NYSE:SUZ Suzano Q3 2024 Earnings Report $9.14 +0.10 (+1.05%) Closing price 03:58 PM EasternExtended Trading$9.15 +0.01 (+0.11%) As of 04:05 PM Eastern Extended trading is trading that happens on electronic markets outside of regular trading hours. This is a fair market value extended hours price provided by Polygon.io. Learn more. Earnings HistoryForecast Suzano EPS ResultsActual EPS$0.46Consensus EPS N/ABeat/MissN/AOne Year Ago EPSN/ASuzano Revenue ResultsActual Revenue$2.21 billionExpected RevenueN/ABeat/MissN/AYoY Revenue GrowthN/ASuzano Announcement DetailsQuarterQ3 2024Date10/24/2024TimeBefore Market OpensConference Call DateFriday, October 25, 2024Conference Call Time9:00AM ETUpcoming EarningsSuzano's Q1 2025 earnings is scheduled for Thursday, May 8, 2025, with a conference call scheduled on Friday, May 9, 2025 at 8:30 AM ET. Check back for transcripts, audio, and key financial metrics as they become available.Conference Call ResourcesConference Call AudioConference Call TranscriptSlide DeckInterim ReportEarnings HistoryCompany ProfileSlide DeckFull Screen Slide DeckPowered by Suzano Q3 2024 Earnings Call TranscriptProvided by QuartrOctober 25, 2024 ShareLink copied to clipboard.There are 13 speakers on the call. Operator00:00:00Ladies and gentlemen, thank you for holding, and welcome to Susana's conference call to discuss the results for the Q3 of 2024. We would like to inform you that all participants will be in listen only mode during the presentation. That will be addressed by the CEO, Mr. Berto Abril and other executive officers. This call will be presented in English with simultaneous translation to Portuguese. Operator00:00:26To change the audio, you can press the globe icon located on the lower right side of your Zoom screen and then choose to enter the Portuguese room. After that, you can select mute to original audio. Before proceeding, please be aware that any forward looking statements are based on the beliefs and assumptions of Susano's Executive Board and on information currently available to the company. They involve risks, uncertainties and assumptions because they relate to future events and therefore depends on circumstances that may or may not occur in the future. You should understand that general economic conditions, industry conditions and other operating factors could also affect the future results of Susano's and could cause results to differ materially from those expressed in such forward looking statements. Operator00:01:14Now, I'll turn the conference over to Mr. Berto Brault. Please, you may begin your conference, sir. Speaker 100:01:25Thank you. Hello, everyone. Thank you for attending our call for the Q3 results. I will start with the highlights. So let me start with sales. Speaker 100:01:35Sales volumes improved as you saw in all business. And Speaker 200:01:40here Speaker 100:01:40I want to highlight that was a very well defined commercial strategy from the team. This strong sales with a better FX allowed us strong EBITDA of BRL6.5 billion despite the higher cash cost. Indeed, the cash cost was higher than the previous quarter and in the previous quarter in the last year, but that was planted as you know. And I want to reinforce here that considering the performance that we have been seeing at the Airbus in the ramp up, considering the efficiency level which is higher than we planned, I have to say that such a peak of higher cost is already behind us. So we will see further detail during the presentation. Speaker 100:02:31My last comment on the financial side is related to leverage, which is still declining as planned now with 3.1 and is still on the leverage topic. I would like to share with you that on the capital location side, I do not see Suzano going through any transformational move in the near future. So leverage will keep declining, it's click declining trend going forward. Also during the quarter, we also had the closing of Lansing, the closing of forest assets from BTG that we acquired. And in the beginning of October, we also had the closing of Suzano Packaging US. Speaker 100:03:17So Suzano Packaging US, the former Packeted assets in Pine Bluff. So looking forward, the focus of Suzano for the next quarters will be generating value from those assets that we brought to our portfolio, delivering what we planned for the Cerrado project and also keep deleveraging the business as a whole. So that's the main highlights from Susan in the Q3. So let me hand over to Fabio, which will cover the Paper and Packaging business. Fabio, please go ahead. Speaker 300:03:58Thanks, Beto, and good morning, everyone. Please, let's turn to the next page on the presentation. Through the combination of good commercial execution and logistics flexibility, we were able to deliver the highest EBITDA since 3 quarter last year despite growing operational challenge related with bottlenecks in our export supply chains. On the domestic market, according to IBA, print and writing demand consider imports increasing 7% in the 1st 2 months of the 3 quarter on a year over year basis. Sales from domestic producers grew 8% on the same comparison base. Speaker 300:04:37Demand was solid in all product lines, supported by better economic activity and from the election cycle tailwind on the coated paper grades. Demand for paperboard continued to grow, increasing a strong 18% during the 1st 2 months of the quarter compared to the same period of last year. Paperboard demand has been strong this year in all market segments, supported by the growth in paper packaging consumption in better economy overall. In the international markets, demand was sustained in North America and Latin. Ohio, in Europe, demand for paper has shrunk during the summer due to seasonality. Speaker 300:05:16Prices in U. S. Dollars were mostly flat in international markets during the period. Looking now to Susanoo's figures, our sales volume in the quarter was 8% higher year over year and 9% above Q2 performance pushed by higher sales volumes in the domestic market. Our export volumes were mostly flat versus the same period of last year and increased versus last quarter, although we have seen a continuous deterioration of the container supply chain with congestions at ports domestically and broad relate to poor service levels and higher costs from all container carriers. Speaker 300:05:56This is a result of a mix of different events, Red Sea traffic restrictions, low water level Panama channel, weather related restrictions at Brazilian ports, which seems to be creating the perfect storm for Brazilian export companies that rely on containers. Suzane is seeking our alternatives to continue to serve its international customers despite these issues. The 3% net price growth over Q2 was led by slightly better prices in the domestic market and favorable FX on our exports. On a year over year comparison, prices were lower by 3.8%, reflecting market adjustments after the normal price levels of the first half of twenty twenty three. Looking at EBITDA performance, the 13% quarter over quarter was driven by higher sales volumes and better price. Speaker 300:06:47In the quarter, we had the annual maintenance downtimes at the Bimeira and Suzano Mills, which are the 2 largest paper mills Suzano have, pressured the COGS in line with the budget. Compared to Q3 2023, Suzano EBITDA decreased by 8% due to lower prices in both Suzano Paper Packaging EBITDA decreased by 8% by lower price in both domestic and international markets despite higher sales volumes. Looking ahead, we expect a strong seasonal demand in Q4 from our domestic market for uncoated papers and paperboard. For coated grades, we anticipate a return to structural decline as the election cycle impact fades. On international developed markets, we foresee demand return to a structural decline trend. Speaker 300:07:35In Latin America, we expect demand to be more resilient, albeit also declining. Cost wise, logistics expenses are expected to remain high due to ongoing disruptions and geopolitical uncertainties, which could offer support to paper prices in most markets. Regarding our cash costs, we anticipate improved performance on COGS in Q4 following the lack of maintenance stoppages. We also foresee stable cash costs ex downtimes in the upcoming quarter. On October 1, Suzano kicked off its operations of the Pine Bluff and Waynesville packaging assets acquired from PACCARB Evergreen. Speaker 300:08:12Our 1st weeks went quite well so far, folks on supporting our new colleagues, customers and suppliers through this transition. We remain very excited about the business opportunities that this move will bring to Susano in the future. Now, I'll hand it over to Leo, who will be presenting our pulp business results. Speaker 400:08:35Thanks, Fabio, and good morning, everyone. So moving to the next slide of our presentation, I would like to begin by sharing some facts related to this past quarter. It was indeed a very special moment for us as we had started to operate and later to sell the first volumes of our brand new rebas mill. During this past month, we have first built up pulp inventories in the outbound logistics chain from Mato Grosso do Sul to Santos Port in order to be able to operate rebas efficiently. These new volumes were the only additions in the Q3 to our previously announced previous inventory levels, which as we have been stating were quite low and stays on the same operational levels as we speak. Speaker 400:09:23Our first shipments from rebas pulp have taken place during the latest part of the quarter. During Q3, we have noticed quite a challenging market, led especially by headwinds from China. There, paper producers inability to increase paper prices during previous quarters squeezed their margins and the new pulp purchases came to a halt, almost a complete halt in July, right when the news of the startup of Rebus and the local Chinese mill, Yansheng, were announced. As the quarter evolved, a sharp decrease in softwood prices led the way to a wave of intense price reductions in hardwood grades, both in local resale markets as well as for new negotiations from imported pulp. Prices declined sharply much faster than on previous cycles, reaching a set point, which triggered customers to reestablish their purchases, especially by the end of the quarter. Speaker 400:10:22In Europe and North America, despite better dynamics in terms of demand, prices started to correct following the trend posted by China. We have navigated Q3 by focusing on maximizing our sales in Europe and America, while also positioning pulp in these markets to cope with higher seasonal demand in Q3 and Q4, and also reestablishing our service levels to regions and customers for whom we invoice directly once cargo is shipped out of Brazil, reducing therefore our backlogs from previous quarters. This dynamic, which includes the sales of rebus first volumes, resulted in a strong invoicing during the quarter. Our realized prices were mostly affected by a higher concentration of our sales during the second half of the quarter, once a significant price drop was already in place, as well as a higher mix into Asia where most of Heba's initial volumes were sold. Despite lower prices in U. Speaker 400:11:20S. Dollar terms in Q3, the combination of higher volumes and favorable FX resulted in a 3% increase of our EBITDA margin, now reaching BRL5.7 billion. Now looking forward, I would like to highlight the following points. Coming to the Q4, we forecast healthy demand in all regions due to market seasonality, consequently favoring operational rates of paper producers globally. Tissue production rates have been the highlight in most global markets and latest production figures have shown its demand resilience despite eventual geopolitical or macroeconomic challenges. Speaker 400:12:01As usual in this time of the year, Chinese tissue producers are now boosting up their production as they are getting prepared for the Double 11 shopping gala. For several weeks and counting, mid-five hundred dollars price levels in China should have over end profitability thresholds of marginal cost producers based on consultant estimates of their marginal cash costs delivered to China. Not surprisingly, we have already noticed some integrated Chinese pulp and paper producers buying market pulp since August, and their purchases of market pulp have been increasing with Suzano ever since. Despite higher volumes coming into the stream, it is our belief that prices in China are either at the bottom of the cycle or quite close to it, grounded by low to equalize pulp levels, pulp inventory levels in Chinese ports and in the hand of Chinese customers. Solid paper production figures being further incentivized by mid- and small sized customers who have recovered their operating rates once their margins increase. Speaker 400:13:10And above average price gap between softwood and hardwood incentivizing fiber substitution. Customers in China and Asia recovering their buying patterns and actually increasing order intake over historic figures. And on top of that, the fact that current price levels in Asia are below marginal cash cost of producers are likely triggering a new round of unplanned downtimes as seen in recent recently in latest cycles. To give you some color on our October sales in China, negotiations are coming in line with our expectations, which includes rebas volumes and our order intake is being confirmed above historic average, which has enabled us to reestablish our operational backlogs, all of that with completely stable prices. Looking forward and focusing on the supply side of the equation, just this week reliable independent sources from the sector have confirmed a significant delay in the startup of the main pool project expected for Indonesia, for which the start up of the first line was delayed from Q1 'twenty five to November 'twenty five and the second line for now push forward for 2026. Speaker 400:14:30In addition, I wouldn't be surprised if we should continue to see further conversions of paper grade pulp into dissolving pulp, just as again announced by a leading dissolving pulp producer to take place in Q1 2025. This factor should ground a healthier market outlook for the coming months and beginning of 'twenty five. With that said, I would now like to invite Ares to address with you the cash cost performance of the quarter. Speaker 500:14:58Thank you, Leo. Good morning, everyone. Regarding our performance of cash production costs, I would highlight the 3 main factors that explain the 4% increase versus last quarter. The first of them is related to the higher consumption of energy at El Acruz Mill due to a low recurring event that brought lower operation stability in the period. These occurrences have already been overcome and we are now back to the performance for zinc in our operation plan. Speaker 500:15:37The second one, the start up of new Rivas mill in July also caused a temporary increase in costs, in this case, in the wood and chemicals components, which were totally in line with the expected performance. In addition to these factors, the high FX, although it benefits the Company's cash generation, also pressured the cash costs this quarter, given that some inputs are linked to foreign currency. 3rd quarter marked the peak of the cash cost in 2024. As looking now forward to the Q4, the solid progress of Hibbett's ramp up allow us to estimate a middle single digit reduction in the consolidated cash production cost when compared to the 3rd quarter. In the year over year analysis, the stable performance of the cash costs can be basically explained by 14% FX depreciation in the period, which offset the cost reduction obtaining the wool, in turn due to better harvest productivity, average ratios and specific consumption, and in inputs, mainly due to lower caustic soda and natural gas prices. Speaker 500:17:07Moving to the next slide, I would like to share with you some important aspects about the 1st months of operations of our new plants. In the chart on the upper left, it should be noted that we had a one off effect of R25 dollars per tonne in the COGS in the Q3 fully related to the start up costs of the new mill, which therefore no longer exists in the Q4. When we look at the mill's cash cost performance in the chart right below, we see that based on June's cost performance, Hibas has already started to benefit the company's consolidated cash costs since September due to the successful evolution of the plant's ramp up. It showed only Rebus ramp up. At the end of the Q3, it reached 8% completion of the learning curve, above the 71% forecast for the pure. Speaker 500:18:18And the last but not least, it's also worth mentioning that CapEx disbursement is according to the guidance already announced by the company. Now I turn the floor to Marcelo Bat, who will continue the presentation. Speaker 600:18:32Thank you, Iris, and good morning, everyone. On the following page, Page 8, we see that the behavior of our capital structure in the quarter has been shaped by some strategic capital allocation initiatives. We had a very robust operational cash flow generation, And we spent a significant amount of cash in this quarter in initiatives that had already been announced before and had its closing during the quarter, especially the purchase of forestry assets and the participation in lending. And we also made a significant investment in share buybacks in the period of close to $500,000,000 that helped point our net debt position to $12,880,000,000 visavis12,000,000,000 in the beginning of the period. Despite the increase in the absolute amount of the net debt, which was expected since we took these decisions on the capital structure side and capital allocation side, we saw a reduction in our leverage in terms of net debt to EBITDA from 3.2 to 3.1, marking the end of the investment period of the Cerro del project with the leverage ratio below what we had expected before. Speaker 600:19:57As I just mentioned on the previous page, the payments related to Cerro del will be minor from now on, and this will help the company to continue in its deleveraging process. In terms of our liquidity, we continue to have a significant amount of liquidity, which is probably more than what we need since the Serhado project came to the end and there has been a very significant derisking of our capital structure coming from that. So we will be working on the coming months to reduce our liquidity. Although we are not in a rush to do that because the market conditions today are favorable to carrying more cash. So we're going to do that according to the opportunities that we have and that we're going to see in the market. Speaker 600:20:47So with that, I conclude the presentation here and turn back to Beto for final considerations. Speaker 100:20:53Thank you, Marcelo. A few takeaways from what we just heard from the team here. The first one, it's regarding the execution of our largest investment ever, which is the Cerro del project. So we must say that we are kicking now a new cycle with a completely different level of competitiveness and cash generation. So this is the first message here. Speaker 100:21:21This is will put us in the completely different level of resilience. And despite the pricing scenario, as mentioned from Lael, we see the business completely prepared to face different scenarios in terms of price. And after all the progress on the business strategy, which is related to the closing of the forestry asset deal, LENSI and also the Suzano packaging business, we are now in the moment of extracting value from those movements and this is the focus of the company from now on. So this is a takeaway from what we heard here. Let me open for questions and thank you for all of you. Operator00:22:11Thank you. We will now begin the Q and A session for investors and analysts. You. Our first question comes from Jon Brandt from HSBC. Please, Mr. Operator00:22:38Brandt, your microphone is open. Speaker 100:22:43Can you Speaker 200:22:43hear me okay? Speaker 500:22:47Yes. Speaker 200:22:47Yes, we can. Perfect. Thank you. Congratulations on the results. It was a great quarter in terms of transformation and all the initiatives that you were able to achieve. Speaker 200:22:58I guess my first question is really sort of a debt capital allocation question. So, Marcelo, now that Serrato is bigger with the Rivas Mill coming on, is there any change to your debt policy either in terms of leverage ratios, targeted gross debt, targeted net debt. I know you briefly mentioned it in your remarks. I'm hoping you can sort of expand on it. And sort of what does that mean for capital allocation? Speaker 200:23:28CapEx looks like it will fall in 2025 percent, pretty substantially depending on pulp prices. So I guess I'm just trying to figure out sort of what's next, right? You should be able to come down into your targeted leverage ratios pretty quickly depending on pulp prices. So did we see sort of increased dividends, maybe share buybacks, are there other sort of initiatives that you're working on in terms of where some of this capital could be spent? I guess that's my first question. Speaker 200:24:01And then sort of my second question, just briefly, you mentioned the pulp reduction, the 4% capacity reduction. I'm just wondering if we don't see a rebound in prices later this year or next year, is there any sort of other capacity that might be at risk of stopping? Thank you. Speaker 600:24:26Ron, thank you for your questions. This is Marcelo speaking. With the end of the Cerro del project and start up of the Hibas Mill, we will continue and accelerate our deleverage because CapEx, as you mentioned, is reducing. We are still working on the CapEx guidance for next year, but for sure it's going to be a lower number than this year that will be released in December. And the first, I would say, goal is to bring the leverage of the company back to the levels of that we need to have outside of investment periods, which is below 3 times net debt to EBITDA between 2 times and 3 times. Speaker 600:25:08And this is going to come very fast in the coming quarters. Of course, the speed will depend on the behavior of pulp prices. So this is the first priority to bring the company back to this normal level. We on the CapEx side, as I said, we will have in December the number for next year and this is going to be a lower number than this year. We are still working on the other capital allocation alternatives. Speaker 600:25:39As Beto said in the beginning, at this point, we are not seeing any potential transformation initiative that could change in a material way our direction of deleveraging the company. The buybacks will continue to be an option for us. We have an open program that still we still have, I think, something like 28,000,000 shares open to be bought. This will be completed in the time frame of the program, which still has more than 12 months to be completed. So we're not going to anticipate to the market at what speed we're going to execute the buybacks. Speaker 600:26:13This will depend on the cash flow generation of the company visavis its valuation in the market. So what you can expect in terms of capital allocation is the company to be to reduce CapEx, to reduce indebtedness in the coming months and to be very selective as we always are in terms of selecting new investments. On the pulp production side, the announcement that we made a few weeks ago has in the background the current stage of the market prices. And this is a decision that we made for the year of 2024. And even if the price changes from now on, it's going to be very hard to change that because this is a very long chain that we have to progress since the harvesting activity up to the delivery to the clients. Speaker 600:27:06So I think for 2024, that's the number. For 2025, we are still working on that. I would just say that for the current market scenario, this is the decision we have, but of course, this will depend on the expectations. Speaker 200:27:25Great. Thank you very much. Operator00:27:30Our next question comes from Rodolfo Angele from JPMorgan. Okay. Left the queue. Our next question comes from Leo Correa from BTG Pactual. Please Mr. Operator00:27:47Correa, your microphone is open. Speaker 700:27:51Hello, gentlemen. Can you hear me? Speaker 600:27:54Yes. Speaker 700:27:55Okay, perfect. Yes. So a couple of questions on my side. The first one for Beto. Beto, in your initial remarks, I guess the message was super clear to us at least that you're trying to convey a message of deleverage. Speaker 700:28:11And you're also trying to convey a message that there's no big M and A transformational moves in the pipeline. So I just wanted to check with you. I mean, if an understanding is right that Suzano will continue to pursue these smaller bolt on acquisitions like you did with Bakhtiv and Lanezig. And the game plan is to continue to obviously to assess market opportunities, but these will be, let's say, in the $1,000,000,000 range at most. I mean, I just wanted to understand exactly what you mean when you say no transformational moves because I guess the market is obviously concerned on bigger M and A at Suzano. Speaker 700:28:50So if you can quantify a bit what you mean with that, I think it would be very helpful for everyone. The second point on pulp cash costs, right? I mean, I think it was super clear the explanation on why the numbers are a bit higher this quarter. And I guess with, obviously, with Sahara ramping up and with, I mean, much lower pulpcashcost platform being consolidated in your overall cash cost numbers, these numbers would decline going forward. I just wanted to confirm, Eirys, you mentioned something in the single digit range of reduction for the Q4. Speaker 700:29:32How are you viewing this for 2025? I mean, what is the potential for further cash cost reductions in pulp? I think that would be very helpful if you can add a bit clarity on that for 2025. Thank you very much. Speaker 100:29:48Yes. Thank you for the question. Maybe I should start with the Iris, please complete if you want. But on the cash cost, we see 2025 in the same good level as I said regarding the next quarter. So what do we have for the next quarter at the end of the day is the company delivering exactly what was planned for Hibas project, which was the 900,000 tons in the first, let's say, 12 months of operation. Speaker 100:30:22So we are completely confident that this target will be delivered. So that will help us in terms of cash cost next year even further. But I think Ares already gave us a kind of, let's say, vision regarding that. Going back to the capital allocation process, I think you read in a very clear way. What I'm trying to say is that we are not planning any big ticket movement in the near future. Speaker 100:30:59That's what I'm trying to say. We have a lot to do with the assets that we already brought to the portfolio. We must extract all the value from Serhade this time. We have all the potential to keep deleveraging the business. And we do not see any movement that can change significantly or in the important way the plan that we have to deliver in the company. Speaker 100:31:31So that's what I'm trying to say. And I think Marcelo also was very clear regarding liquidity. We think with this scenario, the level of liquidity that we have in the company is maybe higher. It's very higher. It's higher than we need, consider the plan that we have for the new future. Speaker 100:31:50So that's it. And regarding the way that we that you mentioned the movement on U. S, the bolt on strategy, it's something that seems a very, let's say, healthy way to move in the U. S. Market as you mentioned. Speaker 100:32:10So I think this is what we see regarding transformation move in the near future. Want to To mention Speaker 500:32:23in addition, that said, we are very confident that you are able to deliver to 2024 a double digit reduction when we compare with the 3rd quarter that you have the results of cash costs, considering, of course, the same level of FX and branch price, that's very important and impacts our costs. But considering the full round pop in Rebus, the mix of production on leverage of the year, we are very confident where Deng Xiaoping's double single digit. Of course, we have specific quarters with more challenge. We have downtimes predicted to Tres Lagos Line 1 and 2 and Uribe's inspection shutdown with 6 months. That's very important to evaluate the assets and have the confidence to pull the campaign off 12 months. Speaker 500:33:35But what to have noticed in the asset and the results until this moment that we are running very well in a good pace and perspectives are good. Just to clarify, a double single digit to 2025 in comparison with the Q3 of 2024. Operator00:34:19Our next question comes from Caio Ribeiro from Bank of America. Please Mr. Ribeiro, your microphone is open. Speaker 800:34:31So my first question is on the wood chip market in Asia, right, where we note availability of wood chips has been picking up, particularly in China as a result of the downturn in the property market. There is also this force of pharma and policy. And while we note integrated paper supply additions are happening, wood chip import prices into China haven't really increased recently, which also suggests that, that domestic wood chip availability has increased, right? So I just wanted to get your views, if possible, right, on whether you perceive this to be a structural phenomenon for the industry, right, this increase in availability of wood chips in China And what impacts the addition of this integrated capacity that we see year after year in China will have on the industry cost curve and the demand outlook? And then my second question is more on the soft wood market and the implications there for hardwood. Speaker 800:35:29With some players right in the softwood market already attempting price hikes lately, do you perceive that we're at an inflection point for softwood, right? And what implications do you see for hardwood if that's the case? Is there room for hikes in the coming months for hardwood as well? Or do you see substitution into hardwood at the very least favoring a demand recovery for that fiber as well? Thank you. Speaker 400:35:55Caio, this is Leo here. Thanks for your questions. I'm trying to organize myself here to be able to answer all of them. First, regarding your question on wood chip into China or for Chinese production. You are correct. Speaker 400:36:14There is more availability in the short term that we had foreseen or that was planned. And that in our view is due to 2 major reasons. First of it is the housing market downturn and obviously that released a lot of wood that was originally used for furniture, which is now being used for other products such as pulp and paper. And second is a program in China that we are monitoring, which is a conversion of planted tree area to agriculture and this program will last until the end of 2025. We don't think it's structural. Speaker 400:36:57We believe that in the future, once these two factors have leveled out, China will be more dependent on imported wood as it was before. As you know, imported wood reached 71% of the pulpwood consumed in China and now it has reduced to 60%. Obviously, this difference being conquered by local Chinese wood, but we believe that the trend should be reestablished once we see these two variables coming back to normality. The impacts of verticalization, as we have seen during now the Q4 and the beginning of next year, we have 3 or 4 important paper producers who are backward verticalizing. We are going to give a lot of details on that in our Suzano Day and actually trying to forecast that and not only for the end of this year in 2025, but until 2028 as well. Speaker 400:37:57But obviously, they are they will have a push in the old demand to market. But there are variables which are very uncertain, which is the exact startup date of these projects, then obviously the ramp up rhythms of these projects, which will start verticalizing. And all of them, just to make it clear, that were announced for Q4, 2024 and onwards are fully verticalized. There is no pulp drying capacity. So they will affect us not as competitors into pulp, but by eventually reducing the demand side of the equation. Speaker 400:38:40Now they're all high cost production, right? So if they're going to be based on either Chinese or imported wood into China, the cost base of this new addition will be high. We expect them to be all over $5.50 to $600 cash cost I mean, pulp cash cost, meaning that as we have seen in several other cycles, once pulp prices get below these levels, these guys, these new volumes will also now come into market to buy pulp creating and generating additional demand for pulp as well. Now I'm going to move into the softwood and hardwood part of your question. We believe softwood is or has reached an inflection point. Speaker 400:39:28We are tracking very closely what's going on in softwood into China. As I mentioned in my speech, the price decreases that we have seen in July were led by Softwood. They were first happening on Softwood, then followed by us in Hargu. But at this mid $700 price delivered to China, we noticed and as per our estimates, several producers, Canadian producers, Nordic European producers are already below breakeven delivered into China. So I believe this will force an inflection point and that's why we see this $20 price increase announcement of several of them into China coming into October November. Speaker 400:40:12The first reflection of this move will be helping us even further in terms of fiber substitution. As you know, the price difference today is $200 on a net base between software and hardware. Then I believe if they are successful in implementing this price increase, this can increase further. And obviously, as you can imagine, we have several, several customers who are coming to our teams in China, in Europe, in U. S, in Brazil for support in terms of knowledge and guidance, in terms of how we can support them in this fiber substitution and migration from software to hardwood. Speaker 400:40:49So the first effect will be an additional demand for hardwood. And regarding your question, if this would be an inflection point for hardwood prices, I think it's too early to say. As I mentioned in my speech, I believe we're either at the bottom or very close with, but I think we need to let a little bit of time go by so that we can define if this is a turning point or not. But the first effect will certainly be additional demand. Speaker 800:41:15That's super clear. Thank you very much, Leo. Operator00:41:22Our next question comes from Daniel Sasson from Itau BBA. Please, Mr. Sasson, your microphone is open. Speaker 900:41:31Thank you so much. Good morning everyone. Most of my questions have been answered. Maybe just a follow-up from a previous question. You mentioned, Liao, the semi integration movements in China and the potential new capacity additions coming from them. Speaker 900:41:46Can you please shed some light on potential marketable projects in Asia? I know that there's a lack of visibility or transparency, let's put it this way. But whatever you guys have or forecast, for instance, for Oki's expansion, I think that could help us to build our supply demand models. That could be great. And piling up on the discussion regarding wood chips, we know that Oki 1 took maybe 4 or 5 years to fully ramp up. Speaker 900:42:17Do you think that despite the increased availability of wood chips because of the downturn in the housing property sector, as you mentioned, there is this chance that this project is going to be delayed or at least the ramp up is going to take much longer than would be normal for a project like that? Speaker 400:42:42Hi, Daniel. Thanks for your question. As I mentioned in my speech, I guess this is extremely recent news coming from consultants prestige consultants to our business, which we just got earlier this week, which is a significant delay in Okichu project. As you know and as some of you or your colleagues have stated, the original start up date for Line 1 was March. This is now being pushed to November 2025 and Line 2 as of now going into 2026. Speaker 400:43:22The information that we have in the project is that it's supposed to be a verticalized project to begin with at 50% integration and verticalization with Ivory Board over 1,000,000,000 tons, print and writing, believe it or not, and also tissue, all of that in Indonesia. But this, again, is all based on market information, which I believe you have the same access that I have as well. And up to now, I'm just talking about startup, right? So now we see the significant delay on startup and then there is a question of how much wood will be available and what will be the ramp up curve. I totally agree with you. Speaker 400:44:07We in our BI area, tracked obviously the startup of Oki 1, and it took 4 to 5 years, I guess, more 5 than 4 to reach full capacity. And that can be the case again for Oki 2. It's hard to say again. It's always hard to estimate in too much details or what's going to happen in Indonesia or in China when it comes to pulp production due to such a difficult position in terms of wood supply. But we expect that based on the previous track records, something similar could happen as well for Okichu. Speaker 900:44:452. Thanks, Lael. Sorry, you mentioned 55% of the Oki line would be integrated. Is that right? And then maybe the second thing still on this front, do you have an estimate on the production cash cost of the recent projects in China? Speaker 900:45:04For instance, Liancheng, do you have an estimate on your current cost base right now? Thank you. Speaker 400:45:14Okay. Yes. So, Oki, again, Daniel, based on market information, which we have read or received through our BI teams either in China or in Brazil is that the second project for Okichu to start will be 50% verticalized into paperboard, printing and writing papers and tissue. So this is to start 50% verticalized 50% market pull, okay? So that's the info in our future. Speaker 400:45:47Regarding Chinese cash costs, based on this unforeseen availability of wood related to the two factors that I mentioned previously, we estimate that the Chinese cash cost today is close to $500 is maybe ranging from $4.90 to $5.10 which as you see or can note is lower than our marginal cash cost scenarios delivered to China, which is at $5.60 to $5.80 showing that at this time of the production curves and with wood cost to different markets, the marginal cost producers are not Chinese, rather are other Asian, even Americans or Europeans delivered to China. So Chinese producers today, it is our view that have this, I would say, dollars 50 advantage of costs below marginal cash costs, but still at $500 range. Speaker 900:46:49Perfect, Leo. Thank you so much for the very detailed answer. It helps us a lot. Thank Operator00:46:57you. Our next question comes from Marcio Farid from Goldman Sachs. Please, Mr. Faraj, your microphone is open. Speaker 1000:47:07Thank you. Good morning, everyone. Thanks for the opportunity. My first question maybe to Fabio. Fabio, thinking about the passive recent acquired assets, my understanding is that Costa V2 was not clear when you firstly acquired the assets and now that you have taken over, right? Speaker 1000:47:26I think, I mean, the idea wanted to understand what are the initial findings so far in terms of how the news operating, in terms of obviously, the potential in the early days, but what's the future of those assets? What's been Suzano do in terms of improving the operations and eventually expand as well into the U. S? And your first assessment of the U. S. Speaker 1000:47:51Markets, that will be great. And secondly, maybe going back to the decision to instill 4% of the volumes, I think I had a similar question in the Q2. But my understanding is that, I mean, the cycles are becoming shorter, right? You're talking about 6 months up and 6 months down. And the 12 month decision feels like it's always going to be lighter, right? Speaker 1000:48:15Prices were at the highs of $750 at the end of last year. You did not have the opportunity to raise production because you had earlier last year decided to cut the 4% and then prices fall again and obviously the decision was basically maintained. So a 12 month decision feels like it's always going to be lagging the cycle that tends to be shorter and shorter by nature, right? So how should we think about that? I mean, how do you reconcile the nature of the cycle with more longer term decision, which seems to make a lot of sense from a strategic perspective as well? Speaker 1000:48:50Thank Speaker 300:48:54you. So good morning, Marcel, and thank you for your question. It's Fabio here. I'm going to take the first one about Pactiv. Just to briefly update, we have been here I'm currently in Pine Bluff sitting here at the mill as we speak. Speaker 300:49:10We have been here since beginning of October when we transitioned the business from Pactiv to Suzano. And as you know, this is an old mill built in the '50s, and the mill Pactiv was more concerned about its converting business. So the mill lacks today a good maintenance. It needs to be well taken care of, and that's what Susano knows how to do. So there's a turnaround story here for us on the industrial side, And we already have started with our short term, medium term plans to bring this mill back to the level of operational stability that we believe we can achieve. Speaker 300:49:58The first signs are very positive. Good signs that the raw materials basket here, especially the cost of wood, it's very competitive. So there's abundant pine and also at a very competitive price in the state of Arkansas. I've been visiting some of the forests and talking to people and this is a good start, gives us good hopes that we can have a very competitive operation here in the near future. So right now, our focus has been on focusing on the people here, the physician, focusing on taking care of our customers and suppliers and also the community that we interact here at Pine Bluff and putting all the efforts necessary to do the turnaround on the industrial area, focusing on maintenance and also on operational stability. Speaker 300:50:58But the perspective is it's a positive one. Regarding the market, it's as you know, the mill, it's serving the liquid packaging market here in North America. It's one of the large suppliers for that specific market space. It's a good market of long term contracts and also good prices. And it's very stable in terms of demand and price wise as well. Speaker 300:51:25We're looking at opportunities to expand the portfolio to serve other markets like cup stock and food service. We do have a good product for that. We already sell a little bit to this other market space, and we want to increase as starting 2025, we have plans to increase our participation in this market space, which gives us more flexibility. And also, we understand that we can get even better margins serving these other market spaces. So it's in a short view, Marcio, we're excited. Speaker 300:52:01We have a plan here for the turnaround and industrial turnaround of the mill and also looking at a strategy to increase our participation in different market spaces from Pine Bluff and Waynesville. Speaker 600:52:24Marcel, this is Marcel speaking about the question on the production cuts. Of course, there is a lag between when we take the decision and when we can implement it because of the nature of our supply chain. But there is no other way to manage this than to look constantly at what's happening in the market, reach our conclusions about the trends on prices and then make the decisions on the production. The lag will always be there. But on the other hand, we have our tools also to try to anticipate what's going to happen in the market. Speaker 600:53:01So for the time being, the decision is that one and we are working on the scenario for next year. And if we have a major change in the middle, we always have the flexibility to adapt. Speaker 1000:53:15Great. Thanks, Fabio. Thanks so much. Operator00:53:20Our next question comes from Rafael Barcelos from Bradesco BBI. Please, Mr. Barcelos, your microphone is open. Speaker 1100:53:30Hello, good morning and thanks for taking my questions. So about my first question, I wanted to go back to your capital allocation strategy. Beto, I know that you mentioned during the presentation that Suzano will not do any transformational movement, but I just wanted to discuss it in more detail. For example, so after the acquisitions of Lenzing and Pactiv, could you please give us more details on which type and size of the assets that you are now looking for? Other than that, also given these lack of big M and A initiatives in the pipeline, I wanted to understand whether the company could bring a new dividend policy in the future. Speaker 1100:54:09And then my second question is about your investment in Lansing. I know that it's still quite recent to ask this type of question, but you're now probably following Lansing closely. So could you please comment on your thoughts on how you could generate synergies with these assets in the future, of course, in a scenario that you acquired the control in the future? And how do you see these assets inside Suzano's portfolio? Thank you. Speaker 100:54:39So, Rafael, thank you for your question. This is Beto. Let me take the first question regarding the capital allocation. And then as you know, during the month of October, we already have the 2 board members, which today is Marcelo and Carlos already sitting. They already took their position in the Board of Lenzi. Speaker 100:55:03So I will hand over then to Marcelo, so then he can share with us his first impression regarding the business since we already have the 1st slab bot meeting at Lenzi. But regarding the capital allocation, it's very simple. What I said is that Suzano is not going to any, let's say, transformation move. What I'm trying to say is that any kind of ticket, the size of ticket that we might do in the, let's say, near future will not impact on the important way our declining trend in terms of leverage. So that's what I'm trying to do what I'm trying to say. Speaker 100:55:45It's very simple. It's we have these two movements, Lindsay impacted, which is for us it's time to extract value from those. And again, a bolt on strategy is something that we can pursue in the future. Again, in the medium and long term keeping our trend of reducing our leverage. So that's it. Speaker 600:56:14This is Marcelo speaking. Just complementing on, we don't foresee any change in our dividend policy as a result of this moment that we live today and we need to keep in mind that our cash flow generation is volatile by nature and we have to deal with that in our in managing the capital structure of the company. In relation to Lensing, we took our position as a shareholder and we, as Berto mentioned, now started to participate in the Board meetings of Lensing. We don't have a direct impact on the management of the company. We will be a shareholder with who sits on the Board. Speaker 600:57:00We understand that Lending is a company with an incredible reputation and an incredible portfolio of products, very high technology in the sector and well recognized by the clients. So the access that the company has to the most important clients in the world, the power of its brands and the reputation of the company is great. It has a very important industrial footprint and it has to work at it as it has been working on improving its operational efficiency, reducing costs and becoming more efficient over time. This is the journey that we will embark and try to help the company to continue in that direction. And I think it's too early to go into more details. Speaker 600:57:47What they have been trying to do, I think, is in the right direction, and it is going to be up to us to try to speed up that process and extract value. And more important than that, I think starting now, we have between year 1 after completion of 1 year and up to the completion of the 4th year, we are going to have a window to decide whether or not we want to increase our participation and become the main shareholder of the company. We're going to take our time in this beginning to understand better the of course, the industrial part in the beginning of the process. The dissolving pulp part is very similar to what we do. But from that point onwards, it's a completely different process, both on the industrial side and also on the commercial side. Speaker 600:58:33So we need to learn before we make the more important decision that we're going to have to make in the coming months, which is whether or not we want to become a controlling shareholders of Lensing. Speaker 1100:58:46Super clear. Thank you, Berto and Batya. Operator00:59:04Our next question comes from Lucas Laggi from XP. Please Mr. Laggi, your microphone is open. Speaker 1200:59:12Good morning everyone. Congratulations on the results. I would like to go back with a follow-up question on the integration trends in China. I mean, Leo, you provide a very good color on the local availability of in China of wood chips. But I would like to go back to the imported parts of wood, especially thinking of like low cost supplier regions like Vietina are already closing the peak levels that we saw in 2022. Speaker 1200:59:39But when we look at the wood chip import prices, they're still significantly lower compared to the peak that we saw 2 years ago. So my question is, I mean, how do you see this availability of wood chips in this low cost suppliers of wood to China? And if it's reasonable to think that the incremental volumes to feel this integration expansion in China in the upcoming months should come from high cost suppliers of wood like Australia and other regions rather than a low cost region as Vietnam? I mean, is it reasonable to expect that Vietnam is reaching its limits to provide further wood chips to China and increase these expansion trends that we are seeing from these verticalized players? That would be my question. Speaker 401:00:31Hi, Lucas. This is Leo here. Thank you very much for your question. First, I would like to point that Vietnam is lower cost, not low cost, right? By the end of the day, yes, it is lower than would from Australia deliver to China, but it still will bring cash costs of any Chinese producer to the low 500s to mid-500s cash cost regardless of the difference of peak to cycle to the lows that we see today. Speaker 401:01:04Today, we see a bit more availability in Vietnam despite growth in imports of imported wood as well. As you probably know, last year, there was a decline of almost 30% of imported wood into China. That's when we saw the bulk of this local Chinese wood being used in the short term. This year, we already see a recovery of imports, again, now growing almost 30%, but still a bit lower than the levels that we saw in 2022. So we see space still of some Southeastern Asia wood supply to China. Speaker 401:01:42But we believe our base scenario is that once we have the 2 variables that I mentioned, which is housing market reestablishing and the program that we see today in China of forestland into agriculture, which will end by the end of 2025. These structural changes will make this verticalized pulp to paper production in China or Chinese market pulp players more and more dependent of imported wood. And then we believe that we're going to see a higher cost scenario compared to what it is today. But Vietnam should still be one of the major sources to comply with the growth of demand of wood from China. Speaker 1201:02:28That's perfect, Lal. Thank you for the answer. Operator01:02:35The Q and A session is over. We would like to hand the floor back to Mr. Bert Aubreyu for his final remarks. Please go ahead, sir. Speaker 101:02:44Yes. Thank you. I just want to remember that we're going to have our Susano Investor Day on the December 12th, also our visit to the Hebras project on December 13th. And I'd like to thank you for being here with us on the call today and for your interest in Susano. And as always, our IR team remains available for any additional question you may have. Speaker 101:03:11And I wish you all a great day. Thank you very much. Operator01:03:16The Susano's SA3rd quarter of 2024 conference call is concluded. The Investor Relations department is available to answer further questions that you may have. Thank you and have a wonderful day.Read morePowered by Conference Call Audio Live Call not available Earnings Conference CallSuzano Q3 202400:00 / 00:00Speed:1x1.25x1.5x2x Earnings DocumentsSlide DeckInterim report Suzano Earnings HeadlinesSimplifyber secures $12m to disrupt bio-based fashion manufacturingApril 15, 2025 | msn.comSuzano S.A. (SUZ): Among the Best Paper Stocks to Buy According to Hedge FundsApril 14, 2025 | insidermonkey.comThe Trump Dump is starting; Get out of stocks now?The first 365 days of the Trump presidency… Will be the best time to get rich in American history.April 23, 2025 | Paradigm Press (Ad)Suzano (NYSE:SUZ) Upgraded to "Strong-Buy" at UBS GroupApril 13, 2025 | americanbankingnews.comZacks Industry Outlook Highlights International Paper, Suzano and Smurfit WestrockApril 11, 2025 | uk.finance.yahoo.comSuzano Backs Simplifyber as Spinnova Signals a Scale BackApril 11, 2025 | msn.comSee More Suzano Headlines Get Earnings Announcements in your inboxWant to stay updated on the latest earnings announcements and upcoming reports for companies like Suzano? Sign up for Earnings360's daily newsletter to receive timely earnings updates on Suzano and other key companies, straight to your email. Email Address About SuzanoSuzano (NYSE:SUZ) produces and sells eucalyptus pulp and paper products in Brazil and internationally. It operates through Pulp and Paper segments. The company offers coated and uncoated printing and writing papers, paperboards, tissue papers, and market and fluff pulps; and lignin. It also engages in the research, development, and production of biofuel; operation of port terminals; power generation and distribution business; commercialization of equipment and parts; industrialization, commercialization, and exporting of pulp and standing wood; road freight transport; biotechnology research and development; and commercialization of paper and computer materials. In addition, the company is involved in the business office, production packaging, and financial fundraising activities; research, development, production, commercialization, and distribution of wood-based textile fibers, yarns, and filaments produced from cellulose and microfibrillated cellulose; and research and development of wood raw materials for the textile industry. Suzano S.A. was formerly known as Suzano Papel e Celulose S.A. and changed its name to Suzano S.A. in April 2019. The company was founded in 1924 and is headquartered in Salvador, Brazil.View Suzano ProfileRead more More Earnings Resources from MarketBeat Earnings Tools Today's Earnings Tomorrow's Earnings Next Week's Earnings Upcoming Earnings Calls Earnings Newsletter Earnings Call Transcripts Earnings Beats & Misses Corporate Guidance Earnings Screener Earnings By Country U.S. Earnings Reports Canadian Earnings Reports U.K. Earnings Reports Latest Articles Amazon's Earnings Could Fuel a Rapid Breakout Tesla Earnings Miss, But Musk Refocuses and Bulls ReactQualcomm’s Range Narrows Ahead of Earnings as Bulls Step InCan IBM’s Q1 Earnings Spark a Breakout for the Stock?Genuine Parts: Solid Earnings But Economic Uncertainties RemainBreaking Down Taiwan Semiconductor's Earnings and Future UpsideArcher Aviation Unveils NYC Network Ahead of Key Earnings Report Upcoming Earnings Comcast (4/24/2025)Gilead Sciences (4/24/2025)Alphabet (4/24/2025)Alphabet (4/24/2025)Intel (4/24/2025)PepsiCo (4/24/2025)Sanofi (4/24/2025)T-Mobile US (4/24/2025)Agnico Eagle Mines (4/24/2025)Barclays (4/24/2025) Get 30 Days of MarketBeat All Access for Free Sign up for MarketBeat All Access to gain access to MarketBeat's full suite of research tools. Start Your 30-Day Trial MarketBeat All Access Features Best-in-Class Portfolio Monitoring Get personalized stock ideas. Compare portfolio to indices. Check stock news, ratings, SEC filings, and more. Stock Ideas and Recommendations See daily stock ideas from top analysts. Receive short-term trading ideas from MarketBeat. Identify trending stocks on social media. Advanced Stock Screeners and Research Tools Use our seven stock screeners to find suitable stocks. Stay informed with MarketBeat's real-time news. Export data to Excel for personal analysis. Sign in to your free account to enjoy these benefits In-depth profiles and analysis for 20,000 public companies. Real-time analyst ratings, insider transactions, earnings data, and more. Our daily ratings and market update email newsletter. Sign in to your free account to enjoy all that MarketBeat has to offer. Sign In Create Account Your Email Address: Email Address Required Your Password: Password Required Log In or Sign in with Facebook Sign in with Google Forgot your password? Your Email Address: Please enter your email address. Please enter a valid email address Choose a Password: Please enter your password. Your password must be at least 8 characters long and contain at least 1 number, 1 letter, and 1 special character. Create My Account (Free) or Sign in with Facebook Sign in with Google By creating a free account, you agree to our terms of service. This site is protected by reCAPTCHA and the Google Privacy Policy and Terms of Service apply.
There are 13 speakers on the call. Operator00:00:00Ladies and gentlemen, thank you for holding, and welcome to Susana's conference call to discuss the results for the Q3 of 2024. We would like to inform you that all participants will be in listen only mode during the presentation. That will be addressed by the CEO, Mr. Berto Abril and other executive officers. This call will be presented in English with simultaneous translation to Portuguese. Operator00:00:26To change the audio, you can press the globe icon located on the lower right side of your Zoom screen and then choose to enter the Portuguese room. After that, you can select mute to original audio. Before proceeding, please be aware that any forward looking statements are based on the beliefs and assumptions of Susano's Executive Board and on information currently available to the company. They involve risks, uncertainties and assumptions because they relate to future events and therefore depends on circumstances that may or may not occur in the future. You should understand that general economic conditions, industry conditions and other operating factors could also affect the future results of Susano's and could cause results to differ materially from those expressed in such forward looking statements. Operator00:01:14Now, I'll turn the conference over to Mr. Berto Brault. Please, you may begin your conference, sir. Speaker 100:01:25Thank you. Hello, everyone. Thank you for attending our call for the Q3 results. I will start with the highlights. So let me start with sales. Speaker 100:01:35Sales volumes improved as you saw in all business. And Speaker 200:01:40here Speaker 100:01:40I want to highlight that was a very well defined commercial strategy from the team. This strong sales with a better FX allowed us strong EBITDA of BRL6.5 billion despite the higher cash cost. Indeed, the cash cost was higher than the previous quarter and in the previous quarter in the last year, but that was planted as you know. And I want to reinforce here that considering the performance that we have been seeing at the Airbus in the ramp up, considering the efficiency level which is higher than we planned, I have to say that such a peak of higher cost is already behind us. So we will see further detail during the presentation. Speaker 100:02:31My last comment on the financial side is related to leverage, which is still declining as planned now with 3.1 and is still on the leverage topic. I would like to share with you that on the capital location side, I do not see Suzano going through any transformational move in the near future. So leverage will keep declining, it's click declining trend going forward. Also during the quarter, we also had the closing of Lansing, the closing of forest assets from BTG that we acquired. And in the beginning of October, we also had the closing of Suzano Packaging US. Speaker 100:03:17So Suzano Packaging US, the former Packeted assets in Pine Bluff. So looking forward, the focus of Suzano for the next quarters will be generating value from those assets that we brought to our portfolio, delivering what we planned for the Cerrado project and also keep deleveraging the business as a whole. So that's the main highlights from Susan in the Q3. So let me hand over to Fabio, which will cover the Paper and Packaging business. Fabio, please go ahead. Speaker 300:03:58Thanks, Beto, and good morning, everyone. Please, let's turn to the next page on the presentation. Through the combination of good commercial execution and logistics flexibility, we were able to deliver the highest EBITDA since 3 quarter last year despite growing operational challenge related with bottlenecks in our export supply chains. On the domestic market, according to IBA, print and writing demand consider imports increasing 7% in the 1st 2 months of the 3 quarter on a year over year basis. Sales from domestic producers grew 8% on the same comparison base. Speaker 300:04:37Demand was solid in all product lines, supported by better economic activity and from the election cycle tailwind on the coated paper grades. Demand for paperboard continued to grow, increasing a strong 18% during the 1st 2 months of the quarter compared to the same period of last year. Paperboard demand has been strong this year in all market segments, supported by the growth in paper packaging consumption in better economy overall. In the international markets, demand was sustained in North America and Latin. Ohio, in Europe, demand for paper has shrunk during the summer due to seasonality. Speaker 300:05:16Prices in U. S. Dollars were mostly flat in international markets during the period. Looking now to Susanoo's figures, our sales volume in the quarter was 8% higher year over year and 9% above Q2 performance pushed by higher sales volumes in the domestic market. Our export volumes were mostly flat versus the same period of last year and increased versus last quarter, although we have seen a continuous deterioration of the container supply chain with congestions at ports domestically and broad relate to poor service levels and higher costs from all container carriers. Speaker 300:05:56This is a result of a mix of different events, Red Sea traffic restrictions, low water level Panama channel, weather related restrictions at Brazilian ports, which seems to be creating the perfect storm for Brazilian export companies that rely on containers. Suzane is seeking our alternatives to continue to serve its international customers despite these issues. The 3% net price growth over Q2 was led by slightly better prices in the domestic market and favorable FX on our exports. On a year over year comparison, prices were lower by 3.8%, reflecting market adjustments after the normal price levels of the first half of twenty twenty three. Looking at EBITDA performance, the 13% quarter over quarter was driven by higher sales volumes and better price. Speaker 300:06:47In the quarter, we had the annual maintenance downtimes at the Bimeira and Suzano Mills, which are the 2 largest paper mills Suzano have, pressured the COGS in line with the budget. Compared to Q3 2023, Suzano EBITDA decreased by 8% due to lower prices in both Suzano Paper Packaging EBITDA decreased by 8% by lower price in both domestic and international markets despite higher sales volumes. Looking ahead, we expect a strong seasonal demand in Q4 from our domestic market for uncoated papers and paperboard. For coated grades, we anticipate a return to structural decline as the election cycle impact fades. On international developed markets, we foresee demand return to a structural decline trend. Speaker 300:07:35In Latin America, we expect demand to be more resilient, albeit also declining. Cost wise, logistics expenses are expected to remain high due to ongoing disruptions and geopolitical uncertainties, which could offer support to paper prices in most markets. Regarding our cash costs, we anticipate improved performance on COGS in Q4 following the lack of maintenance stoppages. We also foresee stable cash costs ex downtimes in the upcoming quarter. On October 1, Suzano kicked off its operations of the Pine Bluff and Waynesville packaging assets acquired from PACCARB Evergreen. Speaker 300:08:12Our 1st weeks went quite well so far, folks on supporting our new colleagues, customers and suppliers through this transition. We remain very excited about the business opportunities that this move will bring to Susano in the future. Now, I'll hand it over to Leo, who will be presenting our pulp business results. Speaker 400:08:35Thanks, Fabio, and good morning, everyone. So moving to the next slide of our presentation, I would like to begin by sharing some facts related to this past quarter. It was indeed a very special moment for us as we had started to operate and later to sell the first volumes of our brand new rebas mill. During this past month, we have first built up pulp inventories in the outbound logistics chain from Mato Grosso do Sul to Santos Port in order to be able to operate rebas efficiently. These new volumes were the only additions in the Q3 to our previously announced previous inventory levels, which as we have been stating were quite low and stays on the same operational levels as we speak. Speaker 400:09:23Our first shipments from rebas pulp have taken place during the latest part of the quarter. During Q3, we have noticed quite a challenging market, led especially by headwinds from China. There, paper producers inability to increase paper prices during previous quarters squeezed their margins and the new pulp purchases came to a halt, almost a complete halt in July, right when the news of the startup of Rebus and the local Chinese mill, Yansheng, were announced. As the quarter evolved, a sharp decrease in softwood prices led the way to a wave of intense price reductions in hardwood grades, both in local resale markets as well as for new negotiations from imported pulp. Prices declined sharply much faster than on previous cycles, reaching a set point, which triggered customers to reestablish their purchases, especially by the end of the quarter. Speaker 400:10:22In Europe and North America, despite better dynamics in terms of demand, prices started to correct following the trend posted by China. We have navigated Q3 by focusing on maximizing our sales in Europe and America, while also positioning pulp in these markets to cope with higher seasonal demand in Q3 and Q4, and also reestablishing our service levels to regions and customers for whom we invoice directly once cargo is shipped out of Brazil, reducing therefore our backlogs from previous quarters. This dynamic, which includes the sales of rebus first volumes, resulted in a strong invoicing during the quarter. Our realized prices were mostly affected by a higher concentration of our sales during the second half of the quarter, once a significant price drop was already in place, as well as a higher mix into Asia where most of Heba's initial volumes were sold. Despite lower prices in U. Speaker 400:11:20S. Dollar terms in Q3, the combination of higher volumes and favorable FX resulted in a 3% increase of our EBITDA margin, now reaching BRL5.7 billion. Now looking forward, I would like to highlight the following points. Coming to the Q4, we forecast healthy demand in all regions due to market seasonality, consequently favoring operational rates of paper producers globally. Tissue production rates have been the highlight in most global markets and latest production figures have shown its demand resilience despite eventual geopolitical or macroeconomic challenges. Speaker 400:12:01As usual in this time of the year, Chinese tissue producers are now boosting up their production as they are getting prepared for the Double 11 shopping gala. For several weeks and counting, mid-five hundred dollars price levels in China should have over end profitability thresholds of marginal cost producers based on consultant estimates of their marginal cash costs delivered to China. Not surprisingly, we have already noticed some integrated Chinese pulp and paper producers buying market pulp since August, and their purchases of market pulp have been increasing with Suzano ever since. Despite higher volumes coming into the stream, it is our belief that prices in China are either at the bottom of the cycle or quite close to it, grounded by low to equalize pulp levels, pulp inventory levels in Chinese ports and in the hand of Chinese customers. Solid paper production figures being further incentivized by mid- and small sized customers who have recovered their operating rates once their margins increase. Speaker 400:13:10And above average price gap between softwood and hardwood incentivizing fiber substitution. Customers in China and Asia recovering their buying patterns and actually increasing order intake over historic figures. And on top of that, the fact that current price levels in Asia are below marginal cash cost of producers are likely triggering a new round of unplanned downtimes as seen in recent recently in latest cycles. To give you some color on our October sales in China, negotiations are coming in line with our expectations, which includes rebas volumes and our order intake is being confirmed above historic average, which has enabled us to reestablish our operational backlogs, all of that with completely stable prices. Looking forward and focusing on the supply side of the equation, just this week reliable independent sources from the sector have confirmed a significant delay in the startup of the main pool project expected for Indonesia, for which the start up of the first line was delayed from Q1 'twenty five to November 'twenty five and the second line for now push forward for 2026. Speaker 400:14:30In addition, I wouldn't be surprised if we should continue to see further conversions of paper grade pulp into dissolving pulp, just as again announced by a leading dissolving pulp producer to take place in Q1 2025. This factor should ground a healthier market outlook for the coming months and beginning of 'twenty five. With that said, I would now like to invite Ares to address with you the cash cost performance of the quarter. Speaker 500:14:58Thank you, Leo. Good morning, everyone. Regarding our performance of cash production costs, I would highlight the 3 main factors that explain the 4% increase versus last quarter. The first of them is related to the higher consumption of energy at El Acruz Mill due to a low recurring event that brought lower operation stability in the period. These occurrences have already been overcome and we are now back to the performance for zinc in our operation plan. Speaker 500:15:37The second one, the start up of new Rivas mill in July also caused a temporary increase in costs, in this case, in the wood and chemicals components, which were totally in line with the expected performance. In addition to these factors, the high FX, although it benefits the Company's cash generation, also pressured the cash costs this quarter, given that some inputs are linked to foreign currency. 3rd quarter marked the peak of the cash cost in 2024. As looking now forward to the Q4, the solid progress of Hibbett's ramp up allow us to estimate a middle single digit reduction in the consolidated cash production cost when compared to the 3rd quarter. In the year over year analysis, the stable performance of the cash costs can be basically explained by 14% FX depreciation in the period, which offset the cost reduction obtaining the wool, in turn due to better harvest productivity, average ratios and specific consumption, and in inputs, mainly due to lower caustic soda and natural gas prices. Speaker 500:17:07Moving to the next slide, I would like to share with you some important aspects about the 1st months of operations of our new plants. In the chart on the upper left, it should be noted that we had a one off effect of R25 dollars per tonne in the COGS in the Q3 fully related to the start up costs of the new mill, which therefore no longer exists in the Q4. When we look at the mill's cash cost performance in the chart right below, we see that based on June's cost performance, Hibas has already started to benefit the company's consolidated cash costs since September due to the successful evolution of the plant's ramp up. It showed only Rebus ramp up. At the end of the Q3, it reached 8% completion of the learning curve, above the 71% forecast for the pure. Speaker 500:18:18And the last but not least, it's also worth mentioning that CapEx disbursement is according to the guidance already announced by the company. Now I turn the floor to Marcelo Bat, who will continue the presentation. Speaker 600:18:32Thank you, Iris, and good morning, everyone. On the following page, Page 8, we see that the behavior of our capital structure in the quarter has been shaped by some strategic capital allocation initiatives. We had a very robust operational cash flow generation, And we spent a significant amount of cash in this quarter in initiatives that had already been announced before and had its closing during the quarter, especially the purchase of forestry assets and the participation in lending. And we also made a significant investment in share buybacks in the period of close to $500,000,000 that helped point our net debt position to $12,880,000,000 visavis12,000,000,000 in the beginning of the period. Despite the increase in the absolute amount of the net debt, which was expected since we took these decisions on the capital structure side and capital allocation side, we saw a reduction in our leverage in terms of net debt to EBITDA from 3.2 to 3.1, marking the end of the investment period of the Cerro del project with the leverage ratio below what we had expected before. Speaker 600:19:57As I just mentioned on the previous page, the payments related to Cerro del will be minor from now on, and this will help the company to continue in its deleveraging process. In terms of our liquidity, we continue to have a significant amount of liquidity, which is probably more than what we need since the Serhado project came to the end and there has been a very significant derisking of our capital structure coming from that. So we will be working on the coming months to reduce our liquidity. Although we are not in a rush to do that because the market conditions today are favorable to carrying more cash. So we're going to do that according to the opportunities that we have and that we're going to see in the market. Speaker 600:20:47So with that, I conclude the presentation here and turn back to Beto for final considerations. Speaker 100:20:53Thank you, Marcelo. A few takeaways from what we just heard from the team here. The first one, it's regarding the execution of our largest investment ever, which is the Cerro del project. So we must say that we are kicking now a new cycle with a completely different level of competitiveness and cash generation. So this is the first message here. Speaker 100:21:21This is will put us in the completely different level of resilience. And despite the pricing scenario, as mentioned from Lael, we see the business completely prepared to face different scenarios in terms of price. And after all the progress on the business strategy, which is related to the closing of the forestry asset deal, LENSI and also the Suzano packaging business, we are now in the moment of extracting value from those movements and this is the focus of the company from now on. So this is a takeaway from what we heard here. Let me open for questions and thank you for all of you. Operator00:22:11Thank you. We will now begin the Q and A session for investors and analysts. You. Our first question comes from Jon Brandt from HSBC. Please, Mr. Operator00:22:38Brandt, your microphone is open. Speaker 100:22:43Can you Speaker 200:22:43hear me okay? Speaker 500:22:47Yes. Speaker 200:22:47Yes, we can. Perfect. Thank you. Congratulations on the results. It was a great quarter in terms of transformation and all the initiatives that you were able to achieve. Speaker 200:22:58I guess my first question is really sort of a debt capital allocation question. So, Marcelo, now that Serrato is bigger with the Rivas Mill coming on, is there any change to your debt policy either in terms of leverage ratios, targeted gross debt, targeted net debt. I know you briefly mentioned it in your remarks. I'm hoping you can sort of expand on it. And sort of what does that mean for capital allocation? Speaker 200:23:28CapEx looks like it will fall in 2025 percent, pretty substantially depending on pulp prices. So I guess I'm just trying to figure out sort of what's next, right? You should be able to come down into your targeted leverage ratios pretty quickly depending on pulp prices. So did we see sort of increased dividends, maybe share buybacks, are there other sort of initiatives that you're working on in terms of where some of this capital could be spent? I guess that's my first question. Speaker 200:24:01And then sort of my second question, just briefly, you mentioned the pulp reduction, the 4% capacity reduction. I'm just wondering if we don't see a rebound in prices later this year or next year, is there any sort of other capacity that might be at risk of stopping? Thank you. Speaker 600:24:26Ron, thank you for your questions. This is Marcelo speaking. With the end of the Cerro del project and start up of the Hibas Mill, we will continue and accelerate our deleverage because CapEx, as you mentioned, is reducing. We are still working on the CapEx guidance for next year, but for sure it's going to be a lower number than this year that will be released in December. And the first, I would say, goal is to bring the leverage of the company back to the levels of that we need to have outside of investment periods, which is below 3 times net debt to EBITDA between 2 times and 3 times. Speaker 600:25:08And this is going to come very fast in the coming quarters. Of course, the speed will depend on the behavior of pulp prices. So this is the first priority to bring the company back to this normal level. We on the CapEx side, as I said, we will have in December the number for next year and this is going to be a lower number than this year. We are still working on the other capital allocation alternatives. Speaker 600:25:39As Beto said in the beginning, at this point, we are not seeing any potential transformation initiative that could change in a material way our direction of deleveraging the company. The buybacks will continue to be an option for us. We have an open program that still we still have, I think, something like 28,000,000 shares open to be bought. This will be completed in the time frame of the program, which still has more than 12 months to be completed. So we're not going to anticipate to the market at what speed we're going to execute the buybacks. Speaker 600:26:13This will depend on the cash flow generation of the company visavis its valuation in the market. So what you can expect in terms of capital allocation is the company to be to reduce CapEx, to reduce indebtedness in the coming months and to be very selective as we always are in terms of selecting new investments. On the pulp production side, the announcement that we made a few weeks ago has in the background the current stage of the market prices. And this is a decision that we made for the year of 2024. And even if the price changes from now on, it's going to be very hard to change that because this is a very long chain that we have to progress since the harvesting activity up to the delivery to the clients. Speaker 600:27:06So I think for 2024, that's the number. For 2025, we are still working on that. I would just say that for the current market scenario, this is the decision we have, but of course, this will depend on the expectations. Speaker 200:27:25Great. Thank you very much. Operator00:27:30Our next question comes from Rodolfo Angele from JPMorgan. Okay. Left the queue. Our next question comes from Leo Correa from BTG Pactual. Please Mr. Operator00:27:47Correa, your microphone is open. Speaker 700:27:51Hello, gentlemen. Can you hear me? Speaker 600:27:54Yes. Speaker 700:27:55Okay, perfect. Yes. So a couple of questions on my side. The first one for Beto. Beto, in your initial remarks, I guess the message was super clear to us at least that you're trying to convey a message of deleverage. Speaker 700:28:11And you're also trying to convey a message that there's no big M and A transformational moves in the pipeline. So I just wanted to check with you. I mean, if an understanding is right that Suzano will continue to pursue these smaller bolt on acquisitions like you did with Bakhtiv and Lanezig. And the game plan is to continue to obviously to assess market opportunities, but these will be, let's say, in the $1,000,000,000 range at most. I mean, I just wanted to understand exactly what you mean when you say no transformational moves because I guess the market is obviously concerned on bigger M and A at Suzano. Speaker 700:28:50So if you can quantify a bit what you mean with that, I think it would be very helpful for everyone. The second point on pulp cash costs, right? I mean, I think it was super clear the explanation on why the numbers are a bit higher this quarter. And I guess with, obviously, with Sahara ramping up and with, I mean, much lower pulpcashcost platform being consolidated in your overall cash cost numbers, these numbers would decline going forward. I just wanted to confirm, Eirys, you mentioned something in the single digit range of reduction for the Q4. Speaker 700:29:32How are you viewing this for 2025? I mean, what is the potential for further cash cost reductions in pulp? I think that would be very helpful if you can add a bit clarity on that for 2025. Thank you very much. Speaker 100:29:48Yes. Thank you for the question. Maybe I should start with the Iris, please complete if you want. But on the cash cost, we see 2025 in the same good level as I said regarding the next quarter. So what do we have for the next quarter at the end of the day is the company delivering exactly what was planned for Hibas project, which was the 900,000 tons in the first, let's say, 12 months of operation. Speaker 100:30:22So we are completely confident that this target will be delivered. So that will help us in terms of cash cost next year even further. But I think Ares already gave us a kind of, let's say, vision regarding that. Going back to the capital allocation process, I think you read in a very clear way. What I'm trying to say is that we are not planning any big ticket movement in the near future. Speaker 100:30:59That's what I'm trying to say. We have a lot to do with the assets that we already brought to the portfolio. We must extract all the value from Serhade this time. We have all the potential to keep deleveraging the business. And we do not see any movement that can change significantly or in the important way the plan that we have to deliver in the company. Speaker 100:31:31So that's what I'm trying to say. And I think Marcelo also was very clear regarding liquidity. We think with this scenario, the level of liquidity that we have in the company is maybe higher. It's very higher. It's higher than we need, consider the plan that we have for the new future. Speaker 100:31:50So that's it. And regarding the way that we that you mentioned the movement on U. S, the bolt on strategy, it's something that seems a very, let's say, healthy way to move in the U. S. Market as you mentioned. Speaker 100:32:10So I think this is what we see regarding transformation move in the near future. Want to To mention Speaker 500:32:23in addition, that said, we are very confident that you are able to deliver to 2024 a double digit reduction when we compare with the 3rd quarter that you have the results of cash costs, considering, of course, the same level of FX and branch price, that's very important and impacts our costs. But considering the full round pop in Rebus, the mix of production on leverage of the year, we are very confident where Deng Xiaoping's double single digit. Of course, we have specific quarters with more challenge. We have downtimes predicted to Tres Lagos Line 1 and 2 and Uribe's inspection shutdown with 6 months. That's very important to evaluate the assets and have the confidence to pull the campaign off 12 months. Speaker 500:33:35But what to have noticed in the asset and the results until this moment that we are running very well in a good pace and perspectives are good. Just to clarify, a double single digit to 2025 in comparison with the Q3 of 2024. Operator00:34:19Our next question comes from Caio Ribeiro from Bank of America. Please Mr. Ribeiro, your microphone is open. Speaker 800:34:31So my first question is on the wood chip market in Asia, right, where we note availability of wood chips has been picking up, particularly in China as a result of the downturn in the property market. There is also this force of pharma and policy. And while we note integrated paper supply additions are happening, wood chip import prices into China haven't really increased recently, which also suggests that, that domestic wood chip availability has increased, right? So I just wanted to get your views, if possible, right, on whether you perceive this to be a structural phenomenon for the industry, right, this increase in availability of wood chips in China And what impacts the addition of this integrated capacity that we see year after year in China will have on the industry cost curve and the demand outlook? And then my second question is more on the soft wood market and the implications there for hardwood. Speaker 800:35:29With some players right in the softwood market already attempting price hikes lately, do you perceive that we're at an inflection point for softwood, right? And what implications do you see for hardwood if that's the case? Is there room for hikes in the coming months for hardwood as well? Or do you see substitution into hardwood at the very least favoring a demand recovery for that fiber as well? Thank you. Speaker 400:35:55Caio, this is Leo here. Thanks for your questions. I'm trying to organize myself here to be able to answer all of them. First, regarding your question on wood chip into China or for Chinese production. You are correct. Speaker 400:36:14There is more availability in the short term that we had foreseen or that was planned. And that in our view is due to 2 major reasons. First of it is the housing market downturn and obviously that released a lot of wood that was originally used for furniture, which is now being used for other products such as pulp and paper. And second is a program in China that we are monitoring, which is a conversion of planted tree area to agriculture and this program will last until the end of 2025. We don't think it's structural. Speaker 400:36:57We believe that in the future, once these two factors have leveled out, China will be more dependent on imported wood as it was before. As you know, imported wood reached 71% of the pulpwood consumed in China and now it has reduced to 60%. Obviously, this difference being conquered by local Chinese wood, but we believe that the trend should be reestablished once we see these two variables coming back to normality. The impacts of verticalization, as we have seen during now the Q4 and the beginning of next year, we have 3 or 4 important paper producers who are backward verticalizing. We are going to give a lot of details on that in our Suzano Day and actually trying to forecast that and not only for the end of this year in 2025, but until 2028 as well. Speaker 400:37:57But obviously, they are they will have a push in the old demand to market. But there are variables which are very uncertain, which is the exact startup date of these projects, then obviously the ramp up rhythms of these projects, which will start verticalizing. And all of them, just to make it clear, that were announced for Q4, 2024 and onwards are fully verticalized. There is no pulp drying capacity. So they will affect us not as competitors into pulp, but by eventually reducing the demand side of the equation. Speaker 400:38:40Now they're all high cost production, right? So if they're going to be based on either Chinese or imported wood into China, the cost base of this new addition will be high. We expect them to be all over $5.50 to $600 cash cost I mean, pulp cash cost, meaning that as we have seen in several other cycles, once pulp prices get below these levels, these guys, these new volumes will also now come into market to buy pulp creating and generating additional demand for pulp as well. Now I'm going to move into the softwood and hardwood part of your question. We believe softwood is or has reached an inflection point. Speaker 400:39:28We are tracking very closely what's going on in softwood into China. As I mentioned in my speech, the price decreases that we have seen in July were led by Softwood. They were first happening on Softwood, then followed by us in Hargu. But at this mid $700 price delivered to China, we noticed and as per our estimates, several producers, Canadian producers, Nordic European producers are already below breakeven delivered into China. So I believe this will force an inflection point and that's why we see this $20 price increase announcement of several of them into China coming into October November. Speaker 400:40:12The first reflection of this move will be helping us even further in terms of fiber substitution. As you know, the price difference today is $200 on a net base between software and hardware. Then I believe if they are successful in implementing this price increase, this can increase further. And obviously, as you can imagine, we have several, several customers who are coming to our teams in China, in Europe, in U. S, in Brazil for support in terms of knowledge and guidance, in terms of how we can support them in this fiber substitution and migration from software to hardwood. Speaker 400:40:49So the first effect will be an additional demand for hardwood. And regarding your question, if this would be an inflection point for hardwood prices, I think it's too early to say. As I mentioned in my speech, I believe we're either at the bottom or very close with, but I think we need to let a little bit of time go by so that we can define if this is a turning point or not. But the first effect will certainly be additional demand. Speaker 800:41:15That's super clear. Thank you very much, Leo. Operator00:41:22Our next question comes from Daniel Sasson from Itau BBA. Please, Mr. Sasson, your microphone is open. Speaker 900:41:31Thank you so much. Good morning everyone. Most of my questions have been answered. Maybe just a follow-up from a previous question. You mentioned, Liao, the semi integration movements in China and the potential new capacity additions coming from them. Speaker 900:41:46Can you please shed some light on potential marketable projects in Asia? I know that there's a lack of visibility or transparency, let's put it this way. But whatever you guys have or forecast, for instance, for Oki's expansion, I think that could help us to build our supply demand models. That could be great. And piling up on the discussion regarding wood chips, we know that Oki 1 took maybe 4 or 5 years to fully ramp up. Speaker 900:42:17Do you think that despite the increased availability of wood chips because of the downturn in the housing property sector, as you mentioned, there is this chance that this project is going to be delayed or at least the ramp up is going to take much longer than would be normal for a project like that? Speaker 400:42:42Hi, Daniel. Thanks for your question. As I mentioned in my speech, I guess this is extremely recent news coming from consultants prestige consultants to our business, which we just got earlier this week, which is a significant delay in Okichu project. As you know and as some of you or your colleagues have stated, the original start up date for Line 1 was March. This is now being pushed to November 2025 and Line 2 as of now going into 2026. Speaker 400:43:22The information that we have in the project is that it's supposed to be a verticalized project to begin with at 50% integration and verticalization with Ivory Board over 1,000,000,000 tons, print and writing, believe it or not, and also tissue, all of that in Indonesia. But this, again, is all based on market information, which I believe you have the same access that I have as well. And up to now, I'm just talking about startup, right? So now we see the significant delay on startup and then there is a question of how much wood will be available and what will be the ramp up curve. I totally agree with you. Speaker 400:44:07We in our BI area, tracked obviously the startup of Oki 1, and it took 4 to 5 years, I guess, more 5 than 4 to reach full capacity. And that can be the case again for Oki 2. It's hard to say again. It's always hard to estimate in too much details or what's going to happen in Indonesia or in China when it comes to pulp production due to such a difficult position in terms of wood supply. But we expect that based on the previous track records, something similar could happen as well for Okichu. Speaker 900:44:452. Thanks, Lael. Sorry, you mentioned 55% of the Oki line would be integrated. Is that right? And then maybe the second thing still on this front, do you have an estimate on the production cash cost of the recent projects in China? Speaker 900:45:04For instance, Liancheng, do you have an estimate on your current cost base right now? Thank you. Speaker 400:45:14Okay. Yes. So, Oki, again, Daniel, based on market information, which we have read or received through our BI teams either in China or in Brazil is that the second project for Okichu to start will be 50% verticalized into paperboard, printing and writing papers and tissue. So this is to start 50% verticalized 50% market pull, okay? So that's the info in our future. Speaker 400:45:47Regarding Chinese cash costs, based on this unforeseen availability of wood related to the two factors that I mentioned previously, we estimate that the Chinese cash cost today is close to $500 is maybe ranging from $4.90 to $5.10 which as you see or can note is lower than our marginal cash cost scenarios delivered to China, which is at $5.60 to $5.80 showing that at this time of the production curves and with wood cost to different markets, the marginal cost producers are not Chinese, rather are other Asian, even Americans or Europeans delivered to China. So Chinese producers today, it is our view that have this, I would say, dollars 50 advantage of costs below marginal cash costs, but still at $500 range. Speaker 900:46:49Perfect, Leo. Thank you so much for the very detailed answer. It helps us a lot. Thank Operator00:46:57you. Our next question comes from Marcio Farid from Goldman Sachs. Please, Mr. Faraj, your microphone is open. Speaker 1000:47:07Thank you. Good morning, everyone. Thanks for the opportunity. My first question maybe to Fabio. Fabio, thinking about the passive recent acquired assets, my understanding is that Costa V2 was not clear when you firstly acquired the assets and now that you have taken over, right? Speaker 1000:47:26I think, I mean, the idea wanted to understand what are the initial findings so far in terms of how the news operating, in terms of obviously, the potential in the early days, but what's the future of those assets? What's been Suzano do in terms of improving the operations and eventually expand as well into the U. S? And your first assessment of the U. S. Speaker 1000:47:51Markets, that will be great. And secondly, maybe going back to the decision to instill 4% of the volumes, I think I had a similar question in the Q2. But my understanding is that, I mean, the cycles are becoming shorter, right? You're talking about 6 months up and 6 months down. And the 12 month decision feels like it's always going to be lighter, right? Speaker 1000:48:15Prices were at the highs of $750 at the end of last year. You did not have the opportunity to raise production because you had earlier last year decided to cut the 4% and then prices fall again and obviously the decision was basically maintained. So a 12 month decision feels like it's always going to be lagging the cycle that tends to be shorter and shorter by nature, right? So how should we think about that? I mean, how do you reconcile the nature of the cycle with more longer term decision, which seems to make a lot of sense from a strategic perspective as well? Speaker 1000:48:50Thank Speaker 300:48:54you. So good morning, Marcel, and thank you for your question. It's Fabio here. I'm going to take the first one about Pactiv. Just to briefly update, we have been here I'm currently in Pine Bluff sitting here at the mill as we speak. Speaker 300:49:10We have been here since beginning of October when we transitioned the business from Pactiv to Suzano. And as you know, this is an old mill built in the '50s, and the mill Pactiv was more concerned about its converting business. So the mill lacks today a good maintenance. It needs to be well taken care of, and that's what Susano knows how to do. So there's a turnaround story here for us on the industrial side, And we already have started with our short term, medium term plans to bring this mill back to the level of operational stability that we believe we can achieve. Speaker 300:49:58The first signs are very positive. Good signs that the raw materials basket here, especially the cost of wood, it's very competitive. So there's abundant pine and also at a very competitive price in the state of Arkansas. I've been visiting some of the forests and talking to people and this is a good start, gives us good hopes that we can have a very competitive operation here in the near future. So right now, our focus has been on focusing on the people here, the physician, focusing on taking care of our customers and suppliers and also the community that we interact here at Pine Bluff and putting all the efforts necessary to do the turnaround on the industrial area, focusing on maintenance and also on operational stability. Speaker 300:50:58But the perspective is it's a positive one. Regarding the market, it's as you know, the mill, it's serving the liquid packaging market here in North America. It's one of the large suppliers for that specific market space. It's a good market of long term contracts and also good prices. And it's very stable in terms of demand and price wise as well. Speaker 300:51:25We're looking at opportunities to expand the portfolio to serve other markets like cup stock and food service. We do have a good product for that. We already sell a little bit to this other market space, and we want to increase as starting 2025, we have plans to increase our participation in this market space, which gives us more flexibility. And also, we understand that we can get even better margins serving these other market spaces. So it's in a short view, Marcio, we're excited. Speaker 300:52:01We have a plan here for the turnaround and industrial turnaround of the mill and also looking at a strategy to increase our participation in different market spaces from Pine Bluff and Waynesville. Speaker 600:52:24Marcel, this is Marcel speaking about the question on the production cuts. Of course, there is a lag between when we take the decision and when we can implement it because of the nature of our supply chain. But there is no other way to manage this than to look constantly at what's happening in the market, reach our conclusions about the trends on prices and then make the decisions on the production. The lag will always be there. But on the other hand, we have our tools also to try to anticipate what's going to happen in the market. Speaker 600:53:01So for the time being, the decision is that one and we are working on the scenario for next year. And if we have a major change in the middle, we always have the flexibility to adapt. Speaker 1000:53:15Great. Thanks, Fabio. Thanks so much. Operator00:53:20Our next question comes from Rafael Barcelos from Bradesco BBI. Please, Mr. Barcelos, your microphone is open. Speaker 1100:53:30Hello, good morning and thanks for taking my questions. So about my first question, I wanted to go back to your capital allocation strategy. Beto, I know that you mentioned during the presentation that Suzano will not do any transformational movement, but I just wanted to discuss it in more detail. For example, so after the acquisitions of Lenzing and Pactiv, could you please give us more details on which type and size of the assets that you are now looking for? Other than that, also given these lack of big M and A initiatives in the pipeline, I wanted to understand whether the company could bring a new dividend policy in the future. Speaker 1100:54:09And then my second question is about your investment in Lansing. I know that it's still quite recent to ask this type of question, but you're now probably following Lansing closely. So could you please comment on your thoughts on how you could generate synergies with these assets in the future, of course, in a scenario that you acquired the control in the future? And how do you see these assets inside Suzano's portfolio? Thank you. Speaker 100:54:39So, Rafael, thank you for your question. This is Beto. Let me take the first question regarding the capital allocation. And then as you know, during the month of October, we already have the 2 board members, which today is Marcelo and Carlos already sitting. They already took their position in the Board of Lenzi. Speaker 100:55:03So I will hand over then to Marcelo, so then he can share with us his first impression regarding the business since we already have the 1st slab bot meeting at Lenzi. But regarding the capital allocation, it's very simple. What I said is that Suzano is not going to any, let's say, transformation move. What I'm trying to say is that any kind of ticket, the size of ticket that we might do in the, let's say, near future will not impact on the important way our declining trend in terms of leverage. So that's what I'm trying to do what I'm trying to say. Speaker 100:55:45It's very simple. It's we have these two movements, Lindsay impacted, which is for us it's time to extract value from those. And again, a bolt on strategy is something that we can pursue in the future. Again, in the medium and long term keeping our trend of reducing our leverage. So that's it. Speaker 600:56:14This is Marcelo speaking. Just complementing on, we don't foresee any change in our dividend policy as a result of this moment that we live today and we need to keep in mind that our cash flow generation is volatile by nature and we have to deal with that in our in managing the capital structure of the company. In relation to Lensing, we took our position as a shareholder and we, as Berto mentioned, now started to participate in the Board meetings of Lensing. We don't have a direct impact on the management of the company. We will be a shareholder with who sits on the Board. Speaker 600:57:00We understand that Lending is a company with an incredible reputation and an incredible portfolio of products, very high technology in the sector and well recognized by the clients. So the access that the company has to the most important clients in the world, the power of its brands and the reputation of the company is great. It has a very important industrial footprint and it has to work at it as it has been working on improving its operational efficiency, reducing costs and becoming more efficient over time. This is the journey that we will embark and try to help the company to continue in that direction. And I think it's too early to go into more details. Speaker 600:57:47What they have been trying to do, I think, is in the right direction, and it is going to be up to us to try to speed up that process and extract value. And more important than that, I think starting now, we have between year 1 after completion of 1 year and up to the completion of the 4th year, we are going to have a window to decide whether or not we want to increase our participation and become the main shareholder of the company. We're going to take our time in this beginning to understand better the of course, the industrial part in the beginning of the process. The dissolving pulp part is very similar to what we do. But from that point onwards, it's a completely different process, both on the industrial side and also on the commercial side. Speaker 600:58:33So we need to learn before we make the more important decision that we're going to have to make in the coming months, which is whether or not we want to become a controlling shareholders of Lensing. Speaker 1100:58:46Super clear. Thank you, Berto and Batya. Operator00:59:04Our next question comes from Lucas Laggi from XP. Please Mr. Laggi, your microphone is open. Speaker 1200:59:12Good morning everyone. Congratulations on the results. I would like to go back with a follow-up question on the integration trends in China. I mean, Leo, you provide a very good color on the local availability of in China of wood chips. But I would like to go back to the imported parts of wood, especially thinking of like low cost supplier regions like Vietina are already closing the peak levels that we saw in 2022. Speaker 1200:59:39But when we look at the wood chip import prices, they're still significantly lower compared to the peak that we saw 2 years ago. So my question is, I mean, how do you see this availability of wood chips in this low cost suppliers of wood to China? And if it's reasonable to think that the incremental volumes to feel this integration expansion in China in the upcoming months should come from high cost suppliers of wood like Australia and other regions rather than a low cost region as Vietnam? I mean, is it reasonable to expect that Vietnam is reaching its limits to provide further wood chips to China and increase these expansion trends that we are seeing from these verticalized players? That would be my question. Speaker 401:00:31Hi, Lucas. This is Leo here. Thank you very much for your question. First, I would like to point that Vietnam is lower cost, not low cost, right? By the end of the day, yes, it is lower than would from Australia deliver to China, but it still will bring cash costs of any Chinese producer to the low 500s to mid-500s cash cost regardless of the difference of peak to cycle to the lows that we see today. Speaker 401:01:04Today, we see a bit more availability in Vietnam despite growth in imports of imported wood as well. As you probably know, last year, there was a decline of almost 30% of imported wood into China. That's when we saw the bulk of this local Chinese wood being used in the short term. This year, we already see a recovery of imports, again, now growing almost 30%, but still a bit lower than the levels that we saw in 2022. So we see space still of some Southeastern Asia wood supply to China. Speaker 401:01:42But we believe our base scenario is that once we have the 2 variables that I mentioned, which is housing market reestablishing and the program that we see today in China of forestland into agriculture, which will end by the end of 2025. These structural changes will make this verticalized pulp to paper production in China or Chinese market pulp players more and more dependent of imported wood. And then we believe that we're going to see a higher cost scenario compared to what it is today. But Vietnam should still be one of the major sources to comply with the growth of demand of wood from China. Speaker 1201:02:28That's perfect, Lal. Thank you for the answer. Operator01:02:35The Q and A session is over. We would like to hand the floor back to Mr. Bert Aubreyu for his final remarks. Please go ahead, sir. Speaker 101:02:44Yes. Thank you. I just want to remember that we're going to have our Susano Investor Day on the December 12th, also our visit to the Hebras project on December 13th. And I'd like to thank you for being here with us on the call today and for your interest in Susano. And as always, our IR team remains available for any additional question you may have. Speaker 101:03:11And I wish you all a great day. Thank you very much. Operator01:03:16The Susano's SA3rd quarter of 2024 conference call is concluded. The Investor Relations department is available to answer further questions that you may have. Thank you and have a wonderful day.Read morePowered by