Suzano SA (SUZ) 2015 Q3 法說會逐字稿

Good morning ladies and gentlemen and thank you for waiting. Welcome to Suzano Pulp and Paper third quarter of 2015 earnings conference call. Participants will be in listen-only mode during the Company's presentation which will be made by Mr. Walter Schalka, CEO of the Company. Afterwards we will have a question and answer session. (Operator Instructions).

We would like to inform you that some statements to be made during this call are projections or forward-looking statements and these forward-looking statements are subject to known and unknown risks as well as uncertainties which could make these expectations not to materialize or be substantially different from what was expected. These risks include among others changes in future demand for the Company's products, changes in the factors that affect international and domestic prices of the products, changes in the construction, changes in the market seasonality, changes in prices charged by competitors, exchange rate variations, changes in the political and economic scenario of Brazil as well as international and emerging markets.

Now I would like to give the floor to Mr. Walter Schalka who will start the presentation. Thank you.

Good morning, everyone. It's a great pleasure to be with you for this third quarter of 2015 conference call of Suzano. We have the Executive Members of the Board; Marcelo Bacci, CFO and IRO; Ernesto Pousada, COO; Mr. Griner, Human Resources and Institutional Relations; Alexandre Chueri, Forestry Officer. Via call we also have Carlos Anibal, Commercial Officer who is in London right now participating in the London Pulp Week and who will also be able to answer questions that are addressed to him during our call.

I would like to thank you all for your presence and say that this is a very special moment for Suzano. It's a very positive day. We will be jointly announcing to you our record results in terms of operating results, exceeding by 54% the highest EBITDA that we had ever had in the past, which was in the previous quarter with very positive operations in all areas of the organization.

And at the same time we are announcing a strong investment program, over BRL1.5b to be invested at a very special moment for the Company. And this investment program, with a major potential to create value for our shareholders.

So this is a very good moment for us because we delivered the results that we were working to obtain and we prepared our future for additional [growing] results to be obtained here.

I would like to start by talking about the record figures that we delivered during this quarter. Of course, operating cash generation which in our opinion is an indicator that represents the best for our sector, the true value creation for shareholders because the comparison of the asset base of the Company gives the true return on capital employed.

We had a record high in the last 12 months with BRL3b in operating cash generation. Our EBITDA BRL4.1b minus our CapEx, CapEx sustaining -- sustaining CapEx generated BRL3b in cash in the last 12 months. Record EBITDA, record high with a 49.4% margin reaching BRL1.476b in 3Q. As I said before exceeding by 54%.

And this was a lot of work done by the organization because we also achieved record multiples in industrial operations, logistics, forestry, outbound logistics and we reached records in energy exports as well. So many record multiples led us to an efficiency gain that together with price, adequate prices and volume gave us also a record EBITDA besides record production.

Another important point is now persistence and consistency in the third for better results in operating expenses, SG&A with the lowest historical level as a ratio of net revenue 7.4%. This allows us a very good cash generation and that led us to an additional liability management move in this quarter, leading to a reduction in our indebtedness both in reals and in dollars in 2015.

With the new reduction of net debt/adjusted EBITDA, this ratio is already at 3 in spite of the dollar having closed on September 30 at BRL3.97 per dollar. So we had a devaluation from BRL3.10 to BRL3.97 and our debt was based on BRL3.97. However our EBITDA for the quarter was with an average exchange rate of BRL3.54.

So you can see that in dollars, we have a net debt/EBITDA ratio that is lower. And due to this operating cash generation we are announcing more than we have estimated, an interim dividend of BRL120m to be paid out to our shareholders.

Regarding the production and sales of pulp, record production of pulp in our operations, 929,000 tons in the quarter. And this is a very expressive figure and it shows the potential that our operations have. And we had sales of 890,000 tons in the quarter.

Total inventories of pulp right now are at lower levels than historical levels and apparently with a downward trend. Therefore, we are rather bullish regarding the overall scenario for pulp. The pulp demand is going up consistently in many regions and mainly in Asia and this allows us to place a very impressive figure of pulp in Asia in third quarter.

And given the transparency that we have with the market, I would like to say that we have anticipated the stoppage of the Mucuri due to the hydrological reasons in the region and we have already resumed our normal operations in Mucuri. And we want to say very transparently that we had a loss of about 30,000 tons of production because of having brought forward this stoppage and also just the stoppage of Limeira. And we have already resumed regular operations according to the schedule that had already been established.

In paper the domestic market is still more fragile vis-a-vis our expectations and year to date we saw a drop of 14% year on year and an increase in exports with positive margins.

And regarding dumping we have made a final decision for the beginning of next year with a potential review of that for 2017 and also retroactively. So we are very bullish about that although we are already provisioning BRL10m in this quarter in our results [owing to] the tariff that was applied. And we trust that over time this situation will be reversed.

Regarding cash cost, as we have said before in previous quarters and mainly in the second quarter, we continue with our policy of maximizing the maximum age of Mucuri, the average age of Mucuri. And in order to do that we are bringing third party volumes increasingly. So we have increased third party volumes from the second to the third quarter from 37% to 51%.

And for those who track the Company's figures we are now considering this as our own wood because we have long-term contracts with them. So that's the purchase of wood from third parties that you can see on this slide and this impacted by BRL56 our cash cost for wood. And the good news is that we have reaching now in September/October the peak of distance in third party volume and gradually as of November we will see a reduction in the average radius which is very positive for our results estimate for 2016.

Regarding our net revenue, we are getting close to BRL10b. In the last 12 months we had BRL9.7b. But the most important news is how we are mitigating inflationary effect. You can see COGS per ton here. In the last 12 months, we had BRL1,316, which means the cost increase from September 2014 to 2015 comparing the last 12 months of 1.8%, for an inflation in this period of 9.1%.

So this obsession to reduce costs will continue and we have good news to convey to you during the presentation. SG&A over net revenue dropping consistently, 7.4% in this quarter but year to date or in the last 12 months 8.5%. So we have a downward trend here.

And the adjusted EBITDA margin also an upward trend. In September 2014, 32.1% and in the last 12 months 43.3%. Although in this quarter we have already reached 49.4% EBITDA margin.

The next slide shows the dollar impact on our results. Many people say that a significant part of our results is a result of the exchange rate variation. It is reality in part, but not totally. In 2012, we had an EBITDA of BRL1,260m and in the last 12 months BRL4,194m. And as you can see quarter after quarter this is consistently growing. So in the last three and half years we have been achieving a major increase in our EBITDA, 233% from December 2012 to September 2015.

The counterpart of that or the flipside of the coin is that in dollar, we are also increasing our EBITDA. EBITDA in dollars in December 2012 was $641m and now we have reached in the last 12 months, almost $1.4b. Part is the exchange rate effect and part is the evolution of our operations in all centers. Always seeking more effectiveness in structural costs and upgrading efficiency in all our operations.

Now talking about investment, the guidance that we had given you in the last quarter of BRL1.8b is maintained for this year. We have investments of BRL1.1b of sustaining CapEx and BRL700m for the expansion and retrofitting as the status quo for each one of the investments.

You can see that the Suzano Digester was concluded and is operating with a lot of success. We are very happy with the investments made. The operation is even better than we had estimated before.

And in the general stoppage of Limeira, we implemented retrofitting and the modification of the digester very successfully. And in the fourth quarter we are concluding all the energy efficiency programs in our operations and we are also concluding the issue of in-sourcing and qualification and modernization of our harvesting equipment.

In all our sites, we introduced the concept of getting light trucks with operations with autonomous operations and also for the Imperartriz and Mucuri operations in Q4 and the biomass boiler of Limeira. And he retrofit will be ready by the first quarter of 2016. So investments in structural competitiveness as you can see.

And we included another bullet point here which is the euca fluff and we want to convey to you this very good news. It is totally according to schedule and it will be producing euca fluff also in December 2015, already in the next two weeks in fact. So this is a very positive point. And it is really according to the schedule that we had announced to the market, both in terms of the deadline and the investment made.

This operating cash generation that we have been obtaining has been leading to some factors.

The first is a reduction of our net debt/adjusted EBITDA ratio. This figure has been dropping rather steeply. And we closed the Imperatriz project in December 2013 with 5.2 net debt/EBITDA ratio. And in this quarter 3 times in spite of the dollar at the end of September being BRL3.97 exchange rate.

And the most important is the trend because the trend is a systematic downward trend. It's a consistent downward trend. And we annualize in a dollarized fashion our net debt/EBITDA ratio and in this quarter we are already at 2.3 times net debt/EBITDA ratio.

And this allows us to do a lot of successive liability management. We have had the fifth wave of liability management during this quarter amounting to BRL4b in liability management for the year. And you can see the chart on the right that we had in December 2013, 94.4% of the CDI cost and the (technical difficulty) dollar debt 4.8% per year for a debt cost of 4% a year, which means that we are reducing our indebtedness gradually and reducing the cost of debt gradually as well.

And this combination is very positive because this will lead to a major reduction in our financial costs quarter on quarter. This program will continue. This is an ongoing program, and we're considering which will be the new wave in this program.

Now, I would like to talk a little bit about our strategy, and tell you that we reiterate our thesis that we have to work on three fundamental pillars, in order to maximize returns for our shareholders.

The first one is structural competitiveness. We will be announcing in the next few minutes to you all a very important investment plan for our operations regarding structural competitiveness. The second pillar is adjacent businesses that can allow us to have a higher ROE and also scalability of our business. And also the redesign or reshaping of the industry so that over time we may obtain sustainable results in the Company.

Looking at our structural competitiveness, we are announcing today our 5.1 project with the objective of reaching in 2018 with the investments announced a capacity of 5.1m tons, 3.8m tons in pulp and 1.3m tons in paper.

For that we have investments in the Imperatriz units debottlenecking our operation there and increasing our capacity in Imperatriz. These investments will be partially delivered already in 2016 and 2017.

And investment also in line 1 of Mucuri and debottlenecking the production line number 1 of Mucuri and capacity increase in Mucuri and expenses reduction of specific consumptions of line 1 chemicals and other products.

In order to make this possible together we have to make investments in the forest base. We are increasing our forestry base at the two sides and with the object of reducing the average radius, a bigger approximation of our forests to our plans.

So the setup of these initiatives or all these initiatives together will lead us to have a lower cash cost with a lower consumption of chemicals and lower fixed cost.

And we would like to announce to you the objective of reaching in 2018 at a dollar at BRL3.8 a cash cost of BRL150 per ton. And at the end of a cycle of planting, seven years, our objective is to achieve for the whole Company $125 dollars per ton of cash costs for the Company as a whole.

So this is the objectives that we are after as of now, a combination of capacity increase and dilution of fixed costs with the competitive gains and cost reductions reaching $150 in 2018 with the objective of reaching a $150 in 2018 and after the cycle $125 of cash costs.

In order to make this possible, we are investing BRL1.14b with 47% internal rate of return estimated. The disbursements will be BRL510m in 2016, BRL585m in 2017 and BRL45m in 2018. The conclusion of the project will be gradual deliveries in each one of the years as part of the project, 2016, 2017 and 2018, and gradually increasing capacity. And in 2018 we intend to reach the 5.1m and the $150 of cash cost at a dollar of BRL3.80.

Together with that we are announcing today another adjacent business. As adjacent business already announced before to you, we have our Lignin business which has a deadline for implementation, the fluff business that will be started up in December this year. We have FuturaGene and now we are announcing our tissue operation in Mucuri and Imperatriz, these two sites.

And the project approved by the Board yesterday for BRL125m will lead us to place a double sheet or a double width machine in Mucuri and another of double width at Imperatriz for the production of jumbo roll.

Our objective, and we are already in contact with our clients, both domestic and international, our objective is that we will be able to sell the jumbo rolls so that they may be converted in the different regions. North and northeast is the fastest growing market in Brazil. The tissue market in Brazil has been growing at 5% and in the north and north east this growth is faster.

Additionally, there is a gradual process in Brazil in tissue, which is the migration from single sheet to more sophisticated products and our machine will allow us to produce from single sheet to double sheet or triple sheet as well. So state of the art production technology in tissue paper.

And there is an additional objective which is the objective of monetizing our tax credits, the ICMS tax credits and we are addressing the issue of accumulated tax credits in the two sites. This is very positive and rather unprecedented in our industry.

And the beauty of this project is the competitiveness that we will have. We have operating competitiveness because of the quality of assets that we have and the fact that we have wet pulp at the plant and also all the control of the utility base and steam energy, water, effluent treatment at the two sites.

So operationally speaking we will be very competitive and our logistics is very well positioned as well. So this combination will bring us a very high level of competitiveness in the region and will allow our clients that utilize our jumbo rolls to operate also in a competitive manner.

In case we do not reach an alignment with our clients in jumbo rolls, we also have the possibility of going towards conversion and this is already included in BRL425m. This is a program with an 81% internal rate of return.

The start-up will be at the two plants at different moments and we are facing at Imperatriz the objective of having the operation in the third quarter of 2017 for jumbo rolls and in Mucuri the fourth quarter of 2017. Each one of the plants has a capacity of 60,000 tons in double sheet and in single sheet it could be 70,000. And we are placing 60 because we will have a mix and this adds a lot of value.

This is a combination that will increase our competitiveness on one hand and also adding value to pulp and solving structurally and definitely the accumulation of ICMS credit that Brazilian exports have regarding many different operations.

So we are very pleased with this combination that we are conveying to you today. Excellent operating results plus a strong investment program, BRL1.5b that we are announcing today. So I think this is very good news, and this is a very clear evidence of the commitment on the part of our Board and on the part of our Company with investments in Brazil and in the different regions where we operate.

With this, I end my presentation and now we could open the Q&A session. We will all be available to answer your questions.

(Operator Instructions). Thiago Lofiego, Merrill Lynch.

This is Thiago. Thank you for the question. Congratulations for the results. I have two questions. The first one has to do with the tissue announcement. Adding to what you said about it, could you tell us about your expectations regarding your margins that you expect for the tissue business? And the 120,000 tons of tissue that you announced, will it be part of the 340,000 tons of pulp or is it additional? This is my first question.

And my second question has to do with the pulp market. You said that the inventories are lower and that demand is high especially in Asia. So I would like to know how your announcements of (inaudible) could lead to an impact in prices mainly in Asia. So could you give us an update regarding prices? Thank you.

I will answer the first question. Thank you. And then Carlos Anibal will answer your question about the impact.

Regarding tissue, the 120,000 tons is included in the other figure which means that we are converting part of pulp into paper. So it's not in the 1.3m tons that we have for printing and writing paper. We will be adding an additional 120,000 capacity in tissue, 60,000 in each one of the two plants. So part of that will no longer be market pulp and will become market sales.

The tissue market is very important in the north and the north east. Many of our clients have been taking jumbo rolls from the south east or the south to the north and the north east. And we will be more competitive in these two regions.

The unit margin that we have allows us to have a reasonable internal rate of return which is 81% on the BRL425m annually. Of course, part of that is in monetization of the ICMS credits which are very big and that are not undergoing any type of restatement in many states.

So tissue is really a new avenue that has created a new path with a lot of added value for the Company and it allows us to place products competitively in the north and the north east and on the other hand allows us to monetize the ICMS tax credits.

Now Carlos Anibal will answer your question about pulp.

Good morning, everyone. Thank you, Thiago, for your question. And I would like to use your question to share with everybody our understanding about this moment regarding pulp and then I will talk about paper as well.

Pulp, according to the PPPC we see a strong growth in demand in the first nine months of this year, 3.7%, 1.2m tones. Highlighting China, we grew over 13%. So it's important to mention the major growth in demand for eucalyptus, 8.6% growth and in China 19%.

Inventories of hardwood in September were very low, 2 days only than what we had in August, 1 day more than in September last year. Although, we had important capacities coming on board during this period, that should have increased our inventories due to the need to form inventories in order to cater to our clients in the foreign markets.

Hardwood, 13 in September, a three-day reduction vis-a-vis August. And in spite of that, 3 days more than September last year. Hardwood, we see more imbalance in the market, a lot of pressure on prices -- no, talking about softwood.

And in China right now, we see our attention turned to two points. Margins for paper producers that are very low and above all the difference between the net price of [wood] for hardwood and softwood that exceeds $40 -- $50 already. But going back to demand, we had major growth in the third quarter, vis-a-vis the second quarter and also the third quarter of last year. And this is valid for demand as a whole, even more so for eucalyptus.

And the ruggedness or resilience of demand in the last few months, especially in the European summer, accounted for most of the sustained prices. China also grew in these last nine months by 19.3% the consumption of eucalyptus.

And on the supply side, we see the operating rate that is very high from 91% to 99% in September. And for eucalyptus, the percentage is over 105%. In 3Q major stoppages for the main market and for the fourth quarter programmed -- scheduled maintenance outages and that will reduce even more supply. And specifically about the current special measures in Brazil and what occurred in China as well and over this week, we heard that in London, there was also a stoppage and in South America. Okay, scheduled, however with longer stoppages than estimated.

39 days is a very low number for eucalyptus inventory. But taking into account the coming on board of new capacities, especially Suzano and [CNPC] in Rio Grande so Sul.

In October, we had above demand from North America, also above demand from Europe. And we see the maintenance of this level in the first weeks of November. We advanced our list price in North America. And in China, although eucalyptus inventories are slightly lower than normal, we can see a lot of pressure on the part of buyers for a price reduction.

And we believe this comes from a very big availability of softwood, $50 lower than eucalyptus, a big availability of inventory of softwood in these locations and increase in supply of hardwood produced locally, some restrictions and reductions of production capacity for tissue for environmental reasons, and once again, also the margins of some kind of paper.

We believe in the fundamentals of the eucalyptus market. And we decided to make no price concession whatsoever over October, which means that we were firm in our prices, we didn't change any prices. And due to the pressure on the part of Chinese buyers, we have not signed any new volumes and negotiations are still underway. And we believe that if the pulp producers have discipline and respect to the market fundamentals, in the next few days we could see a favorable outcome for this deadlock that was established in China last month,

Once again, the eucalyptus fiber fundamentals are fund and limitations on the supply side strengthen the position of eucalyptus producers. And so I expect the industry to have enough discipline to come to a conclusion of all these deals that were interrupted since October.

And I would like to take advantage of your question to raise a point regarding the spread between hardwood and softwood. There is no reason for us to have hardwood always below softwood. Eucalyptus fiber is very well accepted in all markets and we have already occupied a very relevant space, it's very relevant for the production of many kinds of paper in many geographical regions.

And this brings a lot of value to the fiber product. So our position, our understanding is that there is no reason whatsoever for us to always have eucalyptus with a low reference price, lower than softwood.

Differences, of course, will be determined by supply and demand. But in a situation of market stress then we could have softwood being a little bit more expensive than hardwood because of the differences in cost structure.

And the current price differences between these two fibers could cause this in some markets or some paper segments, a higher use of softwood to the detriment of hardwood. But I would like to remind you that producers when they start using eucalyptus fiber, they see the benefits and they usually stick to this fiber. So we are very bullish about eucalyptus position vis-a-vis the other fibers. So this is our understanding. In a nutshell, this is what we see for the pulp market.

For the paper market as Walter said, we had an additional quarter of low demand and we see no indication for short-term improvement in the domestic market. And so we are marshalling our endeavors more and more to the external markets to export with very good results.

We grew our volumes 8.2% quarter on quarter and 25% on a year-on-year basis. You're talking about 72% increase in revenues. Share of exports, 27% of total in Q3 2014, going to 34% in Q3 2015.

I would like to remind you that at this exchange rate level, we see an expressive volume of our exports generating a higher profitability than the one that we generate in the domestic market. So the trend is to continue these endeavors to export in 4Q.

And to finalize about paper prices, we have been saying that in spite of the bad situation of demand, we have other variables such as exchange rate, profitability of exports that support new price increases.

And the exchange rate gives us a higher profitability in export. And we are announcing major increases as of February 2016. We are talking about 24.3% effective (inaudible) and 24% of the offset line.

In the case of paper board for the same reasons mentioned before, we are finalizing our analysis and that will be announced in the next few weeks or days, in force as of the first quarter 2016.

And the only line that we do not announce anything new is the coated paper. And we have been implementing successfully a strategy to occupy space and taking the space from import. So the import of coated paper has already dropped by almost 40%. So we are tapping into that in order to increase our market share domestically.

So now I conclude my remarks and my view or our view about pulp and paper.

Could you clarify the figure that you said? 24% increase for [cut size]?

24.3% for cut size and 23.8% for the offset in forc as of February 1. In the case of paper board, we will be announcing prices in the next two days or a couple of weeks we will be publishing the percentage. And this will be implemented over the first quarter of 2016 as well.

And just a follow up vis-a-vis anti-dumping. Walter had talked about that. So when would this review be of the anti-dumping measures?

The beginning of next year, we have the final decision. And the first formal review will be at the beginning of 2017.

Thank you.

Caio Ribeiro, BTG Pactual.

Good morning, everyone, and thank you for the opportunity. Could you please talk about the implementation of price increases for printing and writing paper and also paper board that you announced for the domestic market in August and September?

What about the acceptance? And what about your order book in the third quarter?

And could you talk about the evolution of the situation in Mucuri regarding the very low rainfall in the region? Has the rainfall come back to regular or normal levels? And do you believe you will have to make more investments in order to reduce the consumption of water?

Caio, good morning, this is Carlos. I would like to start by talking about printing and writing paper. I would like to remind you that for cut size, we announced 9.6% as of August and offset 10.6% as of September. Implementation of increases is according to schedule with very expressive progress in cut size. A lot of progress and a lot of success in the implementation of cut size prices. Offset implementation is underway and we have the national program for school books and also the writing books programs.

And of course these programs are negotiated. And we had the last announcement made. So the implementation in spite of a difficult demand situation is as planned.

In the case of paper board, I would like to remind you that we announced 9.5% as of September. And we had said that we would be starting to see this over the fourth quarter. And we expect to see this progress up to the end of the year.

And the real percentages to be achieved for paper board are planned for the first quarter of 2016 due to seasonal campaigns and differences in product mix and channels, or negotiations that are different. So increases are happening according to what we expect.

(Inaudible) about this river situation in Mucuri. The situation has gone back to normal already. The river already has nine cubic meters per second. And I would like to remind you that the two production lines are producing normally right now.

We believe that as I said before in the other call, now we have the rainfall regime starting. So it should be normal and we should have more and more water. And this means no problem whatsoever.

At the same time, we are making investments in many areas. Walter talked about a major investment that we are making in the effluent treatment station. This is an important point for us to have a better effluent quality, even with low levels returning the effluent to the river.

And we have many projects that are already underway and we are further accelerating them in order to reduce more and more our water need. So we have many projects that are being implemented. And we will go more in depth into other projects that could prove to be feasible in order to minimize the water shortage risk in Mucuri and the region.

We see no risk and as the rainfall regime should start, we do not see any immediate risks to production. So we did face this kind of situation, however, things have gone back to normal already. And it is 1.75 cubic meters, our water need to run the two lines. So you can see that the river water level is higher than what we need to operate both lines.

Thank you.

Lucas Ferreira, JPMorgan.

Good morning, everyone. My question about tissue. Going back to my question, I would like to know what is Suzano's strategy for the long run? How should we see this initiative on the part of Suzano? Are you getting into the tissue market in order to tap into a specific opportunity? And do you intend to do the full integration or do you intend to develop your own brand for tissue?

Is this an opportunity for you to increase your capacity? Could it become something bigger in the future, requiring more and more investment? Or maybe acquiring other companies or developing brands or acquiring brands? How should we see Suzano's arrival in the tissue market? What kind of competitiveness are you aiming at in Brazil?

Lucas, thank you for the question. The tissue business is a business in which we have an intrinsic capacity, a very strong one in fact. We have all the logistic and operational conditions to be a major player in the production of jumbo rolls . We are not familiar with the other stages of commercialization and the use of brand, etc. and this is exactly the reason why we decided to invite our current clients of pulp and international pulp clients as well that with to establish themselves in Brazil.

And global tissue producers showed that they may become buyers of these jumbo rolls. And this way we would be maximizing our structural competitiveness with knowledge of the market and also with the brand experience that these players already have. So this is the decision that we are analyzing.

Well, so far, or up to now, we do not intend to increase or to expand our tissue capacity to other regions. We are only doing this in the north east because there is lower competitiveness on the part of current players there. And we will be offering a very major competitive advantage to the northeast. And this is where we have the accrued ICMS in [Maranhao] and Bahia. So this is our objective during this period.

And we will only be allowed to go to the next stage of production should we not be successful in our talks with the players regarding the sale of jumbo rolls. But we are very comfortable based on the indications that we have received so far from many players because we are in contact with them already. And we believe we will be able to sell our jumbo rolls to our domestic and/or international clients of tissue.

We have -- I have a question to Carlos Anibal. Carlos, this announcement of price increase of 24% is rather aggressive. And I think this is the first time we see such a big increase. If you cannot implement this fully, will you be focusing more on exports or do you intend to finance your clients or selling at lower prices? You announced a very big price increase. What will happen if this is not so successful? Could you explain this please?

Lucas, thank you for the question. We believe that the market variables fully support a price increase of this magnitude if we continue the evolution of the pulp price and exchange rate and the evolution of prices in the international market.

We believe for all these reasons that this is quite feasible. And as you said yourself, we have a unique opportunity of achieving very good margins in exports, as I said before.

We have a major part of our volume today being exported with a better profitability than what is showed in the domestic market. And this doesn't make a lot of sense because we have to be closer to our clients. And we have better logistics, better availability. So this is why we believe that we should see prices in the domestic prices that may be compatible to international prices. There is a mismatch there.

So we believe we will be able to implement this increase as well as the increase for paper board that we will be announcing in the near future.

Now we close the Q&A session. And we would like to give the phone back to the Company for the closing remarks to be made.

I would like to thank you for participating in our call and reiterate that the Company is very enthusiastic with the transformation of our internal processes and evolving in all areas. And we are working quite hard in our relationship with all our stakeholders and very pleased with the results obtained in the third quarter of this year and pleased in being able to announce this investment plan with a huge value creation for our shareholders.

And tomorrow, I would like to invite you all to participate in our annual APIMEC and we will be presenting this information in a more detailed fashion tomorrow.

Thank you very much and I wish you all a very good day.

This conference call is closed. We thank you for participating and wish you all a very good day.

Statements in English on this transcript were spoken by an interpreter present on the live call. The interpreter was provided by the Company sponsoring this Event.