Suzano S.A. (SUZ) Q4 2024 Earnings Report, Transcript and Summary

Ladies and gentlemen, thank you for holding, and welcome to Suzano's Conference Call to discuss the Results for the Fourth Quarter of 2024. We would like to inform you that all participants will be in listen-only mode during the presentation that will be addressed by the CEO, Mr. Beto Abreu and other executive officers. This call will be presented in English with simultaneous translation to Portuguese. [Operator Instructions]. Before proceeding, please be aware that any forward-looking statements are based on the beliefs and assumptions of Suzano's management and known information currently available to the company. They involve risks, uncertainties, and assumptions because they relate to future events and therefore, depend on circumstances that may or may not occur in the future. You should understand that general economic conditions, industry conditions, and other operating factors could also affect the future results of Suzano and could cause the results to differ materially from those expressed in such forward-looking statements. Now, I will turn the conference over to Mr. Beto Abreu. Please, you may begin your conference, sir.

Thank you very much. Hello, everyone, welcome. Thank you for attending the fourth quarter call. And before going through the results, I want to say that I'm very proud about what the team has delivered in the fourth quarter and also in 2024. The name of the game in this last quarter was flawless execution and I want to recognize the operational excellence forward and the power of the team, the power of this organization, when we decide to deliver together something. We reach out recording sales for the fourth quarter and also of course for the year. Leo, the outbound logistics team did a tremendous job and Ribas' with its impressive performance reached in 2024, 900,000 tons of production and 700,000 tons of sales. And let's remember this is fully in line with the guidance that we have shared with you after the startup in mid-2024. Moving to cost, in the fourth quarter 2024, we were also able to set up for ourselves a new baseline of cash cost for our operation. The combination of those figures with a strong EBITDA of R$23.8 billion for the year, bringing our leverage in dollar terms for 2.9 times. I want to highlight this one since leverage is a key metric for us and guide us our capital allocation decisions. Having said that, I want to invite Fabio, now also in charge of our Suzano Packaging business in U.S., to share his insights of our Paper and Packaging business. Fabio, I'll hand over to you. Thank you very much.

Thanks, Beto. Good morning, everyone. Please, let's turn to the next page of the presentation. We have finalized 2024 with a strong operational performance from our Brazilian operations and significant advancements in North America. The assets we have acquired from Pactiv Evergreen will be referred from now on as Suzano Packaging U.S. and their results are incorporated into our Paper and Packaging business unit results. During the quarter, we happily welcomed the Suzano family around 870 colleagues that work in Pine Bluff and Waynesville. Looking to the Brazilian market according to EBA, print and writing demand including imports increasing by 11.7% in the first two months of the fourth quarter compared to the same period of last year. Sales from domestic producers grew by 12.5%, while imports moderated and grew by 4% on the same basis. Demand for uncoated paper was bolstered by the federal government's purchase of textbooks. For coated paper although demand is lower in the quarter with the end of the election cycle, it remains stronger when compared to the same period of last year. Markets outside Brazil performed differently in North America and Latin America elections and even though rebuild positively influenced demand supporting growth demand in 2024 compared to 2023. However, in Europe, the situation has become challenging as demand positive effects have diminished and paper consumption has returned to its declining historical rates. Demand for paperboard in Brazil remained robust increasing by 9% in the first two months of the quarter compared to the same period last year. This growth reflects the performance of the Brazilian economy and consumption levels despite some cooling in certain segments over the last quarter. In the U.S. market, a focus region for Suzano Packaging operations, according to Limeira, there was a 21% recovery in SPS demand in the fourth quarter of 2024, compared with the fourth quarter of the previous year, driven by strong performance in the food service sector, falling as lower than expected performance in 2023, and the first half of 2024. Looking at Suzano figures, our total sales volume in the fourth quarter was 15% higher year-over-year and 24% higher quarter-over-quarter as a result of the incorporation of Suzano Packaging sales. Regarding our Brazilian operations, we had an increase in sales compared to the last quarter pushed by higher sales to the Brazilian market while export reduced to continued unfavorable logistic conditions. The 4% net price growth over the last quarter is attributed to the impact of Suzano Packaging and FX effects on pricing shown in Reais compared to the last quarter of 2023, there's a 7% increase driven by the same factors just mentioned. Looking at EBITDA, there's a 7% reduction quarter-over-quarter and a 3% reduction versus the fourth quarter 2023. When compared to the full year, we also have a decrease in this case of 16% such performance reflect the impact of the incorporation of Suzano Packaging in the U.S. that you all know, it's a turnaround case as well as lower price on both the Brazilian and external markets of our operations in Brazil. Now, I want to provide some color on Suzano Packaging. The integration of our new employees, assets, customers, and suppliers are on track and reflect our expectations prior to the acquisition. During the fourth quarter, we have successfully renegotiated all commercial contracts, securing much better terms for Suzano in 2025, and onwards, and secured synergies on raw materials and logistics, better prices and lower costs will positively impact Suzano Packaging results in 2025. The industrial turnaround as shared with you on the last Suzano Day as well as CapEx plan are progressing as planned and we remain optimistic about the expected future value creation. Considering only our operations in Brazil, our business unit delivered the best quarter in terms of EBITDA of 2024, our result of improved sales levels, FX, impacts on prices as well as cost reduction efforts. We end 2024 with lower cash costs compared to 2023. Looking ahead, we anticipate strong demand in the Brazil market for uncoated and paperboard lines during 2025. Outside Brazil, we anticipate the return to the structural decline in demand in developed regions and less so in Latin America. In the U.S., paperboard demand is expected to remain strong throughout 2025. Pulp prices announcements early in 2025 could offer support to higher paper price. In terms of logistics and input costs, we expect some stability on the absence of trade disruptions and geopolitical turmoils. Now, I'll hand over to Leo who will present our pulp business results.

Thanks, Fabio, and good morning, everyone. So now moving to the next slide of our presentation, I would like to begin by sharing some facts related to our pulp business unit during this past quarter and as well for the full year 2024. The fourth quarter 2024 was marked by lower prices as a consequence of monthly reductions in Europe and Americas, closing the gap to Asian prices, which also declined in the quarter but presented a flattish curve as of from the end of November with low levels tagging below the marginal cash cost of pulp producers. Q4 was also marked by healthier operating rates from our Asian customers as well as their improved margins resulting in a positive market sentiment. It is important to note that a significant unexpected event, the first partial and later a complete operation cease of a major Chinese integrated pulp and paper producer changed dynamics in the region quickly favoring most of our non-integrated customers. During Q4 2024, our sales including the new volumes coming from Ribas mill were performed as planned and allow us to set an all-time high volume for a quarter. As a consequence of these record sales, our inventories became tight and this picture will bring us some challenges ahead to serve our customers, which I will share with you a bit later in my speech. Despite lower prices in Q4, the combination of higher volumes and favorable FX resulted in a resilient EBITDA of R$5.7 billion. For the full year 2024, higher prices in U.S. dollars, higher volumes and the FX levels resulted in a 37% increase in the EBITDA, which reached almost R$21 billion with a 56% EBITDA margin. Now looking forward, I would like to highlight the following points. Coming into the current first quarter of 2025, let me now better explain why I see a challenging scenario to serve all markets with pulp volumes. The addition of factors such as Suzano's low inventories at year-end with a very healthy order entry during this past month, January included, and our lower production volumes in turn due to a concentration of scheduled maintenance downtimes would already mean alone a tough quarter for our logistics operations. But we had prepared ourselves for this scenario. However on top of we had planned for the occurrence of new and recent unexpected events such as the conversion of a key competitor to dissolving pulp during all of Q1, strikes in Finland, and operational problems at competitors mills, all affecting the supply side of the equation and the ongoing halt of the already mentioned major integrated play in China have all tided significantly, the S&D fundamentals in the short-term. Just to bring you more color, every month that such integrated players down the S&D fundamentals are affected in two ways. First and directly, there is the impact of the cease of production and the benefit that this creates to our customers, mostly Chinese customers who have been increasing their paper and board production levels and also their prices in the market. We estimate that every month that this player is down over 200,000 tons of new hardwood demand is generated in China alone. There is also secondary effect as quite often this player also used to sell their excess hardwood pulp in the market, especially when paper margins were not positive enough. This has obviously ceased completely as well. I anticipate that during most if not all of Q1 we at Suzano will struggle to recover our delivery performance to Middle East, African, and Asian markets. All markets that are serviced directly out of Brazil as our sales during this past month exceeded our regional expectations, resulting in the creation of backlogs in our system. Our January price increases were all fully implemented as planned and the February hikes are also expected to come. Such positive dynamics for the first few months of the year paves a constructive sentiment for pulp prices in the upcoming months. This short-term momentum clearly is a reflection of unplanned events on pulp fundamentals, which as I have been constantly stating in our calls and events such as the latest Suzano Day are playing a bigger and bigger role in our markets. Last but not least, the price gap between hardwood and softwood as well as an unclear scenario in terms of softwood availability keeps favoring demand for our pulp and most importantly are setting a new record, a new record in number of projects and engagements with our customers who are willing to deeply participate in fiber substitution projects, a game changer for Utipulp demand growth. With that said, I would now like to invite Aires to address with you the cash cost performance of the quarter.

Thank you, Leo. Good morning, everyone. The cash production cost in the fourth quarter 2024 [Technical Difficulty] in turn due to a closer average distance [indiscernible] two, the outstanding performance of Ribas benefiting the dilution of fixed cost and energy sales. And finally, the lower cost with inputs both in price and consumption, the latter due to the greater operational stability of some mills. Lower costs with wood and inputs as well as the positive effect of Ribas mill also explain the better performance of the cash production costs compared to the fourth quarter 2023, which was virtually offset by our FX depreciation of 18% in the period. Although a higher FX always benefits the company's cash generation, it is worth mention that about 23% of the cash production cost is dollar link. Now looking to 2025, in the first quarter, we expected the cash cost ex-downtime consider here an FX level at 5.8 will come with a no recurring increase of mid-single-digit due to the concentration of scheduled maintenance downtimes in the quarter of our largest high competitive energy exporting mills such as Três Lagoas and Ribas. Even with this one-off increase in the cash cost in the first quarter 2025, the average cash cost external times for full year of 2025 here again with the same FX of at 5.8 should be flattish when they compare to the fourth quarter 2024. As I have already clarified, a lower FX effect ahead would allow us to print an even lower cash production cost for 2025. Moving to the next slide. On the last Suzano Day in the mid-December, I share with you the company's view that Ribas ramp up will -- would be completed in January this year. In other words, in just six months and not in the nine months initially planned for this type of product. But the outstanding performance of the new mill in its first months of operation allow us to deliver an even better result. As we were able to conclude the learning curve at the end of fourth quarter 2024. I would like to also share with you that in the last January Ribas mill already had the best cash production cost in our assets portfolio and after its scheduled on time now in February, the operations will resume with even better performance. Regarding the caps related to Cerrado project, there is no change to Suzano's guidance, in 2025, the final balance of R$150 million is expected to be dispersed. Now, I invite Marcelo to continue the presentation.

Hi, good morning, everyone. Thank you, Aires. I'll start on Slide number 8 talking about our net debt evolution throughout 2024. We started the year with a net debt at $11.5 billion. We generated $1.8 billion in cash flow after paying our maintenance CapEx, financial expenses, taxes, and working capital. We also invested $1.5 billion in growth projects, mainly at Cerrado but also in other projects. So we would end the year following this event with a net debt of $11.2 billion. However, we also invested money in other acquisitions, mainly in the forestry assets in Brazil and also our acquisitions outside of Brazil the Lenzing stake and also Pactiv in the U.S. and we returned to shareholders 0.8 or $800 million buybacks and interest on equity. So our net debt ended the year at $12.8 billion. The good news here is that we continue our deleveraging process and we ended the year at 2.9x net debt to EBITDA when measured in dollars and that's the trend that we will continue to pursue in the coming quarters. For the amortization schedule, we continue to have a very comfortable one with an average cost of debt of 5% in dollars and an average maturity of more than six years with no significant maturities in the quarter. Moving to Slide number 9, our financial results came in at negative $15.6 billion, mainly an accounting issue caused by the negative FX impact on our FX variation impact on our debt in dollars and also the market to market of our cash flow hedges. We continue to have a very solid and robust portfolio of hedges with our zero cost callers totaling at the end of December $6.9 billion with an average put and call at R$5.36 for our puts and R$6.16 for our call. So we remain well protected against any risk of BRL appreciation over time. Moving to Slide number 9, I would like to highlight the company's strong shareholder remuneration in 2024. As I mentioned, we bought back R$2.8 billion in shares throughout the year and we also paid R$1.5 billion of interest on equity in the beginning of the year and announced by the end of the year another interest on capital payment for the beginning of 2025 of R$2.5 billion. So in total for 2024, we returned to shareholders R$4.3 billion, which is equivalent to a dividend yield of 6% for the company. Now, I'd like to pass the word back to Beto for his final remarks.

Thank you, Marcos. So looking ahead let me start with the supply and demand balance. On the supply side for the first quarter, we will have constraint, as Aires mentioned already, of volumes availability on the back of significant concentration of maintenance downtime. On the demand side, we are seeing a favorable moment for pulp price, which reinforce the impact that unplanned events brings to our sector. It's also worth mentioning that Leo and the whole technical team will have as first priority the fiber to fiber projects with our customer. This is a key part of our customer value proposition and this is also part of our customer needs. The first quarter cash cost, as I mentioned is a new reference for 2025 despite the uptick in the first quarter of 2025. At Suzano Packaging U.S., the turnaround has started and I want to congratulate Fabio and the small team that moved to Little Rock in Arkansas to lead this process and lead the whole team at Pine Bluff. So Fabio, so far so good. And finally, as Marcos said, our plan is to keep deleveraging in 2025. Having said that, let's now proceed with the Q&A session.

Thank you. We will now start the Q&A session for investors and analysts. [Operator Instructions]. Our first question comes from Daniel Sasson from Itau BBA. Please, Mr. Daniel, your microphone is open.

[Indiscernible] the new government changes anything in terms of your capital allocation decisions in the country. And my second question maybe to Leo. Leo, just to confirm, you said that the capacity that left the market in China has translated in 200,000 tons of additional demand per month, right, from these non-integrated players that are basically taking over the room left in the market. Do you have any views or can you update us on current situation of that specific player or the current market situation? If you think this is something more temporary and that should revert at some point, or if do you think that this could actually become more structural in the market? And if you are feeling comfortable enough with your inventory levels that you said were or ended the year at low levels, if we should think about a recomposition of inventories throughout 2025. Thank you so much everyone. Marcos Assumpção: Hi Daniel, so starting with your question regarding the U.S., and if that -- if the recent moves changes our strategy on capital allocation, I would say that it doesn't, okay? Because when we're looking to a capital allocation, we're looking to the long-term of that decision. We continue to see the U.S. market as a market that has robust growth. It's a market on the paper side also that has a quite concentrated market in terms of the leading players. And also it's a market that is somehow more protected against imports. And the recent news are also in that line. So this doesn't change the attractiveness of the market for us, okay? Regarding tariffs, just to give you a brief overview, first and look into the history as a reference, in the past years and mandates, we haven't seen any tariffs on pulp, which is our biggest business by far, right? There has been tariffs on the paper side and we are actually -- we actually are enforced by that as well when we export to the U.S. So that is something that you should bear in mind. We also believe that the U.S. is short in terms of hardwood pulp, right? And there is no incentives for new plants in the U.S. There has never been -- there has not been incentives for new plants in the U.S. in the previous years. So doesn't seem to be economical for the U.S. to be implementing tariffs in the pulp industry. So I think that's it on my side.

So, hi Daniel, this is Leo here. I'm going to try to answer your question on the impact of the Chinese mill, which we obviously all know. I'm talking about Chenming, which is also a state owned company. This is a very complex situation. They are a major paper and board and pulp producer in China, totalizing over 4 million tons of paper production, 2 million tons of board, over 2 million tons of hardwood pulp and then over 1 million tons of thermal mechanical pulp as well. We calculate that every month that they are down, as I said, over it's not 200 -- over 200,000 tons of new demand for hardwood is created by our customers, mostly non-integrated customers, who are obviously accelerating or speeding up the operating rates and recovering and this market share left by Chenming in the market. What we hear on the ground in China is that clearly the government is eager to find a solution to the mill, but it's quite complex because it's not only about the sales of the equity of the mill, but it's related to debt, cash flow, and also the quality of assets that make up this huge paper and co-producer in China. So our estimations, obviously we run several different scenarios on that and how we play and position ourselves in the market depends obviously in which scenario will roll out and this is quite sensitive to our commercial strategy. So we cannot share exactly what we believe will happen. But I can say it's quite complex indeed, every time that we talk and get deeper and deeper into the discussion, it seems the issue is harder to be solved. Despite all of that, it's -- I believe it's temporary. I think a solution will be found. I'm not sure when, but it will be found. But it's important to mention and to say that obviously every month that they're down and whatever they left to our customers will not be recovered. So we are monitoring as we speak the situation in China.

Thank you so much, Marcos and Leo.

Our next question comes from Leonardo Correa from BTG Pactual. Please, Mr. Correa, your microphone is open.

Yes, we can hear you.

[Indiscernible] that you were expecting the cash cost number for 2025 to reduce about low-double-digits from the level in the third quarter, right, which was about R$860. So at the time we were thinking something, assuming that math, we were thinking something in the range of let's say R$770, R$780 per ton as a pulp cash cost. Now to see if I understood exactly what the new let's say the revised guidance is, you're indicating that the levels in the first quarter for cash cost will increase a bit, right, given some maintenance stoppages. And for the year, for the full 2025, you're expecting pulp cash cost to be on average flattish versus the fourth quarter, which is about R$800 per ton. So basically over these months, we're seeing a small creep up in let's say the official guidance for Suzano from let's say R$770, R$780 to about R$800 based on the relevant changes in parameters over the period. So I just wanted to double check with you if my understanding is correct or if I'm missing something. And my second question for Marcos again, Marcos, I mean the level of free cash flow generation is quite substantial, right? There still is a bit of CapEx -- of low CapEx and in the numbers, if you look at it on a maintenance perspective, I mean the free cash flow is even higher, right? I mean we're talking about relevant numbers. At the same time, you stopped buying back shares, right, I think over the past months, given the share price appreciation, Suzano stock continues trading at very derated levels versus global peers, right, I mean we're seeing something which seems a bit dysfunctional or it seems abnormal to see Suzano trading at the lowest multiple in the entire coverage universe thinking regionally and thinking globally. So I just wanted to pick your brains a bit on I mean, how are you thinking this derating? How are you thinking buybacks in this context of? But still a very derated stock where the market seems to be very skeptical still on capital allocation going forward. Those are my two questions. Thank you guys.

Leonardo, good morning. Thank you for your question that gave me an opportunity to clarify the information about cash cost. You are correct. When you presented the results of third quarter, I said that full year the average for 2025 will decrease our low-single-digits. But at the moment single-digit, double-digit, sorry. At this moment, we'll consider FX of R$5.35 to this year. And now I present predict with R$5.8 for FX. As I mentioned, our costs are linked to 23% with dollar what represents that every R$0.10 that we increase in the FX we have an impact of R$4 per ton in the cash cost. That's the only difference that we consider here in this new guidance. And now I said flattish because I'm comparing with the fourth quarter, not only more with the third quarter will be 7%, 8% lower than the third quarter. Then all the difference is connected with dollar base. Marcos Assumpção: Hi Leo, thank you for your question. Yes, I agree with you. We are running the company with a very strong level of free cash flow generation. The buyback we always compare the buyback with the other capital allocation alternatives that the company have. And also we also look at our leverage policy as well, right? So we will need to find the right spot between the two things, the two variables in order to do the buybacks or to be more active on the buybacks. As you know, we have an open program until the beginning of next year. But we could do that if we find the right moment to do that. Again comparing the other alternatives that we have for capital allocation and also aiming at continuing deleveraging the company, okay? Regarding the derating that you mentioned, we also agree with that. We believe that this is something that is not only for Suzano that is happening. I think this is probably also related to the -- to interest rate levels not only in Brazil, but also in the world and at some point in time should revert.

Thank you, both.

Our next question comes from Marcio Farid from Goldman Sachs. Please, Mr. Farid, your microphone is open.

[Indiscernible] there has been any change in terms of that understanding on where you want to be in terms of balance sheet leverage. Thank you.

Thank you, Marcio, for the call. Let me start talking about your first question related to capital location and strategy. As you know, we do not comment any specific M&A initiative. But I want to reinforce what I said in the last call and what you just mentioned that we are not considering any transformational deal. Maybe your next question to me would be okay, what you mean about transformational deal and I think a good way to summarize this is that we are not planning and we do not have in our screen anything that could impact our deleverage plan. I think that's the best way to summarize this. The strategy is the same. We're going to keep looking opportunities in the downstream. But it's -- since it's generating value for us and since we can differentiate ourselves against any other opportunity. So we are keeping the same strategy as mentioned before. Let me hand over here to Marcos to over the other question, Marcio. Marcos Assumpção: Hi, Marcio. You mentioned about $800 per ton target for our net debt. That continues to be the case. If you do the math, with our full capacity, including our pulp capacity that is integrated into our paper capacity, that number would be closer to it will be between $11.5 billion and $12 billion. That's a good reference.

All right. Thank you.

Our next question comes from Rafael Barcellos from Bradesco BBI. Please, Mr. Barcellos, your microphone is open.

[Indiscernible].

Rafael, let me start with the second question and then I'll hand over here to Aires. But on the regarding the preference of where to allocate the CapEx or any specific line of business, we are agnostic about that. It's the drivers are really doing something that we can scale up in the future, doing something that we can differentiate ourselves again adding all the competence and knowledge that we have in the business and also doing something that we can fit completely with our strategy. So we are really thinking about generating value. So there's no preference for a specific line of business on the capital allocation strategy. Let me hand over to Aires.

Hi Rafael, thank you for your question. I believe it's so early to talking about any bottleneck in Ribas. Of course, that we are very optimistic with how robust our SSR presenting performance. When I said that we achieved the total line curve at the end of December, it means that we perform for 30 consecutive days in an average that should deliver us a nominal capacity and you get to do this with only 5 months and 10 days. Then the perspective is good. But we are finish our previous maintenance shutdown in the Ribas to check if everything's okay. And probably in the coming quarters, we'll be able to talking about any bottleneck that will identify at the mute.

Our next question comes from Caio Ribeiro from Bank of America. Please, Mr. Ribeiro, your microphone is open.

[Indiscernible]. Marcos Assumpção: Hi Caio, so as you know, we have guided the CapEx for the full year 2025 at R$12.4 billion and our maintenance CapEx at R$7.8 billion, which is a number that you should bear in mind as a regular CapEx for the company going forward for existing operations. The additional CapEx or the discretionary CapEx will also depend on the deleveraging process of the company and also depends on the returns that these projects would have, right? All minor projects that we have approved recently at the company such as the expansion of the tissue business at Espírito Santo state and also the new fluff capacity at Limeira, for example, are projects that yield very good returns for the company.

Caio, regarding your second question, if we are considering pulp extension and power plant strategy, as you know, we own today one-third of the market pulp for hardwood and is also a key part of our strategy keeping the level of relevance that we have in this market. So that's the way that we will analyze a pulp extension mainly in the mid and long-term.

Our next question comes from Alfonso Salazar from Scotiabank. Please, Mr. Salazar, your microphone is open.

[Indiscernible].

Yes, we can hear you.

[Indiscernible].

Hi Alfonso, this is Leo here to answer your question regarding where we are seeing the future demand for pulp, as you know, we are quite bearish and optimistic on that and very constructive looking forward. So first, we have been looking and analyzing trends that are not only China-related, right? So we see tissue demand growing in several markets and many non-developing markets. And we're seeing regions like Southeast Asian markets for example, gaining extreme relevance and rhythm of growth compared to what they were before. So we see not only a concentration of this future growth in China, but in other markets as well. Second, as I have mentioned during my Suzano Day presentation, there are markets like specialty papers, which are now already bigger than old markets that were really relevant for pulp consumption like printing and writing papers. Now, we're presenting more than a fourth of all the furnish of hardwood pulp. And last but not least comes -- our view comes from the movement or migration of consumption trends from softwood grades or other kinds of fibers to hardwood grades like our Utipulp. Maybe you remember in Suzano Day, we presented that in the past despite we have a very consistent trend of hardwood gaining market share over softwood, that really was roughly 0.5 percentage points a year of market share and that increased now to 1 percentage point of market share gain every year, which if you translate that into volume, that by itself as we speak is 600,000, 700,000 tons a year of additional demand to hardwood coming from softwood. So adding all these factors, which kind of dilute the concentration of China, we are extremely bearish looking forward in terms of pulp demand.

Our next question comes from Lucas Laghi from XP. Please, Mr. Laghi, your microphone is open.

[Indiscernible]. Marcos Assumpção: Hi Lucas, Marcos here. So reminding you of our FX hedging strategy. We get all of our revenues, which are mainly in dollars because of our pulp export nature of the business. We subtract all of our expenses that we have in dollars and as Aires mentioned, we have 23% of our cost, which is linked to dollars, which is a minor part of it. We also subtract from that whole amount all of our financial expenses and eventually maturities in dollars and even other payments as well. So we get to a net exposure of dollars. So the company always has a net exposure to dollars. [Indiscernible] What we have today in the market is basically two things. Theoretically, we had a very quick and sudden depreciation of BRL or appreciation of the dollar right, in the market, which was clearly seen in our quarterly results as we at the end of the third quarter, we were at R$5.45, at the end of the year we were at R$6.19. So this whenever we had a weaker BRL, it's better for you to hedge, right, because you're hedging at a higher level. And besides that, we also have a unique combination, which is we have a very strong interest rate differential between Brazil today and the U.S. rates. So that also impacts the forward level that we can hedge in the future. So given these two conditions existing in the market, I would say that they are good for you to continue being at a higher end of the range. I'm not giving -- I cannot give you a guidance how we will operate in the future, but that explains why we ended the fourth quarter at the top of the range, okay?

Lucas, thank you for your question. This is Fabio here. I'm going to address your second question regarding Pactiv. My comments during my speech, we were able to renegotiate the commercial contracts. We got a double-digit price increases with our major contracts. This will come into effect -- half of these impacts are going to come into effect in the beginning of the year and the second -- and we have half of the impact in the second half of the year, so spread out through the year. But we also were able to negotiate our major raw material contracts and logistics. And the impact of that is already seen in our costs as we renew our inventory levels from the raw materials. We have a major annual maintenance that's going to happen in April this year. So we're preparing for that. It's an oatmeal, as you know. So I would say that you should see more impact on the turnaround in the second half of the year.

Perfect, guys. Very clear. Thank you.

Our next question comes from Ricardo Monegaglia from Safra. Please, Mr. Monegaglia, your microphone is open.

[Indiscernible].

Hi Ricardo, this is Leo and I'm going to answer both of your questions. First one, which prices starting with the last one, we follow all the prices going into this non-integrated producer, especially the Asian producers who are verticalizing into pulp as well. And what we see is that prices are not upticking as they were two years ago. So I believe they are competitive in that sense. Also this effect that Chenming has, which is a positive effect on the paper side of the business and the consumption of pulp and has obviously a negative effect on wood, right, because there is more wood availability in the region as they are not running neither their hardwood pulp mills or their mechanical pulp mills as well. So there's a little bit of, I would say, oversupply of wood chips. As I have mentioned in other calls, we also have been monitoring there's a bit more wood available in China due to the housing market effect, plus this is the final year where we see the government stimulating that some of the woodland with hardwood trees to be converted to farmland. So we should see that over by the end of 2025. So in the short-term, I would say, I wouldn't expect, unless something unexpected happens as well, any uptick in the wood prices to China, meaning that this competitive level that they have today should be kept unchanged. Regarding your question on consumer pulp inventories, we see that there is not really a stock formation at this time. We are monitoring the inventories in China ports and they have been trending below what we believe is a completely balanced view. I personally believe that Chinese customers specifically have stock for pulp in the 2023 cycle. And a lot of this reduction in consumption of pulp in China in 2024, despite a strong year in paper production, comes from destocking of the chain in general. So I think that the base point in terms of pulp stocks either import or in the hand of the customers is either balanced or below a balanced level, which brings a challenge in the short-term, right, because as you can believe, every customer is trying to quickly increase their operating rates to get part of this market share left in the market by Chenming. But obviously the pulp is not there at the speed that they would like the pulp to be. I mentioned my case in my -- our case in my speech that we are running with backlogs here and I don't expect this to be resolved before the end of the first quarter. So I see a tight scenario in the short-term obviously created by unexpected factors. But the fact is that the market, as we speak is quite tight and positive for our short-term numbers and commercial tactic as well.

Thank you.

I'd like to thank you for being here with us.

I'm sorry, Beto. The Q&A session is over. We'd like to hand the floor back to Mr. Beto Abreu for his final remarks. Please, Beto, now you can proceed.

Thank you. I'd like to thank you for being here with us today and for your interest in Suzano and as always, our IR team remains available for any additional question you may have. And I wish you all a great day. Thank you very much.

The Suzano's S.A. fourth quarter of 2024 conference call is now concluded. The Investor Relations department is available to answer further questions you may have. Thank you, and have a good afternoon.