Good morning, and welcome to Klabin's conference call. At this time, all participants are connected in listen-only mode, and afterwards we will have a question and answer session when further instructions will be given. Should you need assistance during the call, please press star zero to reach the operator. In the interest of time, we ask analysts to please limit their questions to two each. As a reminder, this conference is being recorded and broadcast simultaneously via webcast. You may access it at Klabin's Investor Relations website, where the presentation is also available for download. Forward-looking statements that might be made during this conference in relation to Klabin's business outlook, projections, operating and financial targets, and potential growth should be understood as forecasts based on the Company's management expectations in relation to the future of Klabin.
Such expectations are highly dependent on market conditions, on Brazil's overall economic performance, and on the industry and the international market behavior. Therefore, they are subject to change. To join us today, we have Mr. Cristiano Teixeira, CEO. Marcos Ivo, CFO and Investor Relations Officer, and the other officers of the company. Initially, Mr. Teixeira and Mr. Ivo will comment on the company's performance during the Q4 of 2021. After that, all the officers will be available to answer any questions that you might have. Now, I will turn the floor over to Mr. Teixeira.
Welcome, everyone, to Klabin's conference call about the Q4 of 2021 results. As you know, the last quarter of the year is a seasonally strong period in terms of market sales for products offered by Klabin.
The quarter continued to have a global economy still recovering from the economic impact of COVID-19, when all of a sudden there was a new problem with the arrival of the Omicron variant, causing interruptions in the production chains and also supply chains and the lack of labor, besides the operating difficulties of logistic shippings that we have in the quarter. Klabin, with the integrated, diversified, flexible business model, continued to experiment a good demand for Klabin's products, mainly exposed to more resilient markets such as hygiene, food, beverages, and packaging, also based on a very good commercial strategy. Thus, Klabin reached once again a cash generation measured by the EBITDA of BRL 1.9 billion in the quarter, a 70% increase on a year-on-year comparison.
For the whole year of 2020 annual EBITDA record BRL 6.9 billion, reinforcing our trust in the path that we have followed so far. In pulp, the supply and demand balance was reached with different consumption among geographies, a strong demand in Europe, U.S., and Latin America, China, with the domestic market still under pressure by logistics, but still operating with good price movements. Klabin is the only producer in Brazil of the three kinds of pulp and shows flexibility in the sales mix among the regions. In the kraftliner market, the U.S. domestic demand continued to be consistent and ended up reducing the supply of paper to other markets, favoring price increases and stimulating the packaging paper global dynamic.
During the Q4 , Klabin started sales to the market of the newest paper, Eukaliner, already having positive returns from clients about the performance. At the end of the year, MP 27 already reached 70% utilization rate of its production capacity. In packaging, the last quarter showed a deceleration in consumption felt by Klabin and by the market in general. This did not have any impact on the accumulated result, which was very good, obtained in 2021. On February 8, recently, we announced our new step in the cycle of growth in packaging with a notice to the market regarding the increase in the conversion of the corrugated box unit in Horizonte, Ceará, with an investment of BRL 188 million. In coated board, demand continues to be very strong, mainly for liquid packaging paperboard in Brazil and in other regions.
The new machine, the MP 28, is already being built and already represents 14% completion. We highlight the renewal of the participation of Klabin in the Dow Jones Sustainability Index in two categories as well as the Business Leaders Group of the COP26 that occurred in Glasgow. Results show an increase in sales in all the businesses with a reduction in our leverage compared to the previous quarter and record annual adjusted EBITDA, reflecting the efficient allocation of capital of the company, cash generation and value creation for our shareholders. Now I would like to turn the floor over to Marcos Ivo, who will talk about the financials of the Q4 .
Thank you, Cristiano. Good morning, everybody, and thank you for participating in our call.
Once again, we delivered a strong result quarter, confirming once again the strength of Klabin's business model and the predictability of its results. Among the highlights, the three that I would like to mention, net revenue of BRL 4.6 billion, an upswing of 39% year-on-year. Adjusted EBITDA margin 41%, an increase of seven percentage points vis-à-vis the same period in 2020, net of non-recurrent effect. ROIC of 19.5%. Now let's go to page four, where we show you the volume of sales increasing by 1% year-on-year, reaching 950,000 tons in the quarter. This growth was driven by the sales volume produced by Machine 27.
Net revenue went up 39% year-on-year due to the strong demand for Klabin's products and also the price adjustment that we had over the year, and also the exchange rate devaluation in the period. The net revenue growth in all business lines on a year-on-year basis, in spite of some cost pressures, drove adjusted EBITDA that reached BRL 1,884 million in the quarter, a 70% increase vis-à-vis the Q4 of 2020, net of non-recurrent effects. Now going to the next slide number five, I would like to mention that the results of 2021 represent the 12th consecutive increase in Klabin's EBITDA.
The sales volume in the year was 3.6 million tons, 6% higher on a year-on-year comparison, coming from the incremental volume of the corrugated box units that were acquired from International Paper do Brasil and sales of machine number 27. Net revenue went up 38% year-on-year with a positive performance in all segments. Price adjustments that drove the net revenue performance more than offset the higher costs, and the result was a record adjusted EBITDA that reached BRL 6.865 billion with a 46% growth on a year-on-year comparison and expansion of the margin to 42% in 2021. On slide number six, benefiting from the price recovery on an annual comparison as well as the flexible sales mix between and among geographies and the portfolio with the three types of fiber, short, long, and fluff.
The pulp net revenue was BRL 1.5 billion in the quarter, a 56% increase if we compare to the same period in 2020. The pulp production cash cost was BRL 1,609 per ton, a 42% increase on a year-on-year comparison. This increase is explained by the higher participation of fluff in the sales mix, by the hike in the price of both chemicals and fuels, and the inflation in the period. Additionally, as planned and aligned in our previous communications to the market, our notices to the market, third-party wood participation increased because of Puma II.
The EBITDA per ton of pulp sold reached BRL 2,439 in the quarter, a major growth, 87% if we compare to the Q4 of 2020, showing the evolution of profitability of the pulp business, even with a challenging scenario on the cost side. Now on page seven. Net revenue for kraftliner in the quarter was significantly higher, 106% in the annual comparison, thanks to higher sales volume and favorable market conditions, which have driven up the price of this product. Measured by Europe FOEX, the price in dollars per ton was up 41% compared to the same period of 2020. Supply and demand for this product is well-balanced, indicating the steady current market conditions, which favors a sales volume from Machine 27. Turning to page eight.
At the end of December, Klabin's net debt was BRL 20.966 billion higher vis-à-vis the prior quarter. That can be explained by the Brazilian currency depreciation against the dollar, which affects the dollar-denominated debt and by the negative free cash flow in the period. Leverage measured by net debt over EBITDA indicator in dollars went from 3.1x at the end of September to 2.9x in December. It is worth mentioning that this is the same leverage we had when Puma II was announced in April of 2019. On the next slide. Klabin's liquidity remains robust and ended the quarter at BRL 11.2 billion. Liquidity is comprised by BRL 8.4 billion in cash and the remainder in a revolving credit line.
Average debt maturity between 2022 and 2023 period in which Puma II is still under construction is of approximately BRL 1.4 billion a year, a comfortable level for the company. That average tenor by the end of 2021 was of 105 months or around nine years, just like in the prior quarter. Let me remind you that Klabin has contracted and not yet withdrawn credit lines in an amount higher than the CapEx to be disbursed until the conclusion of Puma II as detailed in the release. Turning to page 10. Adjusted free cash flow net of discretionary factors and expansion projects was positive in BRL 1.1 billion in the quarter, driven by our strong EBITDA.
In the last 12 months, adjusted free cash flow was of BRL 3.8 billion, representing a free cash flow yield of 13.2%. Now turning to page 11. As published yesterday in our shareholders notice, the company approved a dividend payment of BRL 377 million to be paid on February 25. In the accrual basis, total amount of dividends distributed to shareholders was BRL 779 million for fiscal year 2021. Klabin's full dividends and interest on equity policy is available in our IR website. Now on slide 12. The first stage of Puma II, which started production in August 30, follows its ramp-up as planned. In 2021, Machine 27 production reached 99,000 tons, confirming our forecast and our last earnings call.
The second stage of the project, which will include a coated board machine, is under construction on schedule, and its start up is planned for the Q2 of 2023. Since the beginning of Puma II, BRL 7.9 billion have been disbursed, and out of those, BRL 759 million in the Q4 of 2021. For 2022, as mentioned in our Klabin Day, we plan to disburse BRL 4.8 billion of CapEx as follows. BRL 2.75 billion for Puma II, BRL 520 million in the special projects and expansion projects as well, including, in addition to what we already had reported, investments in the packaging unit in Horizonte, which was announced just this week, and the remainder in industrial maintenance and forestry CapEx.
On the next page, we highlight our main achievements and recognitions in ESG in this quarter. For the second year in a row, we are part of the Dow Jones Sustainability Index in two categories, world and emerging markets. We had a record number of companies that were in this, and we are in one of the 10% that were assigned this category. We are for the ninth year in a row in B3's ISE. We also celebrated joining CDP's triple-A, Klabin being the first company in Latin America to reach the top rating for climate change, forestry, and water security programs. That is an exclusive group of only 14 companies in the world. We also received a new certification from FSC, an international organization, attesting the sustainability of our pine kraft lignin, a by-product of our forests.
These acknowledgments, among others, are thanks to the ESG integration to our strategy. Now, Cristiano and all the other officers and myself will be available to take your questions in the Q&A.
Thank you very much. Now we will start the Q&A session for analysts and investors. The first question comes from Caio Greiner from BTG Pactual.
Good morning, everybody. I have two questions about your commercial strategy for pulp and geographies. You were talking about the European markets and the U.S. market. Could you share your geographical breakdown? Do you believe that you will be producing more with higher prices in the relevant? How do you see this? China and India, so raising prices. I would like to know about your commercial strategy for the short run. The second question, what about the client feedback about Eukaliner?
Because they are receiving Eukaliner now, and they are using it. What about the evaluations, the assessment on the part of your clients in terms of productivity? Have you had any negative feedback about Eukaliner that could hinder the overall perception of your clients about Eukaliner?
Thank you, Caio. Nico will talk about the commercial strategy for pulp, and then Flávio will talk about the feedback of Eukaliner clients.
Caio, good morning. Thank you for the question. As we usually mention, we have a flexible business model. For the pulp business unit, we work with a percentage of contracted volume in some regions, but we also have a percentage in which we have a flexibility in terms of channeling to the markets where we believe that there is a better profitability.
For 2022, very much because of the situation, especially regarding logistic bottlenecks, regarding containers, we are placing more strength of our sales in more mature market, Europe, United States, and we have a relevant participation in Brazil, just to remind you, but without leaving China because it's still an important market, a growth market, but also thinking about the distribution that may lead us to maximize our results. From the prices viewpoint, China has been recovering since mid last year, as you know. Increases were implemented in January, and we announced an additional for February. People are coming back from the Chinese New Year already, and discussions have already started about sales for February. Nevertheless, we understand that these $50 will be implemented during this month. Regarding Europe and U.S., we made price announcements not only for short fiber, but for the others as well.
In long fiber, $40 increase in Europe for January, and for February, we announced an increase as well. This will start over the next few weeks. For eucalyptus, $13, and discussions start this month. Our expectation is that this price has a very good chance to be implemented. For fluff, price increases were bigger, $50 in January, $50 in February, and we have already announced $110. Discussions in January have already been implemented, February under negotiation, and for March, a very good expectation for the implementation because this market continues to have a very high demand.
Here, Caio. Last year, we produced almost 100,000 tons in. We have a very big advantage. We have a very big conversion in cases, in boxes for food, for protein, for e-commerce.
A major part of Eukaliner produced initially was transformed into boxes, and then we started to export to the main destination. South America is a major destination. Argentina, Chile, besides the main countries in the South of Europe that have already received the material. As we said, confirming the dozens of tests that we carried out for performance, for speed, they have a very good performance because you can dry this very quickly, and you save energy. Also reducing the grammage and the compression allows a reduction of up to 10% in the boxes. The expected quality, that is the printing quality that we already expected, mainly compared to long fiber papers. To a large extent, this was confirmed here in-house, and now we have the confirmation from our clients.
Thank you very much. The next question is from Daniel Sasson, Itaú. Thank you.
Thank you very much for this opportunity, and good morning. My first question is about cash cost. We have seen a mix of third-party wood with a higher weight in your cost mix with a greater need of fibers after starting up Puma II. I would like to know which are your expectations about cash costs for 2022, if we are still going to see this cash cost at stoppage going up in the next quarters, or if this is going to be stable. My second question
Is that we have seen in this quarter a difference between production and sales of papers. If we put together paper and conversion of a little over 60,000 tons, and I would say it has to do with the lead time with the production of paper until you get that to your clients. Is that right? Can we find a sales catch-up in the next quarters, even going over production or do you have another explanation for that increase in the inventory level? Thank you.
Thank you, Sasson. Marcos Ivo is going to comment on the wood cash cost. Either me or him or someone else can talk about sales from now on and the difference in sales production basically, because of logistics impact.
That should get normal because of the impact quarter-over-quarter or because the problem will end and we are going to ship whatever is in the chain. This is a problem that is not related to the product sale, but it has more to do with the logistics chain. Regarding cash cost, now turning to Marcos.
I just would like to comment something before. It's important because that has to do with our growth structure, how we intended the company to grow. This first cycle for Puma II, we got wood from third parties, and during that period that we used this wood that is far from us. During this period of time, we are buying land that is closer to Klabin, and we started the forestry process.
In the second cycle of that wood, we believe that this average distance will come down, and we'll go back to a verticalization levels with own wood. That will be happening at the same time as we reduce distance to where we get the wood from. In terms of structure, the Klabin's cost will come down in the second cycle. Now let's be more specific. Well, just adding to what Cristiano said, it's still on inventory. This is not market, this is logistics. This variation that we see in each quarter has to do with our schedule in terms of downtime. Over the year, when you see the full year or in twelve months, you will see Klabin selling what it produces, as it has been in our history in the past few years.
About cost, Cristiano already explained the concept, but I would like to bring another topic. We are working on this topic with a lot of transparency with the financial market. Since we announced the Puma II project in April 2019, we presented a deep explanation about wood. It is in some of our presentations and some documents. It's on our website and even last May, when we migrated the machine to coated board machine. That means that for the first six years, considering Puma II is an eucalyptus project. For the first six years, it will have 30% third party wood, and that has an impact in the wood price. How do we see that in the future?
We had the first step now in 2021 when we started the production in the Machine 27. Now we are going to have another step in 2022. The magnitude is a little lower than what you see when you look at the line of cash cost of pulp and where we have more details, and when you consider the fibers line. When you compare the cost of fibers in the Q4 of 2021 to the Q4 of 2020, what we expect in terms of increase for 2022 is a little bit less than that magnitude. That will then stabilize, and it is going to come down starting 2025, 2026, when Klabin will be switching third-party wood by its own wood, which was planted in the acquired land.
So far, we are moving on exactly as planned. Now, about the other topics, the other items in the production cash cost, we do have inflation all over the world, which has affected commodities prices. This has had a huge impact in chemicals and fuels last year, and this is also reflected in our cost in the last quarter, in the Q4 . The behavior in 2022 will be dependent on the price of these commodities. We are moving on with a lot of focus in the factories working in productivity and optimization for consumption, and we will move on with this agenda.
Excellent. Great. Thank you very much.
Thiago Lofiego from Bradesco BBI.
Good morning, everybody. I have two questions. The first one has to do with the price of kraftliner that continues to go up in 2022. Do you believe you still have room for price increases in order to recover the premium that you usually have vis-a-vis the international market? The second question, still regarding kraft. What about your strategy and the integration for kraft this year, given all these factors, the global kraft market, which is very strong and in Brazil, a weaker economic activity, but you do have very good market share. I would like to know how you're thinking about these two topics.
Thank you, Thiago. Flávio will be talking about the price, and I will start to answer the second question, and then I will turn to Flávio.
Klabin in its fundamentals and about which we talk to you all the time, is a company that seeks the integration of its papers in a percentage that might keep stability of results. This means that we can arbitrate between the domestic market, converting papers that could be exported or exporting the papers as the margin is higher. The way we deal with the situation is based on the fact that we are fully integrated company, and we can focus on the export market. In the last few years, based on the investments made, this has been bringing about a lot of benefits because now we have a higher liner capacity, and we can start opening our partnerships with global partners. We were limited because of the availability of paper. Now we can have partnerships with big box producers in, mainly in Europe, and long-term contracts.
Klabin can be faithful to the international market and clients of corrugated boxes and with a persistent relationship with these clients, especially the ones that we have a contract. Of course, we always do that and mainly maintaining a level of partnership with large consumers of paper, mainly box manufacturers abroad, with the same loyalty that we have with the clients here in Brazil. You have to arbitrate between these two worlds, and you have to respect first, all the contracts that we have, and secondly, we have to respect our margins. The market volume that is not under contract and in which there is no loyalty, that is to say, because the market is not looking for this kind of loyalty with us or because the market is growing. For these marginal markets, we will always be seeking profitability.
Of course, giving priority to our contract, our large box clients, and now all over the world, the consumers of paper. Cristiano has already touched some important points. The natural position of the market is some premium for the domestic market, and we have the new announcements, mainly from U.S. manufacturers of kraft. There was a degree of concern in terms of new capacity coming on board in the U.S. and in Europe. This was balanced by the demand that we see, a spectacular demand for container board and kraft liner, especially the export market is very well balanced. We continue with our strategy of maximizing our profitability, and we follow the prices of the international market, and the domestic market follows these moves with some premium over the year. This is not going to happen immediately, but over the year this is what we will be seeing.
Of course, here we have the contract, and as Cristiano said, we sell important volumes by means of contract, both to the domestic and the export market and whatever is outside the contract, so we have a higher degree of price flexibility.
Very clear. Thank you very much.
Rafael Barcellos from Santander.
Good morning. Thank you for the question and congratulations for your results. I would like to talk about corrugated boxes. I apologize for the long question. In 2020 and 2021, there was a growth in the GDP. What can we expect for demand in 2022? Do you believe it will be greater? For corrugated boxes, I would like to know about the competitive environment.
We have lost the sound. Could you start your second question again?
Well, the first question was about demand, but still about corrugated boxes.
I would like to hear from you about the competitive environment. Looking at the Q4 , it seems to me that you have lost a little bit of market share, so I would like to know about competition, mainly with the new project in Ceará. How do you see the evolution of market share of Klabin for the next few years? The other question is about kraftliner. Prices have been going up quite a lot, as you said yourself, and with the drop of exports from the U.S., but now we start to see exports stabilizing and the coming on board of capacity from Klabin. Do you see any risk of correction in terms of kraftliner?
Rafael, as Flávio said, and of course, he's going to add to what I say, I will start by the second one, and then Douglas Dalmasi will talk about the demand for corrugated boxes in Brazil. About your second question, we get into very complex macroeconomic questions and I think you will be more capable of elaborating on that than we. Anyway, we see inflation in many countries in the world with a big impact. Today, we had the number of the U.S. inflation being published with the interest rates going up five times per year. The U.S. are trying to reduce inflation or balance or offset, and the economic impact will be felt one way or another, and the effect will be felt. There are other complex macroeconomic issues. For instance, China in terms of exports for logistical limitations.
Not to mention the certainty that nobody has that there will be no new variant of COVID. We are living in a very complex world, and every single year, I feel that this year is more complex than the previous one. On the macroeconomic side, it is very difficult to tell you exactly what will be the behavior of exports from the U.S., for instance, because it involves too many factors. Nevertheless, we are very confident about the fundamentals of our product. Paper, mainly in e-commerce, has already proven to be a very big advantage, a very big facility, and because of environmental reasons, it is gaining space, so to say, for primary or secondary packaging.
I have no doubt whatsoever about the transition of traditional retail to e-commerce with two-digit growth and major economists in the world, or major economies in the world getting to a more mature level in e-commerce and gaining momentum in Brazil as well. In packaging paper and corrugated boxes, that can be lighter and therefore reducing the weight for transportation and also being more sustainable. This is already a reality. This is a global trend, and this is not going to change. In the short run, there is a macro economy playing. Now I would like Douglas to add about the demand in Brazil.
Thank you for the question, Rafael. We cannot complain about demand for corrugated boxes right now. We still see very good levels of demand and of course, going hand in hand with the Brazilian economy.
Of course, when we compare this to the second half of 2020 and the first half of 2021 that were impacted by high consumption in the pandemic, the scenario becomes more clear. The level is still very good. Regarding our participation, whenever we look at the margins and in order to continue to grow our margins, in the last quarter of 2021, we did not consider the market share isolatedly, and there was a slight loss, as you said yourself. For the remainder of the year, we expect to continue to follow the performance of the economy, and we believe this is going to be a good year vis-a-vis last year, but always prioritizing our margins and with the best possible distribution of our volumes.
Tapping into the advantage that we have of having an integrated business, our contacts and our clients. Thank you, Douglas.
Just adding, Rafael, corrugated boxes in Brazil were 3.6 million tons. It's already four million tons. four million tons of corrugated boxes in Brazil. We have already seen a substantial growth and the announcements of new capacity, in this case, mainly by Klabin. We have just announced that regarding the Northeast. Still looking at the 2021 demand comparing to our expectation for 2022, at least here in the company, well, we are talking about four million tons of corrugated box. If you maintain this will already be strong. We have the expectation, and we have to be prepared to face any scenario whatsoever.
To make a long story short, up to the end of the year, we will have an additional BRL 90 billion in the Renda Família, the family income from the government, an additional 10 million that because of the elections and investments expected around BRL 200 billion. Many things will be going on during the year. There could be additional income generation or increase in the number of jobs, and it is based on a basis of four million tons of corrugated boxes. We are very careful with these evaluations, but a company such as ours has to be prepared should this all happen.
Very clear. Thank you.
Our next question will come from the English question. English Roman is going to be interpreted simultaneously. It's from Carlos De Alba, Morgan Stanley.
Yeah. Bom dia, everyone. Thank you for taking the call. A couple of questions I have. A lot has been discussed already in the market, but in terms of expenses, we also noticed a quite important increase, certainly quarter-on-quarter but also year-on-year in SG&A, more on the selling expenses than on the general and administrative expenses. Could you comment on what drove that and to what extent this is going to be sustainable, and how you see the new level of SG&A expenses going forward?
On the balance sheet, we discussed the inventory increase in the quarter, but also there was a quite important increase, at least from a cash flow perspective, suppliers represented almost BRL 335 million of cash outflows. You know, the end of the year balance in your balance sheet wasn't particularly higher than the last quarter, but the impact on cash flow generation this quarter was important. I don't know if you could share some comments there and highlights that help us to understand what happened.
Thank you for your question, Carlos. We are going to answer the first part of the question about the SG&A, but I would like to ask you to repeat the question about the balance sheet in English because we could not understand the translation, please.
Sure. Definitely.
Costs and expenses, Marcos Ivo will start the question, and then we'll go back and ask you again about the balance sheet.
Okay, Carlos, about SG&A, specifically about G&A, because sales expenses regarding net revenue of the company have come down. Talking about G&A, when we had an increase of 8% in the Q4 of 2021, basically the same period of prior year, and 23% year-on-year, we have two different impacts. We have inflation in Brazil, which last year was around 10%, and we also had an impact of the plants that we acquired from International Paper. Remember, we just took over this operation at the end of last year, and this year we have the full year of the companies with us. Finally, in the Q4 of the year, we did have consulting services for specific projects.
Now looking at 2022, we expect that we will keep up with inflation or we have no new price increases because we will not have increase in costs as we had last year. The expectation that we have for this year is to follow up inflation.
Just adding to that, Marcos, there was a productivity gain in the company with a margin of 42% in this last quarter when compared to the last quarter of 2020. I will then ask you to please, at your second part of the question, you repeat that.
Yeah, sure.
If you want to ask that in English, that's fine.
All right. Thank you very much. The question is regarding suppliers.
Please follow.
Right. Can you hear me? Hello?
Please proceed.
All right. Thank you very much. Yeah, the question on the balance sheet, I mean, it's balance sheet and cash flow, and it has to do with suppliers. In the Q4 , suppliers represented almost BRL 335 million reduction in cash flow. It was quite important. I wonder if there is any comment that you may have there. If you can attribute this to a change in the terms with your suppliers or it's just, you know, some volatility around the transactions with them. I just wanted to understand because the working capital was much more negative than what we expected for the quarter.
Okay, Carlos, thank you for your question. Marcos Ivo will comment.
Now, talking about the working capital, Klabin had an important reduction of working capital in 2020 and 2021. It's important to remember that in these last two years, Klabin net revenue increased a lot. Even then, at the end, we had a reduction in the absolute amount of the working capital. That means that in terms of percentage of net revenue, working capital vis-à-vis net revenue, that revenue was even stronger. First, I needed to highlight that. Second, it is only natural that we have variations in the different quarters. We always look at things in the mid and long terms.
In the mid and the long terms, that structure reduction that we had in the working capital in the last two years, we expected to maintain that. That is, we'll be working to maintain the working capital of Klabin regarding our net revenue at the same level that we have now after this reduction. Specifically about the suppliers account, where we had a reduction at the end of the year, here we have a combination of a seasonal effect, and also a movement of Puma to suppliers. Puma to suppliers do not have normalized amounts or values over the year. So in different quarters, we might have variations in this account related to payment of these suppliers.
All right. Thank you very much.
Thank you very much. Now, Caio Ribeiro from Bank of America.
Good morning, everybody. Thank you for the opportunity. Could you talk about the packaging paper prices environment, mainly in the domestic market, because the OCC prices have dropped. Is this causing any pressure on the average prices charged by the producers, and there is a competitor who is already slashing prices? How do you see the environment regarding margin, especially in China and in Europe? Do you believe that the levels are good, or do you expect some increases on the part of paper producers in the next few months?
Thank you, Caio. I will start by the second part. This seems to be the routine today. Then Flávio will take over, and he will talk about the price of paper in the domestic market.
The margin from producers, we are following all the results of the sector, and it does not seem to me that there is comfort in the Northern Hemisphere vis-à-vis margins. I believe that the Northern Hemisphere for the non-integrated producers of pulp continues to be high in terms of transferring prices. Structurally, we see the Northern Hemisphere with difficulty in some cases in terms of transferring these costs to prices, mainly in printing and writing paper. In packaging paper, there has been a transfer to prices all over the world, and the producers were able to recover their margins, mainly those who have a more competitive cash cost. They are more strict in terms of margins in the Northern Hemisphere. In the Southern Hemisphere, we have a very competitive cash cost here at Klabin, and our ROIC is better.
It continues to be difficult for those who do not have a very competitive cash cost.
Caio, good morning. First of all, the price. The prices had a very different behavior from what is normal and what Klabin exports in virgin fiber. This is something very unique. I have been in this industry for so many years, and this is unprecedented. What happened more recently was a natural reorganization. If you look at the average for 10 years or five years, it favors the virgin fiber in the domestic market, which is only natural. Klabin sees these price movements based on the supply of OCC, as you said yourself, in the medium and the long run. From the viewpoint of the supply in Europe, in the United States, and Southeast Asia, in Brazil, there is a shortage of OCC, and this is structural.
The new capacities coming on board have brought a degree of balance, including the export that usually went to China. We see a rebalancing in this supply in some destinations, and the same happens in Brazil. In terms of Klabin, OCC will be slightly higher than where it is today, and this reorganizes the prices of paper that are based on OCC. Klabin continues to be very flexible, and virgin fiber is the one that we export the most. Based on this dynamic, there is no material impact on our business. In the world, OCC gives signs of $150, and in China, $400 already. If you look at the longer time frame, we have this imbalance that is being reduced.
That was this change of China increasing their OCC collection and reducing U.S. export and this remaining in the U.S. There is a remodeling of the consumption of OCC in the world, but it is around $150 and $400 in China, which is still favorable regarding the paper market.
Very clear. Thank you very much.
Our next question is from Marcio Farid, Goldman Sachs.
Good morning, everyone. Thank you for this opportunity. I have a few follow-ups. I don't know if Nico is in the call, but Nico, if you can comment, please, on the Chinese market. We have seen an interesting price recovery and the market is still strong. Which are the main drivers for this favorable moment, and what are your expectations for the short and medium, and medium and long runs? Also going back to Caio's question earlier, what can we think about the paper producers' margins in China, especially after this pulp price increase we are following of prices for paper, for printing paper, coated board and sanitary papers. This is lower than the fiber inflation that we have been seeing.
How are paper producers reacting to that in China? Finally, a positive surprise, and the result was the realization of prices. I think that was mainly in the long fiber and maybe fluff. If you can comment also on the fluff outlook and if we still have room for more positive surprises over the year.
Thank you very much, Farid. Yes, Nico is here, and he will take your questions.
Hello, Marcio. Good morning. Thank you for your questions. About China, considering the current inventory levels and the change, whether by logistics bottlenecks or by annual downtime, maintenance downtime or strikes in Finland that affect not only long fiber, but also short fiber, among also other problems, climatic problems that ended up interrupting production. Considering the current scenario, when we compare that to 2020, when we started foreseeing a weaker market in China, that's 2021, sorry. For 2022, we see that price momentum a little bit more on the positive side. The logistics bottlenecks will keep on limiting these volumes to China.
We know that the ports are full because of COVID specifically, and several producers, and Klabin as well, are redirecting products and volumes to other markets, considering that we still have a high price difference between Europe, United States and also Brazil and China. We see that moment in China as a very positive one, and we understand that the price implementation now in February will happen smoothly. For the next months, we still foresee a very positive market. The scenario for the year, we can already tell you that this is better than what we already had. Considering all these exogenous factors that are impacting the market. On the other hand, we can understand that we have room for a Q2 that will also be very positive.
About our sales mix and our price differentials, we already had an assumption that the fluff market would grow in 2022 in comparison to other fibers, because there is no capacity increase for the market here. If you look at the prices and the price forecasts of consulting services, we already saw a price gap that was relevant between fluff and the other fibers, such as short and long fibers and bales. That allowed us to use Machine 26 of Puma, and I mentioned that in Klabin Day. We are now operating at limit mix of this machine. We're already producing 65%-70% of fluff volume, and the remainder in long fiber. The domestic market and long fiber is very relevant and basically we are the single supplier here for that. This mix perspective won't change. The price perspective is positive.
In the beginning of the call, I mentioned we had a price increase announcement in January that was already implemented. We announced $50 more for February. We believe this is going to be implemented and $110 price increase starting in March. When the time comes we will understand if this is going to be possible to be implemented or not.
Also, Nico, I would like to take this question and comment on something that we have been discussing in Klabin for many years, which is flexibility. Sometimes you'll understand it and sometimes don't. We always try to make it clear, and we want to make clear why we make the decisions we make, especially regarding CapEx. When we choose to have two dryers, fibers diversified basket, fibers, short fiber, long fiber.
Now we have three different products in the same site. Can you comment more, please, the price difference between the pulps now?
Okay, very nice, Cristiano.
Yes, that's right. The business model implemented at Klabin, which is a diversified one, allows us to gain an important share with some clients because we are the only supplier with all types of fibers in the same basket. In terms of prices, we have a price differential of over $250 in the net price between fluff and short fiber, for instance. For a long fiber, as I mentioned, we can have a relevant share here in Brazil and focus in segments that is not only in paper, but also specialty papers. This price differential is around $150-$200 per ton. Thank you very much.
Thank you very much, Nico and Chris. If you allow me, considering Cristiano's comment, and you mentioned a high premium, $250 in the average price of fluff against short fiber. Can you remind us what is the cost difference so that we can understand how you tap into margin in the fibers with less premium? Thank you and good luck in the Q2 .
Hello, Farid. Considering what we can talk about is very good. It has a great advantage there.
Okay, great. Thank you.
We received a question from the webcast platform from André from Shitzer.
Good morning. You recently announced the Horizonte project in Ceará, an organic expansion differently from the IP acquisition in Brazil. Do you see opportunities in corrugated boxes for M&As or will you continue with organic projects?
Thank you for the question. It has to do with opportunities and circumstances. Nevertheless, what we can tell you is that the focus is the increase in integration and growth. In this specific state, with the opportunity that we identified, organic growth is the best solution, undoubtedly. Also because of the supply of paper, because Klabin is the best solution for the supply of paper for this region. It makes a lot of sense to have this in this region. This will be considered, and every single state will be considered individually.
It's a case-by-case analysis and the M&A opportunities that might arise. Well, the best way to answer your question is by looking at our dynamics in the last years. We acquired three companies, and we were very successful in the three acquisitions that we made. Also we had major projects in corrugated boxes, such as was the case in Jundiaí around 2014. The same is valid for north, the north and the northeast. We are a growth company and we are dynamic, we are flexible, we are ready for M&As, and we're also ready for organic growth. Adding to all that, at the end of the day, this is a company that will continue to grow the growth that we have been delivering in the last 10 years. Thank you very much.
As there are no more questions, I would like to give the floor back to Mr. Cristiano Teixeira for his closing remarks.
Thank you very much. I would like to mention how we see the Q3 of 2022 at Klabin. The Q3 seasonally is more moderate and the domestic market is slower and the world trade feels the impact of the Chinese New Year recess. At Klabin, we will continue to grow with results as consistent as the ones that we have delivered in the previous quarters. In relation to sustainability, I reiterate our full commitment with the best practices in the private sector in the world. I highlight the engagement of our whole specialist team at Klabin, supporting organizations both in Brazil and in the world regarding climate change global agenda.
Klabin continues steadfast in its vision of long-term value generation and growth, with focus on people, innovation and sustainable development. Thank you very much for your participation and we hope to see you during our next meeting. Klabin S.A. conference call has come to an end. Thank you very much for participating, and we wish you all a very good afternoon.