Klabin SA
BOVESPA:KLBN4
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Earnings Call Analysis
Q3-2024 Analysis
Klabin SA
In the third quarter of 2024, Klabin achieved net revenue of BRL 5 billion, marking a significant 14% increase year-on-year. This growth was primarily driven by rising prices of pulp and kraftliner, enhanced sales volumes of paper and packaging, and the depreciation of the Brazilian real against the US dollar, which bolstered export performance.
The company's adjusted EBITDA for the quarter reached BRL 1.805 billion, resulting in an EBITDA margin of 36%, up 5 percentage points from Q3 2023. This improvement reflects effective cost management and operational efficiencies gained through the integration of strategic projects.
Klabin’s total cash cost per ton rose to BRL 3,179, which is only a 4% increase compared to the previous year. For the year-to-date in 2024, the total cash cost per ton was BRL 3,015, consistent with earlier forecasts. This reflects successful implementation of cost-saving measures and synergies from the Caete project.
At the end of Q3 2024, Klabin reported a net debt of BRL 29.5 billion, which increased by approximately BRL 5.7 billion from the previous quarter, primarily due to the payment for the Caete project. However, the company maintains a robust liquidity position, with BRL 10.2 billion available in cash and undrawn credit facilities, ensuring operational flexibility.
The management announced a strategic decision to reduce the maximum leverage in the investment cycle from 4.5x to 3.9x net debt over adjusted EBITDA. This reflects Klabin's commitment to deleverage while capitalizing on the operational synergies established with recent projects such as Plateau and Caete.
Klabin has approved the payment of BRL 425 million in interest on capital, set for November 21, 2024. This reflects a strong commitment to returning capital to shareholders, aligning with an annual dividend yield of 6%. Management indicated that future dividend payments will consider cash generation capabilities alongside maintaining a conservative investment approach.
The ongoing ramp-up of PM27 and PM28 has focused on increasing production volumes, with an expected 200,000 additional tons in 2025 compared to 2024. The integration of the Caete project is expected to further enhance operational efficiencies and reduce costs, continuously preparing Klabin for future growth.
The management anticipates price improvements in the kraftliner segment for the fourth quarter, with expected increases of around 10% for some SKUs. This positive trend is supported by a recovering domestic market and ongoing adjustments in pricing structures. The coated board production targets are also being refined as the company works through client certifications for new products.
Despite ongoing logistics issues that have impacted operations, Klabin expressed optimism about maintaining strong sales volumes for the upcoming quarters. The strategic focus remains on optimizing production, managing costs, and increasing profitability in key markets, particularly in the corrugated boxes and kraftliner segments.
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Good morning. Welcome to Klabin's conference call. [Operator Instructions]. As a reminder, this conference is being recorded and is being broadcast simultaneously via webcast, which can be accessed through Klabin's Investor Relations website where the presentation is also available.
Any forward-looking statements that might be made during this conference call in connection with Klabin's business outlook, projections, operating and financial goals and potential growth should be understood as merely forecasts based on the company's management expectations in relation to the future of Klabin. Such expectations are highly dependent on market conditions, on Brazil's overall economic performance and on industry and international market behavior and therefore, are subject to change.
With us today are Mr. Cristiano Teixeira, CEO; Marcos Ivo, CFO and IRO. As well as the company's officers. Initially, Mr. Cristiano Teixeira and Mr. Marcos Ivo will comment on the company's performance during the third quarter of 2024. After that, the officers will be available to answer any questions that you may have. Now I will give the floor over to Mr. Cristiano Teixeira. Mr. Teixeira, please go ahead.
Thank you. Good morning, everyone. It is a pleasure to be here with you in another call to discuss third quarter 2024. As a reminder, we changed the format of the call a little bit. I'll start with the slide, speaking about the performance of the markets. And then Marcos Ivo will present the financials in more detail, and I'll be back in the end to speak about the trends. And then we'll start the question-and-answer session.
Well, I guess that -- what we can point out in this slide and it really shows what happened and then Marcos will confirm this was an extraordinary cost performance. Our bet on the capital allocation by the company of acquiring Arauco's areas represented here, and they led to a reduction in the effective cash cost of the company. We have numbers that draw our attention also because we had the anticipation of the business case and the project presented to you, we have synergy of the operation.
With a radius close to our mills, representing a strength, a benefit in that region in the state of Parana. And the reduction in the purchase of third-party wood and the effective delivery of everything that we promised. Again, we can show you that we had the correct strategic decision in terms of capital allocation of the company bringing benefits that lead to deleveraging of the company after one more growth cycle.
I'll drawn your attention in this quarter, to the increase in the volume of paper. We are still going through a difficult period of logistic issues, which have impacted us with back orders in practically all business lines. We had the ramp-up of PM27 and 28, showing its strength, coated boards increasing 20%, kraft 31% in the period showing this balance that we looked for the company since we started showing you these slides showing market segments, pulp, paper and packaging. So it's 3/3 and it really represents what we've been talking about for a while now. In the next 2 years of the company, this is how we will be performing, creating the biggest optimization for the company in order to have free cash flow, deleverage of the company. And only then will we start forecasting growth.
We have been speaking a lot about our momentary focus. It doesn't involve any other strategic decision, which is not focused on free cash flow for the next 2 years as well as deleveraging the company. Lastly, I would just like to bring you something else that we've been talking about, the Figueira project. By the way, you're all invited, and I expect to see you soon in Klabin Day when we're going to be having an on-site tour, the site operating with the 2 corrugated box machines. Bringing a reduction in the integration cost in a moment when domestic market, as you know, is posting significant growth in terms of consumption, improvement in income, again, higher consumption. And the Figueira project started a very surgical moment in what we have planned. So this was very important during the ramp-up of PM27 in the last 18 months when international prices were not attractive.
We were able to focus on integration at Figueira. And now when we start seeing recovery of kraftliner around the world, we can operate paper at Figueira using more recycled paper in Brazil, maintaining what we had already gained and now benefiting from a moment when we have external prices, which are good for kraftliner.
So with this, I'll end this first part about Q3 '24 performance. And again, as a highlight, despite logistics issues and general stoppage, we had paper performing significantly well, considering the expected ramp-up. But now with an expectation of better prices, better prices than before, but also with a very positive outlook for some of the markets, particularly coated board. So this is a general overview of our performance.
And now I'll turn the floor to Marcos Ivo for more detailed results, and then I'll come back to speak about the trends. Marcos?
Thank you, Cristiano. Good morning, everyone. Again, thank you for joining us in our conference call. On Page 4 of the presentation, net revenue in the quarter was BRL 5 billion, up 14% year-on-year. This increase is mainly explained by the increase in the price of pulp and kraftliner, higher sales volume of paper and packaging, as mentioned by Cristiano and the depreciation of the Brazilian currency, the real against the U.S. dollar, which benefits exports. Adjusted EBITDA was BRL 1.805 billion in the quarter. EBITDA margin reached 36% which represents an expansion of 5 percentage points compared to the third quarter of 2023.
Moving on to Slide 5. Total cash cost per ton was BRL 3,179 in the third quarter, an increase of 4% year-on-year. Year-to-date in 2024, total cash cost per ton totaled BRL 3,015, ratifying the cost trajectory in 2024 according to the forecast that we provided to the market at the end of last year. The year-to-date cash cost materializes the various actions implemented by Klabin with emphasis on the synergies of Caete project already being reflected in the forestry cost.
Moving on to Slide 6. Klabin ended the third quarter of 2024 with a net debt of BRL 29.5 billion, an increase of approximately BRL 5.7 billion quarter-on-quarter. This increase in debt is substantially explained by the payment of Caete project carried out in July in the amount of BRL 6.3 billion. which was partially offset by the appreciation of the BRL against the U.S. dollar in the quarter, thus impacting indebtedness in foreign currency.
Leverage measured by net debt over adjusted EBITDA ratio in U.S. dollars ended the quarter at 3.9x within the parameters set forth in the company's financial indebtedness policy. I would like to highlight that on October 29, Klabin's Board of Directors approved a new version of the financial indebtedness policy of the company. The main change was a reduction of maximum leverage in the investment cycle from 4.5x down to 3.9x net debt over adjusted EBITDA in U.S. dollars.
This move reinforces management's commitment to Klabin's deleveraging and ratifies our confidence in this process through the ramp up of project Plateau capturing synergies between Caete project and the Plateau project, which was communicated to the market last week. The full policy is available on the company's Investor Relations website.
Moving on to the next slide, Slide #7. Klabin's liquidity remains robust even after the payment of Caete project and ended the quarter at BRL 10.2 billion. This liquidity is made up of BRL 7.5 billion in cash and the rest in an undrawn revolving credit facility. The average maturity of the debt at the end of the quarter was 90 months, and the average cost of debt in dollars was 5.7% per year.
Moving on to Slide 8. According to notice to shareholders published yesterday, the company approved the payment of interest on capital in the amount of BRL 425 million to be paid on November 21. On an accrual basis, dividends paid out to shareholders in the last 12 months totaled BRL 1.528 billion. This amount represents a dividend yield of 6%.
Lastly, on Page 9, I invite you to our Klabin Day, which will be held on December 10 in the city of Piracicaba at our newest, the most modern corrugated box packaging plant Figueira.
Now I'll turn the floor back to Cristiano, who will bring more details about business trends.
Thank you, Marcos. So as usual, we are already bringing to you this overview as we've done in the past few quarters. So just a reminder, at the top on the left, we can see a little bit of the references that we try to provide when we have the pointer going straight, we're talking about neutrality compared to the previous quarter. So now we're talking about the fourth quarter. The trend for the fourth quarter compared to the third that we have just delivered.
So when we say that the arrow is straight, we're talking about a neutrality. So what do we still see starting with the short fiber pulp. We still see considering the uncertain conditions in China despite the inventory, the stock levels being at good levels globally. We are still uncertain about the Chinese market. So there's an effort to transfer the mix, to transfer major producers to Europe, trying to improve the average price. So this pressure, this stance shall still show a slight drop of short fiber compared to the third quarter -- to the first quarter. So this trend is something we already see although there is a factor here of the fourth quarter compared to the third quarter. We believe that that's what's going to happen.
The small drop still represented here which will probably turn into stability from that point on the way that we can see here. So when we talk about fluff pulp, obviously, you've been seeing, I mean, here I say it again. It's a quarterly reference. But of course, you keep track of the closing of the capacity announced for next year which leads us to having an expectation that in strategic points, clients will come to Klabin, for example, for contracts at a premium compared to our competitors.
So having Klabin as an alternative for long fiber fluff structural in the long term, especially thinking about the company's strategic view of investments in coming years. So despite this view for the first quarter, we still foresee some price stability, a slight drop. And then after the fourth quarter, we do expect to see some price increase next year even though there's still a slight drop for the fourth quarter.
Coated boards are at a good point. We've been feeling that especially in the internal market. As something that may also be subject to the foreign markets, tariff prices considering the countries and macroeconomic and geopolitical aspects that we are monitoring, Klabin benefits from that at this point, as it is a stable producer with a machine ramp-up, long-fiber products comparable to the Northern Hemisphere producers with a gain in grammage.
So we are positioned in a place to gain productivity compared to our clients in square meter terms and at the same time, we see a benefit of price, especially in the domestic market. As for kraftliner, there's a recovery now. There's a recovery compared to the last quarter. So this recovery remains, it's maintained, and that has been reflecting as Klabin is maintaining the export volume that we're having with the ramp up of Machine 27 and the kraftliner volume that we started the coated board machine producing kraftliner. So all of that, which was dedicated to the foreign market with the trend of the price improvements that we've been talking about, will probably lead the company's export volumes to remain at good levels for kraftliner in the coming quarters, especially the next quarter.
When we look at the corrugated boxes, it's a very positive time in Brazil. The month of October is very strong. The expectations for November is also great so that we are expected to perform very well compared to our competitors here in Brazil, making the most of the opportunities of the major top accounts that have an SLA requirement that is very high and Klabin has been able to do that, especially being a reference in the Southeast region with a plant that I hope you get to see visiting Figueira, the service level has improved greatly with this machine compared to our competitors. So that leads us to expect a gain of share compared to our Brazilian competitors.
For bags, you've been also following in some regions in Brazil, there's a lot of investment, reflecting an income generation that impacts other businesses at Klabin. Klabin is at a good moment. But in terms of price, we see some neutrality, so to speak, for the fourth quarter. So these are the trends. Of course, I have all of the Board here. And as you ask your questions, we'll be able to give you more details of each one of the markets.
So thank you, and we'll now move on to the Q&A.
[Operator Instructions] Our first question, Rafael Barcellos Bradesco BBI.
Good morning, everyone. My first question to Cristiano. Cristiano, I'd like to discuss a little bit more about the capital allocation strategy and also talking about fluff. The fluff market has, for some years seen the closing of capacity and there are few additions planned for coming years. So that said, I understand that the company's focus today is deleveraging. That was very clear with the recent movements that the company has made. But I'd like to understand a little bit more how you perceive this need from the market to have a bigger fluff capacity? And what could -- and could this make Klabin anticipate an investment for an additional fluff capacity.
And my second question about the box, the corrugated box market, as Cristiano mentioned in the beginning, October is a strong month. But I'd like to see or hear more about how you see the expectations for the fourth quarter and to close the year as well as the expectations for 2025. And still on this subject, the actual price has been improving, but I'd like to understand how much comes from the mix or an actual price increase and how this has been converting with the price of OCC here in the domestic market?
Thank you, Rafael, for your question. I'll talk first a little bit about capital allocation and the investments in fluff. And then I have Douglas here, who will talk a little bit more about corrugated boxes market. So what we've been seeing in the global fluff market, I think we've been talking to you for some time already that Klabin focuses on long fiber for fluff, even though we do have short fiber products. Strategically, we focus on products with a higher added value, especially geriatric diapers and the other products that are made from long fiber fluff.
That's a market that we believe in and we invest on for the long -- the medium term. We've been saying that Klabin's next investment should come from this product. And for me, this announced closing comes to confirm. We have great global producers in terms of quality, but those global producers have been struggling in their results in terms of the ability to generate cash from those assets, and that would probably represent in plants closing, especially in the Northern Hemisphere.
In the United States, more specifically, Klabin is watching this move and has been preparing in the state of Santa Catarina for future investments. But this does not change our deleveraging trajectory at this time. This is a structural long-term view that's represented in what we call the Klabin vision, the long-term vision.
Nothing is going to change our trajectory for the next 2 years of deleveraging the company, generating cash, reducing debt. And only from that moment on we'll have any type of discussion or proposal for the Board. The focus until that point will be to deleverage the company. So nothing is going to change the company's 2-year trajectory at this time. Douglas, please.
Rafael, thank you for your question. As you said, the market has been surprising this year for corrugated boxes with a growth that's well above our expectations. But starting to look into the numbers, how do we look at them? We see that a lot of the contribution and Klabin benefits from that comes from exporting sectors, such as proteins, fruits that have been growing a lot higher -- at a lot higher rates than last year.
And we're looking at the fourth quarter in the same way. When we look at the sales, the daily consumption, we always look at it on a day-by-day basis, the behavior of corrugated boxes market. And what we see is that it will be slightly stronger than the third quarter, which is great because the fourth quarter, we already start to see a slowdown in November and December, and we're seeing better numbers than the third quarter.
When we look at the market and when we look at Klabin, Klabin has given a slightly better perspective compared to the market when you look at our shares in the export markets that gives us this advantage of a bigger share. When we look at 2025, at Klabin, we always say that the corrugated boxes market when Brazil grows, it doesn't crash the investment of capital or growth in income or the industry, the corrugated box market grows at 1 percentage point more than the GDP.
If the expectation for the next year is 2% to 2.5%, we expect to grow at around that level next year in line with the market. And then if we look at prices, the price of OCC and corrugated boxes, we are seeing a good scenario pressure for cost, of course, OCC is scarce in the market because the market has been growing. And we see these costs remaining at those levels. OCC here in the Southeast, it's above BRL 1,100 and the Northeast even stronger, which gives us a good scenario for price increase for the cost transfer to the entire chain, which is important for us and we see this scenario looking forward. We see this behavior looking forward.
So the market remains strong in the fourth quarter, and we see good signs to be able to transfer this trial to prices. About the bags, just to take this opportunity, we also see a great moment for the year when we look at prices. Despite what we [indiscernible] show that the average price of bags is slightly below. It's on the mix because we're selling more bags of 25-kilo bags but that also gives us more profitability. But the price and volume of bags are also growing in the domestic market.
Next question Caio Ribeiro with Bank of America.
I have a couple of questions going back to capital allocation. Looking forward, the company continues to say that you're focused on deleveraging the company. Klabin even reduced the maximum leverage that the company could have at moments of investment in investment cycles, which shows clear discipline. And the company with the ramp-up of Puma II the reduction of the expansion CapEx in the coming years should be a cash cow. As was shown in this quarter, excluding the effect of the purchase of Caete.
And my questions are, number one, other than the dividend policy, do you see any room at the coming years to complement return to shareholders with a buyback? And if you see M&A activity as an option for growth. And if so, if you're looking for -- if you would be looking for other opportunities in other regions of Brazil and even abroad? These are the questions.
Regarding share buyback, absolutely. We are always looking at that. It's always in our radar, our financial department is always keeping an eye on that. Regarding mergers and acquisitions, we're not considering M&As at this point.
Our next question from Marcio Farid with Goldman Sachs.
I have 2 follow-up questions. I think that, Cristiano, spoke about this in his presentation. He spoke about backlogs, we noticed particularly in pulp. I know that there was a stoppage in Q3 that was a little longer. And together with the operating challenge in Q3 and the backlog volumes were a bit disappointing. How should we think about this looking forward? I understood that Puma I is running well, but it's not clear whether the backlogs will disappear. If this logistics bottleneck perhaps can take a little longer to normalize?
And my second follow-up question, if you could comment on the view for pulp for the coming quarters, particularly considering China and Europe, that would be great. Perhaps you could speak about long fiber/fluff considering a potential strike in Canada? And how this is impacting your recent conversations about all this?
Farid, as regards to volumes. Yes, we do have an expectation of better volumes from the standpoint of the ramp-up of our machines, especially PM28. We'll also have some market stops that are back with recycled paper. So we are expecting recovery of volume. Nicol is here with me, and he will speak about the trends for pulp, fluff. And Farid, you also mentioned in your comment a strike that perhaps is coming. So I'll build on your comment. How does that -- how do things impact us? There is a difficulty in both Brazilian terminals and container ships around the world. Well, that issue remains. It's not totally solved. Expectations of strike that can hinder even more this global balance. So from the standpoint of Klabin, we do have an expectation of growing volumes, increased shipments in the coming quarter and for the year of 2025, but with a caveat. We depend on these logistics issues, which have not been solved. Nicol?
I'll start speaking about eucalyptus and then I'll speak about fluff. As Cristiano mentioned, we have an expectation of higher volume in Q4 compared to Q3 given a higher production. And also the result of some carryovers from Q3 to Q4 mainly of eucalyptus volume. As regards to the market overall strategy with China, the feeling there is that most of the price adjustments are behind us. And that prices are at a lower level or close to it.
There's some signs pointing to that, a higher demand in the last 2 months for fiber overall, driven mainly by the tissue segment, where the utilization rate is around 70%, 71%. Although other segments are operating at lower rates, this is a high seasonality period.
More recently, even today, there was a 9% reduction in Chinese inventories getting close to 1.8 million tons, which in our point of view, is quite balanced inventory, higher fiber consumption by integrated producers. All that confirms that volumes for November have been sold or contracted at the current prices, therefore stable pricing for the month of November.
And some price increases have been announced by producers in printing and writing segment. And this is a very positive signal for the Chinese market from now till year-end. In mature markets, price corrections or price adjustments are the reflection of what happened in Q3. If we consider the month of August, shipments to China were reduced by 28% while shipments to Europe grew by 13% to 15%, a natural process of transfer of volume from China to regions where prices are about $120 above the current Chinese prices.
So at the end of Q3, we saw spot market in Europe and in the United States, which was a little bit more overheated, but we start seeing these additional volumes reducing in Europe starting in November. I'd like to remind you that contracts signed in Europe, United States and also in Brazil are being respected in all.
As regards to the fluff market, the market went through some corrections in recent months. As you know, fluff is linked to long fiber. Long fiber underwent some corrections in Q3. But now see an improvement in the price conditions of long fiber overall, some increases of $10 to $20 announced ounce for Q4 and this should have a reflection on fluff prices in the future given everything linked to the closing of one mill that will produce until the end of the year. But as of next year, we expect an improvement in the average prices overall.
Our next question, Tathiane Candini of JPMorgan.
I'd like to start trying to get more color on the Caete project. We saw that in this quarter, we already have an integration of that cost reduction due to the synergies. So if you can talk a little bit more about the exploration of those synergies, how you see the evolution of that? Is there any perspective for 2025 of a stronger reduction should we count on an acceleration of that for the fourth quarter? That's my first question.
And the second question, I'd like to understand a little bit more of the logistic issues that you mentioned in containerboard. We understand that the demand is better, but they're still impacted by these logistics issues. Is there an update about that? Should the fourth quarter already have it solved? Just to understand it better.
Thank you, Tathiane. So starting with Sandro Avila, our Forestry Director and then we'll get into the logistics.
Tathiane, thank you for your question. This quarter marked the full integration of the Caete project to Klabin's assets. And with that, we reached ahead of time a new cost level that we approved for this project. This year was very important, not only this quarter that we achieved this cost level, but that started happening since the beginning of the year through a strategy of the operational plan that we developed from the moment that we have the closing, we start working on a new operational plan even before the new forest extracting as much synergy as we can from Klabin forests.
So that already brought a very important level of costs and efficiency seen in the first half of the year. In July, when we actually get the new asset with the new forest equipment, operational team that is highly qualified, in addition, the possibility of a different special assortment, increasing the sales of wood. So the third quarter of '24 marks this stage that we reached.
And that should be the structural cost level for Klabin in the coming quarters and cycle. There still be some significant improvement in terms of operational efficiency due to our continuous improvement system as we work with this new level of assets that should also bring new efficiencies, improvement of efficiencies for us, and that will support and guarantee our competitiveness in forestry in our product chain.
Thank you, Sandro. Now I bring Roberto Bisogni, that's our supply chain manager or director rather.
To give you more color about the container sales and shipments, I'll break it down into 2 parts. First, the global issue that we see and monitor to the difficulties in the geopolitical aspects in the Red Sea, especially. And we also have it in the Americas the issue with the Panama Canal.
So that has been generating longer transit time for the ships, for the vessels. We have more vessels having to go a longer distance to be able to make the deliveries and that has been maintaining the fleet occupied, generating significant delays in the stops around the world. We have important terminals around the world, especially, for example, Singapore, China and especially in the United States that have been causing a significant bottleneck and a limitation even in the room available on the vessels and that happens in Brazil as well. So that's an external factor that has been causing quite an impact.
The space available on the vessels and the availability and the scales and the stops of the ships. The second point that we should mention is the difficulties that we're facing in the container terminals in Brazil. Overall, we're feeling some terminals are very full in terms of capacity of the patio container occupation on the yard. And we see a lot of movement in this and it's been growing and there's also a limitation in terms of capacity. We have important terminals in Brazil with a restricted capacity due to renovation or processes to increase capacity.
So the combination of the higher demand with a smaller ability to handle cargo has been also leading to restriction in shipments from Brazil. So combining the external and the domestic issues, we've been facing significant bottlenecks and delays. So there's a lot of services that have weeks of a delay for mooring in Brazil. So vessels coming outside of the mooring windows in the port terminals that generate a line, a queue for mooring that's even longer. And all of that impacts and causes a chain reaction that quarter-on-quarter leads us to face significant backlogs for those shipments.
The perspective, as Cristiano said, we have felt a slight improvement, nothing major at the end of the third quarter. And we're keeping track of that, but we don't see a perspective to end this bottleneck in the short term. We keep track of it, and we hope that it continues to improve so that we can regularize this. Thank you.
Our next question, Lucas Laghi, XP.
I think it's -- I have a follow-up on Caete, but thinking more about the context of the Plateau project. If you can give us an idea of the time line for timber acquisition and the factors of forest planted and considering that Klabin would have a land surplus after the harvest of the first cycle of Caete with the 39,000 hectares included in the agreement, what would be your idea to use this productive land after this cycle in the context of the Plateau project?
So I'd like to understand the dynamics of the use of land and collection of timber in these projects. And also to complement on the corrugated boxes issue to understand Klabin's mix on the virgin and recycled fibers used in the process to manufacture corrugated boxes. And in the context that you mentioned and the pressure for OCCs and transfer the price cost to the industry, Klabin will have the strategy of pass through the price or if there's room for an increase in market share, not necessarily keeping up with the market, but exceeding it. So understanding this dynamics of virgin fiber and recycled fiber in corrugated boxes and the price in the market.
Thank you, Lucas. We'll start with Marcos talking about Plateau and Douglas will come back. Marcos?
Lucas, first about costs and adding to complementing Tathiane's questions, for the cash cost per ton, that's the most important indicator for your modeling. First, I'd like to highlight that this year, we're moving towards delivering a number as the guidance provided last year.
When we look at next year, in addition to having the annualization of those gains from Caete that Sandro explained so well that are fully included in the third quarter earnings, an important benefit that Klabin will have in the cash cost per ton for 2025 is a greater dilution of fixed costs due to the increase in production. Production increase next year is relevant.
Everything based on public information that you have, so when we add the effects of the ramp up of Machine 27, Paper Machine 28, you add that to the annualization of the recycled paper machines that were switched on during 2024 plus the fact that Monte Alegre will not have a general stoppage in 2025 as we disclosed in the release. All of that combined, Klabin will have a production volume of approximately 200,000 tons more than 2024. So this is very important when we considered cash cost.
As for the Plateau project that we announced last week, in essence, this project will not change the benefit of the operating synergies from Caete since it's completely correlated to a lower cost of harvest, roads and transportation due to its location and the condition of the forests that were acquired from Arauco that is maintained. And as for the land surplus that you mentioned, the Plateau transaction involved 43,000 hectares of useful land.
In our original presentation from when we acquired Caete, we mentioned the surplus of 60,000 hectares vis-a-vis the target of self-sufficiency of 75% for Klabin. So 60,000 hectares of surplus in the original announcement, 43,000 have now been transacted on the Plateau project. So Klabin will remain with a surplus of 17,000 hectares useful land vis-a-vis our target for self-sufficiency. But we do not foresee any major transaction in the short term for the remainder of the land surplus that we are very likely to monetize during the cycle, optimizing value generation. For -- since it is dispersed, there's no major numbers for consideration in the short term. I hope I answered your question. Otherwise, I'll remain available.
Great. Now Douglas.
Okay, Chris. Lucas, our fiber mix for corrugated boxes is 70% virgin fibers and 30% recycled. And if you look at it, you see the behavior of the containerboard kraftliner market with a resumption of demand, a strong demand as well as the resumption of prices. So that gives us a possibility for the first improvement we're used to see here the flexibility.
The first improvement in profitability, which is to resume the -- recover that mix, adding more recycled fibers, reducing virgin fibers, providing more virgin fibers to the international markets and combining those 2 spaces with profitability. So that's the movement that we start making strongly now.
Resuming machines, the recycled paper machines that we had switched off last year that will help us change the mix and increase the company's profitability. The second point is with this higher demand for the corrugated box market and the cost pressure of OCC in the domestic market, especially with our competitors that are more on recycled fibers, that gives us the possibility to pass through the price and improve the margins isolated in corrugated boxes in the domestic market. So that's how we're moving along, favoring this increase in profitability.
Next question by Eugenia Cavalheiro with Morgan Stanley.
I have a follow-up to what Marcos said when he answered the Lucas question. I would like to understand, do you consider selling assets as an alternative to deleverage the company faster. I think it's clear that Caete land surplus is now being considered at this point, for sale and monetization as we saw last week. But I'd like to know overall are you thinking about shrinking any business unit at Klabin or any specific asset that you would consider selling to deleverage the company faster?
Thank you. And the -- well, thank you for the question, but the short answer is no. At this point, we are not considering selling any assets to deleverage the company. We should focus on cost reductions particularly benefiting from Caete project, greater cash generation, given the performance and the ramp-up of the paper machines. So we're not considering selling any assets.
And Cristiano, let me add to that. we do see a trajectory of deleveraging Klabin. Just by reaping the fruits of all of the projects mentioned -- we mentioned. Ramp-up of PM27, 28, the ramp up of Figueira, Caete synergies and the Plateau project itself, which is the monetization of the land surplus. And that is why we reduced our financial indebtedness policy. We change it because we trust that we will be deleveraging the company. In addition, that maturity is super long, robust liquidity. So we don't see any reason for this kind of initiative of selling assets.
Next question from Ricardo Monegaglia with Safra.
I have one question about Project Plateau. I think it became very clear that the SPVs will be based on the need. But how should we think about investment for forestry for the SPV because the main focus is to supply wood. Will this have an impact on Klabin's cash flow? And if so, could you help us understand the level of annual investment in the SPVs in the special purpose vehicles, if this investment is included in your forecast of spending with forestry in the coming years? That's my first question.
Second, dividend payout, we thought the change was a responsible one on the part of the company. So I'd like to understand how will you choose the EBITDA percentage within that range in the coming quarters so that we can have the right expectations for the coming quarters.
Well, thank you for the questions. Let's start with the dividend payout, and then I'll turn the floor to Marcos because he's not in the same room as I am. So I'll give him time to answer.
Regarding dividends, indeed, the policy for dividends and indebtedness was changed. It's an important moment for the company because we want to communicate to the market that we have a focus on deleveraging the company. And this is already seen in practice as we have been showing this for many, many years now. But we wanted to have the new policies, and we wanted to make this very transparent, making the policies public.
And this shows that as the company increases our ability to increase cash generation in absolute terms, the trend is that over time, we will be restricting the size of investments, always in a conservative view of protecting the company, both in terms of the size of the investment -- in the investment cycle of the company as well as in managing the debt and the size of our cash. This reinforces our traditional position that Klabin always protects its financial robustness and a solid position.
Regarding how many dividends we'll pay? I think we can look at this in one of 2 ways. Number one, looking at the absolute value in BRLs paid in shares or by unit. If we forecast a volume increase, as is the case with the ramp-up of the PMs, it's all public information. So if I have an expectation of increased production and revenue given higher volumes, coming from the ramp-up of these machines that alone will lead to additional cash generation. So in absolute numbers of reals per share or maintenance or growth.
When we look at the percentage of cash paid traditionally, in recent years we've been paying at the center of the policy, the very middle. I'm not giving you any spoilers. I'm just saying what we traditionally do. We focus on the midpoint of the policy. Marcos, could you add more about plateau project?
No, Ricardo. All of the information that we look at with you is consolidated numbers. Objectively, the CapEx in our projections is consolidated CapEx. Therefore, the number of SPVs and controlled companies of Klabin, all of that is included in the forecast. So no changes will take place. And of course, Investor Relations team is available. If you want to know more detail about the numbers of the SPVs. But objectively, nothing changed compared to our forecast in December of last year.
Our next question, Igor Guedes, Genial.
Congratulations on the earnings, even considering the volume restrictions. My first question is on kraftliner. You made some price adjustments, if I'm not mistaken, the last one in August. Even if the actual price in the third quarter grew significantly, it could grow more because of the logistics bottleneck, there's an order book that was made before the last passthrough. So you made the deliveries at the old price point. For the fourth quarter, will this continue to grow or to increase? What's the scenario you see? Have you implemented all of the adjustments that make you comfortable with the kraftliner's operations levels even with the market conditions that you mentioned about the OCC?
And the second question I'd like to understand the homologation process with your clients for the coated boards in the ramp-up of PM28. The idea with PM28 is to produce more coated board than kraftliner with specific higher added value products. But in the short term, we still see the profitability conditions for kraftliner. So how long do you believe it will take to be able to get this certified and we see a bigger scale of coated boards and a higher price -- actual price from PM28.
Thank you, Igor. So Jose Soares, our Commercial Director for Papers will answer.
Thank you for the question, Igor. Starting with kraftliner, yes, we can expect a price improvement in the fourth quarter, both in the domestic market and the international market. The domestic market due to price correction that we implemented in October of around 10% for some of the company SKUs. In December, there's another adjustment at 10%, which makes our SKUs or puts them all pretty much on the same price level. So we start the first quarter of '25, with the prices already adjusted. And looking at the international market, prices have stabilized. We're pretty much at the peak of the market.
But the numbers that you see in the third quarter are due to that order backlog that was mentioned, we still see some progress in terms of price, actual prices that have not been built yet. So for the two markets, we see -- we'll still see some movement in terms of prices for the fourth quarter. As for your question on coated boards, we're at the final stages of the certification in some of our clients and others we already have the approval for coated boards, specifically the coated boards for liquids for other segments, such as beers or QR boards and the folding coated boards are already produced in Machine 28.
It's a normal usual product for the line. We're ramping up with new clients in the coated board production. However, as you said, in some markets, the price of kraftliner and even white top liner that we have been emphasizing for those products, they often have even better conditions than the coated boards produced in the machine. So our goal today is profitability.
We're seeking the ideal product mix for paper Machine 28. Be it kraftliner, white top liner or coated boards. Of course, in the long term, our goal for 2025 is to increase the coated board production. In broader terms, that's what we have, Igor.
As there are no further questions, I'd like to turn the floor to Mr. Cristiano Teixeira for his closing remarks. Please, Mr. Cristiano, you may go ahead.
Thank you all very much. Just a reminder, December 10, we have Klabin Day. It would be very important for us to be able to meet you there at the Piracicaba unit in our Figueira project. I'll see you there. Thank you.
Klabin's conference call is concluded. Thank you for your participation. Have a great day.