Suzano S.A. Q4 FY2024 Earnings Call

Ladies and gentlemen, thank you for holding, and welcome to Suzano's Conference Call to discuss the Results for the Fourth Quarter 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. Beto Abreu and other executive officers. This call will be presented in English with simultaneous translation to Portuguese. Before proceeding, please be aware that any forward-looking statements are based on the beliefs and assumptions of Suzano's management and known information currently available to the company. They involve risks, uncertainties, and assumptions because they relate to future events and therefore, depend 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 Suzano and could cause the results to differ materially from those expressed in such forward-looking statements. Now, I will turn the conference over to Mr. Beto Abreu. Please, you may begin your conference, sir.

Thank you very much. Hello, everyone, welcome. Thank you for attending the fourth quarter call. And before going through the results, I want to say that I'm very proud of what the team has delivered in the fourth quarter and also in 2024. The name of the game in this last quarter was flawless execution, and I want to recognize the operational excellence forward and the power of the team, the power of this organization, when we decide to deliver together something. We reached record sales for the fourth quarter and also, of course, for the year. Leo, the outbound logistics team did a tremendous job, and Ribas with its impressive performance reached in 2024, 900,000 tons of production and 700,000 tons of sales. And let's remember this is fully in line with the guidance that we have shared with you after the startup in mid-2024. Moving to cost, in the fourth quarter 2024, we were also able to set up for ourselves a new baseline of cash cost for our operation. The combination of those figures with a strong EBITDA of R$23.8 billion for the year brought our leverage in dollar terms to 2.9 times. I want to highlight this since leverage is a key metric for us and guides our capital allocation decisions. Having said that, I want to invite Fabio, now also in charge of our Suzano Packaging business in the U.S., to share his insights on our Paper and Packaging business.

Thanks, Beto. Good morning, everyone. Please, let's turn to the next page of the presentation. We have finalized 2024 with a strong operational performance from our Brazilian operations and significant advancements in North America. The assets we have acquired from Pactiv Evergreen will be referred to from now on as Suzano Packaging U.S., and their results are incorporated into our Paper and Packaging business unit results. During the quarter, we happily welcomed around 870 colleagues that work in Pine Bluff and Waynesville to the Suzano family. Looking at the Brazilian market according to EBA, print and writing demand including imports increasing by 11.7% in the first two months of the fourth quarter compared to the same period of last year. Sales from domestic producers grew by 12.5%, while imports moderated and grew by 4% on the same basis. Demand for uncoated paper was bolstered by the federal government's purchase of textbooks. For coated paper, although demand is lower in the quarter with the end of the election cycle, it remains stronger compared to the same period of last year. Markets outside Brazil performed differently in North America and Latin America, and even though rebuilding positively influenced demand supporting growth demand in 2024 compared to 2023. However, in Europe, the situation has become challenging as positive demand effects have diminished and paper consumption has returned to its declining historical rates. Demand for paperboard in Brazil remained robust, increasing by 9% in the first two months of the quarter compared to the same period last year. This growth reflects the performance of the Brazilian economy and consumption levels despite some cooling in certain segments over the last quarter. In the U.S. market, a focus region for Suzano Packaging operations, according to Limeira, there was a 21% recovery in SPS demand in the fourth quarter of 2024, compared with the fourth quarter of the previous year, driven by strong performance in the food service sector, falling less than the expected performance in 2023, and the first half of 2024. Looking at Suzano figures, our total sales volume in the fourth quarter was 15% higher year-over-year and 24% higher quarter-over-quarter as a result of the incorporation of Suzano Packaging sales. Regarding our Brazilian operations, we had an increase in sales compared to the last quarter pushed by higher sales to the Brazilian market while exports reduced due to continued unfavorable logistic conditions. The 4% net price growth over the last quarter is attributed to the impact of Suzano Packaging and FX effects on pricing shown in Reais compared to the last quarter of 2023, there's a 7% increase driven by the same factors just mentioned. Looking at EBITDA, there's a 7% reduction quarter-over-quarter and a 3% reduction versus the fourth quarter of 2023. When compared to the full year, we also have a decrease in this case of 16%. This performance reflects the impact of the incorporation of Suzano Packaging in the U.S., which is a turnaround case, as well as lower prices in both the Brazilian and external markets of our operations in Brazil. Now, I want to provide some color on Suzano Packaging. The integration of our new employees, assets, customers, and suppliers are on track and reflect our expectations prior to the acquisition. During the fourth quarter, we successfully renegotiated all commercial contracts, securing much better terms for Suzano in 2025 and onwards, and secured synergies on raw materials and logistics. Better prices and lower costs will positively impact Suzano Packaging results in 2025. The industrial turnaround, as shared with you on the last Suzano Day as well as the CapEx plan are progressing as planned, and we remain optimistic about the expected future value creation. Considering only our operations in Brazil, our business unit delivered the best quarter in terms of EBITDA of 2024, our results improved sales levels, FX impacts on prices as well as cost reduction efforts. We ended 2024 with lower cash costs compared to 2023. Looking ahead, we anticipate strong demand in the Brazilian market for uncoated and paperboard lines during 2025. Outside Brazil, we anticipate a return to the structural decline in demand in developed regions and less so in Latin America. In the U.S., paperboard demand is expected to remain strong throughout 2025. Pulp price announcements early in 2025 could offer support to higher paper prices. In terms of logistics and input costs, we expect some stability in the absence of trade disruptions and geopolitical turmoil. Now, I'll hand over to Leo who will present our pulp business results.

Thanks, Fabio, and good morning, everyone. Now moving to the next slide of our presentation, I would like to begin by sharing some facts related to our pulp business unit during this past quarter and for the full year 2024. The fourth quarter 2024 was marked by lower prices as a consequence of monthly reductions in Europe and Americas, closing the gap to Asian prices, which also declined in the quarter but presented a flat curve as of the end of November with levels tagging below the marginal cash cost of pulp producers. Q4 was also marked by healthier operating rates from our Asian customers as well as their improved margins, resulting in a positive market sentiment. It is important to note that a significant unexpected event, the first partial and later a complete operational cease of a major Chinese integrated pulp and paper producer changed dynamics in the region quickly favoring most of our non-integrated customers. During Q4 2024, our sales, including the new volumes coming from Ribas mill, were performed as planned, allowing us to set an all-time high volume for a quarter. As a consequence of these record sales, our inventories became tight, and this situation will bring us some challenges ahead to serve our customers, which I will share with you later in my speech. Despite lower prices in Q4, the combination of higher volumes and favorable FX resulted in a resilient EBITDA of R$5.7 billion. For the full year 2024, higher prices in U.S. dollars, higher volumes, and relevant FX levels resulted in a 37% increase in EBITDA, which reached almost R$21 billion with a 56% EBITDA margin. Now looking forward, I would like to highlight the following points. Coming into the current first quarter of 2025, let me now explain why I see a challenging scenario to serve all markets with pulp volumes. The addition of factors such as Suzano's low inventories at year-end, a healthy order entry in the past month, including January, and our lower production volumes due to a concentration of scheduled maintenance downtimes would mean alone a tough quarter for our logistics operations. We had prepared ourselves for this scenario. However, we also anticipated the occurrence of new and unexpected events such as the conversion of a key competitor to dissolving pulp during all of Q1, strikes in Finland, operational problems at competitors' mills, and the ongoing halt of the major integrated player in China, which have all tightened significantly the supply and demand fundamentals in the short term. Just to provide more color, each month that such integrated players are down, the supply and demand fundamentals are affected in two ways. First and directly, there is the impact of the cease of production and the benefit that this creates to our customers, mostly Chinese customers, who have been increasing their paper and board production levels and also their prices in the market. We estimate that every month that this competitor is down, over 200,000 tons of new hardwood demand is generated in China alone. There is also a secondary effect as this player also used to sell their excess hardwood pulp in the market, especially when paper margins were not positive enough. This has obviously ceased completely as well. I anticipate that during most if not all of Q1, we at Suzano will struggle to recover our delivery performance to Middle East, African, and Asian markets, all serviced directly out of Brazil. Our sales during the past month exceeded our regional expectations, resulting in the creation of backlogs in our system. Our January price increases were all fully implemented as planned and the February hikes are also expected to follow. Such positive dynamics for the first few months of the year pave a constructive sentiment for pulp prices in the upcoming months. This short-term momentum is clearly a reflection of unplanned events on pulp fundamentals, which, as I have been consistently stating in our calls and events such as the latest Suzano Day, are playing an increasingly significant role in our markets. Last but not least, the price gap between hardwood and softwood and an unclear scenario regarding softwood availability keeps favoring demand for our pulp, and most importantly, is setting a new record in the number of projects and engagements with our customers who are willing to deeply participate in fiber substitution projects, a game-changer for Utipulp demand growth. With that said, I would now like to invite Aires to address the cash cost performance of the quarter.

Thank you, Leo. Good morning, everyone. The cash production cost in the fourth quarter of 2024 improved due to a closer average distance, the outstanding performance of Ribas benefiting the dilution of fixed costs and energy sales, and finally, the lower cost with inputs both in price and consumption, the latter due to the greater operational stability of some mills. Lower costs with wood and inputs as well as the positive effect of Ribas mill also explain the better performance of the cash production costs compared to the fourth quarter of 2023, which was virtually offset by our FX depreciation of 18% in the period. Although a higher FX always benefits the company's cash generation, it is worth mentioning that about 23% of the cash production cost is dollar-linked. Now looking to 2025, in the first quarter, we expect the cash cost ex-downtime, considering an FX level at 5.8, to come with a non-recurring increase of mid-single digits due to the concentration of scheduled maintenance downtimes in the quarter of our largest high competitive energy exporting mills such as Três Lagoas and Ribas. Even with this one-off increase in the cash cost in the first quarter of 2025, the average cash cost external times for the full year of 2025, again with the same FX of at 5.8, should be flattish when compared to the fourth quarter of 2024. As I have already clarified, a lower FX effect ahead would allow us to print an even lower cash production cost for 2025. Moving to the next slide, on the last Suzano Day in mid-December, I shared with you the company's view that Ribas ramp-up would be completed in January of this year. In other words, in just six months and not in the nine months initially planned for this type of product. But the outstanding performance of the new mill in its first months of operation allowed us to deliver even better results. We were able to conclude the learning curve by the end of the fourth quarter of 2024. I would like to also share with you that in January, Ribas mill already had the best cash production cost in our assets portfolio, and after its scheduled downtime now in February, the operations will resume with even better performance. Regarding the caps related to the Cerrado project, there is no change to Suzano's guidance. In 2025, the final balance of R$150 million is expected to be dispersed. Now, I invite Marcelo to continue the presentation.

Hi, good morning, everyone. Thank you, Aires. I'll start on Slide number 8, talking about our net debt evolution throughout 2024. We started the year with a net debt of $11.5 billion. We generated $1.8 billion in cash flow after paying our maintenance CapEx, financial expenses, taxes, and working capital. We also invested $1.5 billion in growth projects, mainly at Cerrado, but also in other projects. So we would end the year following this event with a net debt of $11.2 billion. However, we also invested money in other acquisitions, mainly in the forestry assets in Brazil and also our acquisitions outside of Brazil, including the Lenzing stake and also Pactiv in the U.S. and we returned to shareholders $800 million in buybacks and interest on equity. So our net debt ended the year at $12.8 billion. The good news here is that we continue our deleveraging process, ending the year at 2.9x net debt to EBITDA when measured in dollars, and that's the trend that we will continue to pursue in the coming quarters. For the amortization schedule, we continue to have a very comfortable one with an average cost of debt of 5% in dollars and an average maturity of more than six years with no significant maturities in the quarter. Our financial results came in at negative $15.6 billion, mainly an accounting issue caused by the negative FX impact on our debt in dollars and also the market to market of our cash flow hedges. We continue to have a very solid and robust portfolio of hedges with our zero cost callers totaling at the end of December $6.9 billion with an average put and call at R$5.36 for our puts and R$6.16 for our call. So we remain well protected against any risk of BRL appreciation over time. I would like to highlight the company's strong shareholder remuneration in 2024. As I mentioned, we bought back R$2.8 billion in shares throughout the year, and we also paid R$1.5 billion of interest on equity at the beginning of the year and announced by the end of the year another interest on capital payment for the beginning of 2025 of R$2.5 billion. So in total for 2024, we returned R$4.3 billion to shareholders, which is equivalent to a dividend yield of 6% for the company. Now, I'd like to pass the word back to Beto for his final remarks.

Thank you, Marcos. So looking ahead let me start with the supply and demand balance. On the supply side for the first quarter, we will have constraints, as Aires mentioned already, of volumes availability on the back of significant concentration of maintenance downtime. On the demand side, we are seeing a favorable moment for pulp prices, which reinforces the impact that unplanned events bring to our sector. It's also worth mentioning that Leo and the whole technical team will prioritize the fiber to fiber projects with our customers. This is a key part of our customer value proposition, and it is also part of our customer needs. The first quarter cash cost, as I mentioned, is a new reference for 2025 despite the uptick in the first quarter of 2025. At Suzano Packaging U.S., the turnaround has started, and I want to congratulate Fabio and the small team that moved to Little Rock in Arkansas to lead this process and lead the whole team at Pine Bluff. So Fabio, so far so good. And finally, as Marcos said, our plan is to keep deleveraging in 2025. Having said that, let's now proceed with the Q&A session.

Thank you. We will now start the Q&A session for investors and analysts. Our first question comes from Daniel Sasson from Itau BBA. Please, Mr. Daniel, your microphone is open.

The new government changes anything in terms of your capital allocation decisions in the country? And my second question maybe to Leo. Leo, just to confirm, you said that the capacity that left the market in China has translated into 200,000 tons of additional demand per month, right, from these non-integrated players that are basically taking over the room left in the market? Do you have any views or can you update us on the current situation of that specific player or the current market situation? If you think this is something more temporary and that should revert at some point, or if you think that this could actually become more structural in the market? And if you are feeling comfortable enough with your inventory levels that you said were or ended the year at low levels, if we should think about a recomposition of inventories throughout 2025. Thank you so much, everyone.

Hi Daniel, so starting with your question regarding the U.S., if the recent moves change our strategy on capital allocation, I would say that it doesn't. Because when we're looking to capital allocation, we're considering the long-term of that decision. We continue to see the U.S. market as a market that has robust growth. It is a market on the paper side that also is quite concentrated in terms of the leading players. And also, it's a market that is somewhat more protected against imports. The recent news are also in that line. So this doesn't change the attractiveness of the market for us. Regarding tariffs, just to give you a brief overview, first and looking into the history as a reference, in the past years and mandates, we haven't seen any tariffs on pulp, which is our biggest business by far. There have been tariffs on the paper side, and we actually are impacted by that as well when we export to the U.S. So that is something that you should bear in mind. We also believe that the U.S. is short in terms of hardwood pulp, and there have been no incentives for new plants in the U.S. There have never been incentives for new plants in the U.S. in the previous years. So it doesn't seem to be economical for the U.S. to implement tariffs in the pulp industry.

So, hi Daniel, this is Leo here. I'm going to try to answer your question on the impact of the Chinese mill, which we obviously all know. I'm talking about Chenming, which is also a state-owned company. This is a very complex situation. They are a major paper and board and pulp producer in China, totalizing over 4 million tons of paper production, 2 million tons of board, over 2 million tons of hardwood pulp, and over 1 million tons of thermal mechanical pulp as well. We calculate that every month that they are down, over 200,000 tons of new demand for hardwood is created by our customers, mostly non-integrated customers, who are obviously accelerating or speeding up the operating rates and recovering this market share left by Chenming. What we hear on the ground in China is that clearly the government is eager to find a solution to the mill, but it's quite complex because it's not only about the sales of the equity of the mill, but it's related to debt, cash flow, and also the quality of the assets that make up this huge paper and co-producer in China. Our estimations run several different scenarios on that and how we play and position ourselves in the market depends on which scenario will unfold, and this is quite sensitive to our commercial strategy, so we cannot share exactly what we believe will happen. But I can say it's quite complex indeed; every time that we talk and get deeper into the discussion, it seems the issue is harder to be solved. Despite all of that, I believe it's temporary. I think a solution will be found; I'm not sure when, but it will be found. But it's important to mention that every month that they are down, whatever they left to our customers will not be recovered. So we are monitoring the situation in China as we speak.

Thank you so much, Marcos and Leo.

Our next question comes from Leonardo Correa from BTG Pactual. Please, Mr. Correa, your microphone is open.

I understand that you were expecting the cash cost number for 2025 to decrease by about low-double-digits from the level in the third quarter, which was around R$860. At that time, we were thinking it might be in the range of R$770 to R$780 per ton as a pulp cash cost. Now, to clarify the new revised guidance, you're indicating that cash costs in the first quarter will increase slightly due to some maintenance stoppages. For the entire year of 2025, you expect the pulp cash cost to be roughly flat compared to the fourth quarter, which is about R$800 per ton. So, over these months, it seems the official guidance for Suzano has adjusted upwards from R$770, R$780 to approximately R$800 based on the relevant changes in parameters. I just wanted to confirm if my understanding is correct or if I'm missing something. My second question for Marcos is about the substantial level of free cash flow generation. There is still some low CapEx in the numbers; from a maintenance perspective, the free cash flow is even higher, indicating relevant figures. At the same time, you have paused share buybacks. Given the recent share price appreciation, Suzano's stock continues to trade at significantly undervalued levels compared to global peers. It seems somewhat abnormal for Suzano to be trading at the lowest multiple in the entire coverage universe, both regionally and globally. I wanted to get your thoughts on this derating and how you view buybacks in the context of a still undervalued stock, especially when the market appears skeptical about capital allocation moving forward. Those are my two questions. Thank you.

Leonardo, good morning. Thank you for your question that gave me an opportunity to clarify the information about cash cost. You are correct. When you presented the results of the third quarter, I said that for the full year, the average for 2025 will decrease our low single-digits. But at the moment single-digit, double-digit, sorry. At this moment, we'll consider FX of R$5.35 for this year. And now I present predictions with R$5.8 for FX. As I mentioned, our costs are linked to 23% to dollars, which represent that every R$0.10 that we increase in the FX, we have an impact of R$4 per ton in the cash cost. That's the only difference that we consider here in this new guidance. And now I said flattish because I'm comparing with the fourth quarter, not only more with the third quarter will be 7%, 8% lower than the third quarter. Then all the difference is connected with the dollar base.

Hi Leo, thank you for your question. Yes, I agree with you. We are running the company with a very strong level of free cash flow generation. The buyback we always compare the buyback with the other capital allocation alternatives that the company has. And also we look at our leverage policy as well. So we will need to find the right spot between the two things, the two variables in order to do the buybacks or to be more active on the buybacks. As you know, we have an open program until the beginning of next year. But we could do that if we find the right moment to do that. Again, comparing it to the other alternatives that we have for capital allocation and also aiming at continuing deleveraging the company. Regarding the derating that you mentioned, we also agree with that. We believe that this is something that is not only for Suzano but is happening in other sectors as well. I think this is probably also related to the interest rate levels not only in Brazil but also globally. This should revert at some point.

Thank you, both.

Our next question comes from Marcio Farid from Goldman Sachs. Please, Mr. Farid, your microphone is open.

Has there been any change in terms of that understanding on where you want to be in terms of balance sheet leverage? Thank you.

Thank you, Marcio, for the call. Let me start talking about your first question related to capital allocation and strategy. As you know, we do not comment on any specific M&A initiative. But I want to reinforce what I said in the last call and what you just mentioned that we are not considering any transformational deal. Maybe your next question to me would be, okay, what do you mean by transformational deal? A good way to summarize this is that we are not planning, and we do not have in our sight anything that could impact our deleverage plan. I think that's the best way to summarize this. The strategy is the same. We're going to keep looking for opportunities in the downstream but only if they're generating value for us and if we can differentiate ourselves against any other opportunity. So we are keeping the same strategy as mentioned before. Let me hand over to Marcos to answer the other question, Marcio.

Hi, Marcio. You mentioned about the $800 per ton target for our net debt. That continues to be the case. If you do the math, with our full capacity, including our pulp capacity that is integrated into our paper capacity, that number would be closer to between $11.5 billion and $12 billion. That's a good reference.

All right. Thank you.

Our next question comes from Rafael Barcellos from Bradesco BBI. Please, Mr. Barcellos, your microphone is open.

Could you clarify the preference of where to allocate the CapEx or any specific line of business?

Rafael, let me start with the second question and then I'll hand over to Aires. Regarding the preference of where to allocate the CapEx or any specific line of business, we are agnostic about that. The drivers are really doing something that we can scale up in the future, doing something that we can differentiate ourselves while adding all the competence and knowledge that we have in the business and also doing something that we can fit completely with our strategy. So we are really thinking about generating value. So there's no preference for a specific line of business in our capital allocation strategy. Let me hand over to Aires.

Hi Rafael, thank you for your question. I believe it's too early to talk about any bottleneck in Ribas. Of course, we are very optimistic about how robust our SSR is presenting performance. When I said that we achieved the total line curve at the end of December, it means that we performed for 30 consecutive days at an average that should allow us to deliver our nominal capacity, and we achieved this with only 5 months and 10 days. Then the perspective is good, but we are finishing our previous maintenance shutdown in the Ribas to check if everything's okay. In the coming quarters, we'll probably be able to talk about any bottleneck that we will identify at the mill.

Our next question comes from Caio Ribeiro from Bank of America. Please, Mr. Ribeiro, your microphone is open.

What are the factors affecting your CapEx for the full year, and how do you see your discretionary CapEx growth versus maintenance CapEx?

Hi Caio, so as you know, we have guided the CapEx for the full year of 2025 at R$12.4 billion and our maintenance CapEx at R$7.8 billion, which is a number that you should bear in mind as the regular CapEx for the company going forward for existing operations. The additional CapEx or discretionary CapEx will also depend on the deleveraging process of the company and also depends on the returns that these projects would have. All minor projects that we have approved recently at the company, such as the expansion of the tissue business at Espírito Santo state and also the new fluff capacity at Limeira, for example, are projects that yield very good returns for the company.

Caio, regarding your second question, if we are considering pulp extension and power plant strategy, as you know, we own today one-third of the market pulp for hardwood and this is also a key part of our strategy, keeping the level of relevance that we have in this market. So that's the way that we will analyze a pulp extension, mainly in the mid and long-term.

Our next question comes from Alfonso Salazar from Scotiabank. Please, Mr. Salazar, your microphone is open.

What is your outlook on future demand for pulp?

Hi Alfonso, this is Leo here to answer your question regarding where we are seeing the future demand for pulp. As you know, we are quite bullish and optimistic on that and very constructive looking forward. So first, we have been analyzing trends that are not only China-related. We see tissue demand growing in several markets and many non-developing markets. We're seeing regions like Southeast Asian markets, for example, gaining extreme relevance and rhythm of growth compared to what they were before. So we see not only a concentration of this future growth in China, but in other markets as well. Second, as I have mentioned during my Suzano Day presentation, there are markets like specialty papers, which are now already bigger than old markets that were really relevant for pulp consumption like printing and writing papers. Now, these specialty papers represent more than a fourth of all the furnish of hardwood pulp. Last but not least comes from the movement or migration of consumption trends from softwood grades or other kinds of fibers to hardwood grades like our Utipulp. Maybe you remember in Suzano Day, we presented that in the past, despite having a very consistent trend of hardwood gaining market share over softwood, that was roughly 0.5 percentage points a year of market share, and that increased now to 1 percentage point of market share gain every year, which if you translate that into volume, that by itself, as we speak is 600,000 to 700,000 tons a year of additional demand for hardwood coming from softwood. So adding all these factors, which kind of dilute the concentration of China, we are extremely bullish looking forward in terms of pulp demand.

Our next question comes from Lucas Laghi from XP. Please, Mr. Laghi, your microphone is open.

What is the status of contract negotiations with Pactiv?

Hi Lucas, this is Marcos. I want to remind you about our FX hedging strategy. We generate all of our revenue primarily in dollars due to our pulp export business. We deduct all of our expenses in dollars, and as Aires mentioned, 23% of our costs are linked to dollars, which is relatively small. We also account for all of our financial expenses and maturities in dollars, along with other payments, to derive our net exposure in dollars. Currently, the market reflects two main situations. First, we experienced a rapid depreciation of the BRL or an appreciation of the dollar, evident in our quarterly results, where we finished the third quarter at R$5.45 and ended the year at R$6.19. A weaker BRL makes it advantageous to hedge at a higher level. Additionally, we benefit from a significant interest rate differential between Brazil and the U.S., which also influences the forward levels at which we can hedge in the future. Given these market conditions, I believe they support the continuation at the higher end of the range. While I can't provide guidance on future operations, this clarifies why we concluded the fourth quarter at the top of the range.

Lucas, thank you for your question. This is Fabio here. I'm going to address your second question regarding Pactiv. My comments during my speech highlighted that we were able to renegotiate the commercial contracts. We achieved double-digit price increases with our major contracts. This will come into effect — half of these impacts are going to come into effect at the beginning of the year and half in the second half of the year, so spread out through the year. But we also were able to negotiate our major raw material contracts and logistics. The impact of that is already seen in our costs as we renew our inventory levels from the raw materials. We have a major annual maintenance scheduled for April this year, so we're preparing for that. It's an oatmeal, as you know. I would say that you should see a more significant impact from the turnaround in the second half of the year.

Perfect, guys. Very clear. Thank you.

Our next question comes from Ricardo Monegaglia from Safra. Please, Mr. Monegaglia, your microphone is open.

What is the situation regarding wood availability and consumer pulp inventories?

Hi Ricardo, this is Leo. I'm going to answer both of your questions. First, starting with prices, we follow all the prices going into this non-integrated producer, especially the Asian producers who are verticalizing into pulp as well. What we see is that prices are not upticking as they were two years ago, so I believe they are competitive in that sense. Also, this effect that Chenming has, which has a positive effect on the paper side of the business and the consumption of pulp, has obviously a negative effect on wood because there is more wood availability in the region as they are not running their hardwood pulp mills or their mechanical pulp mills. We should mention that we have been monitoring and there is a bit more wood available in China due to the housing market effect. Plus, this is the final year where we see the government stimulating that some of the woodland with hardwood trees to be converted to farmland. So we should see that end by the 2025 year. In the short-term, I wouldn't expect, unless something unexpected happens, any uptick in the wood prices to China, meaning that this competitive level they have today should be kept unchanged. Regarding your question on consumer pulp inventories, we see that there is not really a stock formation at this time. We are monitoring the inventories in China ports, and they have been trending below what we believe is a completely balanced view. I personally believe that Chinese customers specifically have stock for pulp in the 2023 cycle. A lot of this reduction in the consumption of pulp in China in 2024, despite a strong year in paper production, is coming from destocking of the chain in general. So I think that the base point in terms of pulp stocks, either import or in the hands of the customers, is either balanced or below a balanced level, which brings a challenge in the short term because, as you can believe, every customer is trying to quickly increase their operating rates to capture part of this market share left in the market by Chenming. However, the pulp is not there at the speed that they would like the pulp to be. I mentioned my case in our case in my speech that we are running with backlogs here, and I don't expect this to be resolved before the end of the first quarter. So I see a tight scenario in the short term, created by unexpected factors. But the fact is, as we speak, the market is quite tight and positive for our short-term numbers and commercial tactics as well.

Thank you. Beto Abreu: I'd like to thank you for being here with us. I'm sorry, Beto. The Q&A session is over. We'd like to hand the floor back to Mr. Beto Abreu for his final remarks. Please, Beto, now you can proceed.

Thank you. I'd like to thank you for being here with us today and for your interest in Suzano. As always, our IR team remains available for any additional questions you may have. And I wish you all a great day. Thank you very much.

The Suzano's S.A. fourth quarter of 2024 conference call is now concluded. The Investor Relations department is available to answer further questions you may have. Thank you, and have a good afternoon.