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Good morning, and welcome to Klabin's Conference Call. [Operator Instructions] As a reminder, this conference is being recorded and broadcast simultaneously via webcast, and 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 call 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 international market behavior and therefore, they are subject to change. Today with us, we have Mr. Cristiano Teixeira, CEO; Marcos Ivo, CFO and Investor Relations Officer and the other company officers. Initially, Mr. Teixeira and Mr. Ivo will comment on the company's performance during the first quarter of 2021. After that, all the officers will be available to answer any questions that you might have. Now I would like to turn the call over to Mr. Teixeira. Mr. Teixeira, you may proceed.
Thank you very much. Good morning, everyone, and welcome to the First Quarter of 2021 Earnings Conference Call of Klabin. The first quarter of this year confirmed the upswing in the demand that we already noticed in the second half of 2020. This market recovery scenario together with the sound operating performance from the company's results during this period. In packaging, the first quarter delivered a vigorous growth, both in sales volume and prices, driven by the domestic market consumption, the rebuilding of inventories in the whole supply chain, e-commerce and the growth in exporting sectors such as proteins and fruits. I would like to remind you that we have now completed 6 months of integration since the acquisition of the corrugated boxes and recycled paper operations of IP in Brazil with higher-than-projected volumes and prices, consolidating 24% market share vis-à-vis 17% before the acquisition. Growth of 54% in sales volumes and 78% in net revenue from sales in a year-on-year comparison in pulp. Beside the good performance in all fibers in terms of prices, the broad spread between hardwood and softwood of about $220 per tonne ratifies Klabin's accurate decision to have a diversified portfolio, anchoring its position as the only Brazilian company in the sector to produce 3 types of pulp. In kraftliner, the drop in exports from the United States due to the good performance of corrugated boxes dramatically cut prices to react in all regions of the world.
And with the increase in sales volume, the devaluation of the real vis-à-vis the dollar, beside the price recovery in the pulp, papers and packaging markets, which allowed for adjustments in all Klabin business product lines, the company net revenue in 1Q '21 was BRL 3.467 billion, 34% higher on our year-on-year comparison. Our adjusted EBITDA net of the nonrecurring effect in the quarter was BRL 1.254 billion, up by 22% year-on-year.
With an integrated, diversified and flexible business model, the good performance delivered in 1Q '21 shows once again Klabin's capacity to deliver sound and consistent results regardless of the market conditions. With the announcement of the scope of the second Puma II Project machine, which will be a coated board machine, Klabin reinforces its diversified product portfolio besides continuing to offer the market recyclable biodegradable solutions coming from renewable sources. Now I would like to give the floor to Marcos Ivo, who will bring you the financial details of the first quarter of '21.
Thank you, Cristiano. Good morning, everybody. Thank you for participating in our call. We delivered another quarter of positive results. And among the highlights of the period, I mention 3. Record net revenue for 1 single quarter reaching BRL 3.5 billion with a growth of 34% year-on-year. Adjusted free cash flow BRL 4.5 billion in the last 12 months, representing a yield of 17.4%. I would like to mention also the issuance in January of a sustainability-linked bond amounting to $500 million with a maturity of 10 years, the lowest cost ever for a Brazilian company with the same rating as Klabin, being a seminal example of monetization of the company's sustainability. On Page 4, sales volume went up by 7% compared to the first quarter of '20, reaching 909,000 tonnes. The increase in the sales volume was driven by the integration as of October 2020 of the assets acquired by International Paper in Brazil.
As I said before, net revenue in the period was BRL 3.5 billion, and this growth is explained by the increase in the sales volume by the depreciation of the real vis-à-vis the dollar that favors the share of the company sales as exports and also by price adjustments. The high net revenue despite the -- some pressures on costs and the impact of the general stoppage of Monte Alegre for maintenance drove the adjusted EBITDA that net of nonrecurring effect reached BRL 1.254 billion in the quarter, growing by 22% year-on-year. On the next slide, pulp production was 413,000 tonnes in the quarter. With that, pulp production reached 1,562,000 tonnes in the last 12 months. I would like to remind you that the next maintenance stoppage of the pulp unit will occur only in 2022. Pulp production cash cost was BRL 776 per tonne in the period, 3% higher than the fourth quarter of 2020 due to the higher cost of chemicals and fuels linked to the higher prices of commodities and the devaluation of the real vis-à-vis the dollar. It's important to see that the cash cost of the quarter in dollars was $141 per tonne, stable quarter-on-quarter and 9% lower year-on-year. Going to Page #6. At the end of March 2021, Klabin's net debt was BRL 21.7 billion, a BRL 2 billion increase on a quarter-on-quarter basis. And this increase is explained substantially by the depreciation of the Brazilian currency vis-à-vis the dollar that affects our dollar-denominated debt. And leverage measured by the net debt-to-EBITDA ratio in dollars closed the quarter at 4x, stable in relation to the previous quarter within the parameters established in Klabin's financial indebtedness policy and consistent with the current investment cycle. Moving on to the next slide. The company's liquidity remains robust and ended the quarter at BRL 11.4 billion. The liquidity consists in BRL 8.5 billion in cash and the remainder in a revolving credit line. The average debt maturity between 2021 and 2023 period in which Puma II is still under construction is of BRL 1.1 billion a year, a comfortable level for the company. Average tenor for that maturity by the end of March 2021 was 128 months, approximately 11 years vis-à-vis 116 months by the end of 2020. Also, the company has credit lines available and not draw down, which are enough to finance the CapEx to be disbursed until the conclusion of Puma II, and the details are available in the release. Turning to Page 8. Adjusted free cash flow net of discretionary items and expansion projects was positive in BRL 303 million in the quarter. In the last 12 months, adjusted free cash flow was of BRL 4.5 billion, representing a yield of 17.4%. Now on Page 9, our sound operating cash generation combined with discipline in capital allocation drove up ROIC, which reached 16.5% in the last 12 months. This result, once again, shows Klabin's ability to consistently create value to its shareholders under the different economic scenarios and product price cycles. And the last slide, in an evaluation carried out on May 2, the first Puma II machine had 88% of the works executed, and its start-up is planned for the second half of July 2021. Since the beginning of the project, BRL 5.8 billion were disbursed. Out of those, BRL 497 million in the first quarter of 2021. In a material fact published on the 5th, we informed our decision to convert Puma II second machine in a coated board machine, which will have an annual production capacity of 460,000 tonnes, and the start-up planned for the second quarter of 2023. For more information on that decision, we have a presentation available on the company's IR website. Now Cristiano, all the other executive officers and myself are available to take your questions.
[Operator Instructions] And our first question is from Gabriel Galvão from Credit Suisse.
Congratulations for the results. My first question has to do with your prices. FOEX in China for hardwood was close to $610 per tonne on average, and your price was close to $530 per tonne, including domestic sales and export sales. So maybe you could talk about what impacted this discount in the realization of your prices in this quarter? And should we expect this to continue in the second quarter?
And the second one has to do with kraftliner and corrugated boxes. 1 tonne of corrugated would -- to be integrated and if we do this math for the fourth quarter, since the first quarter you were selling more kraftliner than it would be possible, 1.4 tonnes of kraftliner per year, 350,000 per quarter. So could you explain the reason for that? Is it because of third-party purchases of paper? Or what lies behind this discrepancy?
Thank you, Gabriel. Let's start by Nicolini, our pulp executive; and then Deganutti will follow.
Gabriel, thank you for the question. Our average price is based on our sales mix in all the regions. And what we understand is that for calculation of prices for the domestic market, in our viewpoint, there were some differences in the assumptions because of the PIS and Cofins taxes that were not removed from the calculation that at 9.25% in the price -- to the price. I would like to remind you that this was made public already. And another opportunity, we have 1/3 of our sales in the domestic market, and that follow the FOEX prices linked to the European prices. We have a participation in the European market, and the evolution of FOEX was lower vis-à-vis the price increases in China. But looking at the average prices and including the domestic sales, we see that prices were reached in their magnitude.
Thank you, Nico. Flávio Deganutti, Kraftliner and Corrugated Boxes. Gabriel, thank you. Klabin's balance sheet from the point of view of kraftliner has many elements. We are living a very special moment. We are about to start Puma II with a large machine for Eukaliner in July. But in Brazil, we also have the purchase of -- or the acquisition of paper, and this explains that because we are buyers as it does make sense from the geographical viewpoint and capacity balance, so this gives us a good equation.
Our next question is from Daniel Sasson, Itaú BBA.
My first question is about your strategy to fill up the second machine of Puma II with a volume of coated board as soon as possible. I would like to understand where you can have this upside coming from. So when this is going to happen? If you were actively trying to sign contracts for coated board volumes, what is the percentage of guaranteed volume that would make you happy and that would be nice for us to understand the potential of this change in the project's scope?
And my second question is about the pulp price. And also as a follow-up coming from the prior question, in addition to the spread between the fibers that you mentioned, also there is a spread between regions, right? Europe is $100 behind when compared to China. How much do you think this spread can be at? Do you think there is the possibility of Europe's price getting close to what we see in China today? Or maybe even because of seasonal matters or demand, do you think that China could start [indiscernible] and bringing the price down. If you can comment a little bit on that on these differences, I would appreciate.
Thank you, Sasson. Deganutti will talk about strategies on machine that we need.
Sasson, thank you for your question. We look at our historical basis and the coated board market is behaving very well, specifically virgin fiber, coated boards for industrialized food. When we do that projection, Klabin has already today a platform of 700,000 tonnes with its 2 coated board machines in Monte Alegre's unit. Only that and the organic base will allow us to have a significant growth at a rate of 2.5. When we do the same projection using what happened in 2020, in the beginning of 2021 as well, this growth in Brazil and all over the world was closer to 2 digits. The growth change, there is a huge penetration.
And once again, this is -- Klabin's -- as Klabin has 90% of its coated board portfolio in hygiene and food segment. And in 2021, the growth was over 26% for those areas. This way, Klabin is clearly looking for contracts and technologic coated boards such as LPB and COK for clusters packaging in the beer segment.
But also, we have an early demand that we were expecting for 2023. We are seeing in 2021 what we expected for 2023, a scenario in which the capacities entry for competitors is limited.
These curves are projected in scenarios, and they are in the presentation that Marcos mentioned a little while ago. So we see a good scenario for that market in terms of demand and acceleration that is significant according to the curves that we informed on May 5.
Thank you, Flávio. Now, Nico.
Daniel, thank you for your question. The prices in Europe are evolving consistently as you have seen in the latest indexes published by FOEX. In fact, there was a delay in the beginning of the year and the prices performance, but they are increasing, as I said, consistently in the past few months and even weeks. And we expect that this gap with China starts to close when they come down with the $1,090 that was announced. We believe this price will be applied and with implementation of $1,090, the gap will become of more or less $50 per tonne. That is -- there is still some room for possible price adjustments in Europe and in the U.S. if the demand allows it.
Marcio Farid, JPMorgan.
I have 2 questions. One, regarding pulp. Nico, how do you see the market in China? Recently, we saw price adjustments, some talks about the loss in margins, product -- producers of tissue. Could that impact negotiations in the next few months with the price levels that we have today in China?
The second question, on the paper side, we understand the rationale of the decision made about the second machine and the change in scope. But I would like to understand why now? And why wasn't it defined in 2019 when the project was announced? I believe it has to do with more favorable dynamics towards paperboard than kraftliner today. But could you talk about the level of confidence that you have in terms of paperboard? And do you believe that it was the best decision? Why was it made after the pandemic? Or was it made before the pandemic? And that's it.
Thank you, Farid. Nico?
Marcio, thank you for the question. What we have been seeing in China since mid-April is a leveling of the price levels. This is a natural process because of the speed and the implementation of price increases in China vis-à-vis other geographies. Nevertheless, we do not see a point of inflection right now because demand overall continues to be strong and market is -- market in Europe with a very good performance and the volumes contracted in China being purchased with no big problems, the U.S. market with a good performance and with price evolution for these markets. So we do not see any change at the horizon, at least not in the short run.
Farid, regarding papers and the strategic decision about the machine, I would like to start by a point that you raised regarding confidence. Plastic has changed -- migration from plastic has changed a lot in the last couple of years. Two of Klabin's businesses where we felt that very strongly -- I would even include a third one, but this is more recent.
In the last couple of years, bags, paper bags with a very strong demand to replace plastic, which motivates us quite a lot, and Klabin is very important in this market. And this is a strategic vision, and we feel very confident in our talks with our Board. The other one is coated board. Coated board for beer had a strong dynamic in the U.S., so migration from the plastic packaging or stretch packaging. And we see this in the small breweries not only in Brazil, but all over the world that really drove the market of coated board. And after that, the replacement of plastic came very strongly.
So putting all that in context, kraftliner is a safe haven for Klabin. Kraftliner is the product for the future of Klabin. I have already said that in other call that Klabin in the future vis-à-vis global players, Klabin will be the main or 1 of the 2 or 3 main players and producers of virgin kraftliner in the world. So I have no doubt whatsoever about that. And we can bring investment for kraftliner in another site of Klabin, investments that will be bringing benefit similar to the benefits achieved with Puma. And one of the main drivers of our investment in Puma II was the dilution of fixed costs, and we can replicate the model in other units of Klabin, for instance, for kraftliner.
The coated board market is a smaller market and it is limited. Only a handful of players, only a handful of buyers, very highly technological. By means of complex, high-end industrial complexes, industrial processes. And Klabin is one of the few global producers of LPB, for instance. But this specific machine showed us that not necessarily we needed to have, at the beginning, major contract.
And the effect in the last couple of years of plastic replacement gave us the necessary level of confidence, and as I answered the first part of your question. So we are very confident. We are very assertive regarding our decision. But we have to mention and remember that kraftliner is our safe haven, and this is what drives us to the future.
Okay. Just a follow-up, please. For kraft, do you have a more aggressive plan to become more relevant? You have been exporting even to the U.S., a market that was dominated by large local producers. So do you intend to grow kraft more aggressively and tapping into the opportunity that the plastic replacement is bringing to you?
Thank you. And the answer is yes. That kraft and the convertible bag is a product that is in our portfolio with more credibility than ever in terms of strength of the competitive differences of Klabin, and bags becoming more and more technological in order to really go after the competition and exceed the competition, go beyond them. And we have strategic debate with our Board to continue to have this in our portfolio.
Next question from the English room, Mr. Carlos De Alba.
If I may, on some numbers. Working capital, it reduced your cash flow generation this quarter as expected. How do you see that progressing in the coming quarters? Then SG&A is surprised to positively relative to our expectations. How do you see that also evolving in the next few quarters and years as the company grows? How much of the fixed costs will be diluted? And how much would increase just because the company will be bigger? And then finally, a very interesting chart on the return on invested capital. I see that you adjust for the construction in progress that clearly is not generating EBITDA right now, but you have already put money into it. In your modeling, what do you see a sustainable long-term after Puma II stage 1 and 2 your return on invested capital?
Excuse me, you should proceed answering in Portuguese.
My apologies. Thank you very much, Carlos. I need to remind you that this is the first time that I hear you perfectly, Carlos. I would like to congratulate everyone here at Klabin and our IR team because this is the first time that I really hear you perfectly. I will turn to Marcos. But before, I would like to make an observation -- a strategic observation on the SG&A.
I think this is a topic that goes with what I just said. Considering Klabin has projects that are focused in Paraná and Santa Catarina, at least in these cycles that we are analyzing now, these investments will come to dilute the fixed costs of Klabin. So I just would like to bring to you this strategic view, which is important, of value creation that offsets a traditional response in the pulp and paper sector, which is you increase the capacity and you increase the radius of purchasing wood. And this is also true, but Klabin is constantly increasing its productivity in forests and diluting its fixed costs. And these 2 things offset one another.
So now I'll turn the floor to Marcos.
Carlos, thank you for your questions. Now about the working capital, first, I would like to say that in the last 12 months, we reduced the working capital in BRL 1.9 billion. Oscillations among the different quarters are natural. We have also seen that last year. And structurally wise, Klabin will keep on working to reduce its working capital vis-à-vis the company's net revenue. This is our constant goal. And over time, we will be seeing the results. Specifically about the next quarters, we have an event, which is the start-up of the first machine of Puma II, which is going to produce Eukaliner and it will have an increase in the working capital because it has inventory and a little bit of receivables. But that does not change the trajectory of what we want in the mid and the long term, which is to bring down the working capital vis-à-vis the net revenue of the company. About SG&A, we also have seasonalities in the different quarters. But what Cristiano said, I think, is the main message here, which is, over time, with the company's growth, and we already have significant growth contracted right now with the start-up of Puma II. So SG&A per tonne or a percentage of net revenue will have gains over time. About our ROIC, in fact, we do have a part of our capital there that is not included in our accounts. And this is part of the capital that has been already spent in Puma II. When Puma II Project starts producing, we will have EBITDA, and this is going to be part of the capital allocated by the company. And we do not have a target that we can disclose.
But how do we see it strategically wise? The projects -- the large projects that Klabin carried out in the past few years. And here, I should mention Puma I and Puma II that is under construction right now. And the future investments, they have ROICs that is higher than Klabin's ROICs ex these projects. Therefore, we'll be seeing in a sustainable fashion an ROIC growth. But we also will have changes, oscillations among those quarters. It's not going to be a steep curve. It's going to have changes because of the product cycles. But if we analyze it in the mid and the long term, ROIC will be increasing, okay, when compared to the past.
Mr. George Staphos in English, Bank of America.
First question I had will be on Monte Alegre and the maintenance outage. And then this next question will be on the global outlook for containerboard. Gentlemen, can you talk about the outage this year at Monte Alegre? What the year-on-year cost difference was versus 2020? And for that matter, forgetting about timing here, but just in terms of the overall expense that would be incurred in a year, how does the Monte Alegre maintenance spending look for '21 versus 2019? And what did you do differently? And what are the implications for 2022? So increase or decrease in costs over those comparative periods, and what is it accomplished for Monte Alegre as we look out to '22? That's question number one.
Question number two, given our global model, we have operating rates in containerboard improving about 300 basis points in '21 versus 2020. Yet, we're seeing signs at least in the OCC market that the global market has maybe stabilized. What are you seeing early in the second quarter in terms of containerboard trends? Are you, in fact, seeing an increase in acceleration in demand for containerboard and pricing or are you seeing some stabilization? And if you can provide some color on that, that would be great.
Thank you very much, George, and Deganutti will help us here.
Okay. Let's talk about Monte Alegre and the stoppage -- the general stoppage. In 2020, we had an important situation in terms of the COVID pandemic. And due to this reason, we had to dedicate part of our work especially to the essential plant and reducing the number of people in the plant. And for 2021, this led to an increase or widening of the scope. So the way you should look at it is the average between what was realized in '20 and added to what was realized in '21. In 2022, it will happen after February and March this year as of the average values between '20 and '21. Now regarding the second question, I can add to that, if it was not very clear. The market has room for growth. The global containerboard market has room for growth. We see especially the U.S. market that you are very familiar with, and the market continues to have a very accelerated demand, higher than the capacity that came in, both there and in Europe. And what we see for the second half is stabilization closer to the end of the year. So we see a very benign scenario for the -- our capacity of Eukaliner as of July this year.
That's very clear. I just wanted to ask a point of clarification on Monte Alegre. Could you give us, from your most recent calculations or estimate, what the cost was in BRL this year versus last year?
George, this is Marcos Ivo. The numbers that we published, the stoppage of 2020 of Monte Alegre had a cost of BRL 30 million, and this year stoppage BRL 96 million.
Our next question comes from the Portuguese room, Mr. Caio Greiner, BTG Pactual.
I have a question for Cristiano. Now with the startup of the first machine of Puma II very close and having taken the decision about the second machine, we start thinking about what is going to be your next step for growth? Klabin's leverage because of pulp, obviously, is going to be close to 3x by the end of the year. And I would like to know if it makes sense Klabin start thinking or start preparing itself about -- in terms of a next investment round, even before concluding Puma II and understanding if the company could work in 2 different growths -- avenue growths? And also, can you share with us where do you consider to be the next project? You mentioned that inevitably, you probably will grow more on kraftliner. This is a project that you might be adding maybe an additional machine of long fiber in the South of the country and additional consolidation and M&A in corrugated box or maybe a new products such as a soluble pulp. I would like to know if you have any updates on that? And if possible, what would be the ideal leverage that you consider to be from this point on I can go for next growth stage?
Second question about corrugated box. We see that you were able to deliver 10% growth in the year net revenue, but one of your competitors was able to implement prices in 20% -- 25% in the quarter, that's relevant. We understand that Klabin's price implementation might be slower because the way that you were guiding the results, but we also see that the prices of OCC is going up in Brazil. It's over BRL 1,500 per tonne here. So what I would like to know is, does it make sense to wait for another round of 10% increase in the next quarter and then 10% in the following quarter? Are we going to see that type of increase that we saw in your competitor diluted in the next quarters?
Thank you very much, Caio. Okay. Let's talk about investments. We are not going to take our eyes out of our focus right now. We have a huge responsibility with the company. We want to start working very well with machines 27 and 28, period. There is no way about thinking -- there is no way that we are going to think about the sector a year before announcing anything. Everything in this sector, in this industry, we start thinking years before. And you can see -- that's because of the wood cycle. What I could tell you is that this is a constant conversation with our Board of Directors, this strategic view of the future, et cetera. But right now, our focus is on machines 27 and 28. We are dreaming about the future, but it will come in due time.
Douglas Dalmasi, our Packaging Officer is going to talk about the dynamic for corrugated boxes.
Caio, thank you for your question. Well, part of the answer you already have. We have a size where we have a greater share on key accounts. Therefore, the speed of our adjustments in price increases is different from the rest of the market. For the next few months in supply and demand, we expect that the second half of the year is usually strong. And that combined with the supply and demand going well for the year, we do not see new capacities coming in from corrugated boxes. OCCs, we do project that the costs for them is still high and stable at this high price. So we see price increases there throughout the year and also margin improvement for the rest of the year. We cannot disclose the level there, but we do see margin improvement from now on up to the end of the year as we are seeing.
Next question is from Mr. Rafael Barcellos from Santander.
I would like to talk about corrugated boxes. You continue to gain market share. Do you believe this will continue in the next few quarters? And what is the level of market share that we could expect by the end of this year? M&A, could it be a strategy for corrugated boxes, not only corrugated boxes, but maybe other areas of the company as well?
I will start by your second question, and then Douglas will talk about corrugated boxes. There is no M&A being evaluated by Klabin right now. What I always say to you is that, of course, we always pay attention to opportunities that might arise. And in the last few years, we made 3 acquisitions. International Paper was the most relevant, but we also made one acquisition in Manaus and another one in Paraná.
And the whole market share that we acquired by -- led us to increase even more, and the success story has to be reckoned with besides organic growth and besides our engineering capacity for organic growth, and our forestry and productivity gain in our forests for organic growth. Klabin is also a company of consolidation. And we are very proud to say that this happened, always [ respecting ] the markets and the partners, everybody, and we have been able to consolidate what -- and deliver what we promised. But there are no M&As being considered right now.
So Douglas?
Rafael, thank you for the question. Our market share with the acquisition that came to 24%. And as Cristiano said, we are always looking at new opportunities. We have this vision of integration whenever we have a project for paper, and there is a possibility for integration. And integration of International Paper was very successful. We have not lost any share. We maintained it. And this is the way we should go on, maintaining the share and looking at new opportunities and integrations.
Our next question comes from Thiago Lofiego from Bradesco BBI.
I have 2 questions. If you can comment more on the initiative of price increase for coated board? What do you already have? And what do you have coming for the next quarters and new initiatives for coated boards in the domestic market? And second question about cash costs for Puma I. What is the trend here? In the last quarter, if I'm not mistaken, it was BRL 770 per tonne. What can we consider from now on? Which are the variables involved? And what is the level that you are expecting for the next quarters?
Thiago, this the Deganutti. The Brazilian coated board market has huge demand. As I said initially, it's over 26% in the first quarter of this year. There was an inflationary pressure that is significant in the industrial costs as we had a price movement in January and other price movement in April. Today, we have a long portfolio, and this is going to be visible in the results of the second quarter of 2021.
Thiago, this is Marcos Ivo. Now about the cash costs for Puma I. We have pressure on chemicals and fuels, and on your -- understanding your vision, considering we have changes in the quarters. But if we analyze 2021 -- full 2021 and 2020, we should have a cost increase slightly higher than what we predicted in the first quarter of 2021 vis-à-vis first quarter of 2020 because our forest supply forecast for the next month, some increase of the third-party wood, and that implies on a greater average [indiscernible], therefore, again, implying higher costs of fiber.
And just to understand then, the cost was up 3% year-on-year in the first quarter. You're saying that in 2021, the average cost of '20 should be higher than 3%. Is that it?
Well, this 3% is quarter-on-quarter. And what I said is the first quarter of '21 vis-à-vis first quarter of '20. So it should be a little bit higher than what you were seeing in that comparison.
Okay. I'm sorry, I might be wrong here. But from what I see, it is 3% against the 3Q '20. I just would like to understand, it would be -- if it would be more than 3% or if I'm using the wrong number?
It is more. But look at the presentation we just showed. There is a specific number there.
Next question from Mr. Cadu Schmidt from UBS.
With a different focus now, could you quantify the magnitude of price increases that we could consider considering the spot price and the net revenue? You have already talked a bit about it, but we would like to better understand that. Along the same lines, Flávio, what about the price dynamics of paper prices in the domestic market in the last few quarters? For the historical levels, it was explained by the fast depreciation of the currency. But when could we expect a reduction in the spread?
[The interpreter apologizes, but the sound was very bad here.] The price carryover, Cadu, we cannot say anything about price carryover. And [indiscernible] will tell you the dynamics of the paper market.
Cadu, I'm going to talk about the coated board and the containerboard markets, which are the main ones. The [ board ] is very much contracted and the dynamic suffers the effect of the validity of the contracts or the time or the duration of the contract that we have signed with the main players and clients in the business, the kraftliner, has more [ loose, ] so to say, dynamic over the year. The gap will be closed gradually between export prices and domestic prices. And we know that we have a major increase in capacity that will be coming in line and correct the...
The Q&A session has come to an end. I would like to give the floor now back to Mr. Cristiano Teixeira for his closing remarks.
Now I would like to bring you our perception for the second quarter of '21. The flexible operating model and the favorable moment of market will allow Klabin to once again optimize its results. We should be delivering an even stronger growth in cash generation measured by the EBITDA in 2Q '21 and even stronger one if compared to the one that we saw in 1Q '21 vis-à-vis 1Q '20.
Klabin persists in its vision of growth and value generation in the long run. We focus on people, innovation and sustainable development. And more specifically, about sustainability, I would like to -- or sustainability, I would like to reiterate our commitment with the best market practices, and I highlight the company's engagement in the world climate change agenda. Thank you very much for your presence, and I hope to see you all in our next quarterly meeting.
Klabin's conference call has come to an end. We thank you very much for your participation and wish you a very good day. Thank you very much. [Statements in English on this transcript were spoken by an interpreter present on the live call.]