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[Interpreted] Welcome to Klabin's audio conference and good morning. [Operator Instructions] As a reminder, this conference is being recorded and broadcast live via webcast, and you may access it cast.comunique-se.com.br/Klabin/4Q19, where you also find the presentation for download.
Before you proceed, we would like to clarify the 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 mere assumptions based on the company's management's expectations in relation to the future of Klabin. Such expectations are highly dependent on market conditions on the overall economic performance of the country, of the industry and on international markets, therefore, they are subject to change.
With us today in São Paulo, Mr. Cristiano Teixeira; Mr. Marcos Ivo; and officers of the company. Mr. Teixeira will comment on the company's performance during the fourth quarter of '19. And after that, the officers will be available to answer any questions you might have.
Now I would like to turn the floor to Mr. Teixeira. Please, Mr. Teixeira.
[Interpreted] Welcome to the Klabin's results call for the fourth quarter of 2019. I would like to start reminding you, Klabin Day in November, you were there in person. And after that, thousands of people who have followed this deal on YouTube, when I said that cabin was at a strong phase of shipments of packages, especially corrugated boxes. The scenario that I commented then are -- everything is then reflected now in the fourth quarter, just like packaging. Our papers for packaging also had great volumes of savings, especially coated board, which, as I have been saying, are the main alternative products in the world to replace single-use plastic packaging.
We also had significant increases in the volume of pulp and kraftliner paper. I also would like to highlight the good works informative projects, with 20% of the first stage already concluded. As many of you know, this is our major ongoing projects. Therefore, what I would like to tell you is that Klabin's attributes such as operating excellence, cost discipline, the capacity to deliver what we promised and the credibility of being one of the most sustainable companies in the world that is always aiming for innovation and planted areas as well as innovation and product and solutions that are more sustainable. All of that practice and many others turn Klabin a flexible, dynamic company, with a wonderful potential to grow.
Now I turn the floor to Marcos Ivo, that will discuss the financial results. And after that, me and the other officers of Klabin will be available to address your questions.
[Interpreted] Thank you very much, Cristiano. Good morning, everyone, and thank you very much for being with us in this Klabin's conference call.
The last quarter of 2019 was marked by a good operating performance in all of Klabin's units, with some production in sales volumes, profit good levels and also the consolidation of the company's debt expansion profile.
Among the main highlights, I should mention the packaging net revenue totaling BRL 688 million in the quarter, up 9% in the annual comparison. The good operating performance of all units, which was reflected on the total cash cost per ton, down 2% vis-à-vis the same period of 2018. And the average debt maturity, which increased from 4 years in 2018 to 8 years by the end of 2019.
Now on Page 3. Total sales volume reached 927,000 tons in the fourth quarter of 2019, 8% higher than the same period of 2018. We should stress the growth in all of the Klabin's lines of business.
Net revenue in the quarter was BRL 2.7 billion, down 3% vis-à-vis 4Q '18. That was regard of the challenging price scenario for pulp and kraftliner, which was partially offset by a higher sales volume. Klabin, once again, thanks to its flexibility in products and markets, has increased its domestic sales market share in the quarter, moving from 53% in 2018 to 59% in 2019.
In the fourth quarter of the year, the adjusted EBITDA was BRL 965 million, with an EBITDA margin of 36%.
Now on Page 4, I will turn to our business unit highlights. In our third quarter call, we anticipated our expectation about the strong level of the pulp shipments for the fourth quarter of '19, which in fact, has happened. Pulp sales totaled 435,000 tons in the quarter, the highest quarterly shipment volume since our pulp units start-up in 2016.
I should also stress the domestic market share increase in pulp sales mix, representing then 29% of sales in the quarter. This performance is part of the distribution strategy after the termination of the supplying agreement with Suzano.
Because of the pulp price drop, net revenue for this unit totaled BRL 893 million, 19% down vis-à-vis the same period of last year. And paper and packaging, sales amounted to 492,000 tons in the quarter, a significant increase of 9% when compared to 4Q '18.
Net revenue of these business units were up 12% on the same comparison base.
Turning to Page 5. After a planned downtime for maintenance held in July of 2019, the pulp plant continued operating at a good pace, reaching a production volume of 413,000 tons in the quarter. We should mention that in 2019, the production volume was 1.542 million tons, 7% higher vis-à-vis 2018 and above the plant's nominal capacity, which is 1.5 million tons.
The pulp production cash cost in the fourth quarter of '19 was BRL 687 per ton, 2% down and 4% down when compared to the fourth quarter of '18 and the prior quarter, respectively. The dollar-denominated cash cost in the quarter was $167 per ton, which is a global reference.
Now turning to Page 6. The coated board market recovered ground over 2018, which reflected -- which is reflected in higher sales volume starting in the second quarter of the year. The recovery was consolidated in the last quarter, as we have already mentioned in the prior call.
In the fourth quarter of 2019, coated board sales were up 17% vis-à-vis the same period of 2018, totaling 193,000 tons. Growth was driven mainly by higher sales to the overseas market, up 35% in the annual comparison. The coated board unit net revenue was BRL 715 million in the quarter, 23% higher than what we had in the fourth quarter of 2018.
In the year, coated board sales were up 12%, and net revenue increased to some significant, 19%. Since 2018, Klabin is dedicating efforts to geographical diversification and new product development such efforts of more material results over 2019 and give us great expectations for 2020.
I now want to end this section about Klabin's savings operating highlights. And on Page 7, we will discuss some of the financial highlights. The company ended 2019 with a net debt of BRL 14.4 billion. The reduction vis-à-vis the end of September, can mainly be explained by the FX rate variation, which affects the dollar-denominated portion of the debt. Our leverage measured by the net-debt-EBITDA ratio ended 2019 at 3.3x, the same indicator in dollars, which better reflects the company's that, in our opinion, was at 3.2x by the end of the year, the same level of the prior quarter.
On the next page, we have our debt amortization is scheduled by the end of 2019. The main highlight on this page is the trend of the average debt maturity. A year ago, the average maturity was 4 years. Thanks to our liability management efforts over 2019, average maturity ended at 8 years in 2019. At the same time, the average cost of debt showed a slight drop in the same comparison base, and you can see the details in our release.
Also worth mentioning is the company's robust liquidity position, which, by the end of 2019 was of BRL 11.8 billion, against the loan maturities of approximately BRL 900 million a year from 2020 to 2022, significantly mitigating the risk of refinancing the company. These figures show relevant progress of our financial profile over 2019. The company is at a privileged level of liquidity and cost of debt, and we feel safe to move on with our expansion plans and as well our plans to create value for shareholders.
Now turning to next page. Adjusted free cash flow, excluding discretionary factors and expansion projects, was of BRL 679 million, thanks to a number of actions and financial discipline. Working capital in the quarter was down in BRL 383 million, and that is a structural reduction. The company expects no investment in working capital for 2020.
In 2019, adjusted free cash flow was BRL 1.4 billion, equivalent to an 8.1% free cash flow yield in the year, excluding onetime off and nonrecurring effects on the working capital because of the prepayment of fees and financial expenses, probability management adjusted free cash flow for 2019. And despite of the price scenario for pulp, would be similar to that seen in 2018.
The cash generation resilience reflects Klabin's business model, which is integrated and diversified.
On Page 10. Dividend in 2019, Klabin has said shareholders BRL 957 million in dividends and interest on equity. The amount represents a dividend yield of 5.4%. Dividends paid in the quarter totaled BRL 294 million.
On Page 11, as I promised in our Klabin Day, we will start reporting the company's ROIC, considering this is an indicator used by Klabin's management to make decisions on capital allocation. And despite of the challenging year in pulp and kraftliner markets, ROIC in 2019 was 11.2%. After an important change in the recurring level in the last decade, Puma II projects along with capital allocation discipline and constant search for operating efficiency improvements are driving the company's expectation to deliver higher structural returns in the next year -- or in the next years.
Finally, on Page 12, I will run my presentation with the development of Puma II project. In a survey from January 26, 2020, it was verified the product has reached 20% of the construction work for phase 1, in line with the originally scheduled for this project. About Puma's II CapEx in the 4Q '19, there was a total reimbursement of BRL 554 million in the year-to-date, disbursements totaled BRL 1.3 billion. For 2020, the estimated disbursement for Puma II is of approximately BRL 3.8 billion.
Now Cristiano or the other officers and myself, will be available to take your questions.
[Interpreted] [Operator Instructions] Our first question is from Daniel Sasson from Itaú de Valores.
My first question on pulp. I would like to know if you are seeing an impact on the demand on -- when you talk to your clients in the past few weeks. With the matter of the coronavirus in China and possible concerns about this problem in China. I think the investors are concerned about that. And are you going to have an impact in your logistics? We have seen news that this has been a little bit harder to send -- to the ship your production -- or production in general. So I would like to hear from you what's going on regarding this matter. Second question, about your paper business in Brazil. You have increased your paper share in the domestic market vis-à-vis total sales in the company that was significant in 2019. And if we compare here the box conversion business with the ABPO data, we see that you have gained market share over 2019. So if you can comment if you still see room to keep increasing that integration or gaining market share in the country? Or do you think that you are already at a good level of market share? And with that improvement and the demand of the domestic market that we are seeing in the margin, how are you working on price increases in the domestic market? But are you trying to do anything in the past few weeks? These are my questions.
[Interpreted] Thank you, Daniel. Well, to provide you the best answer possible, we usually have the officers of the different areas answering. So Soares, our Commercial Director for pulp, will address, and then your question about paper and corrugated boxes, Flavio Deganutti and Douglas Dalmasi will also answer.
Okay, Soares?
Daniel, thank you for your question. What we have seen in pulp after the coronavirus is that, so far, what we have seen in terms of board shipments similar to all events in the Chinese New Year. It is only natural that in the Chinese New Year shipments are down. But from now on, from this week on, will start seeing really how much coronavirus is going to be affecting for shipment, because in some areas the ports are closed and that could have some additional impact. And this impact is common in the Chinese New Year.
For our clients, in general, they are working normally, at 50% of our portfolio. The clients are working normally. They did not stop their plants, and part of them are coming back now on the sand. So these are smaller clients, and maybe they find problems to get products during this period. But it's not clear yet. We have seen a drop in shipment of course, boards are working with less people, and we have a limit in terms of proceeds. If people can use trains or barges, they keep receiving the product. But those that need trucks are facing problems. We will start really having more clarity next week where decision-makers will be back. Today, we have a hard time finding people that make decisions in the company. So I believe that in next week, we will have a better idea that in addition to a regular Chinese New Year how coronavirus is affecting the market at the moment.
Thank you, Daniel. This Flavio Deganutti from paper business. Yes, in fact, we did have a good performance in the domestic market, we can separate the year-end to relevant recovery was towards the end portion of the year, and that is still on in the beginning of 2020. The growth that we estimate for 2020 will be in line with the market growth. Not much more than that. There was a single exception, which is for the work in a very specific market, and which is the migration of other types of packages to ours. So I can highlight our growth in the club market, also in the market of coated boards that are used to package a can -- of beer cans and now softwood market that are directed for the food industry. Here, we do have a potential to increase clubbing share because these are very specific products, and we have them developed for specific applications as well.
Now I'll turn the floor to Douglas.
[Interpreted] This is Douglas, and thank you for your question. Now about packaging, we do not gain market share in the year. If you follow that up, initial quarters, we were looking for profitability gains, and we are following up the market growth. So in the first 9 months of the year, the market was more moderate. And in the last quarter, there was a strong growth so in general, in all areas, we did follow the growth, and we're able to improve our profitability.
Now also, related to that, we had no product, no market that have contributed to that profitability increase. So both for boxes as well as bags, we have had initiatives going on for a while. And now you're harvesting the fruits. For instance, boxes for the fruit industry, for the e-commerce and bag -- meal coffee bags, and these initiatives allowed us to gain margin profitability and also the price increase against inflation allowed us to gain profitability. But we did not gain market share.
Next question from Thiago Lofiego, Banco Bradesco.
This is Isabella. I have 2 questions. First, is a follow-up on the prior question about the price dynamics in China, do you see the possibility of a threat to have to your prices that you have recently announced for China? And how is the pulp demand in Europe, considering the strike of in the same Finland? Do you see an impact? Can you increase prices in the region. Although also, you have high levels of inventories in China? Or if you were going to have any type of replacement of the softwood by hardwood?
Second question, about Puma II. I would like to understand how is that potential decision to change the Phase 2 of Puma II to switch a machine, to replace a machine for a coated board machine.
[Interpreted] Thank you, Gabriela. I will start with Soares, who will talk about pulp, and then I'll come back and I'll talk about Puma II, okay?
[Interpreted] Hello, Isabella, and thank you for question. About China prices, the increase that we have announced of $20 per ton was implemented, we were able to implement part of that increase in the first week of February, with some players that were operating. And part of that increase is still being discussed.
It's difficult to find the decision-makers, as I said. But we do believe that part of the increase will be able to implement, but we cannot estimate, yes, it's going to be the whole $20. But I would say that it could be something like $15, and we are having difficulties to be able to deliver and invoice with a no price. So it's still too early to say the -- what we estimate right now is $10 to $15 out of the $20 announced.
About your other question on the Finland strike that is affecting European market. We see an improvement coming from the demand of our clients in tissue and so on. There was an improvement in the mood regarding the demand.
And on the other hand, also some pressure on supply because of this strike in February. And the hardwood, we do not see any room to talk about a price increase. Obviously, for March, the scenario could turn possible of a price increase for that, then that's going to be analyzing for February. And in the softwood, that's where we have this already advanced, there an increase of $40 an ounce. So let's see how much of that is going to be implemented in February.
So our volume of softwood in Europe is short is not high. But we are doing that follow-up. And I believe that in March, we might have some room for a price increase because of this strike in Finland. That's more or less how we see the market right now. February is stable and with a possible upside for March.
[Interpreted] Isabella, I would like to add to this question on the strike in Finland. Obviously, we see that, and we are observing what's happening, and we know that the industry in Finland is going through difficulties and we have been receiving constant requests and orders for paper, so that we can help the clients that are not getting supply because of the strike. Of course, we are going to do all we can to cater to these clients. So there is a demand pressure. Obviously, this is not a good reason for anyone, a happy reason, but we will be there to help our clients that we can.
Now about Puma II. That decision, the second machine, and let me just remind you, the 2 machines in the approved projects are for kraftliner machines, the first one, is the machine that we called Eukaliner. 100% eucalyptus in the product, already tested in several countries in the world, and very well accepted and the results that we had with clients that convert that to corrugated boxes.
The second machine would have higher weight that we could use the White Top Liner. And that machine, it has a period of time, established by our engineering team. And that's going to be probably in the beginning of the second half of the year. We have a date to start -- address that decision if this is going to be a core board machine or if it is really going to remain as the kraftliner machine. This is a clubbing discussion that is being held in a strategic fashion, taking into consideration market trends and market conditions. And as soon as we have any color on this subject, we'll be glad to share that with you.
Next question in English from George Staphos, Bank of America.
Two questions for you. One, on cost and fiber supply, and the other on global paperboard and packaging markets. Relative to the first question, gentlemen, can you give us some update on the mix of your own wood versus third-party wood over the next several years, particularly as Puma II comes up? And how your forest resource will be able to meet your demand needs, once again, over the next few years? And then in consideration of your longer-term plan for Klabin and the additional production and capacity that you might be contemplating?
The second question. Can you talk to us about what we would call exit rates into the first quarter in terms of demand and pricing trends for coated board and kraftliner? Particularly, as the global markets remain fairly mixed, are you seeing any spillover of weakness in the global market back to Brazil? Certainly from fourth quarter results, it doesn't look that way. But are you seeing any mix trends in the first quarter?
[Interpreted] George we are going to separate the answers. The first one is about the cost of fiber and a little bit of the supply cost and supply mix. And that's going to be with Marcos Ivo, and we also have talked to you that -- if needed, he will word his comments. After that, Flavio Deganutti will talk about the markets.
[Interpreted] Hello, George, and thank you for your questions. About the supply mix between third-party wood an own wood, Klabin has been communicating to the market already for a while, that we have increased our third-party share in the total sales mix. Using good advantage of good opportunities coming from third-party, with available buying that third-party wood and keeping Klabin's wood to supply Puma II. That increase of third-party wood in Klabin's mix has already happened, and this was already reflected in our mix of owned-fiber and third-party fiber. So that third-party share, third-party participation is already reflected in our costs.
So what we have to be careful is that within between quarters, because of the strategy of our forests, we might have an operation between our own mix and third-party mix. But in terms of our structure, and this is really what matters, we are at a very close level of what Klabin we will have in the next years. Therefore, the cost that we have is already the structural cost. And trying to completed this answer, when we analyze specifically the production costs for pulp, the company's expectation for '20 is that the cash cost for pulping has the same level of the one that we realized in 2019, adjusted by the Brazilian inflation.
I will turn the floor to Flavio, and he will give you the second answer.
[Interpreted] Hello, George. Okay. Now separating the 2 markets, so let me tell you about the coated board market. As this market, it has a very good demand and supply balance. But going back to my first position, let me tell the covenant explore shares of the market that grow more than the market as a whole. So we have specialty markets such as liquid package boards, markets that cater to cans and liquid packaging. So they have good demand. Therefore, we are optimistic in terms of future profitability.
Now turning to the market of container board, specifically kraftliner, we are coming from a long series, and then that's because of what happened to the pulp market and also a downward pressure. Therefore, we had signs of stability by the end of the year, but it's still with a few pressures. But in terms of supply and demand balance, we are clearly at a limit situation, a limit position, okay? Of course, we have a Brazilian recovery here in the market and also, we have increase in exports. This does not deliver in the first quarter a price recovery, but it is bringing a moderate optimism after the second quarter and on.
[Interpreted] Next question from [ Gabriel Valvant], Credit Suisse.
[Interpreted] Congratulations on your results. I would like to follow-up on the first question. What is your strategic position to tap into the possible growth over 2020, considering the Brazilian economy, if you need to deliver Puma or if you have any additional conversion, greenfield projects to work -- to consolidate in the sector? Since 2018, we've seen news in the media that IT would be willing to sell their assets here in Brazil. I don't know if you consider those possibilities? And if you can also talk about your idle capacity per segment, that would be interesting? And my second question is about the capital structure. Do you have any additional plans for deleveraging in case your leverage increases and goes over 5x net debt over EBITDA? Are you considering any assets in EFI.
[Interpreted] Thank you very much, Gabriel. Well, I will start with the first subject, which is the integration of PUMA, this is something we have already discussed a few times in the past. I will say, I will call it Puma I, the pulp paper -- pulp plant. This is a market plant, plant for the market. We have no plans for integration. We are very happy in that market, and we are paying attention to growth possibilities in the future. Therefore, there's no integration for Puma I. What we do have is the no pulp line, which we are calling Pulp IV Puma II. This is integrated and paper machines. And then yes, Puma II is going to be 100% integrated and paper. Puma I is market sales, and it's going very well like that.
Now about the Brazilian economy. We are attentive, we are paying attention. We are preparing ourselves for that. We have already recovered some of our activities and plants that we're working wood reduced shifts in the third quarter of last year. All of that is at full speed. And we feel that trend that we have seen and the end of last year, the trend is still there. Therefore, we have a design ready to cater to the recovery of the Brazilian economy, we are confident the shipment of corrugated boxes last year in Brazil will hit a record CAGR, over BRL 3.6 million of corrugated boxes up. Brazil is still having installed capacity to meet the demand of a small growth. But Klabin and other players as well, of course, will be paying attention to investment possibilities in the industry.
About the consolidation. I think it's more of the same. Klabin has to analyze any corrugated boxes assets, either in Brazil or in Latin America, we are always paying attention to integration possibilities. But right now, obviously, we are doing a -- going on a important investment cycle in the company. And it's not simple to have an M&A in a moment like that. Therefore, yes, we look at it. But there are major difficulties to make sure that we would hold an M&A nowadays.
[Interpreted] Now this Marcos Ivo. About leverage. I know this is an important indicator. But we always look at leverage side-by-side liquidity and debt profile. So right now, Klabin has the longer debt profile in its history. We have an average debt maturity of 8 years. The company sees a good window of opportunities in the capital market in Brazil and abroad. Last year, therefore, we were able to reach the average debt maturity of 8 years. We have a robust liquidity position that can chase the next 5 years of maturities. And on top of that, we have formative projects already fully financed. These are funds we have not diversed yet, but they are already contracted therefore, we are safe, we feel safe about our capital structure in the company and we denote foresee is an area if the company will be at a risk and having to reevaluate that.
[Interpreted] Next question from Thiago Ojea from Goldman Sachs.
[Interpreted] I would like to follow-up on the debt. Now we are going to have an increase in Puma II expenses, it's going to be threefold more, right? So my first question is, what is your understanding for cash generation this year, considering we are going to start at a lower pulp price having to offset the higher expenses? So what do you foresee for cash flow generation this year? And also still in the financial area, of course, there was an important extension on the maturity profile of the debt. But I'm curious, in the fourth quarter, the expenses with financial expenses were reduced. So what do you foresee for the next years in terms of modeling of these debts?
[Interpreted] Thank you, Thiago. Marcos Ivo is going to answer your questions.
[Interpreted] Hello, Thiago Let me address each one of your questions. Well, the company does not provide guidance for cash generation. The first line of cash flow, the EBITDA depends on price, on the FX rate and each one of you know and you have your own projections. What I mentioned in Klabin Day is that some of the lines of the cash flow, we will have improvements in some of them, clearly, in 2021. When they were compared to 2019, one of them is maintenance CapEx of Klabin. And at Klabin Day, we gave you a figure. We foresee that Klabin's CapEx, as is not considering Puma II, at BRL 900 million in 2020, which is lower than the level of 2019.
I also mentioned in Klabin Day that the line of cash of interest received in 2020, also is going to be lower than in 2019. Considering 2019, that line was affected by that liability management work we did, you have some expenses, onetime off expenses. And in the income tax in the company's planning, they have monetized and a higher amount of credit in 2020. So in despite of not giving you the guidance for the bottom line in the cash flow just by these 3 topics I mentioned, I can tell you that we expect improvements for 2020.
About the accounting results for reducing financial expenses in the fourth quarter, that was affected by the FX variation. So part of our debt of [ 70% to 7% ] is a dollar-denominated debt, and the final dollar in the third quarter was [ $4.16 ]. And by the end of the year was [ $4.03 ]. Therefore, we have a financial revenue that brings down the total financial expense. But this is a matter of our competence, this has no cash impact. The cash impact is what I mentioned when you compare that to 2019 to 2020.
[Interpreted] Next question from Marcio Filho JP Bank.
Most of my questions have already been addressed, but I have one about Puma. The figures that we have seen for the fourth quarter were some ones about production and lower costs. And obviously, that comes from a comparison of a weaker third quarter. But I would like to understand, if we can expect a run rate of over 1.6 million tons that we have seen in the fourth quarter as a new normal? And also, the cost level that you have reported in the prior quarter, can we take it as also the new normal from now on?
And a final question on pulp. We have seen Klabin storing 5, 6 days of the pulp. The level of inventory that you have today is already an ideal level? Or do you have a possibility process generation and the working capital? These are my questions.
[Interpreted] Thank you, Marcio. So let's start answering what Marcos Ivo. He is going to talk about cost and if needed -- our business unit can also answer any parts, if needed.
[Interpreted] About the cash cost of pulp, we expect that the cost in 2020, vis-à-vis 2019, and then I'm talking about annualized costs, not analyzing quarter. Because when we look at the quarters, we have seasonality, general downtime, the change base, client seasonality that also affect the wood. So my answer, to be very clear is comparing the cash cost per ton realized in 2019, vis-à-vis what we expect for '20, we expect the same level of costs and added the Brazilian inflation at the most.
Francisco Razzolini will talk about production.
[Interpreted] And thank you for your question. About the operating performance of Puma, we are still going strong. We expect production this year keeps up the pace of the last quarter of 2019. And remember that in the last quarter, we had -- or last year, we had a 12-day downtime, and then has to be discounted from the annual projection.
[Interpreted] About inventory levels, Soares will comment.
[Interpreted] About inventories, today, we have the inventories at normal levels. Last year, we had a reduction of 5 days, as you mentioned. We built inventory levels in Europe, so that we could cater to our clients there. Therefore, we have our inventory levels balanced out, ready to cater to our clients, and our inventory levels today are more or less at 15 to 17 days, which is a normal level of operation for Klabin, considering our exports level -- or levels nowadays.
[Interpreted] Next quarter from Gabriela Cortez, Banco do Brazil.
Most of them have already been addressed, but there is one thing that I would like to go deeper. The strategy for corrugated boxes for 2020 is still to grow market and focus on profitability? I would like to confirm that.
And about the sales percentage of pulp in the domestic market, you are working to increase that percentage rate. And so I'd like to know if you are going to maintain that strategy for 2020. Can you tell me the margin difference between these products that are sold in the domestic and the overseas markets, so that we can understand, if we have a margin gain with that increase of sales in the domestic market?
And finally, about the yield management in 2019, do you still have anything for 2020? Or are you considering that you are at an optimum level?
[Interpreted] Gabriela, please, I would like you to repeat the beginning of your last question. You asked about corrugated box, and another one about the pulp mix. And the third one, we could not hear very well.
[Interpreted] The third one is about liability management. You already worked on it in 2019. And I would like to know if for 2020, do you have anything else that you were going to do there? Or if you are your optimal level?
That's it.
[Interpreted] Perfect. Well, I would like to apologize about this rotation in answers. I don't mean to get you all confuse, but the idea is to have you hearing information from the others that run the specific business units.
So I will start with Douglas, and then I'll turn the floor to Soares and Marcos Ivo, again.
Hello, Gabriela, This is Douglas, and thank you for your questions. In January, we were at a base that is very similar to last year's and we should maintain our strategy for last year, which is to keep up with the market growth, without market share gain. As far as prices are concerned, last year, we have already a recovery above inflation. This year, we expect to keep up with inflation label. So that is to follow-up on the inflation of the year. The profitability gain might come from a market niche growth.
Like I said -- like we mentioned in the Klabin Day, we believe that they will bring us at a value and better profitability.
[Interpreted] This is Soares, and I will address this question about the pulp domestic market. What we foresee right now is that we have reached the level of sales in the domestic market that is going to be very close to what it was in the fourth quarter. Therefore, we do not see any major changes in that share of the domestic market except in the fluff and softwood products because they have a higher impact in terms of exports. And with the Finland strike, we believe that we might have a stock out. And there is an opportunity to gain market share, whether in fluff or bales or softwood. But in hardwood, we foresee a -- we don't see any substantial changes vis-à-vis fourth quarter. About margins, obviously the domestic market allows us to have a better margin because we do not have international expenses and spreads that we have with clients in Europe. We have more economic freights here in Brazil, and this is priced by [indiscernible]. Therefore, it is the same European price with the lower expenses. Therefore, we have a better margin condition when compared to the international market.
[Interpreted] Gabriela, this Marcos Ivo. About the liability management. In 2019, we hired over BRL 25 billion in financing. We have access to different sources of Brazil, a broad capital markets. And that has resulted in a high bar today, our average maturity debt of 8 years at a very competitive cost. Klabin's treasury area is paying attention to the financial market. And they do that every day. If any opportunity arises, we'll go after it. But it's very challenging because we are in a very good level right now.
[Interpreted] Next question in English from George Staphos from Bank of America.
A question on the packaging and e-commerce for Flavio and then Douglas. When we've seen e-commerce grow as a percentage of the market, we've seen a multiplier sent on box shipments. Certainly, that was the case in the U.S., and I think there's some degree in Europe as well. What would you estimate is the percentage of e-commerce right now in the Brazilian market as a percentage of the overall targeted market? And do you have enough capacity in corrugated to supply what would be an accelerating rate of options if e-commerce really picks up in Brazil as it has elsewhere? That's my primary question. And then secondly, could you update us on what might be your worst-case leverage ratio from where it was in prior presentations as we get through the Puma II investment cycle.
[Interpreted] George, thank you very much for your questions. I will start. You mentioned Flavio he is just by me, and he will add to the answer, and Douglas also may help us. But let me tell you a little bit about our vision and about our expectations regarding e-commerce in Brazil. Klabin have been preparing itself in a very expensive fashion to this new reality which is already established as are the e-commerce sales with a 2-digit growth percentage-wise and total retail in Brazil, although this is low. And Klabin some funds at e-commerce, directly with our clients, is one of them. They define and -- the large clients define how we are going to supply them and see their own website. We also have the largest e-commerce partner in Latin America, that's exclusive partner of Klabin. And we supplied the largest company, largest e-commerce company with the box, we send them the boxes so that they can cater to their own clients and ship their products, but also the partners sell plain boxes in the marketplace. And they sell those boxes for anyone who's interested.
Also, we have what we call the apple of our eyes, as we say, it's Klabin For You. This is a new sales channel that is fully ours, that was a successful back. Four young guys left Klabin and they were tutored by our packaging offers in order to create a sales channel. And I would like to invite you all to access that website, it's klabinforyou. And we are showing there how much we value this business in the future.
So now I'll turn the floor to Flavio and Douglas, to see if they have anything to add. Well, but I think they don't have anything to add. Well, but if you are not happy about my answer, we can come back to it. But just to bring this trend and this vision. We do see a huge potential to grow vis-à-vis the traditional retail and especially with the consumption of the corrugated boxes.
I will turn the floor to Marcos Ivo now, and he will answer the other question.
[Interpreted] George, I would like to remind you that the debt profile of Klabin, which you already mentioned and also, Puma II is already fully financed, with signed contracts for phases 1 and 2. Also, as a reminder, I should say, that Klabin has no covenant in its financial debt. And despite of not giving a specific guidance for a worse scenario in terms of leverage. Our projections show that in a greater stress scenario, leverage in this growth cycle would be much lower than the peak that Klabin has had during Puma's I construction.
And we also believe that based on our projections, we'll go through this investment cycle without no downgrading in our ratings, at the ratings agencies.
[Interpreted] Excuse me, if there are no further questions, I would like to turn the floor to Mr. Cristiano Teixeira for his final remarks.
[Interpreted] Very well. Now I will tell you a little bit about my perception for the first quarter of 2020. The strong shipment of paper packaging that we have seen by the end of 2019, it should be maintained, providing us a good expectations in the beginning of this year. As far as the international markets is concerned, the stabilized FX rate will allow us to have good exports. And also, we expect to have a beginning of price recovery in the product portfolio of Klabin. I would like to stress that we are still confident on our path, that is focused on innovation, sustainability and discipline. Thank you very much, and see you in our next call.
[Interpreted] Klabin's conference call has ended. Thank you very much for your participation, and have a nice day. Thank you.
[Portions of this transcript that are marked [Interpreted] were spoken by an interpreter present on the live call.]