Klabin SA
BOVESPA:KLBN4
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Good day, everyone, and welcome to Klabin's conference call. [Operator Instructions] As a reminder, this conference is being recorded and also broadcast simultaneously via webcast which can be accessed through Klabin’s Investor Relations website, where the presentation is available.
Any forward-looking statements eventually made during this conference call in connection with Klabin's business outlook, projections, operating and financial targets and potential growth should be understood as primarily forecast based on the company's management expectations in relation to the future of Klabin. Such expectations are highly dependent on market conditions, on the overall economic performance and on industry and international market behavior, and therefore, are subject to change.
Present with us are Mr. Cristiano Teixeira, CEO; Mr. Marcos Ivo, CFO and IRO, along with other company officers. Initially Mr. Cristiano Teixeira and Mr. Marcos Ivo will comment on the company's performance during the fourth quarter of 2022. After that, the officers will be available to answer any questions that you may have.
Now I will turn the floor over to Klabin's CEO, Mr. Teixeira. Please go ahead.
Welcome everyone to Klabin's results conference call to discuss fourth quarter of 2022 results. During 2022, Klabin achieved record results with EBITDA of BRL7.8 billion, an increase of 13% over the previous year [Technical Difficulty] the company's third year history of EBITDA in the pulp business. [Technical Difficulty] with a highly resilient demand and positive expectations for the future. In softwood, we sustained our leadership in Latin America with a substantial price premium over hardwood. As for hardwood, which accounted for only 30% of Klabin results of 2022 in the beginning of the deterioration of this more commoditized market -- started the sales of Machine 28, formalizing the contract of about 60% of [indiscernible].The contracts that's started in across 2023, we will have prices significantly above what was in 2022.
It has marked definitely the technology transformation of the paper patterning industry [indiscernible] in the context of a low visibility market, the cargo business guaranteed security and stability to the results showing the importance of this integrated business model.
I'll turn over to Marcos Ivo, who will talk about the financial details of 2022.
Thank you, Cristiano. Good morning, everyone. Thanks for following our conference call. In the fourth quarter of last year, we achieved solid results reaffirming the strength of Klabin's business model. And the highlights of the period, I would like to mention 3, net revenue was BRL5.1 billion in the quarter, up 11% year-on-year. Adjusted EBITDA of BRL1.9 billion, up 1% compared to the fourth quarter of 2021 and shareholders remuneration of BRL1.6 billion in the fiscal year of 2022.On Page 4, the sales volume in the quarter was down 5% compared to the same period of 2021, reflecting the lower pulp production and a demand accommodation for kraftliner and corrugated boxes. The net revenue in the period was of BRL5.1 billion, an increase of 11% compared to the previous year. This increase is explained by the price adjustments implemented throughout 2022, which more than offset the reduction in sales volume and the depreciation of the Brazilian currency compared to the U.S. dollar. With that, adjusted EBITDA amounted to BRL1,905 million in the quarter, benefiting from net revenue growth, which has more than offset the increase in cash cost.
On the next page, in 2022, net revenue was at BRL20 billion, a growth of 22% compared to 2021. This increase is the result of higher sales volume and price adjustments, which were partially offset by the strengthening of the Brazilian currency compared to the dollar. Adjusted EBITDA, excluding nonrecurring effects was of record amounting to BRL7.8 billion in 2022 for the 13th consecutive year of Klabin's EBITDA growth.Moving to Page 6, Pulp EBITDA performed strongly both in the fourth quarter and in the year of 2022. The growth compared to 2021 of 18% and 8% respectively. This result was benefited by high price levels as well as the flexible sales mix between geographies and the portfolio with 3 types of fibers, hardwood, softwood and fluff, which more than made up for the reduction in sales volume and the increase in cash cost. The cash cost of pulp production in the quarter was of BRL1,338 per tonne in the quarter, representing a 5% drop from the immediately preceding quarter, confirming the indication that we gave to you on our last call.On Page 7, in the Coated Board segment, which remained with a healthy demand and good prospects for the year 2023, the production volume was of 193,000 tonnes in the fourth quarter and 727,000 tonnes in the year 2022, stable compared to the previous year given that Klabin operates at the limit of its production capacity.
Coated Board revenue reached BRL932 million in the fourth quarter of 2022, an increase of 12% year-on-year. As for the year of 2022, this segment's revenue was of BRL3.5 billion, a growth of 15% versus 2021. Both performances were driven by the price adjustments made during the year.Going on to Slide 8. Adjusted free cash flow, which excludes discretionary factors and expansion project, was positive at BRL1.8 billion in the quarter. In 2022, adjusted free cash flow was of BRL4.1 billion, representing a free cash flow yield of 17% higher than the 13.2% that we had in 2021.Going to Page 9.
At the end of December, Klabin's net debt was of BRL21 billion, a reduction of BRL397 million when compared to September 2022. This reduction is substantially explained the positive impact of the foreign exchange variation on the dollar debt and a positive free cash flow in the period. In turn, leverage as measured by the net debt over EBITDA indicator in U.S. dollars ended December at 2.6 times, stable compared to the previous quarter and close to the minimum level of the company's financial debt policy.Moving forward to the next slide, Slide 10, Klabin's liquidity remained robust and it ended the quarter at BRL9.1 billion. This liquidity consists of BRL6.5 billion in cash and the remaining in the revolving credit line.
The company's cash position is sufficient to repay the debt maturing over the next 40 months. The average maturity of the debt at the end of 2022 was 109 months, which corresponds to more than 9 years. It's worth noting that Klabin has financing contractor that have not yet been withdrawn in an amount greater than the CapEx that will be [ disbursed ] until the completion of the [ Puma II ] project, as detailed in our earnings release.Going on to Page 11. As for the notice to shareholders published yesterday, the company approved the payment of dividends in the amount of BRL345 million to be paid on February 24. In the accrual basis, the dividends distributed to shareholders pertaining to the year of 2022, totaled BRL1,628 million, which represents a dividend yield of 6.8%, a clear evidence of Klabin's ability to combine growth, payments to shareholders and at the same time, maintain discipline in its capital structure.On Slide 12, the first phase of the Puma II project, MP27 continues its ramp up as planned, having reached production of 354,000 tonnes in 2022.
The second phase of the project, which will include a coated board machine, is under construction on schedule, having reached 82% of physical execution and a measurement performed on January 29 and has its production startup planned for the end of the second quarter of 2023. Since the beginning of the project, BRL11.1 billion have been disbursed of which BRL794 million in the fourth quarter of 2022.Moving on to the last slide, Klabin continues advancing in its ESG journey and working to achieve the goals of the Klabin Agenda 2030. As a result of our effective actions and commitment to the ESG agenda, we have received important recent recognition of which I would like to highlight, AAA rating in CDP in the categories, climate change, water and forestry for the second consecutive year, renewed participation for the third consecutive year in the Dow Jones Sustainability Index global portfolio, inclusion in the B3 ISE for the 10th consecutive year and inclusion in the S&P Global Sustainability Yearbook 2023, as the only Latin American company in the top 1%.
Now Cristiano, the other officers and myself will be available for the Q&A session.
[Operator Instructions] Your first question comes from Caio Greiner with BTG Pactual.
I have two questions. The first is about cost. The cost dynamic drew my attention in this quarter, on one hand, pulp dropped 6% quarter-on-quarter and I believe it's because of the cost of fiber dropping. You talked about reduction in the share of third-party timber. So this quarter-on-quarter reduction called my attention in the quarter when you had a maintenance stoppage at Puma.
And this reduction of third-party would more than offset the increase in other costs or lower dilution of fixed costs. On the other hand, your total costs per tonne also increased substantially. The cash cost per tonne increased 8% quarter-on-quarter showing that paper posted a relevant increase. So could you help us understand a little better this mismatch between the two, between the paper cost and the pulp cost? Do you have a strategy to reduce the share of third-party timber in pulp and increase it a little bit in paper? What would be the rationale explaining this?
And how does this impact your pulp cost expectation increasing in 2023? Could we expect a change in the cost for the coming quarters? Second question. Another thing that drew my attention is the reduction of volume in packaging paper, in the quarter, in annual comparison. You mentioned that you had some strategic stoppages in some of the mills and plans. You mentioned the international demand for kraftliner a little weaker and the fourth quarter also has a weaker seasonality in Brazil for a number of events. So I would like to know how the demand is evolving and if we can expect a volume recovery in the first quarter, particularly for these two markets?
Caio, I'm going to turn the floor to Marcos and then I will be back to speak about the reduction in volume. But to start, just to kick us off and to clarify this straight away, there is no wood strategy per product or per business. We have a forestry basket. It's not that we have more third-party timber in one business and not in another, there is a Klabin strategy for the whole region, but Marcos will detail this.
This is Marcos. Hello, Caio. First, I'd like to remind you that in the past call, we had given a signal of a reduction in the pulp cash cost, given that the pulp cash cost had been affected by one time-off events in Q3. If you hear the previous call, you will hear us mentioning this. So this happened as expected, as we indicated. Cristiano has already explained that there is no business differentiation. We try to minimize the total cost of Klabin, without really choosing business A or B. And regards 2023, Klabin's cash cost -- the Klabin's COGS per tonne for 2023, our expectation is exactly what we also shared with you in Klabin Day in December. So considering all Klabin products and all effects, including a mix effect, we expected COGS per tonne for Klabin in 2023, growing a 2-digit growth per tonne, low 2-digit growth. We have an IPCA inflation of around 6% expected for the year. We had a change in the estimated mix for 2023 because in 2023, we are going to have a greater share of coated board that is living a very excellent moment and we'll have the start-up of the M28 that changes the mix of the company and the cash cost per tonne.
In addition to greater integration, the same effect with a higher volume of coated board [indiscernible] to that timber. We have been explaining this to you for a long time. We give you a lot of information in the Klabin Day. Since we announced the project in 2019, we had the first cycle being supplied by third-party timber starting in the second cycle, in the second cycle means 2025 and beyond, in the [curve] that we shared with you in the Klabin Day, we start replacing third-party wood by our own wood.So putting it all together, we maintain the signal we gave you in Klabin Day. I'd like to remind you that this is a year view.
We might have some oscillation quarter after quarter, given that this is natural in the forestry business and forestry supply.
As regards volume, Caio, perhaps, it's important to remind you, we came from very two strong years. Perhaps you didn't realize that, but these market oscillations are a routine in our day-to-day business. I'm sorry to be repeating this and perhaps going into too many details, but we have a planning dynamic at Klabin that has been consolidated for many, many years now. It's called sales and operations planning. We meet weekly with our managers and monthly with our officers and we meet daily with the rest of the team and we operate the machines, always focusing on the best results, since times.
And this is Klabin's flexibility, sometimes we reaches the bridges of third-party paper, sometimes we manage production or reduce output, particularly of recycled paper, for example. Sometimes, we adjust or bring forward paper machines, stoppage of virgin fibers. So it's a nutshell. This is part of a normalcy for all our business, it's part of our flexibility.
Now of course, and we knew that the market tends to be a little bit weaker in the fourth quarter. Kraftliner had an impact, we brought more kraftliner for the domestic market for corrugated boxes. So these market oscillations are more normal than you expect [indiscernible] how flexible Klabin's operations are in our sales and operations planning. So there was a reduction in volume as a [indiscernible] market. And yes, we had market stoppages for some of the paper machines.
Thank you, Cristiano. How do you see this evolution in the first quarter? Should we expect a recovery or is the market behaving similarly to the fourth quarter?
I understand you're asking about paper.
Yes. I meant kraftliner and packaging, more specifically.
Okay. In Q1, the packaging market, actually, the corrugated box market is in its non-seasonality. The market starts dropping after the end of year holidays. It moves slowly until March. In June, it gets a little better and it's a little bit of drops again and it achieves a peak starts in July in the peak, is reached, October, November is strong and December the cycles that all over again. It's all part of the normal curve, the expectation for corrugated boxes is aligned with what we expect for the country's GDP. We spoke that we're always a little higher than the Brazilian GDP with corrugated boxes. And it's the same. We are in the normalcy curve for the beginning of the year.
Your next question comes from Rafael Barcellos with Santander.
The first question is about kraftliner. Could you give us more color on the price and demand dynamics currently. You mentioned in the release about a slightly weaker demand with higher inventories. So I would like to understand to what extent this is seasonal or is this a trend that you see intensifying now in Q1 and in the first half of the year? My second question is about corrugated boxes. I know you don't like to look at market share quarterly, but we have seen market share dropping in recent quarters. So I would just like to understand the trend you see for 2023 in the market share price strategy and if there is any price pressure from the market?
So we start with Flavio Deganutti, then Douglas Dalmasi.
Well, the dynamic of the fourth quarter and we see based on the world market, particularly if we look at the two big markets, U.S. and Europe, all demand is not helping. There is some excess in capacity, more capacity starting in full market and production reasons in the U.S. because of all of that, we see more pressure of the prices, reflecting the supply and demand dynamic that I just mentioned. And when we look at the whole picture, you see price impacting the cash cost of marginal [indiscernible] and that makes high cash costs, find it hard to continue to operate in the coming months.
This is Douglas, Rafael. Good morning. We don't like to look at market share. We look at the integration of markets, means flexibility. But looking at the number, indeed, in Q4, we had 2 factors that impacted and caused a different performance in the market. We had two factors in which Klabin has a higher market share, performing a little less. So that drives down Klabin's number, such as fruit and protein, fruit for climate reasons and protein because it was reduced export to market reason. And another important factor was a greater utilization of lower weight paper. We've been talking about the Puma II machine, PM27. And that makes available of tonnes of Klabin to meet weight of the package. But when we look at square meters, it doesn't correspond to the same proportion.
So when we look at the tonnes number, we get a false impression. Now looking at 2023, we should follow the market in most segments. And in talking with our clients and with the market in general, particularly in these segments that I just mentioned with the fourth quarter underperformed, we see that the fruit and protein sector, where Klabin has a higher market share, there they have a better outlook. So as Cris mentioned, the segment is growing more than the GDP. If these industries come stronger, we should perform better.
But we need to be cautious. We need to follow the performance of these segments. Regarding price in the past, we performed a lot better than inflation. And our quest this year is to be aligned with the IPCA inflation rate.
Just a follow-up question. I don't know if I had a [indiscernible]. But regarding kraftliner, you mentioned that you're seeing a current level of price hit the marginal level. Is that it?
Yes. We have a curve that differentiates producers like us from producers that are more impacted by inflation in their cash cost as well as particularly for producers in the northern hemisphere. Current price levels added to logistics impacts that are still present, caused the net price to touch the cash cost curve. Now during the month of December and January, we also observed a reduction in inventories of the chains. There's a lot to do. Inventories are still higher than historical levels, where there is now a process of reducing the inventories.
The next question is from Isabella Vasconcelos, Bradesco BBI.
I have two questions on my side. First about the future downtime at Monte Alegre, if the studies continue to evolve, if you have any update that you could share with us about the potential project? I remember there were some studies or different studies that you were looking at. So if you have any update on that side, it would be interesting. And the second question, I don't know if Nicolini is [indiscernible] the pulp market, especially in China, post the Chinese New Year, you see the demand is evolving in China. And if we can talk about, in Europe recently, it will be interesting to us.
I'm just going to try and interpret your first question. If I'm wrong, you please tell me. But I imagine that you're saying about the future downtime in Monte Alegre, of course, that doesn't exist. The only thing that I remember about Monte Alegre is boiler -- recovery boiler.
Yes. I'm sorry, that's exactly it.
To answer and I think it will be sufficient. I mean, I may be redundant in the beginning, but Monte Alegre was a bit planned for many years in terms of results. They have the coated board Machine 9, Machine 7 that we mentioned. It's a very important site for Klabin from the 1940s until today, the site with an order of 1 million tonnes. It's a very important site for Klabin. So there, we have a one boiler or have boiler one, that we have been studying to repair it for many number of years. Of course, we've worked with a very high safety level. We're always very conservative. When we started to look at this, we consider the worst cost scenario or maintenance. And as I mentioned, at Klabin Day, and we can go back to what I said then, it's the same thing.
We are more and more confident that within the vision that we outlined initially were in the first quarter of investments or rather costs in the operating amount for this boiler. So if we had an original idea, this number is closer to a third of what we had figured. So this retrofit will be done over the next 2 or 3 years during the general downtimes without any impact on the result or the guidance for the business at that side. So this is something that started for us with a high attention level, because it is an important site, it's best site. And now I'd say it's in the routine of the company. So the boiler will be retrofitted in the coming years and you will see it with us, but the effect will be very small, both in terms of the investments made by the company and the results, of course.
As for the pulp market, Nicolini will talk more about it for you.
Just to add Isabella, we remain with the information from the Klabin Day in terms of disbursement for the boiler in 2023, if it occurs, it's an amount of BRL150 million. That's within what we -- the number that we gave you for the CapEx indication for 2023. So there's no change in the assets.
It's Nico. At this time, we're still analyzing and looking at the developments in China after the Chinese New Year and the expectations in the sense of the improvement of the Chinese economy to understand how this may impact other markets. What I can tell you is that the month of January was a good month in terms of demand, but it's too early to form that there will be a recovery in the coming months. In terms of the European market, the year began in a more challenging way since the middle of last quarter, we saw demand that was more repressed in the print and writing and specialty segments and the market as a whole already expected some correction in terms of prices in eucalyptus pulp after a few months of complete standoff in terms of price. But it's worth remembering that the year started at prices much higher than the initial projections. And now we're looking at the developments in the markets to feel how this is going to develop in the quarter.
The next question is from Caio Ribeiro, Bank of America.
First, I would like to see whether you can talk about the softwood market. We see some players in North America announcing price increases in USD20 to USD30 per tonne. I'd like to see if you understand the dynamic of this market of this fiber if there is room for any type of increase? And second, if you see any movement towards the replacement of softwood with hardwood seeing the levels that are above historical indexes?
Nico is going to answer to you, Caio.
The softwood market starts to give us some positive indications of a steadier market. It's worth noting that this segment suffered first with price corrections in the middle of last year and considering the context, especially in Canada with the production stoppage and downtime announced because of lack of fiber and closing due to capacity or reduction of capacity that led to an announcement of a $30 price increase in international markets. Brazil follows the price in the Europe and these prices are being implemented now in the month of February. It's worth noting that when we compare the dynamics of the markets, the differential, the gap of prices between softwood and hardwood in China and in Europe, it's out of place, it's different. We talk about the prices in China between softwood and hardwood. It's $120 per tonne.
And in Europe in January, it was around -- that's a very small gap in Europe. We see the softwood market steadier due to what has already been discussed and how we will keep watching and see how it develops in coming years.
Our next question comes from Daniel Sasson, Itau BBA.
My first question is related to [potential] decision to invest in the new big project for [indiscernible] expansion. We are close to finalizing the second PM of Puma II expected for midyear. So you're already thinking about the future agenda. So I would like to know, do you have any time expectation to take to the Board of Directors to have approved that bigger project that you have in [indiscernible]. And how if you could elaborate on the kraftliner dynamic. I know we talked a little bit about this. But it recalls my attention to the cost reduction in the international market more recently in the high-single digit, low-double digit crop. Could you elaborate on the price expectation of kraftliner [indiscernible] U.S. economy can wait a little bit? And has there might be a little more kraftliner left to the exposure there?
And so regards to Santa Catarina, here is what I can tell you. The paper and pulp market characteristics. I mean, we study and plan projects we win ahead. So my answer to you is yes, we continue with that in our radar, not only in the radar of the management of the company, but also in the radar of the Board of Directors. We have a strategic approach of softwood. However, this is the year [indiscernible] I said it a couple of times, the coated board machine, it brings embedded technology, which is sophisticated. It has sensors, increase in [indiscernible] product in the new world to have low weight coated wood compared equally to U.S. virgin fiber coated boards in the many categories of [indiscernible].We worked many, many years for this machine. The coated board market is not as big as the containerboard or even the pulp market. So it is a more select market in terms of producers to consumers.
It has a premium value profitability of long-term contract. Just one detail, we have contracts for Machine 28, which have 3-year contracts with excellent negotiation and ensuring a good part of Klabin's stability of results. So I'm estimating a number that will be communicated to you in the future.Looking at Klabin today projecting for the next few years, Klabin and its 3 primary businesses, make a parallel with the U.S. market because I think it will be more direct [indiscernible] to understand. We have a co-market as a number of companies call bio material, it's bio-materials market.
As you well know, we have 1.1 million tonnes of hardwood and many, many more thousand tonnes of softwood with a premium price for softwood. You have seen what has happened in recent years and Klabin with softwood and for consolidated throughout Latin America and approved by all brands in the world. When we look at the other business, I will take a risk here and say containerboard with corrugated box. The company typically you're looking at an IP or IPCA in the U.S. In this market, Klabin is highly integrated, with the market share that was mentioned. We don't look at this and it's a good time of the moment.
But we have about 25% of the Brazilian market of corrugated boxes and we sell paper to practically all other Klabin competitors in these segments that require virgin fiber paper. Now when we look at Klabin's third market and bringing a relative innovation for you, dividing it by 3, and that is the coated board. That's what they call consumer board in the U.S. This market with PM 28 projecting for the next 2 years, you will divide Klabin, will break it down into 1/3 biomaterials, 1/3 corrugated boxes and the 1/3 of coated board. So these 3 segments absolutely consolidated with niche products. And for all 3, we have projects in the future vision. However, at this moment and this can extend to the next year, we will be focusing on this division, consumer board and of course, consolidation of our other businesses as well.
We'll focus on increasing efficiency, always trying to increase efficiency. So at this point, I prefer not to mention the focus on the Santa Catarina project because the future of softwood is consolidated for us in that region. So, there is no relevance of materiality to speak about projects this year and perhaps next year. BRL323 million is our new capacity we want to deleverage the company and gain operating efficiency. As for the liner market, well, I spoke a little too much I apologize, but I wanted to give you this kind of detailed level, and I'll turn the floor to Flavio.
I elaborate a little more. We have a situation that is very different compared to previous cycles, some big numbers. The U.S. market to get of the market 2 million tonnes, if we had the main producers, in their published releases. And the U.S. exports are at their lowest possible level and compared with a long historical series, which is a counterintuitive normally with the weakening of external markets, the U.S. market exports more. And as I explained before when answering Rafael's questions, now we have a situation of low profitability. We stop capacity, and we export less. And I am going to enter the new element, which is an element of Klabin. Klabin has its own mix, we do a lot of virgin fiber, low-weight paper, Eukaliner brought a little more of this context to our products. Klabin has its own geography. We have also in America some markets, which are very relevant in our portfolio. So this is a market. So we have a high market share in these markets. We also have a mix, which is very much favored by fruit, vegetables, fat, protein. And these markets continue to do well. So we reap the fruit of operating in specific mixes that help us in a macro view. Now looking at the U.S. market, even before they actually have a recession, if a recession ever happens, now they are reducing capacity and they are exporting less.
Our next question is from our webcast from André, XP.
We have seen some news of a greater potential payment from Brazilian companies and taxes either by MP 1152 or yesterday's Supreme Court decision. Can you give us a view of how these measures can impact Klabin?
Andre, I'll turn the floor to Marcos Ivo.
Andre, as for MP 1152, it's in Congress, waiting for approval. But we have the text so we can make our statements based on that. Klabin has always had a more conservative attitude in its tax decisions. In the past, this has led Klabin to adopt what the ODC -- OCD defense and what you'll see in the tax cut bill 1152. And to make it simpler, that if approved, it will bring a change in the transfer price of Brazilian companies when they sell to their own subsidiaries outside of Brazil. So Klabin, since we opened our subsidiary outside of Brazil and it became more relevant with Puma I as of 2016, we always have a very conservative position, understanding that there was a high risk of falling an aggressive practice in terms of tax payments.So which was a conservative path, which means that if this bill is approved as it is today, it will have no impact for Klabin. Now, I mean, you were talking about Supreme Court's decision yesterday that may bring a big change to the results in certain situations of lawsuits and we don't see anything that may affect Klabin, looking at our past, other than greater legal and security for future decisions. But in terms of the decision, the best decisions that have been made in our cases, there's nothing we can see that would cause an impact.
Excuse me, if there are no further questions, I would like to turn the floor over to Mr. Cristiano Teixeira for his final remarks. Please, you may go ahead.
So thank you. First, I would like to give you a side note, before talking about the perception of the last quarter. The side note is our -- about our new Legal Director at Klabin, Mariangela who came from the Grupo Votorantim Cimentos. She's been at Fibra, Vale. She is a highly qualified professional that is now joining our team and adding her structured view, acknowledge to our company in tax and legal terms. So welcome, Mariangela. It's a pleasure to have you with us.
So now I'll give you our perception on the first quarter of 2023. Usually, the first quarter of a year is a period with a lower seasonal demand at a slow pace in all markets. Especially this year, due to the macro scenario, visibility is low. At Klabin, we have positive perspectives for this first quarter with results expected to be above the same period on the previous year. We remain steady in the constant search for operating efficiency and cost control. Our main focus remains on MP 28, which now presents 82% of its works concluded and we're confident for the start-up of production in the second half of 2023.I thank you all for your participation and I'll see you on Klabin's next earnings conference call.
This is the end of the conference call held by Klabin S.A. I thank you very much for your participation and have a nice day.