Klabin SA
BOVESPA:KLBN4
Earnings Call Analysis
Q4-2023 Analysis
Klabin SA
Over the past year, the company has grappled with declining revenues and challenged profitability. Specifically, the company faced an 11% year-over-year decrease in net revenue in the last quarter, arriving at BRL 4.5 billion. The drop stems primarily from lower pulp and kraftliner prices combined with the Brazilian currency's appreciation against the U.S. dollar, which was slightly offset by higher sales volumes. In the face of these market conditions, the adjusted EBITDA also decreased, excluding nonrecurring effects, landing at BRL 1.2 billion for the quarter with a margin of 36%, reflecting a broader annual trend with net revenue down 10% year-on-year to BRL 18 billion and an adjusted EBITDA margin of 35% for the full year.
Despite overall revenue and margin pressures, the company succeeded in maintaining steady performance in certain segments. For the fourth quarter, pulp sales volume reached 412,000 tons, with a significant portion, 96,000 tons, attributed to fluff at an average price of $902 per ton. This performance underscores the high added value of longer and fluff fiber products. Coated board sales volumes grew by 11% year-over-year, and the company achieved an 18% revenue increase within this segment. Looking at the full production cash cost for pulp, it was down 1% from the previous year, indicating modest improvement in operational efficiency.
The adjusted free cash flow for the company was robust, reaching BRL 3.1 billion with an impressive free cash flow yield of 13.3%. By year-end, the company held a net debt of BRL 20.2 billion. However, the liquidity position remained strong at BRL 13.1 billion, which includes cash and an undrawn credit facility. This financial capacity enabled the company to approve the payment of interest on capital and dividends, signaling a confidence in its cash-generating abilities despite existing debt levels.
Klabin has managed to maintain its environmental stewardship, retaining its position on the CDP's AAA list as the only Latin American company with such a rating, and inclusion in the Dow Jones Sustainability Index and B3's ISE. These environmental accolades, along with strategic long-term contracts and the clarity provided by recent disclosures, suggest that the company is aligned with best practices and transparency in its sector.
Moving into future expectations, the company is betting on increased demand and the ability to optimize its production capacity. The demand for corrugated boxes showed a growth trend since the fourth quarter of 2023, indicating a positive start to 2024. Furthermore, the company is focused on the ramp-up of Paper Machine 28, which is expected to contribute significantly to the production of coated board, with no reliance on third-party purchases. As for the incremental EBITDA guidance, the expected higher dilution of fixed costs was not accounted for in the current projections, which leaves room for potential positive adjustments, particularly considering the cost savings not included from the Caete project. The executive conversation signaled a confident stance on achieving greater production efficiency and the delivery of major projects like Figueira and the acquisition of forestry assets.
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Good morning, and welcome to Klabin's conference call. [Operator Instructions]. As a reminder, this conference call is being recorded and being broadcast simultaneously via webcast and can be accessed through Klabin's Investor Relations website, where you can also download the presentation. Any statements that might be made during this conference call in connection with Klabin business outlook, projections, operating and financial targets and potential growth should be understood as merely forecasts based on the company's management and expectations in relation to the future of Klabin. Such expectations are highly dependent on market conditions, on Brazil's overall economic performance and on industry and international market behavior and are, therefore, subject to change. Present with us today are Mr. Cristiano Teixeira, CEO; Marcos Paulo Ivo, CFO and IRO and the company's officers. Initially, Mr. Cristiano Teixeira and Mr. Marcos Ivo will comment on the company's performance during the fourth quarter of 2023. After that, the company officers will be available to answer any questions you might have. I now turn the floor to Mr. Cristiano Teixeira, Mr. Teixeira go ahead.
Hello, everyone. Welcome to our conference call to discuss fourth quarter 23 earnings results. In the last call, we tried to change a little the format, making it plus bureaucratic stop reading attacks on my end. So I will show you the slides, basically reporting on our markets, on Q4 and obviously, the full year of 2023. And then Marcos Ivo will give you more detail on the financials. And at the end, in my closing, entering the Q&A, we will bring you what we call a panel of trends or the trends. And then I will be highlighting those trends. So at the end, I will be presenting one final slide. All right, for starters. What do we see in Q4? We can see the layout of the slide, which has to do with what we try to explain to you, showing the several markets in which we operate. And then we have all of the company's officers here, and we can give you more detail on pulp, on paper, the different types of paper, and we can speak about the different characteristics of coated board and liner and packaging paper. We discussed this internally, whether we were going to totally change the way in which we communicate with you taking into account how the U.S. market communicates with the market there. They talk about the consumer market as they call it, and then all coated boards and corrugated boxes integrated with papers and then the fibers. We discussed whether we should adopt that model, but we decided not to. So I don't want need to be surprised. We are not going to be doing this not today, not in the future. So how do we want to communicate with you? We would like to adopt this format that you can see on the screen. So we have the traditional verticals or colors of the company. Here, we're not specifying the forestry area given the characteristic of supplying these business pillars. It involves efficiency and cost. And here, we try to give you more of a market view. So I think that this is a debut reinforces what we tested in the prior call to start talking to you, talking to the market in this way so that you can understand how Klabin operates in our one-to-one conversations. Our goal is to communicate with you. So this was the main comment regarding the format of the presentation. So let's start talking about the full year 2023. What I would say is this, despite 2023; we had a good performance in 2023. The comment here is that there was an expectation -- can we have the 2023 slide on the screen? There was an expectation that in 2023, we would have faced perhaps a U.S. economy doing more poorly in the end of 2022. That was what was expected for 2023. So we were more concerned about 2023. But that didn't materialize at least not in the American market. But when we go to Europe, perhaps the European market was a little worse than expected. And I'm talking about expectations in the end of 2022. So we were thinking about a recovery from the Covid pandemic. But anyway, the U.S. market did well, and I'm being very matter of fact. As you know, Europe is slightly worse than what we imagined. In China, still with a lot of doubts, but a market that during 2023, they had to cope with average salaries that attempt of deflation more towards the end of 2023. And that gave us a result in terms of that first cycle of deflation of food and this was added to agriculture yield. So that caused the deflation more towards the end of 2023. So we started 2024. And despite the year of 2023 being better than expected, at the end of the year, we were still very concerned. In the radar, we had fiscal or tax concerns in Brazil. But in the end of 2023 and forecasting for 2024 and our budget activity with all that concern and with the U.S. market, not yet feeling the recession that we thought they would go through we thought, “Okay, the other ones have had problems.â€We still have in our radar some concern about Brazil and the United States. So in our budget, we considered all of that. Thinking about the end of 2023 and start of 2024, what we see is the United States still like waiting in Brazil better than what we expected in the short term. So we have a positive feeling at this point. So now I'm going to try to address the slide on your screen. Volumes, as you know, this volume of 3.7%. Total sales, we started 2024 for the ramp-up of PM28. There were difficulties in during the presentation, you'll be able to see and ask questions about it, but the ramp-up of PM28, there is the production ramp-up for the machine that can also be used for kraftliner. When you talk about 100% coated board, we have the approval of these products. We are at a very good pace of approval of these products. That will require more detail, but I'll leave that for the Q&A with our officers and the slide will help us. There is BRL 1.95billion for the paper market. If we work specifically at coated boards, 705,000 tons, we are talking about a PM that is not included in the snapshot. We have 460,000 tons of capacity. That's a little smaller than that due to general stoppage, but we have between 440,000 and 450,000 of net sales. On top of these 705,000 tons that will start being produced by Klabin in 2024. And this is already happening. Likewise, now I'm going to move to packaging, which is the third group. We have 1,600, 000 tons. And here, we can expect -- Again, I'll leave all the details for the Q&A with our officers. But we started 2024 with a very positive expectation for the Figueira project, which is totally on budget, on time; it's all going according to plan. And this will add capacity for 2024. Like I said, I will make some comments more towards the end about the panel of traffic lights, let's call it. The trends we are identifying, Marcos, myself, with the management and the Board. Well, we want to be more and more transparent with you. We want to be more and more objective in communicating with you, showing the markets where we operate and as we improve transparency and as we improve your understanding of our business, we tend to be closer to you in terms of our expectations for this year and for the coming years. So I'd like to end this introductory part, thanking our investors, Klabin management and the Board for your support. I think that we had a year where we focused on one on efficiency and productivity. We were still delivering some projects. We set the stage for 2024. 2023 was a year to work for 2024. Executing the year, but with 2024 with a strong 2024 in our radar in terms of efficiency and productivity. So we have a lot of reasons to thank all Klabin employees, our management, our Board of Directors, for our success in 2023. And in terms of what we planned, executing in 2023, well, to have a 2024 even better. Well, that expectation is materializing for us in the beginning of January due to market conditions and to our productivity. Things have been shown to be better than what we expected. I would like now to turn the floor to Marcos Ivo to explain the financials in more detail.
Thank you, Cristiano. Good morning all. Thank you for following our conference call. On Page 5 of our presentation, net revenue in the fourth quarter was BRL 4.5 billion, down 11% year-on-year. This drop was due to reductions in pulp and kraftliner prices as well as the appreciation of the Brazilian currency against U.S. dollars, which was partly offset by higher sales volumes. Adjusted EBITDA net of nonrecurring effects was BRL 1.2 billion in the fourth quarter of 2023 with a margin of 36%. Now on Slide 6. Sales volume over 2023 totaled 3,666,000 tons, down 5% versus 2022. This reduction is explained by the market stoppages in containerboard production. Net revenue was BRL 18 billion in the period, down 10% year-on-year. This drop is explained by lower pulp and kraftliner prices, the appreciation of the Brazilian currency and also lower sales volume. As a result, adjusted EBITDA in 2023, excluding nonrecurring effects, was BRL 6,259 billion, a margin of 35%. Slide 7. Pulp sales volume was 412,000 tons in the quarter. The highlight was fluff, which had record sales volume reaching 96,000 tons. The average price of long fiber fluff driven by fluff was $902 per ton in the period, accounting for a spread of $319 over short fiber. In 2023, this spread was $392 per tons, showing the high added value of long and fluff fiber. The cash cost of full production was BRL 1,318 per ton in the quarter, down 1% on the same quarter in 2022. In 2023 full year, the cash cost of pulp was BRL 1,338 per tons. On Slide 8, in the coated board segment, we highlight the ramp-up of PM28 and the benefit of this investment on the company's results. In this context, the volume of coated board sales was 198,000 tons in the quarter, an increase of 11% year-on-year. Net revenue in the coated board segment grew by 18% compared to the same period of 2022, reaching BRL 1.1 billion in the quarter. In 2023, net revenue from coated board reached BRL 3.9 billion, an increase of 11% compared to the previous year. Paper Machine 28 produced 162,000 tons in 2023. Of this total, 49,000 tons was coated board. For 2024, we expect and confirm total production from PM28 amounting to 350,000 tons. Moving on to Slide 9. The total cash cost per tons was BRL 3,000 in the quarter. Accounting for a 12% reduction compared to the same period of last year. In 2023, the total cash cost was BRL 3,133 per ton, the same level as in 2022 and below the guidance previously given by the company. This result reflects the performance of COGS per ton and general and administrative expenses, which fell significantly compared to the same period last year. As a result, we confirm the fourth quarter cash cost, the reduction in general and administrative expenses that we had shared with the market as well as the positive impact of the increase in production volume of PM27 and 28, which contributed to the greater dilution of fixed costs. Moving on to Slide 10. Adjusted free cash flow, which disregards discretionary factors and expansion projects, was positive by BRL 820 million in the quarter. In 2023, adjusted free cash flow reached BRL 3.1 billion with a free cash flow yield of 13.3%. Turning to Slide 11. Klabin ended 2023 with net debt of BRL 20.2 billion, a reduction of approximately BRL 700 million compared to the previous quarter. This reduction is substantially explained by the positive effect of the appreciation of the real against U.S. dollar on foreign currency debt with no material cash effect in the period. As for leverage, measured by the net debt over adjusted EBITDA ratio in dollars ended the quarter at 3.3x within the parameters set in the company's financial debt policy. Moving on to the next slide. Klabin's liquidity remains robust and ended the quarter at BRL 13.1 billion. This liquidity comprises of BRL 10.7 billion cash and the remainder in an undrawn revolving credit facility. This cash position already reflects the funds in U.S. dollars that will be used to pay for the Caete project scheduled for second quarter 2024, as mentioned in the material fact of December 20, 2023. It is worth remembering that the closing of the Caete project still depends on the usual conditions precedent in this type of transaction. The average maturity of the debt at the end of 2023 was 94 months at maturities over the next 2 years totaled BRL 2.8 billion. Turning to Slide 13. According to the advisory to shareholders published on December 14 and yesterday, the company approved the payment of interest on capital and dividends, which together account for BRL 363 million to be paid on February 26. On an accrual basis, the proceeds distributed to shareholders in 2023 totaled BRL 1,340 billion. This amount accounts for a dividend yield of 5.7%. On Page 14, I would like to highlight recent achievements on the ESG front, which make Klabin one of the most recognized companies in the world for its sustainable performance. In this context, yesterday, we announced that Klabin is still on the CDP's AAA list and is the only company in Latin America to achieve such rating. For the fourth consecutive year, we have also been included in the select global portfolio of the Dow Jones Sustainability Index as well as being part of B3's ISE. And now Cristiano, other officers and I are available for the question-and-answer session. And at the end, Christian will come back to comment on the trends for the first quarter of 2024.
[Operator Instructions]. Our first question comes from Rafael Barcellos with Bradesco.
My first question is about the boxes market. I'd like to get more detail regarding the demand for the year. What has been the start of the year until now? And Project Figueira will start later on in the year. I'd like to understand how the start-up of the project can impact the market this year? And how the start-up of the project can affect the cost of the corrugated boxes unit. Second question is about the kraftliner market. We have seen kraftliner prices suffering for a while now. And Klabin for a while now has been talking about the strategy of integrating more kraftliner, some market stoppages. I know that you mentioned about the general feeling of the market in the beginning of the call, but it would be interesting if you could elaborate on the supply-demand dynamics for kraftliner in 2024. When do you think we can start expecting a better price dynamics?
Rafael, this is Douglas. We saw domestic demand for corrugated boxes growing since Q4 of 2023. And when we see this economic behavior, declining interest rates, income for consumption increasing, the population's income level of confidence of consumers improving, we see the packaging market moving ahead. It is like a thermometer of the economy. In January, that was the pace, a strong pace in January, and that's what we're expecting for the year. If the Brazilian GDP behaves in the same way in 2024, if we have the consumption economy getting stronger and consequently, retail getting stronger. Normally, historically speaking, the packaging market will grow above GDP, at least 1 percentage point above the GDP, and this is what we're expecting for 2024. As for the Figueira project, it will start operating in the second quarter of 2024. On one hand, we're seeing that we got it right in terms of approval and startup date. We got it right, the right timing. It's our merit. It will start up in 2 stages, on 2 corrugating machines. We have the expected number of tons. We could increase to 100,000 tons or we don't want to have any stoppages. So we want to perhaps have 240,000 tons when it's in full operation. For Figueira this year, we're going to have only 70,000 tons additional because the second machine in semi conversion equipment will start operating more towards the end of the year. And next year, yes, we'll have full capacity. So consequently, we won't see a relevant reflex of cost reductions this year because we won't have a full production yet. We don't see this reflected in the conversion cost.
Regarding the prices, we have been talking about stability starting in Q4 '23. In Q4 2023, we started seeing some price stability and a slight demand increase. In the last call, we spoke about a balance between supply and demand. We started seeing a correction of inventories. In 2023, we did suffer with high inventories. So we got to Q4 with balanced inventories and a slight improved demand. This is the same process that we see in January. We have a portfolio of orders, which is quite robust, advancing into March, which shows that the demand has shown signs of recovery. A part of that is for logistical reasons of some markets being difficult to be accessed. And this is opening up some additional opportunities for us. As for prices, naturally, as demand improves and with more aligned inventories, also regarding the U.S. economy, we have heard and seen some U.S. competitors also reporting improved demand and an expectation of growth in 2024. And I guess that with all of that, the impression we have is that Price increase is expected for Q2. Direct conditions are there for us to start talking about the price recovery. Still at a modest level, but we are leaving behind a scenario of stagnated prices. We're living that behind us. This is what we see Rafael.
Next question comes from Daniel Sasson with Itaú BBA.
I'd like to congratulate the company on improved disclosure and increased level of information that you communicated about the project. I think that's helpful for the sell side and the buy side, we can understand the real value of the product and consider that in our estimates. My first question is also related to that. The material fact disclosed yesterday, the increased EBITDA in the coming years until 2027 or BRL 3 billion compared to the last 12 months of Q3 of last year. If you could give us a little more color, perhaps you cannot really break it down how much of that could come specifically from Figueira project and from Puma II in full ramp up. But perhaps you could speak about the assumptions in terms of prices for corrugated boxes or coated board [indiscernible] considering or FX, foreign exchange? And what are your main sources of upside and downside for your estimates always regarding this BRL 3 billion that you included in the guidance. That's number one. Second question has to do with the pulp market. We have seen sequential announcements of price increases, particularly in Europe, perhaps because of what you wrote in the release the fact that the volumes were directed to China and not a year up in the second half of '23. So perhaps this feeling of shortage of product in Europe that would drive up prices in the region with even a price gap compared to China. Do you share this view? And what kind of flexibility do you have to perhaps redirect some ships from China to Europe because historically, Europe has been more important to you than to your competitors, and it is a region that seems to have a better dynamic of pulp prices, at least in the short term.
So regarding the material fact, it's curious because I would say that the material fact was very good for the company. Of course, this is reactive to something. But it’s got a simple explanation. And there are a lot of mathematics involved, and you do the math better than us. So all the difficulties in the ramp-up, public information, we just told you what the ramp-up of the machine would be. When we talk about products and markets, we always talk about a mix per machine that we try to operate with in terms of conversion, et cetera. When we talk about price trends, we always get support from consulting firm input, and it's all public. We talk about paper and pulp. When we talk about corrugated boxes, we always mention boxes, Douglas Dalmasi has just mentioned or 1% premium over the GDP that the corrugated boxes market always offers. That's the characteristic. We don't have time to explain this in detail. But this rhythm of corrugated boxes in a country like Brazil, well, I have a lot of statistics to talk about this, but it's not just about looking at the past. It really depends on income of the population, what's happening in practice when I talk about income, I'm talking about income improvement, absolute capital income. So taking all that into account, when we compare countries, we realize that there are some distortions. For example, why is it that Brazil, if you look at the region -- I'm not going to say globally because we don't follow all of the countries in the world? But if we talk about the main markets in the world and in Latin America, I would like to leave a question in the air. Why is it the Brazil dropped less the shipping of corrugated boxes than what happened in many countries in Europe and in Latin America?It has to do with the characteristic of income in Brazil. And we like to look at that a lot. We study that a lot. Well, my trend is not to avoid answering your question, on the contrary. But reading the material fact, we have more details there. I would risk saying that that disclosure of information was unique in the Brazilian Stock Exchange. The level of transparency we have there, the level of transparency regarding the ramp-up of machines where we get our price trends from, what's left are assumptions related to some contracts that we cannot, will not and we cannot disclose and we cannot give you details on that. This regards everything that is always said about Brazilian inflation. We use market curves. We use public information or projected information about inflation. So in a very simple math of volume and curves, we get to the numbers that we've been talking about, the number that was disclosed in the material fact. So we feel very safe about this. We wouldn't be saying these things if we didn't feel safer about this. If we were not supported by the partnerships we have and our long-term contracts. I guess that the material fact in and of its office very transparent. It communicates a lot in addition to our presentations. So regarding the material fact, I'll stop here, and Nico will speak about the pulp market.
Sasson trend for the quarter, it remains very positive for all 3 fibers. You know that Klabin produces eucalyptus long fiber and fluff. So it's a positive trend in terms of demand or due to price realization that has already happened and others that will be realized soon. Our expectation for the quarter remains very positive. When I speak about demand, we'll look at what we already have in our portfolio for the whole quarter. Your question was also about Europe and our flexibility of moving volumes win. We never denied that Europe was always a very relevant market for Klabin, just like the domestic market, which reflects the same price index that we have in Europe. So we have basically 2/3 of our eucalypt sales going to Europe and the domestic market. Our flexibility depends on contracts because all supply contracts set forth a tolerance of about 10%. So we can move volumes among regions and also due to production gains, auction or output gains is translated into allocation of volume in those markets that are more profitable.
Next question, Marcio Farid with Goldman Sachs.
I would like to have a follow-up question maybe being provocative after Rafael's question about paper and packaging. Since 2019 or 2020 to date, basically, massive investments in Packaging and Paper involved IP acquisition with slightly more than BRL 300 million and almost 350,000 tons capacity. And obviously, the Puma II project was slightly more than BRL 12 billion plus something in forest assets invested as well. When I check the total volume sold, we can see some growth. Naturally, Puma II is not fully ramped up, the second machine, PM28, only got started out. However, we can see in tropic growth, more than 200,000 tons of paper for packaging and growth, offset by other papers and sectors as well. So it seems to me, after all this investment, market conditions didn't help. However, we see nearly nothing reflected in total volume. Considering the future, the idea is to try to understand. Douglas mentioned that Figueira potentially will be in full capacity. Possibly, there will be a better demand scenario. But Klabin seems to be far from running full capacity, considering the current capacity. So the question is, how do you expect to see volume growth being translated in the coming years in uncertain market, but with apparently access capacity and certainly -- well, sometimes see the impact of these investments that have been made recently reflected in the balance sheet. If I'm not mistaken, new capacity of WestRock in Brazil, so a better demand scenario. So possibly more availability not only at Klabin, but also competitors. So that's my first question.
And along the same lines and with full respect, it's curious how I can have a completely different vision on what you see on the same fact. So all Klabin's investment, no exception, small or big -- just a side comment, we don't do post audit every day but naturally, we do follow the figures. All our internal rates of return are beyond what we had approved by the Board or in any disclosure, so all of them. And rest assured, when we think about the period since 2017 up to now, there is no exception of a better internal rate of return than what we said before. So when we go to market, I'm also happy to see and to show and share with you that first and second slide that I showed before, where we break down our markets. Once again, I always go back to the mathematical simplicity of looking at that chart. In that chart, we all know the start-up of PM27and 28. PM28 hasn't been fully run, as you showed, but they always improve the mix of cash flow of the company. PM27 did greatly improve the cost mix of the company and also shipping more square meter rather than turn of boxes. So we ship the same unit of box, but by using less paper to manufacture the boxes. That's why I always like to show it in details because now we can get closer to the mathematics that we use closer to what you do. So perhaps, I suspect that you're not disregarding third-party purchases from the volume. We always share with you that we may run up to 300,000 tons additional with the company. When we purchased paper from the market, so if to any extent the market is favorable for paper purchase, we decide to buy this in the market. As a result, we improved our total capacity. From the practical standpoint, the only figure -- if I just told you that all internal rates of return are better than what we expected. If I tell you that all our machines are running at a better efficiency pace than what we expected. The only difference that you have to subtract from the map is third-party paper. If I'm not buying today, it's only because I am better off using my paper, therefore, improving the profitability, the results of the company and our actions. We talk about flexibility, and we do believe this is being understood by all. But when you ask this question, Farid, this is great. It gives us a chance to explain things that maybe are not being clearly understood when we speak of flexibility. Lastly, about production of coated board in PM28 I’ll invite Soares to tell us more about it. We're doing very well on the ramp-up of product mix in PM28. We're very excited with our main clients. So now I ask to Soares give you more -- to qualify the qualification time of these products.
For coated boards, we are in this fast track. We've been having an excellent cooperation from our partners, particularly LPB. We are very much advanced in the very stringent test period. In a year, we expect to have this process completed by mid-year. This will be a milestone in the process of qualification of an LPB coated board. At the same time, we already had a share in the foreign market with other partners of ours, and we are coming back to that. In the pandemic, we had to stop exporting to some markets or lower our volumes. And now with the capacity of PM28, we are at full capacity to recover to come back to these clients and markets, and we've been favored by a logistic program with SOS channel, now ships and vessels. They have to use it, and this is improving the transit time. We've been having an increase in demand. We're noticing better demand in Asia, which has been helpful in this first quarter to improve our exports of coated boards. In the domestic market, we're also benefiting from the climate in the beer market. Demand has been good since November, above our expectations. So PM28 for year 2024, we imagine it will run about 60% of production for coated board. So that's our general outlook about PM28.
Just a follow-up question. Your comment and use of flexibility at the end of the day, strengthens the fact that Klabin is running below what it could deliver in terms of total volume. So my question is, considering the future, are you running about the same sales volume compared to 2019. Clearly, you can use of the flexibility of recycled products to have better market conditions. So the question is should we expect to see Figueira more competitive ramping up? Or could we also consider underused capacity ramping up at a higher cost and therefore, less dilution of average cost in a scenario of more favorable demand. I don't know if my question was clear, but that's my follow-up question.
So I would love to be running full capacity and buying third-party paper and having a trend in the market. This is not happening, and I don't see this happening according to the current scenario. Having said that, you mentioned fixed cost dilution and this is shown in our earnings. We do have gains in productivity, like I said in the beginning. We are managing, therefore, per ton we’ve been managing to lower the company's cash cost. And this is not only related to volume but also with efficiency. I mentioned an example which is square meter. So less fiber per square meter with the same product resistance and other efficiencies that we are pursuing. And I cannot give you all the detail right now. But coming back to your question and I agree with your last comment. It's true. I'd love to dilute even further our fixed cost. But in order to make it happen, it takes a market. And for the moment, it is not there. How should I put it? We've been relatively accommodated in the pandemic peak except for some humanitarian problem, we had a commercial thing. But except for that, we were accommodated because particularly in the second half of the pandemic consumption with all that liquidity -- and by the way, this acceleration is not only in the packaging business, but nearly all nondurables in the world, those who are really affected were durables, but it happened over the pandemic and my perspective, which is what we see today is that after the pandemic, now we got into a reality check. We adapted our fixed cost, our production, absolute numbers and when we check per ton, in our case, something comes up, but not the full potential yet. And I agree with you that from the moment all the volume comes back, we will improve even further the company's fixed costs. But I conclude by thanking your question, and I'm really happy with the volume we're delivering today. And all these investments include Figueira which is a brilliant project for the company, just as the IP acquisition. As we also have with other past projects, these new projects added to ramp-up of VM-28 will still bring a lot of productivity gains to the company.
Next question, Lucas Laghi with XP Investimentos.
Just adding to a couple of points that you already addressed during the call, particularly related the guidance of the BRL 3 billion incremental EBITDA and also vis-a-vis the discussion on unit cash cost of the company. When we consider the evolution of production capacity for PM28 and Figueira project, what we had in mind was precisely the expectation of higher dilution of fixed costs and the opportunity to lower the unit cash cost. However, when you look at the assumptions for incremental EBITDA, and this is crystal clear in the reference form, maybe one of the assumptions, except for price that is slightly out of control. When we check the cash cost assumption that is an inflation assumption. I think about 3,100 tons in 2014 and 2024, not considering this cost dilution. So is it reasonable to assume that if you think about our reduction of production capacity, this is not included? The use of capacity on optimum capacity that would bring this cost dilution that doesn't seem to be embedded in the guidance. And just to confirm, BRL 350 million, BRL 400 million of cost savings with Caete is not included either. So that's a potential upside when you think about cost reduction. So these 2 points just go deeper into the assumption of what is embedded in incremental EBITDA for the years to come.
My first answer was about the material fact. Now something adding to that, Marcos is going to talk about the same topic.
Your question makes it easier on me to answer it. At first, what Cristiano said, the comment that led to this guidance, which is very rich to support our communication, this happened prior to Caete project. And therefore, considering the chronology of the facts, it was not possible to include Caete in the math, and this is confirmed in all the assumptions that we broke down and explained in our material fact. Second point we're very confident about the comments in the reference form. Christian already mentioned this today. And naturally, these are very down toward assumptions to put it bluntly. Your analysis on a potential upside on top of this figure, cost cash per ton below inflation rate, it's very reasonable to assume that even though it's not our base scenario in the material fact or in the formal guidance. This is very interesting to work on this analysis. You have all the other details of the company, and this is good food for thought. Just wanted to add to this. Have a good day.
As there are no more questions, I would like to turn the floor to Mr. Cristian Teixeira for his final remarks. Mr. Teixeira, you may proceed.
Well, thank you, everyone. And as promised in the beginning, I will talk about the last slide, the expected trends. We're getting more and more used with these traffic lights. And I'd like to make clear that maybe it's because it's a schematic drawing, we don't really pay a lot of attention to it. But the accurate position of this needle requires hours and hours of discussion with each officer. So again, I'm going to bring you some color on this. If our guess work, of course, of the officers of the company in terms of what we are seeing of the demand, the pace in which we are operating today and the prices that we are expecting for this quarter that we are in right now. So this is a little bit of our expectation, a perception. So I'm going to talk a little bit about this, but not elaborate too much. But for each one of these gauges that you see, I believe that the answers from our officers will be presented here to give you a lot of detail regarding how we are running prices and short fiber. So if you see the arrow on the green or right at the border of the green, it's because we see some improvement today compared to what we've been delivering. Just as an example. On the left at the top, we wanted to set the tone of this arrow. Again, I apologize. I'm being very simplistic in my explanations. But when we have these straight errors because we are thinking about neutrality, but when it's more towards the left, it's a negative trend to the right, it's a more positive trend. And the higher intensity of the positive trend, we move the needle more, more to the right. More to the right, it's a positive trend. More to the left, it's a negative trend. Again, I just wanted to explain how we are working with these called traffic lights. We are looking at this with a lot of attention. And we practically see all of the needles of pulp, short fiber or fluff or with a positive trend. When we talk about what we are living today and for paper coated boards -- and for coated boards, we're talking about long-term contracts. So the trend of the needle for coated boards is always to move very little, except in some market moment when there is a lot of consumption, particularly consumption of seasonal foods that could be related to summer, for example. The coated boards tend to be more stable.In liner, Jose Soares already mentioned that he sees demand improving. He can already see this not just for our company, but in the market movement, we see some expectation. We see it as a neutrality. But if I have a demand needle moving to the positive side, at a second moment, we could see also the needle of prices moving to the right. So we'll have to wait and see how the market behaves. For corrugated boxes, demand running better than expected for the period for January. And this is a surprise both for the month and for the year. Of course, it's way too early to speak about the whole year, but at the moment, January was better than expected. With price neutrality, I'd like to remind you that in the last 6 years, the price of corrugated boxes has been increasing above inflation due to consumption characteristics that we don't have time to address here as we are running out of time. But either due to market consolidation, all the characteristics of income in Brazil, corrugated boxes in dollars start seeing a price increase, price in dollars. And for industrial bags, we see some industrial bags, we see a relative stability, we were expecting some government actions that would have an impact, but we had a lot of rainfall. And in periods of a lot of rainfall, it's really difficult to have a qualified opinion about this market. We'll have to see what happens. So with this, I would like to end my explanations about the trends. I reaffirm with you that our main focus for 2020 is delivery of projects. Like I said, we worked a lot in 2023 to deliver a lot. We want to deliver a 2024 with a ramp-up of Paper Machine 28, which will contribute with a greater production in 2024 for production of coated board. The difference between coated board and liner is that we don't buy coated board from third parties, so we only see this number of coated board increasing, not being regulated by flexibility. Coated board is if we have production capacity, we'll have selling capacity for coated board with no volume arbitration. Figueira project, we are very confident about it. We are confident regarding the startup of production in the second quarter of this year. The project is unfolding really well. And lastly, the acquisition of forestry assets, what we called Caete project, we are estimating approvals occurring sometime along Q2. In addition, in this year, when Klabin celebrated 125 years of existence, I stress so we continue firming the constant pursuit of operating efficiency in our plants, and we pursue cost optimization. Thank you very much for your participation. I hope to see you next time. Klabin's conference call has come to an end. I would like to thank all of you for participating, and have a great day. Thank you very much.