Klabin SA Q4 2024 Earnings Call (English, Portuguese) Transcript

The following is excerpted from the question-and-answer section of the transcript.

Question: Rafael Barcellos - Banco Bradesco BBI S.A. - Analyst : 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 deleveraging. 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 in 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 box market. So how do you see the competitive environment in the future of the 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 CATIE project that we may see? If you can get into more details about this cost trajectory.

Question: Daniel Sasson - Ita· Corretora de Valores S.A. - Analyst : Cristiano, a quick follow-up on the prior topic from my colleague. And maybe you have that focus very clear on deleveraging and the ratio of net debt over adjusted EBITDA is a lot high, but the path for deleveraging seems to be clear even with this outlook for the pulp segment compared to REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. FEBRUARY 27, 2025 / 2:00PM, KLBN4.SA - Q4 2024 Klabin SA Earnings Call (English, Portuguese) 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 period. 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 well 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 nonintegrated manufacturers. I would like to know if you 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, Scheming, if those could offset this movement. That is how concerned are you with the possible price drop in pulp or if the scenario would be to maintain that scenario and higher levels as we have seen in the beginning of the year.

Question: Daniel Sasson - Ita· Corretora de Valores S.A. - Analyst : Yes, that's right.

Question: Tathiane Candini - JPMorgan Chase & Co - Analyst : 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 demand 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 Klabin 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?

Question: Tathiane Candini - JPMorgan Chase & Co - Analyst : Yes, exactly.

Question: Caio Ribeiro - BofA Securities - Analyst : My first question is about the forest base of Klabin. The company is working on some recent movements of buying and selling forestry assets such as (technical difficulty) . But looking ahead in 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 this deleveraging strategy? This is my first question. And my second question, as you mentioned, Cristiano, most of the capacity in 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 footprint 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 years. 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.

Question: Marcio Farid Filho - Goldman Sachs Group, Inc. - Analyst : 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 decrease in paper pulp, but the expenses were high. So that offset some of those gains. So just to understand what's recurring and what's nonrecurring 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, 1,500, but being below 1,600 or 1,650 below past year. So just to understand what's been happening at Puma and if you can expect a stronger production for 2025. And a follow-up to Caio's question, actually, the opposite from what he thought, I was wondering whether we were going to see more forestry monetization rather than acquisitions. And you talked a little bit of the thesis from the past would be to monetize the forest. I believe a lot of it has been done, but with the deal with FMO, but just to understand if there's more models or monetization of biological assets to be made to help on the speed of deleverage. That would be great.

Question: Marcio Farid Filho - Goldman Sachs Group, Inc. - Analyst : No, it is clear. I think for production, it was more specifically about Puma I, 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 on 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.