Klabin Sa S/Adr

Good morning and welcome to Klabin's conference call. At this time, all participants are connected as listeners only, and later we will conduct a question and answer session, and instructions will be given at that time. 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 through webcast. which can be accessed through Klabin's investor relations website, where the presentation is also available. Any statements eventually 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 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 therefore are subject to change. Today with us, we have Mr. Cristiano Teixeira, CEO, Marcos Ivo, CFO and IRO, and the other company's officers. Initially, Mr. Cristiano and Mr. Ivo will comment on the company's performance during the fourth quarter and year of 2024. After that, the officers will be available to answer any questions that you may ask. Now I'll turn the floor to Mr. Cristiano. Please, you may go ahead. Good morning. Thank you once again for being with us now on this meeting about the last quarter of 24. I will talk a little bit about the performance on the quarter, but I will state more to the whole year. And that allows us to give you a better, more structured view. On slide three, you can see our performance with about 1 million tons in sales for the quarter. Revenue of 5.3 billion, which represented 17% increase compared to the same quarter of last year. That was the fourth quarter of 23. I remain with what we've been talking about for some time. The company has been improving in terms of mix, and I'll talk a little bit more about that on the whole year view. But the company has been working with the three segments of our fibers, our papers, including coated boards and container boards, and packaging. So we maintain this behavior of taking the company to what was outlined by the strategy with one-third, one-third, and one-third in terms of volume. Of course, the results and revenues vary according to price curve. But that's the work that has been done over the last few years. And we start to see this is contracted. I'll specify it a little bit more. But we can already start to see the representation in the fourth quarter of 24. And we can go to slide four. where we see the year better. And of this total of 3.9 million sales for the year, which represented about 20 billion reais in terms of revenue, 9% more than 2023. So with the ramp ups that we've been talking about. And EBITDA 7.3 million, 17% more than 2023, the same way. confirming that we continue to improve the company's margins. In addition to increasing volume revenue, we also improved the company's margins, focused on the cash cost performance. considered by the volumes of the company that go up, reducing cash costs, but also with this product that was an extraordinary project that was Caete, which also brought a reduction on the company's average distance to supply the units in Ortegaida and Telemaco. So in this representation here on the chart for the performance of 2024, I'd like to talk to you When we talk about paper market, it's 1.3 million tons. So what's going to happen in coming years? This is already contracted. The equipment's all installed, either machine 28 or 27, as well as the units here at Figueira, the units in Piracicaba and São Paulo. And the unit in the state of Ceará, four corrugated boxes. So all of the investments have been made and contracted. The equipment's been installed. So what happens in the company in the coming years? There's an improvement in terms of mix. So there'll be an increase from this 1.3 million. There'll be a transfer of the craft liner production to the production of coated boards. So the 520 tons will go down. And the coated board share increases. Remember that we're having the ramp up of the machine, producing more craft liner in the beginning as the products begin being approved, and we can get into further detail with Suarez. But we increase our coated board capacity, reducing our craft liner capacity. In practical terms, this means price stability, long-term contracts, mainly. Another portion of craft is also reduced. increasing conversion of corrugated boxes. Remember that our nominal capacity for corrugated boxes being stabilized is 1.1 million tons. So part of that prep liner paper, once the units are stabilized at Figueira and Ceará, there will also be a transfer of those papers for the company's bigger conversion. So with that, We reach what we have been delivering to you, especially in 2024, and start delivering in the next two to three years, stabilizing the company with strong cash generation compared to today. We've already been showing that since 2023, talking about what was going to happen in 2024. It's also going to happen in 2025, 2006, and 2007. So there's a significant improvement in cash generation today. And that's aligned with information that's already public disclosed to you that we've been providing for some time, simply based on the capacities that are already released in our investment. So there will be this biggest cash generation in coming years and an important release in the free cash flow with a strong focus on deleveraging the company, precisely because we'll be generating more free cash. So all of the companies structuring cash always taking the business model of one-third, one-third, and one-third with the biggest integration of papers and stabilizing the financial data and deleveraging mainly in the next two to three years, put the company as a company that is ready to face the challenges of the market that are coming ahead obviously being able to enjoy a lot of its capacity for integration. And over the last five, six years, as you've seen, this has been happening, and this year as well, in the beginning of the year, but basically contracted for the first and second quarters with a recovery of prices on inflation in the packaging areas of clubbing. So passing through either inflation with a premium on top of that, so the company starts to pass on or transfer more sales volume to more stable markets, making up for inflation or even higher than inflation for the price. And it also stabilizes with a quoted board volume. As you know, this is a product that has long-term contracts and reduces its capacity For container board sales to the market, of course, this is one of the products, along with short fiber, that is more volatile for the company. Of course, we'll always be able to operate with this volume of craft liner in coming years, depending on international prices of the papers. Especially paper machine 28, we can operate in other ways in other machines, but especially machine 28 will always... be considering the best segment in terms of absolute margin for that machine. So despite this flexibility that we may still have in producing craft liner or coated boards or even converting packaging, clubbing zone packaging, we will operate the company's SMOP with a lot more flexibility than what we had been operating already. Remember the flexibility that we always brought to you clubbing could make container boards or packaging today with the same machine we can always choose between coated boards and you know the coated board segments either for liquid food items or for folding markets in general we'll be able to performance that choosing the market vis-a-vis what we see in the craft liner market, vis-a-vis what we see in the packaging market itself. So it increases Clubbean's flexibility in coming years. So we closed the year of 24, representing what we had been already been declaring, that was the company's period of deliveries. We have only seen the first year of this delivery period. We still have a couple of years ahead, as I said, with significant improvement in cash generation and free cash flow and the company's leverage precisely with the volumes already contracted and released to you by the investments that we've announced. So that should happen in the next 18 to 24 months. We've been working a lot in addition to the capacities and the markets. We've been working a lot in the company's efficiency. And I'd like to point here something that often goes unnoticed, but we've started on January 1st a new version of SAP. This new version of SAP came in with no impact to our clients. We had a plan that was very close, especially to Brazil's corrugated box clients, but there was a joint plan, and we had no segment that was impacted by this new version of SAP that comes in very well. Today, at the end of February, we are already working with numbers that, I mean, we spent one quarter comparing it with the company's previous accounting figures. But the figures have been coming through a lot faster for our release, for our internal analysis, and with the reliability as we had in the previous version. So given that context, for the company seeking efficiency with the increase of volumes, mixed improvements, or even with this restless work, improving the company support department's gaining productivity by reducing GNA either through systems technologies or training people. So giving this context, I'd like to tell you with this company portfolio, it becomes an important macroeconomic proxy. I mean, we realize the capacity of analysis that we can on the company's data. In addition to having 24% market share of corrugated boxes and selling papers to our competitors, but also being in coated boards and especially in the fibers present in different segments. Hygiene and cleaning, as you well know, natural or processed food items and construction, clubbing starts to have this contracted profile in terms of mix and products and volumes. It becomes a more important proxy than it was before. So something that we've always talked about, it's nothing new. When we start to realize I'm getting to the – final analysis. But when we start to run a quick comparison with Brazil, we prepared ourselves for Brazil in 22, 23, for a country that would be strong in 24, 25. And that happened. The volumes of corrugated boxes sold and shipped, published by Emprapel. And of course, Klabin keeps track of that in terms of market share. So a significant improvement in the consumption of supermarkets in Brazil. So there was an improvement in income levels and job generation in the country. We had this information confirmed today that also concerns markets yesterday. But all of these improvements that we had addressed came from the investments made, especially here in Sao Paulo and the Figueira region. unit and in the state of Ceará. So this first part of the analysis is that company was mindful of this moment of improvement in Brazil. What we're saying now, of course, with an expectation in terms of inflation, it's important that we always say that even though we're a proxy of the economy, clubbing for a number of years, this analysis, we can go back for at least 20 years, clubbing When the GDP improves, our sales of corrugated boxes keep up with the GDP, sometimes even at a premium, depending on the level of exports that the company has. And when there's a worsening on the GDP due to monetary policy management to combat inflation, when there's a worsening of the GDP in the medium to the long term, Klabin is also able to drop less than the GDP. So what we've been working on now, and we brought to you a lot of times already, when this can happen, we're not saying it's going to happen now. It's quite the opposite. We're still going through a significant increase in sales of corrugated boxes and increasing prices and so on. But if we make a projection, if there is a worsening, we're also protected in the domestic market. either considering the price correction that always keeps up with the inflation at least, and we increase our numbers of conversion due to the explanation that I told you about the product mix and so on, but also when there's a change in the average ticket of the consumers, I already gave you this example a series of times in the past years, but when there's a replacement of type of protein or a worsening of the average ticket, Clabin also keeps up with this replacement in terms of volume. We may lose on the liquids, but we grow on the other hand. And in the recent past, we talk about the replacement of beef to poultry or eggs. And now eggs, as we see, are not as affordable. But this replacement of swapping types of protein, we were always able to keep up with them since Clabin is a proxy and we supply all of the big brands in Brazil. So I apologize for this longer explanation. I tried to give you a little bit more of a view of what we built in 2024 or what we intend to deliver in the coming years based on the volumes that have already been contracted and published in our investments or mostly on what you expect for Brazil. So Klabin is prepared both from what we hope to maintain this level of employment, of job generation that has been delivered, improvement in income levels. And if soon we expect the government to be able to control inflation, we'll be prepared for that volume. If there is a worsening or an improvement in these macroeconomic features, translating that into the GDP, you know that we're able to both keep up with the inflation or even maintain and improve inflation our volume considering the product mix that I have just explained. So right now, I turn back the floor to Marcos Ivo. I was a little more detailed in this explanation, but Marcos will be more objective in terms of figures so that we can understand the fourth quarter of 24 precisely and the whole year of 24. And I'll come back in a minute with you to talk about the trends after the Q&A.

Good morning, everyone. Thank you very much for being with us on this conference call. Now, going back to the presentation on page five, net revenue in the fourth quarter was 5.3 billion reais, 17% year-on-year. And Christiana has mentioned that this increase reflects the higher price of pulp and craft liner, growth in paper and packaging sales volume, thanks to the ramp-up of our projects. and also the real depreciation against the dollar, which happened in the adjusted EBITDA, excluding non-recurring effects, was 1.8 billion reals in the fourth quarter of 2024, 13% higher than the same period in 2023, with an adjusted EBITDA margin of 35%. Now, moving to slide number six for 2024 as a whole. Net revenue was 20 billion rials, up 9% year-on-year. This is mainly explained by the greater sales volume of paper and packaging, thanks to our project Puma II and the resulting also a higher pulp prices and also Brazilian rail depreciation against the dollar. Adjusted EBITDA in 2024, excluding non-recurring effects, reached 7.3 billion RALs, 17% higher in annual comparison. Here I would like to highlight adjusted EBITDA margin, which was 37%, up 2 percentage points vis-a-vis 2023. we can see that the sound performance of all the businesses, Puma to Rampop, synergies stemming from Kitee project and the foreign exchange effect contributed to adjusted EBITDA growth in 2024 when compared to 2023. Now moving on to page seven, the total cash cost per ton in 2024, including the effects of downtime was significant. 3,173 reals, confirming the cost projection we previously provided to the market. The year-to-date cash cost for the year materializes several actions carried out by Klabin, with a focus on synergies from KIT project and a dilution resulting from greater sales volume in the period. Now, moving forward to slide 8, Klabin ended 2024 with a net debt of 33.3 billion reals, up approximately 3.8 billion reals compared to the end of the third quarter of 2024. This increase is primarily explained by the impact of the real depreciation against the dollar in the fourth quarter of last year, which affects foreign currency denominated debt. Leverage measured by the net debt to adjusted EBITDA ratio and dollars ended the year at 3.9 times, which was stable compared to the 3Q14 and within the parameters set in the company's financial debt pumps. Now, moving to page 9, Cobain's liquidity remains strong, ending the year at 10.6 billion RALs. This liquidity consists of 7.5 billion RALs in cash, and the remainder in undrawn revolving credit lines. The average debt maturity at the end of the quarter was 87 months, and the average cost and dollars was 5.7% per year. Now, on slide number 10, on the left-hand side of the page, we have Cleveen's CapEx for 2024, which totaled 3.3 billion RALs, also confirming the projection we've provided to the market. So the right on the same page, dividends distributed to shareholders throughout 2024 amounted to 1,528,000,000 RAUs, which represents a dividend yield of 6.2%. Now, I would like to conclude emphasizing Sabine's commitment to financial discipline and capital allocation reflected in constant compliance with our financial policies. I also highlighted the predictability of our company's business model, which delivered in 2024 projections previously disclosed to the market for cash costs and capex. I will now hand the floor back to Christiana, who will provide more details on our business trends. Thank you, Marcos. So now moving on on what we have been doing from the last calls before turning to the Q&A, I would like to bring to you our projections for the upcoming quarters. So on the slide 11, first I will concentrate on the first column, which is the demand. Remember that this first column, when we talk about that market impression for that product, so that is like an external information coming into ClubBank. Now, looking at the two other columns, sales volume and price, those represent what we should be executing in the first quarter when compared to the fourth quarter. and sales volume and price always have carryover effects or logistics issues, and I will talk about those shortly. But first, let's talk about demand, about the different products here. And then, of course, the officers can give you more color in the Q&A session. About short fiber, what we see, again, in terms of demand, and I would like to stress what has been already said for a long time, not only by us, but also by other short fiber producers as well as consulting services that has become recurring and frequent in the past few years. Stop producing. And because of a number of reasons, I won't go over them. But what we see now in the first quarter compared to what we were seeing the last quarter of prior year, we see already a significant difference. In the midst of the third quarter to the fourth quarter, we would see ramp up of important projects that had been delivered. And they are 2024 and also at the end of 2023, semi-PC and also looking at the historical demand of 1 million tons organically that we saw growing, especially in Asia. We saw that as a sign of concern, especially because of the issues we were already discussing by the end of the year in regards to the United States and China. So we We're concerned about that at the end of last year. We started the year removing production, removing 200,000 tons a month, this month, in the beginning of the year. And that has offset the ramp up of the other projects that I mentioned. And we're also to change the expectation in terms of price stability. And now we have a price improvement in the quarter, in the first quarter for short fibers. So this is good news in terms of the market, but also we are still concerned about the outgoing capacities and if they will be fine or not once discussions are still there in terms of this Chinese manufacturer. But matter of fact is that we see price improvement in short fiber pulp prices different from what we had seen at the end of the year, last year. Therefore, it's a positive moment because of all these reasons. In terms of demand for short fiber, when you talk about fluff, and now we'll talk about all the products under the market or demand column. When we talk about fluff, another statement that we have been making constantly in our calls, fluff is a product that stabilizes the premium price and long fiber in general, and also fluff, but mainly fluff has stabilized a price premium on compared to short fiber. And that has been significant in the last few years. So what we had five years ago in terms of instability began, that was a difference. And we now found an stabilization of this premium, which was $300. And now what we see is that, uh, Most of the fiber removal from the market, for the many reasons that you already know, the long fiber or 80% of fiber production in the world that is no longer being produced is long fiber. So the price is the same because of that and also because of the trend that we always have talked about in terms of the use of long fiber, especially for the elderly. So when we look at these market factors and also the main fluff manufacturers in the world having problems in remunerating their assets or generating cash because they have a high cash cost, we see them clubbing, performing very well because we're a competitive company and long fiber, and we take part on premium products in the world, which are specifically elderly products. So this is a more broad understanding here. And when I talk about the market, and that confirms what we are talking to you in terms of structure for the past few years, what we see right now is prices for fluff coming from the main manufacturers in the world, with a significant improvement for fluff right now, improving what we see as positive in the past few years. As far as coated board demand, as you know, this is a very large market compared to fluff. This is a market of 50 million tons. And when we look at the different segments, there are different niches of 3, 4, 5 million tons. But when we look at coded board as a whole, we see influence of China exports last year. There are different players last year because of tariffs imposed by Europe. So this market is having a hard time. Obviously, the niches in this coded board segment are more protected when compared to others. But what we see right now, and this also may be having seasonal characteristics, but for more commoditized coded boards, we see a worsening in the scenario when compared to the end of last year. This explanation can be compared here to Kraft. But with Kraft, also in the last quarter of 2024, there was a bullish trend. A view for the United States, we expect it to have the U.S. coming strong in terms of corrugated boxes, expedition or shipment. And we are still waiting for that. If there is this strong shipment of boxes for the U.S., that could reduce Americans export and also dropping craft goods. prices in the world of course this market is very confusing right now in the world we have to see how the American economy will perform in the next quarters but in regards to what we had in terms of the year expectation is still positive we have an expectation that in despite of saying here that the market in the first quarter is not as good as we expected when compared to the fourth quarter but for the year we to have a positive expectation for craft liner for corrugated box and backs remember that the middle the center of the craft you know turning a little bit to the left is worsening and these are seasonal in Brazil we have volumes what we have increased and have defined since the acquisition of AP corrugated box here in Brazil. And now, so the capacity increase and all that market share that we were able to gain in the past few years, we will be maintaining and also we will go for a mixed improvement. So there is a positive overview here, but specifically in the first quarter, because of seasonal issues, both bags and corrugated boxes, are not as good when compared to the fourth quarter of 24. Now talking a little bit about volume and price. Then I will go from clubbing's market understanding, which was the first column. But when we turn to the next two columns, unfortunately, they are not intuitive. I will talk a little bit about them, but especially because of an inertia that we are carrying over specifically because of logistics. The more unstable the market is, that is, the product changes, clients have less minute demands for clubbing and all of that, you know, and this is happening since 2022 and 23. And you remember that we did have logistics issues. 24 was no different. So we start foreseeing a stabilization of that, specifically in the logistics process, as well as in the client's inventory, we are seeing a greater stability than we had seen in prior years. And you will realize that in clubbing's results in the second quarter. So what you see here in terms of volume and price, and what's not intuitive when you talk about the demand, it is because exactly that, because we have that inertia in terms of the market and, overview and what we ship to clients. And this shipment, because of the carryover that we have, is still posting older prices. So here we are translating to you each one of the products, this carryover expectation and what we expected to generate in the first quarter. But in the second quarter, we will see a better compliance between the market overview and sales volume and price. So I end now. My comments in terms of the expected trends will now turn to the Q&A session and we have all officers to take your questions as well.

Ladies and gentlemen, we will now begin the questions and answers session. In order to ask a question, please click on the raise hand button. To remove your question from the queue, please click Lower hand. Our first question, Rafael Barcelos, Bradesco BBI. Please go ahead. Good morning. Thank you for taking my questions. My first question to Cristiano. I'd like to understand a little bit more of your strategic view on the company. I understand that the priority for the company is the leveraging. That's very clear, but if you could tell us about the main discussions on capital allocation that you've been having and how you're keeping up with news in terms of M&A and the industry and what Klabin's role would be in this context, even looking at the domestic market. Klabin has always brought this flag of consolidating the corrugated boxes. So how do you see the competitive environment in the future of industry and Klabin's role? And another question about costs. If you can talk a little bit more about how you look at the cost trajectory, both in terms of pulp, paper and packaging throughout the year, what's the main important synergies of the Kayete project that we may see? If you can get into more details about this cost trajectory. Thank you. Thank you, Rafael. Thank you, Rafael. So in terms of our strategic view, and you talked about capital allocation, the best choice that we can have, or you can see today for capital allocation, is paying off debt. That's what we've been doing. So all of the focus on free cash generation for the next 18 to 24 months will be to reduce the company's leverage. Of course, We always study, as you well know, other ways, such as share buyback or investments to the company. But at this time, there is nothing in our pipeline that would be more interesting for the company than paying off debt. And with that, I link the strategic view also to what you asked about in terms of cost. We had, I wouldn't say a surprise, we knew the asset that we acquired from Arauco very well. It's an extraordinary asset. And that was indeed better than what we anticipated in terms of time to execute. We were able to advance the business case well. talking about reducing cash costs, specifically with a reduction of the average distance, as I mentioned in my opening remarks. So that's direct costs. And you could see significant improvement precisely in this project that was, of course, compromised by leverage, which is what I'm addressing to you, that this leverage will also be tackled at a much faster pace than what we were doing before. especially due to cost improvements due to KIT. So what's coming up in terms of costs? We have the ramp up of paper machine 28, especially in the ramp up of FIGEDA in particular, but of course, in absolute terms, the ramp up of paper machine 28 is still a lot more important at this time, but all of this volume that I actually mentioned is that we're going to increase and is already contracted for the company since the investments have already been made and disclosed by us, all of that will bring dilution of fixed costs. I also talked to you about our discipline in terms of efficiency gains in G&A that continues, that brings some safety as we published to you the company's cash cost view and CapEx view. We are very confident today of our strategic view, of two-year strategic view to use capital allocation towards reducing debt and improving the company's costs by diluting fixed costs or by seeking efficiency. All of that will bring the company's leverage very quickly to very low levels. And then, Rafael, and we'll talk briefly about the future, clubbing continues, as you know, with our focus, connecting it directly to what I said about the fluff market. We remain very interested in the fluff, the long fiber fluff market, specifically speaking. You already know, and we've talked about this project before. This is in the three-year horizon, maybe, or at least more than two years. So we'll continue bringing more information to you, not earlier than that. And noting that the company being stabilized in two years in terms of the production volume that I talked about in the beginning, getting to our cash generation capacity at stable levels, which is an important premium compared to what we have today, once we've reached that level and the leverage for the reduction of debt is already below what we have today, well below what we have today at that point, An investment such as the one in Santa Catarina that we talk to you about often is a very small step for this company that we're going to see at around 2028. So this investment is not on the level of investments that we've been seeing in short fiber pulp. So even after this period of two years working on deleverage, improving costs, reducing debt, even after this period, the investment we foresee in the future and fluff should have a very small impact being below the guidelines that we published in our indebtedness policy. I think, Rafael, I apologize, but in terms of the industry, I will not really explore this now. I confess to you that we're at a moment where we always have 10-year studies at the company and that remains. But I can confess to you that these geopolitical movements or commercial moves and the flow of markets we've been seeing around the world require more reflection, more pondering in the short term. Klabin is certain of the segment it works on. We're very confident. And with the strategic decisions we made in recent years, again, we feel very safe, very protected due to the explanations that I gave you in the beginning of the talk. But for us, regardless of the direction that the industry is going in terms of M&A and so on, When it comes to Klabin, for us, it's more of the same. Protecting the strategic design that we have, reducing our debt, as I told you, and having this potential for conversion in Brazil in line with our clients in terms of service level, focusing on niche such as LPB and Fluff that you know we have important global partnerships with. So little visibility in from us, no reflection about M&A from our side and the industry on the short term due to this moment of the world and a strong focus on reducing debt costs and improving cash generation with the volumes already contracted.

Thank you, Cristiano. Our next question is from Danielle Sasson from Itaú BBA. Please, you may go ahead and ask your question. Thank you very much. Thank you all for taking my question. Cristiano, a quick follow-up on the prior topic from my colleague. And maybe you have that focus very clear on the leveraging and the ratio net debt over adjusted appetite is a lot high, but the The path for the leveraging seems to be clear, even with this outlook for the pulp segment compared to what you had in your budget last year. And maybe you can reach 3.5 times by the end of this year, right, which is the top of your guidance from 2.5 to 3.5, not considering the expansion periods. So just to make sure. to reach to that level is enough for you to say, okay, I am at 3.5 and I still see a strong cash generation ahead so that you can bring expansion projects to be approved by the board, even if that does not mean cash disbursement in the short term, 25, 26, or really you will only be thinking about that from 27 on and then to work on stronger projects more significantly starting on 2028, as you mentioned. I just want to make sure if I understood your time frame, the time frame of your decision. And my second question is to Nico. In the initial speech, you talked about the impact of this large player in China leaving the market and the demand increasing 200,000 tons a month. for the non-integrated manufacturers. I would like to know if you would have an update on that. Our visibility is not as great in terms of the potential comeback of this player. And even if that player comes back, if there are additional integration movements happening in some capacities in China, for instance, Ali and Shang, if those could offset this movement, that is, how concerned are you with the possible price drop in bulk or if the scenario would be to maintain that scenario in the higher levels as we have seen in the beginning of the year. Thank you. Thank you, Sasan. So being very much straightforward, there is no possibility of having or announcing investments in 2025 or 2026. The focus of the company right now and We have a dozen projects in terms of efficiency gain in the company. We are very conservative right now, and we really have the ambition to be a worldwide reference. So I think we are already there, but we'll establish some criteria that will place us far ahead of the competition because we'll be working on the efficiency this year and next year. So any type of investment that we have, decide to talk about is going to be in 2027. There are forces on. There is something that translates the discipline, but it's kind of annoying because, you know, deleveraging, deleveraging is annoying, but that's it. In 25, 26, we are going to focus in efficiency, deleveraging, and we are not going to be announcing any investments. Any other reflections will be then announced in 2027. Nico will comment on the other question. Well, and sometimes annoying is good, right? Yes, that's right. Good morning. This is Nico. Thank you for your questions about the shimming. What we have is a lot of speculation in the market. No one has a very clear vision of a possible comeback of shimming. What we know is that some of the large lines are still not working, a line of 1.4, 1.5 million tons, a smaller line working, 600,000 tons. But this is a significant impact. Every month that they don't work, we have 150,000 less in the market. So that has contributed in the market, and we do not expect this recovery to happen before April. That involves the Chinese economy. We know that the government wants to attract two main players, at least, so that they can take over the control of this company. But everything is uncertain for now. We have seen three price increase announcements. Two of the three have already been implemented successfully. The third one now in China and Europe. We did not see that happening before Shanghai Pope Week. But we believe that it is possible that this third price increase will happen. It's more than $20 in China. So we had three consecutive increases of $20 in Europe, in the United States, an initial one of 102, other ones of 60. And we believe that that will happen now in March, but after Shanghai Popui. Thank you very much, Nicole.

Next question, Tatiana Picandini, JP Morgan. Please, you may go ahead. Good morning. First, thank you for taking my questions. My first question goes a little bit in line just to confirm the expected trends. When we're talking about, and I think you've talked a little bit about this already, but when we look at the first months of the year, the prices of pulp and the mint has been seeming a little stronger compared to the fourth quarter. So I'd like to understand whether the forecast that you have in terms of volume and price is due to a lag that we should see an improvement reflected in the second quarter or whether there's another factor. And if I may, a second question. Thinking a little bit about what you said at the beginning of the call, we tend to see clubbing with a little bit more exposure domestically, and we'll possibly see a more stressed macro scenario in Brazil in the second half of the year. So I'd like to understand from you, thinking about papers and packaging, if there's any strategy, thinking a little bit more about the second half, and if there is a little more pressure on the macro, or if the strategy remains focused on Brazil. Thank you. Thank you for your question. I understand your lag as a carryover, right? Yes, exactly. So, yes, I confirm what you understood. We actually, we really did have an LC in the second quarter, an improvement, and this improvement is due to what we've been seeing in the first quarter. this improvement that is happening is not represented. It will not be effectively delivered in the first quarter due to the lag that you mentioned, the carryover that we brought from the end of last year, which is a longer accumulation due to logistics and operational aspect. So the first answer is to confirm you understood it and you see the improvement starting on the second quarter. Now, in terms of the macro scenario for Brazil, I'll give you the reference that I brought when I talked about Klabin being a proxy of the macroeconomy. It's a fact. I always bring this. If you blow up in terms of customers, brands, especially in corrugated boxes, selling more than one million tons of corrugated boxes, selling papers, both craft and coated boards to markets in beer, liquid foods, other box manufacturers, definitely clubbing is a proxy of the domestic market. So what I told you is that we had, I mean, I think we got it right with the investments we made because we had an expectation of a strong Brazil in the years of 24, 25, which did happen and is happening still. Obviously, Today, in general, when we talk about the economy, we're talking a lot more about what's expected of the economy from what's happening. But what's happening today are good factors. So the income was, the revenue was generated. The improvement in consumption did happen. So this inflation is a product of that improvement, which leads to other analysis that since Brazil doesn't have sufficient production capacity for that improvement, there was no gain in productivity. So when we project that, we project the inflation. And if this inflation happens, when it happens, and what we've been seeing in terms of interest rates going up to reduce economic activity, We do expect that at some point in the second half of this year, maybe 2026, there will be a slowdown of the GDP in Brazil. And when that happens, as I explained in the beginning, and if that happens, but if it does, here at Clubbing, we sell both Products with lower added value, with a smaller ticket in the economy for food always. 70% here is for food. And as well as we sell more premium products, or even for exports. So, and corrugated boxes alone, I'd like to bring a component that we don't talk a lot about to you, but when there's an improvement, of exports, for example, of proteins and fruits. Remember that Klabeng is by far the biggest market share for packages for the export of proteins and fruits from Brazil. So even corrugated boxes have an effect of exports that's very important. Also absorbing some protein. whenever there is a devaluation of the Brazilian currency, that means an increase in reais for us here in Brazil since we sell to exporters and we seek to sell those packages for exports more connected to the foreign market. So we are mindful of any potential macroeconomic change in Brazil as we have been in the past and we made that investment. Now, The situation is better. We don't have investments to make. What we have is greater flexibility. I also talked to you about this, that the same machine, the most modern coated board machine in the world today, PM28, can be used both for coated boards for liquid foods or for beer or for coated boards in general or craft boards. paper in the same machine, and this craft can be both exported or converted into packages, and packaging can serve the domestic market and the foreign market. So just reaffirming that Klabin's at a much better position in terms of our flexibility than we were one year or two years ago. So we're very safe and prepared. And we will relatively, compared to any other manufacturer in the world, I can assure you that based on our portfolio, we always will be relatively better than any other manufacturer that's integrated in Brazil or in the world. Very clear. Thank you.

Our next question is, It's from Caio Ribeiro from Bank of America. Please, Caio. Good morning. Thank you very much for this opportunity. My first question is about the forestry phase of clubbing. The company is working on some recent movements of buying and selling forestry assets such as Caite and Plateau. But looking ahead and the forestry asset that the company has today, do you foresee a need to increase in this forestry asset to be able to cater to future expansions? On the other hand, do you see opportunities to divest in some forestry assets to help and optimize the company's structure and help in the leveraging strategy? This is my first question. And my second question, as you mentioned, Cristiano, most of the capacity and the pulp market has been for long fiber and fluff. This is contributing to increase the premium for long fiber when compared to short fiber. And you talked about the possibility of increasing your footprints in the fluff market. And looking at fluff and long fiber in the market, we see that there are no added capacity for these products in the upcoming year. So my question is if you are considering adding capacity that would allow you to have more flexibility to change the mix between manufacturing and selling fluff or long fiber in the market. Thank you. Thank you, Kayo. So first about the forestry assets, you already said it all in your question. I will just add a piece of information here. When we talk about Parana and Santa Catarina states, these are states with a great tradition in wood. And in Santa Catarina, especially long fiber, these are hardwoods. And they have a whole ecosystem of export, wood export in the region. And with this whole ecosystem that we have in those two states, We have strategically defined and also with positive effects in the community of these two states. We are present in 62 towns, and we are going to operate with 75% of self-sufficiency. Therefore, there is market in the region for us to supply third-party wood at competitive costs and with a low average distance. And this is our strategic position, considering the position that we have in these two states of 75%. And let me mention that this is not possible in other Brazilian states, maybe in any other Brazilian state, because we do not have the full ecosystem of wood as we have in those two states. So any other investments out of these two states, you know, for that to be done, we would need a very large a forestry base and then self-sufficiency would have to be 100%. So now going back to the beans world, 75% of these two states is safe for us. And we are above that. Remember that we have acquired at all coast areas to use the wood that we have and those areas. Once the, once the wood is used and the wood where we invested in closer areas, when, that wood is ready to be cut. So clubbing will have land available and lands that are distant from our average radius and those areas will then be available for monetization. Yes, this is already happening. We have already anticipated what forecasted and the areas that are not related to the supply of second cycle of clubbing they will be monetized and we have good projects to bring to you in the future and it also will strengthen our the leveraging speed now about your second question for lung fiber or fluff file our focus is greater in fluff. Obviously, any investment in a drying machine and a pulp machine, that machine also will be able to produce, to manufacture the bleached long fiber. But club beans focus, you know, whenever this investment is mature, is going to be fluff. Perfect. Very clear. Thank you very much.

My next question, Marcio Faridi, Goldman Sachs. Please, you may go ahead. Thank you. A few things here on my slide that attracted my attention in the balance sheet this quarter. I think expenses were higher than expected. Operational was very strong. The cost decreased, but the expenses were high, so that offset some of those gains. So just to understand what's recurring and what's non-recurring, for us to think about the coming quarters. And also when we look at the Puma production and sales for the year at around 450, 500, but 1500, but being below 1,600 or 1,650 below past year. So just to understand what's been happening at Puma and if we can expect a stronger production for 2025. And a follow-up to Kyle's question, actually, the opposite from what he thought, I was wondering if, whether we were going to see more forestry monetization rather than acquisitions. And you talked a little bit, part of the thesis from the best would be to monetize the forests. I believe a lot of it has been done, but with the deal with Timo, but just to understand if there's more models or monetization of biological assets to be made to help on the speed of the leverage, that would be great. Thank you. Thank you, Farid. Thank you. In terms of expenses, remember that during last year, many times we had given the guidance, but many times during the calls you asked us if we were going to improve by the end of the year, and we said we're going to follow the guidance. So we remain on that same line. What we set forth on the guidance, our expenses and our cash costs will follow the guidance. So about that, we remain consistent. on the same line that we've been talking about. That's what we delivered and what we are going to deliver. As for production, it's the same. We have the guidance in terms of product mix slightly impacted by the carryover that I already mentioned, but what we're going to see that you can expect from us is delivering on the guidance that you've already been seeing for clubbing and the last three or four calls. As for your last question, I don't know if I understood it correctly, but yes, we do have still some monetization. We have already done part of it. And of course, when it becomes material, we'll bring it to you. I don't know if that was not what you meant on your last question. Please feel free to ask again. No, it is clear. I think For production, it was more specifically about Puma 1, thinking about pulp, because they're running between 100 and 150 tons below the plant's normal capacity, just to understand whether it's recurring or not. As for the follow-up and the cost, so from what I understood, the level of expenses that we see for the fourth quarter is recurring. It is a higher level, but it's partially offset with a lower cash cost, right? I think that's what I understood. Yes, that's it, Farid. And as for the production, it's what we also talked about on Clubbing Day. It's not recurring. The normal numbers that we send to you in terms of information of production and costs by the guidance we provided remain the same we gave on Clubbing Day. Great. Thank you.

Ladies and gentlemen, we end right now the Q&A session. I would like to turn the floor to Mr. Cristiano Teixeira for his final remarks. Please, Mr. Cristiano. Thank you all very much. And we hope to see you again in our next earnings call. Remember that we will have the opening of FIGEDA on March 27th. And I would like to take this opportunity to tell you that this opening will be dedicated to our clients. But I should stress that this is going to be very important to rectify what we have been talking about in terms of technology or investment. Thank you all very much and see you in our next call. The full recording of this conference call is available at the IR website at the company. Mabin's earnings call has ended. We thank you all very much for your participation and have a nice day. Thank you.