Dexco. We're going to talk about a few things here at Dexco Day. We're going to talk about the results for the first, or excuse me, the third quarter of 2023, the first nine months, some perspectives for the fourth quarter, and we're going to focus on what we can expect from Dexco for the next years with the end of our investment cycle that started in 2021 and will end in 2024.
So this is a brief agenda. We're going to be talking to Antonio Joaquim, our CEO, who will give us a macro perspective and how it impacted our operations in 2023. Then Francisco Semeraro, our CFO, is going to give us the earnings results, EBITDA, debt, leveraging, cash generation. Then Henrique Haddad, the VP for wood, will give us some results on the wood panels and forestry results.
After that, Raul Guaragna will tell us about some of the results for Deca and finishes in 2023, and what we are going to do. And then Marina Crocomo, Marketing and Design Director at Dexco, will tell us about the new structure and a revision of the brands of the company's brands. After that, we will have Daniel Franco, who will tell us about innovation and corporate venture, some of the results from the investments that started in 2021.
And finally, Glízia Prado will tell us about our results for people and how we're going to meet the goals that we have for the next months. Antonio Joaquim will give us some perspectives for the future, and we'll discuss the end of this investment cycle further.
Before I pass it over to Antonio, I'd like to thank our investors and analysts, lending banks, APIMEC, rating agencies, and all the stakeholders who came to this event in person, and the over 200 people who are watching us online on YouTube. Antonio, over to you.
Hi, everyone. Welcome to Castelatto. This is our most recent acquisition, and here, we have a much more pleasant location than in Paulista, especially when you don't have such great results, because, then you can distract people from that. We like to bring people here to give you the opportunity of seeing one of our plants from up close. Castelatto is a project that we see a bright future for. It's very interesting. It's a niche product, but it's very high-end, and we are making a big bet on it.
One of the founders of Castelatto is here with us, Gabriel. He is a mentor behind Castelatto, and we've been working a lot and learning quite a bit about this new business. Castelatto is a product that adds a premium line to our business, so we're very happy to have you here. This is a space that we often use to receive our clients and also architects, and it's a very pleasant place to be in. Let's continue with the next slide.
So I'd like to briefly talk to you about the macroeconomic scenario. I know that all of you are keeping track of it, probably much better than I am. You know, the situation that Brazil is in, that we're still experiencing. There's still a lot of instability, but there are some news that we can consider to be positive.
The main point, as we've been seeing for a long time, is that we're going through a high interest rate cycle, which affects us significantly. It affects our results as we are also concluding an investment cycle. So obviously, our indebtedness goes up, and if interest rates are higher, this affects our balance.
So this downward trends for interest rates helps us. It helps with our balance sheet, but it is very slow, and it also helps us with the market. This reduction is more constant, so this would be more beneficial for construction. We know that when interest rates started going up in the past, that it would generate a natural slowdown in the market, because this kind of industry has long investments that requires credit, and if credit is expensive, it does affect us negatively.
So this is a positive trend to see interest rates going down. Of course, how it will happen and how far down it will go depends, and it's a bit cloudy, depending on how our tax reforms in Brazil go, and how people's perception of the Lula administration is. It also is affected by the global economy and how the war is going to affect global economies. We all know how these trends go. The situation here is that individual indebtedness has significant numbers, so it's a moment in which people are holding back. After COVID, we saw a couple of things. Something was foreseen, which is that idea of share of wallet.
Like, if you didn't spend on this during COVID, then the only interesting expenses that you could have for that money was to refurbish your house, to buy a house, to buy a second house. So this was the only option in our industry. When that was over, and we see, you know, tourism is going up, families are traveling, and of course, there's competition for the same money.
So we had a very interesting opportunity yesterday. We were with eight clients with our board, clients from different industries, and it's unanimous. What clients say is that it was a difficult moment. We expect it to get better, but no one really expects it to come in the short run. Of course, some people in the construction industry were very excited.
They believe that they're going to see a sharp growth in new buildings, in construction, but we're a bit more cautious, because we know that it takes some time to affect us. So if we do see that growth, we will enjoy it in the future when we reach the conclusion of these construction works.
We also see that with new apartment buildings being launched, there aren't many news. It's a stable scenario. When you look at the Consumer's Trust Index, it does tend to go up, but it's still stable. It's not the type of improvement that makes you think that things are much better now. I really think that right now, there is a degree of caution when people think about long-term major investments. Think about your own situation.
If you're considering having a long-term high investment, like buying a house, you're still feeling cautious about it, right? The market is not as favorable. But I think overall, a scenario, in a scenario like this, what we're discussing is that we see indications that things are starting to get better, but to what extent?
Well, that we'll have to wait and see. Let's continue. So what I'd like to say is that we went through a second and third quarter in a very different way than we had imagined. We did imagine to see more recovery in the third quarter, and you can see that it didn't come. This recovery started to appear in ceramic tiles. As we had shown, wood is very resilient, it is doing well. I would say that the year is, has already been, earned for the wood division.
This is a very resilient market, and they're doing very well, and we can tell you some more about that later. But we're still facing a very adverse environment when it comes to demand in the finishes market, especially ceramic tiles and Deca. What about Castelatto? Well, Castelatto is a small fish in this tank, right? So it doesn't really pull everything up.
Castelatto is a great part of our business, but it's a small operation in comparison to the entire ceramics division. So what's going to drive our results up or down significantly is the areas where you have the most scale. Now, another thing that also appeared and was very important is, as you know, that we changed—we switched systems right in the beginning of the quarter, so that affected us. It wasn't unexpected.
There was nothing too significant here, but there were some delays affecting us. I wouldn't say that we underestimated it, but we imagined that we would be able to solve many problems quickly, some internal issues, but it took a bit more time. Everything is doing well. We have great teams.
The changes have already been made, but there's some space to speed up. I think we're talking to many clients. Raul and I have traveled a lot, extensively, to talk to many clients, and that took some more of our time. But my personal expectation, if we look at the last quarters, is that things in the third quarter didn't advance exactly as we had imagined from the market's perspective. It will take a bit longer. We are still confident.
We came, things started to improve, but we expected a faster recovery, and it's a bit slower. So we have to visit that process again. I think next year, well, all signs show that it will be better than this one wherever we look, because I think we're going to be much better adjusted to the market conditions, and the market conditions should be better. But we don't really expect to see a huge ramp up. That's not what we believe. Let's take a look at the figures with Francisco, and I think at the end, we'll have some more time to debate.
Good afternoon, everyone. Thank you very much for coming. Let me give you some more perspective on his comments about our economic situation and Dexco situation. Our EBITDA curve in the last few years, since 2019, shows a change in trend and levels when we consider pre- and post-pandemic times. 2021, we had a lot of EBITDA being generated, and that led to a debt level that was rather reduced, both the numerator and the denominator, very positive on the whole. In 2022, as we explained, the first quarter had a sort of hangover effect post-pandemic. In the second half, we were anticipating difficulties considering our macroeconomic scenario. In 2023, we have a new curve in the year to date.
So, as Antonio mentioned, our business units remain resilient, especially wood, as we have these structural changes taking place. And this is, of course, a price we have to pay to put things back on track, both internally, operationally, but also commercially. So the new curve means a level that is higher, better than 2020.
We have two different curves. Our debt, now 2.6 in the last quarter, so we are actively managing our debt, as you may have seen in our latest announcements, our operations and internal adjustments. But we also have an investment plan we've been following since 2021, and we will also discuss this plan as we discuss our prospects. And this investment, of course, makes us earn a cutting edge.
So we want to strike a balance between these two curves to address these needs and also having... or making the company more competitive, as we have a macroeconomic scenario that is not so wonderful. So we have good operating results, of course, and we want a whole bundle of improvements that might lead us to deliver better in the middle and long term.
Our EBITDA delivery, our EBITDA results this quarter, adjusted and recurring EBITDA compared to previous periods, BRL 288 million were our earnings this quarter, with two faces to this result. We have Wood going fine, good margins, resilient in this quarter. In addition to the system change that Antonio mentioned, there's also an impact in the half of June, of course.
But then the panel market has resumed, and as we manage our possibilities and consider our plant, industrial plant occupation, we've made intelligent choices. We have no special highlight in sales in Wood. We should remind you that we sell wood in interesting lots. It's not in bulk, right? Or just for a week or a month.
That's not how it works, and there was no particular highlight this quarter, except that it is a rather resilient on a good level for us. Now, finishes, construction finishings. We will also explore our structural change in this sector, and we've made change to optimizing our assets, and also we discontinued one of our operations in the third quarter. We are also slowing down and shutting down one of our ceramic or ceramic tile plant.
Of course, we have some consequences in the short run, but we are on a different level from now on. Pulp, we will discuss that later, too, but the result was interesting in terms of both absolute profitability and margins. BRL 173 million this quarter, and that's 49%. When you look at our cash flow, again, when we look at our conscious management, what we control, cost, investment, and expenses from a cash perspective, except for cost, everything we've done in cost and expenses, we have managed our cash flow diligently, especially when you consider CapEx and inventory management.
The scenario remains challenging, as we mentioned from the beginning, but when you manage your CapEx level to run your operations and generate interesting profitability levels, and also working capital levels, that is sustainable at 18%.
So if you just consider a volume with its pressure of the pressure on it, we would expect a higher working capital. Our historic perspective was about 30, and even higher than 30% before in terms of working capital. So we need fine-tuning to keep the right service level provided to our clients with the right working capital level, making sure that we have a good occupation rate with optimal use.
This quarter, we generated BRL 163 million in cash flow, sustaining cash flow in 106 in the year to date. This is something that we manage both the upper and the lower part to have the right structure and the right profit level. We're still working on our investment plan, and it was reduced to BRL 1.8 billion.
This plan, in this plan, we keep the major landmarks or, and deliveries, but then the CapEx commitment level is less than predicted. In 2021, BRL 2.5 billion, so we're making intelligent choices. And the, the choice also are the projects that are in this package. So we have the strategic deliveries of BRL 2.5 billion, but then we spend BRL 1.8 billion in generating good results in the middle, mid, and long run.
Our debt, indebtedness, we are at 3x, 3.5x, and 2.6x, that's the indebtedness when you exclude our investment plan. So this investment plan is a major contributing factor to our debt. But we have good leverage when you look at the mid and long-term perspectives. Our debt schedule, 3.4 years, that's the average debt term, and that does not include CRA.
We have completed the issuing this, so BRL 1.5 billion, that's a 10-year term, and we're expecting that by the end of the year, when we look at the curve again, after 3 months, we are expecting to get more than a year in this average term, and that means efficient capital management, but at the right cost.
In addition, I'd like to highlight, when you consider how robust we are, we also extended our credit facility or credit line. We had BRL 500 million, we now have BRL 750 million, and this is available for the credit line or facility that's available for the company. Now, Haddad will talk about wood.
Good afternoon, everyone. It's a great pleasure to be with you today. Let's just shift our focus away from the figures. It's the first time I can talk to you, like, face to face, not just about the earnings, but about our results overall. So let's talk about the market. This quarter, we have remained stable. The beginning of the year, we had some problems, especially in quarter one and the beginning of quarter two.
Now, in quarter three, when you consider the market, we have reached a balance, and that's very positive for us. We believe the worst is already over when you consider consumer expectations. This year, we're still expecting a market that's lower, less than 7%, as compared to last year, and we focus on the trend, the market trend. We have already been through a rather, complex, complicated phase. Our wood operation results.
As Francisco mentioned, at the beginning of this quarter, we had some problems, some issues with our sales. So this 9% in this drop in sales is a result of what we were trying to understand our new operating model, so we had some delays. The good news is that with this, a good part of this volume, it was carried over, so it was not sold until or collected until September, but it will come in October and November, and that was expected. And this is positive, and even better than we imagined at first. In other words, we did have volume losses that were significant at the beginning of the quarter, but this will not affect our earnings in the second half of the year.
This is really good for us, as we understand that this is consistent with the market model, and that's very important for us. One more thing that's very good for us, we have made strides in the things that we can control, our management. When you look at our EBITDA, our absolute EBITDA, as compared to last year, we have evolved.
That's 25% margin, and that's really healthy, a great figure. And this is something we for a while, we just wanted this to be, to be like this, and I think we have really improved. And one positive factor, that's how I see this. I see it as a positive in this number. There's no forest sales that are that significant. Of course, forest sales are very good, forestry sales offset results, but this is not our business, right?
We sell wood panels, and we add value this way and build value in the entire production process by diluting fixed cost and also making our plants work. In quarter three, we have 80% capacity... but that's over 85%. So our success rate, so in November, we're even better. December, we have some slow down, but the movement is consistent overall.
As for dissolving wood pulp, this is another topic that has caught our eye when you think about wood earnings. We're really happy with this change in dissolving wood pulp. We have some variables like quality of final finished product, and also the ramp-up volume exceeded our expectations. So this is a great occupation rate for us, too. If we're not above our full capacity, we are even better than 500,000 tons a year.
This is almost a reality, almost taking place. So we are now seeing more consistent margin evolution, also benefits from the cost of materials. You may remember we've had years with a lot of suffering or difficulty with the price of chemicals and wood when you were planting your forests. At the end of the day, we see very positive evolution taking place.
This increase from 51%-61% is not probably sustainable, but any number between 51% and 61%, anything in between, is already a dream come true for us. So we're back on track when you consider our profitability level. One more very important topic is about the type of business we operate in. So wood.
Those that have been following our wood operations, you may have noticed we're trying to be as consistent as possible, making structural moves whenever necessary, and many such steps were taken in these seven years I've been working for the company. We've been working hard.
Now, when we built the strategy frame, and Raul was leading the team at the time, we believed we were striking a balance of our priorities in this next phase of our wood operations, our wood section. So what you've seen was just an adjustment in the order of our strategy pillars, with a focus on consumers first, then resilience. We still believe that this is crucial for our operation. It would be pointless to dream about growing or profitability without being resilient or sustainable in this economic environment we have in Brazil.
That's where we have to learn to live and make things happen. Now, another element that is still discussed and at work on is the trends. So what will we do in the future? What can we expect of wood? What have we done with wood? What do we want to do? What is our intention? That's how I organize these ideas to help us understand the potential.
We don't have a short-term, significant result, but it shows the DNA of a business that focuses on forests, on forestry. We have long-term planning, of course. We're not dreaming about next year's plan. When you think about forestry, it's usually a period of at least seven years and above. So Caetex, the company we invest in the state of Alagoas, this leads to the capacity of making choices. We have the ability of making choices in wood.
In an environment that has a completely different cost level, with land speculation that's completely different from the south of Brazil. Our investment or the DX Ventures, we are really proud to participate. Some of them are in their infancy, of course, they're still starting. But when you look at one of them, you see that this is no longer a startup.
Some of them are really aggressive, with very resilient and robust strategies, and we are participating with our products and our technical teams to help develop solutions together. And this is what we wanted. We wanted to be involved in this ecosystem, and not only in theory, but in practice, to have new things. And then prospects. We're working on hybrid panel solutions.
We have moisture-resistant or fire-resistant panels, and also a panel that's hybrid, resistant to both, that can be used in Brazil. Cubo, one of the initiatives to build homes. So we have many initiatives, also biochemicals, that can be a good solution. As these solutions get stronger, we will be sharing these results with you. We do not want to create expectations before we are absolutely sure of things.
We're thinking long term here. Journey or consumer journey, client journey, we have very well-defined levers. Everything we've been doing in-house, we follow the same pattern, and that's very good. We cannot be... We can't afford to be slow. We need to know where we're going to. And then efficiency, our efficiency journey, that's crucial, too. So again, consumers or clients are the focus.
Again, we want to remain competitive, and we shouldn't forget that we need good performance levels, good quality levels. We cannot, we cannot afford to be in a standstill. We need to keep the wheel moving, and I'm really happy when I see this type of model evolving, but not changing all the time. It remains consistent, it remains, we keep generating good results.
And then forestry, that's another sort of a dilemma we've been facing. There's very sensitive issues when wood, as far as wood is concerned. We've discussed this many times before. This issue, no one imagined how dramatic it is when you consider the impact on cost, and also wood availability. I'll give you just one example to further consolidate this. We're talking about a price increase of wood that is at least twofold.
Of eucalyptus forests, one of them, it's really close to a two-time increase. So in addition to wood panels, our greatest competitor is pulp investment, pulp and paper investment in Brazil, and these companies, they will not stop. You know, that this is something that we're expecting at least a few years of great challenges, significant challenges ahead.
In addition, at Dexco, we're surfing this wave, and we are indeed getting good results, capitalizing on it. We're not stopping at wood production, wood panel production to sell forests, of course, but we're still doing both. We're still investing in our productivity and the efficiency of our forestry management. In the last seven years, we increased our average radius in 15%. And finally, sales of isolated surplus production.
This is something we've done, we've done before, and we'll probably keep doing it. You should manage. Francisco mentioned this, but I'd like to stress this point. This is not a quarterly account. This is not something I need to sell 10 or seven. Unfortunately, that's not how it works. I wish it were that simple.
We, in this case, this is a living asset. So in addition to managing our demand, and that's rather a difficult variable to manage, you also need to control the evolution of our forests and make all adjustments. So I'd just like to stress that this action remains on our portfolio or our tool set, but this is not that predictable or not as predictable as we wanted.
So we're still continuing. We hope that this year is good. I mean, we still have 45 days ahead of us, but I'm confident that this year will conclude on a positive note with very decent margins, but also that next year we will start off very well so that we can create a more solid base for 2024. I'll pass it over to Raul, who will tell us about the next business.
Thank you, everyone. Good afternoon. It's a pleasure to have you here at Castelatto. As Antonio said, this is the most recent acquisition for the company, and it shows a lot of potential. It's very complementary to the portfolio that we have. Another topic I'd like to discuss with you is to underscore what Antonio said.
We knew that we would need to take structuring initiatives very quickly due to the change in the market. We saw that it was a tough first half, and usually, the second half is better. It did become better, but much lower than we expected. So you saw that we had to make quick decisions to really position ourselves to compete in the future in the best way possible, starting next year.
We need to change as the economy changes as well. The good thing about this is that wood is showing a lot of resilience and different behaviors, so this allows us to do things in a year like this and reposition our division, and also face a market that everyone expected to be better. It was much tougher, and you'll see references to this during my talk.
But we are seeing some advances. We met with clients, and this makes us very confident that we're on the right track, and I think that we're going to be able to get to a different level very quickly. We see that it's still a tough scenario. When we see this level of reduction, we see that the basics really affect us. So cement, basic construction materials have a different kind of behavior than what we see right now.
When we look at finished basic goods, the market has been going down in the last few months. It's a slower drop, but this is a very large basket. If we look at our own segment, the market is dropping much more sharply than this, mostly due to the inventory that was built up along the chain. It's a very long chain, right?
Clients tend to build up their inventories. This is something that has always happened. It allows them to sell to their clients very well, but whenever there is a deceleration, then the industry will feel it. Yesterday, we saw that people were much more optimistic about next year, but it still seems like that the effects of this reduction will be much lower than what we expected.
So we will need to adjust our expectations so that we can capture what happens in the construction industry. Of course, there has been changes in interest rates, and that might boost our industry. When we look at metalware and ceramics or sanitary ware, this is a very difficult market, but we see very important elements here. First, working capital has changed.
It's very easy for a company of our size, with so many units, to let go of this when the market is going down. Because the best thing that we can do to ensure our EBITDA works is to produce, but that might lead to unsustainable inventories, and over time, that also leads to mistakes if you don't have... if you're not predictable. Our market share levels have also been conserved.
What happens is that with our size, the size of the market that we have with market, with our historical market share levels, are insufficient to generate significant results. So that's why we have so many structuring initiatives this year. What we're sure about is that we're ready to compete in any scenario. We have many assets. We've made some investments in ceramics, and in Queimados, we have people taking care of the machines.
They can start again at any point. The market has been preserved, but the truth is, when you look at these conditions, like 49% or 30%, that also explains some of our volume. Showers have a lot of added value, but they are low volume. They went down significantly this year because of a warmer-than-average winter, but now the industry is not, as we have inventories built up, the industry is not selling it.
So especially metalware, which is more complex, where we have outside suppliers and a longer and more complex supply chain, looking at the system, as Antonio said, we suffered a bit more than we had imagined. We lost some days in production and revenue, and this was passed on, and some of it cannot be recovered very quickly.
Despite that, we had some market share losses in July, but we expect to be back to our own levels. In this division, we have negative EBITDA for the quarter, but it's still slightly positive for the year. We're going to talk about everything we did here, but we're focused on this investment plan, investing in PVD.
Our D.Coat is a product that has been accepted very well in the market, and we're reaching historical levels. We're the only company that has this capacity, the biggest capacity in the world, in PVD here in Brazil. Automation, now in October, we're starting to see our automated line working in Jundiaí, so this will make us better. This commitment is still there.
I mean, it will conclude for next year, but with what was said about our capital responsibilities, we reviewed many things and reduced many other things to have more assertive investments. Automation in sanitary ware is better, and our PVD is also lower, but it will be more than enough for the market.
This long-term perspective, I mean, we have to keep our eye on the ball on the short term to do what we need to do, but without forgetting about the future. Our business needs to continue carrying this momentum, so we need to have diligent and consistent projects. In ceramic tiles, it follows the same, a similar story. Occupation is very high in the industry. Lines are stopped around across Brazil, and this in effect only Dexco.
In Santa Catarina, we have had a lot of trouble because we have some gas contracts that are take-or-pay. So that's how the market is. When your production stops, you're affected by that, but it's not something that you can stock up. It's a heavy product that wears with time, so it doesn't make sense to build up a lot of inventory.
So stopping the operation was much faster than what we expected. This is still on our radar, but here we saw an opportunity of stopping with the latest inventory, adjust our models, and many plants are operating very well. Our team is operating very well. So we're reducing our inventories significantly, but we can also see our clients' inventories going back to the regular levels.
A construction material store or a home center has between 25%-45% of its revenue coming from ceramic tiles. So if the market has too much, it's difficult to sell. I mean, this is a very difficult product, and we're very lucky with sell out. We have the technology for it. We've been looking at sell out, and we're starting to see some signs, which are still ambiguous, but we see some good perspectives, like the reduction in the drop.
In January, we saw high two-digit growth levels, so it's still negative. The truth is that the basis for the third quarter is a bit weaker, and the comparison for the fourth quarter is even weaker. But we're starting to see a reduction in how fast it's going down.
It's at 74% occupation, which is very good. It's similar to wood, right? It's a continuous-use product with high operational costs, so you need to have a good capacity occupation rate. Otherwise, you will incur in costs, and everything that you take into the inventory is a high cost, and not a lot is left over at the end.
So being adjusted for capacity makes a big difference in this division. But here, as you remember, we started very negative in the beginning of the year. This quarter, we had a reversal. It's still low results, but, you know, lines are stopped, capacity has been adjusted, take-or-pay. So we do see a lower occupation than the industry in this case, but when you stop a unit like we did, this occupation level is lower.
You know, we've lower, fixed cost and with more efficiency. So again, with Botucatu in early 2024, we will be at a different level, not only in production capacity, but also technology, quality, design, the weight and size of the different parts. Of course, the plant we have there is unprecedented in Brazil when it comes to capacity and capability. So this is what we're seeing with, ceramic tiles.
This is a unit that we're making a big bet on. We have good brands, Ceusa and Portinari. Castelatto is keeping up with this trend, but it's a more specialized unit. Of course, it matches all of our other products. This is our strategic agenda. I mentioned this in the first slide. We're preparing for the future. So we have industrial automation, a lot of, tech infrastructure. It's a lot of intensive labor.
In our industry, we need to work with technology and automation, and we see a gain of seven percentage points in sanitary ware, which brings a lot of money to the table. In capacity and productivity, this is the segment in which we have the most intensive labor, so there's a lot of manual work and expensive parts. This has a significant impact on our business, but it's sustainable.
We're seeing continuous improvement here, and it makes us think that we really will be at a different level in the future. Our competitive strategy is key. Deca is a well-recognized brand, of course. This was also a major insight or a major correction that our clients made when they talk about the capacity of the brand and their own willingness to continue to bet on the brand.
But of course, you need to do things well. We repositioned it. We have a price premium, so when we did it, of course, it's the right price for our brands with the investments that we've made. We're starting to recover... We've recovered our market share this year already, and this brand repositioned happened in February. So what really gets us is the volume. Our industrial footprint, as we've mentioned, is great. It's less complex, more efficient, and it's very able to respond to whatever challenges we face....
To conclude, this is our strategic agenda. We'll need to honor this legacy, the legacy of our brands, the legacy of our long-term investments, and future perspectives. Having high service levels, this is important for our clients to deliver quickly, to help them to meet their own clients' needs.
It's important to have your products in place, and Marina will mention this in her presentation. So based on this pit stop in 2023, we're now in a position that we're ready to grow for the right size for next year, as according to the market. I'll pass it over to Marina.
Thank you, Raul. Let me introduce myself. This is the first time I meet you in person. I've been in the company for almost eight years, but the challenge is to take care of all brands at Dexco. So in this first slide, just to give you an understanding of the formats that we've been working on since the beginning of the year. Before, of course, each business had its own specific structure, marketing, product development, and portfolio management.
Was it an individual looking at each business's challenges, yes? We had a specific area. When we talk about Dexco, we have some specific challenges for internal and external communications. Now, we have directors who face this challenge and look at responsibility, and take care of the specificity of each business, looking at the challenges in each business, and also seeking opportunities that can apply across the board.
So we have some processes in this area. There are some specific areas that have core activities, taking care of specific brands and businesses, like portfolio management, strategic price management, segmentation, competition, and also communications. Each one of our brands have their own visual identity, so there's a lot of synergy between them. But we also have many activities where we can capitalize on by doing together.
We have seven brands on the same industry, so we have to evolve for more comprehensive solutions for our consumers. So one of the challenges of having a continuous outlook is not only looking inside the company. I'm also a part of ComEx, bringing in client challenges to our strategic agenda. You heard that we talk about investments for growth, but we're also getting closer to our end consumers and also our clients.
This is very important. So when we talk about cross-sectional areas, there are some specific activities, like client relations, the people who influence what we do, and also design, the design office. Each of our areas, each of our businesses, has its own product development challenges, but this is centralized in a single area called the Dexco Design Office.
So we have a comprehensive outlook when we talk about product design. So this is the product development process. This might be the longest process in the company. It integrates all of our areas. So I took this process specifically to show this is at the heart of what we do. And we have two slides here.
One discusses what we do inside the company, and the next, we'll discuss what we do outside the company. When we talk about what we do inside the company, it's a long process. I think many of you have been with us with Revestir . This is one of the last stages where we bring to the market everything that was developed in the last months. So you might have processes with different maturity levels, different challenges, and, Revestir is an important brand.
Many of you have seen it, but our challenge is to make this process more efficient in the company, to provide operational efficiency, to have a more careful look on the processes, taking care of this with great methodologies, testing hypotheses and translating it into prototypes, creating agile processes, and at the end, doing it simultaneously for each business.
Our business has technology, engineering, R&D challenges, which are completely different. But at the end of the day, our consumers don't care about that. They want comprehensive, integrated solutions, where we can solve their pain points at the end of the day. So that's what we're moving towards. When we talk about being in the company, we have this end-to-end journey of what we need to do. A lot is happening, but it's a very extensive process.
The most important thing is when we look at outside the company. When you look at Dexco brands together, we also have major benefits. Each brand has its own process and their own way of absorbing trends, understanding what's going on for consumers, and how that can be translated in-house.
We have also grown and grown more mature in the way we do this. We're much more nimbler and robust, so we translate behavioral or market trends or building trends that translate into each of our brands and how that can generate good results for the company.
This is not something that can be done in a couple of months, of course, but we know that the whole legacy of our brands will get stronger and stronger with an integrated product development process that's increasingly more robust. The major point of this is how we are evolving it and getting closer and closer to our consumers. We've done that... We've been doing that for a long time with very successful best-selling products.
But again, we need to minimize any old mistakes that might take place with making the company nimbler, with listening to our consumers more intensely, not only end consumers, but everyone, influencers, for instance, that have a great role to play. 100% of the products you've seen this year and in the years ahead, we have one target.
100% of these products should be inspired and validated in our research banks, and 80% of these products are validated by our end consumer. Last year alone, we interacted and validated and tested these products with over 6,000 consumers. This year, we're expecting to have an even greater number of tests. So we're expecting our brand legacy to evolve and keep bringing good results to the company. I'll now turn it over to Daniel to talk about our innovation and strategy initiatives. Thank you.
Thank you, Marina. It's great to see you. It's such a nice place to be, right? Better than Avenida Paulista. Let me give you an update of our corporate venture strategy this year. I should remind you that the slide I showed you last year, as Marina explained, if you want to develop a product and also both a Dexco product and solutions, you need all the points of the journey.
Things might be different. Our journey is, of course, the one of civil construction and also interior design, so we look for disruptive opportunities. The idea is to address pains with a very positive impact, albeit in the long run. Some of the investment that Haddad mentioned is part of our theory.
Some of them have already been through their investment cycle. This investment cycle is completed, and we're not expecting to have new investment, of making new investment. Of course, we might have a follow-on. This might be expected, but that's not highly significant. In other words, the way we are, our status is the one we might get the most we want to get the most benefit from.
One of the thesis that Haddad mentioned was the innovative use of our forests, which is one of our most competitive assets worldwide. This is one of Dexco's greatest competitive advantage, and then increasingly greater use of wood in civil constructions for many reasons. First, carbon neutrality, then the structural property or properties of wood, and also the industrialization in this sector.
One of the challenges of the civil construction sector is to reduce building time, making the building site, which is usually really sort of a handicrafts thing. We want to make it an assembly line using less manpower. That's another great challenge in building construction. Younger people no longer want to work on a building site.
They want to be motorcycle couriers working for iFood, for delivering food. So, so this manpower is getting increasingly more expensive. So we have also off-site construction. In other words, how can you make the, How can you make civil construction more industrial? In this thesis, Well, this is our major investment. And why am I saying this? Because there's a lot of synergy between all these elements.
They're also a consumer of inputs, like Urbem, regarding sustainable raw materials, combining three elements which I believe are the best friends of future constructions: wood, steel, and glass. That's what makes Brasil ao Cubo so efficient. We can build so fast, like we see on Instagram, what they're building in China, for instance. As for our third thesis, renovation and decoration.
Well, we have over 350 works now, more than 200 that we had before. So why are we making that investment? There's a differential, there's competitive edge and also high digital capacity of Dexco. Dexco learns from it, will be a better company for both the retail market and for consumers at large. On our next slide, I'm going to show you a number, a figure that represents the power of disruption in our sector.
This is not typical civil construction growth, growth curve, but it shows the four startups together we have invested since 2022. Before we decided to invest on them, we've already had a good relationship with them, with this ecosystem and entrepreneurship, developing products together with them. In about four years, they multiplied their sizes 2.6 times higher, larger than what they had in 2020.
We see works they've already conducted. This is the Cerrado Project, Suzano Cerrado Project. That's a new factory that they built, that Brasil ao Cubo built. This is a vineyard in the region of Farroupilha, in the south of Brazil. The wine is good, but the construction, the building is much better. The construction method was by Noah. They designed the whole project as well as McDonald's on Avenida Paulista.
We're not having that today, but at the beginning of Avenida Paulista, you see that McDonald's building, 100% wood, slabs and columns and everything. This is just a flavor of what we've been doing this year. So we can have a look at some of the initiatives Haddad mentioned. What we learned from these companies?
What, how or what positive impact can we create in addition to growth, of course? We're talking about BRL billions in sales this year, and the trend is for this to double in a very short amount of time. So, especially or in addition to that, there's a lot of learning that makes us increasingly better to follow these trends. Casa Simetria. Casa Simetria is a project, a home project. It's a pilot project. It will be sold. It's 100%, with all the furniture.
When someone buys an apartment, they need to put all the furniture in, and this is already ready-made. This is not funded by Brazil's national housing system. If it's 100% ready, you don't need the finishings, because that would be part of the funding, and the level of competitiveness is really high. This is a pilot. We are having a pilot project with a housing project with 60 houses.
If it works, we'll scale it up for 300 houses. 100% of the home products, fixtures, and everything are Dexco's. And it's not drywall or anything, it's all wood, and even the façade is by with the tiles. So we are really delivering a full solution to consumers. Any idea of the time it takes to build such a house? Anyone? Six months. Well, such a house every four days.
The first house takes 28 days, and that's like an assembly line, so it's delivered with cranes and everything. It's 140 square meters, and it is highly competitive, similar to the competitive level of civil construction, civil construction's traditional level. We cannot make buildings at this cost, but with the tax reform, we're expecting to have or to be close to that. This is a trend that came to stay.
In the district of Vila Madalena in São Paulo, there's another house. It's 100% engineered wood. We have five floors, five slabs, a great project, great design. It's being built with Dexco solutions. 100% Dexco, in addition to wood, all the internal finishings. It's a wonderful architectural design. Then there's the Jericoacoara Hotel, Hard Rock Hotel in the Jericoacoara Beach. It's again, 100% engineered wood.
These are just some examples to give you an idea of the power of this ecosystem, of hundreds of other projects. So you see how this type of innovation may have a good impact on the market, not only next year, but maybe in five or ten years. That would add a lot of value to Dexco and also civil construction at large. I'll now give the floor to Glizia, who will talk about our people strategy.
Good afternoon, everyone. I'd like to share our strategic agenda when you think about human capital and the importance of this, of our projects. We believe that those that connect strategy and execution is a company's culture, a culture that will change our mission into competence or skills. So this is the second season of our cultural change process. The first process phase started in 2015, five years.
We invested in training leaders in technical skills, in more structured communication, but above all, we created or co-created a way of being and doing things. So we worked on management of people and management, management of results. In 2021, after we redesigned our strategy, considering our challenge for the next five years, we chose again in co-creation, involving absolutely everyone to revitalize our way of being and doing things.
So we added three new topics. We're now working in addition to looking at our clients, our consumers. You may have noticed that everyone here mentioned this. All my colleagues mentioned how important, how central consumers are. Number two, how can we invest, further invest in our efficiency, invest by investing in technology, but also the use of data for decision-making purposes? That's the base of our digital transformation.
Finally, we've also renewed our sustainability strategy with ESG, environmental, social, and also governance. So this is better structured today. I'll now zoom in on our diversity, equity, and inclusion. That's one of our journeys. We committed to improving our internal demographics publicly with some social markers, including a target that by 2025, we'll have 35% of our leaders will be women. I can tell you that we are at 31% today, when you consider both Brazil and Colombia, and we have 5% of disabled people.
We are also investing in literacy of our leaders and our employees, and also projects to attract and develop our skills, not only our professionals, our employees, but also the surrounding community, so that we have a Dexco that is increasingly more respectful to diversity and that might support, and also put more innovation to our industrial processes.
I'd also like to turn it over to Antonio, but before I do so, we're not who we want to be, but we are not who we used to be. We have changed. We have a structured plan. We're investing in this, and we're expecting in the next two years to complete our process of innovation. Now, over to you to close the session.
Okay, everyone. So, when you will get materials, right, slides and everything from this presentation. I've always said our company is one that has different businesses. We are a house of brands, of solid, consolidated brands, and also a long-term, solid strategy. One thing I'd like to stress about our strategy, sometimes you say that we are too low profile. That's what people say, but what we do in ESG is extraordinary.
We've always been extraordinary in sustainability and ESG. This is not something we mention so much, but this is very present in the commitments that we've made with the public. We don't have some marketing about it, but we do practice ESG on a daily basis. So what Daniel mentioned about DX Ventures and our investment abroad, sometimes we lose good business here because some of them are not aligned to our ESG strategy, so we decline good opportunities.
Because we don't believe these opportunities when they are not aligned to ESG, and this was not a single case. So we have good or small businesses we invest in with wonderful cases like Brasil ao Cubo, it's just one of such examples. These are people that are building different things and that can generate good results in the long run.
You also see a good expansion process that's well aligned to our commitment, our promises. For instance, our forestry base in Brazil's Northeast. Moments are tough, let's reduce CapEx. Well, in the Northeast, in this particular operation, when you consider it alone, it doesn't consume CapEx. It's self-sustainable. It pays for itself, and we want to be close to 40,000 hectares with this.
If I wanted to set up a wood panel factory, I have about 18-20 thousand hectares, so I could start it now. It doesn't make much sense right now to expand our wood capacity because the market has reached a balance situation. It's balanced, so it doesn't make much sense. But I have this forest and I'm selling wood at very good prices, and I'm building a whole base for the future.
We have strategic projects that are being discussed in association with this forestry base, not necessarily wood panels alone. That's one option, of course, but we have other projects, very interesting projects that are under discussion, and I cannot reveal, I cannot disclose anything, but we are studying them with good partners, good prospects, so we're expecting this forestry base to generate good results.
And one more thing, many people ask me, "Now, Antonio, this is a tiles market, and you're expanding your forestry capacity?" Well, in the Botucatu plant. We have, as you can see, you can talk to Raul about this. He can give you examples and explanations. So we have many new technologies that we can offer, things that will make us stand out in the market.
So the Botucatu plant adds capacity, of course, and when we are to offset this current market situation, with the Botucatu plant, we shut down some old factories in Santa Catarina. That was a temporary shutdown in the Santa Catarina plants, and we will be running in Botucatu alone, with a lower cost and products that are at a very high quality level. When we look at these examples and the strategy that we have, you see it materialized in our business. You can move on.
Throughout 2021 and 2023, we had several structuring initiatives. I'm always referring to this because our vision is more based on the short term, right? We look at it, we see the challenges that we're facing right now, and how it will affect us in a month. I mean, that's how it works.
But as we are managers, we can't forget what we're building on the long term as well. So I see that, Dexco has been very successful in its corporate rebranding, right? No one thinks only about Deca, but Dexco is also a very now well-known brand for wood, and with the contingencies that we have made, as Francisco explained, we're focusing on these strategic projects.
Wood at the top, some debottlenecking, some improvements in mix, projects and productivity in Deca, and I mentioned the Botucatu plant, and we specified, we designed, we engineered the Botucatu plant in 2021, and this is a plant that will take, you know, a couple of years to be implemented at a project. So now we're at the final stage, assembling equipment, and we will probably begin in the second quarter of 2021.
All of the equipment is in the plant. We did it a bit slower in order to have some cost savings, but it's been performing very well. So just as we need to invest in metals and, our D.Coat technology, which is proprietary, we start, we talked to some clients, and, you know, we need to ramp things up. And of course, difficult decisions.
When I talk about structuring decisions, you know, this is what we all, all do every day. So we decided to close the Queimados plant, the Louças Sul plant. Whatever we think will doesn't make sense in our portfolio, or whatever we can do differently, I mean, we have no attachments to. I say that, you know, we have to keep our feelings at home with our family and so on.
We need to look at productivity, at the results, and this is what we do. So these structuring initiatives will take place if it's necessary, and that might continue. This is a part of any administrator's job, right? Reviewing footprints, closing plants. There are some operations that make sense, and some might not, and we need to make quick decisions. It's incredible.
We had a lunch meeting, I think many of you were there, and we went to BTG with many investors, and many people asked about this way of reformulating our own company. I'm always looking towards the future instead of the past, so we have to be brave, we have to encourage young talent.
Yesterday, I had the opportunity of meeting a young manager of ours who was in an event with me, and I was very happy to see a young talent who had great responsibility levels, and, you know, this is continuous work. So this entire process, focusing on these returns, I mean, we can only imagine what it will be like in 2024 and 2025. We will be very strong during that first stage, so we're focusing on these projects.
We don't have any major projects or many major acquisitions on the bench. We don't even have a balance right now to do much. I mean, if we had a very different business, of course, shareholders would be willing to do it, but that's not what we want to do. We really want to optimize our business.
So we're cutting costs right now, as we have never been. Costs, expenses. I even told Danielle, "This cocktail doesn't really match our current moment, right?" But I'm just kidding. We always like to receive you. We're really working on it, reviewing, and this will be permanent. But you'll see next year, I mean, we have projects, and we're really going to reinforce our marketing initiatives with PDVs.
We navigated, we coursed through the pandemic, and, you know, it might seem like we stopped looking at the company, but we really want to reinforce what we're going to do. So it's not just cutting, but spending where we really believe it makes sense. I think that's basically it. Yes, Guilherme. So I'd like to invite Marily Monge from APIMEC to give you, this prize in your hand.
Hi, everyone. Antonio, congratulations for this event, and thank you for this 37-year partnership. I think this is the second oldest in our list of partners servicing, the capital, goods market. So congratulations on this event and for this disclosure for the entire market. We think that this is very important for market analysts. This is, worth a lot.
I'd also like to let you know, you all received in the beginning of this meeting a form. I hope that you can give us that back. This meeting is running for... Excuse me, this meeting is running for this prize, and we'll need your assessment so that this company can compete. So until the end of the month, we're going to elect the best IR professionals. This entire team is dedicated to it. So if you can go to our website and vote for the best IR professionals, and we're also being voted for Analyst of the Year. So congratulations on this wonderful afternoon.
All right, everyone, now we're going to open up for a question and answer session. So if you're online, you can send us your questions. If you're watching us online, you can also do this through the online portal, and we'll summarize questions for the people here.
Hi, everyone, this is Caio Greiner from BTG Pactual. I have a couple of questions. About six months ago, during the Revestir Fair, I asked you a question, and it was a time in which the company was understanding the size of the problem it was facing. I understand that there was a change in management, and you presented an action plan to the market. We discussed optimizing industrial assets, and maybe you were excessively betting on your portfolio to expand your capacity, and there were many industrial adjustments as well. Six months later, we can see that these results were a bit short of people's expectations. I'd like to hear a couple of things from you.
How much of this can we see as the market being weaker than expected? And for the future, how much can we imagine that these initiatives will continue? So are we looking at a J curve, or are we looking at other action plans? If you can tell us, you know, how should we think about this unit for 2024? That would be very interesting to hear. My second question is for Antonio. It's great to see that the company is focused on, you know, solving this crisis, and we see many action plans, but maybe... You know, Haddad mentioned a 2024-2028 plan. Given that reference date, we have thought of Dexco as a-...
A migration from an industrial company to a company that would be closer to the consumer, which was more about diluting wood, but now it seems to be out of balance again. So I'd just like to hear from you, Antonio, what will be the company's direction now? Is there a change in that 2020, 2021, perspective? Is Wood your focus now? Are we expecting another dissolving pulp plant, and how can we think about, Dexco for 2028 to 2030?
Yes. So I'm going to start by answering what we mentioned. We have many good, foundations, and we still believe that. Whenever we test these bases, we get a confirmation that they're really there. Our plants are very good. They will become better with this cycle of investments. It will create, resilience, competitiveness.
We have a very good team that has been recognized by the market. We heard this from our clients, and this is a great foundation. We were worried about reaching this level and finding a team that was, you know, shaken and upset by what has happened. But we see that people are looking to work, to act, so—and that's essential so that we can come out well on the other side. The market is much rougher than what we expected. When we look at our GDP growth, you know, we might be mistaken in thinking that Brazil didn't suffer that much, but we saw a reduced demand earlier this year, and the bigger fall harder.
So you either advance in market share, which generates a spiral, destroying prices, which is very difficult to recover, or you can preserve your market share and adjust it later. We talked about structural changes, which were done at a higher proportion than we expected, because we found good opportunities to do this kind of thing without losing our capacity to respond to the market, but positioning ourselves better.
I'd say that this cycle of adjustments, as I said before, you know, we're going to start 2025 with the right size, with everything we need to compete, and we'll be ready. We won't see anything that wasn't thought of before. Looking at, you know, what affected the market overall and what affected only us, it's hard to separate because, as I said, since we're smaller, we're more exposed.
The market share that we have and that we sustained, especially in Deca, is not enough to generate results for our size. The ceramics scenario was also tough. We had a learning curve that was a bit longer. We had to sell these two items together, and that takes a bit longer, but we're very prepared for it.
We've been recovering market share, but we have paid the cost for it. But what really surprised us was the market. And it's very hard to have a year like this, right, with plants closing, but you have to be direct, assertive, and quick. If you have a company this big, and if you just let months get away from you, then you're going to build up products produced with low...
You know, carrying a high fixed cost, and then you can't sell this later on, otherwise you'll just collect bad results. A part of it was due to that. Some idleness from last year carried some of our product prices, and that affected our margins. The most recent price reset was done recently, and I think we're very well positioned with the premium that the premiums that our brands have and the portfolio that we have. So I'd say that we are at the right level or we'll be at the right price next year.
You mentioned that the market share that you sustain is not enough to generate the results that the company needs. So is the company maybe depending on a market recovery?
No. We reduced a number of job positions, so we are adjusted. We don't depend on market growth next year. If we maintain our market share, and if we recover some of it, then definitely the results will change. Adding to that answer, before I answer your question... Well, we're driving our efforts to the short term in 2024 to have better results without depending on major changes to the market.
As I said, we're not counting on the market growing 20%-30% because we don't believe it will. So if the market is at a normalized level, according to our expectations, or let's consider this, if the market is at the current size or a bit better, I mean, we expect to be better, right?
But let's imagine that it does. We're going to need to improve our results because of what you said, which is our own internal processes. That's very relevant. What can happen is this: if we have a positive surprise from the market, then things can get very interesting, but it's an upside, and if you ask if that's in next year's budget, it is not. I'm counting on the chickens that have already hatched.
If there is a recovery, I mean, thinking about the next year is very interesting. Some class associations say that the market is going to grow 12%. We don't really believe that it will grow that fast, okay? If it does grow that much, wonderful. We'll be prepared for it, and then things can be different, but I can't tell you to count on it. No way.
That would not be responsible. We do think that it will be a slower recovery. As for your other question, stresses the fact that we are saying, well, I'd love to make this presentation, this screen, make it our five-year strategy plan, our five-year view.
Now, in forestry, their forestry plan is a 20-year plan, but our consolidated company plan is always five years ahead, and we usually have an annual revisiting of our plan, and that usually takes place in November, at the end of every November. So it would be, like, the 6th and 7th, but we chose to transfer this, to postpone it to a date that's still to be defined, and that will be March or April next year.
We prefer to close our year the way it is. I'd love to do it, but I cannot. Otherwise, well, you won't find any company that will do this. Otherwise, you will be sending information to your competitors, those that love to steal your market, and that's okay, right? But again, this plan has been adjusted at a very small level.
So the idea of decommoditizing and also to increase the focus on the world of finishings on our portfolio, this remains unchanged. We will still invest intensely the way we planned. And now in wood, things are very clear. We have four operating plants. They're doing great. Henrique Haddad was showing me very interesting figures.
So wood will beat our year's budget. It will. It's really resilient. Wood is great. I invested very good wood scenario, highly sustainable. We're doing great, and our future is also. We're very optimistic about the future. Can this be a pulp business? It can. It accounts for half of what we have in the state of Minas Gerais. Can that be done? Yes, it can. Will it be done? I'm not sure.
Well, the only thing I know is, without a forest, I can't do anything else. As I now have an opportunity I've never had before, and this is to build a forest, and based on the wood that is generated there, it can become self-sustainable. This is something we hadn't had before. We had our forest there, but now it's self-sustainable.
That's unheard of. We have Caetex, that's a company we control, that's—we have 60% stakes. I was having dinner with our partners in São Paulo, and everyone was so excited because the company is now self-sustainable, and this was our goal, so we are adding value to the future. Do we have interesting projects? Of course, we do. We do.
In fact, when you look at the current market, there is no project, short-term project, to build wood panel factories, as you can see, and such a project would take at least three years. And if we had any business, we would be announcing it, but that's not the case. Not at all. So wood, I believe wood will grow.
It has a good growth potential with good results, and also the potential of adding new value, as Haddad has shown us. Now where do we bet on? You need or we need to be much better than we are today. I know, with Deca, for instance. So that's what we're doing. We're working on this, so we have a good potential to grow and to do new business. It's less capital intensive.
So wood and a wood panel factory or a panel, well, that with BRL 1.5 million reals, million reals at least, it's really capital intensive. But that's not what we are interested in. Now, we are ready. We believe we have good brands. Can we build new brands? Of course, we can. We might create new brands, adjust our directions, our...
Anyway, what I think we should understand, our long-term plan, this plan, long-term plan hasn't changed much. It's been adjusted year-over-year, of course, it is. But after the pandemic, for instance, the great question at the end of 2021, it was a wonderful year of EBITDA of BRL 2.2 billion or BRL 2.3 billion, okay? But the greatest question at that time was, and now, what next, right? That was the question everyone was asking.
We're now living this market hangover, if you will. But we need to consider a longer-term perspective, and this is to recover what Raul mentioned. We need to generate much more EBITDA with greater sales figures. That's. And we're expecting this to happen. In other words, we have learned from our mistakes during the pandemic.
We did some market actions there that could be different, but we couldn't even deliver what we were selling. The market was highly demanding. So we're now correcting this. Whatever was in-house was changed, and we are now revisiting our go-to market. We're talking to our clients. We are finding out what needs adjusting. We have a large project to adjust our PDVs and materials. We really want to help our clients.
We're working hard on this, but this strategy is not like... It's completely different. No. Now, it's wood. No, that's not what we're saying. Wood, it's not exactly. It's not so much better than we imagined. No, wood is exactly as we expected. What is not taking place is that the other side is not doing as well as we expected.
This is the point. As for dissolving, well, pulp is like a baby. It's in its infancy. We're working, of course, on it. Prices are resilient. The market is interesting. We're operating, but this is a very long-term project or initiative. Thank you.
Thank you, everyone, for your time. I'm Gabriel Simões, Goldman Sachs. My first question about wood. You mentioned that with this going away from de-commoditization and being closer to your clients. So thinking about standing timber, not thinking about wood, standing timber, it makes—it's new. I didn't understand about levels of utilization at a shorter term.
In a quarter, for instance, when you consider your panel wood, wood panel resumption levels, are you still considering selling wood? If you want to make the most of this opportunities, because this year, this led to very interesting results with interesting margins to the company. So that's my first question. Number two, it's a more general question with a focus, maybe Raul could discuss. This is about non-recurring expenses in the last quarter, this quarter. Can you expand on that? The number was different from what we expected.
When you consider Deca and finishings or tiles, so we saw this turnaround in your business combinations, and over time, your recurring non-recurring expenses are also being seen in your statements, in financial statements. Can you expand on this? What do these expenses really mean, and when should this end? When are you expecting them to end? When are you expecting these businesses to be integrated when you are then expecting the results of these figures? Thank you.
Let me start with a question about selling forests. It's great that we can tackle this. So this discussion is very common, very frequent in our management, in our integrated planning, both in the short and in the long run. One first issue, very important issue, by the way. When it comes to forestry planning-...
Forestry planning is not 100% predictable, of course. So if this asset has variations, it you need to live with them. A while ago, we made a model to this process. That's the use of our optimal capacity at Dexco. I'm not going to show you the formula, of course. I'll just give you an idea of how this works. So we have an internal target.
The idea is to operate our forests within a verticalization range. So part of our forests will belong to us, and the other part will be buying and then selling. In other words, we're having 10 percentage points of variation, very close to the ceiling, to the cap, but we'll be floating. And why is that? Because, as you may notice, in the data that I've shown, we are reducing our average distances.
There will be times when we have an opportunity to sell from a forest that's further away, or I might invest in a closer forest. And that, of course, changes the productivity or improves the productivity of our forest assets. Now, what happened at the beginning of the year, and this might have generated in expectations, we will try to keep this variable as possible, but not likely.
We spent a while, as you know, I mean, these are not online movements. We spent the whole last year. The market was significantly destroyed. It didn't take place overnight, right? So at the beginning of the year, it went up further. It was even more significant, so we found an opportunity. There's this joke: We need to negotiate with Russians because selling forests, in order to sell forests, you need a buyer.
For this to be a good deal, of course. Then the conditions under which we made those sales, these conditions led to a package, and that included lump payments. There's a spot payments, and this is a combination of variables that might take place again, but not every quarter. It's not that likely to happen.
Now, what do you see taking place today? We made that move. We will keep working on it, but it's not that visible because we both sell and buy. So when we make adjustments, that's our net value. When you had a significant period with less forestry, forest consumption, we had good news. Last year, at the end of last year, we were surprised to find out that our productivity level, as we had our inventory, our productivity level was better than expected.
At the end of every year, we have an inventory of our forests to find out how much was our real growth. So we kind of aligned our planets to make that move, so to speak. So we have all the levers in our hands, at hand. Now, the point of this balance, when you exclude these 10 percentage points upward or downward, our idle capacity is a problem.
You might remember, and I'll make a comment at just about the end of Antonio's question or answer, by the way, of the importance of structural change. Those that were here in 2016 and 2017, you might believe we're talking about forests, but the challenge of restructuring, we did everything or even more than Raul is leading now in his, We, we shut down factories, we laid off significantly.
We have this very significant downsizing, but this was deep and painful, but necessary. We sold forests, and inside these forests were reserves that had the names of the company's shareholders. These were not easy solutions or decisions, but we were thinking long term. There's one important problem, or there's one thing that we do at Dexco.
We face the facts, that we solve problems, and we just move on. Now, we will continue operating the same way by selling and buying. This is our DNA. Now, and the way we did it before, this is not expected this year. Maybe at the beginning of next year, we might have additional moves, depending on circumstances, but we're not expecting that.
I think it's interesting, yeah, on your side, those of you who follow our, up on our company, the still, standing timber is not our business. It is an excellent hedge. That's one thing. Now, if our wood panel market, suppose we are operating at 85, maybe even 90%, right, capacity. Now, if we have a market demand operated at 100%, that's what we will do.
What we will not do is just to put pressure in the market. I'm not just finding-- I mean, what do I look at? Well, I never lose my market share point. I'm not thinking about a month when it's lower and the other month it's higher. No, I'm thinking about my installed capacity. I think about my market share mission numbers, and I have what we call capacity share.
So this is something I will maintain. If the market falls down, let's suppose the market falls at 20%, I might go as low as 20%. Okay, I can do that. So I'll take that 20% in wood that I didn't produce, and I'll say, "Let's organize this structuring or structured sales operation." We're not selling, you know, on spot.
I sell to Suzano and I sell. These are large operation. That's when I can operations, I can leverage values, and also making it more solid, making our business more solid. This is what can be done. Now, consider the current market situation. The market, as you know, is interesting now, and this, right now, we're just moving on. So market demand is really solid, and we're expecting it to have, you know, great price opportunities. It's not bad at all.
The market is great. What I'd like to stress is, if you make your calculations, number of planted hectares times annual productivity, you will reach a volume that is generated by a forest. Let's say it's 100. Suppose, this volume matches my installed capacity. It's very close to my installed capacity. It might be at 90% or a little higher, a little lower, but, that's what we want.
That's what we aim for. So when my competition is suffering so much as a result of the wood that they have to buy, I don't need to buy wood. I can even... I mean, if the market falls a little, I can even sell wood, but I don't have forestry surplus to sell, except for my northeast operation. Everything that is produced there, I don't expect-- I don't store, when, or keep it.
When it's time to sell, I just get down that wood, and I sell it. Now, here, things are different. I have no surplus. So if you consider talk to my forestry director and say, "Make a plan for the next 15 years," they say, "Industrial consumption, this amount; production, this amount." I don't have any surplus. I'm not buying wood at any price. Of course not.
And, there's one more thing we do. I've always done that. When someone offers me wood, that at a good distance, I can buy that and sell another wood. But, in net terms, I'm not talking about sending, selling, standing timber. Otherwise, I need to rent new areas. I could set up a project like the one we have in the northeast by renting land and selling wood.
We haven't, have not considered that hypothesis because renting land is more expensive here. So, we haven't done that yet. We're not motivated to do that. Now, one more thing I can tell you, I can assure you that wood prices won't fall in the long term. I know the high deficits we have in the supply market, those that need to buy wood, right?
These are very significant. What their deficits are, they're really significant. If I had all the forests that I sold in the past, I'd be wonderful. We just, you know, being extraordinary, but that's not like we have. So it's not my major business, so you have to know that our forests, our forests are an excellent hedge. And what do pulp and paper companies, what are they seeking?
If you look at Klabin, they invest in forests. Of course, they do. Suzano? Yes, they do. Why? Well, they don't... They do not want to depend on a market because the free market is very small when you consider their demand levels.
Let's say if you need 300 meters of wood, that's a lot of wood, and that's probably, I don't know, a week or two at Suzano. So it's very little for the people who need it, and it's too much. I mean, imagine how many hectares you would need to cut down to have that. So you see that people are rushing to plant forests, and why are companies doing that further and further away? Because they don't have opportunities here.
If you look at land prices, it's very clear. So it's very important to understand that, because when you see quarterly results, the first question people ask is, "Well, didn't you have a sales?" I would love to, but that's not how it works. If you look at what is sold in a year versus the next, it's about flat due to these operations.
But this is hedging. It's a protection mechanism. I think that due to the long-term nature of investing in wood, if I were to pursue land to plant new forests, I might be making a mistake, because I would need to bet on a strong demand at this price level in a number of years. So that's difficult, but not in the northeast. It turns, I'm not buying land, I'm only renting, renting at competitive prices, so it's a good project.
And I see that, you know, we always have to keep in mind that you have to find any industrial process for a forest. A forest for itself, if you have an isolated business, I mean, that can be difficult. You have to find your business. I'll take this opportunity. I think there was some bias in your question. Understanding the number and also the strategic rationale, and I'll let Raul give us some future perspectives and what we might have in the future.
What guides our decisions is that principle of transparency. So to be very direct, you know, we've received awards from different associations. I mean, these are values associated to impairments, so non-cash impairments due to discontinuations and processes. So we mentioned BRL 20 million in impact. The cash effect of that is 1/6. So what would it be?
Basically, contracts that we had in the past. When you discontinue an operation, you would need to honor them. They're still negotiable, but they're basically a part of this BRL 20 million, and the rest is, you know, split into many things, but there's a part in liabilities. So we're talking about non-cash accounting measures, which are associated to impairments.
Most of them are associated to the assets that we are no longer using. So molds, even the case of Queimados, which was a significant part of the decision. The use of that operation from the principle that we already had of readapting our position of assets to other operations makes an important part of that implementation. So some lines and so on, unviable.
Some people might buy it, but it's highly unlikely, because our principle is to reactivate capacity in other places when it's important, when it's significant for us. So there are accounting impacts. So 1.16 is expected in cash. There are consequences in contracts, but this is connected especially to real estate assets. Great, and from the perspective of the business, it's like I said during my presentation, we are wrapping up on this readjustment cycle.
We're adapting our size to the size of the market. More than that, actually, if we have a lot of market growth, we can service it, and if there are any expectations of growth, then we can transfer our assets with impairment. But these are good brands and good equipment that can be transferred, and we can reactivate our capacity ahead. So from the investment and from the deactivation perspective, we are coming to the end of the process. Thank you, everyone.
Any other questions? Mari? So these are the last two questions.
So this is Camila from Bradesco. Thank you for this event and for giving me the time to ask a question. I'll be very quick. In terms of working capital, can we expect more stabilization from now on? Are the inventories at the right level, or will there be a reduction? Are you comfortable with the current financial cycles? That's the first question. Concerning costs, Botucatu... Well, I'll be very efficient. Are there any measures that we can base ourselves on? How much can we expect in normalized costs for next year in the new plant? That's it. Thank you."
Thank you, Camila. So to speak generally about working capital, I think that's an important question. From an aggregate perspective, working capital has two significant variables: the level of service and the quality of our inventory. These are our, our main levers. So for Dexco, we can say that maintaining it at this level has been very healthy for the company.
We've been working in adapting our capacity to ensure that the quality of our inventory, and Marina mentioned our product cycles and so on, so that this inventory in our universe has high quality so that we can react. The indications, according to all the changes that we've made, is that although we're managing this closely, we've seen a positive reaction from clients in terms of service level and adaptation of it according to their needs.
Can it be done better? Yes, but considering the company's size, I mean, we can balance between product lines and so on, but on a structural level, we're always going to look for optimizations. We're at a good level, especially when we look at service quality. Now, let me tell you about Botucatu. Sorry to interrupt, Francisco. Let me just add something before you discuss Botucatu.
I'd just like to take your question to say something. Obviously, when we talk about inventories, we have a lot of inventory in ceramic tiles. So if you separate that, it will go down. We just came back from some downtime, and you don't require a lot of inventory there. In general, in the market, there's no logical reason for any store owner to keep great levels of inventory.
Why? Because the market had a surplus in offer, so many clients are doing that. So we can work with less. We expect to work with a lower inventory in ceramic tiles. Now, in Deca, we're changing our way of working. We're going to operate on selling inventory, and this will not increase our inventory at Deca. It will not.
We are adapting our operations so that we can offer to our clients a much better service. Our goal is to deliver 80% or 90% of our products in a 10 to 15-day horizon. This is what we want to do. We want to have that commitment with our clients. So we're changing in order to do that, but that's not going to change our inventory.
We're at a very optimized level when it comes to wood, and we believe that we can keep it there. That's why Francisco is saying that overall, it's not a bad business to... I always say, if you have a good inventory level, that's in general below 20, it's great.
You can work at that level easily in an industrial level, but if you go too far down, then service levels will be affected, and if you increase too much, then you're being inefficient. So right now, we're a bit inefficient in ceramic tiles. We had the inventory that we produced, and then at some point, we had to stop that line.
Gabriel, who is the founder of Castelatto, said, "Do you know what's great about Castelatto? It doesn't have a furnace." So you walked around, and you saw that they didn't have an inventory, right? If you go there, it's all labeled for the client because it's produced according to demand. So you can't have something like that in ceramic tiles. Of course, you have a furnace. It can shut down, but it can be turned on, and if you turn it off, it will take a month to turn it back on.
Thank you, Antonio. Now, to tell you a bit about Botucatu, this is an important concept. The broad cost of service. Botucatu has an essential factor, which is inseparable from our strategy, which is arriving at the client's end. So there are efficiency gains that we can have, like gas consumption. There's another aspect that's also important that we might not see such an important difference in, because it refers to the mix of products. But what we expect to see gains in is service level and logistics. For many consumers, the levers related to that are associated to the total cost of operating a plant like this.
Now, bringing in every volume that services this, the northeast and the southeast, from the south, going through São Paulo, has, of course, a relevant cost. Antonio has said that they are high volumes. I mean, investments in stocking and so on is, are very complex. So when we talk about evolution, it will probably come in a general package, and it will be significant.
I'm not going to specify how much, but when we disclose our results, we're always going to consider these two aspects: cost, which is carried by the mix, the mix is very relevant, but the general package is a solution delivered to our clients that will be cheaper, more competitive and faster. The reality when you talk about costs is that if you have an FOB sale, you're going to capture all of these gains internally. So like he said, it's difficult to compare.
If you're going to produce it in Botucatu, the individual cost will be much higher. But if you're going to produce a 90 by 90 in the south and in Botucatu and compare the same product, then you're going to get some gains. Gas prices will be better, the productivity of the line will be much better. It's a much better line with a lot more automation. So this is what we already have.
The next part is this: At how much do you arrive for your clients? 60% of the Brazilian market, if you include the Brazilian Midwest, 70% of the market is here in the Brazilian South. So you're going to be much cheaper to arrive to your client. If you deliver for them, you're going to have some gains, or even if you're coming from FOB, your clients will have gains.
They'll be able to generate more and make the business turn. So the gains of servicing the market is, are significant. I don't have it off the top of my head, but if you compare shipping from Criciúma and São Paulo, and Botucatu to São Paulo, it's half of the price or even more than that. So you're comparing 230 kilometers to 800 kilometers, something like that. So that is relevant.
Good afternoon, everyone. Can you hear me? Hello? So thank you for this presentation. This is Arthur Biscuola from Santander Bank. Just a follow-up on costs. You mentioned that this was a strong year, where you had reduced fixed costs for the company, and it makes us believe that the company is more- is better prepared to be more efficient in a complicated scenario for the next years, for 2024, being similar to 2023.
So specifically on ceramics and Deca, how are these investments and automation contributing to your operational efficiency gains in the company in the next years? Do you have any expectations, and what level of profitabi- profitability do you see on the long term on these processes in the Deca division? Thank you.
Hi, Arthur. So there are some cost elements here. So there's a reduction in the fixed cost base, which will continue regardless of the footprint adjustment, as I mentioned. This is already done. We've executed it, and it's prepared for the next years.
There's also an efficiency gain that's connected to automation, which is the industrial process management system. We have invested in that. You see seven points gained in productivity, and that's very good. There's a lot of money, and it does change our competitive capacity here. Automation itself suffers two impacts: the reduction in labor, and this is a completely automated process, so the plant will have a part that can be created by touching a screen twice.
So not only is it handled less, not only are you having fewer quality issues, you're also going to require fewer people. So of course, you can't automate anything. Some things are low volume, and you can do that through... It's more efficient to do it through the traditional method. When we look at high volume, then you have double-digit productivity gains.
Deca profitability will be at the same levels that we had been presenting from 2020 to 2022, so two digits in all units. Thank you.
All right, everyone, so that concludes our Dexco Day. Thank you for being here at Castelatto. We had over 200 people watching us online, and we'd like to invite you to some coffee before you head out. Thank you.