Earnings Call Transcript - SUZ Q1 2023

Operator, Operator

Ladies and gentlemen, thank you for holding and welcome to Suzano's Conference Call to discuss the Results for the First Quarter of 2023. We would like to inform you that all participants will be in a listen-only mode during the presentation that will be addressed by the CEO Mr. Walter Schalka and other executive officers. After the company's remarks are completed, there will be a question-and-answer session when further instructions will be given. Before proceeding, please be aware that any forward-looking statements are based on the beliefs and assumptions of Suzano's management and on 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 results to differ materially from those expressed in such forward-looking statements. Now, I would like to turn the floor over to the company's CEO. Please, Mr. Walter Schalka, you may proceed.

Walter Schalka, CEO

Welcome everybody to the first quarter release meeting that we are discussing today. It's a great pleasure to have all of you. With me today, we have several members of the C level of the organization. In the end, we'll be prepared to answer your questions. I think it's very clear that this quarter, we were able to generate R$3.7 billion in investments on CapEx. And even during this scenario, we maintained our flat debt at $10.9 billion. On the commercial side, we had sales on the pulp side of 2.5 million, in line with the first quarter of last year. In the paper sector, we returned from our usual trends that we experience in the first quarter, increasing our inventories slightly to prepare for the upcoming second half. This trend was altered last year due to large volumes in exports. However, we reverted to our old trend this year. Our pulp inventory levels are currently below optimal levels. Regarding operational performance, we had R$6.2 billion in EBITDA, a little bit over 20% higher than the same period last year. Our operational cash generation, which we believe is the right KPI to assess Suzano, was R$4.7 billion, and our cash cost remained flat compared to the previous quarter. We maintain a very strong balance sheet, currently having $6.1 billion in cash and credit lines. As I mentioned before, our net debt is $10.9 billion, and we are very comfortable with almost seven years of average maturity, resulting in leverage of 1.9 times net debt over EBITDA. I am pleased to share some information regarding ESG. We were able to deliver our sustainability report before the AGM happening this week. This is the first time we accomplished this, and it is very comprehensive with detailed information and full transparency to the market. Moreover, we received carbon credits approval for the first time from our first project. We aim to establish several programs in place, amounting to around 1.7 million carbon credit tons. In this first quarter, we received approval from the antitrust authorities regarding our acquisition of the Kimberly Clark Tissue operations here in Brazil, and we expect to complete this transaction in the second quarter of this year. Now, I will pass it to Fabio, who will share information regarding the Paper and Packaging business.

Fabio Almeida de Oliveira, CFO

Thanks, Walter, and good morning, everyone. Let's turn to the next slide on the presentation. The Paper and Packaging business unit has delivered solid EBITDA during the first quarter of 2023, despite a more challenging market scenario in the international paper markets. Shipments for print and writing papers and paperboard decreased in major international markets at the beginning of 2023, which reflects a restocking move that began at the end of last year. Demand in the domestic market has been more resilient for both print and writing and packaging grades. According to recent data, demand for print and writing papers in Brazil decreased by 3.2% in the first two months of 2023 compared to the same period last year. However, this decline is largely attributed to the strong comparison base from 2022 when encoded papers were sold into the containerboard segment. If we exclude these volumes, we estimate that domestic demand for print and writing has still grown. Domestic demand for paperboard increased by 3% in the first two months of this year compared to a year-on-year basis, driven by sustained consumption of essential goods and stabilization in the supply chain. The supply imbalance is starting to fade, and demand is returning to its historical trend in mature markets. In emerging markets such as Latin America, there's still some demand growth fostered by specific segments, like textbooks, for example. Suzano's sales volumes in the quarter were 11% lower on a year-over-year basis. The decrease in sales volume was explained by our commercial decision to reduce our offerings to the export markets due to high paper stocks in most markets. This decision allowed us to replenish our own paper inventories which had been running at low optimal levels during 2022. Domestic sales represented 72% of our total sales in the quarter. In the last two years, we have seen higher paper prices due to supply restrictions coinciding with demand recovery post-COVID. However, as these factors fade, markets are expected to return to their secular demand behavior. Prices in spot markets are experiencing declines but remain stable at healthy levels in North America and Western Europe. In this market, supplies are adjusting their operating rates to match demand. In Brazil, prices have lagged compared to international markets in dollar terms for most of last year, providing an opportunity for some price increases at the end of 2022, which were implemented during the first quarter. Our prices in the first quarter were 32% higher on a year-over-year basis. Our EBITDA reached R$708 million, a 35% increase on a year-over-year basis. This marks our highest EBITDA and EBITDA per ton for a given first quarter. Looking forward, we expect demand for print and writing to return to secular trends. Higher demand for packaging is expected to continue to outpace GDP growth due to sustainability initiatives. Suzano's Paper business is more concentrated in the domestic market, which is less volatile compared to the supply/demand imbalances seen in some international markets. Although inflation around materials and energy persisted during Q1, we observed signs of cooling down, offering good perspectives for the remainder of the year. It's worth mentioning that the structural competitiveness of Suzano's Paper and Packaging business provides a solid ground to navigate unforeseen market demand. Now, I will turn it over to Leo, who will present our Pulp business results.

Leonardo Grimaldi, CRO

Thanks, Fabio, and good morning, everyone. Let's move to the next slide of our presentation to address our Pulp business unit's results for the first quarter of 2023. As noted on the upper left graph, our Q1 sales volumes were 3% higher than Q1 2022 but 11% below the preceding quarter, which had a higher seasonality effect. Due to our Q1 sales performance, our inventories remain below optimum operational levels, as mentioned by Walter. Over the past quarter, demand has been quite mismatched across different regions. In Europe, while the Tissue segment was resilient, Printing and Writing, alongside some specialty grades, continue to see lower order intake due to distributors and printers' destocking efforts. In North America, most hardwood consumption is concentrated in the Tissue segment, leading to stable hardwood pulp demand. In China, pulp demand began to increase throughout the quarter, with a larger concentration in March. Production levels in most paper segments, as well as paperboard, were high, actually above historic levels, which kept pulp inventories across China's supply chain normalized and balanced. Given the lower-than-expected pulp demand in Europe due to destocking movements, we have noticed volumes being redirected to China, intensifying price reductions in that market relative to other regions. Our average export price for Q1 was $719, which was 13% lower than Q4 and 13% higher than our prices in Q1 2022. By the end of the quarter, actual prices in China were lower than market indexes as most orders were finalized just before the month closed after prolonged negotiations that took place during the Shanghai Pulp Week. The Q1 EBITDA performance was mainly driven by solid sales volumes, which, despite lower prices, led us to an EBITDA of R$5.3 billion, representing a 57% EBITDA margin. Looking forward, I want to highlight a few key points. In China, we are witnessing optimism from our customers, characterized by improving confidence levels and expectations for increased consumer spending, aided by the recovery of paper and carton board exports. Order intake for Suzano in April aligns closely with March, trending near historical levels. In Europe, we expect that distributor and customer restocking could last a couple of months, ultimately stimulating the recovery of paper and subsequently pulp purchases in that market. The Tissue segment continues to show stable and resilient markets with positive downstream demand. In North America, focusing on Tissue again, most major producers report steady and positive operating rates. Regarding the supply side, we anticipate that the current rearrangement of volume between Europe and other regions will persist at the beginning of Q2. In terms of new capacity, we anticipate that they will gradually reach the market, potentially more significantly towards the latter half of the year. Unforeseen downtimes will continue to exert pressure on supply predictions, caused by the technical age of pulp producers, weather-related events, and strikes, alongside cost pressures and wood availability in various regions. We believe current price levels in China and other Asian countries are below marginal production costs and expect this to manifest as a contraction in domestic production in the region, as several integrated BHKP (Bleached Hardwood Kraft Pulp) and paper producers may reduce pulp production, turning instead to market pulp purchases. We've started to see inquiries from this profile of customers since March and April. With that, I would now like to invite Bacci to discuss our cash cost performance for the quarter.

Marcelo Bacci, CFO

Thank you, Leo. Moving to page six, we see that we had a flat performance of our cash cost in relation to the previous quarter, aligning with our expectations. This was due to higher maintenance costs resulting from annual shutdowns, which also impacted fixed costs, counteracting any positive effects we observed from lower commodity prices. We anticipate lower input costs will support similar cash cost levels in Q2, despite the higher number of scheduled shutdowns in that period. We also expect cash costs in the second half of the year to be lower than the current levels, given current commodity prices. Moving to page seven, the Cerrado project is performing on time and within the established budget. We are currently at 57% physical progress on the project. The CapEx amount has been updated to account for inflation corrections that are part of the contracts we have with our project suppliers. That inflation amount is R$1.9 billion from the start of the contracts to the end of 2023. In addition, we have gained R$300 million on FX compared to our budget for realized payments made in dollar and euro-denominated parts of the project. This leads to an amount of R$20.9 billion. Furthermore, we identified opportunities to produce rather than purchase several items for the project. This includes chemical plants, facilities, and some forestry assets, which will enhance the project’s return. This allows us to keep our guidance for cash costs for the project unchanged in the future, even considering high inflation during this period. We also keep our guidance for CapEx for 2023 intact, with all differences impacting only 2024. On page eight, our net debt remained stable at $10.9 billion during the period, despite the $800 million in CapEx incurred. The leverage ratio stands at 1.9 times, and our liquidity remains robust at $6.1 billion, covering all maturities until the end of 2026. Finally, on page nine, we present that we currently maintain a $7 billion portfolio of FX derivatives, which includes hedges related to the Cerrado project and covers 67% of our FX gap coverage over the next two years, where we have an average put of R$5.63, providing us significant protection compared to current market levels around R$5. With that, I will hand it back to Walter.

Walter Schalka, CEO

Thank you, Marcelo. It's important to emphasize that we continue to pursue our strategic avenues for the future. We have five different avenues, one being our ongoing commitment to reducing our total cash cost. All projects are currently in place. Next month, we have the Jacareí plant retrofitted, and we have also been working on the forest side and logistics to lower our total costs. The second important strategic avenue is our existing relevance in the global pulp market; the Cerrado project will reinforce this point next year. The third avenue focuses on vertical integration, with the Kimberly Clark assets forming part of this vision for the future. The fourth avenue includes exploring new alternatives to replace our trees, and we are pleased to note that we are currently operating MFSC in Brazil and Finland and are seeking new opportunities in this area. Lastly, our strategy regarding sustainability and carbon certification has advanced considerably during this quarter. Our commercial strategy for pulp and paper will remain unchanged. It’s important to reiterate that our ambition is not to increase our pulp inventories, and we emphasize that the company is managed by events rather than averages. To highlight this point, we are not planning to increase our inventories in the near future. We see cash costs as an opportunity in the third and fourth quarters of this year. To reinforce our policy, we maintain financial and capital discipline. Our balance sheet is strong, and we will sustain clear strategies in this regard. We are also pleased with the progress of the Cerrado project, which is on budget and is expected to transform Suzano into a highly competitive company with the lowest cash costs in our system and potentially the lowest globally. We are on track to deliver this as expected and in line with our original budget. We are now ready to answer your questions. Thank you very much.

Operator, Operator

Thank you. The floor is now open for questions. Our first question comes from Thiago Lofiego with Bradesco BBI.

Thiago Lofiego, Analyst

Thank you. Good morning, everyone. I have two questions. First, Leo, we have been hearing that pulp is being sold for around $450 to $480, and this seems to be encouraging integrated producers to begin purchasing market pulp. How significant is that potential additional demand, and how quickly do you think those integrated producers can adjust their purchases? Second, concerning leverage, if prices stay around $500 per ton for an extended period, similar to what we experienced in the last cycle, would leverage be a concern? My calculations suggest that leverage could exceed five times for a few quarters in that situation. I would like to hear your thoughts on this. Thank you.

Leonardo Grimaldi, CRO

Thanks, Thiago. This is Leo here addressing your first question. As for the potential additional demand from integrated BHKP and paper producers in China, it's challenging to estimate accurately, as no consulting company tracks this metric. However, if you consider that integrated BHKP and paper producers total between 8 million and 9 million tons, a 10% reduction in their production could lead to approximately 800,000 tons of additional demand for BHKP. Nonetheless, this is merely an estimate correlating a 10% decrease. Timing is also challenging to predict, as it is dependent on the strategies and financial plans of these producers, so we cannot comment definitively on that.

Thiago Lofiego, Analyst

And just a quick follow-up. Are you guys seeing that happening on the ground already or is this just potential…

Leonardo Grimaldi, CRO

Yes.

Thiago Lofiego, Analyst

Yes. Go ahead.

Leonardo Grimaldi, CRO

Good. As I mentioned in my speech, since March, we have started to observe this trend. We have begun to receive inquiries and actually sold to integrated BHKP and paper producers, and this trend is continuing into April as well. I believe it will increase significantly over the next month.

Marcelo Bacci, CFO

Thiago, this is Marcelo speaking. In regard to your question, we have previously guided the market that we established a net debt limit that we expect not to surpass, which is $12 billion. We are currently at $10.9 billion. In any scenarios we foresee today, we will not surpass the $12 billion threshold. Of course, the net debt to EBITDA ratio will increase as a result of a decrease in EBITDA. However, the increase in net debt levels will be minor moving forward. We have enough available cash today to cover the maturities we have in the next four years, meaning we don't need to access the market for refinancing in that timeframe. Therefore, any potential impact on leverage will not visibly affect our debt costs or access to funds. So we are not concerned about leverage at this point. We will continue managing the company with a very disciplined approach to capital allocation and financial discipline. However, we do not foresee any issues from a financial perspective in the foreseeable future.

Thiago Lofiego, Analyst

Okay. Thank you, Bacci. Thank you, Leo.

Operator, Operator

Thank you. Our next question comes from Leonardo Correa with BTG Pactual.

Leonardo Correa, Analyst

Yes, good morning, everyone. My first question pertains to the marginal ton of Suzano. If we look at the highest cost lines of Suzano, I would like to understand how that is performing or how that could perform profitability-wise, specifically EBITDA per ton, in a scenario of pulp prices moving to $450 to $500. I just wanted to hear how Suzano's marginal ton could be affected in this aggressive pricing environment, keeping in mind that you mentioned Suzano is the lowest-cost producer in the industry. My second question pertains to capital allocation in light of the medium-term prospects. Given that we're approaching the peaks of the CapEx cycle, and considering that the pricing environment hasn't been advantageous and may remain pressured over the next quarters, if we were to assume an average pulp price of $550 over the next years, leverage would likely peak at around 3.5 times net EBITDA, which is not alarming but perhaps exceeds your comfort zone. In light of this, how are you assessing the medium-term outlook on capital allocation and balance sheet? Would it be fair to view Suzano as entering a deleveraging phase from 2025 to 2027, where significant projects would be minimal, focusing instead on debt reduction? Those are my two questions. Thank you very much.

Leonardo Grimaldi, CRO

Hi, Leo here addressing your first question, which Walter briefly touched on in his closing speech. While Suzano is competitive and adept at navigating diverse scenarios in different markets, we constantly analyze costs—not just in average terms but also by examining specific fourth quartile costs of wood and production. However, our plan and commercial strategy is focused on closely analyzing and supporting our customers' needs while ensuring we do not inflate our inventory levels, as stated by Walter.

Leonardo Correa, Analyst

Can you provide any detail, Leo, on the profitability of your marginal ton?

Leonardo Grimaldi, CRO

No, unfortunately, we do not disclose that information.

Leonardo Correa, Analyst

Okay, thank you.

Walter Schalka, CEO

Regarding capital allocation, if we consider a scenario like the one you described, the peak of our leverage will be just prior to the startup of the Cerrado line. Once the project is operational, we will generate additional cash flow, ultimately reducing leverage. Dependent on market conditions, our available capital for allocation will vary, but it is fair to assume that the peak will occur right before we commence Cerrado, after which subsequent capital allocation decisions will unfold.

Leonardo Correa, Analyst

Thank you, guys.

Operator, Operator

Thank you. Our next question comes from Daniel Sasson with Itaú BBA.

Daniel Sasson, Analyst

Hi, everyone. Good morning. My first question concerns CapEx, focusing on Cerrado. I noted that your forest logistics and other CapEx increased from 4.6 to 6.3. I wanted to gain more insight into the forest aspect. Was this increase solely due to the port issue mentioned, or is it also linked to land acquisitions? Specifically, I'd seek details on how land acquisition for Cerrado is advancing. Given that competition for land has intensified in recent years, I'm curious if you foresee potential challenges in acquiring new land for future projects, not just for Suzano but perhaps for the entire industry. My second question relates to the inventory levels of your customers. Walter, while you mentioned that Suzano's inventory levels are slightly below normalized levels, at what point do you anticipate customers will begin building inventories back up to more normalized levels?

Walter Schalka, CEO

Thank you very much, Daniel. This is Walter here answering your first question. I want to clarify that we do not have any cost overruns on this project. The initial variations stem from adjustments based on parametric formulas with our suppliers, primarily due to inflation, particularly labor inflation during this period. If we evaluate compared to 2021, we are exactly at the same cost level. In considering whether to make or buy certain items, we analyze which option holds a higher net present value for us. As such, for chemicals like sulfuric acid and logistics, and for terminals such as Santos port, alternatives may involve leasing or purchasing land. The additional R$1.3 billion in CapEx relates not to the core project but to additional make-or-buy alternatives we can pursue. Our land banking has substantially increased; last year, we added approximately 400,000 hectares through acquisitions like Parkia and Caravelas, and we are continuing to expand land banking for future. This year, we are on track with planned investments to plant 300,000 hectares of forest.

Marcelo Bacci, CFO

To complement, we do anticipate increased future competition for land and forest, which may impact the timing of potential future projects for us and the competition at large.

Leonardo Grimaldi, CRO

Now, transitioning to your second question, regarding customer inventory levels in North America, we find them to be quite normalized and have remained stable for several quarters. In Europe, they are also normalized, as we have effectively planned shipments from our local terminals several months ahead. The reduced operating rates outlined by Fabio earlier were anticipated, and customers have maintained normalized inventory levels. However, we are observing some inventory increases in European ports, which might require time to normalize. We expect shipments initially scheduled for Europe might be redirected to other global regions. In China, we do not observe any inventory build-up among customers, based on recent reports from our commercial teams. Customers do not show increased inventory holdings at the port either, and we expect restocking from Chinese customers has yet to commence.

Daniel Sasson, Analyst

Thank you, Leo, Walter, and Bacci.

Operator, Operator

Thank you. Our next question comes from Jonathan Brandt with HSBC.

Jonathan Brandt, Analyst

Good morning, gentlemen. Thank you for the opportunity. Leo, I want to ask about your inventory levels. I know, Walter, you've mentioned that you're not planning to increase them; however, for several quarters, you've noted that they are very low. Is this becoming a new normal for inventory levels? Can you sustain this level of inventory going forward? Given that significant maintenance downtimes are anticipated in Q2 and Q3, how should we view sales volumes for those quarters concerning inventory levels? Do you foresee a continued destocking trend or adequate production in the upcoming quarters to meet contracted demands? My second question involves understanding where the bookings for pulp prices might trend over the next couple of years. Given current prices falling between $450 and $480, and your anticipation of an increased supply in the second half due to new capacities coming online, coupled with your project coming up in the latter half of 2024, do you believe demand will improve sufficiently to absorb this new capacity? Or should we expect pulp prices to stagnate in the range of $450 to $500 for the next couple of years?

Leonardo Grimaldi, CRO

Jonathan, this is Leo. To address your first question regarding Suzano's inventory levels, we consistently report below optimum levels. Despite this, we've successfully adapted to managing our operations under these low inventory conditions. Though this is not ideal as it places stress on our system, we have adapted to navigate and operate effectively this way. As we anticipate more adverse scenarios approaching in the second quarter, maintaining lower inventory levels could position us more favorably. Concerning our long-term view on pricing, we maintain a positive outlook on the fundamentals within the pulp segment. We expect demand to grow, attributable not only to organic growth but also from fiber substitution favoring hardwood, as well as fossil substitution favoring all types of pulp. When correlating our long-term expected demand with these variables and the impending capacities, we feel confident that long-term pulp prices will remain aligned with historical averages, generally around $600 to $620 CIF China.

Walter Schalka, CEO

To add to Jonathan's point, we've learned from our prior experiences. In 2019, we faced a significant error in our commercial policy that led to excessive inventory accumulation. We have since decided not to replicate that model. Our inventory levels will be maintained at reduced levels. Of course, a marginal shift is possible, but not substantially. On the other hand, we continuously track the possible implications of sustained pulp prices trending below our peers' marginal costs. We believe the current pricing is significantly below the marginal costs of many, and we don't see this as sustainable over a protracted period. It is uncertain how long this will ultimately last, but we expect a resolution to emerge.

Jonathan Brandt, Analyst

Okay. And Walter, just to follow up on that point, I know Leo mentioned not disclosing the exact marginal ton profitability, but can you affirm that, at these pulp prices, all of the pulp you're placing into the market earns sufficient return? Is it yielding returns above the cost of capital?

Walter Schalka, CEO

That's not entirely the case. Currently, at these pricing levels, certain volumes yield positive cash generation, while some do not provide adequate returns on capital employed.

Jonathan Brandt, Analyst

Understood. However, you're not preparing to withdraw those volumes from the market, correct?

Walter Schalka, CEO

We will closely follow market dynamics and currently do not have a definitive stance. This quarter and the next will see numerous maintenance shutdowns, possibly leading to lower production volumes. Yet, we will closely monitor market conditions to see how we might respond commercially.

Operator, Operator

Our next question comes from Jens Spiess with Morgan Stanley.

Jens Spiess, Analyst

Yes. Hello. Thank you for taking my question. I wanted to ask about additional demand from integrated producers in China. At what price point did you observe them beginning to issue inquiries and place orders? This may indicate their respective costs. Furthermore, if pulp prices start to increase, when would they likely resume production and halt purchasing from you? For my second question, while not highly impactful, can you share any insights into the Kimberly Clark assets? Specifically, how do prices per ton and profitability compare to your current operations for modeling purposes, and what expectations should we have moving forward?

Leonardo Grimaldi, CRO

Jens, this is Leo. Regarding your first question about the price point that Chinese integrated BHKP and paper producers began placing orders, this is quite difficult to pinpoint due to the substantial variability in their cash costs. Estimates suggest their cash costs range from $600 to $700, with slight decreases expected due to reductions in wood prices, affecting cash costs by $20 to $30. Thus, we'd anticipate costs in the current range are between $575 and $680. However, pinpointing when they will either reduce or halt production remains intricate.

Luis Renato Costa Bueno, CFO

Hi, thank you for your question. This is Luis Bueno answering regarding Kimberly Clark. The tissue products from Kimberly Clark in Brazil typically sell at a 20% to 30% premium above the average market price across all channels and regions in Brazil. This premium is something we expect to sustain in the market starting in June.

Jens Spiess, Analyst

Okay, perfect. Thank you.

Operator, Operator

Thank you. Our next question comes from Marcio Farid with Goldman Sachs.

Marcio Farid, Analyst

Good morning, everyone. Thank you for the opportunity to speak. I have a couple of questions. First, I want to follow up with Fabio to discuss the paper business. It appears that the correlation in terms of EBITDA per ton profitability for both pulp and paper has been very high. However, paper has been outperforming in recent years. As we enter a more challenging landscape for pulp, should we expect the paper business to remain stable? We've witnessed European producers reporting minimal EBITDA for the first quarter in the rough paper sector. I want to grasp if we might see some offset in paper EBITDA as a result. My second question revolves around potential maintenance downtime. Is this an appropriate time to consider extended maintenance periods, given the current market may not necessitate rushing? Should we think about the possibility of undertaking additional work compared to usual times? Thank you.

Fabio Almeida de Oliveira, CFO

Marcio, good morning, it's Fabio here. Thank you for the question. In terms of EBITDA for paper and our outlook for the business, you're correct that the correlation between pulp prices and paper prices is primarily valid only in international markets. The domestic Brazilian market is more consolidated, with business drivers, including government national books that drive demand locally. In the domestic market, the correlation tends to align more with the exchange rate than with pulp prices. Recently, we've noted that paper prices in international markets have exceeded domestic prices, a situation that is not typical. This correction has led to upward adjustments in domestic market prices, successfully implemented at the end of 2022, continuing into this first quarter. Currently, we are starting the year in a stronger position compared to last year, both in international and domestic markets. However, the trends for international markets are opposite to those of the domestic market. We hold confidence that the bulk of our sales, with over 70% in the domestic market, will lead to a reasonably healthy year for the paper business, linked to returning to the seasonality we saw pre-COVID, where we build up inventories in the first half of the year to support demand in the second half.

Walter Schalka, CEO

Marcio, this is Walter addressing your second question. Our annual shutdown schedule is being maintained as planned. We will not be extending the duration of shutdowns at our facilities. It’s also important to mention that at Jacarei, we had planned a slightly longer shutdown period due to ongoing retrofitting, but this will remain unchanged.

Marcio Farid, Analyst

That's very clear. Thank you very much, Fabio and Walter.

Operator, Operator

Thank you. As there are no further questions, I would like to turn the floor back over to the company's CEO for final comments. Please, Mr. Walter Schalka, you may proceed.

Walter Schalka, CEO

Thank you very much for joining us for this session. It is crucial to underscore that we will maintain our financial and capital discipline in the coming quarters and years, even in a very volatile scenario. Our CapEx plans for this year and next will remain unchanged. We are pleased with the progress of the Cerrado project, which will eventually transform us into a more competitive company. Additionally, we are excited about new avenues, including vertical integration in the tissue business and preparations for the company’s future. I am very optimistic about the developments we're experiencing and look forward to sharing our trajectory with all of you. Thank you, and have a wonderful weekend.

Operator, Operator

Thank you. The Suzano first quarter results conference call has concluded. Have a nice day. You may disconnect your lines at this time.