Good day. Welcome to Klabin's conference call. At this time, all participants are in listen only mode. Later, we will conduct a question and answer session when instructions to participate will be provided. We kindly ask that for the benefit of time, each analyst asks a maximum of two questions. Should you require assistance during the call, please dial star zero. As a reminder, this conference call is being recorded and being broadcast simultaneously via webcast, which can be accessed through Klabin's investor relations website, where the presentation is available. Forward-looking statements eventually made during this conference call in connection with Klabin's business outlook, projections, operating and financial targets, and potential growth should be understood as merely forecasts based on the company's management expectations in relation to the fut ure of Klabin.
Such expectations are highly dependent on market conditions, on Brazil's overall economic performance, and on the industry and international market behavior, and therefore are subject to change. Present with us today are Mr. Cristiano Teixeira, CEO, Marcos Ivo, Chief Financial Officer, and Investor Relations Officer, as well as company officers. Initially, Mr. Teixeira and Mr. Ivo will comment on the company's performance during the first quarter of 2023. After that, the officers will be available to answer any questions that you may have. Now I will turn the call over to Klabin's CEO. Mr. Teixeira, go ahead.
Welcome everyone to Klabin's conference call to discuss the first quarter of 2023 earnings results.
Facing a challenging market scenario with macroeconomic and geopolitical uncertainties that led to loss of profitability in the market due to falling product prices and cost inflation for producers in the pulp and paper sector, Klabin achieved EBITDA of BRL 1.9 billion, up 13% compared to the same quarter last year, and 2% compared to the fourth quarter of 2022, which reinforces our dynamism to face the most different scenarios in Brazil and globally. In the pulp business, Klabin differential in having own fiber afterward proved once again to be strategic and efficient in diversifying our product portfolio. Linked to that, Klabin privileges long-term contract and diversification of the geographic mix, offering different solutions such as pulp, long, and short fiber. This strategic positioning ensured solid margins and resilience in the business result.
In the context of a weakened global market, our packaging and containerboard paper businesses, such as kraftliner, recycled paper, and Sack Kraft, brought security and stability to the results, showing the importance of our integrated business model. Model was reinforced with the start-up of the new corrugator in Horizonte state of Ceará, in addition to a new line of bags in Lages state of Santa Catarina. In the consumer division, the consolidation of sales of Paper Machine 28 through long-term contracts and the expansion of the portfolio for white coated board brings good expectations for a market that remained heated in the first quarter, especially in the beverage segment such as beer, milk, and liquid food, which translated into improved profitability in the quarter. I now turn the floor to Marcos Ivo, who will bring the financial details about the first quarter.
Thank you, Cristiano. Good morning, everyone, and thank you for joining our conference call. In the first quarter of 2023, we delivered consistent results, reaffirming the strength of Klabin's business model. Among the highlights of the period, I would like to mention three. Net revenue of BRL 4.8 billion in that quarter, up 9% year-on-year. Adjusted EBITDA of BRL 1.9 billion, an increase of 13% over Q1 2022. Return on capital invested, measured by ROIC of 19.4% in the last 12 months. On page 4, sales volume in the quarter was down 2% compared to the same quarter of 2022. This dropped and mainly from lower demand for kraftliner in the foreign market. Net revenue in the period was BRL 4.8 billion, up 9% year-on-year.
This increase is explained by price adjustments implemented over the past quarters, which more than offset the reduction in sales volume and the appreciation of the Brazilian currency against the dollar. With this, adjusted EBITDA totaled BRL 1,942 million benefiting from the growth in net revenue, which more than offset the increase in cash costs.
Please turn to slide five. Net revenue for the pulp business was BRL 1.7 billion in Q1 2023. The highlight in the period was once again the flexible sales mix between geographies and the portfolio, with three types of fiber: short fiber, hardwood, long fiber, softwood, and fluff, which positively impacted the average price in the period and net revenue. The cash cost of pulp production was BRL 1,355 per ton in the quarter. Same level quarter-over-quarter. Leveraged by net revenue, the pulp segment's adjusted EBITDA reached BRL 945 million in the quarter. On page six, in the coated board segment, which continues with healthy demand, production volume was 172,000 tons in the quarter.
Net revenue per ton or net price per ton of coated board was BRL 5,621 million in Q1 2023, up 14% and 8% year-on-year and quarter-on-quarter respectively. Driven by price adjustment, net revenue of coated boards reached BRL 965 million in Q1 2023, an increase of 11% year-on-year. Moving on to slide 7. Adjusted free cash flow, which disregards discretionary factors and expansion projects, was positive by BRL 872 million in the quarter. In the last 12 months, adjusted free cash flow was BRL 4.6 billion, representing a free cash flow yield of 20.6%. Moving on to page 8. At the end of March, Klabin's net debt was BRL 21 billion, stable when compared to December 2022.
Leverage, measured by net debt over the EBITDA ratio in dollars, ended the quarter at 2.6x, stable in relation to the previous quarter, at close to the minimum level of the company's financial indebtedness policy. Moving on to the next slide. Klabin's liquidity remains robust and ended the quarter at BRL 9.6 billion. This liquidity is made up of BRL 7.1 billion in cash and the rest in a revolving credit facility. Company's cash position is sufficient to amortize the debt that matures in the next 47 months. The average maturity of the debt at the end of March 2023 was 105 months, equivalent to almost nine years.
Company has contracted financing that has not yet been drawn down in an amount superior to the CapEx that will still be disbursed until the completion of the Puma II Project, as detailed in our earnings release. Moving on to slide 10. According to the notice to shareholders published yesterday, Klabin approved the payment of dividends amounting to BRL 389 million to be paid on May 16. In an accrual basis, the dividends distributed to shareholders in the last 12 months totaled BRL 1.671 billion. This amount represents a dividend yield of 7.8%, a clear evidence of Klabin's ability to combine growth, payment of dividends, and at the same time maintaining discipline in its capital structure.
In the last page, the first phase of the Puma II Project, MP27, continues its learning curve, having reached production of 369,000 tons in the last 12 months. The second phase of the project, which will include a coated board machine, is under construction on schedule, having reached 72% of physical execution in a measurement performed on April 23rd, and has its production startup planned for June. Since the beginning of the project, BRL 11.6 billion have been disbursed, of which BRL 521 billion in the first quarter of 2023. Now, Cristiano, the other officers and I are here for the Q&A session.
Thank you. We will now begin the Q&A session for analysts and investors. If you want to ask a question, please dial star one.
If you want to remove your question from the queue, please dial star two. Our first question comes from . Go ahead, sir.
Good morning. Thank you for taking my questions. I guess my first question would be to Cristiano. I just want to understand your mid to long-term vision for the company. We have seen a more severe cycle given that initial expectations with kraftliner and pulp faced adjustments in recent months. I'd like to understand how this cycle and recent pressure can affect your investment decisions and capital allocation, mainly. My second question is about kraftliner. In your release.
Well, the other segments are performing well. I'm going to focus on understanding one of the most sensitive parts, which is kraftliner. In your release, you mentioned some market stoppages in kraftliner. It would be interesting if you could give us more detail on this. We would like to understand the stoppage, what the conditions are, and if market conditions remain unchanged in Q2. We know that Klabin has a flexibility between kraftliner and conversion. Depending on a drop in demand of kraftliner, conversion will not be able to offset that. I'd like to understand how you're planning this mix looking forward. Thank you very much.
Thank you, Rafael. I'll start with the second part of your question. I have Fabio and Douglas with me, and if they want to add anything, they may do so. You see, these market stoppages are normal.
They happen all over the world. You probably followed this in conference calls by other companies. Basically, this decision is made given a vision of marginal prices. When you have spot prices out of contract declining, you try to face that with your variable costs that you can somehow manage. For example, third party wood. It's a combination. When you have a combination of out of contract declining prices with raw material, in the case of Klabin, wood from third parties, we can only we can offset a higher price of wood that has to travel longer distance with a lower price. Of course, it's a calculation of profitability. There's a dilution of fixed cost and the integration with our boxes unit.
We manage both in the integration and again, convert more or less recycled paper depending on the production cost, depending on the price of OCCs, or I can convert more or less paper liner depending on the spot prices that I mentioned. That is very common. I mean, of course, I'm not gonna say that this is normal because we only do this in difficult and challenging market situations as is the case now. It is a tool in which we see great value. In practice, it is Klabin's flexibility. It is our integrated business model, having our packaging unit to be able to convert part of the paper at a higher transfer price than the marginal price, and being able to manage part of production with this reduction.
In a relationship with more distant wood price, this preserves the profitability, our main focus is to preserve and protect our profitability. Now, focusing on the first part of your question and go straight to the point, capital allocation. In a market that is uncertain with high interest rates, inflation pressures because we haven't got to the end of this attempt to fight inflation globally. In other words, even yesterday we saw an increase of the 10-year interest rates in the United States. This trend continues in Brazil and globally. In this context of fiscal policies, still upward trend of inflation, increased interest rates to control for inflation, this has led to a loss of income in Brazil and in the world. This has led to a deterioration of prices. This in turn leads companies to seek for efficiency, as much efficiency as possible.
This is the time when difficulties show up in the results of companies for companies that have less flexibility. Any signaling of capital allocation for big transformational investments is at this point postponed. Klabin has nothing to propose and submit to a board of directors regarding investments at this point.
Excellent. Thank you very much, Cristiano.
Our next question comes from Thiago Lofiego with Bradesco BBI.
Hello, good morning, everyone. I have two questions. First has to do with the cost dynamics of Klabin as a whole. You have been talking about an increase in the cost per ton per year of 12%-13% increase. I would like to see if you see any downside, what your guidance is. Is there any potential for gains here? My second question is addressing Nicolini. Nicolini, how do you see the pulp market in China more specifically?
If you could speak as a whole about pulp, in China, we understand that inventories remain low in terms of paper players, even at a lower price range, we see a marginally better demand. As far as we understand, the volumes are not super strong in the general market. I'd like to get your sense of this, what you have seen in the market, if you think that there is more room for correction or have we achieved the bottom? I'd like to get a sense of how you're thinking about this. Thank you.
I'll let Marcos Ivo to speak about cost and then Nicolini.
Okay, Tiago, regarding costs, we continue to see the same level of production cost increment for tons.
COGS per ton that we indicated in Klabin Day in December and in the conference call of the fourth quarter, which is in the low 2-digit range. We continue to envision that for the rest of the year. Looking at Q1, we had some good and some worse things, but the range remained at this level. Some costs started reducing, as you could see, chemicals and fuels. On the other hand, we felt the effect of a lower dilution of fixed costs given the market stoppages. The second quarter of this year has the same level of market stops that we had in Q1. Putting everything in the basket, we continue with the same cost indication for 2023.
Hello, Tiago. Good morning. This is Nicole speaking. As you have followed, the market remains very challenging.
The market has been deteriorating since the end of Q1 and a little more intensely now in Q2, particularly in China, where we had a more abrupt price reduction. Given the whole context of a pent-up demand, the arrival of new capacities, the new macroeconomic context, increasing costs overall, and with inflation pressure, all this has made the market remain challenging from the standpoint of demand. As you know, Klabin has less exposure to China, which does not mean that we do not sell to China. On the contrary, we do. Given the whole context of contracting production volumes from last year to this year, our focus was to concentrate sales in mature markets such as Europe and the United States, as well as our position in Brazil, which is quite relevant.
Looking at the whole market context in China, we see price levels are very depressed, below the marginal cost of production, which led paper producers to stop pulp production and they started buying some market pulp. Still very timid in my point of view. This process of restocking has not happened in the main paper producers, although the level of inventories at these producers are considered very low. This process of restocking should happen in the coming months. We don't know at what intensity this will happen, but the expectation is that this will happen in the coming months. European and North American markets, the printing and writing market remains very challenging. We see some integrated producers putting some pulp volume competing with non-integrated producers. This has led to additional pressure in terms of price.
The upside is that the tissue segment continues to operate with a high machine occupancy rate. We have a greater concentration of sales for the tissue segment, and this, in a way, has helped us in our sales volume with no great problems.
Thank you, Nicolini. Perfect. I just want to understand, what is the price level for imported eucalyptus in China? In China, $470-$480. Do you see a hard negotiation looking forward in the next month?
Well, this level of price led to the normal volumes that we had allocated to that market. Now we'll have to see what will happen in June.
Okay. Thank you. Thank you, Ivo. Thank you, Nico.
Tiago, I just want to, based on your question, say that since our greatest exposure to China is not in short fiber pulp, I just want to add an observation, which I believe is important. Let's do a quick math here. Our 4.7 million tons, including Paper Machine 28, which we'll have to start up in June. Of these 4.7 million, 1.65 million tons would be pulp. However, of these 1.65, 1.1 is short fiber and 550,000 tons are long fiber, and most of it goes to the fluff market. It's 1.1 million as part of 4.7 million. That would be our exposure in short fiber pulp. In this exposure of 1.1 million of short fiber pulp.
The exposure to China is very limited because we work with long-term contract offering. As you know, a diversification of fibers we do have. The greatest exposure to China for Klabin is limited in coated board for liquids and in the China exposure. I think that we can give you an idea of the contracts for our customers of liquid fluid, fluids in China for LPB, so I have Fabio who will speak for one minute. I apologize, Tiago, but I just wanted to add information about China regarding our exposure.
Hello, Tiago. Good morning. If we look at China, I will include all Southeast countries. Over there, the main composition of our exports would be in liquid packaging. Over there, it's a market that grows the most, substantially including a part of India, where we allocate volumes recently contracted for the big players in that region of the world. We have Singapore, Vietnam, Thailand, and the big China as major destinations of volumes that continue to grow. India is a special chapter. It is a chapter that has been enhanced in recent years, where they are building new factories. A good part of what we're going to produce in Paper Machine 28 is going to go to India. Now, I remind you that Klabin will be a player of 1.2 billion tons of coated board, particularly geared to the beverage world.
Special, coated boards with long fiber, which is what we are envisioning for the pulpworld.
Okay, thank you very much.
Next question, Daniel Sasson with Itaú BBA.
Hello, everyone. Good morning, everyone. Thank you for the opportunity. My first question is maybe a follow-up Thiago's question about prices. Nicolini, you mentioned the price of hardwood, not so relevant for Klabin, $470 or $480 in China. Resilience points that you mentioned in the results in the call is precisely the mix in different fibers and pulps. The geographical exposure to other regions, maybe not so focused on China vis-a-vis some of your players in FOEX. Even if we consider a higher discount, we don't see a price adjustment in Europe as strongly as we saw in Forex before.
Could you tell us more about the price or maybe the price differential, if it exists in the actual current Chinese market, how many more dollars per ton, for instance, can you sell in Europe vis-a-vis prices of $470 or $480 that you mentioned for China? My second question may be for Cristiano. It was very clear about capital allocation. As we speak, well, this is not a provocation for you about the approval of this project. It seems to be taken into account and you are focused on MP28. Cristiano, considering the macro conditions that are slightly more complex and tough, particularly in Brazil, in the domestic market, do you see opportunities to consolidate, for instance, M&A or corrugated box or the movement that we already saw before as you did in the recent past? Thank you.
Thank you, Sasson.
Nico will begin answering the question.
Sasson, thank you for the question. Look, we have a significant price differential if we compare mature markets in China. Like I said, the drop in price in China was more sudden and faster than expected, considering the whole scenario and the economic scenario in China in general with low growth. Particularly after the Chinese New Year, we expected to see a new demand which didn't happen. However, in Europe, the price index is a benchmark, is a reference. It doesn't mean it's 100% accurate considering we are competing in the global pulp market. I can tell you our differential in price is still significant in these regions and our strategy to focus on those markets with long-term agreements, which include multiple years, they allow us to maximize our price result as a whole.
Thank you, Nico.
Sasson, when it comes to M&A, I think you particularly mentioned corrugated box. I would like to consider like this. For instance, Klabin's position is persistent when it comes to integration and the intention to increase integration of our actions and papers. Specifically, I'm referring to for boxes. When it comes to bags, we are already 90% integrated. To what extent we will manage to have this integration? 70%? Well, if the number is not correct, maybe Marcus and Douglas, please correct me if I'm wrong. To what extent can we evolve to 90% or 95% integration for packaging? That's a question for the future, maybe for the coming years. I guess the intention is to reach a level of integration around 80% or 85%.
This percentage cannot be totally settled now, we just want to say that our intention is to improve integration. However, despite having grade corrugated box manufacturers in Brazil, the level of technology from all manufacturers with modern machines and corrugators, at the end of the day, Brazil stands out. If you follow up the market for 30 years, for instance, today, Brazilian corrugated corrugators, they are second to none, including family companies or SMEs. We are always keeping our eyes open. Nothing right now. I think We don't know if Klabin would consider an M&A right now, when it comes to structure and the concepts of our business, we stick to our vision.
Thank you, Cristiano.
Next question, Guilherme Rosito with Bank of America.
Good morning. Thank you for taking my question. My first question is about wood cost.
This quarter, we had a significant increase year-over-year, quarter-over-quarter. What's the idea of the cost per ton for pulp in general? Is it to maintain the coming quarters, or do you expect to see an increase or a drop? What is the magnitude? The second question is about the containerboard market. Could you give us some color about domestic and foreign markets? kraftliner are a little bit weaker, so should we expect the conversion rate to be higher in 2023 compared to 2022, for example?
Thank you, Guilherme. Marcos Ivo is going to answer your question, and we also have our forest officer, Sandro Avila. He may also add something. Marcos Ivo is going to talk about wood cost.
Guilherme, first, answering your question, being to the point, the total cash cost at Klabin or total COGS, we follow with this indication of growth in 2023 vis-à-vis 2022 of low two-digit, like I said in the first question in the call or answering Thiago Lofiego's cost. This includes wood. Now, just diving deeper into wood, we remain consistent in our explanation about wood because we've been actually working within our plans and our forecast. If you recall, Klabin Day in December, Sandro, our Forest Officer, he made a deep presentation about the mix of third-party and our own wood over the years. We could clearly see that the peak of share of third-party wood in Paraná system is for 2023 and 2024.
This is where we expect to see the peak in wood price. It begins to go down 2025, which is a small drop. This drop comes more strongly as of 2026. The essence behind all that was a means to deliver efficient capital allocation, and therefore, the full first supply cycle for Puma to start with third-party wood. As of the second cycle, we use our own wood, which was planted in areas that we already purchased, and therefore are close at wildlands. We remain consistent within our plans, our schedule, and very bullish about the future of wood. Guilherme, Douglas Dalmasi, our Packaging Director, is going to add some comments to your second question. You said it makes sense to have containerboard and packaging. Flavio, who is the paper officer, he could also make some comments.
Good morning, Guilherme.
Thank you for the question. Let me talk about conversion for bags and corrugated box. For bags, Cristiano already said that we had high integration levels. Startup of the new line and the volume behavior is expected to be similar to what we had in the first quarter. We work with full capacity, and the behavior will remain as such for the full year. Full house, domestic market, foreign market will remain as usual. For corrugated box, similar behavior to what we saw in the first quarter for the market. Growth of 2% in the market, and that's what we consider for the rest of the year, including paper. We consider to keep on following up the market growth. I'll repeat a remark that I made in the previous quarter.
We have to keep our eyes open not only for tons when we consider corrugated box at Klabin. We have to focus on square meters. For square meters, the behavior was similar to the market behavior when it comes to growth. For the coming quarters, we'll also follow up the market behavior and growth market, which should achieve 2% growth. That's our outlook, and this allows us to measure our integration level.
Can I just add to the comment, Liliane, about Douglas' answer? In quarter square meter, for those of you who haven't followed us up, let me explain the merit behind this. MP27, as you know, was the EucaLiner product. A product that are being launched 100% with eucalyptus and also with state-of-the-art equipment.
As a result, it was state-of-the-art equipment crosses with highly qualified people and naturally the pulp and fiber which allowed us to come to Paraná's plant with 100% eucalyptus running in the machine. This machine at EucaLiner delivers from 10%-15% less fiber or pulp per square meter. The box made from this paper, the structure is preserved with less raw material. Therefore, here we can see the competitive cash cost of the product. At the same time, this product offers to box manufacturers further efficiency like, for instance, a reduction of energy used in the corrugator. When Douglas says that we will focus on square meters, that's because Klabin has reduced the weight or grammage in Brazil with a more technological paper.
This is important in terms of cost reduction and also important when it comes to CO2 emission from transportation or trucks with fewer tons with the same efficiency in transport. I just decided to touch upon this, and I hope I haven't affected your answer, Liliane.
Crystal clear. Thank you.
Next question from Massimo Fariji with Goldman Sachs.
Hello. Thank you for the opportunity. My first question is a little more structural, thinking about coated boards and kraftliner in the global competitive market. Everything we see in here makes us excited with the expected demand. I think that most companies and your customers would agree with that. What we have seen in recent years are announcements of great capacity expansion in all regions, in Latin America, United States, Europe, and particularly China. I'd like to see how do you envision demand? I mean, I think that demand should be positive, but we could be a little worried with supply. China, every month there is a new ton being produced of coated board or in Russia, the United States, and also in Latin America. How can we understand this? How should we think about this scenario looking forward?
My second question, perhaps to Marcos Ivo. Ivo, the forest piece. I just want to understand the conditions of supply and demand. Is it in a worse margin or less tight than in the last two years? Because the competitive landscape is a little tighter. How do you see this? Should we expect any significant change? Finally, on the side of costs, I think I spoke a lot about this, but we have been positively surprised with a decline in the price of diesel, oil, and chemicals. Perhaps we could see a better cost landscape than three, four months ago when you give us a guidance. Could we expect a reflection of these lower commodity prices on your results, perhaps improving your guidance a little bit? Thank you very much.
Faridi. The sound was a little hard, so let me make sure I understand your question correctly. The first part of your question addressed to Marcos Ivo would be regarding wood, and then you talked about a tight market of wood supply. Is that it?
Actually, I had talked about wood, but my first question was regarding coated boards and kraftliner, and then I spoke about wood in Brazil.
Okay. It is clear now, Faridi. Thank you. I just wanted to make sure I had understood. All right. I will ask Flavio to speak a little about coated boards, and then I'll answer the second part.
Hello, Faridi. This is going to be a little longer explanation regarding your structural question and splitting the consumer market and the containerboard. The kraftliner containerboard market is facing some new entries of recycled fibers. In another recent announcement, they talked about closing down less competitive assets. The supply that is coming in less market stops kind of balanced the price landscape that we see now, which is at the limit of the marginal cash cost. We have Brazil that continues to be very competitive. We see specialization of products, Klabin operating particularly in the exports market where it makes sense. In other words, fruits, vegetables, protein exports, markets that talk directly with the virgin fiber market.
Of course, naturally now we have a more difficult balance in the horizon of the next 12 months for this market, with the fact that Klabin is operating here producing coated board at very competitive prices. I'm not going to repeat Cristiano's comments on EucaLiner. Let's talk about coated board. You talked about coated board with greater capacity from China, a Folding Boxboard. Most of it not integrated, so part of the acquisition of fiber and wood from abroad. That capacity will get into the last quartile of the cash costs, and it competes in the world of more general boards, short fiber. Of course, exports will depend on the logistics possibilities. Klabin, with its 1.2 million tons of coated boards, considering Paper Machine 28, we are in the long fiber board for liquid foods and beverages.
Exports are linked to beer, milk, et cetera. That's its essence. We have another important piece that is gaining momentum, which would be boards with barrier. Special coated boards linked to industrialized cold chain products. That's where we're growing a lot, and that's where we do not have direct competition from typical coated board produced globally. Here, there's another important element regarding demand. Even in a market where demand starts to settle, we have an important substitution. The main winner, quote-unquote, to replace plastic single-use packaging is board. Is board that is taking up important space, and again, in the beverage world. To bring one last element, Klabin made an investment and this is underway, the transformation of the machine 28 production adding white boards.
Very soon we'll be acting in the market of special boards with long fiber and also in white boards. That's where those earlier signed contracts come into play regarding this paper machine. We don't see any important issues in this world where we are navigating.
Thank you. Faridi, I will continue with the answers. I will start talking about wood and then Marcos Ivo will speak about inflation. I will probably add some more to that, taking advantage of a trip that we took last week, and we were speculating about inflation from of our peers. Sandro Avila is also here that can add to my wood comments. Let me get started. You see, I have a relatively controversial view regarding wood availability in Brazil. Starting with planted area in Brazil.
I see an opportunity, and I think I have mentioned this in earlier calls. Perhaps after productivity, and I ask for a poetic license to speak a little about structural aspects of countries. I think that the first point to unlock capacity in Brazil is productivity, and this involves education and so on and so forth. In terms of creating value in the country, specifically in Brazil, given our characteristics, I see that if we have more planted areas, this would be 1 of the main ways to unlock value in this country. Through planting in pasture areas. Pasture productivity in Brazil is very, very low, and Brazil is 1 of the major protein producers globally. I know that Brazil is a continental country. I know that every Brazilian region has a different reality.
In the context of time, and perhaps we can talk more about that in another moment, Brazilian productivity is less than 1 cattle per hectare. One cow per hectare. This number could certainly triple or between 4 times given the reality of the country. With just information alone, we have 9 million hectares planted in Brazil, data from our Ibá, the association of our industry. What we foresee, just considering 9 million of hectares planted and I'm not gonna mention any names, but the biggest protein producer in Brazil. They alone manage in terms of buying cattle from their suppliers, something like 90 million hectares. 90 million hectares, 10 times. The pasture area used is 10 times the size of planted areas with trees planted for our industry and some other industries, such as industrialized wood and steel.
Why am I mentioning all this? Because countries like Mato Grosso, and if I'm not mistaken, the government has an expectation of doubling planted area and opportunities in other regions of Brazil. You see our sector very much abides by the regulation. Our industry abides by global certifications. We are benchmarked around the world. Any Brazilian or foreign player operating in Brazil are benchmarks in terms of forestry management and are unlocking this value. In other words, gain productivity in cattle ranching, transferring areas to planting of forest. This will bring more productivity for the current cattle ranchers, and it will bring us an opportunity to increase the area of planted trees in Brazil. Structurally speaking, I see this as a great opportunity in Brazil in the coming decades. I truly believe that planted area in Brazil for our industry should double in size.
That does not mean that in the short-term we will not feel circumstantial cost pressures. Now speaking more about Klabin. Klabin in the south of Brazil, I'd like to remind you that we have two fibers, 50% long fiber, 50% short fiber, and we operate primarily in the states of Santa Catarina and Paraná. In these states, well, Brazil exports wood to the United States linked to civil construction numbers or housing construction in Brazil. The south of Brazil basically exports this kind of wood, special wood that influences the demand and the price of wood in the south of Brazil. It's kind of forecast. Everybody's hoping that this will not happen.
In this forecast of a reduced economic activity in global markets, including the United States, that's then will be an opportunity for a balance of prices in third-party wood in the next 12 to 18 months. Of course, this depends on many other circumstances. Let's talk about demand for wood in Brazil, wood consumption in the United States, and you probably understood the relationship. In this context, I should say that right now the worst is behind us in terms of wood price. In the long term, I see an opportunity. My last point is that perhaps, in terms of the cost of wood, the cost of wood has an economic relationship with the cost of land. I'm not going to get into the merit of that because this would be too long.
I spoke about economic cost and land cost, I'm going to speak about distance. Distance is the same for everybody. When we see these new pulp units, which is to have one single product, now they're trying to pursue very high production capacities, having wood traveling long distances, and this long distance is perpetuated in regions with relatively lower productivity compared to the south of Brazil. They have their wood travel long distance to maintain their production in the dynamic of bigger machines. In the case of Klabin, we have said this over and over, and we have shown this in our numbers. Marcos has spoken about this. As we get third-party wood in the first rotation of wood, this first rotation, therefore third-party wood traveling longer distances, so cost increases due to longer distances.
In this Interval of time, we have acquired areas nearer Klabin, in which we are already planting. For the second rotation, this structural costs will drop, it's due to this. I have spoken a lot in my answer. Marco, Sandro, if you want to add anything. I just wanted to explain this to you, Fariji, and I apologize for being too long. I think that the debate regarding wood price in Brazil is kind of confused with planning and perhaps even opportunities that exist in our industry. I'll turn the floor to Marcos to speak about inflation.
Let me just add to that, Fariji. We continue with the same indication of increase in COGS per ton for the year of 2023. Of course, if we have a price reduction that is more intense in commodities which are raw materials for Klabin, this will also be reflected in our cost. Right now, from what we can see at the beginning of May, we continue with the guidance that we gave you in the prior conference call. It is important to remember that part of the cost per ton in the second quarter of this year, in April, we had the general shutdown. Our biggest site, Ortigueira and Puma, where we have the production of pulp in Puma too, in the first phase already in production.
We had a stoppage, a scheduled stoppage with a greater scope, which means more days of downtime. That impacts the COGS per ton because we're going to have lower dilution of production and fixed costs in the second quarter. This is just as a reference, our general shutdown in the Puma Unit lasted six more days than last year, especially because of interconnections that were planned, the bottlenecking for the startup of Paper Machine 28. Faridy, I'll just make a comment of something that I forgot regarding cost and inflation. Marcos and I last week were in Europe. We were visiting six of the major players of our industry in Europe. We just wanted to understand their global view of the world, expectations, threats, geopolitical risks, and how each company sees all this.
We kind of normally do this to maintain a healthy understanding of the world and of our industry. In that context, we left the meeting with an impression which is no different from ours. They were concerned about cost of labor. Europeans and Americans are facing salary adjustments that were not exactly, how shall I put this, the routine after or in the post-war context. Of course, an increase in the cost of power, et cetera. All of that has a reflection on us. Our concern regarding inflation continues to exist for all of us in the industry, here and globally.
Thank you very, very much for all the details. Super clear. Good luck, and keep up the good work.
Thank you. This concludes the question and answer session. We move now to the final remarks.
As for the second quarter of 2023, our outlook remains of a challenging market with a global scenario of inflation and continued deterioration in pulp and kraftliner prices minimized by Klabin's integrated business model in the packaging unit and the demand from the consumer segment. Additionally, in April, early second quarter, we had a general shutdown of the expanded Puma plant, which reduced slightly our production volumes, but successfully interconnected with a new coated board machine. For that, we achieved 92% of the implementation schedule for MP28, with startup schedule for next June, strengthening Klabin's position in highly resilient segments with growing global demand. Given complex market context, we'll remain vigilant in our focus on operating efficiency with cost control and optimization of the mix of products and markets.
I thank you all for your participation. Seeing you all in Klabin's next earnings conference call. This concludes Klabin S.A. conference call for today. Thank you very much for joining us, and have a great day.