Suzano SA Sponsored ADR Stock

Ladies and gentlemen, thank you for holding, and welcome to Suzano's conference call to discuss the results of the second quarter of 2026. We would like to inform that all participants will be in a listen-only mode during the presentation that will be addressed by the CEO, Mr. Beto Abreu, and other executive officers. [Operator Instructions]

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 the 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 will turn the conference over to Mr. Beto Abreu. Please, you may begin your presentation.

Hi, everyone. Thank you for attending our second quarter results call. I want to start with the highlights of the following 3 points. The first one, we reported solid operational results with a strong free cash flow, once again showing resilience of the business even with a more volatile geopolitical conditions. The second point that I also would like to highlight is that on July 1, we had the Arbex closing, fully aligned with what we have previously expected in terms of time line. The governance and the management team is already 100% in place. And now we will focus on the integration and on capturing efficiency gains of this new organization.

The third point, I also would like to say that Suzano will keep the focus on reducing the TOD, the total operational disbursing, and of course, on deleveraging the business. I also want to take the opportunity to say that today is the last call for Aires Galhardo, our Vice President for the industry operation and also engineering. Aires is leaving a legacy of major achievements of Suzano, and we all want to wish him every success in his next journey. So thank you very much, Aires.

On the next call, we will also have -- we already have Carlos Anibal as the company's Industrial and Engineering Executive Vice President. Carlos has been with us for 23 years already, has previously held the roles of Paper Business Vice President, Commercial Vice President and also Forestry Vice President. So he has experience in many areas of the company. And he has been both a supplier and a customer to the industrial area. So we wish him great success in this new cycle. Very welcome, Carlos.

Having said that, I will turn over to Fabio to talk about the paper business.

Thanks, Beto. Good morning, everyone. Please let's turn to the next slide.

Our second quarter performance reflects higher sales volumes and prices as well as lower SG&A on a quarter-over-quarter basis. These positive factors were offset by inflationary pressures on wood and oil-related products and logistics as well as longer-than-expected ramp-up following our annual maintenance downtime in Pine Bluff mill. Looking at our addressable markets in Brazil, print and write demand according to Iba remained stable in the second quarter compared to the same period of last year. On a quarter-over-quarter basis, the 4% growth was driven by seasonality and higher demand for coated papers, benefiting from increased promotional and communication-related activity ahead of this year's elections.

On such context, Suzano's domestic print and write volumes grew 4% on a year-over-year basis and 10% on a quarter-over-quarter basis. In the export markets, print and write demand declined 4% year-over-year in the U.S. and Europe, according to PPPC. Latin America showed stability, led by an increase in participation of Asian players in the region.

Now looking at paperboard, demand in Brazil grew 8% in the second quarter when compared to the same period of last year and grew 11% against the first quarter. We note some customer inventory buildup in the first half of the year ahead of the implementation of paperboard price increases. Against this backdrop, Suzano domestic paperboard volumes grew 11% on a year-over-year basis and 28% on a quarter-over-quarter basis.

In the U.S., according to FP&PA's data, SBS shipments grew by 11% year-over-year, albeit at an operating rate around 82%, which is softer year-over-year and stable quarter-over-quarter. Adjusting for recent capacity closure of the Smurfit Westrock La Tuque mill, Clearwater's Cypress Bend capacity reduction and the interruption of operations at the Nippon Dynawave facility, operating rates increased to 90% and should support better market dynamics in the second half of the year. Our Suzano Packaging sales volumes were quite stable on quarter-over-quarter and year-over-year basis.

Turning to the EBITDA performance. Our Brazilian operations improved 28% on a quarter-over-quarter basis with higher volumes and better prices domestically and from our exports despite unfavorable FX. Compared to second quarter 2025, the EBITDA from our Brazilian operations declined 20% due to lower price, export volumes and FX. Suzano Packaging EBITDA was impacted by the scheduled maintenance outage in May and operational instability returning from the outage as well as increased costs due to the ongoing Middle East conflict, especially in oil-related inputs, mainly resins and logistics.

Looking ahead to Suzano's paper and packaging business performance, sales volumes from our Brazilian operations tend to improve across both domestic and export markets, given historical seasonality for the quarter. In the U.S., we started Q3 with a strong order book with improvements in supply and demand dynamics. We remain focused on managing inflationary pressures related to the Middle East conflict, mainly in resin and logistics. Through initiatives already implemented or currently underway, we expect to mitigate most of these impacts going forward.

Now I will hand over to Leo, who will be presenting our Pulp business results.

Thanks, Fabio, and good morning, everyone. Let me highlight the main developments in our pulp business unit during Q2 2026 and share our outlook ahead. Q2 was marked by different dynamics in pulp markets. In Europe and North America, pulp demand recurrently outperformed expectations, supported by stronger paper production due to war-related effects and inventory replenishments across the value chain as customers aim to get ahead of expected cost increases. These factors led to consistent month-over-month increases in pulp prices during the quarter.

In China, the narrowing softwood hardwood price spread and the high availability of softwood pulp at Chinese ports weighed on purchasing activity from paper producers despite solid paper production, higher wood costs impacted integrated local producers and a greater clarity around the delayed start-up of OKI 2 mill. This unfavorable backdrop driven primarily by softwood dynamics affected the broader pulp market and led to hardwood pulp price concessions towards quarter end. Even at lower prices, customer purchasing activity remains subdued in June.

At Suzano, our Q2 was marked by constrained production output due to a concentration of planned maintenance downtimes added to our ongoing reduced operating rate as well as an inventory rebuilding towards minimum operation levels required to support our operations as previously discussed. As a result, our sales reached 2.9 million tons during Q2, lower compared to Q2 '25 and slightly above Q1 '26. Higher prices across all markets, combined with the recovery of delayed invoicing to China and Asia drove our average export price to $601 per ton in the quarter.

Turning to the right side of the slide, the BRL 4.2 billion in EBITDA with a 48% margin reflected higher prices in U.S. dollar, partially offset by higher cash costs and FX headwinds.

Now looking forward, I would like to share our view on the key factors influencing pulp market fundamentals. Market dynamics in July were quite similar to those observed in the end of the second quarter, healthy demand in Europe and North America, but mounting pressure in Asia for the same reasons pointed out before. As hardwood pulp prices in China approached the mid USD 500 range, paper producers stepped up buying activity and our July order intake returned to healthy levels. In addition, our market intelligence team indicates that hardwood pulp inventory levels remain well balanced, both at Chinese ports and on the hand of paper producers in China.

As we move into August, we see a more constructive environment developing in Asia. Seasonal demand is expected to strengthen. Hardwood pulp prices have moved below the cash cost of a number of Chinese producers and a wider softwood hardwood price spread enhanced the competitiveness of hardwood grades. Together, these factors should support higher order intake volumes in China and Asia, reinforcing our confidence in a stronger second half of the year. Furthermore, the prospect of paper price increase announcements in Asia should provide additional tailwind for pulp demand in the coming months.

While demand indicators are becoming more constructive, the supply side also presents potential upside risk to market fundamentals. At current CIF China price levels, a meaningful share of global pulp capacity remains under economic pressure. According to a well-known industry consultancy, the just updated numbers, approximately 17 million tons of softwood and 5 million tons of hardwood capacity are currently operating below cash cost levels at the China prices, representing close to 30% of global market pulp production.

Production curtailments announcements have reached the headlines during the past months, mostly in softwood pulp, but still insufficient to rebalance the market fundamentals. At the same time, industry profitability continues to be pressured by rising input costs, several of which are linked to ongoing geopolitical tensions. Still on the pulp supply side of the equation, a stronger El Nino season this year may increase the likelihood of weather-related disruptions in key producing regions with possible implications for wood availability and production costs. Together with the recent forest license revocations in Indonesia, these factors could contribute to a tighter-than-expected S&D scenario in the short term.

To conclude, I would like to reiterate that Suzano's unmatched business platform supported by our best-in-class assets and unique end-to-end logistics capability provide us the agility to respond quickly to any market conditions and capture commercial opportunities. With our inventory levels already aligned with our operational needs, we remain well positioned to navigate the ongoing volatile global environment.

With that said, I would now like to invite Aires to share our cash cost performance for the quarter.

Thank you, Leonardo. Good morning, everyone. Cash costs excluding downtimes reached BRL 843 per ton in the second quarter '26, broadly in line with our guidance. The 5% sequential increase mainly reflects higher input costs, particularly natural gas, caustic soda and chlorine dioxide amid continued pressure from global commodity and energy markets from the conflict in the Middle East.

Wood costs also increased quarter-on-quarter, mostly driven by longer cartages and mill production mix. These effects were partially offset by stronger utilities results, supported by higher export volumes, favorable FX and fixed cost dilution from higher production volumes.

The conflict in the Middle East remain a factor affecting our year-over-year cost performance, contributing to higher chemical and energy price. Wood costs were pressured by higher logistics and harvesting activities, driven by transportation mix, labor and maintenance. These headwinds were partially offset by the same positive factors discussed in the quarter-over-quarter analysis, namely favorable FX effects and stronger energy sales performance. In addition to the higher energy export volumes, energy price benefited from the excess energy auction related to Ribas mills, which became effective in January '26.

Beyond the information presented on the slide, I would like to provide some additional color on maintenance downtime costs. The BRL 129 per ton this quarter, in the second quarter '26 mainly reflect a heavier maintenance schedule during the quarter, extending downtime at the Tres Lagoas mill and the remaining impact of Ribas mill downtime that began in the first quarter of '26.

Looking ahead, the company remains on track to deliver an average 2026 cash cost, excluding downtime of approximately BRL 800 per ton, in line with its guidance and disclosure assumptions, supported by the gradual cash cost decline in coming quarters.

With that, I pass the word to Marcos to continue the presentation.

Thank you, Aires, and good morning, everyone. I'll start on Slide 7, explaining the impact of higher oil prices in our operations and the effectiveness of our hedging strategy. In second quarter 2026, our costs increased by BRL 275 million due to higher oil-related prices. And we had a positive cash impact of nearly BRL 150 million from our hedging portfolios, compensating nearly 60% of the negative impact. Looking ahead, we have 85% of coverage over our hedgeable exposure in the second half of 2026 and 35% in 2027. As a sensitivity, if Brent prices remain at today's level of $87 per barrel, Suzano will receive a positive cash adjustment of BRL 250 million over the upcoming 18 months.

Moving to Slide 8. I'll show that our currency portfolio continues to protect our free cash flow. In the second quarter of 2026, we had a positive cash adjustment of BRL 480 million from our FX hedges. Our portfolio of zero-cost collar remains solid at $4.6 billion with an average put option of BRL 6.11 per dollar, covering 57% of our U.S. dollar exposure. As a sensitivity, if the BRL remains at today's level of BRL 5.19, Suzano will receive more than BRL 4 billion on positive cash adjustments in the upcoming 24 months.

Moving to Slide 9. Our positive free cash flow in the quarter contributed to reduce our net debt from $13 billion in first quarter 2026 to $12.8 billion in the second quarter. Our leverage ticked up from 3.3x in first quarter 2026 to 3.4x in the second quarter, mainly explained by the contraction in our last 12-month EBITDA. Following the acquisition of Arbex in the third quarter, we will consolidate 100% of Arbex net debt and only 1 quarter of EBITDA. But we believe that the correct way of looking at this metric will be to consider the last 12-month EBITDA of Arbex. We remain highly focused on executing our strategy to reduce Suzano's leverage following the conclusion of this transaction.

Lastly, we maintain a very healthy cost of debt at 5.1% in U.S. dollars with a comfortable amortization schedule of 76 months with limited amortizations in the short term. Important to mention that we continued our liability management effort in the second quarter of 2026, and we issued BRL 2.5 billion or $500 million in local instruments with an average tenure of nearly 11 years and a final cost 60 basis points below the Brazilian benchmark rate for the same period.

Now I'd like to turn the call to Beto for his final remarks.

Thank you, Marcos. I want to highlight 3 main points looking forward. The first one is that we're still expecting higher demand on the second semester and then stronger sales. That's the first point. The second one is that we're still confident that we will deliver the guidance regarding the cash costs that we share with all of you. And the third one is that we are already expecting efficiency gains from the Arbex operation in the second semester since the team is already in place. So having said that, I will open for...

[Operator Instructions] Our first question comes from Caio Ribeiro with Bank of America.

So my first question is on your cash cost guidance for the year, which you kept at BRL 800 per tonne, which points to a drop to levels below BRL 800 per tonne in the second half of the year to achieve that. So I know that you guys are confident in achieving that, but I just wanted to see if you can share some more color on the main components right of that cash cost and the variables that should help you deliver that guidance. And if you can give us also some color on the general trends that you're seeing for next year, how sticky some of those cost impacts from the conflict are, that would also be great.

And then secondly, a question on leverage, with the company targeting to reach that level below 2.5x debt to EBITDA in 2027 to '28, and you still have to consolidate the net debt from Arbex. Just wanted to see if you can share some color on the pathway towards achieving that level, if you believe at this point that it can be reached solely with free cash flow generation in the period or to what extent you're incorporating divestments as part of that assumption to reach that level, that would also be very helpful.

I'll start, thank you. I'll start with the leverage question. So the bulk of the free cash flow generation will continue to come from our operations. So we expect to generate that from our business. As Beto mentioned, we also expect Arbex to contribute on our deleveraging process as they will be able to generate efficiency gains over the upcoming quarters, namely in 2027 and in 2028. And on top of that, as we started mentioning in our last Suzano Day in December last year, we are also focused on a couple of divestments on noncore assets. We mentioned to you that we will have a strategy of selling land plots in Brazil that will be sold to a higher best use than being only being used by planting forestry. And we already started -- we started that in the last months and last quarters, and we expect that to also help on the deleveraging process going forward.

Caio, Aires speaking here. For second semester, there are 3 main reasons to expecting a decrease in our cash cost. First of all, we don't have significant downtimes at our facilities, that will increase our production, delaying the dilution of the fixed costs. The second one, these downtimes normally impact all the costs in the analysis because normally we bring to the general shutdowns and other maintenance that we have scheduled for the year. And the third most important factor, we expect a reduction of the consumption in the wood, especially because we've been totally in place our deal with Pangeia that we presented in the end of last year. It will take place in a good amount and reduce probably our ratios and our wood consumption in the coming years.

There is another important effect, that's energy. Probably in a specific quarter we have an increase of surplus and it will deliver a better result. For next year, I prefer Carlos be in place to say what you're waiting for coming year.

Our next question comes from Marcio Farid with Goldman Sachs.

Well, first of all, Aires, I've been following your work since your Fibria times and very well done. Congrats on the great journey on Fibria and then on Suzano. It's been truly remarkable the operational deliver you guys have delivered. So congrats and good luck on the next steps.

Yes, I have a couple of questions. The first one on Arbex. I've seen many link updates. Clearly you've been moving fast in terms of putting the team together. And I'm sure by now you probably have an even better idea on what the company and the assets and the markets look like versus when you did the due diligence for the acquisition. So it would be great to hear your updates, early impressions, next steps. And your ongoing conviction on the deliveries that can be expected.

And secondly, maybe on the paper side, I think Fabio mentioned China imports have been hitting the market. We've been hearing about Chinese and Indonesian imports being more harmful to the Brazilian market as well. So trying to understand if you can see actions being taken by the government in terms of tariffs and how you are positioned for that? And also if you can comment on the U.S. profitability side, that would be great as well.

Marcio, this is Beto. Let me cover the Arbex and then the team here with all the other questions. I think 3 things that we should highlight on the Arbex. The first one is that the team, I'll say, the clean team from Suzano and for Kimberly-Clark have been working together during all this period of time, and they have delivered tremendous job in terms of carve-out and also in terms of writing down all the value gain streams that we had in place. So all the premises that we share once we announced the deal, we want to confirm that they are still in place. So we are now focused to deliver the premise that we also shared with you.

The second thing is that the governance also it's working already. We have a board already in place with 3 members from Suzano 2 from Kimberly-Clark. They already had a first meeting. They already are working to implement the plan that we have approved. And secondly, we are very glad about the management team that we were able to put together with people from both companies and also hiring people from outside. So we are confident that we have a very strong team to extract all the efficiencies that we shared with you once we announced the deal. So the team very confident about what we are able to build with this initiative. Thank you. So let's take the -- I'll hand over to Leo -- to Fabio.

It's Fabio here. Marcio, thank you for your question. So let me take the first part about the Chinese imports. Yes, we have seen a big inflow of Chinese imports in the first half of the year. This is mainly given the stronger real, for most of the first part of the year, and also lower freights that we have seen in, especially in the beginning of the year. Things have changed a little bit. We have seen some price increases announced by Indonesian Chinese paper producers. And also, we have seen rising freight costs, mainly with the Middle East conflict. And also the Brazilian real has weakened a little bit. So let's see what happens in the second half of the year with these adjustments.

Through Iba, the main players are discussing ways of protecting the domestic industry, looking at our import duties and see if we have the right level of import duties in order to protect what we are doing. So we are discussing and discussing with the Brazilian government ways of protecting the national industry here.

Your second question regarding U.S. profitability, we have had a difficult second quarter. That was -- part of that was expected by the -- we had a cold maintenance outage, which is first time that we have done that in Pine Bluff. It's the one that we turn off all the utilities at the mill. And so we had some difficulties bringing the mill back to operations, and that affects our results in the second quarter. And also, we have a delay in pricing protection. We have 80% of our volume under contract and our contracts, they offer some inflation protection prices, but there's a lag of 3 months between when the cost hit us and when we can increase price to customers. So -- and that second quarter was the lag period that we had higher costs and prices start rising now in the third quarter.

We are optimistic about the second half of the year, as I mentioned, there are some things happening in the market. Our main competitor had a major accident at the mill, is still down, not operating. That's Nippon Dynawave. And we have received a very strong orders book for the second half of the year. And so we now need to produce well and so that we can have this -- collect all these volumes that we have already in place here with us in terms of orders.

So we're very positive about the second half of the year. We have no major event in terms of maintenance plan for that period. So -- and we see the mill running much better now in August already. So we're optimistic.

Our next question comes from Rafael Barcellos with Bradesco BBI.

Congrats Anibal for the new position. So first question on pulp markets. So Leo, your speech seemed a bit more constructive versus what we have been hearing over the past 1 or 2 months. So I just wanted to hear your thoughts on how strong you believe demand will be in this -- in the end of August as we approach a stronger demand seasonality. And if you are comfortable to call where we are in hardwood pulp as the bottom? And any other comments that you can provide on the cycle could be interesting as well.

And the second question, Beto, on capital allocation. So the company still have some potential investments going forward, like you have the right to increase your share in Lenzing, in Arbex. You also have a buyback program open and you have this priority now to deleverage. So I just wanted to hear your thoughts and your framework here on which areas you should prioritize? I mean, if you can consider any sort of asset sales to accelerate deleveraging and your overall thoughts on how you're going to balance the buybacks, the potential investments in this deleveraging process.

Rafael, good morning. Thank you for your question. Yes, indeed, we are a bit more constructive when it comes to volume allocations. As we know, second half of the year is seasonally higher than the first half of the year. And during these first weeks of August, all interactions that we are having with our Asian customers and Chinese customers, obviously, are extremely positive. We expect that August order intake will exceed significantly our average order intake pattern. So we are quite confident of that. And we're also seeing now the first signs of integrated Chinese producers, mainly the higher cost ones already coming to the table to start discussing in negotiations. So that's always a big indication of higher volumes going forward.

Regarding your question, if we see hardwood pulp reaching the bottom, obviously, we cannot give forward-looking statements, but we are confident as the negotiations have started that at current levels or very close to them, we will see the industry moving in China and in Asia and consecutively in Europe and North America as well. So we are very confident of a strong second half of the year.

Rafael, thank you for your question. To be very straightforward in terms of capital allocation, our priority, it's really deleveraging. So this is where we're going to focus despite rights that we might have on those deals that you mentioned before. And this is also related to buyback. Again, the focus and the main priority of the company is deleveraging, and this is what we're going to focus on.

Regarding asset sales, you know that we own nearly 1 million hectares in terms of land, and we have a small part of that, very small part of that, that we call higher and best usage of the land that we might divest. Actually, we have started already. But besides that, there's no other important divestment process that we are taking into consideration at this time.

Our next question comes from Daniel Sasson with Itau BBA.

Before we start, I'd also like to thank Aires for all the changes we've had over the years, your constant availability to engage with us. It's really been a privilege to follow your journey across Aracruz, Fibria and Suzano. So best of luck in your next steps.

My first question, Marcos, you mentioned that you expect the internal free cash flow generation to be the main driver of your deleveraging path over the next few years, followed by opportunistic -- by some opportunities to divest some noncore assets and so on and so forth. At what time or at what point do you believe the company can rethink about its formal policies so as to maybe send a clear message to the market with regards to shareholders' returns, for instance, by changing its dividend policy? Because I think that the main point of discussion we had with investors last night was the super strong free cash flow -- operating free cash flow that we posted this quarter, right? So once this continue to materialize after the incorporation of Arbex mainly, you're going to start to be -- ask about the capital allocation and so on and so forth. So I'd like to understand how your official policies are entering into this discussion.

And then maybe my second question to Leo. If you could expand a little bit more, of course, it's you can't say whether you are close or not to the bottom of prices for the cycle. But if you could give us more information or more details about what you just said that there are some high-cost integrated Chinese producers maybe considering buying pulp from -- buy market pulp, right? What are your estimates in regards to the Chinese pulp production cost depending on if they use domestic wood or if they import wood chips from Vietnam, for instance, because we're seeing wood chip prices increasing across South Asia in general, right? So that would be really helpful.

Daniel, thank you for your question. First, I would say that we continue to be very focused on our strategy. So the first point is we will continue to be ever satisfied in terms of how competitive we can be in our operations. So we're always looking for opportunities to improve our efficiency in all the value chain that we have, starting from the forestry, actually from the nursery to the forestry to the logistics on the commercial area, so on -- in the industrial area, so on and so forth. So this will be a top priority for us. And this -- we believe that this will help and contribute to generate cash to reduce our leverage.

Second point, as we mentioned, we will continue to extract value from our recent growth investments that we made. And the most relevant one is Arbex for sure. And we are confident that we will be able to deliver the efficiency gains that we're expecting for that business.

Last point, we should look for optionalities that we can have and that we can bring to the table as we have an irreplicable asset base in our hands. And we started with the land plots, as we mentioned, but we could extrapolate that into other business that we have. Of course, whenever trying to extract value from our asset base, this could take some time. We mentioned to you before that we have very strong and competitive logistic assets that we have in Brazil, replicable as well that we could extract value from that in the future, but could take more time.

So for the short term, we are definitely focused on bringing the leverage to the level that we believe it's healthy for the company, 2.5x. As we reach that, we will be able to decide on a more aggressive or not return to shareholders. So I would say that the main assumption behind considering a new return to shareholder will be focused on deleveraging the company to 2.5x.

Daniel, this is Leo here. Thanks for your question. I'm going to try to give a color in other variables other than just wood and to fundament why we see a constructive second quarter or second half of the year with several potential upsides in the model.

First, with all our market intelligence team in China and all the work we do, our current estimate of average cash cost for pulp production in China ranges from $540 or $535 to $550, and that's the average Chinese cash cost. So obviously, older mills operate at a higher cash cost and newer mills at a lower cash cost. So -- and prices, as you know, are very close to these levels and already breaching the cash cost of higher cost Chinese producers. I'm not even talking about marginal cash cost because that's, in our view, around $630. So we really think that something has to go on, on this global pulp scenario, as I mentioned before, continue to say it's completely unsustainable to see an industry operating with 30% of the total production underwater. This is -- this cannot be sustained for a longer time.

And a bigger evidence of that is the amount of unplanned downtimes and closures announcements that we have seen so far. I have always been saying that this is one of the drivers of change. That's not in our forecasting models, but that happened and could happen in cycles like this. So just to exemplify, the unplanned downtimes and closures last year totaled roughly 1.7 million tons, adding softwood and hardwood.

And what we know up to today and with yesterday's announcement of Metsa Kemi, we are now reaching 2.5 million tons already. And again, that's just until yesterday. So it's a 45% increase in unplanned downtimes and closures up into August, right? That's almost 1 million tons of product that's now less available to markets, but in my view, still insufficient. We still need to see more closures for market to recover balance.

Last but not least, it's important also to look at the inventory levels at Chinese ports. They are high indeed, but they are reducing. We see a reduction from peak of roughly 300,000 tons. In our view, that's all softwood inventories being reduced. A few months ago, inventories of softwood represented 65% of what was available at ports based on our market info and teams in the ground. Today, we see maybe a 50-50% buildup in terms of what is the Chinese stocks, meaning that if you make the calculations, hardwood is completely on balance. But there's still an overstock in softwood grades, which we believe with this number of announcements of closures and expected future announcements to come under this economic scenario, which I mentioned, should again reshape and rebalance Chinese inventories and, consequently, the market as well.

Our next question comes from Rodolfo Angele with JPMorgan.

I have a couple of questions. One is just to Marcos on working capital outlook. Just wanted to hear if you have any visibility on potentially freeing up some working capital to help that process of deleveraging in the second half of the year.

The main question I have is for Beto on strategy. So -- when we discuss the investment case for Suzano, one pushback that we constantly receive is, again, because of the past and the fears of potential opportunistic M&A, shifting the focus away from deleveraging and shareholder returns into more investments. So I just wanted to make the question very vocally to you so that we can, for sure, clarify even better that how management sees M&A as in your toolkit of potential things to do and to just how you look at it as a whole. That's it for me.

Thank you very much. Thank you for your question. On working capital, definitely we have a very strong focus on improving that line. This is a target -- an internal target for the company. And it resounds on the never satisfied approach that we have. How can we be more effective and more efficient on our inventories, how can we be more efficient on our CapEx, so on and so forth. So we will continue to look at this line with very close eyes and looking to capture opportunities.

However, I would say that there are fluctuations in that line that are very frequent, right, in most of the -- in most of the accounts that are relevant. So accounts receivables, accounts payable, CapEx postponement, so on and so forth. So it's very difficult to predict or to forecast anything on that line. But you can bear in mind that this is a strong focus of the management at this point in time.

Rodolfo, thank you for your question. I have been saying that our strategy, it's very concentrated currently on, I'll call reshaping the level of competitiveness of our company. We still have a lot to do on that area in the next couple of years. The commercial team have been doing a great job and what we can call creating new demand through the fiber-to-fiber strategy. The potential of those initiatives is still in place and still growing. And as I said, on the very short term, the next 2, 3 years, deleveraging the business. So there's no M&A in the pipeline at all. So this is what we're going to keep focused, and this is what we want to do. Thank you, Rodolfo, for your question.

Our next question comes from Alfonso Salazar with Scotiabank.

The question that I have tried to put together some of the comments that you have made during the presentation, the fact that China is exporting more, what you mentioned about the situation in China. And we know that consumption in China has been very weak recently, overall consumption, not only paper. But this is something that more people are starting to think this is structural, not something cyclical. And at the same time, they are producing more.

So I'm wondering if at some point, as you consider what could happen if you start having overcapacity and more supply in China, more exports, the need for more exports as we have seen in many other industries. what grades and what markets you think could be more exposed? What would be the strategy, especially -- this is important, especially as you are getting more exposure to new markets through Arbex. So if you can comment on how this situation could unfold or what are your thoughts about what we are seeing today?

So this is Leo here. I'm going to answer your question. But before that, I missed -- just -- I'm going to get back to Daniel's question when he asked about the wood impact in China. And just to clarify because I skipped that one.

So we are seeing today the Chinese industry using roughly 58% to 60% of their needs from local wood in China. And roughly 40%, 42% imported. The important part of it, there is a price increase. As we all know, that ranges from $30 to $50 from end of last year. And I think in 2 calls ago, I mentioned that this could be a probable impact related to the revocation of the Indonesian licenses and now Indonesia importing wood from Vietnam, which is what's happening. And in China, there's also an uplift in prices compared to early last year's prices of roughly $30 in BDMT.

And we see a lot of volatility in the short term, very related to the typhoon season. There's a big correlation of wood prices in China and this weather-related events. So every time a typhoon occurs. And obviously, the recurrence of those in a strong El Nino year is higher. So we see peaks every once in a while. But all in all, if we consider the lowest part of this range of $30 BDMT increase, we're talking about $60 increase in the cash cost of the Chinese producers. And if we consider the upper range of $50, that's a $100 per ton cash cost increase for Chinese integrated or pulp producers. So that's our view on wood.

Now going to Alfonso's question, this is a big dilemma, right, Alfonso. First of all, I would start by saying what I don't agree to. We don't agree that the consumption in China in paper grades is weak. We see in most grades, packaging and tissue, double-digit growth, demand growth in China. So it is not our view that we're seeing a contraction of demand in that grade. Obviously, printing and writing grades still grow domestically. The demand for those still grow, but at a lower pace and not double digits. So we're not seeing at all in any of these grades, a trend in paper grades that point out to a negative consumption trend. It is a positive consumption trend in China, obviously, excluding exports and adding imports to that.

But yes, there is an overcapacity in the industry. This is not new. This is not 2026 information. This has been going on for many years or decades. But it's important to say that there are grades that are easier to be exported, which are more efficient in logistics, I would say, printing and writing and packaging grades. And as you kind of correlated to Arbex, your question, and tissue, tissue obviously is a product that's much harder to be exported because logistics and the cost of logistics is a key component. So it's a product that usually you would reach efficiency closer to your production basis. So risk levels differ among different grades in terms of paper production.

The Q&A section is over. We would like to hand the floor back to Mr. Beto Abreu for his closing remarks.

Thank you very much again all for our second quarter 2026 results. I want to thank you. And if there is any further questions, please get in contact with our IR team. We will be keen to answer any further doubt. So thank you very much, and have a good day.

The Suzano S.A. second quarter of 2026 conference call is concluded. The Investor Relations department is available to answer further questions you may have. Thank you, and have a good day.

Ladies and gentlemen, thank you for holding, and welcome to Suzano's conference call to discuss the results for the first quarter of 2026. [Operator Instructions] This call will be presented in English with simultaneous translation to Portuguese. [Operator Instructions]

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 will turn the conference over to Mr. Beto Abreu. Please, you may begin your presentation.

Thank you. Thank you, everyone, for attending our first quarter 2026 results. Let me kick off our call highlighting that Suzano's business model has distinct attributes that set it apart in the pulp and paper industry and provide greater resiliency in the current global environment. Our consistent long-term focus and conservative financial management reduce the company exposure to risk associated with the current geopolitical landscape.

For example, in international logistics, Suzano operates under long-term contracts with dedicated vessels. We have more than 50 vessels and 10 of them fully dedicated to our operations, which protects the company against increases in freight rates and ensures reliable services to customers worldwide. Additionally, the company has inside the fence production of critical inputs for its manufacturing process, mitigating supply risk and also cost pressures.

Finally, to reduce the impact of energy cost pressure linked to higher international oil price, Suzano maintains a hedge portfolio that mitigates its exposure to Brent-related volatility. During our presentation, Marcos Assumpcao will give you further details about that.

Turning to our results. Let me start with the EBITDA of the first quarter. In our view, the numbers reflect a solid performance with volumes above first quarter 2025, given historical seasonality compared with fourth quarter 2025, supported by higher pricing and G&A expenses that fully offset year-over-year inflation. These results are starting to show the management's clear focus on strengthening the company's structural competitiveness.

As a highlight, I also would like to share with you that we are currently running our operation with 10% less headcount when compared with a year ago. So besides that cash production, cost delivery in the first quarter of 2026 was 100% aligned with our operational plan and also aligned with what we mentioned in the previous call. So despite cost pressures arising from the current geopolitical environment and based on the visibility we have today, we continue to expect our average cash cost in 2026 to be below 2025 levels.

Let me move for free cash flow. And the free cash flow in the first quarter of 2026 reflects specific cash flow items in the quarter, as we know dividend payments, also the timing of interest payments under our debt schedule and also a one-off CapEx related to the wood swap with Eldorado last year. Therefore, our capital allocation priority remains focused on further strengthening Suzano's capital structure with a clear emphasis on reducing net debt.

And before handing the call to Fabio Almeida, I also would like to note that we are encouraged by the efficiency gains already mapped in our JV with Kimberly-Clark, which reinforce our expectation of value creation going forward and confirm the quality of the capital allocation decision underlying this partnership.

Having said that, let me hand over to Fabio that will cover paper and packaging business.

Thanks, Beto. Good morning, everyone. Looking at our markets in Brazil, paper-wide demand according to IBA increased by 3% in the first 2 months of the first quarter compared to the same period of last year, led by stronger coated paper demand and higher volumes of imported uncoated wood-free. International markets continued to face a challenging environment with a weaker demand and excess capacity for papers.

According to PPPC, demand in mature markets declined by approximately 7%. In contrast, Latin America posted demand growth of 5% year-over-year. However, prices remain under pressure, giving very low prices to Asian producers across major markets. In paperboard, Brazilian demand grew 6% in the first 2 months of the first quarter when compared to the same period of last year, supported by improved economic activity.

In the U.S., AF&PA data shows that SPS shipments and production were broadly stable year-over-year, albeit at a lower operating rate around 82%. Production of liquid packaging board grades dropped 20% year-over-year, reflecting softer end consumer demand and inventory reduction by packaging converters during the quarter. In this context, during the first quarter, we experienced different dynamics across our Brazilian U.S. operations. While all Brazil operations delivered stable volumes when compared to first quarter 2025, we have seen lower volumes from Suzano Packaging as a result of lower demand and LPB inventory reduction at the converters end.

Turning to price performance. In Q1 2026, we continued to see sequential improvements at Suzano Packaging on a dollar basis, while our prices in our Brazilian operations suffered from lower export prices and FX impacts. Our export prices were further affected by reduced shipments to the U.S. market, which used to be one of our strongest combinations of prices and volumes abroad prior to the position of tariffs.

At the EBITDA level, the 8% year-over-year decline was mainly driven by lower export prices from Brazil together with FX appreciation. Meanwhile, Suzano Packaging EBITDA delivered a strong EBITDA increase of 167% year-over-year, reflecting our turnaround effects.

I would like to highlight the cost improvements achieved in our Brazilian operations, which delivered a 8% lower COGS per tonne on a year-over-year basis and a 6% reduction quarter-over-quarter. These gains were driven by lower cash costs across all mills and lower logistics costs, supported by our continuous focus on operational excellence. At Suzano Packaging, costs in first quarter were impacted by higher natural gas consumption and prices during the severe winter storm in major parts of the United States at the end of January. Total weather-related costs were estimated around $5 million.

Looking ahead to the performance of Suzano's Paper and Packaging business, sales volumes and prices from our Brazilian and U.S. operations will improve in Q2, following the usual seasonality and with the implementation of price increases and the pass-through of cost indexes in our U.S. contracts.

Market conditions are expected to lead paper producers to increase prices since higher raw materials, energy and logistics costs are expected to hit paper producers hard as a result of the ongoing conflict in the Middle East. We expect our industrial cash costs from our Brazilian operations to be stable in Q2 versus Q1, while logistics costs should trend slightly higher with increased diesel prices and container rates.

At Suzano Packaging, our annual maintenance is scheduled for early May, which will temporarily impact production costs in the quarter, in line with our business plan. We don't expect any sales impact from the annual maintenance shutdown and we are fully committed in delivering full year results for Suzano Packaging, better than what we did last year.

Now I will hand it over to Leo, who will present our Pulp business results.

Thanks, Fabio. Good morning, everyone. Let's now turn to our Pulp business unit, where I'd like to share with you the highlights of the first quarter of 2026 as well as my view for the upcoming months. This past quarter was marked by more balanced market fundamentals as a consequence of healthy paper production in key markets and supply side events reducing short-term availability of hardwood pulp.

In China, paper and board production according to SCI posted a 15% increase compared to Q1 '25, with growth across all paper segments and January and March production levels in line with the highest and record production months of 2025. Recent supply side developments, notably pulp production curtailments in Indonesia following the revocation of forestry licenses and a greater clarity on the delay of APP's OQ 2 project start-up to year-end, meaning that no new market pulp volume will reach the market in 2026.

This all has supported hardwood pulp price increases during the quarter to all markets with strong order intake levels and slightly above our forecast, resulting in continued delivery backlogs, particularly for Asian markets, including China.

In this context, Suzano sold 2.84 million tonnes of pulp in Q1 '26, representing almost 200,000 tonnes increase compared to Q1 '25, which was fully consistent with our sales plan designed accordingly to market seasonality. Pulp production volumes during the quarter came in below budgeted levels due to some nonrecurrent events during planned maintenance and the ramp-up following the scheduled downtimes.

As a result, we were unable to rebuild inventories throughout the quarter and our inventory levels ended Q1 '26 quite low and flattish like year-end 2025. Our industrial teams are fully committed to gradually recover these lost volumes, mostly on the second half of this year as demand picks up towards year-end.

With the unfolding of the Iran war affecting logistics to key markets where we have important customers, our unique and irreplicable logistics, as Beto has said, enabled us to keep delivering pulp to our customers in the region, being able to surpass any eventual additional war-related surcharges to ensure pulp supply chain continuity.

Now looking to the right side of our slide, the BRL 4.1 billion in EBITDA was a result on a year-over-year basis of higher volumes, lower costs and better prices in U.S. dollar terms, however, facing a toll from FX appreciation during the period. Compared to the previous quarter, EBITDA declined despite higher pulp prices in U.S. dollars, primarily due to seasonality, a stronger Brazilian real and a more intensive maintenance schedule.

Now looking ahead, I would like to highlight a few key points. The conflict involving Iran war has unfolded so far and even implications across regions and markets. In Europe and North America, demand has exceeded our expectations with paper producers increasing their operating rates to capture temporary market opportunities amid reduced competition or longer and more expensive logistics affecting prices as well as a surge in these markets to build up finished goods inventory on the whole value chain.

This dynamic has led us to announce a new round of price increases for May, specifically directed to Europe and North America. The war has also been affecting cost structures of different pulp players in different regions as energy matrixes vary, while also raising imported wood delivery costs to key markets and impacting logistic costs and flows.

Overall, supply and demand dynamics have diverged meaningfully between hardwood and softwood grades. Hardwood pulp fundamentals remain quite balanced and healthy, a backdrop that contrasts with the current situation faced by softwood producers. In softwood, we continue to observe high inventory levels in China, which combined to declining prices throughout the past months, result in an increasingly unsustainable environment in our view.

According to a recently updated report from a well-known industry consultant, roughly 11 million tonnes of softwood, which is equivalent to 40% of global softwood capacity, is currently operating at loss. Again, 40% of total softwood production is currently operating at loss. And the situation is further aggravated by higher war-related cost pressures still to impact their cost structures.

These dynamics point out to a higher likelihood of commercial downtimes or permanent closures of softwood mills, especially in the Northern Hemisphere, while also incentivizing projects of de-verticalization of integrated pulp and paper producers in the western part of the world as we have been stating before.

The ongoing convergence of hardwood and softwood pricing with different dynamics in Western and Eastern markets has increasingly shaped recent discussions with our customers as softwood market imbalances intensify competitive pressure. Our commercial strategy is structurally focused on maximizing our sales, also taking into account seasonality and regional dynamics, while reinforcing the fiber substitution and expanding the addressable market for hardwood. Fostering fiber to fiber and increasing the addressable market for hardwood is totally key for us.

Looking specifically into Suzano's Q2 2026 sales volumes performance compared with Q2 '25, our production output will be constrained by previously announced planned maintenance downtimes at major pulp lines such as Tres Lagoas 1 and 2, Mucuri 1, 2 and Jacarei as well as by the lower operating rates at some of our mills, resulting in almost 300,000 tonnes of production reduction year-over-year.

In addition, some inventory rebuild will definitely occur in Q2 '26 as we were unable to increase inventory levels in Q1. We plan to keep this rebuild in minimum possible levels. However, it is critical to ensure our high service level standards to our global customer base as well as operational efficiency.

To conclude, I would like to reinforce that Suzano's unmatched business platform, supported by our best-in-class assets and the unique logistics structure provide us agility and resilience across our supply chain. This enables us to respond quickly to changing market conditions, capture commercial opportunities and consistently maximize value, even in an increasingly volatile and uncertain global environment. We are very well prepared to navigate these rougher seas.

With that said, I would like to invite Aires to address our cash cost performance during this past quarter.

Thank you, Leo. Good morning, everyone. Turning to cash costs in the first quarter '26. Excluding stoppage, it reached BRL 802 per tonne, up 3% quarter-on-quarter. The increase was mainly driven by temporary operational factors, including higher input consumption, especially auxiliary materials, reflecting the scheduled replacement calendar associated with planned shutdowns. In addition, purchased energy costs were higher due to a nonrecurring event at mills.

We also saw temporary pressure from wood costs, driven by higher specific consumption as well as a lower fixed cost dilution following the reduction of production volumes in the quarter. These effects were partially offset by a lower input price and by the 3% average depreciation of U.S. dollar versus the real, which reduced costs in local currency for items such as caustic soda and natural gas.

Finally, energy sales performance improved, supported by a higher average price and the start of volumes contracted in the auction for surplus energy from the Ribas do Rio power mill. Importantly, there was no impact from the Middle East conflict on our cash cost in the first quarter '26. Year-over-year, cash cost excluding stoppage decreased 7% in the first quarter '26, driven by a combination of several factors. The main driver was the 10% average depreciation of the U.S. dollar against the Brazilian real, which reduced the cost of key dollar linking inputs, particularly caustic soda, natural gas, chlorine dioxide.

We also benefit from the lower wood costs, reflecting a shorter average from forest to the mill distance, lower diesel prices in the harvest and transportation and a favorable mix effect related to wood sourcing and new allocation. In addition, input price excluding FX came down, especially caustic soda and natural gas, while fixed costs were also lower following reduced spending on the labor and service. Finally, energy sales delivered a strong result, supported by a higher average energy price, including a contribution from the previous mentioned energy option.

Looking ahead to the second quarter '26, our initial expectation was for cash costs to be closer to the first quarter '26, reflecting the high intensity of scheduled maintenance shutdowns according to our operation plan for the year. However, we now anticipate some pressure on the cash cost in the quarter related to the impacts from Middle East conflict, particularly through energy and the other input markets.

As a result, our current expectation is for our cash cost in the second quarter '26 to increase by a low single digit versus first quarter '26. This headwind is partially mitigated by our Brent hedge portfolio, which our CFO will now address in more details. But first, additionally, even with this conflict scenario, based on our assumptions that we have today, we expect to close 2026 with average cash cost lower than compared to 2025, even on a nominal basis. Again, as a disclaimer, this forecast is based on the assumptions for Brent, and here, say, a year to go, at $85 Brent and inputs that we have today.

Marcos, the floor is yours.

Thank you, Aires, and good morning, everyone. I'll start my presentation explaining Suzano's exposure related to oil and also detailing our hedge portfolio, which offers us a clear competitive advantage in the current volatile environment.

On the left part of the slide, we show a sensitivity to the variation of Brent prices, assuming a full pass-through of all the impact of Brent to local prices, which have not occurred yet. In that case, for every $1 per barrel increase in Brent, our EBITDA will decline by BRL 47 million. However, our current net cash impact of the event of $1 per barrel increase in Brent prices is only BRL 12 million, less than 25% of the full impact that we showed in this table.

The diminished impact is explained mainly by long-term diesel contracts, which have not been impacted by higher oil prices yet, and most importantly by our portfolio of hedges on oil that we built over the past 2 years, which will likely compensate higher costs with positive derivatives and financial results.

Moving to the right part of the slide, we show our current portfolio of oil hedges due to our exposure to shipping costs and also natural gas prices. We also use 0 cost collars for our hedges. But in this case, we buy [ call ] options and we're selling put options with the same premium. Our current portfolio ranges between $57 to $69 per barrel on average, which means that our cost of oil for the hedges that we made is capped at $69 per barrel. Of course, we gave away the possibility of having lower than $57 per barrel cost as we did the 0 cost collar.

We are nearly 90% covered for our 2026 exposure. And as we made in the sensitivity, if Brent prices stays at $104 per barrel, which was the level that we closed by the end of first quarter 2026, we will receive a cash adjustment of BRL 810 million over the upcoming 2 years. In the first quarter of 2026, we already benefited from our hedges and we had a positive cash impact of BRL 48 million in our results due to our oil hedges.

Moving to the next slide. I'd also would like to reinforce our FX hedge portfolio, which is already offsetting the impact of BRL appreciation. As you can see, our current portfolio stays at $5.6 billion, which means more than 60% of our FX exposure with an average put option of $5.97 and a call option of $6.90. And in the chart on the right, we show our full portfolio and also the impact -- the cash expected impact if the currency remains at 5.22, which was the same level that we closed the first quarter of 2022. So if that was the case, we will receive more than BRL 4 billion in positive cash adjustments over the upcoming quarters as well.

Moving to the next slide. On the top part of the slide, we can see that our net debt increased slightly to $13 billion in this quarter, mainly impacted by the dividend payment in the beginning of the year, also higher CapEx payouts and a concentration of interest payments in the period. Our leverage remained relatively stable at 3.3x when measured in U.S. dollars. Regarding our amortization schedule, we continue to have a healthy average maturity of more than 6 years, while we maintain our average cost at 5%, which is also a clear competitive advantage for the company.

I would also like to highlight that following the end of the quarter in April, we concluded 2 other very important transactions in the local market. We issued a CPR of BRL 2.5 billion, nearly $500 million, with an average term of 11 years, and we swapped that into CDI and we stayed at 96% of all-in swapped cost of CDI. So a very, very competitive instrument. We were also able to issue an additional BRL 180 million in incentivized debentures with a 15-year average maturity and with even more competitive costs.

So now I would like to hand it over to Beto for his final remarks.

Thank you very much, Marcos. I think the summary of what you just said, I would say that we should have a unique portfolio -- hedging portfolio for FX and Brent in the industry. I would say at least one of the most robust hedging portfolio to face the current business environment. I think this is the first thing.

The second one, going back to Fabio's presentation, let me highlight one of his point, which is he is expecting sales and pricing in U.S. and Brazil improving already in the Q2. On the pulp cost, we, as we mentioned, continue to improve. Our performance is showing the commitment of this management on this line of our business, not only on cash costs, but many other line of costs.

On the JV, as I mentioned, we are moving fast and the closing is estimated to be on the third quarter of 2026, 100% aligned of what we planned. And this management will keep the focus on strengthening our balance sheet, competitiveness and also reducing our net debt.

Having said that, we will open for questions. Thank you very much.

[Operator Instructions] Our first question comes from Daniel Sasson with Itau BBA.

My first question for Leo. I mean, since the last call, the price drivers seem broadly unchanged, Leo. I'd like to know if you agree with that, restrictions in Indonesia, reasonably healthy Chinese demand, still somewhat tight supply. But the announced price hikes have been harder to implement, right? Or I'd like to know if that's also your view. So digging deeper into that, what explains the main increase being focused on Europe rather than in China? How do you see the continuation of land revocations in Indonesia, the impact on cost in China? So if you could give us some color on that, it would be great.

And my second question is actually more of a follow-up in your -- from your initial speech. You haven't been able to replenish inventory levels because of the maintenance stoppages you mentioned. You also mentioned logistic challenges in the quarter. Can you please elaborate a bit more? I mean, did the logistic challenges translated into lower revenues in the first quarter that were pushed to the second quarter? Or did you have any one-offs in terms of production that didn't allow you to replenish investments in inventories as quickly as you thought you would? Those would be my questions.

Daniel, this is Leo here. On the first one, you are correct. The price drivers that I mentioned in the last call related to hardwood are unchanged. We still see a positive demand and actually a positive surprise coming from Europe and U.S. tissue, where we see even stronger demand than we had originally forecasted.

And on the supply side of the equation, again, you are correct. The factors that we have pointed out are confirmed or even further confirmed being the revocation of forestry licenses in Indonesia affecting pulp -- market pulp production and availability in Q1 and also the postponement now very clear of OQ 2 to year-end and maybe even beginning of 2027. So that is really unchanged.

Regarding implementation of price hikes, I think we have to separate the world in 2. We have Eastern markets and we have Western markets. Eastern markets, our prices have been increasing continuously since mid last year, while softwood prices have been declining continuously since mid last year. And now this price differences have reached a point where all our negotiations are much harder with our customers if we want to sustain this fiber-to-fiber agenda, which, as I have mentioned in my speech, is a priority to us.

So at this time, in Asia, we are being cautious. We are waiting. We understand that something has to happen in softwood. As I mentioned, 40% of the global production is bleeding as we speak. And we are not in a position to make moves that will jeopardize our overall strategy of supporting a much bigger market and addressable market for hardwood and not only in short term, but mid and long term.

In Western markets, different than that, still the price gap between fibers allow us to keep increasing our pricing, our prices, and that's why I can confirm to you all now that we have managed to implement full the $50 increase in all Western markets as we had announced. And now we are getting prepared for this new implementation of the recently announced $50 for May. So different market conditions depending not only on regional demand, but also in how we are positioned against softwood pulp with the strategy of maintaining this fiber-to-fiber agenda.

Our lower sales in Q1 is not related to logistics impact. It's really related to our plan. We had a very strong Q4 last year we understand and our customer base has a seasonality where we have a lower Q1 traditionally to Q4 of the previous year. Despite that, we were able to sell 200,000 tonnes above last year or Q1 2025.

So in terms of our plan, we were completely aligned with our sales plan, but some one-off events in the maintenance downtimes and their ramp-ups, as I have mentioned, did not allow us to make this replenishment of inventories, which was our original plan. I have also confirmed in my speech, Aires and his team are fully devoted and aligned to recover this production, mainly on the second half of the year, which is actually good for us because that's when we have demand pickup. So that would be a perfect match for us as well.

That all said, we will have to do some inventory replenishment in Q2 2026. We're going to try to keep it to a minimum possible, not to affect our overall figures, but it is necessary and we have to do it now.

Our next question comes from Marcio Farid with Goldman Sachs.

Well, I think we spoke last time in China and you mentioned the plan to try and create a business outside of China and especially with the integrated mills pushing for a potential disintegration as well. It caught our attention. It seems like there is potential there. Just wanted to understand what is the latest there? And if you have any updates and more details you can disclose to us?

And maybe second question to Beto. Beto, obviously, share price performance has been a disappointment. We look at the last -- whatever window you want to look, 1 year, year-to-date, 5 years, share price is basically below where -- even before Cerrado startup, which was a $5 billion investment, right? And we speak to investors. Obviously, capital allocation and the leverage levels, it's 2 main points of attention. Obviously, the sector has derated with all the structural change that we have been observing as well.

But I wanted to hear from you and from management, from the Board side, is there a level of discomfort with the recent trend? And if there is anything that can be done or you think it's a matter of market understanding that Suzano's strategy might take longer to be reflected on share price and on investors' perception to what value generation is. And I think it's inevitable that we discuss that given the recent trends. And it would be great to hear from you.

This is Leo here. I would just, to answer your question, do a step back so that we have all stakeholders aligned in terms of what we talked about in China. Suzano's strategy in leading the fiber-to-fiber agenda consists in very -- in 2 very clear avenues. The first one is fiber substitution itself throughout education projects, refining pilot plants and then applying our knowledge in our customers' machines and mills to be able to substitute not only softwood grades, but also other kinds of fibers like U.S. mix hardwood or bamboo or any other alternative fiber as well. And that's one of the avenues.

But the second avenue is a very important one, a bit more complex in terms of timing, which is how to de-verticalize integrated pulp-to-paper producers, right? We all know that globally now we are reaching almost 120 million tonnes of pulp to paper or packaging verticalized producers. A big part of that is on western markets and a big part of that are old mills, very old mills or old mills which are being pressured for quite a while now in terms of their cost structures, in terms of pulp production, and I would say that even further pressured now with war-related cost pressure. So this is a key part of our strategy.

We have been engaging with several of these players, very known in their markets. And the idea is to, together with them, discuss an alternative route where they are becoming more asset-light, shutting down their pulp production and Suzano being able to virtually integrate with them as their solution in terms of pulp supply, making them more competitive in this challenging and competitive world ahead of us and ahead of them.

Projects are ongoing. These are longer maturity projects than the first avenue of fiber to fiber. We are in the imminence of confirm the first project, and we are going to give full visibility, obviously, when that happens because I personally believe that this case will show not only to the customers that we have already engaged with, but several others that there is a possibility -- there is an alternative to verticalization, which is happening in Asia.

A couple of things regarding your question. The first one, of course, the management is not comfortable with the share price. I think there's a couple of things that's related to that. Firstly, we don't think it's aligned with the robustness of the business. That's the first thing. There is not a single reason, of course. For sure, the FX situation and geopolitical moment, it's something that for sure affects.

We see here in the management when we look at the base that we have in terms of assets, in terms of asset portfolio, in terms of logistics, in terms of the trend of our cost. Let's look for the trend and how do we see this in the mid, long term. And not only about cash costs, but also all the other line of cost. We see a very robust and resilient business to face the moment. And in the very -- and I would say, in the mid- to long term, we see a positive trend for the business despite the current situation.

But based on that, regarding capital allocation, of course, on those moments, despite our focus on deleveraging the business that I have been saying and also reducing our net debt, buybacks is always an alternative. And in a moment like that, of course, we are analyzing right now that possibility since it's reaching a level that we have to consider this kind of alternative. But we also must take into account our track record on capital allocation. And this is the way that we should be moving with the discipline and concentrated again on the elements that I just mentioned and attracting value from the investment that we made.

And also -- so having said that, I do not foresee, just to clarify, any kind of movement that can impact our cash, I would say, inorganic move that can impact our cash in the next coming years. So again, to keep very disciplined and maintain the track record that we have been seeing on capital allocation.

Maybe a quick follow-up to Leo. Leo, you mentioned you want to replace inventories. In our calculation, you should have been losing about 160,000 tonnes of production from capacity, already considering the 400,000 tonnes that you lost. But by the numbers reported, it seems like you've lost 400,000 tonnes and you have not recovered any inventories, which might suggest that the downtimes were much longer than expected. And you're talking about replacing inventories on even more aggressive downtime in the second quarter, which means sales are going to be even weaker. Is that the right way to think about it? Was the downtime more aggressive than expected in the first quarter?

Marcio, thanks for your analysis and question. But unfortunately, we do not disclose our production figures nor our inventory figures for the past quarter and also not looking and going forward. What I can tell you is that despite the maintenance -- the concentrated maintenance downtime seasons that we have now even further in Q2 '26, which we had 0, by the way, in Q2 '25, and the need to reestablish inventories, and we will push that to the minimum possible levels.

The sales output in Q2 tends to be above what we have performed now in Q1 2026. And again, this is not a guidance. It's just to show the trend that we are seeing here at Suzano. And obviously, due to the implementation of the price increase rounds that I have mentioned previously in our backlogs, we see a much better also pricing in Q2 compared to Q1 2026, all this in U.S. dollar terms, obviously.

Our next question comes from Rafael Barcellos with Bradesco BBI.

Beto, Marcos, in recent months, you announced the buyback program, right? I understand that the company is now running with a leverage level which is above of where you feel comfortable. And other than that, you have the K-C disbursements in the third Q. But when do you think that you'll be ready to start accelerating the execution of the program? I mean you just discussed how low the shares are at the moment and so on. So I just wanted to understand, I mean, when you believe you'll be ready to accelerate the program?

And given -- and that said, I would say that there's any sort of asset sales that you could use to accelerate the deleveraging process? And ultimately, just going back to the dividend policy question, I mean, if you see any room for a discussion of a more robust dividend policy in the company.

And then my second question -- sorry for one more question on pulp markets. But last quarter marked a big change in your tone about pulp markets, right? I mean you were clearly much more positive versus the previous quarters. And so I just wanted to -- wrapping up everything that you just said here in the call, I mean you mentioned that western markets are going up, prices are going up. eastern markets then you've seen more challenges, but you're still not seeing any sort of downward pressure on prices in Eastern markets, right? So I just wanted to -- if you can wrap up. I'm understanding that in western markets, you're still seeing good trends. Eastern markets kind of mixed, but so far, stable prices in the eastern markets. So if you can just wrap up your views, it could be helpful.

Marcos here. Regarding buybacks, I think Beto already mentioned, we are already analyzing. For sure, it's an interesting capital allocation for the company. We always look at that considering our leverage levels, but we also consider the valuation levels of the company as well. We would like to highlight and reemphasize that we continue to be one of the companies in our sector with the highest free cash flow yields with nearly 14%, as we included in our report. We also look at our valuation levels. We're trading well below our historical valuation levels. So definitely, this is an option for us.

Regarding dividends, we would rather have a lower and more normalized leverage level before changing our dividend policy. But we see room in the future as we deleverage to improve dividend payout. But that's not being discussed at the moment.

Okay. Rafa, this is Leo here. First, you really don't need to be sorry for sending us questions. We are well prepared, and you guys can keep coming and keep sending us the pulp questions at all means. I think, Rafa, that the big change compared to our last quarter's call is really the trend that's going on, on softwood, which has been deteriorating further than what we had already been seeing 3 months ago.

It's impressive to say, as I have mentioned in my speech, that 40% of this industry of the softwood pulp producers today have cash costs above current market prices, 40%. So this is a big change to the model. And as we want to be supportive to the fiber-to-fiber strategy, as I mentioned, this changes a bit our short-term tactic in order how to navigate, especially in China, right? Because in Europe, the situation and also in the U.S. is different, as I have mentioned.

But just a quick sum up then as you asked. So the war has been, in fact, resulting in different dynamics in different markets. Softwood scenario is unsustainable and has been an increasing headwind to our pricing strategy, especially in China and in Asia. In China, we are cautious to be able to support our commercial strategy and keep pushing this fiber-to-fiber agenda. And in western markets, we have a heated up demand a bit over what we had expected or over what we have expected originally, right? And market dynamics have been changing quickly and now further challenged by the Iran war. But I am really confident that we at Suzano are at the best position, the best position to navigate any scenario ahead of us.

Okay. Just a quick follow-up, Marcos. Would you consider any sort of asset sales to accelerate the deleveraging process?

Yes, we are analyzing, as we mentioned even in our Suzano Day last year, a couple of divestitures, mainly for noncore assets. I would say that land plots that could be measured or valued at square meter, not at hectares, for example, is a first option for us. So the high best use for our land. This is one of the things that we have been considering. But there could be other options as well that we have been analyzing in order to reduce our leverage even quicker.

Our next question comes from Leo Correa with BTG.

So a couple of pending -- more numerical questions for me. Just first, reverting back to the cost discussion, right, Aires. You talked about a bit of a guidance, right, for the second quarter, which is of an increase mid-single digits vis-a-vis the first quarter, right, which is probably going to put things above BRL 900 per tonne pulp cash cost. I remember some months ago that you guys gave like some -- let's say, some indications of cash cost levels for 2026 of about BRL 800. And since then, of course, a lot has changed.

I think as Marcos explained, the hedges have been working very well and very well executed. So clearly a lot of protection there. But still many moving parts. And of course, the base is very high. So my question is, can that -- let's say, can that indication of BRL 800 still be maintained? Or you would say the numbers for 2026 are up for some discussions and probably higher levels?

The second question -- again, sorry for the detail. I know this is something that you already said in the introduction was a one-off, right? But the CapEx at Suzano specifically has been an issue for investors over many years, right? The still high number and above maintenance levels. The BRL 3 billion here is above, let's say, the guidance for the year of BRL 10.9 billion. So I can assume the guidance is still maintained and that the levels going forward will drop and things will normalize. So I just wanted to double check on that.

Leo, this is Beto. Let me take the second question, and then I will hand over to [ Beto ]. Very simple. I just want to mention that the CapEx guidance is completely maintained. So there's no change on that. And by the way, we also, as I mentioned before, see a trend of lower CapEx in the next coming years. So this is absolutely aligned with our plan, okay? On the cash cost for the second quarter, let me hand over to Aires.

First of all, I said that they're low, in the middle, single digits to the second quarter ex downtimes. That was in my speech. And we remain our target, our focus on keep our cash cost close to BRL 800 per tonne ex downtimes for full year. As I mentioned, our assumptions at this moment in the cash cost, especially to Brent, is $85 per barrel a year to go. And that's important. Note that our hedge don't enter in this line in our balance sheet, coming in other line that Marcos presented. Then I am considering here this level of BRL (sic) [$] 85 per Brent. If you have more, could impact negatively the cash costs.

Our next question comes from Caio Greiner with UBS.

Leo, just going back to the point on the current pulp backdrop and more specifically about the China and western markets and western markets divergence. I wanted to explore a little bit more of the weakness in China specifically because I think it's a little bit hard to understand considering that we're seeing strong level of paper demand, we're seeing wood chip prices on the rise. I think the only point that I caught from your speech that was the main source of weakness was the war impact. Is that right? Is that the main point as to why you're seeing such weakness in China? So in other words, if we were to see the war to end shortly, with that will we be able to see a reason for pulp to go back on the rise?

And then specifically on softwood, again, why do you think that we're seeing such weakness on softwood markets versus hardwood, specifically in China, again, considering that we're even seeing cost inflation, we're even seeing pine wood chip prices on the rise? I think maybe something a little bit more specific to China would be really helpful to us.

And then the second point on wood chips. Again, not only pine chips, but wood chip prices in general have been on the rise, already $30 to $40 per tonne higher versus 2025 lows. Again, we understand the slightly tighter operating environment in China with some capacity restarts, new capacity starting up, lower exports out of Indonesia. So I wanted you to explore 2 points here on wood chip markets for us. How do you see this backdrop impacting pulp fundamentals and prices going forward? And if you see this upward trend as something more structural or more of a short-term impact?

Okay, Caio. Leo here. I'm going to answer both questions. So first, regarding China and what's going on there. You're right, the demand is positive. Paper production has been performing very well, as I mentioned, 15% over what happened in Q1 2025. Domestic consumption is good. Exports have actually even been increasing as well. So all these indexes or KPIs related to paper production and consequently pulp demand are positive.

Now I will have to split the answer in 2, first analyzing hardwood and then softwood. On hardwood, we have balanced inventories even trending a bit low. We are seeing a lower trend of imports going into China, meaning that these balanced inventories could even tighten up a bit. And we had on the supply side of the equation, these 2 major events, being the Indonesian curtailment and also the postponement of OKI taking place. So that gives a very favorable condition of which -- or for which we have been exploring month by month in Q1 and increasing prices in China inclusive.

Now when we look at softwood, the situation is different. First, looking at the supply side, despite there obviously were not any new projects in the pipeline, we still have not seen an accelerated amount of commercial downtimes or planned or permanent downtimes. Numbers are trending still very low. It seems that producers are still keeping decisions in terms of what to do looking forward despite, again, 40% of them are losing money as we speak. So there were no supply adjustments.

And on the demand side, you had 2 effects directly hitting softwood. First is fiber-to-fiber and the successful execution of our plan and other plans as our competitors as well. It's not only an exclusive to Suzano. So definitely hardwood has been gaining throughout this year's space that was previously occupied by softwood.

And second is the fact that with the softwood chips now available in China since approximately beginning of last year, we have also been observing roughly 1.6 million, 1.8 million tonnes of annual softwood now being produced in China with costs very similar to hardwood pulp cost as well. And this obviously occupies space that was previously being supplied by softwood. So the big difference to the model is coming from the softwood side of the equation.

And obviously, if we were the only fiber, fundamentals would lead us to keep pushing prices up as per our plan. But as we are not the only ones and softwood keeps declining and approaching our prices, it is obviously a headwind that we have to pay attention, especially if we want to foster the fiber-to-fiber agenda, which we will foster. So meaning that we have to be cautious, and how can I say, and hold the anxiety of trying to make moves that will further compromise or that could further compromise us in the midterm.

I'm going to move to your wood-related question. As we have been mentioning since Suzano Day on December 11 last year, we at Suzano see that there is enough wood in China to support the new projects up going in this country, the upstream verticalization projects. However, the big question mark is that the prices of this wood to be able to supply not only the new projects, but also now with a further pressure from the full restart of Chenming's operation and pulp production obviously integrated as well. So that will keep putting pressure on the market.

We have been seeing wood prices going up. Even before what we see are impacts of the Iran war and logistic costs, wood in China -- domestic wood has been increasing $10 to $20 of bone-dry metric tonne and imported wood has been increasing anywhere from $25 to $35, $40 per metric tonne. So obviously, that puts a pressure and brings their cost structure up. And it is our view that this will be further incentivized as more and more of these projects are -- have their go live.

So it's important to say that when we analyze what's going on today, based on 2024 production, our numbers point out that now pulp producers occupy roughly 15% to 18% of the wood basket today available in China. And as I have been saying before, just with the confirmed projects, that would move up to 40-ish percent level. And with the unconfirmed projects, that would move up to almost 80% of the wood basket. Obviously, this analysis does not consider that they are going to import more and more volumes of wood chips as well. So all based on 100% China-based wood supply.

But on the other side of the equation, it's important that other uses -- other sectors also use Chinese wood. When we add up the furniture, the packaging and logistics, the forms work or directly linked to construction segments, these segments traditionally use almost 90% of this wood basket available. And we see, obviously, as a result of the lower real estate market that they now use roughly 70%. That's our number in terms of this wood basket available. So clearly, there's going to be a shock in the short term, right, as these projects in pulp continue to be deployed. Again, they are roughly at 20% now.

And as they keep increasing, this will put a lot of pressure on this wood supply and demand scenario in China, and we expect that this will keep moving up. And then obviously, their cash costs will keep moving up consequently as well.

Our next question comes from Caio Ribeiro with Bank of America.

So I have another question on the pulp market, which is a little bit more longer-term structural in nature, touching on some of the topics that you mentioned in your previous response, Leo, but maybe to dive a little bit deeper, right? I mean you mentioned that 40% of the softwood production right now is underwater. So clearly, something has got to give there.

But looking at the hardwood side of things and downstream side of the market, right, we continue to see potential new hardwood market pulp projects contemplated, other projects already confirmed and being built up even at lower pulp prices, which you can argue that maybe the returns aren't there to justify those projects, but they're happening anyway.

Meanwhile, there's integrated capacity additions in China that also keep coming and which generate implications for organic demand growth for market pulp, as Suzano has been flagging, right, in recent presentations. And it also hampers downstream pricing power as well in China, right? So my question to you is what in your view would be the main catalyst? I mean, what really needs to change in the market that could alter this trend, right, and reverse this recurring wave of supply additions, both on the market pulp side of things and integrated side of things in China?

And then secondly, a different topic here. But as you look at your operations today, do you see any additional opportunities in your current assets to repurpose some of those assets, right, to shift diversifying into other grades, perhaps reducing your exposure to hardwood market pulp that way, and adding products that have less correlation with drivers for paper-grade pulp like dissolving wood pulp, for example? Those would be my 2 questions.

Looking long term, as we have been presenting, we see an oversupply scenario in the pulp markets despite a constructive view on the increasing demand for pulp. But obviously, due to the fact that we have a headwind coming from verticalization in Asia as well as for the moment 2 projects by OKI and Arauco confirmed in the pipeline going forward. But these 2 by themselves already creates a scenario of oversupply as I have mentioned.

So we see that, that rebalancing factors can come, as I also have already said, in one of these 4 dimensions. First is a recovery of permanent closures as we had seen 3, 4, 5 years ago happening, especially in softwood assets. Again, as we have mentioned, it seems unsustainable that this much percentage of the global production is bleeding as we speak. And the returning to previous patterns of permanent closures will certainly be one of the key parts to rebalance the total market.

The second is a higher amount of commercial related or unexpected downtimes. We are tracking that weekly. We see that growing over 2025, but still not to the levels of 2023 and 2024. But as I have mentioned in one of the previous questions, most of this still is hardwood, believe it or not. So we have to see -- or it's reasonable to understand that this kind of decisions will have to be seen on softwood assets as well.

Third is the time to market of projects. So on this more challenging market scenario, projects and their time to markets which were previously announced can be reviewed. And this is the case that we have seen for OQ 2. And that can happen to other pulp projects, but also to other verticalization projects in China, which are very much concentrated now. We have a big cycle in the fourth quarter of '26, but it is very unclear and grayish to say when they are actually going to go live and come to market.

And fourth, which was Marcio's question, is the unverticalization trend. This is something that we really believe that's going to happen. It's a huge amount, millions and millions of tonnes of the industry, which is verticalized pulp into paper packaging. And it doesn't make sense. Their production costs are way higher than average historic pulp prices. So we really believe that in the western markets, we are going to see this wave of de-verticalization happening in the months to come. And I hope that Suzano is the one that will be able to confirm the first of this project. So again, 1 of the 4, 2 of the 4, 3 of the 4 or these 4 factors can add up and change market dynamics to rebalance markets going forward.

And again -- sorry, you asked about repurposing assets. Yes, we can do that. We're actually doing that as we speak. We have just confirmed the -- started the fluff production at our Limeira Sao Paulo site. That used to be solely a paper-grade pulp line and it's now producing fluff pulp. And we could do that in other locations as well and as well as other alternative kind of pulp fibers like unbleached kraft and other grades as well. So yes, it is an alternative and we're always looking how to tackle this kind of opportunities.

The Q&A section is over. We would like to hand the floor back to Mr. Beto Abreu for his final remarks.

Thank you very much for all of you. I actually will take the opportunity of final remarks and to complement a few things on the Caio's question to Leo regarding a little bit more about the mid-, long-term view. So besides what Leo said, Caio, regarding permanent closing that might happen, shutdowns, even de-integration in the western part of the world, we had to share with you that in moments with the level of volatility that we have on the FX side, also on the geopolitical side, the level of confidence that the management has regarding how resilience and the level of robustness of our business increase.

So when we look about the mid, long term, besides those things, we also have to consider that consolidation might happen. So relatively, we'll have to analyze and see who will be prepared -- more prepared in the situation like that because that's a natural consequence of a scenario that might happen. So we have different scenario. We don't -- we have optimist, middle and more, let's say, worst-case scenario, and we have to be prepared for any one of them. Just to add those comments on the final remarks.

Thank you very much for all of you. And any question -- any further questions, the RI team will be fully available. Thank you very much.

The Suzano S.A. first quarter of the 2026 conference call is concluded. The Investor Relations department is available to answer further questions you may have. Thank you and have a good day.

Ladies and gentlemen, thank you for holding, and welcome to Suzano's conference call to discuss the results for the fourth quarter of 2025.

[Operator Instructions]

They would be addressed CEO, Mr. Beto Abreu and other executive officers. This call will be presented in English with simultaneous translation to Portuguese.

[Operator Instructions]

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 will turn the conference over to Mr. Beto Abreu. Please, you may begin your presentation.

Thank you, and welcome, everyone, for our fourth quarter results call. I would like to cover mainly 3 highlights related to the -- our results in the fourth quarter and also our results for 2025.

Let me start highlighting the strong shipment in pulp during the fourth quarter. This is record volumes for Suzano, and it's absolutely related to our supply chain team on the operational excellence side. So flawless execution in our process. So the team here is very glad of what the supply chain team was able to deliver. On the paper business unit, we also had a strong volume. But the point that I would like to highlight here is the continuous improvement of the Pine Bluff operation in U.S. We have been doing a great job over there, learning a lot and showing how our management skills and competence can add value from assets also outside Brazil. We are learning a lot of things that for sure will be used during our K-C operation in the future.

On the side of cost, cash costs came absolutely in line with the plan. On the other side, I would like to ask you to pay attention to the DTO -- sorry, the TDO of Suzano, I would consider 2025 as an inflection point. So what we can expect for 2026 and for the coming years is a new trend in terms of TDO, and this is absolutely in line with our agenda of increasing and improving our level of competitiveness. We also saw a strong operational cash flow in the fourth quarter and also free cash flow, even on the lower price, I would say, cycle. And for me, the message here is the level of resilience of our business, resilience and competitiveness. So this is a business that's going to be even stronger in the future in terms of competitiveness to face any kind of business environment.

So that's the summary for me for the first quarter, volume, cost and the capacity of the business to generate cash in any kind of business scenario.

Having said that, I'd like to hand over to Fabio that will cover the Paper and Packaging business.

Thanks, Beto, and good morning, everyone. Please let's turn to the next page on the presentation. During the fourth quarter of 2025, our Paper and Packaging business unit delivered strong volumes from its operations in Brazil and also in U.S. Favorable seasonality helped to lift volumes in the quarter, while we continue to see paper prices declining in export markets. In U.S., Suzano Packaging continued to be a positive highlight with stable prices quarter-over-quarter and a solid 21% increase year-over-year. During the quarter, we also had our annual maintenance downtimes for both Suzano and Limeira.

Despite the outage in Limeira -- during the outage in Limeira, we finalized important upgrades at the mill, which will improve cash cost competitiveness as explained in our last Suzano Day. Looking at our markets in Brazil, print and write demand according to IBA increased by 1% in the first 2 months of the fourth quarter compared to the same period of last year, led by uncoated paper demand due to seasonality. Demand for cut size and coated paper remained relatively stable year-over-year. International markets remained weak with declining demand and oversupply. Latin America demand has been more resilient when compared to the U.S. and Europe, but the region has seen an income of inflows of Asian papers at very low prices.

Now looking at paperboard, demand in Brazil grew 2% in the first 2 months of the Q4 compared to the same period of last year, also showing the same improvement versus last quarter. In the U.S. market, according to FP&A data, SBS shipments on the fourth quarter were stable quarter-over-quarter and year-over-year, but production was up 2% with the ramp-up of new capacity. New capacity has put pressure in operating rates, mainly in folding box and foodservice market segments, while liquid packaging board remains more insulated.

Looking now at EBITDA performance, the 10% increase over Q4 was driven by the ongoing turnaround of Suzano Packaging, which delivered improved EBITDA quarter-over-quarter and year-over-year. Our EBITDA from our Brazilian operations took a hit from lower prices and FX despite higher volumes in the quarter on a year-over-year and quarter-over-quarter basis. The maintenance downtimes performed at Suzano and Limeira mills were on time and on budget, but also had an impact on our costs. Looking ahead to Suzano's Paper and Packaging business performance, sales volumes from our Brazil and U.S. operations will be lower in Q1 compared to last quarter, following the normal seasonality of the period.

We also expect prices to improve with the phased implementation of the price increases we have announced in Brazil and export markets. Price for Suzano package should remain stable in dollars since the majority of our volumes are under contracts with pre-agreed prices.

On the cost performance, since there are no planned downtimes in Q1, we expect an improvement in our cash cost in our Brazilian operations. For Suzano Packaging, we continue to work to reduce our cash cost, but we could see some pressure in Q1 due to the winter conditions in the region and much higher natural gas prices than expected.

As a final note, I would like to share that in January, we made the decision to cease our paper operations at our Rio Verde mill. This small site was our only nonintegrated mill and was producing around 50,000 tonnes of paper annually. This mill had the highest cash cost in our asset portfolio. And with this closure, we expect a positive impact to our 2026 results by reallocating its products to the more competitive Suzano and Limeira mills and adjusting our commercial strategy.

Now I'll hand it over to Leo, who will present our pulp business results.

Thanks, Fabio, and good morning, everyone. Let's now turn to our pulp business unit, where I'd like to highlight the key developments from the fourth quarter of 2025. This past quarter was marked by price recovery in all markets due mainly to a higher demand of hardwood pulp in China and Asia in general as well as a more pressured cost base for wood in Asia, consequently increasing cash costs of those producers as anticipated in our Investors Day.

In China, paper and board production according to SCI, posted a 17% increase in Q4 '25 when compared to Q4 '24, and the full year analysis presents another positive year with 3% growth in paper and board production and with highlights to Ivory Board, which posted 8% growth in tissue with a 6% growth in 2025. This has reflected in a higher demand of pulp, having pulp imports grown 1.7 million tonnes in 2025 according to Chinese custom statistics, of which 1.4 million tonnes of hardwood pulp. Purchases of hardwood pulp have been further incentivized by softwood fiber substitution trend and also by players in the textile markets increasing their purchases of paper-grade pulp, mostly hardwood.

Our order intake during the quarter was above expectations, meaning that despite a very strong quarter in terms of invoicing, we are still carrying backlogs of deliveries to markets where we invoice directly out of Brazil, like China, Southeast Asia and the Middle East.

Looking at our price performance in Q4 '25, the $538 per tonne that you see on the slide, although higher than previous quarter, is a backward-looking figure. Market prices are already above that level, as you know, but our reported prices in Q4 was impacted by invoicing backlogs. All incoming orders during the quarter and in all regions in the world were captured at a higher price set point, fully aligned with our price increase announcements with a strong month after month order intake, a trend that is still ongoing. We sold record volumes in Q4 and above our production output during the period, meaning year-end inventories or bringing year-end inventories to very low levels and placing pressure on our logistics operations as inventories fell below optimum operational levels.

Looking at the right side of the slide, the BRL 4.8 billion in EBITDA, up 8% quarter-over-quarter was supported by higher volumes and better prices in U.S. dollar terms.

Now looking forward, I would like to highlight the following points. In China, following a strong production pace of paper and board producers in Q4 '25, January has posted upbeat figures according to SCI, even slightly above the strongest production month in 2025, which was December and 27% higher when compared to January '25. Importantly, this increase has not led to paper inventories build up at paper producers compared to the past month's levels. And just to connect that to pulp demand, as an example, these figures translate into an additional consumption of 250,000 tonnes of pulp compared to Jan '25 just for Chinese tissue producers.

Also in January, order intake from our customers continued quite strong with full implementation of the announced price increase. Our announced price increase were also implemented in all Western markets. As the year began, news on the supply side of the equation have positively affected short and midterm price perspectives.

First, news about the Indonesian government revoking forestry permits covering an area of over 1 million hectares, including plantations for industrial users such as pulp and paper on top of the 500,000 hectares that had that permit revoked during 2025. This brings 2 tailwinds to pulp markets as Indonesia currently produces over 4.5 million tonnes of market hardwood pulp, of which 3.5 million tonnes are exported to China. One of them is that a key pulp producer has promptly announced an immediate and unexpected curtailment of 150,000 tonnes of market pulp for February and March combined.

Another is that according to our market intelligence analysis, Indonesians are likely intensifying their wood chip purchases mostly from Vietnam, placing upward pressure on wood chip prices. This would affect not only Indonesian costs, but also Chinese and Japanese pulp producers who are major offtakers of Vietnamese wood chips. Even before the developments in Indonesia, we had been observing rising imported wood chip prices into China, which, as I have shared in our last Investor Day, represents roughly 50% of the wood furnace for Chinese pulp and paper industry.

Separately from that and very important, APP has announced the delay of the OQ 2 project start-up from early Q2 to mid-Q4 2026. As this was the only market pulp capacity addition considered for 2026, now no incremental market pulp capacity is expected to reach markets this year. The addition of positive paper production figures in China with their gradual price increases in Tissue and Ivory board grades added to unforeseen news on the supply side of the equation, results in a positive short-term dynamic for hardwood pulp, way better than we had expected for the beginning of the year. We don't believe that this trend is short-lived, and we expect that it should continue post February.

For Suzano, Q1 and Q2 '26 concentrate most of our planned maintenance downtime program for the year, as you saw on our previous earnings release. Therefore, we now need to ensure the proper inventory buildup in Q1 after the record Q4 '25 invoicing performance, focused on recovering our global inventories to optimum operational levels, which will reflect in improved logistics efficiency and also service levels to our customers. We also need to especially prepare our inventories for Q2 when our planned maintenance downtimes will peak, resulting in almost 300,000 tonnes of lower output compared to Q2 '25 according to our production plan. This requires ensuring that our inventories are strategically positioned to serve contracted customers in line with their agreed inventory policies.

As a consequence, we have lower pulp availability to be sold to customers who purchase directly out of Brazilian ports, such as China, Asia markets, Middle East and Africa, meaning that our volumes will remain constrained in the coming months and with 0 allocation to spot markets and customers.

To finish my presentation, I would also like to call your attention to the fact that despite price increase implementations during recent months and taking the latest China PIX indexes as a reference, just yesterday night, updates from Hawkins Wright presents that an equivalent to approximately 7 million tonnes of bleached chemical pulp are currently loss-making, and this is still clearly unsustainable.

With that said, I would now like to invite Aires to address our cash cost performance during the past quarter.

Thank you, Leo. Good morning, everyone, and move to the cash cost slide. We closed the fourth quarter confirming the cost path we had anticipated at the beginning of last year, reaching the lowest level of 2025 with a cash cost of BRL 778 per tonne. Compared with the third quarter '25, the 3% reduction was mainly driven by lower input costs, supported by stronger operational stability across our mills and by lower prices for key energy and chemical items such as natural gas and caustic soda. Fixed costs also declined driven by lower labor costs, while wood costs benefited from a shorter average radius and better wood quality, which in turn reduced the specific consumption in the pulp production. In addition, higher energy export volumes and more appreciated FX contributed positively to cash cost performance in the period.

Fourth quarter '25 marks our best cash cost performance since 2021 with the lowest nominal level since fourth quarter '21 and even better performance in real terms as it represents the lowest level since first quarter '21.

For 2026, we expect the average cash production cost of pulp to be broadly in line with the fourth quarter '25. The partner should mirror 2025, meaning a more pressure first quarter versus fourth quarter '25 due to planned maintenance and nonrecurring events such as 2 turbines overhaul, followed by a gradual decline in cash cost over the course of the year.

Moving on to the next slide. As I recently shared with you at our latest Investor Day, Suzano is implementing a comprehensive multiyear program to improve its competitiveness with a clear focus on reducing what we call total operation disbursement or TOD. As you can see on the slide, the 2025 TOD reached BRL 2,060 per tonne, improving on year-over-year base and reinforcing the downward trend toward our 2025 guidance also shared with the market at our Investor last December -- Investor Day last December.

Now I turn the floor over to Marcos, who will continue the presentation.

Thank you, Aires, and good morning, everyone. Moving to the next slide, I will start commenting about the positive free cash flow generation of $400 million in 4Q 2025. even in a scenario of pressured pulp prices. This cash flow generation contributed to reduce our net debt to $12.6 billion by the end of 2025. And as a result, our leverage in dollar terms declined to 3.2x. On liability management, I would like to emphasize that last week, we renewed our revolving credit facility with 20 banks. And the result of that was that we upsized the line from $1.3 billion to $1.8 billion, and we were also able to reduce the cost of this new line.

Moving to the next slide. I would like to highlight our financial discipline by 3 key metrics. First, we delivered our 2025 CapEx in line with our guidance. Second, we are reducing our 2026 CapEx guidance by nearly 20% year-on-year. And third, we are maintaining a very healthy portfolio of FX hedges. By December 2025, we had a $6.2 billion portfolio with an interval of BRL 5.83 to BRL 6.73 per dollar. So as reported in this big orange box, the expected cash adjustments for our zero-cost collars portfolio, if the FX remains at BRL 5.50, which was the level at the closing of 2025, we would receive positive cash adjustments of BRL 2.7 billion. If BRL remains at BRL 5.20, for example, which was close to the level of yesterday's closing, our adjustment would surpass BRL 4 billion in the upcoming 24 months.

Now moving to the last slide. I'd like to update you with our shareholder remuneration program. Last week, we paid BRL 1.4 billion in dividends, which equates to more than 2% of dividend yield. We also concluded our fifth buyback program on February 9, in which we acquired 15 million shares. And we announced yesterday a new buyback program to acquire up to 40 million shares in the upcoming 18 months.

Now I would like to turn it over to Beto for his final remarks.

Thank you, Marcos. As we just hear, I think a couple of things to clarify when we look ahead. From Leo's presentation, what we saw is a more constrictive business environment for 2026, and this was related to clear and concrete events that somehow has changed the supply and demand balance. On the cash, Aires also had a chance to share the level of ambition that he has for the cash cost during 2026. We also expect the same level of trend when we look for the TOD. We still see opportunities on the sustaining CapEx and also on this logistic infrastructure and cost. And this will also allow us to keep reducing our net debt in line with our deleverage objective for the business.

And I also would like to highlight that our JV with K-C is progressing absolutely as planned for closing in mid-2026. The level of liquidity that we have today is also considering the payment in the third quarter for our JV.

So having said that, I will hand over to the group to hear all the questions for the Q&A. Thank you very much.

[Operator Instructions]

Our first question is from Mr. Rodolfo Angele from JPMorgan.

I have 2 questions for you. First, I think the main discussions with investors have been on what Leo has discussed in his remarks. So I just wanted to dig a little bit deeper on that front. Aside from all the topics that you mentioned, Leo, can you talk a little bit more about what do you see in China? You mentioned that paper demand is strong, but I would like to hear a bit more what do you see on the pulp side? Any updates, any change in the trend that we were seeing of increased production out of China? Any risks to the numbers that you presented on the Investor Day of close to 6 million tonnes of distance. So that's my first question.

And my second question is to Marcos. I think the message from Beto was very clear on the trends on the cost side. But I wanted to hear from you a little bit on CapEx, especially if we look ahead, not for this year, but the trends, especially into '27. We believe there is a case for lowering CapEx through time. We don't need a hard number, but if you could comment on at least the trend, that would be great.

Rodolfo, thank you for your question. This is Leo here answering regarding pulp. And just to review, right, in our Investors Day, we give a 5-year road map of what we're seeing in terms of further verticalization or upstream verticalization in China despite not disclosing the year-over-year numbers. But I will do that here for 2025 and 2026, just to make my answer clear.

In 2025, all our very detailed mapping of upstream verticalization in China pointed out to roughly 2 million tonnes of new pulp capacity coming to market. And that 2 million tonnes were almost all, if not all, compensated by lower operating rates of the mills at the beginning, plus the Chenming effect, negative effect when you compare their shutdown in '25 compared to '24 and also to the fact that several integrated pulp-to-paper players and buyers have swapped hardwood pulp volumes especially in Q3 when pulp prices reached the minimum. So we saw a net zero effect of verticalization in 2025. And that explains why we see a very positive imports of hardwood and growth of over 1.7 million tonnes or 1.4 million tonnes, sorry, into China, as I mentioned in my opening speech.

For 2026, we have mapped closely a new addition of upstream verticalization. The number is a bit even bigger than in 2025. It's roughly 2.8 million to 3 million tonnes of capacity. But different than last year, all of these projects with an exception of one are starting or supposed to start in Q4 2026 and one starts in Q3 2026. So we should see no effect of that in the beginning of the year, maybe in the end of -- very most end of 2026, if nothing is delayed. So that's very much concentrated in the latest part of the year. That's why we see even stronger fundamentals for the short-term dynamics in hardwood.

Rodolfo, thank you for your question regarding CapEx. Yes, there are a lot of moving parts on CapEx, including inflation for sure. But we see a couple of nonrecurring items that we will have to pay on our CapEx in 2026. To give you a couple of examples, first, we are -- we have our SAP upgrading version. We also have the Pangea Deal that we did, which was the wood swap with Eldorado, which had a payment in the first quarter of 2026.

We even had an additional investment at Cerrado regarding the bonus for the productivity that we had over the initial 12 months of the project. And we also had a spillover payments from a couple of industrial projects that we concluded in the second half of 2025. So considering all of those nonrecurring items, let's say, there is room for us to see a lower number on CapEx, but I would not like to give you that as a guidance, okay?

Our next question is from Mr. Caio Ribeiro from Bank of America.

So my first question is on buyback execution, right? I'm just wondering if you could talk a little bit about the mentality and the process that goes behind deciding whether to execute the buyback or not, particularly as you look at the previous program execution versus the new one that was announced. Looking at the past program, I'm wondering if the M&A transactions that were announced by the company impacted the magnitude or pace of execution of the buyback program. And going forward, as the company focuses on absorbing those assets acquired and assuming that no more M&A is carried out, does it make sense to execute a higher portion of the new buyback program or fully executed?

And then my second question is on potential divestments, I just wanted to see if you could share a little bit more color on how this divestment lever could be used to accelerate the deleveraging progress of the company? What assets you could consider as potential divestments and what the timing would be? And if there is a targeted leverage level for the company?

Okay. Caio, remember that at our Suzano Day, we mentioned that we have an ambition to reduce our net debt to $11 billion, okay? That's the most important priority here for the company. So connecting your question on the buybacks, the focus of the company remains on deleveraging its balance sheet. But we try to be very opportunistic on our buyback program. There are a lot of variables that we look when we are doing the buybacks or when we are more active on the buybacks, including leverage, but also our view for the share price, our views for pulp price outlook in the short term, our view for the currency outlook as well. So there are a lot of variables that we consider, and we try to be as opportunistic as possible in order to create value for shareholders.

Regarding divestments, as we mentioned also in the Suzano Day, this is a very small portion of the free cash flow expectations for 2026. This is just like a changing mentality for the company, looking for opportunities that are not core business for the company and eventually divesting. The most -- the opportunities that we see are mainly on the forestry business in which we could do the high best use of the land. Sometimes we're using a land for our forestry plantations, but that land is probably more valued for other crops or for other businesses, and we could eventually transform that into cash by converting that land into other businesses.

So I would say that this is the most likely event that we will see in terms of divestments. And this, as I mentioned, is not a relevant portion of our free cash flow generation expectations for 2026.

Caio, I just want to complement what Marcos just said. The deleverage plan for the company, it's not related to any divestment. The deleverage will come from the operational side. That's our plan here. If there's any specific opportunity in terms of generating value for the shareholder with a specific assets, this is something that we will consider.

Our next question is from Mr. Marcio Farid from Goldman Sachs.

Two questions on my side. Maybe the first one to Leo. Leo, very clear message on the pulp markets. Maybe the missing link there is paper prices in China, which have either been under historical lows or have not performed as good as pulp. So maybe the question is, does it matter at all, right? Obviously, the upstream and downstream markets have their own supply-demand dynamics. They tend to correlate to each other. But does it matter that paper prices are not moving? Are you confident that they are going to be moving? Does it matter at all for the pulp price direction from here? And how do you see the relationship between hardwood and softwood at this point because the gap has narrowed quite significantly with hardwood performing a lot better, right? Just trying to understand those 2 topics also important to try and build the pulp mill as well.

And secondly, to Fabio. Fabio, obviously, great momentum on the U.S. Packaging side. And obviously, internally, it seems that you are progressing quite well in terms of operational efficiency and also renegotiating some of the contracts with suppliers and clients as well. We look at your global peers and especially the major -- the largest ones in Europe and the U.S. And after earnings quarter, they pointed to quite negative outlook on -- especially on demand side as well in the case of Europe with competition with imports.

So just trying to understand how do we make that up? I mean, can you perform well in this current market environment? If you have any comment in terms of what you're seeing for your specific products in the U.S., obviously, a more protected region as well. So if you can comment a little bit on the broader market view as well and the progress around U.S. packaging business, that would be great.

Marcio, thank you for your question on the pulp side and how that correlates to paper prices in China as well as softwood. First part of the question, we see -- obviously, the main line that drives our business is tissue, and we see quite on average margins as we speak. We saw the beginning of a price recovery for those grades, but we track that with the current fiber mix that they're using. And obviously, as they are also focusing on this fiber transitioning agenda, moving a bigger part of their purchases to hardwood that also helps offset their cost structure. And in most cases and in several times of the cycle or in most times of the cycles, we see pulp prices pushing paper prices and not the other way around.

So Obviously, the margins and the prices of paper in China are one of the factors that we use in our decision-making process, but not the only one that we use to decide what we're going to do. And also just in line with that we have been supportive in a way. Our last price moves were at a lower range, let's say, closer to $20 a month price increases with time, and that has obviously also the objective to give time to our paper customers to adjust their prices in market. But again, that's not the only variable that we take into consideration.

Your question on the hardwood-softwood gap. Obviously, everyone noticed that we were trending at above $200 in China. Now this number is closer to $100 in other regions in the world is over $100, but I use the $100 as a reference. As we have more and more customers engaging with the fiber-to-fiber agenda and understanding how to better blend and use hardwood pulp, I think that what we see today is paper producers everywhere in the world having a lot of pressure in their margins, and everyone will try to capture margin despite the gap is $170, $150 or $200. The agenda is of a much bigger knowledge in terms of how to utilize hardwood. And I believe that this trend is not stopping despite if the gap is lower or higher.

Marcio, this is Fabio. Thank you for your question. I will address your question about packaging market. You're right. Global packaging market is undergoing a major challenge with lots of oversupply in most of the grades of packaging papers and also some weak demand, especially in Europe. In the U.S., I don't think demand is the main issue here. What's happening, the market is kind of insulated with the tariffs. What's happened is that we have a new capacity that come to market this year and also last year. And this is causing some imbalance in the supply and demand curve and the operating rates for SBS has gone down. So when you look at the major results for the players that have announced their results, there's some concerns about this imbalance and impact on prices.

But this has happened mainly on the open market for SBS, which is Folding Box Board and also food service market. We are kind of insulated from that. You know that our production here at Suzano Packaging, 80%, 85% of that goes into liquid packaging in a market which we have a very large market share. And we are -- we have a 2- to 3-year contract with our major customers. In that 80% to 85% of our exposure, we are protected. Demand is quite stable. Our prices are covered and protected under our contract.

And on the 15%, 20% that we sell to the market, that's the type of pressure that we feel momentaneously from the market. But we're confident that there's still some costs that we can take out of our operation here and the resilience of the liquid packaging market in 80% of our business is going to help us to survive well during these tough market conditions here. The U.S. markets have adjusted themselves in terms of supply and demand imbalances, and we have started to see some capacity closures as well. So I expect operating rates to come back to normal in the near future.

Our next question is from Mr. Daniel Sasson from Itau BBA.

Congrats on the results. My first question is related to the cost front. Aires, you mentioned that you do want to have a better performance on average in 2026 versus 2025, but you're already running at 5% below the average of 2025 in the 4Q. I know it's not a straight line, but if you could compare your current performance at the margin with your total disbursement operation guidance or maybe let us quantify a little bit the sort of improvement that you expect in 2026, if the 4Q '25 is a good proxy. I think that would help us think about the evolution from now until your guidance in 2027.

And my second question, Leo, it was great to hear you say that the order intakes that you've received so far this year have had prices above the average of the 4Q for all regions. But can you please comment a little bit if you're seeing any changes at the margin over the past few weeks, maybe? My question is more related to the decline in resale prices that we've seen or the fact that you guys are trying to increase prices by $10 per tonne this time around and not by $20 per tonne as you had been doing since the end of last year. I mean, are you seeing any weakness or signs at all?

And if you could comment a little bit about the current wood price or wood cost for Chinese producers in China, the domestic wood and the import wood chips mainly from Vietnam, which have also shown a slight decline in prices or in that case, cost for Chinese producers, that would be great.

Daniel, thanks for your question. As I mentioned, we intend to work on average of 2026 roughly in the level that we operate in the fourth quarter 2025 when we closed BRL 778 per tonne. If you consider our average in the year 2025 of BRL 817 per tonne, it's close to what you said 5% in reduction. But of course, we have a challenge in the first 2 quarters, especially because our stoppage that we have scheduled. In the first quarter, we have Imperatriz, [indiscernible], Veracel, and Aracruz Linha A that put a lot of pressure in our cost, especially because of Ribas performance that will bring our cost below.

And in the second quarter, we have Tres Lagoas, 2 lines that put pressure in the same way. Then our trend is a proxy of we have last year when we start the first quarter with a higher probably cash cost when we compare with the fourth quarter, but a trend to reduce in the coming quarters, close the effort in the same level that we achieved in the fourth quarter of 2025.

Okay. Good. Daniel, this is Leo here. I'm going to answer the several questions on pulp together. First, just to rephrase, I mentioned that our order intake in Q4, all months of Q4 had prices higher than our Q4 delivered and invoiced prices. And obviously, January follows the same trend. So even what we were able to capture month-over-month in Q4 had price at points higher than the $538 price that you saw in our release. In terms of how we are seeing the margin or the market going forward, already talking a bit about February. As I mentioned, January is quite strong. We see no changes at all. We -- despite this calendar of the Chinese New Year, where our customers will be leaving for holidays on this weekend and probably returning closer to Feb 23, 24.

Prior to leaving all of our customers have confirmed purchasing intentions or numbers. We are just finalizing the details and most will be finalized indeed after the Chinese New Year. We didn't see absolutely no customer in China and in Asia skipping their purchases or what they expect to purchase in February, meaning that we see no changes in this habit or pattern that we have been observing for the last several months. Our decision of not pushing a higher price increase in February was much more related to the calendar of the month because as most of negotiations will be concluded in a very short time period due to the return of the holidays, we didn't want to be opening any spread of negotiation with customers. So our increase of February is unnegotiable. We will implement it at all costs.

Resale, your question on resale, we believe that this should react post Chinese New Year. Today is trending roughly $10 to $15 below the imported PIX prices references. And our certainty comes to the fact that we also, as I have mentioned in previous calls, we also are always tracking and selling in our customer portfolio in China, integrated pulp and paper producers and also traders who are big markers of price in the resale market. And I can confirm to you today that already all major traders in China have purchased volumes at higher set points than the resale prices that you see on screen. So we have an expectation that you should -- that we should see some reaction on this index post Chinese New Year.

Now on wood costs. Wood costs, we saw on the end of last year, an increase on the wood cost base for China, increasing their cash costs, as we have commented and talked about during Suzano's Investors Day. On the end of the year and early '26, we saw different movements. We saw imported wood chip prices increasing at a range of 12% to 15%, while Chinese wood falling at a range of 10% to 12%. And if you consider that the Chinese industry uses half-half imported and local, I would say that today, our view is that these wood costs are quite stable to what we had on the end of last year, the higher cost basis that we saw at the end of last year, imported wood compensating the -- a bit lower cost of Chinese wood.

This precedes all the news on the floods and revocations of licenses in Indonesia. Just to make it clear, Vietnam, which is a major supplier of wood chips to the region, 70% of that wood chip goes to China. roughly 25%, 23% goes to Japan and currently 7% goes to Indonesia. And our market intelligence analysis show that with this latest revocation of lands and we correlate that to the pulp and paper industry, we believe that Indonesia will push for a higher demand that their needs could reach almost 20% of the available wood chips from Vietnam. So you can imagine the pressure that will put on the markets, on the wood chip markets going forward. So our expectation is that especially this imported base will have a higher cost point looking forward.

Our next question is from Mr. Rafael Barcellos from Bradesco BBI.

Congratulations for the results. The first question is just like a follow-up and a wrap-up on these discussions on the pulp market. So Leonardo, sorry, one more question. But just to wrap up everything you have just said during the call, I mean, there was a clear positive tone, particularly when we compare with our last interactions, right? So I just wanted to understand what was the key development that has made you change the tone. I mean if you just -- if you can just like wrap up and just comment, I mean, what was the key development that has made you change the tone?

And secondly, Beto, I mean, when we look at the Paper division, there were like 3 important developments in 2025, right? I mean there was the acquisition of K-C, the first positive EBITDA in your paperboard assets in the U.S. and the new Tissue mill in Brazil. So that said, I mean, what do you believe should be the highlights for the division in 2026?

Okay. Good. So Rafael, let me share with you what made us change the tone from our last interactions. First is the intensification of the revoking of forestry licenses in Indonesia. now affecting directly the pulp and paper industry. At the end of last year, when we had summed up almost 500,000 tonnes of hectares with license revoked, we didn't correlate any of that directly to the pulp and paper industry. Now that's not more the case. So that is one major factor happening and already affecting directly one of the key producers and an immediately -- an immediate curtailment of 150,000 tonnes in 2 months only of market pulp and how that can affect all the wood dynamics, as I mentioned in my last answer to Daniel.

Second and major change is the delay of OKI from April to the fourth quarter last -- this year. meaning that in terms of pulp coming into market, we should see no new volumes in 2026. This is a major change. It's also important. It's not only that OKI also started or APP also started a board machine -- is expected to start this board machine over 1 million tonnes in Indonesia now in March, meaning that the plan was, as we understand, to be integrated with OKI 2. But now as OKI 2 was delayed, you have a double effect of less market pulp in the market or no additional supply of market pulp in 2026.

At the same time, they're going to need to feed up this new machine and our expectation is that they're going to need roughly 350,000 tonnes of pulp in 2026, meaning that their system should be even tighter to run 2026. So I would say that the major changes have been really on the supply side of the equation. And just to sum up and wrap up, this has changed market dynamics completely and on a very fast-moving pace, as I mentioned in my opening speech.

Thank you, Leo. Regarding the questions for 2026, what do we expect from K-C paper business in U.S. and also the tissue after the investment that we made in Aracruz, as you mentioned, on the tissue side, we are expecting to increase the level of return of the business. Firstly, we were able to deliver another project on time and on budget. That was the case of [indiscernible]. She is in Aracruz. And we expect to now in 2026, extract the right level of value that we expect from this investment. So in the end of the day, we expect to have a better ROIC in this business with a lower cash cost and higher volume.

On the Pine Bluff business in the U.S., I want to highlight again the great turnaround that the local team were able to implement. We have now a positive EBITDA differently from the asset that we have received it, but we are looking to generate cash with the business. So we still a journey in this process of not only generating positive EBITDA, but of course, generating cash with the business. So that's what we expect for 2026 is to keep moving forward on this direction of having assets that can generate value for the shareholders.

On the K-C JV, I think there are 2 main elements that we must consider for 2026. One, of course, is the carve-out is finalized, the carve-out in all countries on time. So that's not a simple process. It's complex, consider the amount of countries that we have. We are on track, but still a lot to do. So finalizing this process on time is absolutely key. So keep working very close the 2 clean teams to make sure that we will deliver this on time.

On the other side, we also have the value creation stream. So making sure that we have all the details regarding, let's say, the levers that we must consider in the beginning of this operation to start generating value as soon as we can is also the second priority. So by the way, we are glad on how the both teams are working together in this process. And -- but for 2026, we would like to see value being created in the JV in the beginning and the carve-out being finalized on time. So again, I think the bottom line of everything is what I have been saying this, which is 2026, we must extract value from the investment that we have made in the past.

Our next question is from Ms. Eugenia Cavalheiro from Morgan Stanley.

If possible, I would like to understand better where do you expect the cost reductions in the pulp business to come from? So I mean, you already disclosed a bit the level that you expect for the year, but just to understand what are the levers for that cost reduction?

We gave some drive for this year. We are not hoping for coming years, just in TDO (sic) [ TOD ] that we presented in our last Investor Day. And for this year, our intention is to work in the same level that we closed the fourth quarter 2025, roughly BRL 780 per tonne. That's the idea for the average of 2026.

The Q&A session is over. We would like to hand the floor back to Mr. Beto Abreu for his final remarks.

Thank you very much for everyone. Thank you for the questions. If still any doubt, as you know, our IR team is always available. So thank you very much, and see you in the next quarter call. Bye.

The Suzano S.A. Fourth Quarter of 2025 Conference Call is concluded. The Investor Relations department is available to answer further questions you may have. Thank you, and have a good day.

Good morning, everyone. I didn't hear anything. Good morning, everyone. It's great to have you here. Thank you for joining us. Good to see the room completely full from here. I know that's a little bit warm, but I'm sure that we're going to have a great morning here today. It's -- I want also to say that we have the whole management team from Suzano here today. So the whole team, the only one that's not here with us today, it's Pablo. Pablo Machado in Shanghai. But we have, for instance, Fabio, that's based in U.S. in charge of the Paper and Packaging business and Fabio is here today. I'm just mentioning the one that's living abroad. Carlos Anibal also based in Austria, is also here with us today. Carlos is currently the Vice President of the Board of Lanzi, and we have the rest of the team here.

And the team would like to share with you during the morning our strategy, our priorities, our initiatives go through a lot of details regarding our view of the market and what we are doing and where we're going to focus our initiatives in the next 2, 3 years. We -- you will remember that our strategy in the last years were related to 5 main avenues, but the business environment has changed and do it, most of the change was related to the elements that we can see here in the slides. So that's the first thing. The other thing is that we must consider that we are finalizing a kind of a cycle of capital allocation. And we can mention here the main projects that we have delivered, and we're still delivering in the next couple of months.

We can mention Cerrado, which is now finalizing the first year of operating at full capacity. Our facility of fluff in Emera, our new tissue facility in Aracruz, we also have the investments in Pine Bluff U.S., the stake at Lenzing and more recently, the swap, wood swap with Eldorado and the KC deal that we should pay next year 2026. So we must consider that a cycle of capital allocation is being finalized.

So when we look for the strategy from now on, going forward, we will focus instead of 5, in 2 main avenues. Two main drivers, which is the first one, competitiveness. This has been part of our strategy for many, many years. We want to keep investing and straining our level of competitiveness, not only against ourselves, but relatively against the competition. So I would say that that's our first and main priority mainly in the next 3 years.

And the second one is extracting value from those projects that I just mentioned. Again, we are finalizing a cycle of capital allocation. So now it's time to extract value from those. And the growth will come not from new projects, not from M&A will come once we deliver what we have planned with those investments that we made in the next -- in the last couple of years. So this is the priority. And we will see during the presentation, that we will cover details related to those main priorities.

And we also will share with you how we're going to measure. We will see that the total operational disbursement will be presented in most of the presentation today because this is, for us, is the best way to measure how we're going to keep reducing cost and keep increasing competitiveness. And of course, the consequence of that will be deleveraging the business to reach our target of 2.5x net debt per EBITDA.

So I hope you enjoy the morning today. And having said that, I would like to hand over to this tremendous professional, Leonardo Grimaldi, who will take you through the pulp market, how we see this going forward. Thank you very much.

Thank you, Beto. Thank you. Thanks for the tremendous. Good morning, everyone, good afternoon and evening for those abroad. It's, again, a huge pleasure to be with you at Suzano Day. My presentation is structurally similar to my last year's presentation. However, it brings some important updates to several of the variables in our models. I'm again going to show the evolution and our view on the fundamentals of hardwood pulp for these upcoming years. I will update you guys on what we are seeing in terms of verticalization in China and in Asia. And as well, I'm going to give several examples of what we're doing in the fiber-to-fiber or the fiber substitution agenda.

As always, to begin, we look at the organic demand for hardwood pulp for the upcoming years, and we are forecasting a solid growth of 4.5 million tons until 2029. This growth is being supported by growth in regions like China and other Asian markets. And in terms of product lines, tissue grades, paperboard and specialty papers are driving the demand for hardwood pulp at a CAGR of roughly 3% when it comes to fiber needs. This is the organic part of the demand, but as I have been pointing out several years, the fiber substitution agenda gives us an additional addressable market and increases the demand for pulp year-over-year. I am going to be talking more about fiber-to-fiber later in my presentation, but I would like to update to you what we are seeing in 2025.

2025 was again another year of growth in terms of share of hardwood over softwood, 1 percentage point, which means that just this year, an additional demand of 700,000 tons of hardwood pulp was created. 700,000 tons, meaning that rhythm, that last year, I mentioned that we were seeing almost double at what it was in the past is still maintained.

So we are seeing average on average, 1, 1.2 percentage points growth in terms of the share of hardwood over softwood. Another way of looking at the same scenario is if we look at the change in demand among grades in the last 5 years, while hardwood posted 2.2% positive CAGR, softwood posted 2.3% negative CAGR in the same period of time. Last year, it was the first time that we brought a lot of focus in terms of verticalization in China and Indonesia and how that affects our market.

At the time, many were skeptical, right? We were a few -- one of the fews that we're talking about this. But today, I believe that this is already understood and accepted by most and seen as a threat to the fundamentals of our business.

We have a team on the ground in China, a big team. And what we do is we map all of the announcements to really see what are our confirmed projects. So in our numbers, and we are updating those. We are seeing from '25 to '29, 6 million tons of hardwood pulp projects now being deployed in China. These are confirmed projects. They do not include announcements or speculations. Again, these are all confirmed by our team. What does that mean? There's a negative aspect of that because, for example, a paper producer, who used to be a customer of Suzano or of our competitors as they are now upstream verticalizing core producing pulp, they're going to buy less market pulp. So in this way, they reduce the addressable market or the addressable demand for hardwood pulp. So that's a negative.

Thank you, Beto. Thanks for the tremendous. Good morning, everyone. Good afternoon, and even for those abroad. It's again, a huge pleasure to be with you at Suzano Day. My presentation is structurally similar to my last year's presentation. However, it brings some important updates to several of the variables in our models. I'm again going to show the evolution and our view on the fundamentals of hardwood pulp for these upcoming years. I will update you guys on what we are seeing in terms of verticalization in China and in Asia. And as well, I'm going to give several examples of what we're doing in the fiber-to-fiber or the fiber substitution agenda.

As always, to begin we look at the organic demand for hardwood pulp for the upcoming years, and we are forecasting a solid growth of 4.5 million tons until 2029. This growth is being supported by growth in regions like China and other Asian markets. And in terms of product lines, tissue grades, paperboard and specialty papers are driving the demand for hardwood pulp at a CAGR of roughly 3% when it comes to fiber needs. This is the organic part of the demand. But as I have been pointing out several years, the fiber substitution agenda gives us an additional addressable market and increases the demand for pulp year-over-year. I am going to be talking more about fiber-to-fiber later in my presentation, but I would like to update to you what we are seeing in 2025.

2025 was again another year of growth in terms of share of hardwood over softwood, 1 percentage point, which means that just this year, an additional demand of 700,000 tons of hard pulp was created. 700,000 tons, meaning that rhythm, last year, I mentioned that we were seeing almost double at what it was in the past is still maintained. So we are seeing average on average, 1, 1.2 percentage points growth in terms of the share of hardwood over softwood. Another way of looking at the same scenario is if we look at the change in demand among grades in the last 5 years. While hardwood posted a 2.2% positive CAGR, softwood posted a 2.3% negative CAGR in the same period of time. Last year, it was the first time that we brought a lot of focus in terms of verticalization in China and Indonesia and how that affects our market.

At the time, many were skeptical, right? We were a few -- one of the fews that we're talking about this. But today, I believe that this is already understood and accepted by both and seen as a threat to the fundamentals of our business. We have a team on the ground in China, a big team. And what we do is we map all of the announcements to really see what our confirmed projects. So in our numbers, and we are updating those. We are seeing from '25 to '29, 6 million tons of hardwood pulp projects now being deployed in China. These are confirmed products. They do not include announcements or speculations. Again, these are all confirmed by our team. What does that mean? There's a negative aspect of that because, for example, a paper producer, who used to be a customer of Suzano or of our competitors as they are now upstream verticalizing producing pulp, they're going to buy less market pulp. So in this way, they reduce the addressable market or the addressable demand for hardwood pulp. So that's the negative.

But there are several uncertainties in this model or in this concept as well. First, is the time to market of these projects. There are several announcements. So the actual dates that they're going to start is a bit blurry when it comes to China and it comes to our exact points in terms of their start-up dates. Then there are learning curves. How quick it is going to be, and also their operating rates. Usually, we note that the operating rates of pulp mills in China and in Asia are much lower than what they are in the western side of the world. Another different concept is how they operate these mills. Depending on what's the price of pulp and how that compares to their cash cost in several moments of the cycle, they reduce even further their operating rates, and they become marketable buyers. So this in and out, this swing in the market is very unique to the dynamics in China and in Asia.

And third, which is a hot topic for most, are and what's the availability of wood chips to support these projects. It is our view that with the decline in the housing market, there is wood available in China to support these projects that are now confirmed. So we do not question if there's wood or not for those projects. What we do question in our models, and we have several scenarios for that, it's what's the cost of this wood, because as these projects are now being deployed and are coming into market, they are going to be obviously placing more and more pressure in terms of woodchip prices and that should increase in the short term or midterm.

If you look at the map, it's also curious to see that with the Guangxi area, where we have 2, are out of the 8 projects for the next years, is where we see the most competitive pulp mills in China. That's where the big part of the eucalyptus base is located. So, usually, in Guangxi, we note the most competitive projects when it comes to pulp, but not all projects are in Guangxi, as you can note. Out of the 8 projects, we have 3 of them in central region in China.

So overall that we understand about wood costs, they also carry an additional logistic cost to bring obviously, wood to their sites either from China or imported. And if we see 3 of the projects are in the Shandong area, Northeast of China. And these mills usually don't have access to the Chinese wood or the eucalyptus wood from Southeast China. They usually either import or they use popular trees, which is another tree used in China to produce pulp, and this tree has a 15% to 20% premium over eucalyptus wood chips. So not all mills in China carry and have the same competitiveness level.

So when we add up now the organic demand that I presented, plus fiber-to-fiber, and you can note that we're still being conservative here. This is below the trend that we have been seeing for the last 3 years. And we subtract the net effect of verticalization, considering our view on operating rates in China and also some mill closures in other countries of the world, we come up to an increase in demand of 3.1 million tons until 2029. So that number that we saw previously, organic demand was adjusted considering all these factors bringing our demand forecast to 3.1 million tons. Now that can be further incentivized by additional fiber-to-fiber movements or fossil-to-fiber movement, being customers now being privileged by the agenda of having more bio-based products.

When it comes to the supply side of the equation and mapping the main projects and also the main conversions, we come up to a net additional capacity of 4 million tons until 2029. So now, we have 3.1 million tons of demand growth and 4 million tons of capacity growth, and once we factor in these 2 numbers, we come to a demand to capacity ratio that is below optimum for quite a long period of time, below optimum for quite a long period of time. And this scenario is completely unsustainable. So what do we expect? When demand to capacity ratio is below optimum points, which would be roughly at 91%, 92%, prices are usually lower, and then prices are lower, a big part of the industry loses money or has inadequate margins. So what we expect? We track very closely 4 scenarios or variables, and I would like to share those with you.

First is the number of permanent closures in this kind of scenario. This only shows softwood pulp mills, which are the even older pulp mills, mainly in the Northern Hemisphere. And we see that the 2025 closures are inferior to what they were in the past years. Something has to happen here.

Second thing we track is the amount of commercial or market-related downtimes and unexpected downtimes. And as you will notice, and this includes softwood and hardwood in this graph, and as you all noticed, it's also below what it used to be in previous years. It is our belief that the geopolitical tensions and the tariffs war, which was kind of the top priority in the agendas of most in Q2 and Q3 2025, made a lot of decisions in this first and second variable be postponed.

Now tariffs are clear. So we believe that decisions will be made. Third variable that we track is the go-to-market or when the pulp mills will actually start. So we're talking about market pulp mills and also integrated pulp mills because obviously, any change in these dates will move or change the scenario completely.

And fourth, and also very important, are the integrated players in our sectors. There are almost 110 million tons of pulp to paperboard production in the world, which is integrated. A big part of this are older mills. The first generation of pulp and paper production, high cost, so we believe that 2 things could happen here. First is a closure at a bigger rhythm of this noncompetitive integrated views and that will generate demand for nonintegrated paper players, asset-light, more competitive.

Second, and we are seeing this trend and it's quite important. As China verticalized and this group here gets worried, we are seeing a lot of traction in discussions where an integrated pulp to paper producer is thinking about closing his pulp production and becoming an asset-light producer. So deverticalizing in that sense and expanding the addressable market for pulp. So these are the 4 avenues that are moving around and that we see opportunity for change. We see the market today at a whole mood kind of in a freeze waiting for something to happen. And we believe this is short-lived, something has to happen in the short term. This is not sustainable. And any change in 1 of these 4, 2 of these 4, 3 or 4 of the 4 will change market dynamics quickly and pricing dynamics also very quickly.

But again, to this unsustainable market that I was talking about, there's another way to look at is, which is comparing the cash cost to the market price. On the left, you see hardwood producers. This is only market pulp, right? So on the left, you see hardwood producers cash cost and where the price is today. And on the right, you see softwood producers and where the price is today. So this is an analysis of a renowned consultancy, Hawkins Wright. They just published this number days old. And as we speak, December 11, 2025, means that 14.5 million, roughly 15 million tons of pulp production in the world is bleeding and losing money, bleeding and losing money, 15 million tons. This is completely unsustainable.

So what do we do under this scenario? First, as Beto has mentioned, and as you're going to see in the presentations of several of my colleagues throughout this morning is focused in being every day more competitive. Second, as a market leader, it is our role to increase and to support a bigger addressable market for hardwood pulp. We believe that it is our role to be the protagonist in this fiber-to-fiber agenda and increasing, therefore, the size of the pie or increasing even further the size of the pie for hardwood producers.

I wanted to show even bigger, but they did not allow me to do so. But in anyway, this slide I showed last year, but it's just to reinforce the concept. I'm sorry, to be repetitive on that, that we see a lot of space for hardwood to grow in all product lines. In green, you see the furnish of hardwood; and in blue, softwood in all product lines. And you see that despite the numbers that I'm going to show you in 2 slides from now, there is still a very low base. So we see this as a huge opportunity. And again, if these grades increase the utilization of hardwood in 1 percentage point, 1 percentage point, and I'm going to show you what we are doing, 1 percentage point, this would give in 5-year period, an additional demand of more than 3 million tons of hardwood. So this is a huge opportunity for the sector.

This idea of being protagonist on fiber-to-fiber movement didn't start last year or this year. It started actually 3 years ago. Today, we have a very strong team dedicated in this movement to support our customers in a very well-designed process as well. It starts with training. We give a lot of knowledge sharing to our customers, showing them the characteristics about Euca pulp, how they interact with the fibers that they are using and also how to better prepare their machines for such.

Second, we go to our customers' mill, and this is a machine-by-machine-based project. Where we map all of their machines to understand the maximum capability of fiber substitution or if any investments are needed, to further increase the utilization of hardwood.

Third, and this is, I believe, a differentiating point of Suzano, as in Brazil, we produce several kinds of paper, several kinds of tissue grades, several kinds of board with 100% eucalyptus. We invite the customers to Brazil, and we opened fully our paper production sites to our customers and their technical teams to spend how many days they wish sharing knowledge and understanding how we produce paper, tissue and board with 100% Euca pulp.

Fourth, we run in our labs in Brazil in Shanghai or tech centers that we partner around the world, a lot of simulation in terms of what will be their new products or if any characteristics would change, if they change the simulation or the furnish of hardwood and softwood or other fibers eventually as well. Then we are ready to run pilot trials and then industrial runs in their mills, both pilot trials and industrial runs with full support of our technical teams who are based, part of them in our international offices and part of them in Brazil.

Just this year, we have more than 70 customers, fully engaging on the fiber-to-fiber agenda, meaning that our technical team are doing projects in more than 100 industrial sites as we speak. So this is really major and to bring a little bit of data or more information on that, we track a control group of 15 tissue players through time. Just this year, with this setup in this process, we were able to increase hardwood to an average of 95% when it comes to this control group, 95%.

So 12 percentage points increase in 1 year, in just 1 year, and very -- and again, it's not only on the obvious fiber substitution prices, right, moving away from softwood and coming to hardwood, the gain also comes because we come into their mills, and we share a lot of knowledge in terms of how to refine the pulp and how to prepare all of the stock to be able to feed their paper machines. So stock prep and refining is a big part of this project as well.

There is an extreme case that the customer has reached 35% energy savings with the support of our team, meaning that in this tissue producer's case, the energy saving that he got after our team helped him, was even bigger than the substitution of softwood by hardwood. This is not all. We also have an innovation platform to support the fiber-to-fiber agenda.

Our R&D team is creating enhancing fibers through time. When it comes to a paper producer, and this is not so obvious, they do not ask for 1 variable in terms of their control. They are tracking several variables when they are considering what fiber they're going to use. So for this example, we brought to the Tensile Index, which is usually -- we usually associate that of being much better in softwood than hardwood.

We have launched this Eucastrong family of products. These are enhanced eucalyptus fiber is much stronger. We have 2 versions of it today already commercial, Version 1 and Version 3, a little bit different among themselves. And you can see that in terms of Tensile, they are approaching more and more software than actually already being over the lower grades of softwood because softwood also is not all the same. And we have new versions of the Eucastrong family, already being tested in our labs and to be commercial in the next quarters to come, but the fiber-to-fiber agenda is not only contained in the paper segments. We see the fluff segment has a huge opportunity. And again, fluff pulp is used for diapers, feminine hygiene products or hospital pads, pet pads, products like. We see a huge opportunity for that. And that's why we have announced 2 years ago, an investment in our Limeira mill, which is converting our pulp line to a flex Eucafluff line. This investment is to be ready in a few days from now.

And our key focus now that our production has or will increase fourfold, and once fully deployed, it means that with Eucafluff, we are going to have 6% of market share in this total market, still small, I know that, but our focus for 2026 is homologating this process. This is a more technical product than paper-grade pulp. It demands a bit more work in terms of homologation. Our customers and our prospect customers have tested already the lab samples of the Limeira fluff, which is a bit different from our Suzano fluff. And now they're awaiting the commercial product to arrive to be able to fully homologate their mills.

Regarding Eucafluff, and I know several challenged this concept of having fluff being produced with hardwood pulp as well a few years ago or 9 years ago, when we started this project, innovation from Suzano, several were questioning if it's a reality or not. So rather than staying here and talking good things about Eucafluff, we will share with you a short video, which is one of the main features of the product.

This is a very standard lab test to measure how the products absorb liquid and how long do the liquid stays inside the product. In the left, you see a pad produced of softwood fluff, and on the right, you see a pad produced with Eucafluff. Eucafluff, since it's produced with eucafibers, smaller fibers, the panels are much more dense than the panels made out of pine fluff. So less void space, meaning that the course of the products are much denser than the traditional pine fluff products.

So this morphology of the fiber and of the core makes a quicker and more dispersed liquid absorption. And also it keeps the liquid inside the product, and as you can see, there is less rewet, which is one of the key variables being analyzed. Our numbers are reaching almost 20% reduction in rewet when compared to 100% pine fluff product. So that means less rewet, higher retention, and obviously, extra dry skin to our consumers who are using our products. This is quite cool. Isn't it?

So since I talked so much about the fiber-to-fiber agenda, and as in Brazil, we have an example, not only in the paper and packaging, but in tissue, where we produce tissue, napkins and kitchen towels, 100% with eucapulp I would now like to invite Luis to talk to us about the consumer business unit.

Great news on the pulp. Hi, everyone. Thank you for attending the Suzano Investor Day. Today, I'm going to share with you two points, two main points. The first one is the strategy for our consumer goods operation in Brazil. And the second one is to update you on the JV with Kimberly-Clark that we announced in June. Regarding the Brazilian operation, we currently have an imbalance between supply and demand in the country with more supply than demand. However, even in this scenario, we were able to increase prices and reach a price premiumness of 18% compared to the average of all the other brands in the market. We moved from 16% to 18% premiumness and this price premium is what allowed us to slightly increase market share in the country throughout 2025.

When we look at the regions, we maintained our leadership position in the North, Northeast and Southeast regions, and we were able to further enhance our position in the south of the country, moving from the fifth position to the third position. Looking ahead, we see that with the start-up of our mill in Aracruz that we announced last quarter, we are going to be able to increase the availability of our products to serve better and faster and cheaper our clients, and we will continue to increase market share moving forward, but this strategy is based on 3 pillars.

The first one, as you see, is brand. When we compare the brand power from Neve with all the other brands in the market, Neve has a 42% more power than the other brands. How do we do that? We do it throughout the years with innovation, investments, but also with the relaunch of the brand. We just relaunched the Neve brand, and you're soon going to see no supermarkets a new packaging and a new logo, much more updated than the previous one. So we are constantly investing on the brand, not only on the brand, but also on the second pillar, which is innovation.

We've been innovation -- we've been innovating the market faster. And in 2025, we increased the number of product launches that reached the market. I have here some examples, the Neve Toque das Ondas is a product that is -- we just announced the start-up of this project. You're going to see the shelves on all supermarkets. I invite you to test. It's the only product in the market with the NTT technology. Just Suzano has this technology. It's a wonderful product, and I'm sure you're going to love it when you use it. And also, on the bottom of the slide, you can see that we are also investing in other categories beyond tissue, which have better prices and better margins.

And the third pillar of growth is the portfolio. On the right, you have how is the Brazilian market. On the left column, you have Suzano. As you can see, we are always moving from 1 ply to 2 ply and from 2 ply to 3 ply and 4 ply.

The more plies you have, the more premium is the product, the more price you can get and the more margins you can get. So the combination of these 3 pillars is what allows us to have 18% price premiumness compared to the average of the market.

Now moving to the JV with KC, we announced this JV in June. And just remember, it's a $3.3 billion net sales and a $500 million EBITDA. It's a 51% Suzano, 49% Kimberly-Clark. And where we are now. Now we are working all of our teams are working to carve out the tissue and professional business from the Kimberly-Clark operation and we are expecting the antitrust to finish by the second quarter next year and that we are going to be able to close this operation by mid next year.

After that, we're going to enter the second phase, which means we will have a JV, but still being managed through TSAs. And those TSAs, we are going to work to get rid of it very fast, and we expect to get rid of the TSAs, which are transient service agreements with Kimberly-Clark, and we expect to get rid of them by mid-'28. So then we reached the third phase, which is to have a completely independent and autonomous company from both Kimberly-Clark and Suzano with its own governance and also, its own Board. So by mid-'28, there will be another company, which will -- we are also creating the new name of this company that will be an independent and autonomous company compared to the parent companies, KC and Suzano.

And we are using this time between signing and closing also to study and to talk to many companies around the globe, who have gone through M&As to understand, which are the learnings that we can incorporate in our planning for the start-up of this new company.

As we go deep and refine the business plan, we are even more confident that we are going to be able to capture the $175 million in operational gains that we announced in June. Those gains, there is a pillar, which will enable us to get this value, which is the building of the new culture for this company. So in parallel to refining the business plan, we are also designing the culture of this new company, and also, which are the tools that will reinforce the behaviors and the construction of this new culture. So we are currently designing the organizational structure, revising the performance assessment, how it's going to be the performance management and incentive systems for this company. And in the end, we also want the regions to have a full P&L accountability. So this is what we are working on from today to the closing of this operation.

And now to talk about the competitiveness and growth strategy for the paper and packaging business, I would like to invite my colleague, Fabio, on the stage. Thank you.

Hi, everyone. Good morning, good afternoon, good evening, wherever you are. It's a pleasure to be here with you today once again. And I have two objectives here with you today. One is to share with you what we are doing in the Paper and Packaging business unit to improve the competitiveness of the business, which is really important, given the structural change that we heard from Leo, that's happened in the pulp, and also, in the paper business, also geopolitical forces that are reshaping the trade in paper. And second is how we are preparing this business for future growth. So we need to capture first all the investments to have made returns and then prepare the business for growth.

On this slide here, you have the footprint of our business operations. We've been sharing with you for the past years, the structure of our business here in South America. You know about how different our business model is go-to-market, reaching more than 40,000 customers in Brazil and how we capture margin throughout the chain. And you also know that we have expanded this business model from some other countries in Lat Am like Argentina and Ecuador, and it's doing well. And now we have a business in the U.S. with the acquisition of Pine Bluff, and also Waynesville in North Carolina, 2 mills that we have in the United States.

What I want to share with you are the pillars of competitiveness that our business has today. First one is our cash cost reference. All our machines, paper machines, they are included in the first quartile in terms of cost. Are they going to be in the first quartile in terms of cost like in the U.S., we're moving in that direction. We have the potential to be there. The uniqueness of our business model. So you know about our print and writing business model here in Lat Am, we talked about that. But also, we have a very unique business model in the United States with long-term contracts with a liquid package board. And we have some of our products in the showroom there. You can take a look. We own about 60% to 70% of market share in liquid package board fresh in the U.S. So it's a long-term contracts with very strategic customers. So this bring uniqueness to a business model, also in the United States.

We are very competitive in print and writing and we want to become even more competitive. I'm going to share with you some of the activities that we are doing today, which is a very strong cash generator for Suzano. And we want to think about ways that we can expand our portfolio in the U.S.

I want to share with you now an information. I don't know if you have that about how we are working in our portfolio to mitigate the risk of print and writing. This is something that we have been doing through the years, the acquisition in the U.S. helped us a lot. Today, we have most -- half of our revenue coming from packaging. You have seen the information throughout the years, but not only here, we have the board sales in Brazil and the U.S., but we are doing lots of innovation as well. We have a new product, which is a white top liner, craft liner and our cups here in the region. This portfolio of innovation products should reach 100,000 tons of sales next year. So we are moving in that direction. That's helping us to mitigate the risk of our print and writing portfolio.

Moving to the next slide. I want to share with you why we believe paperboard in the United States is the place to be in terms of packaging growth for Suzano. First of all, it's a very sizable market. We're talking about a market which is 10 million tons of demand. If you look at North America, it's about 12 million tons and it's concentrated. We have very few players compared to other regions. You can see the numbers here in this slide, and this is a market which is very concentrated, which brings discipline in terms of managing demand and supply.

It's a growing market, grows between 2% to 3% per year. And we have a price premium in this market compared to other regions, which probably it's going to improve even further now with the barriers that have been announced in terms of trade.

Moving to the next slide. Here, we're going to be focused on Suzano operations in the United States. I want to give you more color about what we are doing there. You have seen our third quarter results. We have shifted this company from a very big loss last year in terms of EBITDA into a positive EBITDA in the third quarter of this year. So we have been very busy since the acquisition in October. One of the main areas that we are focusing here is reducing our cash cost, industrial cash cost to try to improve it. We have so far accomplished 6% cash cost reduction. We have the number here on a 100 basis, that's the cash cost that we received from Pactiv and now we are on 94, but more important than that, we have also mapped here the future steps of potential reduction.

As you can see, we have another 7% additional reduction that we can do without CapEx from Suzano. This is being in the United States. We have some optionalities that probably are not -- we don't have here in South America, but for instance, we have a partner that we're going to be investing in a new wood yard for our mills a huge project. We're talking about more than $100 million investment. That's going to help us to reduce the cost of our processing our wood, improving effectiveness at the mill. And also, we have a part -- another partner that's going to be the CTO plant that's going to help us to reduce -- to use the soap and to create a revenue stream and reduce cost on the mill. So another 7% that we can reduce without investment from Suzano.

And then additionally to that, we have mapped and we have started in the last year, projects that can reduce even further, but this time, with CapEx from Suzano, another 8% of cash reduction. We're talking about here a continuous digester. This plant has batch digesters. So we can substitute this batch digest by continuous digester and a dignification investment in the mill that's going to help us, not only to increase the quality of the products that we are producing, but also reducing the cost and also bring incremental volumes that we could explore new revenue streams.

So all in all, we're talking about a reduction of 21% in cash cost throughout the years. I want to just highlight that the CapEx projects that are doing by Suzano are not yet approved, and we're only going to move forward with that if they bring the adequate returns for us. And here, so we're building optionalities for organic, inorganic growth. And inorganic growth, I just want to make it clear that this is something that's not our focus at the moment, but we want to be prepared when that happens when Suzano is prepared to do the move. We are in the right place to do it.

So here, it's my last slide. We're talking about our operations here in Brazil. Last year, when I came here to Suzano Day, I told you about an important project that we're doing at our Limeira mill that would increase the competitiveness of the Limeira mill. This project has been concluded. We are just concluding the final steps to move forward with a full capture of the benefits of this project in 2026. This project is going to bring us BRL 100 per ton in Limeira, which is really important for the cash cost of the paper and the unit there. And we are doing 2 things here, which are really cool and it should bring a lot of results for us.

We are using digital twins in our paper machines so each one of our paper machines, we have built a digital twin that's running parallel with the machines and allowing us to make adjustments in some of the parameters. And the focus here is to reduce -- to improve the quality of the paper, to reduce breaks in the machine and also to help us to save raw materials and to reduce our cash cost. So we're doing now the hot test. We've been running this for the past few months. And next year, we're going to start running it for a full capture.

And we're also using digital twins in our digesters in Suzano and Limeira to reduce the wood consumption, monitoring the CPA level of how we cook the wood, so that we don't overcook or undercook the wood, we have the right wood consumption here. So these 2 projects were very happy with the way that they're moving.

And lastly, but very important, we are also using digital tools to improve our logistics costs. You know that paper logistics cost can be very costly. It's a very heavy product to transport and we're using digital tools here to make more effective the way that we hire freight into the market and especially autonomous drivers, we have created an Uber for the internal Uber for autonomous drivers here that we are using that's going to bring us good results.

So all in all, we have here some savings that we have read included in our budget for next year, between BRL 80 million to BRL 115 million that we expect as a reduction and improving the competitiveness of our business moving forward already in 2026.

So with that, I want to invite Douglas, my colleague Douglas, who is the Head of our Forest division. He's going to be sharing with you what we are doing to enhance competitiveness in our forestry business, which is one of the main backbone of our cost structure.

Thank you, Fabio. Thank you very much. Hello, everyone. It's a big pleasure to be here. I'm Douglas Lazaretti, Executive Vice President of Forestry at Suzano. Over the last 10 years, I've had the opportunity to live, learn and lead across every region where Suzano operates. And that experience gives me a holistic and grounded understanding of our forestry platform, one of Suzano's main strength. Today, I want to show you how our long-term forest strategy contributes to the Suzano's competitiveness based in 3 main pillars, but before that, let's turn to one of the most pressing challenges we face, the climate change. This is not a distance threat. This is a reality that is already impacting our operations.

Our regions have a record 180 millimeters less rainfall per year over the last 6 years. Without action, this could mean a reduction of 7 cubic meter of eucawood per hectare year. But what sets Suzano apart, it's how we respond. And for that, let's move to our first pillar, our forestry unique capability.

Despite the impact of climate change, our productivity is increasing, and this is possible by the investments that we have been done in silviculture and logistic and genetics, the 2 most powerful tools to overcome this challenge. In Mato Grosso do Sul, for example, we are increasing the share of our own clones that outperformed the market bringing more resilience, eucawood and stability, even under climate stress. It's important to highlight that each 1 cubic meter more of eucawood per hectare year or 3% gain adds BRL 1 billion at NPV to Suzano. The billion forests, as Carlos Anibal mentioned last year, let me repeat, BRL 1 billion at NPV to Suzano, the billion forest.

So now let's move to our second pillar, our discipline of execution. We are consistently delivering an optimized cost, and this is possible by increasing the one self-sufficiency and also reducing the distance between firms and mills. In 2027, we will reach 150 kilometers, which means a reduction of more than BRL 170 million in logistics. This is possible by expanding our forest base and creating strategic opportunities.

And talking about opportunities, I wish to address the swap transaction with Eldorado. It's a great and unique example of our third pillar. Suzano is still harvesting, it's now harvesting, 18 million cubic meter of eucawood from Eldorado. The same volume will be harvested by Eldorado, but is starting only in 2028. This time-based swap by preserving our stand-in forests will increase our wood stock by 18% net gain, and we add 1 more year on the forest average age in Mato Grosso do Sul.

This combination allow us to increase the pulp production in Ribas and to optimize our operations in Mato Grosso do Sul. This deal has an expected return of 20% and will contribute to the reduction of the TOD. So in short, resilience, discipline and value creation. This is how we manage forests, as a strategic and high-performance asset.

And with that, I will hand it over to my colleague, Aires. Thank you very much.

Hi. Good morning, everyone. It's a pleasure to be here with all of you today. It's a good day, especially after last night games, at least for pulp deals.

I'd like to start by sharing some excellent news. We are closing the year of 2025, which also marks the first full year of operation at our unit, Ribas do Rio Pardo. And what we have achieved in this first year is quite remarkable. We will exceed the nominal design capacity of Suzano project and produce in 2025, 2.57 million tons. And in the first 12 months of the operation, we outperformed the learning curve for more than 60%, which is an exceptional result for a plant of this scale in the first year.

And these numbers reflect a very highly experienced team, months of training supported by modern simulators, and our flawless project as a cushion. And all of this give us confidence to keep pushing forward. And remain this positive trend, we believe that we closed Pactiv with no CapEx, no new investments in this plant. We could achieve close to 2.7 million tons starting in 2027. And then we expected to maintain this positive trajectory in 2026, which will be essential to strengthening Suzano's competitiveness.

And that brings us to the second point, competitiveness. This has become the central topic across all discussions at Suzano. How do we have discussed, how do we lower CapEx per ton, what we can do differently and better? And then over the past months, we conducted a deep diagnostic review of the company and revisiting our cost and expense structure. And this exercise is always the same, challenge of what we do, why we do it and how can we do it differently. And we organized is working to value journeys that at the end, electrified more than 70 initiatives with a potential of significantly enhance our competitiveness in the short, medium and long term.

These initiatives expand our value chain. Since the client selection, nursery management planting through harvesting and construction roads, optimizing our production models, product allocation, customer services and aftersales. And each initiative has a clear value capture target, defined time lines and one Suzano leader responsible for its implementation. And whenever possible, we aim it on reducing carbo emissions and reducing water consumption.

In summary, we are fully focused on maintaining and expanding our competitiveness in the coming years. And the impact of this effort will be flagged, as Beto mentioned, in the total operation disbursement in 2027. Considering our consolidated 2025 results and even accounting for inflation inputs and services, we project a total operational disbursement of BRL 1,983 per ton in 2027, considering 2026 currency. And that's exactly the same value that we present last year as just only for cost inflation. That demonstrates our discipline, our consistent and our confidence in the execution and reinforce our compromise of delivering what we promised.

This being said, I would like to invite Malu, my colleague to continue this presentation.

Well, firstly, I want to say that it's great to be back here at Suzano Day. Suzano's long-term success relies also on a resilient ecosystem and territory. That is the business case behind our sustainability strategy that has all to do with protecting and generating value for the business, for the people and for the environment. And we do that through 3 interconnected pillars. Let's start by nature. Well, we depend on nature and in its ability to regenerate cycle after cycle, as well on our capabilities to promote conservation and restoration.

Moving to climate. Mentioned already here today, climate change is not a risk. It's a reality for us. And because of our business model and our capabilities, we can create meaningful impact on both sides of the equation. On the reducing emission side as well as on the removal of carbon from the atmosphere.

Going to the third pillar, people. Today, we have data that's shown that our operations can run much more efficiently when our neighboring communities also thrive, not only Suzano, but Suzano and the community thrive. Well, we have big challenging across all these 3 pillars, too big to be addressed alone. So that's why it's very crucial. It's essential that we engage our value chain to amplify the positive impact Suzano can cause.

I think it's also important to call the attention to the fact that the sustainability strategy does not belong to the sustainability team. You saw here today, Fabio, Douglas and Aires embedding the sustainability lens into their strategies and performance. We have that in mind, we selected 4 teams where we need -- we want to focus. Why this for? They are the ones that we believe that Suzano can create positive impact, but most importantly, scalable impact. And they are water, climate, biodiversity and social.

This includes, for instance, tracking the availability of water in our critical water sheds. There is no other company doing that. It also includes to connect 0.5 million hectares of fragmented habitats, creating biodiversity corridors. There is no company. It's hard to find a company to work on such a scale, 0.5 million hectares. And we are also contributing to the improvement of life -- of the life of at least 200,000 people that live in the territories where we operate.

And as I'm going to call, I will pass the word to our CFO, Marcos, I think that's worth to mention that today, 40% of Suzano's debt is linked to sustainability targets. Thank you. The floor is yours, Marcos.

Thank you very much, Malu. Hello, everyone. I'll start my presentation connecting with what was said before regarding a less certain pulp price outlook in the short term. I'd like to spend some time explaining the rationale for production discipline at Suzano. For every mill that we have, we are comparing always 2 variables. First, the highest cost of wood that we have in our system, which is usually linked to third-party wood at long distances and also comparing with the lowest export home port that we have, which depends a lot on the logistic costs to serve our customers. We combine these 2 variables also with the outlook for pulp price and FX volatility for the upcoming 6 months. And by doing that, we have a very clear view of what should be the optimal production at every mill of Suzano.

Our goal is to guarantee that every tonnage that is produced at Suzano generates an adequate return for the company. And a very clear example of that strategy was in August when we announced a capacity shutdown of 450,000 tons, which had a very minor impact in Suzano's cash flow.

Moving to the next slide. We want to reinforce Suzano's commitment and priority to deleverage the balance sheet of the company. We have now a new target of net debt at $11 billion throughout the cycle, and we outlined a very clear and detailed plan to reach that level. That plan includes: first, total operational disbursement reduction. That theme was very explored today by Aires, Douglas, Leo and Fabio. This is embedded in the company's journey of competitiveness inside the culture of the company.

Second thing, we're cutting discretionary CapEx. This is 100% aligned with what we announced this week for 2026 CapEx guidance. We're also optimizing our working capital. We're looking for opportunities to sell noncore assets. We're sticking to our minimum dividend policy that we just announced last night, BRL 1.4 billion of dividends. And we continue to maintain a conservative approach towards buyback. We believe that by doing that, reducing our leverage and our net debt, we will be able to capture opportunities that could arise in the market if profitability remains well below historical average for our industry.

Here in this next slide, I want to show that we continue to see our cost of debt as a source of competitiveness for Suzano. In 2025, we were able to issue $4 billion of new debt and we have 2 main highlights. First, we came back to the U.S. bond market with meaningful transaction, $1 billion 10-year bond at the lowest corporate spread ever for Suzano. And second, we also did 6 different transactions totaling almost up to $3 billion, and all of them were priced in below our bond cost curve. We believe that this reflects Suzano's discipline and when to time the market to capture opportunities. And by doing all of these transactions, we brought forward all of our liquidity needs for 2026. We already have cash in hand to pay down for the Kimberly-Clark transaction, which we expect to close by mid-2026.

Now I would like to show the progress we made in all of our metrics regarding our debt guidelines. First, we expanded our maturities to 80 months. Second, we reduced the percentage of debt that is maturing in the upcoming 36 months or 3 years to only 17%, and we now have cash in hand to cover for 40 months of our upcoming obligations. That's way above our target of 24 months. Most importantly, we did all of that, maintaining our cost of debt at 5%, which is very competitive, that was all despite higher interest rates in the U.S. and all the volatility in the U.S. market.

Going to my last slide, I want to show Suzano's consistency in its FX hedging strategy. Here, we have a very long history of 7 years of the results of our policy. We were able, in the past 7 years, not only to protect our U.S. dollar exposure, but also to generate close to BRL 1 billion of positive financial results, which was converted into cash.

Now considering our current portfolio of close to $6 billion of FX hedges, if we were to stay -- if the currency was to stay at 5.32, which was the level of the closing of the third quarter, we would generate a positive result on the financial side of BRL 2.6 billion in 2026 and 2027. So protecting our profitability from a potential BRL appreciation.

So in summary, we continue to focus on production discipline in order to maximize the company's results. We are very committed to deleveraging the balance sheet of the company, and we will continue to look for opportunities to enhance our capital structure and reduce our cost of debt.

Now I would like to hand it over to Beto for his final remarks. Thank you.

Thank you, Marcos. I would like to wrap up what we just saw in the presentation right now. And I -- when you come for a group like that to present our plans and what we are expecting to deliver, I really like the concept of reasons to believe, reasons to believe that we will deliver what we are presenting here today. And let's go back to the presentation of Aires regarding what we are delivering at the Cerrados project above what we announced above what we planned.

Let's go back to Fabio's presentation, what we are delivering at Pine Bluff, the huge turnaround that Fabio and the team is doing in Pine Bluff, delivering above what we expected, Fabio. And also, with the business, we are expecting to start generating cash very briefly. And this is all about what we are talking about competitiveness. I also have a personal reason to believe, which is the group of talent that we have of Suzano. It's our group of people, proud of its journey that we built in the last many years, proud of the platform that we were able to build, proud of the competitive position that we were able to build and motivate about what we still have to do in the next couple of years.

You know that in Suzano, we have 40,000 people working at Suzano and 92% would recommend Suzano for a relative or for a friend to work at this company. So this is the level of motivation of a team with a track record of delivering and also with this flawless execution competence that's embedded in our future. And we also saw a lot of examples of how can we capture value from the assets and from the cycle of investment that we already made. So we saw the presentation from Douglas in the forest side, what the benefit that we still have to gain in the next couple of years, not only on the operational side, but also on the deal with Eldorado.

We also saw in Luis' presentation that we are expecting to capture a lot of value in the KC, by the way, do not underestimate what is moving abroad. We must keep rumble and understand that there's a lot of challenge, but we are very confident of what we can deliver?

So the summary of this and going back also to Leo's presentation, when we saw the leadership of the company in increasing the size of the pie of the pulp market, leading many initiatives on the fiber-to-fiber and into the fluff business, bring us to the beginning of my presentation, when I said that we're going to focus on increasing our competitiveness and also extracting value from the investment that we have implemented in the last couple of years.

We believe that doing that, we will be prepared for any scenarios. We can discuss here 2 or 3 scenarios, what's going to really happen in this market that's somehow reshaping, but we want to be prepared for any one of those scenarios and take the opportunities that might appear in front of us and be prepared to start a new cycle for the company in the right moment.

Having said that, I want to say thank you. I know they're a little bit warm for the attention, and now we're going to go through the Q&A. And for that, I would like to ask the whole management team to come to the stage. Thank you very much.

So first of all, thank you, Suzano, for the entire team. Thank you so much for the presentation. I think, very enlightening. I have 2 questions. My name is Leonardo Correa from BTG Pactual. Two questions. First one for Leo. Leo, thanks for the presentation. I think the tone is quite clear, right, on the outlook. At least on my side, I think what has been surprising us over the past years in the pulp market has been all of what's happening in China.

We saw -- if we take the consultants cash cost curve for China specifically, right, we saw big deflation over the past 2, 3 years, right? At one point, Chinese cash cost numbers were at $600 per ton. They've now deflated to about $480, right, which is quite a big reduction. So I wanted to hear from you if you think that we're now at a floor, you talked about wood chip costs increasing in China and now my question to you is whether you think we were turning around those numbers, and we're going to start seeing some inflation back in China, which I think for the market would be a positive. So that's my first question.

Second one to Marcos and maybe to Beto, if he wants to chip in. Marcos, something that caught my attention in your presentation was at least I haven't -- I don't remember a big message on noncore divestments, right, from Suzano. You didn't quantify anything or you didn't give us any details on exactly what would be, let's say, available for sale? Is there any business line at this point for Suzano that's less attractive and that you would be willing to sell. If you -- can you give us any color, that would be very helpful.

Sorry, let me, Leo, if you don't mind, and then I turn it over to Marcos, if you want to jump in. It's regarding the selling assets, we're still looking for very selective in the small elements. So there's no huge element of divesting of -- at this time, okay? So it's really opportunity, high alternative value lands. So -- but it's a big company. So if you look the whole thing, you will find assets and elements that you can divest and generate more cash. So that's the kind of situation that we are considering at this time, okay? There's no big element in the plan regarding divestment. That's the first thing.

I will hand over to Marcos, please let me know if you want to complement. But before handing over to Leo, I just -- regarding the inflation, I just would like to mention that if we go back to the wood chip cost and Leo know all the numbers, let's say, 6 months ago, the cost of wood in the pulp production in China, 6 months ago was roughly speaking, $295, $300 per ton, and now it's $360, so it's 20% more, and again, the cost of food in the pulp production.

So I just want to share the numbers to complement exactly what's Leo said during the presentation. Is there wood available? Yes, there's wood available. The question is, at which cost? How the cost looks like in the future if you have more demand for that? And I'm talking about the inflation of wood cost only in the last 6 months from, let's say, April, June to the current situation. Leo, thank you.

Thank you, Beto.

Leo, just to complement on the second question and the first one, Grimaldi will answer. We have -- as you're right, that's the first time we're talking about a noncore asset divestment. As Beto mentioned, we're not considering anything big at this moment, but there are 2 main areas where we could focus at this point. One, of course, is land and considering the high best use of the land, and we have land across like many different states, many different cities in which we could even sell land that became closer to larger cities to real estate, and this is something that has a lot of value.

And the second thing, which people don't are pricing much at Suzano is we have a lot of infrastructure assets that we could sell part of it. And that could be meaningful in the future. Remember that we have 3 port terminals. Remember that we have also -- we also have our rail terminals that connects to rails as well. So this kind of infrastructure assets that we have. And today, we believe that they're not well priced in, in our share and historically, they trade at a much higher multiple than our industry, it could be a source of additional cash flow in the future.

Well, thanks for your question. Beto already tackled a quicker answer to it. So I'm going to go to a deeper level in terms of how we see the China wood dynamics to support his answer in my answer. So in China, we see and we map roughly in the 2 core species that produce hardwood, which is eucalyptus and popular for euca, roughly 6 million hectares of land of planted euca and in terms of popular around 8 million hectares of planted trees. And that derives in the wood basket of roughly 138 million, 140 million cubic meters of wood. That's the wood basket of hardwood in China.

As we all know, a big part of that was used before in the housing market and for other users as pulp usually pay less, right? So usually a smaller part of this wood basket would come to the pulp industry.

2024, we already saw a year of a lot of investments in new pulp mills in China. And this -- the dynamics are the pulp mills in China being hardwood and also BCTMP pulp mills, which also use hardwood wood chips. If we add how they're performing and where they're buying with today, roughly half comes from China, half comes from imports. So imports are roughly back to what they used to be 2, 3 years ago in terms of volume, but this new volume that they're consuming roughly is 25% of the wood basket in China, so 25%.

Upon the deployment of that projects that I mentioned, which totaled 6 million tons of new hardwood capacity confirmed projects and also adding to that 2 million tons roughly of BCTMP pulp mills, which are also confirmed and being built or to be built. If they use all Chinese wood to feed or to the necessities of these new mills, then they're going to reach -- the pulp industry will reach 47%, 48% of this wood basket. So obviously, as each of these new projects come live, it should put more pressure on wood prices. Now even more interestingly, I didn't talk about the unconfirmed projects, but several consultants do, right, and map those projects as well.

If we get all the unconfirmed projects, which are already announced, but unconfirmed. And if they were being fed by Chinese wood, this wood basket, the pulp industry would consume 84% of it, which is unrealistic or prices will have to be much, much higher than what they are today.

So wood costs, we expect that should be inflating through time, as Beto mentioned, and it would put further pressure on Chinese mills. And when you mentioned this cash cost, I believe they are correct or it's kind of in the level that we see today. But again, these are the Guangxi mills, the most competitive mills, all of those mills that are being deployed, the 6 of them are being deployed on other regions carry an additional cost of $20, $30 or $40 on top of that. So it's not all -- all mills have the same competitiveness price point that you mentioned.

Rafael Barcellos from Bradesco BBI. Thanks for the opportunity. Congratulations for the event. Beto, Suzano has now many growth avenues, right? I mean the packaging business in the U.S., Lenzing, the international tissue business through KC and even your traditional pulp business with a project like Limeira, right? And I imagine that many of these initiatives have very good rates of return and can even like match most of your criteria for investment decision, right? So I just would like to -- if you could elaborate a bit more on your framework on choosing the next step, right? I mean what should you prioritize going forward?

And as a second question, I remember, Beto, the first time we spoke -- you mentioned the opportunity that you are seeing on the cost side, on the pulp business, right? Initiatives like mechanization of the -- on the forestry side and so on. So I just wanted to -- if you could add more, whether you see like upside risks to your guidance for 2027 would be very interesting.

Yes. Thank you, Rafael, for the question. On the first question regarding everything that you mentioned that's in the pipeline that's on the table, I would say that the next step, it's -- as I said here, is really generating value and deliver what we promise with those investments. So we're still in the journey on the Pine Bluff. So it's not only a journey of turning around that specific business, but it's a journey of understanding as much as we can in the market. So Fabio now is a member of the association in U.S. He saw the idea of having a team and we have a group of 6 employees from Suzano that's now based in Arkansas on different areas, on finance, commercial, also on the operational side. It's really about understanding the whole thing. If we go to Lenzing and Carlos is here, Carlos sits in the Board, together with Leo, our priority here, it's keep understanding the business.

So as you know, we have a call that just -- that we aspire by end of 2028. So we have a bench of time to keep understanding the business, keep understanding the textile industry and take the time to analyze and understand what we're going to do with that. It's -- we have -- it's an optionality that in any way that we have, so with a great contract. So let's take the advantage of the contract that we have. And we have a huge challenge, Rafael, that's also on the table. And again, that we must focus on, which is delivering the KC efficiencies that we understand that together with the KC we're going to be able to deliver. KC brings to the table a lot of competence on the marketing side, on the product development side, on managing very strong brands, global brands that they have. And we understand that we can add a lot of value on the operational side, on the management side and really operating those assets at a lower cost on the most efficient way. So that's the combination that we are expecting from complementary competence and understanding where we are spending a lot of time understanding the case of failures.

We have a lot of case of failures in Brazil of companies going abroad. And how can we understand more the failures than the success to make sure that we're going to be prepared in the process. And we are taking the time between the signing and the closing, to understand better the market, the people, the levers that have in the business. So this is our priority. Again, there's a lot to do already. We don't want to put other initiatives on this table. What we saw during the presentations to you was a lot of focus. And if we go, for instance, for innovation technology, just to complement your question, you saw a lot of initiatives that in the past was a very potential initiatives that used to make a lot of sense for us. But today, we have decided to stop and to focus on the innovation and the technology side on 2 main areas, again, a lot of focus on the fiber-to-fiber.

So this is where we're going to put reserves, people, investment, is make sure that we're going to have further and more and more application for our Eucastrong for our hardwood. And the other one, it's in the Forest side. So making sure that we're going to have clones that will be more and more productivity in the future with more productivity in the future. So that's the 2 areas that we're going to vest on innovation. So that's the first question. Sorry, Rafael, the second one is.

And the second is about whether you see upside to your cost guidance going forward given the mechanization of the forestry side. I mean any kind of those initiatives, whether they are included in this guidance.

Yes. I think when -- once we decide, firstly, when -- once we have finished a lot of investment initiatives, we have to adapt the structure and the organization for the new reality. So we used to have a structure for many projects that was being developed and implemented. Now they are done. So that is about execution. So let's be -- we are expecting, I would say, a more lean structure already in 2026 in the next couple of years.

The second one is optimization using technology and process review. I would expect, as we saw here, a lot of benefits in the logistics side. So we are looking the end-to-end logistics and apply new technology, reviewing the process. We see this as important leverage in terms of reducing our TOD.

Second one, it's, as you said, it's on the planting system. So as you know, this is an industry that's still planting 100% of the trees manually. So we expect and we started already the mechanization process. So we expect to in Mato Grosso do Sul in 2 years' time, have 70% of the whole planting being mechanized. So the machines are there, was tested. Now, it's about rolling out this and of course, learnings will come. So that's the second element. And we are also bringing technology for many of our process, review process. Fabio mentioned one of the initiatives on bringing AI to some of our process and the kind of benefits that you can generate with a very, very low CapEx.

You will not see Suzano do know launching a big digitalization strategy. Now we're going to put digital process and use AI and everything. We are doing a different way. What we are doing is, where are the main pains in our process that we can use the right technology to reduce costs and be more efficient. So this, I would say, is the third initiative that we can expect reducing our costs in the next couple of years.

Caio Greiner from UBS. Marcos, maybe my first question to you. On the CapEx side, we talked a lot about cost today, but also on the CapEx number. It was great to see the guidance being revised slightly downward from previous estimates, maybe even below market expectations down slightly below BRL 11 billion. And I think the question and the debate we usually have with investors on that is that -- the fact that a lot of people perpetuate those levels, but not necessarily include the benefit for the extra CapEx above the maintenance CapEx for your investment. So the question is, what can we expect in terms of total CapEx for the coming years? And how can -- how do you think that investors can better start appreciating those investments and maybe start factoring that into our models and to EBITDA generation in the future.

And Leo, my second question to you, it was interesting to see in the presentation, the utilization rates below 90%. And then you even talk about the possibility of what could drive the market to become tighter and you mentioned deverticalization, which is interesting. I think it's one of the first times that we discussed that in a little bit more detail. So it would be interesting to hear those conversations that you briefly mentioned that you're having with some of these players. What are they telling you? What would be the timing for this? And do you think this actually has the potential to drive market to rebalance and utilization rates to move back, if this could eventually offset the Chinese integration? And again, what's the timing for this?

So answering your first question, Caio, regarding CapEx. You're right. There is room for us to continue reducing our CapEx. Of course, there is a lot of the CapEx that is built in, in the forestry business, but there are still some projects that we have done in the past that we're finalizing at this moment. There is still some CapEx for Cerrado, for example, which is totally compressible for the upcoming years. Important to mention, as Douglas said in his presentation that as we evolve in the 1 billion forest evolution and increase in the productivity of our forestry, we should require less land and also less CapEx for silviculture, for example.

But that -- we need to deliver that. And in the short term, we're still building up the full forestry area that we need. So that's why probably we still have a CapEx that's still a little bit above our sustaining CapEx level, which is, as you saw in the past few years between BRL 7.5 million and BRL 8 billion. So there is room for sure, to continue compressing will depend a lot on what we're doing at the forestry side.

Remember, there is also some inflation in the industry, which is not low at all, inflation at the -- so we're doing more and more to compensate the inflation that we're seeing in the area. A lot about the mechanization that we just discussed also will help on the cost side but also could help on the CapEx side as well in the future.

Just to complement what Marcos just said regarding CapEx, let me give you other public examples of initiatives that will compress the CapEx in the next coming years. Besides Cerrado, which is BRL 200 million, we also have the rest of the wood swap that we will pay in 2026, BRL 139 million, which is not that we will not have in the coming years. And you know that we are also upgrading the SAP system, the SAP HANA, which we will finalize in 2026. We are talking about extra BRL 200 million that's not going to be next year. Just a couple of examples that our CapEx that will be compressed for the next coming years. So I think this is a trend. If you look at what we just released in terms of CapEx, I think really is a trend.

Okay. Caio, thanks for the second question, again, about fiber-to-fiber. So as I mentioned in my presentation, we started more proactively this journey about 3 years ago. After the end of the second year, with the help of a consultancy, we mapped all of the assets in each kind of paper production where we could have better benefits. So today, we have screening of all global markets, actually, all paper producers in the world, their machines and capability of their machines so that our team can actually go quite focused on that. But the fiber-to-fiber strategy is actually has 2 branches to it. One, which is more obvious, is substituting other grades like -- or other kinds of even hardwood and targeting softwood grades to increase the addressable market, as I mentioned.

We have a team dedicated for this journey, right? And part of them under the commercial team, part of them under the R&D team of Suzano, but with joint similar targets and same compensation targets in terms of what we have to do and focus with our customers. We have a second team also under the same leadership, which is based on this mapping that we did at the end of the second year, what are the integrated pulp producers in the world? What are their cash costs? And what are the most probable to make decisions of deverticalization, and it's not only a cost position base, but also how old are their mills and when they have to make critical decisions in terms of investing in these mills in a new boiler or a new part of that mill, will demand a lot of CapEX and believing in that equipment for the next 30, 40, 50 years as well.

So we have 2 teams, one focusing on fiber replacement and other assessing these sites, these mills to enable this discussion of the verticalization. This is not the sales team to procurement team conversation. This is a conversation that the leadership has. I'm involved, Beto is involved. We are talking to CEOs of these companies. We have a lot of interest in that sense. We have 2 main focuses today being studied in one in North America, one in Europe. And obviously, there are more complex projects, right, because you can imagine that this company, for example, will be shutting down a part of their production sites and what they are today.

So it's a more complex project, which takes longer, but I really believe that this is a true example of a new business model that will be created with this verticalization that's ongoing on China. That's the only way if you think about it, that higher cost, European assets or North American assets can compete against Chinese because obviously, they're going to export many of these paper products or tissue or paperboard to these markets as well.

So I believe Beto -- and Beto is most of the time with me in these discussions that we see full leadership engagement from these companies to really believe and create a different concept and model of business, which will make European producers and North American paper producers, again, competitive vis-a-vis Asian producers.

Daniel Sasson from Itau BBA. My first question, maybe to Beto, you opened your presentation talking about competitiveness efficiency. So if you could detail a little bit more what do you see as opportunities in terms of reducing your SG&A? Is it something that bothers you? Or where do you want to be? Maybe even going beyond 2027, right, we have the guidance for the total operating disbursement, what can you do? What are the initiatives? Where do you want to be?

And maybe my second question to Marcos. It seems that there is a huge mismanagement between the EV per ton that Suzano is currently trading at and the investment that some of your competitors are willing to do in Brazil. So maybe building up on Leo's question on the divestment of noncore assets, would you consider to do some sort of recycling plan for your producing assets? Would you be willing to divest from your producing plants at the right value, of course. Are there other opportunities to convert plants such as what you did in Limeira, how do you see your operating footprint and the opportunities that you see to generate value there?

Daniel, maybe regarding the cost, I think I mentioned to Rafael, a couple of initiatives that we're going to be able to implement to reduce. Let me go through exactly your point of SG&A. I think we have the chance to talk about that in the beginning of the year that we were not happy with the level of SG&A of our organization, and this was because many, many projects was going on. Now as I said, we are finalizing most of them. We are delivering, for instance fluff, the tissue machine in Aracruz. So many of those projects now, Cerrado started, let's say, with a buffer. Now we are adjusting the organization for a steady state operation. So many initiatives that now we can really adapt the structure and the overhead of the organization for the new reality.

So I think that's the -- how did we do that? We really decide, I would say, Carol, a couple of months ago, Carol and Aires, they were leading this initiative was really doing a kind of benchmark exercise on the specific SG&A in the whole industry, not only in Brazil but also abroad. The idea, if you want to be the leader in cost, you must be the lever in each line of the cost. So that's what we did. And the SG&A is reducing as we speak right now in 2025. And in 2026, we will see the same.

Daniel, to your second question, I would say that any M&A transaction that we look at on the buy side or on the sell side, we need to add value, right? So we have that as our mantra. We are flexible. And you can see that we are flexible when we did the JV with KC, right? It was a transaction, initially thought to be a 100% acquisition. We built together with KC a transaction that was a completely different one, 51%, 49% JV, so on and so forth. So we are flexible. We could be considering selling small parts of our assets in order to recycle capital as well. But of course, it needs to add value to the company. It needs to be at the right valuation level. So we're open for discussions like that. As you mentioned, regarding new potential conversions, we have the benefit of having a full system of mills. We operate in 9 different mills, and some of them have different lines. So we have opportunities to consider on that front as well.

Marcio Farid Filho from Goldman Sachs. Thanks a lot for the time today. It's been very enlightening. I think pushing on what Leo just said, right? I mean, trying to have U.S. and Europe competing more with China. I think the -- I will elaborate, but I think the question is can U.S. and Europe really compete with China, right? Clearly, Suzano has a much better cost position. And I think Suzano is going to be a winner in a sector where maybe the profit pool is becoming smaller, right? But I mean, we look at paperboard in China, FOB price is $500 a ton. And everybody else is $1,000 a ton, right? It seems like the gap is so huge. China build a pulp mill 30% faster, 20% cheaper or even more than that, right?

So I think the question is outside of maybe government protectionism. And I think maybe FOB is in the best place because U.S. is probably the best place to be with all the import tariffs as well. And maybe it would be great to hear from Carlos, right, what's happening in Europe? I mean, SAP UPM just got together on the paper business, Stora Enso trying to spin off their forest business. Everybody is trying to compete against China, to your point, right, in different ways, but I mean, how do you see, and it's probably not -- that's unnecessary searching every day, but how do you see the sector in 5, 10 years from now and outside of China and especially this Chinese momentum continue or not. And we can debate here whether chips prices are going to be 30-plus percent higher or not. But it seems like China is here for the long term. They are not optimistic anymore, right? And Suzano is clearly here for the long term as well and have its own position. But again, how does everybody else compete in this world? And where do you see the sector in 10 years' time?

I will start. Maybe this is a 2-hour answer question, and maybe we're not going to get the answer completely right. But under first of all, the pulp perspective and nonintegrated customers. So just to focusing on these 2 main regions. Main customers for hardwood pulp in the U.S. are tissue players. And the tissue dynamic in North America is very unique. We have very strong brands, different technology of products, which are not made in China. So the concept of the how the market dynamic is in place, protects our customers, which are positioned usually on the higher part of the pyramid against lower cost, eventually, imports of jumbo rolls from China. So we see the market a bit more protected.

When it comes to Europe, there is a bigger concern because now we're talking about nonintegrated customers in several niches, right, printing writing, paperboard and also tissue. Again, tissue a bit more protected, but other customers are extremely concerned. And again, trying to find out how can they be protected against this Chinese threat by having closer relationships with customers, but also in the cost side. And then it opens a lot of opportunities and discussions with us. And again, this opens opportunities on the fiber-to-fiber agenda because if they continue doing paper like they do, which is much more conservative when compared to how Chinese do. It even brings their cost position to a much harder place to compete against Chinese.

So we believe that this threat is there. They understand, and it opens in the short term, a lot of opportunity for us to tackle even more opportunities in fiber-to-fiber and even in different pricing models, we have been saying that for quite some time that we are very open and quite creative in terms of how we design our contracts with these customers to enable them each one with their particularity to compete against Chinese.

Now the other part are the integrated pulp and paper capacity producers like those that I showed that add up to 110 million tons per year. If they don't do anything, it's my belief that we are going to see a bigger amount of closures in that sense as it was 2, 3, 4 years ago. We saw a little bit less in the last 2 years, but we see a lot of potential for those to recover. But that's opening this new perspective and maybe a completely new model for the future where integrated mills, and I truly believe this is a model of the future. We'll be closing up their high-cost pulp sites and seeing ways to virtually connect to lower-cost producers like Suzano. We call this a virtual integrated model when we're talking to them so that we can together bring their cost structure much lower and down so that they are able to compete against Chinese as well. And obviously, regulations and policies will always be a way that they can also seek for momentarily protection in both markets.

Marcio, let me just complement from a paper perspective now. And I think on a cost per cost basis, on the paper side, it's going to be very hard to compete with China. Maybe for Europeans and Americans, maybe impossible because you have some structural change that would make it very hard for the industry to reinvent itself. But I see 2 ways of the markets that could reshape. I look at -- I think in the American markets, North American markets bring us some perspective on that. You're going to see companies moving more towards the final customer. You see downstream integration, as you see in the U.S. most of the companies are integrated through converting and some of them are operating inside the brand owners, so makes it much difficult for imported products to come. And even at a lower cost to replace. You can do that by integrating downstream or you can do that by integrating it virtually with your supply chain.

So I think the U.S. model shows us some of that different business models can lead to differentiation and protection for the industry. And the other thing that may happen, and we're probably going to see more of this trade protections, either from tariffs or either from technical specs because as Leo pointed out during his presentation on the way it is right now, it's completely unsustainable. So I think you're going to see lots of that happening, companies changing business model in order to adapt and try to find differentiation to try to protect themselves through the business model or looking for protection from government.

And just to add, the sustainability standards in Europe and North America are much higher than the sustainability standards in China and in Asia. So that is a key protection point as well because the customers of our customers demand certification standards, compromises that today, Asians still cannot comply with. So that as well is a blocker to several producers coming into these markets.

Marcio, I think it's -- just to complement because I fully agree with your statement regarding Europe and maybe summarizing what we just said. And we spent myself, Leo and Carlos a lot of time with the players in Europe last month on the pulp week. And there's not a silver bullet as we know but there's overcapacity. So things like what we saw in start and UPM must still -- they start to have -- must start happening more often. And secondly, shut down capacity with a very low, let's say, competitiveness.

The second one in the pulp side, it's what Leo said, this is despite of China. This is nothing related to China. It's they don't have the level of competitiveness for a long time ago. So it's just a new trigger after the war and after everything, it's getting worse. So it's about maybe the deintegration. It's the other way around process that we are seeing in China. This is the second thing.

And the other thing, as you know, that in Europe, they take more time, and we usually see Europe as a single country, which is not. There's a lot of different situations, different countries, and they usually take much more time to react than U.S. and then Latin America for a more tougher scenarios. So I think there's a couple of things that must happen in the next coming years that we have changed the situation in Europe in the market.

I know that you'd never forget me. Thanks for question. I'm going to address your point in the Paper and Package producers perspective. And I can say to you that I've been following Europe over the last 20 years more or less closely, but always looking at that. And what we see today, I had never seen before. As Beto has said, overcapacity increasing costs, wood cost today is much higher than what it was to be 5 years ago. It has decreased a little bit over the last few months, but it's still very high. Overcapacity, we have even some producers adding more capacity, very low pricing power. They are losing share. They are losing space in U.S. They are losing space in the neighborhoods. Middle East used to be region dominated by the Europeans. Today, that market is dominated by the Chinese.

And I think the European producers, they are not taking the actions at the right pace. In my view, in 3 years' time, we're going to see European industry on the Paper and Package side, completely different of what we have today, a completely different setup, and that can be a great opportunity for us even on a fiber-to-fiber. We're going to see producers rationalizing production, taking out high-cost facilities, high-cost machines. We're going to see asset combinations, and again, I do believe that all that will create a new space that Luis' team will fulfill that will mean additional demand for hardwood in Europe. So Europe is going to be different in 2, 3 years' time. And what we have today is not sustainable. The enaction there is enough. They're going to need to do something different.

Hello, everyone. This is Alfonso Salazar from Scotiabank. I have a couple of questions. The first one, we haven't discussed the recycled fiber market and the implications of what is happening in China with all this integration that is now taking place. Also, there is a good number of projects that can be developed in Brazil over the coming years, that will increase demand or supply of virgin fiber. So I just want to understand what it means for the usage of recycled fiber? That would be the first question.

The second one is regarding the printing and writing market. I don't think that was in your presentation, anything related to that? Maybe I missed it. But any comment on what do you think is going to happen over the coming years, we have seen a contraction, but at what point or at what point in time you think and at what level do you think is going to stop and bottom finally? Those are the 2 questions that I have.

Alfonso, this is Leo. I'm going to answer the first question. When it comes to fiber-to-fiber, the obvious first step is focusing on fibers that costs more than our pulp so that we can replace them easier or in the case of the innovation platform that I mentioned to you that Suzano is developing, we obviously charge an additional price for those as these products are getting closer and closer to softwood. And usually recycled grades were priced below virgin pulp grades.

What we're seeing now, and that maybe connects to your second question is that with the decline of printing and writing grades. There is less formation of sorted office products, or SOP recycled grades. And that's the top of the pyramid in terms of quality when it comes to recycled grades. And that is a very particular grade and very important grade to tissue producers because still a big part of the tissue industry, 30%, 35% of the furnish for tissue producers globally are recycled fibers.

And as we see a declining demand for printing and writing grades and a smaller availability of sorted office papers, this price is increasing. We are mapping quite closely. We have also in the fiber-to-fiber team, a project with one of the key users of this recycled grades in the tissue in the European tissue industry. And we are always mapping the points or the set points in terms of what needs to be the higher price of this premium recycled grade that will make financial sense for us to substitute with hardwood pulp or with virgin fiber. So this is an active discussion in our agenda. I think every year, it intensifies more and more, especially for again, tissue producers, which uses high premium recycled grade. And I think that every year, this gap gets closer and closer. We are in the kind of in the proximity of the threshold being crossed.

Alfonso, I'll answer the second one here about the print and writing segment. As you know, the speed of decline in the market has increased the pace. Now we're seeing in developed markets with a pace of decline at 6% to 8% per year. That's what we are seeing in North America and in Europe for the past few years, which is huge. And we are seeing even the developed markets, under developing markets like Brazil and Asia, that had growth in the past. Now is kind of stable and also declining, but capacity is, believe it or not, still the net capacity still going up, mainly in Asia.

So it's not a good future for the whole overall market. That's what's driving movement like the UPM SAP that you have seen recently. We're going to see more of that as we discussed in the year. And we are preparing ourselves. We have a good cost structure, even lower our cost structure to be as a last man standing practice here on the print and writing.

I don't have an answer for your question, about when it's going to plateau I think it is very difficult because we were competing with digital tools. We don't know what technology is going to change and bring in the cost of technology into the future, but we are preparing ourselves here for the worst scenario. And I think that nobody has an answer for that.

Caio Ribeiro from Bank of America. Thank you very much for the opportunity, and thank you for the presentation. Super insightful, as always. So my first question is on your pulp business, right, and especially how you see the structure of that business in light of this world where we continue to see your Lat Am competitors contemplating or moving towards additional expansions. So how do you respond to that? Do you grow the business further to keep your market share intact? Do you pursue further integration? Do you see the size right now as adequate for your business model? Or do you pursue a shift perhaps into other products like the solving wood pulp? So that's my first question.

And then moving on to tissue, right, and particularly discussing the JV with Kimberly-Clark. The narrative in Europe, as far as we perceive it, has been one where the private labels over the last few years, have gained share versus the branded products, right? And so I'm curious to hear, I mean, what differentials that you can bring into this JV to perhaps trigger a reversal of that cycle and start gaining share similar to what you've done in Brazil?

Caio, let me start with the first one. And very straight to the point. There is no way to have a return on new pulp project with the level of price that we have been seeing. So if we have to think and something at least of $600 per ton from that level to above to stop thinking about a minimum level of return in a project like that. And I also would say that Suzano is very well positioned if in the future, we just start to thinking in increasing our pulp production, it's not in the -- it's not in our priority today as I -- as we talk today. But any extra capacity for Suzano will be a brownfield, not a greenfield, which is completely different CapEx per ton.

So we wouldn't consider a brownfield even on the level of such $600 to have the right level of return. So this is how it would be in the greenfield. As you know, we have a portfolio that allowed us to have this kind of flexibility to increase capacity on completely different levels. I'm talking about brownfield in Ribas, which is 100% prepared for that or Imperatriz, which is also 100% prepared with that, with different level of capacity, different level of production to face the kind of situation, this kind of flexibility we do have, but now with this level of price. So greenfield is even worst.

I am going to complement Beto being a little bit less polite than he was a PowerPoint accept everything, anything. Obviously, as we saw a few days ago, if we are forecasting that 20% to 30% of the hardwood industry will shut down in a few years, obviously, it makes sense in having a new pulp mill. But we are very truthful to our beliefs and to our role in terms of how we -- as Aires mentioned and throughout the presentation in terms of what we deliver and the messages that we are very clearly delivering to you guys as well. And we clearly do not see the scenario. We are seeing a scenario that unless something dramatically changes, we're going to see very low or below optimum demand-to-capacity ratio, which obviously will derive these prices that Beto mentioned, and we will not make any new project, greenfield project makes sense.

And just complementing on that as well. Like when you're looking at returns in a high interest rate and more volatile environment, we already spoke about that. You should require a higher return for your investment above the cost of capital of the company. We see at current levels of prices, for sure. We wouldn't reach anything close to a little bit above normalized levels of spread over a rock for new projects.

Going for the second question, thank you for the question. When we look at Latin America, Europe and Asia, the 3 regions are very different in terms of market consolidation and also private label. So Europe, you're correct, is the region with the highest level of private label penetration among all the regions that we have. This number has kind of stabilized right now, but on very high -- on a very high level. Going for our operation in future operations in Europe, we see 2 points here. The first 1 is that we have the best brands and the strongest brands in the country so when -- in the region. So when we look at the branded business, I think we are very well positioned in terms of the brands that we carry. We still have opportunities to innovate and to bring new products or to enter new categories with those that are strong and already known in the market. That's number one.

The second one is, we are going to implement a series of cost reductions as we have mentioned in the presentation and some of my colleagues have mentioned here, that will make us more competitive in this market and will allow us also to compete in other areas as well, for example, in private label because we do have idle capacity already on the mills that we have installed in the country. So the combination of cost reduction will allow us to be more competitive and enter new businesses as well in the region, therefore, filling up the mills, diluting fixed costs and then getting a higher margin.

Just complementing and what Luis said, but the main opportunities in this business in the first 2, 3 years, its cost in all lines of the P&L. So we have all those opportunities, as Luis said, but the new management team has to focus to do at least half of what we have done here in Brazil. So this is the priority as soon as we start managing together the business.

Ricardo Monegaglia with Safra. I have 2 questions. First, connecting Aires with Douglas, so forestry and also Cerrado. Aires, you mentioned about the plans to raise capacity to 2.7 million tons and connecting with Douglas, everything he said about wood productivity, less rains. So I wonder if you will be able to keep this 2.7 million tons per year with our current asset base and also current rain conditions in Mato Grosso do Sul or you plan or Suzano plans to do similar deals as the one with Eldorado, the wood swap, would that be necessary? So this is my first question.

And my second question to Marcos. You mentioned opportunistic buyback. So I just wonder if you could guide us through what are the ideal variables that would make you decide for a buyback?

So thank you for the question. The first one, we are ready to increase the pulp capacity in Ribas. Our forest base is already established. So we are completely ready to support this 2.7 million ton per year in Mato Grosso do Sul.

And of course, that's -- we are more comfortable after the deal with Eldorado, the financial AI product that brings our addition of consumption in these coming years, especially because the average of -- have of wood pulp contained inside the wood because the average of the forest is higher than we have predicted several years ago. And then it will give us confidence to announce this volume of pulp and of course, we are talking here remain the same pace in [indiscernible]. We will deliver here more production at Cerrado and try to increase and operate on a higher level -- interest level issue.

Ricardo, regarding your second question on the buybacks, we look at many variables, right? So of course, the price of the stock is probably one of the most important ones, but we also look at other metrics on the industry. We compare also the outlook for the currency makes a difference for us when we are considering buybacks as well. And we look at our disbursements that we have for the future. We look at our leverage as well to see how we're projecting our leverage for the upcoming quarters. So we take all of that into consideration. And considering what I mentioned in my presentation that we have a very strong focus on deleveraging the balance sheet of the company.

We will probably be more selective on buybacks at this point in time. We are already being more selective on buybacks at this point in time. By any chance, we have an improvement in the cycle that we have or we're able to generate additional cash through an asset sale that was not forecasted and we are now starting to consider. Then we open room for the buyback. So we're taking a very conservative approach towards that, but we look on a daily basis on all of those variables to see if it makes sense for us to engage in the program or not. We have an open program for the buyback. It's still open. We have room to do buybacks if we need and if we decide to do.

Thanks, guys, for the presentation. Yuri Pereira from Santander. Still on forest productivity. I'd like to understand if you have in your plans some approvals about GMO regulations and how is that important for Suzano in the long term. And if you could also recap to us about the benefits and the differences that these regulations could bring to the sector.

Carlos, would you like to mention about.

I can start. Today, we have 11 events approved by the Brazilian Biotech agency. And those events are related to herbicide tolerance, insect resistance and productivity. And once we can get the approval of others that we have been working on. Once we can find a solution with the certification body, we're going to be in a unique position to have those GMOs contributing, even more to take us to a much higher productivity level. Right now, we have ongoing discussions with some NGOs with some certification bodies, but we don't have a conclusion yet. This is one of the fronts that I lead there in Europe, and this is one of my priorities. We got to find a way to make it happen once we have a lot of value in having those GMOs planted or brought to our plantations.

Just to share a thought on that area. Carlos is leading this initiative, which is very important for us in Europe since he is based there. If you buy a box of corn flakes at home, the corn inside the box has GMO, but the box, we are not allowed to use it. So that's the rules today. So -- and we want to challenge this very strongly to make sure that we have the same right that other futures like soybean and corn that are using GMO for more than 20 years already. So it's in our agenda.

We have room for another last question. The team always deliver.

Thank you, Marcos. Congratulations to the team. So I'm going to make a heads last one to Malu and Douglas. I think we're having some real climate change. The world has lost the majority of our coral reefs. And we're moving towards losing the Permafrost and that will release a lot of CO2 in the air. So it seems that the ship has sailed, and the oil productions are every year higher. And I would like to know if you have any perspective for the next 5, 10 years or for the next decades of how big these challenges will be and how to face them.

Well, thank you for the question. I think in the coming years, it will be higher, the challenge because the technologies, the investments are not there yet. I think everybody is moving faster, but not on the speed that's still necessary. In our case, to be very concrete, and then, Douglas, you can complement. We have been investing a lot on research and development, okay? So to have a more resilient seed, to have a more resilient plant is already necessary for us. We are not waiting for this climate change. We have been dealing with that in the last few years. And we have been able to be managing it because we started earlier, right, with all the research that we have with all the efforts that we have on the environmental side and the social yet.

When you look at global level, we still need the development of the carbon credit markets okay? It's still not on the right pace. We have just finalized COP. There is no evolution on this side, but you can see that it's not -- it's something that it will be happening, not now, but maybe in a couple of years, and we will make a difference. Companies will move faster when the market will become much more mature, but companies are also moving because they are being impacted already, not only -- it's not news, it's not about information. Because of a lot of things happening. People are saying that companies are not investing on climate -- fighting climate change and more or any other sustainability agenda.

And for me, you are the first ones that show to us that it's not really changing because you're still demanding from us, data, performance, risk analysis on every environmental and social, let's say, risks that we -- each different business faces so I think what we have today, it's not on top of the agenda, maybe not on the front page of the news, but companies realize it's important. So we are moving and working together with public sector. If we don't work together with them, we advocate, it's very important for us. We have to be part of the definition of those rules, not only here in Brazil, but also abroad, because they are impacting our business. So we are organized. We are organizing Intermodal ourselves to the part of those debates of those developments.

It's quite hard to think about this future to simulate that, but what I can say is that we are obsessed by resilience. A couple of years ago, our focus was productivity. Now, it's not just productivity. It's productivity and resilience. And as I saw today, we are completely focused on that. Suzano has one of the largest bank clonal in the world for eucalyptus. And even considering the climate change, we are delivering on productivity and resilience. Resilience not just for water, but for pests and diseases as well. This is how we are working to overcome this challenge.

Just a final statement on that, so then we can finish. We see sustainability as an opportunity, not as a cost. This is the way that we believe this is the way that we manage we truly -- we fully believe the whole team at Suzano that we can keep growing the business and at the same time, generating positive social impact and protecting the environment. Those 3 things must come together. That's how we manage the business, and we see a business case under any sustainability initiative. So having said that, we really would like to thank you in this warm day to spend the morning here with us. We really appreciate the questions. We really appreciate the discussion. So thank you very much for that, and we see you next time. Thank you.

Ladies and gentlemen, thank you for holding, and welcome to Suzano's conference call to discuss the results for the third quarter of 2025. We would like to inform that all participants will be in a 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. [Operator Instructions].

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 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 will turn the conference over to Mr. Beto Abreu. Please, you may begin your presentation.

Hi, everyone. Thank you for attending our third quarter call results. Let me start with the highlights of the quarter, which most of the figures was quite aligned with what we planned for the quarter. But I'd like to highlight a couple of things. The first one, it's send to the team in Pine Bluff, our congratulation for the process of turning around the business. So as you saw, we have the first positive EBITDA result for the quarter for Pine Bluff, and I think this is the new trend for the business. So the team over there is doing a great job. So we are very glad about what we have achieved at this time.

And -- but the most important one here regarding the highlights is the cash cost. So we are glad to having the chance to keep the trend of reducing our cash cost. This is something that we're going to keep working, of course, not only for the next quarter, but also for the next couple of years, so we still see opportunities to keep gaining efficiency to gaining productivity. And this is an area that is under our control, and this will be in the next 2 years, our main focus. So reducing the total operational disbursement, it's absolutely key and will be the first priority for the organization here in the next 2 years. So this is something that is under our control, and we understand that we don't need to expect or to leave a different cycle of price to do the job that we have been doing. We must anticipate ourselves to make sure that we bring to the organization any kind of opportunity to give to keep efficiency and productivity in our business.

The consequence of that, it's, of course, deleveraging the company, which is absolutely a priority for us. So having the chance to deleverage the company even on low cycle of price, it's something that we believe and that we want to keep doing, and not waiting [indiscernible] different cycles in terms of price to focus on deleverage of the company. We believe that we can do that even on scenarios as the one that we are living right now, okay? So that's my highlight. That's the main message.

So now I will hand over to Fabio that will cover the Paper and Packaging business.

Thanks, Beto. Good morning, everyone. Please let's turn to the next page of the presentation. Our third quarter results were highlighted by strong sales volumes in all markets and our first quarterly positive EBITDA for Suzano Packaging. We have had stable operations in all our mills with lower cash costs versus previous quarter, in Brazil and also in the United States, with lack of annual planned shutdowns. Our third quarter volume marks the highest quarterly volume for our Paper and Packaging business unit in history, even faced very challenged paper market conditions.

Print and white demand, including imports in the Brazilian market according to EBA, declined by 7% in the first 2 months of the third quarter compared to the same period of last year. However, domestic producers outperformed imports with a more moderate 4% decline and a 29% drop in imported volumes. The overall contraction in demand was primarily driven by the coated paper segment, which has benefited from additional demand during the 2024 election period. Demand for cut size and uncoated papers remained relatively stable.

Turning to the international markets served by the company. We see that despite the structural reduction for print and write in mature markets, uncoated paper grades, our main export product performs better than the other grades. On the negative side, there are continued negative effects of economic headwinds and uncertainties related to the ongoing trade war. In Europe, demand has been more sensitive to those trends, reducing 6% on the year-to-date, while North America and LatAm, demand for uncoated wood-free continue to be stable.

Now looking at paperboard demand. In Brazil, we saw a 4% net decrease in the first 2 months of the Q3 compared to the same period of last year. Sales from domestic producers dropped only 1% while imports shrunk minus 14% in the same comparison period. In the U.S. market data from the American Forest and Paper Association show SBS shipments have grown 5.9% on a year-over-year basis, while inventories have grown 17% on the same basis. This is mainly due to the unpack of a new SBS machine in the second quarter of the year. Yet, according to SG&A, our operating rate for SBS producers grew 3.4 percentage points versus Q2, reaching 86.5% albeit below historical levels.

Looking at Suzelo figures, our sales volumes were higher than the quarter-over-quarter and year-over-year basis. Our export volumes in Brazil remained strong in the period. Better sales performance in Brazil quarter-over-quarter reflects demand for uncoated and cut size while on the year-over-year reduction in Brazilian sales is led by the coated paper segment. Suzano packaging volumes recovered from the maintenance outage and increased 7% versus the previous quarter.

In terms of prices, prices from sales in Brazil reduced 2% on a quarter-over-quarter due to seasonality and product mix, but were 2% higher on a year-over-year basis. Prices on the external markets suffered by our Brazilian operations, reduced 6% quarter-over-quarter and 10% year-over-year, reflecting challenging market conditions across all regions as well as FX effects.

Prices in dollars for Suzano packaging grew 2% quarter-over-quarter, reducing 1% [indiscernible] due to FX effects. Our EBITDA has reached BRL 542 million in the quarter, an 11% increase quarter-over-quarter and a 10% decrease year-over-year. On a quarter-over-quarter basis, we have had improvements in our cash costs in Brazil and also in the U.S. Higher sales volumes and on the down side, lower prices in our export markets and unfavorable exchange rate. On a year-over-year basis, the decrease in EBITDA is mainly due to lower export prices and exchange rate. This is our first positive quarterly EBITDA for Suzano packaging.

Looking ahead to Suzano's Paper and Packaging business performance, we have planned maintenance outpatients in the near Suzano mills in Q4, which would have an impact on costs. During the [indiscernible] outage, we will finalize the implementation of a series of improvements at the mill, which will upgrade the site sustainability [indiscernible] and reduce its pulp and paper cash costs moving forward. Ex outage, we expect costs to be stable in the next quarter for all our paper operations and sales volumes should increase in line with the historical seasonality for the period. We expect a stable sales prices in Q4 and better regional mix due to higher sales volume in the Brazilian domestic market. Suzano Packaging EBITDA will continue to improve in Q4 and beyond.

Now I'll hand over to Leo, who will be presenting our pulp business results.

Thanks, Fabio, and good morning, everyone. Let's now turn to our pulp business unit, where I'd like to share some highlights for the third quarter. The early July announcement of potential 50% tariffs from Brazilian pulp exports to the U.S., which could compromise the midterm continuity of book falls into this market and its customers, introduce an unprecedented short-term turbulence in the market. This uncertainty affected logistics streams and reduced visibility for market participants regarding near-term dynamics, which contributed to a deterioration in sentiment and triggering a further drop in pulp prices in China to sub-500 levels.

Prices in Europe and North America follow the same downward price trend with the usual lag. As the quarter evolved, when Brazilian pulp was included in the U.S. exemption list, the restored tariff-free access allowed operations to stabilize and ease commercial risk. It's worth noting that although the potential new U.S. tariffs on Brazilian pulp would likely be neutralized over the medium term given the tendency of global book markets to rebalance through interconnected trade flows, the initial reaction from pulp and paper participants underscored market sensitivity to trade policy signals.

As usual, in pulp cycles, the sub-500 price point triggered a strong buying activity from Chinese customers, including integrated paper producers who also secured significant pulp volumes during the quarter. Our order intake levels in China were abnormally high throughout the quarter, generating backlogs of deliveries, which persist to this day as our sales to the other regions in the world were executed as previously planned for the quarter. We have effectively sold all our production volumes during Q3, keeping our inventory stable in line with our commercial strategy.

Our invoice volumes were, however, impacted by our announced production curtailment, which started in July in the last 12 months. We have announced 3 rounds of price increases for all markets starting August, which are being implemented as we speak, but still not yet reflected in our third quarter invoice prices due to the carryover effect on our higher-than-usual backlog, as well as the lagging effect in Europe and North America.

Looking to the right side of the slide, despite strong volumes, a combination of lower prices in U.S. dollar terms and the less favorable effects resulted in BRL 4.5 billion EBITDA for our pulp business unit, equivalent to 49% EBITDA margin.

Now looking forward, I would like to highlight the following points. In China, following our strong sales performance in the previous quarter, October order intake also reached high levels with all of our customers confirming purchases with a new $10 price hike including integrated paper producers who keep buying market pull. As these orders were received or closed in the last days of October, you probably saw that, that's already reflected on today's index publication. Since September, paper and board production in China has continued to grow, driven by seasonally higher demand during this time of the year and supported by exports of coated paper, tissue and cartonboard that exceeded levels seen in the same period of 2024.

In China, price increases were announced by paper and paperboard producers for November across most grades. Although this is still in the process of being implemented, this moves may indicate a turning point in paper pricing dynamics.

Still on the outlook for paper pricing and pulp demand, September brought yet another shift for Chinese producers. Stricter regulations on imported recycled grades, which represent over 3 million tons of furnishing to this market, prompted domestic pulp producers to fill the gap using unbleached BCTMP and other mechanical book rates made from local hardwood, which has consequently driven up demand for local wood. In addition, wood chip demand in China is being fueled by the ramp-up of new integrated capacities launched since late 2024 as well as the restart of some of Chenming operations. Despite uncertainties around local wood prices and its full market impact, these developments are expected to intensify demand in the coming months and further pressure with chip prices.

We continue to monitor wood cost dynamics in the region as rising demand for Chinese wood chips also supported by tighter recycled fiber imports points to a more favorable paper pricing environment and higher cash costs for Chinese market pulp and integrated paper producers. All considered, we expect that pulp prices will continue to move up from the current levels -- from the current levels. During the next months, we will seek the implementation of the remaining part of our price increase announcement, meaning $20 on a net basis, which were still not implemented.

Volume-wise, as we progress through the fourth quarter, we continue to allocate our targeted volumes across all regions with full confidence in closing 2025 as planned.

On the supply side of the equation, it's important to notice that hardwood pulp prices have remained below the estimated cash cost of roughly $600 per ton for 13 consecutive months. According to a leading consultancy in our sector, over 15% of global hardwood market pulp production today is operating underwater, and softwood pulp producers are facing an even greater pressure.

Zooming into Europe, producers have now enjoyed 1 year below breakeven levels considered the regional sales only, and we estimate that more than 25% of European capacity is currently unprofitable, all based on local delivery costs and the European price index net of rebates.

As I have stated in multiple occasions, I view this in scenario as completely and sustainable -- completely unsustainable and believe that more significant supply side adjustments are likely to take place going forward.

Still on the supply side, just this week, a major Brazilian competitor has announced further capacity swings to dissolving pulp, taking approximately 600,000 tons of paper grid pulp out of the market in '26 when compared to 2025, we should improve the S&D fundamentals for the upcoming months.

With that said, I would now like to invite Aires to address our cash cost performance for the past quarter.

Leo, thank you very much. Moving to next slide. The cash costs, excluding [indiscernible] third quarter came in at [ BRL 801 ] per ton, making a 4% decrease compared to the second quarter. The most significant driver of this reduction was the lower cost, the lower wood cost mainly due to improved wood costs resulting in a lower specific consumption and the operational efficiencies in harvesting and logistics.

Additional contributing factors included lower consumption and price of key inputs such as caustic soda, [ chlorine oxide ] and lime, reduce energy costs, especially for natural gas, driven by the decline in the branch price and FX appreciation, which lowered the cost of dollar-denominated foods in local currency. When we compare to our cash cost to the third quarter in '24, the cash cost decreased 7%, reflecting gains from operational efficiency, input cost reductions and scale.

The key highlight was the broad contribution of Ribas units, which support improvements across all cash cost components. The highlights of improved performance were wood cost, which saw the most significant reduction driven by shorter average ratios, better performance on the field and a lower TCO price, which scale gains also helping to get indirect costs and lower input consumption, especially caustic soda and [indiscernible] supported by operational improvements and fuel to gas conversion in the lime kilns at the Ribas and Imperatriz mills.

Looking ahead, we are pleased to share that the cash cost production [indiscernible], is already running below the BRL 800 per ton mark. This solid performance gives us confidence that we will deliver in the fourth quarter of '25. The most competitive part on the cash cost of the year while also support our full year average close to the level recorded in fourth quarter '24.

Now I hand over to Marcos to continue the presentation.

Thank you, Aires. Good morning, everyone. So I'll start with the leverage. Our leverage in dollar terms ticked up to [indiscernible] our net debt remained stable in the quarter, our EBITDA last 12 months declined mainly because of lower pulp prices.

In terms of our net debt, as I mentioned, it remained stable on a quarter-on-quarter basis, and I would like to highlight that we continue to generate positive free cash flow throughout the quarter and that we saw some nonrecurring events impacting our liquidity and leverage in the quarter, namely the wood deal that we did with Eldorado and also the premium we paid for the repurchase of the bonds of 2026 and 2027. These events totaled close to BRL 1 billion.

In terms of liability management, we did a lot of different transactions with a highlight of the issuance in September of $1 billion new 10-year bond for Suzano issued at the lowest corporate spread ever for the company, and we also repurchased the bonds maturing in the short term, 2026 and 2027. The result of that -- is that we were able to reduce our short-term maturity risk, and we also were able to increase our average terms of our debt from 74 months to 80 months without changing the average cost of our debt, which remains stable at 5%.

Moving to Slide #8. We highlight the healthy hedge portfolio that we have at this point with a good option of [ 564 ] and a call option above [ 650 ]. Our total portfolio is at $6 billion. And if we were to -- if the BRL remains stable at [ 5.32% ], which was the level of the closing of the third quarter, we would have a positive cash impact of nearly BRL 2.5 billion in the upcoming 2 years, including the fourth quarter, with the impact of positive BRL 800 million in 2026.

Moving to the next Slide #9. We would like to reinforce our guidance for CapEx for 2025 at BRL 13.3 billion, which implies a CapEx of BRL 2.9 billion in the last quarter of the year.

Now I would like to hand over to Beto for his final remarks.

Thank you very much, Marcos. A couple of things that we understand that it's absolutely key to send as final message regarding the next couple of quarters. So looking ahead, as I said, we will keep focusing the whole team in the cash production cost, not only for the fourth quarter, but we understand that, that must be attendance in the way that we manage the business, and this is dealing with something that we control to be prepared for any kind of scenario in the long term. So that's the first thing.

The second one is that we have a couple of investments that we made in the last, mainly a couple of 2 years. As I mentioned, Suzano packaging. There's a new tissue [indiscernible] that just start up and also keep working in the progress to the closing of the JV with [indiscernible] investment that we have made that we must keep working to gradually improve performance in packaging, [indiscernible] but make sure that we will extract the values and the efficiency that we mentioned when we signed a JV with K-C.

So having said that, the focus is extracting value from the investment that we have made already and not putting other initiatives on the table. So how to summarize this is, focus on what we control, we keep reducing cash cost and also making sure that we will extract the value from the investment that we have been making.

Having said that, I'll be open for the questions.

[Operator Instructions] Our first question comes from Caio Ribeiro with Bank of America.

So I wanted to dive into a little bit more detail on your view on the dynamics of wood chips and softwood in the Chinese market specifically. So first of all, I wanted to ask you if you've noted any meaningful changes in terms of the prices of domestic wood chips in China as a result of all of the supply additions that we've been seeing coming from Huatai, Nine Dragons, and in particular, Chenming announced resumption, right? And whether that has had any meaningful impact in your perception on the marginal cost of production of pulp in China?

And then secondly, in terms of softwood, right, clearly, the dynamics for that fiber have been weaker in comparison to hardwood with prices dropping while hardwood has been on a recovery track. And our perception is that this has largely to do with an abundance of this type of fiber, right, softwood in Chinese markets as a result of higher domestic production. So I wanted to ask whether you've seen any meaningful changes there in terms of domestic producers in China perhaps reducing softwood output as a result of the recent drop in softwood prices, and whether that incentive from customers to switch from softwood into hardwood is still present, or if there have been any changes there given that reduction in the spread between both fibers?

Caio, this is Leo here. Thank you for your questions. Regarding war chips, yes, we have seen an uptick in the prices not only of the Chinese wood chips, but also of imported wood chips in this last 2, 3 months. Imported wood chips on a BMT basis have increased almost $10, which would generate roughly an effect of $20 in a cash cost of breach hardwood production, while Chinese wood chip prices as per our monitoring has increased from $25 and in some cases, $40, and that's always a double effect, approximately on the cash cost of production.

So your assumption is aligned with ours that yes, this will create [indiscernible] in an increasing cash cost of Chinese producers, both of market pulp and also integrated paper and packaging producers, which we are seeing that are now and more intensely pushing for paper price increases. I believe that obviously, this is a consequence of higher cost in their season, and that should support the S&D fundamentals for hardwood for the upcoming months.

Regarding softwood, yes, indeed, it's weaker. It seems to be trending in the opposite direction than harder for these past months, especially in China. I think there are 2 effects. First is the availability of the unforeseen softwood chips at a very competitive price, in some cases, at the same price as hardwood chips since the beginning of this year due to the infected wood and the policy to try to cut and use this wood as soon as possible. We believe that this wood will last more 2 to 3 quarters in the market. And that is putting pressure on softwood both by some integrated players, now producing softwood in their system, and they used to buy it, but also having less -- putting -- leaving less space for softwood pulp.

And the second factor, which I would like to call your attention is the fiber to fiber movement. Obviously, even with the gap that has reduced from over $200 to roughly $150, $160. It's a huge incentive still for fiber substitution. We see a lot of traction, a lot of action in China, many, many customers interested in seeking our support in this journey. So in terms of how can they be less and less dependent on softwood and more and more depending on hardwood fibers like ours. So I think it's a double effect that is making the scenario for software producers a bit worse than what we see in hardware today.

Our next question comes from Daniel Sasson with Itau BBA.

My first question goes to Aires. Aires, if you could comment a little bit about your cash costs. You mentioned that you're running already below BRL 800 per tonne in the fourth quarter. But considering the deal you announced with Eldorado that -- and the [indiscernible] you are not that far from your expected cash cost level in 2027, according to our TOD if there is room for additional improvements or lower cash costs in the medium term? I'm thinking more specifically about 2027, not to anticipate what -- any revisions you might make to your TOD, but to think if this cost-cutting trajectory is going to be somewhat linear throughout 2026 and 2027 or if you have specific events that we should see maybe 2027 so as to drive your costs down.

And my second question to Grimaldi. Thank you so much for the comprehensive backdrop that you viewed for pulp prices. Grimaldi, if you could just discuss a little bit about your expectations for the main topics to be discussed in 2 weeks at the London Pulp Week or in 1 week at the London Pulp Week -- last week, Chenming stoppage was maybe the most important topic. And exactly, you mentioned in your speech that you're thinking -- that you are still hopeful or optimistic about price increases going through. Is there anything that changed over the past couple of weeks, so as you give you -- or to leave you more optimistic given that the industry was not able to absorb the price increase attempts in September and October, right? Is there anything that changed at all? Or if you could explain why you are optimistic or more optimistic now than you were in the past maybe 2 months?

Daniel, thank you for your question, Aires speaking. Considering [indiscernible] start to supply of our [indiscernible] probably in January. We do not suffer any packages probably rescale the sequence that we receive at the facility in the fourth quarter to rebalance consider this new volumes. But the main reason of the zero that will give you our rational to do this was that our reduced -- our consumption per ton of wood consumption would per tonne in the coming years. When we compare with your previous analysis, we are considering in the business case and with the first samples that we have on wood, [indiscernible] around 5% [indiscernible] wood per ton in Mato Grosso do Sul.

If you consider that we will supply on an average, 18 million cubic meters per year, we will need 4% and less for the coming years to produce the same amount of pulp. That's the rational that you have to do this deal. We'll try to explain better in the same days in the next month. Then the rationale to next year and the other one is to running always below [ 800 ] tonnes per quarter. Of course, we can be affected with some [indiscernible] times that will affect in a specific. But the idea that we have in our plans, that's our average, we will be below 800 tonnes per year.

Okay. And Daniel, its Leo here, and I am going to answer the second part of your question regarding expectations for [indiscernible]. I think first, expectation, which is more and more clear is that this market scenario is completely unsustainable. And as we are going to a market that is a core of production of softwood, I think this one is even higher than what we see or sense when we're talking about South American pulp production. It's completely unsustainable. Even if we consider European cash costs and sales into the European market.

Again, as I stated in my speech, as per our calculations, more than a year already [indiscernible] at 25% of the local hardware production. So this is unsustainable and the fact that the market is unsustainable as is, I think, will be one of the main factors being discussed during modern pulp week.

I also think that what will be a topic is the rhythm of unexpected closures. As I mentioned during the last call, we saw a very low level of unexpected closures in the first half of this year. And our line of thought is that all the stabilities around the world and geopolitical issues made some decisions not to be taken in the short term as many were on the wait and see and try to see what could be the scenario after there was a clear view on tariffs. As this is now clear, we see that the addition of this unsustainable scenario with a clarity in terms of tariffs will speed up the amount of unexpected closures, commercial downtimes that we see in the market.

And in fact, as per our controls according to consultancies numbers, if we compare the unexpected closures of beach chemical pulp in the first half of the year, and just the 4 months of the second half of the year, meaning until October, there is already a 40% increase on disclosed unexpected closures. So our thoughts or our line of thought seems to be executing or seems to be happening as we speak. And we again believe much more has to happen under this very depressed pricing scenario.

Now regarding your question on my optimism a quarter ago and today, I think my optimism level is slightly better now despite I was optimistic in the last quarter. Thus, the reason we have announced a sequence of 3 price increases. And the reason why we did that is because, obviously, we were monitoring order inflows in all markets and in China, more deeply even with the purchasing patterns of integrated paper producers, the amount of capacity on the water in the world as we speak, and this feeling of optimism now has been a bit upgraded, if I could put it this way, due to the fact that we're seeing a reversion in the cost of wood chips to Chinese producers. As I mentioned to Caio previously, we have seen this $25 to $40-ish increase on the prices of [ BDMT ], meaning an impact of anywhere from $50 to $80 in the cash cost of Chinese producers who are using Chinese wood. And this obviously put pressures in the whole system and establishing -- establishes a new grown for what they can accept or base their decisions in terms of timing that they buy market pulp rather than consume local wood as well.

So it's my optimism increased a bit, I would say, due to the effect of this new scenario regarding regulations on recycled fiber, as I mentioned, and would increase. It is, however, important to say that my optimism is somehow limited. We see gradual price increases, but under this oversupply scenario unless something major happens on the supply side of the equation, my optimism is not as big as you can imagine. So I would just like to point this out.

I'm sorry, just complementing the first question regarding the TLD that you asked it. Just a remark here, we are completely committed with the guidance that we shared with the market regarding what we have to deliver by 2027 and confident that we're going to be able to deliver, okay?

Our next question comes from Rafael Barcellos with Bradesco BBI.

Beto, I wanted to use one of your highlights during your speech. I mean, congratulations for the results in your U.S. Packaging business. It's good to see that you are on track to keep delivering in this new business. And my first question is exactly about it. I mean, what can we expect in the coming quarters? Or do you have any sense of EBITDA contribution from this business for next year? And ultimately, what is the full potential in the long term for the business?

And the second question, Beto. The second question is about [ Lenzing ]. If I'm not wrong, you can already exercise the option to acquire an additional stake in the company. So could you -- could you please share with us your overall thoughts on the investment? I mean, other than that, after roughly a year, I mean, what has changed in terms of how do you see Lenzing as part of your portfolio?

Thank you very much. Yes, since October, we already have the option to execute if we want, as you know. We are not considering to use this core in the short term. We still with the team, analyzing all the trends, all the investment in further capacity in the business mainly on dissolving pulp globally. This is a market that it's also facing a business environment in terms -- in terms of competition, mainly in Asia, which we should further analyze.

So I'd say that the best answer for [indiscernible] now is we will keep as it is with the 15% and keep analyzing the business and keep this study. There is no plan for using the call in the short term.

Regarding Suzano Packaging, as I mentioned, we are very glad to be anticipating, I would say, the business plan. Firstly, in terms of positive EBITDA after taking a business that used to have a negative EBITDA. A lot of initiatives have been implemented on the commercial side, on the procurement side, on the logistics side. On the logistics side, we have been able to take the advantage that we have a strong logistic operation in U.S. that's led by Leo's team in U.S. and there's our synergy on those negotiations to do all the logistics for the business.

We were able also to adjust the team for the reality that we have in the company and in the market. I would say that it's still a lot to come. Fabio has a clear plan for the next 2 years, not only for generating positive EBITDA, but also generating the amount of cash that we are expecting for the business. It's a small business, as you know, but it's helping us a lot to understand the market, of course, to extract value from the unit, but also to understand what is for a company moving abroad. Having the chance to implement our principles in terms of management in a different future. I think we are also learning a lot in [indiscernible] that will help us on the KC JV in the future.

So I cannot disclose a number in terms of next figures. But I would say that we are very glad regarding what we have delivered so far.

Our next question comes from Caio Greiner with UBS.

My first question on pulp. I wanted to go back to that discussion on the long-term fundamentals that Suzano discussed during the Investor Day. I mean we've seen a significant amount of capacity additions in China in 2026, but pulp production in China still seems to be growing only gradually. Still, I guess, the market in general and investors have been really concerned about this idea of China becoming the dominant player in the industry. And again, I know you provided a deep dive on this during our Investor Day in 2024. So I just wanted to understand if there are any updates on that structural view being that maybe a tighter wood chip market as we already discussed, anti-evolution ideas in China. So I guess the question is, since last year, have you become more or less concerned at the margin regarding the structural fundamentals for pulp?

The second question on Kimberly-Clark and following up on this last topic. Just maybe Beto or Fabio, if you guys can give us an update of how the asset is performing. How -- if you have been able to dig a bit deeper into each asset that you're acquiring, there's more clarity on the synergy potential, fiber-to-fiber potential or maybe if you got the chance to understand if there are any assets that don't really fit quite well into the portfolio that are likely to be sold. Anything that you could comment here would be really helpful.

Caio, this is Leo here. I try to answer your question, not taking color out of our Suzano Day 2025 as we are planning to update completely the scenario that we presented last year, bringing insights on the verticalization effect of Chinese production in our hardwood market. And again, it's important to say that as we have local market intel teams in most major markets, China included, this anticipation of view of trend makes us, I guess, more prepared for any kind of reaction or action that we need to take in terms of what's coming ahead of us.

So our view, I would say, is quite neutral at this time. I think the same trend that I have presented to you and to all of you during our last investor call is maintained. We see -- we still see this verticalization affecting our market. But as you mentioned, we are not seeing this pulp production yet growing. Obviously, when you put all these projects in our time line, still a lot of them, I think the effect we are going to see on a bit more short to midterm, the next 4 quarters, which has 2 ways of looking at this, right? Is the [indiscernible] impacting, obviously, market fundamentals. And the positive way is a much bigger demand for local wood chips and a pressure that this could further pause on wood chip prices. And again, we have to monitor that.

And as we speak and see what's going on is that this market prices that we still see, which are low, despite they are going slightly up from the 494 valley a few months ago, still is incentivizing many, many Chinese producers, paper producers -- integrated paper producers to buy market pulp. And this is the reason why we see that pulp production is yet not growing or is not growing, while imports of pulp are booming in the market. You probably saw that hardwood pulp is -- the imports of hardwood pulp is growing more than 11% year-to-date to China.

However, I would say that our view remains cautious, right? We are in a cautious mode, which obviously will depend on how we interact and see these moving parts in the wood chip prices in China. And also, as I mentioned, this completely unsustainable pricing scenario and how it correlates to cash costs around the world and will depend on supply side adjustments in the near term.

Luis, do you want to jump in and I can complement.

Okay, Beto. Caio, this is Luis speaking. As we have already disclosed before, during the phase pre-signing, we have visited all the mills around the globe. And we are very positively impressed at that time with the conditions of the plants and also housekeeping and everything. So at this stage, we have received more information and have been talking to KC given the constraints that the process requires. And we are more positive with the initial estimates that we had. And as time goes by, we will have more time to fine-tune the estimates and to build a business plan for closing.

So our idea is when we close the deal, we will have already a business plan for the coming 2 years with the right level of detail on which are the levers to generate value on the deal.

Just to complement on that, we see the value creation in the business that we mentioned. It's very clear for us the elements that we have analyzed before the deal and maybe further elements that we will find and we are already discovering. I would say that our main concern is not regarding the assets. If there's opportunity to optimize the asset, we will do it. If there's opportunity to optimized geographies, we will do it. This is something that usually is not in the agenda of a big multi-national, but we will consider portfolio management as -- if necessary.

I would say that the main elements that we should take into account against not the assets, it's not the carve-out that we have to do, which is difficult. But it's putting 2 futures to walk together with the same values, but having the ability to extract the best of each one. That's the main challenge that this organization have in this process.

Our next question comes from Yuri Pereira with Santander.

I'd like to ask maybe if you have any information about the floods in Southeast Asia, if you see any impact -- any further impacts on wood prices in China, if you have any information, please? And regarding the solving pulp, do you see more shifts like [indiscernible] for the next year. If you can recap for us what's going on in the dissolving pulp market to result in this shift or if it's only low hardwood prices per se?

Yuri, this is Leo here. I'm going to answer both questions. Obviously, floods have influenced also wood chip prices in the short term. I didn't mention it because obviously, this is very, very punctual and short-termish, first in the southern part of China. And now as you probably saw in Vietnam 2, 3 days ago where the daily rainfall was a record all-time high. But, yes, obviously, this is also influencing wood chip price and its dynamics.

In terms of dissolving pulp, what we see is that today, prices and DWP is trending higher than the historic average of delta between hardwood and DWP over $250, and that's incentivizing this flex capacity to swing in that direction. So in this case, yes, we expect that possible new flex capacity and moving or shifting from hardwood, which, as I mentioned, is unsustainable [indiscernible] is possible.

Our next question comes from Lucas Laghi with XP.

I just have one, I mean, on CapEx. But could you please provide us an update on -- specifically on expansion CapEx. I mean, if we exclude the BRL 935 million expected from your 3 main projects, I mean, according to your latest presentation deck and considering the BRL 1.6 billion in the guidance for 2025. I mean, is it reasonable to expect that this line should reduce in the next year proportionally to this reduction on the treatment projects that you guys are concluding this year? Or I mean should we expect Suzano continue to approve new competitive projects like those ones already in 2026. And if you could also link your rationale or this -- the approval of these competitive related projects in terms of market conditions, I mean it would be important as well for better understand how to think of this expansion CapEx line going forward?

Lucas, Marcos here. We will update the market with our guidance for 2026 CapEx by the end of this month. But I will try to give you a little bit of a trend what we see in terms of CapEx. As you mentioned, we still had in 2025 disbursements for the [ Sajao ] project. And we also had the conclusion of some growth projects that we undertook in 2025, namely the Fluff project at Limeira mill, which will start up in the fourth quarter. Also the additional capacity in tissue at Aracruz Mill and the new biomass boiler at Aracruz as well. So going forward, we should expect a declining trend in terms of CapEx for next year as we will have lower disbursements and also will have less projects in our pipeline.

Our next question comes from [indiscernible] with Goldman Sachs.

So just regarding pulp prices, I mean, Leo you mentioned that pool price situation is unsustainable. But at the same time, the pulp price cycle has been -- the hikes have been very gradual, right? So I think this is the main difference from what we've seen in other cycles. At the same time, we have APPO entering the first half of next year alongside other projects in China. So just to get a sense of where exactly do you see pulp price cycles in the future? Like do you think we are seeing a derating of this range of prices? Like in the past, I mean, we would usually see prices going above $700 per tonne in both cycles. And now the -- I think it's hard to think that we'll see prices reaching $700 again. So just wanted to get your sense on what exactly do you see these price ranges going forward?

[indiscernible], thank you for this question. Just a tricky one to answer is obviously, it has several parts that are connected to our commercial strategy and are very sensitive in that case. But let me try -- and I'm going to give a lot of color in terms of how we are seeing the variables that can change this game in the short term and looking forward during our Investors Day. But in principle, they all originated from the fact that we have now been living a scenario where for several, several months the industry is bleeding, right? And several things could happen to change this scenario.

First is, again, reintensifying of permanent closures. We have seen a decline in permanent closures in BCP during this year. Again, we suppose that a lot of that has to do with the uncertainties that the geopolitic tariffs have created in the decision-making process of this extremely high cost and unsustainable producers that we see in the Northern Hemisphere.

Second is the unexpected downtime rhythm going forward. Even though I mentioned that we see an uptick already in the 4 months of the second semester, compared to the first semester of this year is still low compared to previous years. For the same, we expect or we suppose for the same reasons of the one that I mentioned regarding permanent closures and all the uncertainties during these tariffs and geopolitical timing. This, again, is unsustainable and something should or could happen in that direction.

Third point that could change these dynamics is the timing of the new projects being implemented. Today, we have official news regarding [indiscernible], which are the same as you have. But obviously, all of this more challenging scenarios, can stimulate different actions in terms of time to market of new projects. And in the same token, time to market of the verticalized projects in China or the ramp-up curves, right? So that is a variable that we have to follow very closely and could change completely the game as we look forward.

And fourth and very important as we talk about verticalization in China and the impact it has on reducing demand for hardwood pulp. But there is a huge opportunity, which is what we see on the Western world, more than -- or 2/3 of the pulp produce in the world is integrated into paper and packaging production. Many, many old sites, old mills, which were the origin of paper production and board production are in Europe and in North America and persisting this trend or this pricing trend, we believe that these mills are unviable or unsustainable. So we believe a lot in the thesis of the de-verticalization in the western part of the world as a consequence of what we're seeing in China as we speak.

Our next question comes from Eugenia Cavalheiro with Morgan Stanley.

I wanted to explore a bit more what you're seeing as growth opportunities in the paper market in the U.S. And also on the profitability side. Where do you feel like -- what level you feel like it's reasonable for the company to achieve? And how far are you from that right now?

Eugenia, it's Fabio here. Beto, I can take that about the U.S. We're still a very small player here in the American market. We have 4% to 5% of the SDS market. So still plenty of rooms to grow. At the moment, what we are doing here, again, is focusing on our growth in foodservice. It's trying to diversify a little bit from the liquid packaging board market that we are concentrated and it's doing well.

Regarding business moving forward and our profitability moving forward, we cannot provide any color on that, but I would like to say that there's still lots of opportunities for us to improve in terms of costs here, and we're going to be addressing that in the next quarters and moving in the next year.

Thank you, Fabio. Absolutely aligned with what we said in the beginning, which is focused on efficiency. So as Fabio said, a lot of -- still a lot of opportunity to improve portfolio and cost in the current facility that we have in U.S. And Eugenia, there is no further, let's say, inorganically alternative for U.S. in the short term at this time. So we are again completely focused on extracting the value from those assets that we have a prior already.

We finalize the call here. And I want to remember that we have the Suzano Investor Day 2025 on December 11. So we will be great to have all of you with us. So thank you for attending the call. And the IR team is always available to clarify any further questions. Thank you very much.

The Suzano S.A. third quarter of the 2025 conference call is concluded. The Investor Relations department is available to answer further questions you may have. Thank you, and have a good day.