Suzano S.A. (NYSE:SUZ) Q4 2023 Earnings Call Transcript

Suzano S.A. (NYSE:SUZ) Q4 2023 Earnings Call Transcript February 29, 2024

Suzano S.A. isn’t one of the 30 most popular stocks among hedge funds at the end of the third quarter (see the details here).

Operator: Ladies and gentlemen, thank you for holding and welcome to Suzano’s conference call to discuss the results for the first quarter of 2023. [Operator Instructions] They will be addressed by the CEO, Mr. Walter Schalka, 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’ll turn the conference over to Mr. Walter Schalka. Please, you may begin your presentation.

Walter Schalka: Good morning, good afternoon, good evening to everyone that is joining us for the session of the fourth quarter results of Suzano. It’s a great pleasure to be with you. Guys today is a very emotional day for me. As you know, yesterday, we announced the transition of Suzano’s role as a CEO, to be part of the Board of Directors, and to be on several committees. Of course, I’m very proud from the 11 years contribution that I have been delivering to the company and being part of the transformation of this company for the last 11 years. I’d like to start some issues. First, to welcome Alberto Abreu, I think it’s a person that is going to have an important contribution to the company on the next coming years.

I think and I recognize that he has the right skills to continue and the word is like that is continuing the transformation of Suzano. I’d likely as well to thank you the 20,000 people that is working every single day on Suzano to being transforming Suzano on a better company that is impacting the society. Of course, I would like to thank you the leaders and the management team, our Silevo that have been with me for the last many years and being part of this transformational journey that has been very positive to all stockholders. As you may know, one of our main points on our culture is to create value in sharing with all the stakeholders, and they have been amazing on this process. I’d like to thank you, the Board of Directors for the support that I got from the period that we have been here and the reference shareholder as well that we implement a very good governance where the roles of everyone were very clear during the process.

I’m very positive about our future about Suzano and going to be part of that. And it’s very clear that capital allocation is quite important issue for us. And I’m going to be on the Board of Directors to help to continue to look for alternatives that would create value for everyone. Our policy of looking for new investments in one side, but we have a very financial discipline in one side and very disciplined on capital allocation will continue on the next coming years. It’s not related with me related with the all the governance system of the company. Now I’m going to turn to the results of the fourth quarter and 2023 results. I’m very pleased to announce a very good year for Suzano and a very good fourth quarter. I think we had an extremely good operational performance on the fourth quarter.

But it’s very important to bring to your attention the main strategic achievements that we had last year. First, related with expanding our role in different verticals. We increased the addressable market on the fiber to fiber on the fluff market announcing an expansion with a swing line in the Limeira plant. On the other hand, it is very important to mention that our Tissue business last year had major additional volumes with the acquisition of the tissue business of Kimberly Clark in Brazil, and we announced a new plant in Aracruz that is going to be commissioned on 2025. Regarding growth and modernization, and competitiveness, we have been working to retrofit Aracruz in Jacarei, extremely important projects for us. We never had on our history, so much expansion in terms of land banking and forest base.

We were close to 300,000 additional – sorry, 300,000 hectares of planted areas last year, and we are going to have the same amount for this year. Aires is going to share with us today good news about the Cerrado project. And I think this is a transformational project for our history. We are going to increase volumes on a very competitive base for the future. And we continue to have shareholder compensation. We concluded the third buyback program, and we had now the fourth program that we announced a few weeks ago. There is going to so the market that we believe that we are under value. And the best capital allocation for us would be to buy back shares and show to the market that we can keep creating value to our shareholders. And we announced last year, we pay in January the interest of equity payment of BRL1.5 billion.

In terms of results on the Page #4, we had last year, 10.2 million tons of pool, 1.1 million tons of paper. We had the lowest-ever inventory in the company showing that the market is demanding volumes for us. Aires is going to explain in detail what is the market conditions for us right now. We had an adjusted EBITDA of BRL18.3 billion. The cash cost for the last quarter last year was BRL816 per ton. We have been decreasing every single quarter our cash cost on the last year, and our very robust balance position. Marcelo is going to go in more details about that. But we have a very good liquidity. Our net debt is not growing even at a very high pace, even considering the largest CapEx on our history, showing that we are able to deliver new projects without expanding our net debt on a very high level.

And our leverage was 3.1x net debt over EBITDA. Of course, this is regarding a lower EBITDA due to the lower prices that we had last year. Now I’m going to turn to Fabio, who is going to explain a little bit more about the paper business. Fabio, the floor is yours.

Fabio Oliveira: Thank you, Walter, and good morning, everyone. Please let’s turn to the next page on the presentation. 2023 was a challenging year for paper and packaging markets globally. Excess of inventories led to a much lower level of demand in most markets. Normalized supply chains coupled with excess capacity on print and writing and paperboard mainly in Asia, increased competition, which turned into higher price over paper price international markets. Despite these challenged conditions, we were able to deliver solid results, full operational flexibility, and revenue discipline, achieving the second-best EBITDA in our history. On the domestic market, according to EBA, print and right demand decreased 13% on a quarter-over-quarter basis.

In a full-year comparison, we see 11% decrease in print and right demand, quite above its secular trend caused by destocking from 2022 levels and paper substitution, mainly in the promotional advertisement segment. Our core markets, uncoated wood-free and cut-size products performed better than our paper grades and demand was more resilient. On international markets, print, and right demand was also hampered by the destocking cycle, but also by micro-colon certainties that limit economic activity and a faster advancement of digitalization. Print and with demand has shown above 20% in the mature markets such as U.S. and Europe, foreseeing adjustments in capacity to match new demand levels. Regarding paperboard, we have seen inventory adjustments as supply normalized, mainly the pharmaceuticals and domestic segments, which start early in the third quarter and continue through the end of the year.

As a result of that, IVAS data shows an 8% reduction in domestic demand on quarter-over-quarter. When you look at the full year, we see that paperboard demand almost flat compared to 2022 on a stronger first half of the year. Suzano’s total sales volumes in Q4 were 17% higher than last quarter due to seasonality. Compared to year-over-year sales volume increased 5%, driven by higher volumes for the external market. Our annual sales volume compared to 2022 decreased 6% due to lower sales in the domestic market, which represents 67% of total sales. The average net price during the quarter was 7% lower than our average price in Q3 and 50% lower than Q4 on 2022. But when looking at 2023 versus 2022, our average net price remained 3% higher. It is important to mention that lower net price in the second half of the year reflect lower price in international markets.

Suzano’s domestic prices were more resilient and were only 1.4% lower year-over-year due to seasonal product mix. Looking at now at EBITDA, the 11% decrease quarter-over-quarter and 29% year-over-year were both driven by lower prices despite higher sales volumes. The same factors led to lower EBITDA per ton. Our full-year EBITDA was $2.6 billion, a 9% decrease versus 2022, but still much higher versus pre-pandemic levels, as it can be seen in this slide. Looking ahead for 2024, we expect to see normalized levels of demand as inventory levels seem healthier than compared to 2023. The structural trend of digitalization, permanent shifts in consumption behavior will continue to impact demand, but we expect purchase trends to go back to its historical pattern.

Cost inflation over the past year had eased and settled, and we should expect flat cost for paper products in 2024, a bite the stress of global geopolitics, which could impact supply and demand balance in the future. Now I will turn over to Leo, who will be presenting our pupa business results.

Leonardo Grimaldi: Thanks, Fabio, and good morning, everyone. Let’s move to the next slide of our presentation in order to address with you our Pulp business unit results for the fourth quarter and full year 2023. I would like to begin by sharing with you some facts on the supply side of the pulp fundamentals. Despite incoming volumes from the main 2023 projects in the [indiscernible] inventories in major markets reached low levels along the fourth quarter of 2023 coming to even more critical set points at some key port terminals in Europe. We have also noticed that permanent capacity closures in bridge chemical pulp reached almost 2 million tons during 2023 with a substantial share of this volume curtailment already affecting markets during the second half of the year.

When considering the supply factors and adding demand drivers such as the recovery of paper production and pulp demand in Europe and a healthy demand and order intake in Asia, aside fundamentals have triggered new rounds of full price increases in all markets. As you can note on the upper left graph, our fourth quarter sales were quite strong, much aligned with Q4 2022, despite the fact that we had lower production availability. Our pulp inventories, as Walter mentioned, have now reached the lowest – the lowest levels ever, which have demanded us to push and stress our operations to the limit in order to ensure the maintenance of the supply chain excellence and the established commitments in our contracts with our customers. The combination of strong volumes with price recovery, FX, and lower cash costs have resulted in a higher EBITDA margin for the quarter, reaching BRL3.8 billion or 48% margin.

Now looking forward, I would like to highlight the following points. Both print and writing and specialty paper producers operating rates have been recovering in Europe at a stronger pace than expected. As a consequence, most of our customers have been revising up their book demand for the next months and quarters. In order to best serve our customers in Western markets, our business therapy is different than those for Asian markets, meaning that we have to build up and carry more pulp inventories close to or even within the customers’ facilities in Europe and North America, stressing further our current logistics constraints. As we speak, we are in the process of reestablishing inventories in Europe and North America, but this effort should take a few months, especially because we have to combine this initiative with ongoing invoicings to other markets like Asia, Africa and Middle East, for which today, we have significant backlogs.

This has been further intensified by logistic headwinds due to the Red Sea conflict and challenges also in other routes. For the upcoming months, we are limiting our offers to Asia, to Middle East, and to Africa to better manage our inventories globally and to recover the backlog caused by late shipments. This means that we have been fully booked in January, and we also have been fully booked in February, and expect that this scenario will last some more months before the whole system is restabilized. Talking about the demand side of the S&D equation in China, January paper and oil production was positively has possibly surprised both market participants and now post Chinese New Year, initial signals show that demand for pulp has been recovering over expectations as market contenders are preparing for higher seasonality and consequently higher paper production months, led by increase in commercial printing and spring publishing season in China.

Such positive dynamics is also being benefited by the implementation of several price increases for paper, specialty papers, and packaging grades in Asia and in other key markets of the world. Demand in Europe continued to positively surprise our forecast with an additional short-term upside coming from the lower paper imports from other markets due mainly to logistic constraints. As you already know, considering all of the above, we have announced earlier this week a new round of price increases to all global markets and expect that they are successfully implemented during the next weeks. Our market sources indicate that Chinese BHKP resale prices as well as Chinese local hardwood prices are trending up with conditions to close the gap to imported pulp in the very short term, reinforcing the tighter-than-expected market environment.

With that said, I would now like to invite Aires to move forward with our presentation.

Aires Galhardo: Thank you, all. Good morning, everyone. We are on Slide 7. Look to our cash cost performance in the fourth quarter compared to the previous quarter. The middle single-digit decline was driven by lower wood costs mostly due to shorter from forest to new distance, improved wood consumption per ton of pulp, and supply mix, lower chemical price being Kaskida highlights, lower input consumption on the back of greater operational efficiency of our mills and a reduction of fixed costs with increased production volume. On a year-over-year comparison, the 13% improvement was benefited by lower input costs with a fall in commodity price, lower consumption of inputs leveraged by energy efficiency project carried out at Sakari, and several improvements in wad KPIs, such as lower diesel price, better efficiency in the harvest in the logistics, lower average distance as well as a lower wood consumption per ton of pulp produced.

Looking forward, we expect a flattish cash cost performance throughout 2024 compared to four quarter ‘23. The benefit of Cerrado project food stock should be seen in the end of the year as the ramp-up progress. Moving to the next slide. As you can see, Chad project has involved as planned in ‘23 and we are very confident for its startup by June this year. Now I turn the floor to Marcelo Bacci to continue the presentation.

Marcelo Bacci: Thank you, Aires. Moving to Page 9. I’d like to start by giving a retrospective view of our indebtedness. As you can see on the top of the slide, we have gone through during the years of ‘20 and ‘21 through a deleveraging cycle right after the merger with Fibra. And since the end of ‘21, we have been generating a significant amount of capital through our operations and gone through a very relevant investment cycle with $4.6 billion being invested in modernization and growth. But on top of that, we have been able to return to our shareholders $1.4 billion and – which was a significant return when compared to previous years. And if you look at the behavior of our net debt over the years, we now stand at $11.5 billion, which is more or less the same level that we had 3 years ago and $2 billion below the year of 2019.

With that, we have been able to keep our leverage ratio under control. We now stand at 3.1x net debt to EBITDA in dollar terms. And we expect this ratio to go up in the first half of this year before we start the Sahad project and then start to decrease after we start the new mill and then see the revenues coming from the new bill affecting positively our revenues. In terms of liquidity and amortization schedule, we have been improving this number constantly. We now have between cash-enhanced standby facilities and signed contracts that are still to be drawn, $6.8 billion of liquidity, which corresponds to 4.5 years to the next 4.5 years of maturities. This is a very comfortable position that we keep improving all the time, seeking for opportunities of new transactions.

As we had said before, we have a significant amount of our debt at fixed rate. And constantly, we are starting to move back to some floating rates to benefit from the expected reduction in interest rates that we will probably see in the coming years. Moving to the following page, which is the last page of the presentation, we’d like to touch on the guidance for total operational disbursement that we gave last year. At the end of last year, we signaled to the market that we expect the total operational disbursement to reach BRL1,75,000 at the end of 2017. And we are now reaffirming the same number, 1.753 toward the end of 2023 currency, which means that we have been offsetting the inflation of the last year of ‘23 into the number and keeping the same guidance with a slightly different split between the three components, sustaining CapEx, SG&A, freight and cash costs.

With that, we conclude the presentation, and we can move to the Q&A session.

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Q&A Session

Operator: Thank you. [Operator Instructions] Our first question comes from Mr. Rodolfo De Angele from JPMorgan. Mr. Angele, the floor is yours.

Rodolfo De Angele: Okay. Thanks, everyone. Of course, I just wanted to start by saying that you’ll be missed, Walter. It’s very big shoes to kind of feel looking forward. And it’s great to hear that you’re going to be around and the focus is on continuity. But let’s move to my questions. First of all, very impressed from the words from you, it seems very bullish for the pulp market outlook. So Leo, can you comment a little bit more on what you mentioned. How are things particularly in Asia? And you mentioned that you’ll have to limit some of the output to the region. Can you share, please, some more light on this? And the second question I have is given that demand seems to be – or the business environment seems to be quite tight. We’ve been asked a lot about the 4% capacity that was closed. Is that coming back? We’ve been asked a lot about this. So if you could comment that that would be great. Thank you very much.

Leonardo Grimaldi: Thanks, Rodolfo. Good morning. Thanks for your question. Yes, I’m going to start with the first part, talking about what we’re seeing happening in Asia and also about how we are managing our system to reshuffle this inventory throughout the world, as I mentioned in my speech. Asia had – or China had a very strong January production month. This was quite surprising. I think it exceeded the expectation both market contenders. And after Chinese New Year, the sentiment of optimism is on the streets. Obviously, we all know that there is a higher seasonality period of the year due especially to commercial printing and to publishing season. But also the paper producers and packaging producers were able to implement price increases right after Chinese New Year and already announced new rounds of price increases for March.

And this obviously creates an additional optimism in the market. And we see an immediate reflection and we see resale prices going up. They have been going up since last week. Our market sources even report higher numbers on the street today as we speak than those reported yesterday night. So we see resale already catching up to imported pulp prices. And we see also local Chinese hardwood producers following imported pulp prices. So this is a more speculative part of the market is reacting quick to translate the same scenario that we see in the short-term. What I mentioned regarding limiting volumes to Asia, and also the fact that we have been oversold for the last few months is because as Europe is coming back on track and also North America and our business model in these markets demand local inventories either in outpost terminals or even inside our customers, we need to reshuffle all these volumes back from other markets in Asia, Middle East or Africa to Europe and in the United States in order to comply with our supply agreements and contracts.

And then by doing that, and our customers keep revising up also their forecast. Obviously, they don’t expect that it is as strong as it was in ‘21 and ‘22, but there is a significant recovery based on ‘23 levels, and they keep revising it up, we are constantly trying to resell vessels outside Europe in order to establish these local inventories and the same is taking place in the USA. So that is why we’re having to limit the volumes that we are offering to markets like China, like Asia, like Africa, like Middle East, so that we are able to return quickly to a prompt supply chain system and an efficient supply chain system that we guarantee to our customers.

Marcelo Bacci: Also, this is Marcelo speaking. In relation to the production for this year, we continue to analyze the situation in the market on a marginal basis, and we will make the necessary decisions throughout the year, reflecting the market conditions. We are not ready to disclose more than that at this point.

Rodolfo De Angele: Great. Thank you.

Operator: Our next question comes from Mr. Jon Brandt from HSBC. Mr. Brandt, the floor is yours.

Jon Brandt: Hi, good morning, Walter, just wanted to congratulate you on a great 11 years. Certainly, you’re leaving Suzano in a much better place than when you started. So congratulations and best of luck in your new role. I guess my first question is related to one of your customers. And I know generally, you don’t really like to discuss that. But I understand Vinda in China is in the process of being acquired by I guess, one of your competitors. And presumably, they would want to use their own internal pulp when that acquisition is completed. So I guess I’m wondering, what does that mean for you? Is that sort of another issue that you have to deal with in terms of moving those volumes away from Vinda towards a bunch of smaller customers?

Is there any concern about how that might go? I guess that’s my first question. And my second question just relates to some of the logistics issues that you are discussing: Panama, Canal, and the Red Sea. If you could maybe elaborate a little bit more on sort of the issues that you’re seeing. Is it costing you more to ship? Is it taking more time? I guess, how big of a concern are these logistics issues? Thank you.

Leonardo Grimaldi: Thanks, John. This is Leo here. I’m going to answer both of your questions. First one related to a very important customer of ours in Vinda in China. We are following the latest developments. We have been a very close partner to them for quite a long time. And our obviously, first initiative is to support this transition with so many friends who have been supporting Suzano for such a long time. So how do we make this as smooth as possible for all of those in this company, which have been supporting us and our predecessors here at Suzano for a long time? As you know, the market is interlinked, if it is the new management’s decision to verticalize production downstream from their pulp mills, certainly customers where they were selling will open up and the whole system will again reshuffle itself around.

So we don’t see any issues on that. We are very much committed to supporting this transition, especially due to all the support we have gotten from the Vinda team throughout these past years. Regarding logistics for Suzano due to our setup, we have all these long-term agreements and even vessels. The cost is not an issue. It’s much more delay on shipments and to routes, right? We have a lot of shipments to the region that involve Red Sea transit. So we’re having additional lead times, which can go from 10 to 15 days. And there was also an abnormal rainy season in Brazil at the end of the year and into January, affecting southern ports in Brazil, which is also affecting a bit the lead time of vessels and how they rotate in the whole seas.

But it’s a matter of lead time, not of cost.

Jon Brandt: Perfect. Great. Thank you.

Operator: Our next question comes from Mr. Leonardo Correa from BTG Pactual. Mr. Korea, the floor is yours.

Leonardo Correa: Hello. Good morning, everyone. Can you hear me?

Walter Schalka: Yes.

Leonardo Correa: Okay, sorry about that. So I’m going to start out the same way. Walter, it was a pleasure to exchange all the ideas and to hear you over the past years. Congratulations on this amazing career so far as a CEO, and I hope you have a lot of luck on your new role at the Board, and I’m sure that you’re going to be very close to the company still. So congrats on that. Moving to a couple of questions, guys, the first one is on – just on the new potential investment cycle, right? I mean, of course, everyone is thinking about that, and this is core to the investment case. And management has been talking about this new cycle, right? Even though we’re still in the middle of – we’re still finalizing Cerrado, but we’re already thinking about new investments, right?

A lot has been talked about internationalizing the company. You’ve clearly talked about trying to reduce exposure to pulp and to Chinese markets and to perhaps reduce volatility of earnings. So I just wanted to hear you on how this mindset is evolving and what are your considerations for the new incoming CEO voted on, what he should look for, what regions, do joint ventures make sense? Would you be looking to expand further in Mato Grosso? So I mean, if you can give us any intelligence on any of your views on what you’re going to pass along to the incoming CEO, that would be great. The second question is regarding cost, right? I mean we’ve seen quite a lot of progress. All of that inflationary environment, right, on the pulp cost seems to be behind us, right?

I mean, you reached BRL900 per ton at peaks. We’re now closer to BRL800. It’s a 13% drop year-over-year. I just wanted to see what you’re thinking on in terms of the continued evolution of this cost reduction into 2024. I mean can we expect similar single-digit drops, or perhaps you’re still thinking more of a stability scenario is making more sense, just to get your thoughts on how you think costs are moving forward. Thank you very much.

Walter Schalka: No, it’s Walter talking. Thank you very much for the opportunity and to answer your question. First of all, I would like to thank you, Rodolfo, and John and you for your considerations. Thank you very much. I’m very pleased to hear that, and I will continue to be very close to you in the next coming months and after as a Board member as well. I think it’s very clear there is the company have been working in order to maximize returns to our shareholders. This is an important issue for us is part of the value creation process that we want to distribute among all the stakeholders. And this is critical. We are very disciplined on that. Now, we are very agnostic about geographies. We could look for opportunities in Brazil or in other regions, but we are very clear with the target that we aim to have products and projects that create at the same time, differentiation could be in case, could be on product or service, but we do not want to be in the mid-pack.

But in addition to that, projects that could be on scale with the company will generate higher cash flow operations after the commissioning of the Cerrado project. It’s very clear on that. Cerrado has a very good cash cost, and we are very pleased with the impact of Cerrado’s going to create for us. And we will look for alternatives for value creation to the shareholders that could be cash returns if we do not have good projects. But if we have projects that would bring value to our shareholders, we consider that. I think it’s very clear and I like to bring to your attention the fact that the company is moving and having the benefit of higher volumes to the short fiber market. This fiber-to-fiber program that has been in place for several years.

It’s every year bringing new volumes to the industry to the short fiber markets, replacing long fiber. So of course, we want to replace Force as well, plastics as well. And the combination of both is expanding the pie, and we are having benefits on that. It’s very clear right now that the long fiber market is not very competitive. We are going to see a lot of permanent closures on this industry, and this allow us to have even more volume growth coming from long to short fiber. Suzano could have other different verticals that we have been looking for. The textile market, it’s one of them. We are looking for opportunities as well on packaging, on tissue, and this could create new opportunities for the future. Just to reinforce the point that discipline is a very critical issue for us.

And I’m going to be one of the guardians of that in the Board of Directors. Now I’m going to pass to Aires.

Aires Galhardo: Thanks for your question. We believe that there are two ways – main ways to reduce cash costs in our facilities. The first one is increase in our efficiency and productivity in our facilities. We have done this with our [indiscernible] Jacarei Aracruz and of course, we’ve Cerrado project. And other one important one is reducing distance between forest and mills. And I’ll have done with our highest program of plantation and the land banking in our [indiscernible] history of Suzano. This impact will reflect closely with the Cerrado, then after the startup probably in the last quarter, we will notice a reduction in the cash cost after the ramp-up. And then in terms of forest, as Marcelo showed, we are remain our ritual to 2027.

That represents a reduction – a part reduction in this part of costs. Then I answer directly your question. We believe that we have a healthy cash cost performance in the first three quarters this year and probably I have [indiscernible] the last one after the ramp-up of Cerrado.

Operator: Our next question comes from Mr. Marcio Farid from Goldman Sachs. Mr. Farid, the floor is yours.

Marcio Farid: Hi, good morning. First of all, Walter. Obviously, very much congrats on Adeno Suzano. I know it’s a not good buy yet. It will be around for a few months, but also on the Board. So hopefully, continue to hear from you as well. Congrats on the journey so far, and good luck or the best on the future endeavors. A couple of questions on my side, please. The first one, Leo, obviously, China, a very strong year, probably 4, 5x the usual volume growing to China. Europe, very, very weak, obviously, 20% down versus last year. U.S. also very weak. So I know you talked about how you see the market today in terms of expectations on pricing. But trying to understand how should we think about the whole balance for the year, right?

I think what are the main trends you’re observing, especially as you progress your commercial strategy for the Cerrado volumes that are probably going to be placed in the second half of the year, right? And then second question, Fabio, on the paper business. You briefly talked about the challenges that the market saw last year, and yet earnings were quite strong, right, mostly flat versus 2022. So just can you please give us an update in terms of how you’re seeing the packaging, and graphic paper markets, obviously, in the key benchmark regions, which tends to be Europe, but also how you see the situation in terms of competition with imported volumes there were very high coming out of Asia, especially China, Indonesia last year. Thank you.

Leonardo Grimaldi: Thank you, Marcio. This is Leo here. I’m going to answer the first part of your question. And you’re completely right for last year, China and Asia were the highlights of pulp consumption to our markets, right? The consumption in China exceeded by far, I think, any expectation since midyear with additional or higher production rates and almost all product lines or paper product clients in China. When we look at the four product lines that affect hardwood production or consumption the malls, which are uncoated paper-scored tissue and every board production last year grew 11% compared to Chinese production grew 11% compared to ‘22, and that’s massive, right? That’s a huge additional demand for pulp, which offset it, especially in the second part of the year, the downside of consumption that we were seeing in Europe.

Now, we are in the moment of returning these inventories and all the system and back to support a recovery in European and North American markets, as I mentioned. Inventories are low in these markets. And they have fallen over 40% against peaks from last year, and they are trending all below historic levels as well. So, we have a double challenge. First is to recover this historic pattern and then is to maintain that. And that’s why we are reducing allocations to other markets because this involves a lot of efforts and volumes to be redirected to this market. So, that’s why – and obviously, the volumes are not one-to-one, right. Since the business models are different and 1 ton of growth in Europe demands from us, a diversion of much more than 1 ton from other markets as the business models and the setups are different and demand local inventories sometimes even inside our customers.

Regarding Cerrado volumes, as I have mentioned during Suzano Day, we are expecting that most of these 700,000 tons, which is our estimation for 2024, will reach markets by the very most end of the year. We have finalized all of the strategic allocation discussions and analysis for this volume. And we are very confident on that. As Walter mentioned in the previous question here that you guys made to him, we are obviously tackling not only organic demand in our traditional hardwood markets, but also several fiber-to-fiber opportunities, for which our teams globally are already deployed so that we are very successful in on Sahaba [ph].