we also had with other past projects, these new projects added to ramp up of PM28 will still bring a lot of productivity gains to the company. Thank you, folks. Next question, Lucas Lagie with XP Investments. Please go ahead, Lucas. Good morning. Thank you for taking my question. Just adding to a couple of points that you already addressed during the call, particularly related the guidance of the three billion incremental EBITDA and also vis-a-vis the discussion on unit cash cost of the company. When we consider the evolution of production capacity for PM28 and FIGATA project, what we had in mind was precisely the expectation of higher dilution of fixed costs and the opportunity to lower the unit cash cost. However, when you look at the assumptions for incremental EBITDA, and this is crystal clear in the reference form, maybe one of the assumptions, except for price, that is slightly out of control when we check the cash cost assumption that is an inflation assumption. Think about 3,100 tons in 2014 and 2024, not considering this cost dilution. So is it reasonable to assume that if you think about a reduction of production capacity, this is not included, the use of capacity? an optimum capacity that would bring this cost dilution that doesn't seem to be embedded in the guidance. And just to confirm, 350, 400 million reals of cost savings with CAET is not included either. So that's a potential upside when you think about cost reduction. So these two points, Just go deeper into the assumption of what is embedded in incremental EBITDA for the years to come. Thank you, Lucas. My first answer was about the material fact. Now, something added to that, Marcus is going to talk about the same topic. Lucas, good morning. Your question makes it easier on me to answer it at first. What Cristiano said, the comment that led to this guidance, which is very rich to support our communication, this happened prior to Kayete project. And therefore, we couldn't, considering the chronology of the facts, it was not possible to include Kayete in the math. And this is confirmed in all the assumptions that we broke down and explained in our material fact. Second point. We're very confident about the comments in the reference form. Cristiano already mentioned this today. And naturally, these are very down-to-earth assumptions. To put it bluntly, your analysis on a potential upside on top of this figure, cost cash per ton below inflation rate, it's very reasonable to assume that, even though it's not our base scenario in the material fact or in the formal guidance. This is very interesting to work on this analysis. You have all the other details of the company, and this is good food for thought. Thank you, Marcus. Thank you. Just wanted to add to this. Have a good day.

As there are no more questions, I would like to turn the floor to Mr Cristiano Teixeira for his final remarks. Mr Teixeira, you may proceed.

Well, thank you, everyone.

And as promised in the beginning, I will talk about the last slide, the expected trends. We're getting more and more used with this panel, these traffic lights. And I'd like to make clear that maybe it's because it's a schematic drawing, we don't really pay a lot of attention to it, but the accurate position of this needle requires hours and hours of discussion with each officer. So again, I'm going to bring you some color on this. It's our guesswork, of course, of the officers of the company in terms of what we are seeing, of the demand, the pace in which we are operating today, and the prices that we are expecting for this quarter that we are in right now. So this is a little bit of our expectation, our perception. So I'm going to talk a little bit about this, but not elaborate too much. But for each one of these gauges that you see, I believe that the answers from our officers are represented here. It will give you a lot of detail regarding how we are running prices in short fiber. So if you see the arrow on the green or right at the border of the green, it's because we see some improvement today compared to what we've been delivering, just as an example. On the left at the top, we wanted to set the tone of this arrow. Again, I apologize. I'm being very simplistic in my explanations. But when we have this straight arrow, it's because we are thinking about neutrality. But when it's more towards the left, it's a negative trend. To the right, it's a more positive trend. And the higher the intensity of the positive trend, We move the needle more more to the right. More to the right if it's a positive trend, more to the left if it's a negative trend. Again, I just wanted to explain how we are working with these cold traffic lights. We are looking at this with a lot of attention, and we practically see all of the needles of pulp, short fiber, or fluff with a positive trend. when we talk about what we're living today, right? And for paper, coated boards, and for coated boards, we're talking about long-term contracts. So the trend of the needle for coated boards is always to move very little, except in some market moments when there is a lot of consumption. particularly consumption of seasonal foods that could be related to summer, for example. Coated boards tend to be more stable. In liner, José Suárez already mentioned that he sees demand improving. He can already see this, not just for our company, but in the market movement, we see some expectation. We see it as a neutrality. But if I have a demand needle moving to the positive side at a second moment, we could see also the needle of prices moving to the right. So we'll have to wait and see how the market behaves. For corrugated boxes, demand running better than expected for the period for January. And this is a surprise both for the month and for the year. Of course, it's way too early to speak about the whole year, but at the moment, January was better than expected. With a price neutrality, I'd like to remind you that corrugated boxes are In recent years, in the last six years, the price of corrugated boxes has been increasing above inflation due to consumption characteristics that we don't have time to address here as we are running out of time, but either due to market consolidation or the characteristics of income in Brazil, corrugated boxes in dollars start seeing a price increase. price in dollars and for industrial bags we see some industrial bags we see a relative stability there's We were expecting some government actions that would have an impact, but we had a lot of rainfall. And in periods of a lot of rainfall, it's really difficult to have a qualified opinion about this market. We'll have to see what happens. So with this, I would like to end my explanations about the trends. I reaffirm with you that our main focus for 2024 is delivery of projects. Like I said, we've worked a lot in 2023 to deliver a lot. We want to deliver a 2024 with ramp up of Paper Machine 28, which will contribute with a greater production in 2024. for production of coated board. The difference between coated board and liner is that we don't buy coated board from third parties. So we only see this number of coated board increasing, not being regulated by flexibility. Coated board is if we have production capacity, we'll have selling capacity for coated board with no volume arbitration. The GATA project, we are very confident about it. we are confident regarding the startup of production in the second quarter of this year the project is unfolding really well and lastly the acquisition of forestry assets what we called kaiti project We are estimating approvals occurring sometime along Q2. In addition, in this year, when Clubbing celebrates 125 years of existence, I stress that we continue firming the constant pursuit of operating efficiency in our plants, and we pursue cost optimizations. Thank you very much for your participation. I hope to see you next time. Clubbing's conference call has come to an end. I would like to thank all of you for participating and have a great day. Thank you very much.